March 2007 Archives

New Kids on the Block

By Tom Nicholls

Africa is becoming a strategic battleground for energy resources, with Asian state-owned companies challenging the traditionally dominant Western majors

IT’S OFFICIAL: Asian investment in Africa has reached record levels. It set a 12-month high of $90 billion last year, according to a United Nations report. Not surprisingly, that investment was concentrated in the energy sector, with Chinese and Indian companies fighting it out to secure oil supplies for their high-demand, energy-deficient home markets. And UN officials have predicted continued strong growth in the flow of capital from Asia to Africa.

China's President Hu Jintao and outgoing Nigerian President Olusegun Obasanjo last year in Abuja. They seem to get on

Spearheading the investment wave is China. Equity ownership of foreign energy resources has become Beijing’s preferred method for securing supplies for its booming domestic market. Steady oil and gas supplies mean continued economic growth, the creation of jobs of wealth and – in turn – social stability. The political value of all that to Beijing means that Chinese companies are generally prepared to pay more for oil and gas assets than Western companies, which are focused on financial, not strategic, returns.

Nigerian licensing round

A forthcoming licensing in Nigeria is likely to reflect the gradual transfer of influence from West to East. Asian companies are expected to bid hard for oil and gas assets. The timing and contents of this licensing round keep changing. However, the latest indications are that around 30 onshore and offshore oil and gas blocks – significantly down on the originally planned 65 – will be up for grabs. Winners will probably be announced after April’s general election.

Chinese and Indian companies, in particular, are expected to emerge triumphant – certainly if recent experience is anything to go by. In May 2006, 15 blocks were awarded in a so-called mini bid round – a scaled-down version of the full-scale round planned for this year. In that round, the government linked the right to develop upstream projects with commitments to invest in domestic infrastructure. Indian and Chinese energy companies were the most successful participants, with China National Petroleum Corporation (CNPC) picking up four licences, for instance. The quid pro quo involves spending $4 billion on local infrastructure – revamping a refinery, building a hydropower plant and installing a fast-rail system from Abuja to Lagos.

It's not just about Nigeria

Asian influence is not, of course, restricted to Nigeria. Earlier this year, EnCana sold its Chad exploration assets to CNPC for around $200 million. As in deals that Chinese companies have secured elsewhere in Africa, the path of that transaction looks to have been smoothed by diplomatic manoeuvring. It was sealed shortly after a visit by Chinese foreign minister Li Zhaoxing to Chad. Until now, Chad’s oil developments have been run largely by ExxonMobil and Chevron. With expectations of significant Chinese investment in the country, that looks set to change.

Angola has also benefited from Asian investment. It is China’s largest single source of crude, shipping some 500,000 barrels a day to the country – roughly a quarter of its output. China’s state-owned energy companies are also benefiting from the political and diplomatic connections that have eased their way into oil and gas projects in other countries.

China is also big in Sudan, buying half of the country’s oil exports last year. Chinese companies are drilling in Niger. CNPC has investments in Mauritania and Algeria. India too is prepared to pay a strategic premium for assets. In last year’s mini licensing round in Nigeria, a grouping of India’s Oil and Natural Gas Corporation and Mittal Steel won licences for two blocks, paying signature bonuses of $50m and $75m; in exchange, they will spend $6 billion on a refinery, a power station and a railway.

Malaysia is in the picture too, through its highly influential state-owned oil company, Petronas. And South Korean companies are catching up. In November, South Korea signed a $10bn railway construction deal with the Nigerian government under an infrastructure-for-oil deal.
Western governments, which, just like Bejiing and New Delhi are concerned about energy-supply security, are watching with concern as Asian firms buy up African energy assets. And, in many cases, there is little that Western-based companies are able to do to defend what has traditionally been their patch because NOCs are not generally subject to the same investment rules. Yes, the Western majors still have a significant edge in terms of technology and expertise in managing big projects. And this makes them valuable partners, especially in complex offshore projects. But that advantage will be gradually eroded.

Joel Brenner

Joel Brenner, the head of the Office of the National Counterintelligence Executive, told the AP that he is concerned about Russia's dramatically increased espionage activity:

"The Russians are back at Cold War levels in their efforts against the United States," he said at an event held by the American Bar Association. "They are sending over an increasing and troubling number of intelligence agents."

Google Video is hosting an interesting 23-minute documentary film about Russia's media crackdown made by Journeyman Pictures, featuring compelling interviews with free speech leaders in Russia, as well as some terrific archival footage of Soviet-era propaganda films.

Unfortunately I can't embed the video on the blog, so just click here to view it.

Although the film dates to 2005, it displays a chilling prescience for what was to come in subsequent years. Fast forward the film to 14:56 to see an interview with Anna Politkovskaya, who says "I’ve written my will. I’m getting my children used to the idea that at any moment they might be left without me."

Today Politkovskaya was also awarded the World Press Freedom Award from UNESCO.

We pleased to offer this translation of a column written by Jens Hartmann in yesterday's edition of the German daily Die Welt.

By the Grace of Putin

By Jens Hartmann

Rosneft is one of the most powerful energy companies in the world. Its know-how comes from former competitor Yukos, which was broken up by the Kremlin and whose assets were plundered by Rosneft.

The Arctic Circle lies somewhere in the south. A herd of wild reindeer, frightened by the noise of the rotors on our Mi8 helicopter, toils through waist-deep snow. There isn’t a human settlement to be seen within a radius of 100 km – only whiteness adorned by stunted conifers. The Siberian river Yenisei, flows slowly through the terrain, pushing masses of water into the Arctic.

Oil in the Land of the Gulags

Banished by the tsar, Stalin served time in a camp here in eastern Siberia. He must have hated the area. So much so that he later had his victims construct a railroad here. It is called the “death line” or “Stalinka” and was built over corpses. With the dictator’s death in 1953, construction work was halted. Should the snow reveal the landscape for the short summer, one can find rails, watch towers and skeleton.

In all, 1,300 oil workers have started down the road to conquering this former empire of the Gulag. They are developing the Vankor oil field for the oil group Rosneft. Vankor is virgin territory. The 2.5 billion barrels in reserves discovered there so far (a barrel being 159 litres) are worth US$150 billion on the world market at today’s prices.

Yukos Reloaded

Russia’s oil company of the moment is Rosneft. While the industry showed a growth in production of only 2.2 percent last year, the state controlled company increased its output by 8.5 percent to 80.6 million tons of oil. This year, 90 million tons are to be pumped. Rosneft has greater oil reserves than ExxonMobil, BP, ChevronTexaco or Royal Dutch/Shell.

Rosneft is Yukos reloaded. The once modest state enterprise could but only distinguish itself after taking over the Yukos group, which was forced into ruin by state pressure.

The transition from private to state sector is – at least from the point of view of the Kremlin – a success story. Not least because Rosneft is sticking to the strategy begun by Yukos of buying western technology for the exploration and development of oil fields. For the industry as a whole, however, state intervention – which ranges from an extremely high taxation to encroachment on private property – is harmful.

The Supervision Principle

Mikhail Ivashatkin, 27, is one of the front-men involved in the Siberian project. The engineer from Rosneft subsidiary Vankorneft monitors subcontractors such as the U.S. companies Schlumberger and Halliburton, which are tapping these fields for Rosneft. “They don’t like to have people looking at their cards. I can understand. It’s about trade secrets," he says. He is “about 80 percent” satisfied with their performance.

Ivashatkin stands on one of the decrepit oil rig and watches the drill bit rotate. The Americans have driven the well down to 3,100 metres. 200 metres still remain. Theirs is an art which few in Russia master: They carry out horizontal drilling. First, they go deep, then the well takes a turn quasi. In this way, it is possible to exploit every nook and cranny of reservoirs containing oil. Vankor is a showcase project for the Russian oil industry. Thus, a large part of the 200 plus wells in Vankor are to be drilled horizontally. Some 60 percent of the wells are “smart wells”, which means: computer-aided sensors monitor the flow of oil.

East-West

Ivashatkin flies to Vankor from his hometown Kranoyarsk, which lies 1,300 km to the south. He works there for 30 days, sleeping in a tin container, before going home again for another 30 days. Those who are employed at Vankor belong to Russia’s better-paid workers. A well worker receives 80,000 roubles per month (€2,320). Last year, Ivashatkin experienced temperatures of minus 60 degrees Celsius. The minus 10 degrees and icy north wind which mark our visit are “like summer vacation camp”. Only at minus 44 degrees Celsius is work suspended.

Rosneft will invest US$6 billion in Vankor. Every screw must be flown in or, in winter, brought to Vankor over a steamrolled road. The first oil is due to flow in September 2008. From 2012 to 2016, Vankor, with an annual output of 22 million tons (which corresponds to about 4.5 percent of present Russian production), will have reached its peak. TNK-BP, Surgutneftegaz and Gazprom could also produce oil nearby. An enormous oil-producing area could come into existence around Vankor.

Since the end of the Soviet era, only a few new reserves have been developed in Russia. An Energy Information Administration analysis states that, by 2020, Russia must derive at least half of its oil from new oil fields in order to compensate for the phasing out of old fields.

The Cash Cow

Rosneft can afford this virgin territory project, because the state has granted tax exemptions for eastern Siberia, and because the group has a cash cow. Rosneft subsidiary Yuganskneftegaz produces oil in western Siberia, where the Ob river meanders towards the north, and where it is only marginally warmer than in Vankor.

In December 2004, a letterbox company purchased by auction a majority of shares in Yuganskneftegaz for around €7 billion. The letterbox company probably belonged to Rosneft. No oil company has been sold so cheaply since the wild 1990s. Yuganskneftegaz lay at the heart of the Yukos empire.

Today, under state trusteeship, it accounts for more than two-thirds of Rosneft’s output. That’s not all though: Yuganskneftegaz also brought the new owner a borrower's note against Yukos in the amount of 263 billion roubles (€7.6 billion). That comes in handy in the Yukos bankruptcy.

Old Colours, New Owner

In Nefteyugansk, the capital of Yuganskneftegaz, little has changed since the changing of the guards from the private to state sector. Even the Yukos colours of yellow and green are still to be found on some walls and on one oil worker’s overalls. Those who once received their wages from Khodorkovsky now receive them from Rosneft’s main office, which is located just across from the Kremlin. Sergei Kudryashov, previously general director at Yuganskneftegaz, has made his way into Rosneft headquarters, a stately property from the 19th century. Kudryashov, vice president for production, is the highest-ranking former Yukos man there.

The Rosneft research centre is led by Mars Khasanov, who held the same job for Yukos. Not far from Moscow’s Gorky Park, Khasanov and his 90 co-workers – most of them used worked for Yukos – puzzle over how oil can be pumped from the ground more cheaply. If engineer Ivashatkin out in Vankor has problems with the angle of a well, he can call Khasanov four time zones to the west.

Sell Out

That Khodorkovsky built up an ingenuous petroleum group is demonstrated by the fact that oil companies from around the world are interested in those Yukos holdings which yet to be auctioned off. Five refineries, the two production companies Tomskneft and Samaraneftegaz, 193 companies in all, are up for sell. Assets worth US$26 billion are at stake, according to the bankruptcy trustee. Rosneft has by way of precaution borrowed US$22 billion, in order to have a financial cushion thick enough for acquisitions. One competitor for these assets should be Gazprom, the world’s largest natural gas monopoly.

Today, Rosneft has a Kremlin lobby comparable to that of Gazprom. In any event, the head of Rosneft’s board of directors, Igor Sechin, who also serves as deputy chief of staff in the Kremlin, has been able to keep Gazprom from incorporating Rosneft. “With great probability, Rosneft will emerge as the initiator for a further consolidation of the industry. Rosneft is becoming the basis of a new state mega-group,” the Moscow business magazine Profil speculates. “Why Rosneft? That is the only chance it has to remain independent of Gazprom.” Rosneft must grow extremely quickly: “So quick that a monster such as Gazprom cannot swallow and digest the group.”

By means of a gigantic investment programme, Rosneft is to be made fit for the future. That is how the investment plan for 2007 foresees an increase in expenditures of 45 percent vis-à-vis the previous year to 174 Billion roubles (€5 billion). Rosneft has already accumulated commitments of around US$12 billion. With the aforementioned US$22 billion, the mountain of debt is becoming menacing.

Soviet Bureaucracy

Decision making in a state company takes incomparably longer than in a private economy. Rosneft managers confirm this. “The bureaucracy is more strongly pronounced. You are frequently busy with collecting signatures and papers,” says one person at the highest level Rosneft who was previously with Yukos. Intervention from the Kremlin regarding Rosneft’s strategic direction – for example, which partners it has to work with – interferes as well.

Thus, the private oil company Lukoil, comparable with Rosneft in terms of size, is clearly more profitable. The stock market is indifferent to this, however. For it, the “Kremlin factor" is decisive. Rosneft can get an okay from the Kremlin for acquisitions and licences more easily. Lukoil shows a market capitalisation of only US$71 billion, Rosneft US$89 billion.

After a phase of extensive growth, Rosneft must try to prove that a state giant can also manage efficiently. The example of Yuganskneftegaz has stirred hope. In any event, Vladimir Milov, president of the Institute for Energy Policy in Moscow and one of the leading opponents of Putin’s policy of nationalisation, sees in Yuganskneftegaz the “successful continuation of the former owner’s work”. He adds: “While the intervention of the state usually chokes any kind of growth, this is a pleasant exception.”

A glance at the stock market prospectus from last year makes clear that even the group’s top managers have their doubts about the economic rationale of their Kremlin masters. There, it is said: “The interests of the Russian government do not have to correspond with those of the other shareholders..., which can lead to Rosneft choosing practices which do not serve to maximize shareholder value.”

Garry Kasparov pens an article in today's WSJ titled "Putin's Gangster State.":

Putin's Gangster State

By GARRY KASPAROV

This month's flurry of auctions for pieces of the state-controlled Russian energy company Rosneft has attracted an impressive number of A-list banks and Western energy companies. Many reputable corporations seem happy to loot the corpse of Yukos, the dismembered parts of which are being sold and handed off, over and over until the last drops of blood are cleaned away.
[Kasparov]

That's a disappointment, but not a surprise. The surprise will come when the investors find out their Russian partners are cashing out as quickly as possible, ready to head for the hills -- or their mansions abroad -- in the face of rising political and economic uncertainty.

Anyone trying to make a fast buck investing in Russian President Vladimir Putin's police state should first practice our traditional triple kiss. That's one for kissing off moral principles, another for Mr. Putin's backside, and the last to kiss their money goodbye when a fresh government comes in and starts looking into all these dirty deals.

While the Kremlin's favorite oligarchs pack their suitcases (doubtless full of cash), the former head of Yukos, Mikhail Khodorkovsky, sits in prison for not bowing low enough in front of the Kremlin throne. Yukos was only the biggest and best-known example of what has become standard practice under the Putin regime. There is no dividing line between bureaucrats, gangsters and the police. Allegiance to the Kremlin is the only thing that matters.

The loyalty screws are being turned tighter, illustrating the administration's increasing instability and paranoia. In recent weeks, the Kremlin's political cleansing continued with the liquidation of the Republican Party led by Duma member and Kremlin critic Vladimir Ryzkhov. In a batch of recent political appointments, old cronies from St. Petersburg were called up in force -- for example Alexander Veshnyakov, one of the architects of our stage-managed election process, has been replaced. Vladimir Churov, who in his four years in the Duma never proposed a single piece of legislation and never once spoke in parliament, is now in charge of next year's presidential election. Mr. Churov was elected to the post on a competitive basis -- with one name on the ballot.

It would be easy to believe that Mr. Putin picked up the concept of "stay the course" when President Bush discarded it last year. Mr. Putin's course, in brief: Loot as much public and private money as possible and get it into the companies and personal accounts of those loyal to the Kremlin. Clean the looted assets abroad with IPO's, auctions and eagerly complicit Western investors. Crack down on any sign of public or political opposition, no matter how small, using overwhelming force. Invalidate or ban parties and groups opposing the Kremlin. Harass, beat and even jail their activists. Shape the election laws to strip away democratic rights and civil liberties. Create menacing new laws that allow the executive and its courts to define anything they like as "extremism." Maintain tight control of the media, especially television, and use it to promote the regime and its leaders while blaming "foreign-sponsored extremists" for all problems.

Western political leaders, pundits and investors are willing, even content, to accept this in the name of the cherished legend, "stability." But when 20,000 police are amassed in Nizhy Novgorod to smash an opposition rally, does that speak of stability? What about when the local government blocks access to a Russian pro-democracy opposition Web site?

The outdated Russian infrastructure is collapsing and it's taking the Kremlin's façade of stability down with it. The standard of living for a huge majority of Russians is declining steadily. The 20 million or so Russians lucky enough to live in Mr. Putin's dream world of energy riches and its ripples are all the West sees, or wants to see. The remaining 120 million are becoming poorer and more agitated by the day.

The uncertain battle over what will happen when Mr. Putin is supposed to step down from power in 2008 is the primary cause of the increasing shakiness of the administration. But it is not the only cause. The nationwide pyramid scheme that sucks the money out of the regions and funnels it to Moscow and St. Petersburg is running dry from the bottom up. There are countless bureaucrats who are now being squeezed, so they must squeeze harder themselves. The top is taking from the middle now, and before this year ends the elite will turn on each other. We can only hope that there is still some cash left for the next government to stabilize and rebuild. Any administration wanting to bring about genuine change will have to move a lot of debris first. In many cases the existing bureaucratic structures will have to be demolished and built again from scratch.

The missing link is that, due to the Kremlin's complete control of the media, few Russians make the connection between their problems and the current administration. The reforms of the 1990s, mainly associated with Yegor Gaidar and Anatoly Chubais, created in most Russians' minds a link between free markets, democracy, corruption and poverty. The Putin regime consistently exploits those fears. They say, "it's dirty and unfair, but this is democracy, this is capitalism. Look, here is your president welcomed as a peer by President Bush and the rest." The Kremlin wins on both ends. They profit from each transaction and then go on the news to blame these shady and rapacious dealings on the corrupt and imperialistic West.

The Kremlin's policy has its supporters outside of Russia as well. A recent editorial by Henry Kissinger called for "maximizing incentives" and "removing frictions to active cooperation" between the U.S. and Russia. If Ronald Reagan had had that mindset I would still be playing chess for the Soviet Union! Was President Reagan "removing frictions" when he told Gorbachev to "tear down this wall"? The lack of Western political will to stand up and acknowledge the true state of affairs in Russia only encourages Mr. Putin and his gang to push further.

The politicians are passive while the foreign business elite actively supplies the Kremlin with the confidence and ammunition -- literal and figurative -- to crush the democracy movement. Those who do business with this oppressive regime are putting themselves in the compromising position of supporting repression to protect their investments.

Opposition rallies will take place on April 14 in Moscow and the following day in St. Petersburg. The police state will again be out in a show of force, this much is certain. But will anyone be watching? Mr. Kissinger also referred to Russia's authoritarian government as "inherently transitory," and here I must agree. It is a transition to a dictatorship -- one that is forming right under the pinched noses, blind eyes and closed mouths of the West's political leadership.

Mr. Kasparov, former world chess champion, is a contributing editor at The Wall Street Journal and chairman of the United Civil Front of Russia.

A Theatrical Performance of Russian Justice

By the Polittechnologist

Many people were shocked by the Basmanny Court’s recent just ruling that investigative actions with Mikhail Khodorkovsky and Platon Lebedev should have been carried out anywhere but Chita, and continue to lose sleep over what it might portend. As well they should, because in my opinion, this ruling is the most frightening move yet in the whole saga of YUKOS and its managers and shareholders.

Why? Because this is the first signal of the joining together into a single whole of all the many criminal cases that have been fabricated with varying degrees of meticulousness.

Moscow is where we find Pichugin, and Alexanian, Pereverzin, and others. Bakhmina is sitting out her sentence in Mordovia. Dragging all of them all the way out to Chita is bad. And so it is that they’ve decided to make a gesture of sorts in the Basmanny Court. It seems the procuracy was wrong, so the place for conducing the investigation must be changed. And the small fact that the actual investigation has already been completed (in Chita) seems to be beside the point.

As a result, the court has actually played right into the procuracy’s hands – and not once, but twice. First, it tactically waited until the investigative actions ended, and second, it provided a lawful opportunity to continue the investigation, only now in aggregate with the other cases.

Just wait and see – a new strand, and a new case, are sure to appear in the very near future. And the seemingly lawful ruling by the Basmanny Court has in actuality paved the way for further lawlessness. Which could take place somewhere in Saransk or Tambov or wherever. But don’t delude yourself for one moment about that court ruling – because there is no justice in Russia. None. Period. What there is, is a political decision to destroy Khodorkovsky, and you are seeing it being carried out.

You well might ask why the procuracy has even bothered to protest the Basmanny ruling if this is so? No mystery here –they just happen to be huge fans of a peculiar genre of theatrical performance known as “playing at justice”.

Freedom's Zone has publised an interesting translation of an interview with Dr. Elaheh Kulai, who was formerly one of just 11 female MPs in Iran, on the state of relations between Iran and Russia. The interview was first published in the Iranian exile Persian newspaper Rooz.

Busheher Nuclear Power Plant project. Photo: AFP

Q: In other words you do not regard Russia as a friend of Iran?

A: I do not believe that any nation is our permanent friend, nor do I believe that any nation is our permanent enemy. The rule in international relations is that whatever is permanent for our country is whatever is really in their interest.

Therefore no nation, not Russia, not America, not Europe, not China nor any other nation can be our permanent friend, nor can they be our permanent enemy. Our permanent friend is our interests, which we must properly identify.

Likewise, we have no permanent enemies and in our relations with other nations our interests can juxtapose and interpenetrate.

Q: In your view, in evaluating relations between Russia and Iran over the last 100 years, were these relations mostly damaging or mostly beneficial to Iran?

A: In my view this issue should be seen from the Russian point of view. Whenever leaders in Iran acted correctly, relations with Russia benefited us. We must ask how to order our relations with Russia. Russia is a large neighbor at our northern borders by the Caspian Sea. We can have various ties with the Russian society, policy, culture and economy that are beneficial to us. One must not look at the issues as black and white or as all or nothing, but we must not lean on Russia or think that Russia will defend our interest.

Russia is a country like no other country in the world. It is essential and constructive for us to develop relations with Russia, and the usefulness of these relations is undeniable. However in my view it would be unrealistic for us to count on Russia in conditions of intensifying conflict with the West.

Complete interview here.

In other news, it seems that 48% of Germans think that America is more dangerous than Iran.

The new issue of the Washington Quarterly has numerous, long articles dedicated to Russia - there is high quality information in abundance here, worthy of examination and discussion. See below for some excerpts, I'll post a critique later on when time permits.

Dmitri Trenin: Russia Redefines Itself and Its Relations with the West

Power and property are inextricably linked in Russia itself, and Russian leaders, though primarily business oriented, are not oblivious to the political influence that comes with ownership or market dominance. They reason that economic dependencies lead to political dependencies, which result in privileges. The oil and gas business, they believe, is essentially political. For decades, Western oil companies were major political players in the Third World countries in which they operated. Since the 1973 oil boycott, decisions by the Organization of the Petroleum Exporting Countries have been essentially political. The Baku-Tbilisi-Ceyhan pipeline was a U.S.-driven political project, with the aim of bypassing Russia. Transit countries, such as Ukraine and Belarus, have used their critical geopolitics to win concessions from their Russian suppliers. The Russians thus make no apologies for being the principal purveyor of oil and gas to the Western markets. They see it as a strength that stands out among so many Russian weaknesses. They enjoy being an energy power. ...

With the U.S.-Russian economic anchor being essentially absent, political relations can and probably will become substantially worse. A crisis could arise over some provocation or miscalculation in Georgia or Ukraine, should the main Ukrainian factions resume their bitter internecine fight. A resumption of hostilities in Abkhazia or South Ossetia would draw Russia in, resulting in a Russian-Georgian military confrontation, with Tbilisi appealing to the United States and Europe for protection and support. A major political split within Ukraine could also put the territorial unity of the country in question, encouraging Russian irredentists to propose holding a referendum in overwhelmingly Russian-speaking Crimea. Russia is turning nationalist, with clear anti-U.S. overtones, while the U.S. public sees Russia in an increasingly negative light. The rhetoric of both countries’ 2008 presidential elections is likely to strain relations even further. During the U.S. campaign, Russia’s membership in the Group of Eight may become an issue; and in Russia, the United States can be cast as the one country that seeks to prevent the recovery and rise of Russia. If the legitimacy of the new Russian president is questioned, the damage could be truly severe.

Celeste A. Wallander: Russian Transimperialism and Its Implications

Moscow has used its importance in global energy markets to fracture the EU’s common trade policies; to limit its neighbors’ willingness to pursue political and security relations that Russia opposes (influencing Ukraine’s new reticence on NATO membership, for example); to lay the groundwork for multifaceted cooperation with a rising China; and to create leverage for Russia’s entry into the global economy as an investor and owner. Sometimes this has been quite obvious. In November 2006, Belarus and Russia faced off in a confrontation over the state-owned gas company Gazprom’s demand that it be allowed to buy 50 percent of Beltransgas or it would triple or even quadruple the price Belarus pays for Russian natural gas.In other cases, it has been subtler. Gazprom is joint owner with a company called Centragas Holding (the ownership of which remains a mystery) of RosUkrEnergo, a Swiss-registered company that serves as an intermediary for selling Russian and Central Asian gas to Europe. Instead of buying natural gas directly from Gazprom, Ukraine’s state energy company Naftogaz buys it at a negotiated price from RosUkrEnergo, leading corruption experts to believe that the company’s sole purpose is to generate and siphon rents in interstate energy deals.

The subtlety increases the further one gets from Russia’s post-Soviet borders. In western Europe, Gazprom created a subsidiary company with minority German ownership chaired by former German chancellor Gerhard Schroeder, conveniently not long after Schroeder as chancellor had approved the agreement to build the new Northern European Gas Pipeline. Gazprom is seeking to build a new pipeline to Germany that bypasses transit countries such as Ukraine and Belarus, an objective that many in Europe viewed with concern insofar as it would increase European dependence on Russian energy exports. By creating a subsidiary in which German political and business interests have a direct stake, Gazprom succeeded in persuading key players to go ahead with the deal.

Jeffrey Mankoff: Russia and the West: Taking the Longer View

If the twenty-first-century world is destined for multipolarity, the Russian elite is largely unanimous in believing Russia must be one of the poles. For all of the talk of cooperation with the West in the aftermath of the 2001 terrorist attacks, no one in Russia really believed that it would give up its identity as an autonomous actor in world affairs. The ongoing discussion of the concept of “sovereign democracy” to describe the Russian political system focuses to a great degree on this issue. A truly sovereign state, as defined in contemporary Russian political discourse, is one whose goals and methods, at home and abroad, are made solely on the basis of calculations of national interest rather than because of external pressure to conform to behavioral norms. Foreign Minister Sergei Lavrov underlined the importance of foreign policy autonomy in a September 2006 address: “I think that the rapid revival of Russia’s foreign policy autonomy is one of the issues [that] is complicating relations between us, since far from everyone in the [United States] has gotten used to this. But they must get used to it.”

Alexander Rahr: Germany and Russia: A Special Relationship

The Russia factor will continue to split the EU. The countries of the old West, such as Germany and France, will continue to pursue a constructive partnership toward Russia and will be reluctant to enlarge NATO and the EU further into the post-Soviet space. New EU and NATO members in central Europe, on the other hand, will likely continue to lobby for a new policy of containment against Russia. They will be supported by U.S. conservatives who have lost any hope of Russia’s democratization. Meanwhile, Germany will have to balance all these competing pressures during the forthcoming EU presidency. In all likelihood, Berlin will refrain from proclaiming a new EU ostpolitik but will strike a compromise between the Merkel and Steinmeier camps on the issue of Russia and the post-Soviet space.

Merkel will concentrate on building consensus on a common EU foreign and security policy within the EU member states and will cautiously avoid any indication of a German special relationship with Russia. She does not want to be accused of conducting a Russia policy over the heads of the central and eastern European countries. Meanwhile, Steinmeier will probably make several trips to countries of the post-Soviet space during the German EU presidency to initiate a broad dialogue with Russia, Ukraine, and other post-Soviet states on a pan-European energy foreign and security policy.

Committee for Support of Khodorkovsky Operating in Chita

By Grigory Pasko, journalist

Marina Savvateyeva is the chairperson of the Center for Support of Civic Initiatives of the city of Chita. She is also deputy chairperson of the Committee for Support of Mikhail Khodorkovsky. This committee was founded in 2005. The newspaper “Znay”, the news bulletin of the Trans-Baikal Civic Union, published an announcement on the founding of the committee in November 2005. It says, it part: “Mikhail Khodorkovsky became a prisoner of the Trans-Baikal colony IK-10 because he openly criticized today’s political regime… The power has always considered the Trans-Baikal region a land of imprisonment at hard labor and of deportation… The destinies of many of Russia’s best people, who became victims of political repressions, are closely connected with the history of the Trans-Baikal region – from the Decembrists to the victims of Stalinism… We are creating our public committee to express our support for the civic position of Mikhail Khodorkovsky, who became a victim of direct political pressure and the absence in our country of an independent judicial system…”

Photo of Marina Savvateyeva (L) and Tatiana Maltseva (R), members of the committee for support of M. Khodorkovsky, by Grigory Pasko

I met with Marina in Chita right after yet another court session at which the question of the supposedly unlawful participation by Marina and her committee colleagues in a picket in support of Khodorkovsky (right after the new charges had been filed against him on February 5 of this year) was being considered.

Marina Savvateyeva had lodged a complaint with the court, asking it to rule that the prohibition on conducting the picket had been illegal, and requesting the court to oblige the city administration to approve the conducting of a picket the following Saturday. The court has yet to adopt a final decision, apparently because it’s not that easy to rule that blatant lawlessness is legal: the city administration had no grounds whatsoever to prohibit the picket and arrest its participants.

Here is the latest answer to come from the city administration of Chita [in all its untarnished bureaucratic glory—Trans.]: “…To the point of your application on picketing I inform about the impossibility of conducting the given undertaking in the place and time announced by you in connection with information addressed to us that has been received about special measures being conducted on 5 March of the year 2007 by law enforcement organs with respect to persons suspected of and charged with the commission of crimes on the territory adjacent to the square named after V.I. Lenin”, signed, Deputy Mayor of Chita A.I. Glushchenko.

Photo of square named after Lenin in the center of Chita by Grigory Pasko

I can understand the desire of a bureaucrat to justify the unlawful actions of the law enforcement organs. But why does he need to violate the law himself in the process? Pursuant to Article 12 of the Law “On Operative-and-Detection Activities”, information about the organization and tactics of conducting operative-and-detection activities [roughly “police work” in Russian—Rough Trans.] is classified as a state secret. But Glushchenko’s letter indicates the kind of operative activity (“special”), its character (“with respect to [certain] persons”), its time (“5 March 2007”), and its place (“the square named after V.I. Lenin”).

Maybe this is why the court, having considered the arguments of the prosecution and of the defense of the picket participants, came to the conclusion that the trial needs to be postponed until better times.

Also postponed was consideration of the question about the participation in the picket of the former priest Father Sergiy, who was defrocked for his “calumnious” ties with Khodorkovsky: Sergey Mikhailovich Taratukhin had spoken with Mikhail Borisovich in the Krasnokamensk penal colony, which served to give rise to conflicts with the diocese.

Marina Savvateyeva told about the forms of the committee’s work. The work has gotten stronger in the past year. Oleg Kuznetsov, a scholar-anthropologist, who heads the committee for support of Khodorkovsky, conducted many meetings with journalists. The committee members have participated in pickets, met with inhabitants of the city and the Kray and clarified to them what Khodorkovsky was locked up for in actuality.

It is noteworthy that the makeup of the committee includes not only lawyers – Yevgeny Anisimov, Irina Zaborovskaya, Igor Linnik, Vitaly Cherkasov – but also entrepreneurs – Andrey Zhidkov, Alexander Luchankin.

Of course, the local power does everything to hinder the activities of the committee. But it seems the enthusiasts aren’t giving up.

From the Economist:

Lord Browne, BP’s chief executive, visited Russia’s president, Vladimir Putin, last week. Speculation has it that TNK-BP’s participation in the auction was meant to confer legitimacy on the event (Russian law requires there to be at least two bidders), and thus to curry favour with the Kremlin—and perhaps also with Rosneft, who might be a more palatable partner than Gazprom. Though TNK-BP insisted that its interest in the auction was real, it seemed to wane pretty quickly. Meanwhile, more charges are being brought against Mikhail Khodorkovsky, Yukos’s former boss, who was arrested in 2003, and PricewaterhouseCoopers, Yukos’s auditor, has also been targeted by prosecutors. Those cases also seem designed to help justify the sell-offs. But larceny, even with a (relatively) respectable face, is still larceny.

[Thanks to outreach by Grigory Pasko to bring more Russian voices onto RA.com, we're pleased to offer this guest column by Ivan Pavlov, Director of the Institute for Information Freedom Development - Bob Amsterdam.]

Access to Information is Obstructed in Russia

By Ivan Pavlov, Director of the Institute for Information Freedom Development*

In 2005, before the adoption of Federal Law No. 149-FZ «On information, information technologies and the protection of information» of 27 July 2006, a group of jurists working together with our Institute for Information Freedom Development (www.svobodainfo.org), initiated a series of court cases to contest the inaction of a number of organs of state who were not providing access to information on their activities in full measure. The reason for going to court became the absence of official websites of some state organs, as well as the absence of certain socially significant information on the websites of other state organs.

Ivan Pavlov

Among the categories of socially significant information encountered in normative legal acts, we can name the following: information on the state of the natural environment (ecological information), legal information, information on accidents and other emergencies that threaten people’s safety, information on citizens (personal data), information on the activities of organs of state and organs of local self-administration. The last category, which is sometimes called government information, occupies a special place in this list.

Its specificity lies in the fact that the state is the proprietor of the largest volume of socially significant information. Second, state information resources are the most in demand in society. Third, the right to access to information on the activities of organs of state is relatively new for the Russian Federation.

The first law in the world on freedom of access to government information was adopted by the Parliament of Sweden in the year 1766. In Russia, the right to access to information was first set forth legally in the Declaration of Rights and Freedoms of the Person and the Citizen, adopted by the Supreme Soviet of the RSFSR in November 1991. That same year saw the adoption of the Law of the RF «On mass information media», which among other things was called upon to regulate legal relations in the sphere of access by journalists to information on the activities of the organs of power. That said, the first law regulating the general part of the information-law sphere appeared only in 1995.

An important role in ensuring the right of citizens to access to information on the activities of the organs of state power is played by the federal targeted program «Electronic Russia (the years 2002-2010)», confirmed by Decree No. 65 of the Government of the RF of 28 January 2002, as well as Decree No. 98 of the Government of the RF «On providing for access to information on the activities of the Government of the Russian Federation and federal organs of executive power» of 12 February 2003. The latter normative legal act confirmed the List of Information on the Activities of the Government of the Russian Federation and Federal Organs of State Power required to be placed in public domain information systems.

In accordance with the latter Decree, federal organs of executive power are obligated:

- to ensure access for citizens and organizations to information on the activities of federal organs of executive power, with the exception of information classified as restricted access information, by way of the creation of information resources in accordance with the List confirmed by this Decree;

- to place the indicated information resources in a timely and regular manner in public domain information systems, including on the Internet network.

As of today, the organs of power in Russia furnish the public with only 23.6% of the information from that volume that must be found in the public domain. The experts of our institute came to such a conclusion on the basis of the results of a research study on the openness of federal organs of executive power conducted in 2006.

Subjected to study were the official websites of these structures, because, in the opinion of the specialists of the institute, it is precisely these websites that are an important source of information on the activities of the state. These websites allow us to make judgments about the transparency of management procedures. By analyzing a website, we can draw conclusions about the predisposition of one or another agency to corruption.

We came to the conclusion that today’s power does not even satisfy one quarter of the requirements of citizens for socially significant information – the information the agencies are required to place on websites according to existing legislation.

A situation whereby information is found in the public domain is simply not to the advantage of certain structures of state. For example, the Federal Agency for Technical Regulation and Measurement (Rostekhregulirovaniye) did not desire that information on state industrial sector standards be available on the Internet. No wonder – until recently the complete database of standards was being sold for 250 thousand rubles (around a thousand US dollars–Ed.). Such activity most likely brought a good profit. This is a situation where taxpayers were being sold information that had been created with their own money.

If in November 2004, 54 federal organs of executive power (out of the 85 in existence today) did not have their own websites, then now there are only two such agencies. These are the Main Administration for Special Programs of the President of the RF and the Federal Agency for High-Technology Medical Assistance.

The “troika” of leaders in openness of information consists of the websites of the Ministry of Emergency Situations of Russia (43.8% of the required information is available), Rosnedvizhimost [the Federal Real Estate Cadastre Agency] (39.7%), and the Federal Customs Service of Russia (34.6%). The laggers in the race for the title of “Best federal organ of executive power website” became the Foreign Intelligence Service (approximately 12% of the required information) and the Federal Migration Service (only 11%).

It goes without saying that the mass media can not really be considered free if they do not have free access to information. They are not in a position to be able to analyze or competently criticize the activities of an agency if they do not have the complete picture at their disposal.

Russia today presents a vivid example of a closed society in the informational sense. The right of access to information has atrophied so much in our country that even judges often do not know that it is prescribed in the Constitution. The fact is that for now, we lack – at a genetic level – an understanding of the importance of transparency of power. We still have a long way to go before we recognize the benefit of this.

(*The Institute for Information Freedom Development is a non-profit, non-governmental organization founded in St. Petersburg in 2004 that conducts research on the legal theoretical and practical aspects ensuring the rights of citizens and organizations to access socially significant information, in particular to information on the activities of organs of state.)

Yesterday in the Moscow Times, the political analyst Yevgeny Kiselyov published an article examining the recent actions of Russia's courts in regards to the Mikhail Khodorkovsky case. I have posted the complete article as I've been informed that our resident Polittechnologist is preparing a rebuttal of sorts.

Worried Over Strasbourg, Scared of The Hague

By Yevgeny Kiselyov

For over a week now I have been perplexed by the fact that those monitoring human rights in Russia have not come up with an answer for the following question: Why after four years of relentlessly prosecuting the Yukos case did Moscow's Basmanny District Court decide in favor of former CEO Mikhail Khodorkovsky on March 20?

Why has the court -- the very name of which has become synonymous with selective application of the law, or simply lawlessness -- suddenly granted the defense's motion against hearing the latest charges against Khodorkovsky and his former business partner Platon Lebedev in a court in the remote Chita region?

There was another decision from the court, on Monday, that muddied the waters a bit but likely didn't represent a change in the outcome. I will return to that later.

The fact remains that over the last four years the court has handed down dozens of rulings regarding Khodorkovsky, Lebedev and Yukos. The defense lawyers have, as a rule, challenged the actions by the Prosecutor General's Office. The court, as a rule, has decided in favor of the prosecution. That's why the latest decision was so surprising.

Those who prepared the proceedings moved the hearing to Chita, almost 6,000 kilometers away. This would have made it more difficult for the press, defense witnesses and defense lawyers to attend. It looked like a move to reduce publicity after the initial Moscow proceedings were accompanied by daily demonstrations and the presence of high-profile supporters.

Shifting the venue to Chita was against the law, which states that defendants should be tried either in their city of residence or where prosecutors claim a crime was committed. Nobody expected the court to allow an end run around this requirement.

Even less expected was its subsequent change of mind.

Some starry-eyed optimists might suggest the court has just decided that strict adherence to the law is paramount. But the shift is more likely linked to a comment by Yury Shmidt, Khodorkovsky's lawyer. He said that when the court openly and repeatedly sides with the prosecution it helps the defense. The more Khodorkovsky's rights are violated, the greater the chance he will win when he seeks redress from the European Court of Human Rights in Strasbourg.

The Strasbourg court will examine if the defendants had access to objective and impartial proceedings; whether the adversarial principal of justice was properly applied; if the defendants' procedural rights were ignored; if the proceedings were open to the public and media; and how state-controlled media covered the proceedings.

There were clearly violations. Neither Khodorkovsky nor his lawyers was given sufficient time to become acquainted with the prosecution's materials in the case. The defense was refused the right to introduce documents, reports by independent experts and other materials into the record of the court's proceedings. And, as defense lawyers have often pointed out, the verdicts have been nearly verbatim repetitions -- including grammatical errors -- of the indictment.

It is not hard to imagine Khodorkovsky and Lebedev winning their case in Strasbourg.

Until recently, Russian authorities have maintained a very condescending attitude toward the Strasbourg court. It might have been unpleasant losing different cases in the court, but the decisions obtained on human rights violations there don't have the power to overturn rulings from Russian courts. Telling the public that the problem is in the court's anti-Russian bias, fanned by enemies who cannot bear to watch the country's return to power and greatness, is also an integral part of the strategy.

But the authorities now seem to realize that decisions from Strasbourg have legal as well as political consequences. The legal consequences could roll over into financial penalties in the billions of dollars.

As a case in point, this year the European Court of Human Rights is expected to hear complaints connected with the Yukos case. A parallel process has been taking place quietly and unobtrusively. Yukos shareholders have filed a lawsuit against the Russian government demanding compensation for what was essentially the nationalization of the oil company. The amount they are suing for, $50 billion, is the largest in the history of legal arbitration.

Although the authorities are publicly silent about the case, they are taking it very seriously. They have spared no expense in hiring a major U.S. law firm, Cleary, Gottlieb, Steen & Hamilton, and bringing in top-notch Russian lawyers.

The first hearings at the International Court of Arbitration at The Hague will come at the end of the spring. The court could rule that the case is outside of its jurisdiction, which would end Russia's problems. If it takes the case, the proceeding could stretch out for years. Imagine the difficulties for Moscow if the Strasbourg court ruled in Khodorkovsky's favor while The Hague was still considering the unlawful nationalization complaint.

The Kremlin now has to deal with the possibility that future verdicts from Strasbourg will be used in arbitration lawsuits or criminal proceedings against the state or senior Russian officials.

This helps explain why President Vladimir Putin replaced Pavel Laptev, who ended his term in Strasbourg in disgrace, with Veronika Milinchuk, a close associate of Justice Minister Vladimir Ustinov, as representative to the human rights court. Her appointment came with the announcement that, henceforth, the country's representative to Strasbourg will hold the post of deputy justice minister.

Ustinov has his own reasons for being concerned about the result of the proceedings in Strasbourg. After all, it was he who ran the Prosecutor General's Office that brought criminal charges against Yukos executives, applied for warrants to conduct searches and arrests, and managed to obtain the strict verdicts it was seeking against the accused.

Taken together, all of this suggests that the looming hearings in Strasbourg might be behind the decision to transfer the trial back to Moscow.

If this is the case, we might even expect the new proceedings to be conducted in accordance with all proper procedures. Even if it adds a year to the duration of the hearings, it will be worth it. A facade of irreproachable punctiliousness will have to be maintained during the process of reaching the predetermined guilty verdict. Only then will the state have any hope of defending its actions in Strasbourg.

Monday's decision on the legality of moving Khodorkovsky and Lebedev to Chita might introduce some confusion here. But, as a member of Khodorkovsky's legal team explained to me, the ruling was of no real importance.

For the defense, what is important is that it has in hand a decision with greater legal bearing. This is the Basmanny District Court ruling that the investigation into the charges against Khodorkovsky and Lebedev can't be carried out in Chita, and this ruling can only be overturned by a higher court. If the Moscow City Court upholds the decision, this supports my theory that there is a political consideration in relation to the Strasbourg Court in play. If the Moscow City Court does overturn the decision, I'm wrong, and the Basmanny District Court ruling was just a blip.

We probably won't have to wait long to find out what the real case was.

From the Financial Times:

Moscow rules The Financial Times March 29 2007

There is something unsettling about BP, Britain's largest company, publicly co-operating with the Kremlin by allowing TNK-BP, its Russian joint venture, to join state-run Rosneft in this week's auction of assets from the bankrupt Yukos group.

To nobody's surprise, there were no other participants and Rosneft won, paying just $7.59bn for a chunk of its own equity with a stock market value of $8.4bn. TNK-BP abandoned its bid after less than 10 minutes. But it insisted it had participated in good faith - and pulled out only because it could not match Rosneft on price. The company failed to convince analysts, who said that from the start the auction was designed to favour Rosneft.

Under Russian law, an auction must have at least two bidders to be legal. So TNK-BP's participation was helpful to the sale process.

To be fair, oil and gas companies often have to operate in countries with the most difficult political conditions. Russia is no exception. Under President Vladimir Putin, the state has openly re-established control of natural resources and squeezed down private companies. Russian officials argue that they are merely correcting the wrongs of the 1990s, when domestic oligarchs and foreign speculators took advantage of a country in turmoil.

The biggest victim has been Yukos, which has been broken up following tax and fraud probes and the jailing of Mikhail Khodorkovsky, its founder. Foreign companies have also been hit, notably Royal Dutch Shell, which was forced to sell control of the $22bn Sakhalin-2 gas venture to state-run Gazprom. In this environment, it would not be surprising if TNK-BP was keen to curry favour with Mr Putin, not least because the Kremlin is considering revoking the licence for the huge Kovykta gas field.

In itself, participating in a quick-fire auction is a small price to pay for edging up an inch or two in Mr Putin's estimation. Companies around the world try to ingratiate themselves with governments.

But it is not a pretty sight, even in developed democracies, where the authorities claim to tolerate a measure of criticism. In emerging economies, particularly big rich authoritarian countries such as Russia, the spectacle can be demeaning.

A measure of play-acting is perhaps essential for success in this imperfect world, not least in business. Grovelling has its place, as do fawning and flattery. But executives must remember that there are costs as well as benefits. A company that lowers its standards may find it more difficult to observe high standards in future.

It could become harder to resist political and bureaucratic pressures and for a company to disentangle its interests from those of the regimes under which it operates. The public image of the company suffers - and so does the image of business in general.

CFR.org is hosting a podcast discussion with Andrew Kuchins, director of the Center for Strategic and International Studies’ Russia and Eurasia Program, on the recent spate of apparent contract killings in Russia.

Among other comments, Kuchins remarks that 1) to be an investigative journalist in Russia is an extremely dangerous occupation, and 2) if a murder of a journalist occurs, it is highly unlikely that the crime will be solved. He also says that the West can't really do much to improve the situation for journalists, because it no longer has the leverage it had in the 1990s. Kuchins: "As this rash of contract killings demonstrates, I think it really demonstrates more the weakness of Mr. Putin's system, rather than the strength and the control that the Kremlin has."

[We're pleased to welcome back our guest blogger and expert Russian ecologist, Albert Kalashnikov, who has written for us in the past.]

Construction of the VSTO as a secret operation of the special services

[VSTO – Eastern Siberia – Pacific Ocean oil pipeline]

By Albert Kalashnikov, ecologist

From 1985 to 1999, not a single kilometre of trunk pipeline was built in Russia. The state did not consider this a priority problem, inasmuch as a decline in oil production was being observed in the country and existing transport capacity was quite sufficient. In 1999, OAO «AK «Transneft» (the state trunk oil pipeline transport monopolist) begins realization of the first large pipeline project – «BPS» (the Baltic Pipeline System) from the fields of Western Siberia and Timano-Pechora to the port of Primorsk – export to the countries of the European Union (60 million metric tons of crude per year). Concurrently with this, the private company «YUKOS» resolves to throw down the gauntlet to «Transneft» and announces its intention to build the first private trunk oil pipeline in Russia. «YUKOS» head Mikhail Khodorkovsky had decided that it was necessary to orient oneself not towards Europe, but towards China, which is increasing purchases of oil for its economy year in and year out. As a result, an inter-governmental agreement is signed between Russia and the PRC for the development of a design for the oil pipeline. From 1999, «YUKOS» begins to actively lobby at all levels the project for the construction of the pipeline from Angarsk (Irkutsk Oblast) to Daqing (Heilongjiang Province). The overall span of the «Angarsk-Daqing» Russo-Chinese oil pipeline (RCP) route was supposed to comprise 2214 km, of which 1453 km along the territory of Russia (30 million metric tons of crude per year). The announced cost of construction was $2 billion.

In response to the «YUKOS» initiative, «Transneft» in alliance with «Rosneft» in that same year, 1999, propose an alternative variant for the construction of an oil pipeline to the East. Their «Oil pipeline for deliveries of Russian oil to the countries of the APR» [Asia-Pacific Region] (Angarsk-Primoriye) project was not only more expensive (with an announced initial cost of more than 5 billion dollars), but also more complex and long 3765 km. In order to pay for the project, it was calculated with a capacity of 70 million metric tons of crude per year. And here there arose a problem – where to get so much crude? Probably the only advantage of the given variant was its soundness from the point of view of opportunities for diversification, and, correspondingly, it gave the state levers for managing export directions (not only the PRC, but also S.Korea, Japan, the USA, and other countries of the APR). In execution of instruction No. Pr-1315 of the President of the Russian Federation of 17 July 2001, «AK «Transneft» in August of 2001 set about drawing up Declaration of Intent and Justifications of Investments into the construction of its project. The project got approval in the Ministry of Economic Development and Trade of the Russian Federation, where in January of 2002, there took place the presentation of the Declaration of Intent of the project with the participation of the Ministry of Energy and oil companies. In April 2002, «Transneft» coordinated the Declaration of Intent in the administrations of the regions on the territories of which it was planned to build the oil pipeline facilities.

Photos: Albert Kalashnikov, the pipeline under construction.

At the same time, the «YUKOS» routing was moving along in parallel at the government level. On 8 September 2001, the signing of a general agreement for the development of a feasibility study for the Angarsk-Daqing oil pipeline took place in St. Petersburg. The document was signed based on the results of negotiations between the head of the government of the RF, Mikhail Kasyanov, and the premier of the State Council of the PRC, Zhu Rongji. Construction of this oil pipeline was slated to begin in 2003 and finish in 2005. In the meantime, the parties could not come to a consensus on the main question: on pump-through tariffs and purchase guarantees, which in the end put the brakes on the realization of the given project. And the reason for this was the demand of the Chinese that they be allowed to participate in the development of a series of oil-and-gas fields on the territory of Eastern Siberia, including Irkutsk Oblast and Yakutia, among others the Yurubcheno-Takhomskaya oil-and-gas, Verkhnechonsky oil-and-gas-condensate, and Talakanskaya oil fields. That they took such a tough stance was explained by the emergence of the PRC in the Aktöbe field in Kazakhstan and the construction of an alternative oil pipeline along the route Tengiz-Kenkiyak-Atasau with access to Urumqi (Xinjiang-Uyghur Autonomous Region).

To the holding back by Russian officials the «YUKOS» head reacted thus: “While we were first from the point of view of the construction of a pipeline, we could attain somewhat better positions from the Chinese partners. If we become second after the Kazakh colleagues, then we will have to orient ourselves to those conditions which will develop by that time. And from this point of view, our bureaucratic delays will lead to certain losses.” It is interesting that Khodorkovsky’s prediction came true in 2004 – China signed agreements on the construction of oil pipelines with Kazakhstan and Uzbekistan. And on 23 August 2005, the Management Board of the partners in the company «Kazakhstanneft» accepted an offer from CNPC on the acquisition of its company for 4.18 billion US dollars (CNPC thereby secured production and deliveries to China of approximately 7 million metric tons of crude annually). The only geopolitical plus for Russia here became the fact that as a result, China “diverted” a part of Central Asian crude from the «Baku-Ceyhan» oil pipeline. And in the long term, the trans-national company «BP» is going to have real problems with being able to fill it (the Azerbaijani fields are on the decline).

In the meantime, the outcome of the battle of the routings still had not been decided at the initial stage; opinions in the government were split. Prime Minister Mikhail Kasyanov was pushing for Japan, defending the interests of «Rosneft»., while Minister of Energy Igor Yusufov lobbied «YUKOS» defending the Angarsk-Daqing route leading to China. The Ministry of Nature reacted “negatively” to both variants, because they envisioned laying the pipeline in immediate proximity to Baikal, found under UNESCO protection.

Now let us recall the whole legal chaos of the Russian bureaucratic apparat relative to the environmental component of both projects. Here we have everything from anti-constitutional prohibitions on holding referendums, to direct pressuring of ecologists-volunteer community workers, to gross violations of the procedures for holding public hearings on environmental impact studies, and much more about which many materials have already been written. And so, against this background, don’t the periodically repeated bursts of nature-protecting activeness on the part of official ecologists look strange?

There can be one explanation for this: already then, the decision had been adopted in the Kremlin to stretch out the question of the start of construction of the eastern oil pipeline a maximally long time. Two objectives take shape here:

1. To use the oil factor for as long as possible to strengthen the foreign policy positions of Russia in the Orient, playing on the economic confrontation between the PRC and Japan. This line persists to this very day thanks to the dividing of the project into two stages of construction and the continuing uncertainty with the routing of the second stage. Thus it is still not clear where exactly the terminus of the oil pipeline will be – in Khabarovsk or Primorsky Kray, or if everything will simply be confined to just the first stage (with a cost of 185 billion rubles) and will end in Amur Oblast;

2. To have the time to prepare for and carry out the “nationalization” of the «YUKOS» fields, which under any scenario were the principal source of crude for filling the eastern pipeline. After all, it was clear right from the very start that there could not be two routes; there were only enough reserves for one pipeline, since «Transneft» does not have its own fields and does not engage in oil production, while its “ally”, the production company «Rosneft», does not have a sufficient effective reserve. The subsequent sad outcome for «YUKOS» is known to all… The low-efficiency «Rosneft» gobbled up its more successful competitor and as a result became practically the monopolist of the oil industry in Russia, having the opportunity to personally manage the trunk oil pipelines through the agency of «Transneft».

Hence, what appeared to be a many-years-long confusion with the eastern oil pipeline, the growth of environmental alarmism, the multitude of discrepancies, the intensifying protest attitudes – all of this in the end now looks like a top secret operation by the special services. A behind-the-scenes game, in which the moves were predetermined in advance. We should give its author and moderators their due and admit that the game succeeded. It is especially interesting to recall the so-called public hearings, which are conducted en masse in all the regions of the territory through which the route passes. Here it is necessary to clarify the fact that such undertakings are of course required by law, but they are often simply ignored, both by the customers and the supervisory organs, and by the public. But here, everything is by the book: a public reception office remains open its legally mandated two months during the course of the hearings, and personal invitations are sent out to all the local environmentalists-seditionists. And the predictable result is right there in front of us: a broad burst of protest locally, appeals to courts, and all of this with stable informational support from the news media. Then the supervisory nature-protection organs are brought in and as a result «Transneft» is forced to put the brakes on once again. Time passes and everything is repeated yet again, then again and again. It should be said, to the credit of the employees of the company «Transneft», that they carry this burden of the judges that has been laid upon them without complaint. The hearings continue…

Photos: Albert Kalashnikov, the pipeline under construction.

The environmental component of the VSTO [Eastern Siberia – Pacific Ocean oil pipeline]. I will not weary you with discussions about how low Russia fell to the role of a raw-materials appendage of technologically developing countries, whether the VSTO is needed or not, and if it is needed, then by whom concretely, and so forth. What we are talking about here is that the VSTO has always been a “cat in a bag”, and today the situation has changed little. It seemed to the public that their protest actions do have an effect on the choice of the direction of the route: recall the campaigns in defense of Tunkinsky Park, Lake Baikal, the Cedar Valley Preserve, the Barsovy and Imangra Wildlife Sanctuaries, Perevoznaya Bight… The route “ping-ponged” from the borders of Mongolia to the Yakutian tundra. In the end, all the parties came together on the northernmost variant, which is the one now being realized. But was it not clear from the very beginning that this route is the most effective one in the sense of ensuring that the oil pipeline would be filled? Its proximity in passing by the new fields being developed is exactly what provided such an opportunity.

There is no doubt that the VSTO is a project that is highly potentially dangerous for the environment. And there is no doubt that the builders of the pipeline will deviate from the confirmed technical documentation that is being discussed at the public hearings.

European Union Energy Commissioner Andris Piebalgs has said the "C" word again in regards to Russia's efforts to coordinate with other natural gas exporters. It is good to see that someone is awake in Europe.

From the WSJ:

Mr. Piebalgs said Russian and Algerian officials had told him they agreed to cooperate only on "issues of technological challenges, research activities, perhaps some swaps," but he added, "I can't exclude at this stage that there won't be moves to establish a gas cartel."

Mr. Piebalgs said a cartel would jeopardize the development of gas markets and damage EU relations with cartel members. He also said "consumers would definitely lose confidence in the gas supplies."

"To be fair, gas could be replaced," he said. "It's not a good choice for the European Union, because natural gas is very clean as a fossil fuel, but it could be replaced by other means such as coal or lignite or by nuclear."

Mr. Piebalgs said the U.S. encouraged the EU to continue its plan to diversify its supplies. Russia accounts for 25% of the EU's natural-gas imports and Algeria 10%.

Analysts said one reason the U.S. wants to encourage the EU to diversify its energy mix is to erode the political power Russia holds through its gas and oil exports.

From Bloomberg:

Calpers Asked to Mull Risks Yukos Bid Could Pose to Chevron

By William Selway

March 26 (Bloomberg) -- The California Public Employees' Retirement System should examine whether the value of its Chevron Corp. shares would be hurt should the oil company buy assets of bankrupt OAO Yukos Oil Co., a board member said.

California Controller John Chiang sent a letter last week to Russell Read, the fund's chief investment officer, asking it to study the risk of a Chevron bid for the Russian company's assets. Calpers owns 9.03 million Chevron shares worth about $670 million, according to a U.S. regulatory filing.

Russia's government took control of Yukos, once the country's largest oil exporter, because of unpaid taxes. Former Yukos owner Mikhail Khodorkovsky, who is serving eight years in a Siberian penal colony for tax evasion and fraud, says he is being punished for opposing President Vladimir Putin, and the U.S. has raised concerns about the takeover.

``Considering the legal, financial and geopolitical controversy that has been associated with Yukos' recent history, I am concerned that, should Chevron participate in the auction and succeed in acquiring assets, the transaction may pose risks to Calpers' investment portfolio,'' Chiang wrote.

``To protect our investment in Chevron, and the overall health of our portfolio for state retirees, we should engage in immediate due diligence to assess the risks and, if warranted, take appropriate mitigation steps,'' the controller wrote.
...
Chiang is one of 13 members of Calpers' board of directors, which oversees the fund. Garin Casaleggio, a spokesman for Chiang, said any decision on whether Calpers should sell shares of Chevron would be made after the fund's staff has studied the matter and made their own recommendation.

The fund has a history of using its $230 billion of assets to press for changes in corporate behavior. Every year it targets as many as a dozen public companies among its holdings to seek policy changes and better financial results.

And the New York Times:

Last Thursday, John Chiang, the California state comptroller, sent a letter to Calpers, the retirement fund, asking it to review investments in Chevron in light of that company’s reported intention to bid in the Yukos auctions. Calpers, with billions invested in equities, has in the past swayed boards with its criticisms of corporate behavior.

Mr. Chiang cited the risk of lawsuits and divestment campaigns against Western companies for “complicity in illegal and unethical activities by the Russian government.” Russian authorities say they are obeying their own laws.

Chevron, of San Ramon, Calif., has not announced a bid for Yukos assets but has not contradicted statements by the bankruptcy receiver in Moscow that it sent a letter of intent late last year. Chevron is among the top 20 companies in the Calpers portfolio.

Mr. Chiang has not commented on BP’s role, but his spokeswoman, Hallye Jordan, said in a telephone interview that “he will soon.”

From Yulia Latynina in the Moscow Times:

The Geopolitics of Accounts Receivable

By Yulia Latynina

On Sunday, the 15 members of the United Nations Security Council, including Russia, unanimously passed Resolution 1747, which provides for the imposition of sanctions against Iran in response to its nuclear development program. On Monday -- the very next working day -- Russia announced that Iran had finally made overdue payments for Russian construction work on the Bushehr atomic energy plant in Iran.

Looking at this from a commercial rather than a diplomatic standpoint, Moscow appears to have pried the money from Tehran using the Security Council in much the same way it uses the Prosecutor General's Office for the same purpose at home.

When trying to explain why Russia is assisting Iran in its atomic energy program, analysts usually opt for complex geopolitical explanations, like portraying it as Moscow's answer to a U.S. White House trying to create a unipolar world.

A simpler explanation is that Russia has become a very active economic actor and pragmatically minded people in President Vladimir Putin's circle are prepared, in the best tradition of Adam Smith, to sell just about anything to anyone.

Complete article here.

From the Bangkok Post:

The presidents were drawn in particular to a stand devoted to Chinese tea culture, Interfax reported. Hu presented the Russian leader with a tea set inscribed with tea-boiling tips in Russian.

Observing women in traditional Chinese costume, the Russian leader remarked, "I don't know what's more beautiful - the clothes or the girls," the news agency reported. He then added: "It's the girls."

Stratfor posted this analysis yesterday, which makes the recent actions of BP even more odious than they may first have appeared. If this "managed competition" of state-owned energy companies really does give the illusion of stability - it would seem to be a short-lived phenomenon.

Igor Sechin, a key silovik begins to catch up with Gazprom, for now...

Bankrupt Russian oil company Yukos began auctioning the last of its property -- approximately four big chunks and several smaller assets -- on March 27. A subsidiary of Russian oil mammoth Rosneft acquired Yukos' 9.44 percent stake in Rosneft. Rosneft's bid countered a bid from British-Russian oil firm TNK-BP, a company in which Russian natural gas giant Gazprom is working to acquire a majority stake. If TNK-BP had won the Yukos auction, the 9.44 percent stake, along with the 1.25 percent stake it already owns, would have been enough to garner TNK-BP -- and eventually Gazprom -- a seat on Rosneft's board. In retaliation, Rosneft has threatened to bid against Gazprom for majority stake in TNK-BP.

Rosneft and Gazprom began competing after they failed to merge in 2005. Until then, the two state-owned companies had always kept to their respective petroleum products -- Gazprom to natural gas and Rosneft to oil. However, after the merger collapsed, they began to cross over into each other's fields, and the wrestling match escalated. The forces behind both Rosneft and Gazprom are powerful members of Russian President Vladimir Putin's inner circle of trusted associates. Putin is planning to leave office within a year, and a fracture of this magnitude would have ominous repercussions unless Putin can get it in check.

Putin held an impromptu meeting of his personal group during the weekend of March 24-25 in order to sort out the Yukos matter. Under his proposal, Rosneft would gain most of Yukos' assets and Gazprom would get TNK-BP and a few smaller Yukos assets. Putin's offering of TNK-BP shows not only how little he values foreign investment, but also the desperation of the situation. With Putin's proposal, Gazprom would lose a degree of its freedom as the newly empowered Rosneft closes in on Gazprom's business maneuvers.

So, why would Putin want to compromise Gazprom, which has championed the government's consolidation of power? The answer is: balance. Putin has always sought to balance competing interests in Russia. He has balanced the oligarchs, military and siloviki while placing his own influential players from St. Petersburg (his hometown) into key positions. Putin has even blurred the lines among most of the groups, as he did when he named siloviki-magnet Sergei Ivanov as defense minister (Ivanov was the first civilian to head the military) and then as first deputy prime minister.

However, in the past few years, the balance has been tipped. Gazprom and its political forces have gained too much power, and if one -- Deputy Prime Minister Dmitri Medvedev, who sits on Gazprom's board -- is a likely successor to Putin, Gazprom must be checked before the transfer of power takes place. Putin must ensure that neither he nor his successor can be overwhelmed by Gazprom. To do this, the president must strengthen Rosneft.

Allowing Rosneft to gain the larger of the Yukos assets is the first step, but the second is to get the company a larger political force with which to counter Gazprom's numerous champions in the government. Gazprom has Medvedev (who, if he does not succeed Putin, is likely to at least fall into the premiership) and Deputy Chief of Staff Vladislav Surkov, Putin's top aide and one of his most trusted allies. Rosneft's sole defender is Deputy Chief of Staff Igor Sechin, Putin's longtime friend and adviser. Though Medvedev is the face of Gazprom's force, it is Surkov and Sechin who are duking it out behind the scenes. If Medvedev becomes president or prime minister, Rosneft will need a force to counterbalance his presence and be the face for Rosneft and Sechin.

The obvious -- but not ideal -- choice is Ivanov, who has stuck to defense and military issues and has no experience with energy politics. However, Ivanov is Putin's other likely successor. Putin has realized that if the Rosneft-Gazprom battle goes unchecked, the power struggle among his inner circle will collapse the state, either before or soon after he leaves office. Unless he wants to hand his successor a shattered Kremlin, Putin must overcome a cadre of powerful personalities -- and he has less than a year left to do it.

From the Moscow Times:

The State of Auction Theory

By Konstantin Sonin

Returning to theory is often one of the ways people try to explain what went wrong in major auctions that have been held here in the past. The sale of the state's 75 percent stake in Slavneft in 2002, for example, was run in such a way that it maximized the opportunity for collusion between the most likely bidders. When the auction mechanism is based on open bidding -- so-called English auctions -- it is easy for participants who have reached an agreement on the outcome beforehand to track the bidding and make sure that no one deviates from the plan. The fact some of the firms participated were just fronts for unknown interests facilitated collusion even further. If one party to the plan noted that a bidder was acting outside the original agreement, he might activate a "sleeping" bidder to protect his interests.

In the 2004 auction for Yuganskneftegaz, formerly the largest production asset at Yukos, the whole process reached the absurd. It was unclear immediately following the auction which of the major parties interested, Rosneft or Gazprom, was behind the unknown company that came out the winner.

An example of how best to prevent collusion between bidders came in the auction for a blocking stake in state-owned telecoms giant Svyazinvest in 1997. As this case demonstrated, the risk of behind-the-scenes deals is minimized if the auction is conducted using sealed bids. The ultimate winners said themselves that they overpaid for the stake significantly, which had to be a positive result for those who organized the sale.

It appears that we may face the same issues again when Yukos' remaining assets go on the block over the next few weeks. In the first of these auctions, in which the now-bankrupt company's shares in state-controlled oil major Rosneft will be up for bid Tuesday, the outcome looks like a foregone conclusion. Even ignoring the likelihood of political interference, the main contender is Rosneft itself. It will be hard for TNK-BP, the other declared contender, to walk the fine line involved in losing the auction while still giving the impression that it is trying to win. As a result, it will likely be very careful in bidding. If the auction were "closed," meaning that it was based on the submission of sealed bids, the price fetched for the assets would be higher, as the favorite would have to insure itself against the risk of coming in too low.

The organizers have clearly not taken a best-theory approach in setting up another looming auction, scheduled for April 4. This will combine a 20 percent packet of shares in Gazprom Neft (the renamed Sibneft), ArcticGaz, Urengoil, and other Yukos assets. Pure theory would suggest that these assets should have been auctioned off separately. That way, bidders who didn't have deep enough pockets to vie for the entire package might have been interested in some of the individual assets. At the risk of sounding repetitive, this should have been designed as a closed auction as well. Bundling all of these assets into one package has made the auction absolutely uncompetitive. There is only one company in Russia that is interested and able to tackle something this big, and that is Gazprom. If the plan had been to auction the assets individually, Gazprom would have faced competition for at least some of these, a factor that would likely have driven prices higher. But the organizers apparently believed that organizing the auctions separately would allow the bidders to collude and that some assets would be scooped up on the cheap.

All of this theory aside, it is possible that political decisions about what should go to each of Rosneft and Gazprom and with only token competition have played the chief role in determining the auction mechanism here. If this is the case, then everything has been organized according to auction theories.

Reading the popular tech blog Slashdot this morning, I was directed to an interesting Fortune article about the hot (pardon the pun) market for technology investment out in the frozen plains of Siberia. We think this is great news and should be followed closely - Russia has so many terrific opportunities for foreign investors with the burgeoning and innovative private sector, diversifying away from just natural resources and minerals. If only doing business with state-owned firms could be as rewarding...

Time for Novosibirsk to export software solutions, not Russian brides

Fortune:

This is Akademgorodok - Academy Town - where Russian high tech booms. This place, called the Silicon Forest, won't pass for Silicon Valley anytime soon. Private high tech has expanded from a $10 million business a decade ago to a still-tiny $150 million industry last year, with the number of firms growing 15 percent annually.

But there is enough softly priced expertise for Intel, IBM, and Schlumberger to make camp here. And in a signal of Akademgorodok's broadening reach and legitimacy, a local IT firm is producing a Web portal for Oprah Winfrey.
...
Tapping brain resources, then, becomes a priority. Every year, Russia graduates as many science and technology specialists as India - 200,000 - although Russia is 80 percent smaller by population. Russian science and technology hold a unique position in the world, with a tradition of critical thinking and developmental breakthrough, along with a professional hunger born of the proximity to actual hunger.

Russia's software exports total $1.8 billion annually; the country is the third-largest software-outsourcing destination in the world, after China and India. "Inside Intel we have an expression," says Steve Chase, president of Intel Russia. "If you have something tough, give it to the Americans. If you have something difficult, give it to the Indians. If you have something impossible, give it to the Russians."

Below is a debatable controversial editorial comment from the Wall Street Journal today. Here is a short comment Bob wrote a while back about Russia and Iran.

Little Sweaty Fist

Why is Putin now getting tough on Iran?

BY BRET STEPHENS
Tuesday, March 27, 2007 12:01 a.m. EDT

"This is very easy to understand," said Russian President Vladimir Putin last year, explaining his idea of an energy policy. "Just think back to childhood when you go into the street with a sweet in your hand and another kid says, Give it to me. And you clutch your little sweaty fist tight around it and say, What do I get then?"

So why, when it comes to the Iranian nuclear file, has Mr. Putin finally opened his little sweaty fist, signing on--with no apparent compensations--to additional U.N. sanctions on the Islamic Republic while calling a halt to Russia's construction of the nuclear reactor at Bushehr?

That's the $64,000 question to which nobody seems to have anything better than a partial answer. Nearly from day one of his presidency, Mr. Putin has been Iran's best friend at the U.N. and, not so coincidentally, the leading supplier of its advanced conventional weapons. In 2000, the Kremlin tore up the so-called Chernomyrdin Agreement, a secret protocol negotiated by then Vice President Al Gore, in which Russia pledged to stop selling arms to Iran within five years. In 2002, deputy foreign minister Vyacheslav Trubnikov went out of his way to state that "Russia does not accept President George W. Bush's view that Iran is part of an 'axis of evil.'"

Since then, Russia has openly supplied Iran with sophisticated surface-to-air missiles. There are reliable reports that Russia has also assisted Iran covertly with its ballistic-missile technology. The Bushehr deal, itself valued at $1 billion, was intended as just the first of five planned reactors, worth $10 billion. Russian diplomats have diluted to near-insignificance the sanctions imposed so far by the U.N. In January, Russian Security Council Secretary Igor Ivanov paid a call on Iran's Supreme Leader Ali Khamenei. It seems the meeting went well: "The Islamic Republic," said the Ayatollah, "welcomes all-out promotion of relations with Russia, believing the capacity for expansion between the two sides is higher than expected."

And then, on March 19, Iranian, European and U.S. sources reported that Russia had informed Iran that it would not supply the reactor with the uranium it needs to function unless Iran complied with U.N. resolutions calling on it to suspend its enrichment program. And citing a payment dispute, the Russians also began pulling some of their 2,000 personnel from the site, while officially claiming it was a routine staff rotation. At the Security Council, U.S. diplomatic sources confirmed that Russia had been remarkably cooperative in negotiating Saturday's unanimous resolution on Iran, going so far as to blunt an attempt by some of the nonpermanent members to insert language calling for a nuclear-free Middle East--code for disarming Israel.

What gives? Past experience suggests the answer may yet turn out to be not much at all. At the 2003 G-8 summit in Evian, France, Mr. Putin reportedly assured other leaders that Russia would not supply the Iranians with nuclear fuel unless they agreed to snap U.N. inspections of their nuclear facilities. A later "clarification" from Russia's atomic energy minister indicated that Russia would provide the fuel no matter what Iran chose to do about the inspections. Similarly, Vitaly Churkin, Russia's ambassador to the U.N., has recently insisted that "there has been no Russian ultimatum to Iran of any kind," while adding that the deal with the Iranians "was on track." Put simply, the (easily resolved) payment dispute may be all the "fire" there is here, and not smoke to cover a sweeping change in Russian policy.

For their part, U.S. diplomats are sticking to their story that the Russian-Iranian split is real--as do the Iranians, who in the last week have publicly accused Russia of being an "unreliable partner" practicing "double-standard stances." The words are carefully chosen. As Victor Yasmann of Radio Free Europe writes, "Russia cares about its commercial supplier . . . [and] in preserving its political reputation within the Islamic world." That's especially the case now that Russia's once-failing military exporters are doing a thriving business selling bottom-of-the-shelf weapons to Syria, Libya, Venezuela, Yemen, Algeria and other bottom-of-the-shelf states. If Russia is seen to succumb to international pressure on Iran, other dubious regimes may be less inclined to attach themselves to it as clients.

Yet another reading of events suggests the mixed signals coming from Russia reflect policy schizophrenia within the Kremlin itself. "There is clearly an active pro-Iranian lobby in Moscow," says Pavel Felgenhauer, defense correspondent for Novaya Gazeta. He adds, however, that Moscow's change of policy is "the result of an assessment that a nuclear Iran is a major danger to Russia and its national interests." Among other indicators, Mr. Felgenhauer points to Russia's naval buildup in the oil- and gas-rich Caspian Sea.

The Russian leadership may also have started to notice that it is increasingly in bad odor with a West that, at some level, it longs to be considered a part of. "There is a compact pro-Western group who think that cooperation with the major industrial states, primarily the United States, could benefit Russia much more than murky dealings with questionable partners like China, Iran, Iraq or Libya," writes former Russian diplomat Victor Mizin in a perceptive analysis in the Middle East Review of International Affairs.

Finally, there is the "little sweaty fist" hypothesis. Critics of the Putin government were dismayed last year when the Bush administration agreed to Russian membership in the World Trade Organization, apparently for nothing in return. The Bushehr volte face may be the delayed (and disguised) payoff. Alternatively, Russia may expect that its sudden pliancy on the Iranian file may yield dividends on the things it cares about most, particularly in what it considers its rightful sphere of influence. In a recent Los Angeles Times op-ed that may have also served as a trial balloon, the Nixon Center's Dimitri Simes proposes two prospective giveaways: The breakaway Georgian "republics" of Abkhazia and South Ossetia, which Mr. Putin has long regarded as rightfully Russian, and the looming question of Kosovo's independence, to which Russia is vehemently opposed.

In the meantime, the Kremlin preserves all its options, a reminder, as Glen Howard of the Jamestown Foundation observes, of an old KGB maxim: First create a problem, and then offer to be part of the solution. On that score, at least, Mr. Putin is nothing if not true to type.

Russia's foreign ministry has just released a 70-page strategy paper repeating many of the hostile perspectives toward U.S. foreign policy as expressed by Vladimir Putin during the Munich security conference speech. While it is difficult to disagree with the many of the paper's statements on the escalating situation with Iran (although accusing Washington of causing a "clash of civilizations" is not exactly constructive), it is the other components of Russian foreign policy that they are seeking to piggyback on this popular anti-Americanism that should cause concern, such as energy policy, arms sales, Kosovo independence, and economic and political interference in the former satellites, among others.

From the IHT:

Russia assails U.S. global policy, warns against attacking Iran in foreign strategy paper

MOSCOW: Russia's Foreign Ministry on Tuesday sharply criticized the United States for what it called over-reliance on force and warned Washington against military action against Iran.

But in a major review of foreign policy priorities, the ministry said Moscow was ready to cooperate to end global crises if Washington treats it as an equal partner.

The 70-page document, echoing a tough speech by President Vladimir Putin in Germany last month, reaffirms Russia's determination to challenge the United States when it feels it has to — despite Moscow's recent decision to increase pressure on Iran's nuclear program.

The statement reflects Russia's growing confidence and economic clout, and appears to be a signal to Washington that, while the two nations can work together, Russia will not always follow the U.S. lead.

The document also plays to national pride in advance of parliamentary and presidential elections.

"The international community mustn't take risks connected to the escalation of the situation around Iran until the United States takes sincere, conscientious efforts to normalize its relations with Tehran," the ministry said. "Attempts to label Tehran as part of an 'axis of evil' and statements about the need for a regime change in Tehran ... exacerbate the situation."

Russia criticized what it called "the creeping American strategy of dragging the global community into a large-scale crisis around Iran," saying that Tehran helps maintain stability in Afghanistan and Central Asia.
...
The Foreign Ministry also warned that Russia would defend its economic and political interests in other former Soviet nations. The statement also bristled at Western criticism of Moscow's record on democracy and human rights.

"A strong an increasingly confident Russia has become an important part of positive changes in the world," the ministry declared. "The balance of forces and competitive environment lost in the end of the Cold War are being gradually restored. The myth about a unipolar world has collapsed irrevocably in Iraq."

Complete article here.

Today's news that the Russian state won the discount auction for Yukos's nearly 10% stake in Rosneft comes as no surprise for anyone close to these proceedings. The final price was a paltry $7.6 billion - only $90 million above the opening price, and still 10% below the value of the stake. Even though on Friday, representatives of BP insisted that they would be seriously bidding after these assets with the intention of gaining a strategic foothold in Rosneft - yet they couldn't be bothered to even offer market value? That just doesn't add up, and contributes to the widely held assumption that BP's participation was only smokescreen of formality to lend legitimacy to this rigged auction of stolen goods.

Don't worry though, of that $7.6 billion that Rosneft will apparently pay, you can bet that no money will actually change hands. Indeed, the bankruptcy supervisor himself, Eduard Regbun, has been nominated to Rosneft's board of directors, and will stand to profit privately from his public role.

From the AP:

Journalists and television crews crowded the company's conference hall, formerly the venue for Yukos managers to tout the triumphs of what was Russia's biggest oil producer. But the hall became the scene of its dismemberment, with footage of the first liquidation auction broadcast to plasma screens mounted on the walls.

The process lasted just a few minutes: Four men in dark suits sat behind two tables covered with orange tablecloths. They raised their numbered paddles a total of 10 times. Number 2, RN-Razvitiye, bid last.

Rosneft, which has borrowed US$22 billion (euro17 billion) from foreign banks for this and future auctions of Yukos assets, was widely expected to win.

In a statement afterward, Rosneft said it would use the 9.44 percent stake it acquired as a "strategic currency" and could exchange the shares for oil assets in Russia and overseas.

From the IHT:

Few doubt that Rosneft will win. In Russia's politically supercharged energy industry, any other company wanting to bid would need a nod from the Kremlin first. That explains why BP's entry into the auction got a jaundiced reception from government critics. By Russian law, there must be at least two parties to an auction, and until BP entered the fray last week there was only Rosneft.

Just on Friday, the chief executive of BP, John Browne, and his designated successor at the company, Tony Hayward, met with Putin. A spokesman for BP, Robert Wine, said Monday that the meetings had been intended for Browne to introduce Hayward to Russian officials. He said that he could not say whether the auction Tuesday was on the agenda.

On a recent excursion to Nefteyugansk that was organized by the company, Rosneft executives defended their management of the asset and the role of the state in business generally.

"We try to make sure our shareholders get the best dividends and value," Sergei Kudryashov, Rosneft's first vice president, said. "There is no difference between us and any private companies, like BP or Exxon."

From the Sacramento Bee:

Yukos assets bid raises concerns

By Gilbert Chan - Bee Staff Writer

State Controller John Chiang wants the California Public Em- ployees' Retirement System's staff to take a hard look at the fund's investment in Chevron Corp. if the company succeeds in today's scheduled auction for assets of OAO Yukos Oil Co.

Once Russia's largest oil producer, OAO Yukos is now bankrupt. In a letter to CalPERS, Chiang cited critics, including the U.S. State Department, that have questioned the sale and accused Russian authorities of violating the law by seizing Yukos assets and jailing the company's former chief executive over fraud charges.

"I am concerned that Chevron -- which is a top-20 equity holding by CalPERS -- may be exposing itself to litigation and divestment campaigns based on allegations of complicity in illegal and unethical activities by the Russian government" Chiang wrote to Russell Read, the fund's chief investment officer.

The fund's investment in Chevron amounted to $827.1 million, or 0.35 percent of total assets, as of Dec. 31, 2006.

Here is a short video clip showing the confrontations between anti-government protesters and police this past Saturday in Nizhny Novgorod. Additional coverage: Kommersant and New York Times.

Deng Coy Miel, Singapore

Spero News reprinted the following article from Radio Free Europe:

Energy: Looking for ways to circumvent Russia

Diplomat: Agreement would support Europe's stated aim of diversifying its energy imports -- and help Azerbaijan emerge as a viable alternative to Russia's natural gas giant, Gazprom

Three meetings. Three cities. One goal: making Europe less dependent on Russian energy.

On March 22, Azerbaijan's foreign minister was in Washington, Georgia's prime minister was in Turkmenistan's capital Ashgabat, and a major energy conference opened in the Georgian capital Tbilisi.

Topping the agenda in all three cities were plans to develop alternative oil and gas transport routes that circumvent Russia and loosen Moscow's stranglehold on Europe's energy supplies.

This diplomatic flurry came just one week after Russian President Vladimir Putin signed a deal with Greece and Bulgaria to build a pipeline to transport Russian oil from the Black Sea to the Aegean en route to European markets.

Federico Bordonaro, a Rome-based energy analyst, says today's scramble for control of energy transit routes is beginning to resemble the Cold War struggle between Russia and the West.

"What we were used to during the Cold War years was a kind of security dilemma," Bordonaro said. "Powers needed to choose between alliances and between different security strategies. Something very similar is apparently going on in the field of energy security."

Complete article here.

With the news that energy companies such as Chevron, BP, ENI, and Enel are interested in participating in the upcoming auctions of Yukos assets, investors and shareholders are beginning to cry foul. The first major indication - a letter from California State Controller John Chiang to Calpers, California's massive state pension fund, expressing concern over the group's stake in Chevron and BP in regards to the companies' decision to engage in ethically and legally questionable investments in Russia.

From the FT:

Doubts raised about Calpers investments

By Catherine Belton in Moscow

California's State Controller is calling for Calpers, the huge Californian state pension fund, to review its investments in Chevron and BP over their potential participation in the sell-off of Yukos, the now bankrupt Russian oil major whose owner, Mikhail Khodorkovsky, has been jailed.

John Chiang, also a Calpers board member, said in a letter dated March 22 to the fund he was concerned about the legal risks attached to Chevron's possible participation in the Yukos auctions, which Yukos' owners have slammed as the biggest expropriation in history.

"I am concerned that Chevron. . . may be exposing itself to litigation and divestment campaigns based on allegations of complicity in illegal and unethical activities by the Russian government," Mr Chiang wrote in the letter, obtained by the Financial Times. "We should engage in immediate due diligence to assess the risks and, if warranted, take appropriate mitigation steps," said Mr Chiang who oversees California's $100bn budget and the $233bn Calpers has under management.

Russian officials have asserted that Chevron has expressed interest in bidding for the Yukos assets, which include two production units with a combined output of 500,000 barrels per day and seven refineries. But the US oil major itself has declined to comment.

A spokesman for Mr Chiang said the state controller would now extend his calls for a review of the fund's investments in BP too. "The state controller will take the same route with BP as with Chevron," said the spokesman, Garin Casaleggio. "He's going to ask for another assessment of the risks to the portfolio."

Calpers holds approximately 47.2m shares in BP with a market value of about $478m. It owns 11.35m shares in Chevron valued at $704.6m.

But analysts said a review by Calpers, which is known for taking a more vocal and proactive approach to ethical investing, was not likely to lead to other funds following suit, while it is likely oil foreign oil majors would pay little heed.

"Oil companies are used to criticism over their investments," said Chris Weafer, chief strategist at Alfa Bank. "It goes with the territory."

Calpers is now one of the few global funds to refrain from investing in Russia.

From the Globe and Mail:

Yukos auction plans ignite investor backlash

SHAWN MCCARTHY

OTTAWA — Western oil companies and banks that are lining up to participate in the auction of remaining assets from Russia's OAO Yukos are facing stiff resistance from supporters of the oil giant's former owners.

California controller John Chiang has written to fellow board members of the giant California Public Employees Retirement System, urging them to oppose any bid by Chevron Corp. for a stake in a former Yukos subsidiary.

In the letter to be delivered this week and provided to The Globe and Mail on Sunday, Mr. Chiang warned that California-based Chevron — in which the state pension fund is a major shareholder — would face “allegations of complicity in illegal and unethical activities by the Russian government” if it purchased Yukos assets.

As a result, the company could be subject to legal action, posing a risk to Calpers' investment, the state controller said.

Yukos, once Russia's largest oil company, was forced into bankruptcy when its founder and chairman, Mikhail Khodorkovsky was prosecuted and jailed for tax evasion. He now faces new charges for corruption and money laundering.

State-owned companies OAO Rosneft and OAO Gazprom have already acquired some of the prized assets, and are now leading contenders to win a bankruptcy auction for the remaining ones. Several western companies, including Britain's BP PLC, Italy's Eni SpA, and Chevron, are expected to bid in joint ventures with the Russian firms.

Rosneft announced this month that it has arranged a $22-billion (U.S.) loan to finance Yukos acquisitions. Its lenders include Barclays, Goldman Sachs and JPMorgan.

In an interview, Mr. Khodorkovsky's lawyer, Robert Amsterdam, complained the western firms are so eager to do business in energy-rich Russia that they are lending an air of legitimacy to political persecution of his client and corruption by Russian President Vladimir Putin's administration.

“Western banks and western energy companies are prepared to engage in conduct that is corrupt because they are trying to curry favour with the Kremlin,” he said.

The company's western investors, who now hold worthless shares, warned this weekend that they would launch lawsuits worth billions of dollars against oil companies that purchase Yukos assets or banks that finance the auction.

BP said on Friday that it would bid on Yukos assets after company chief executive officer John Browne met with his Rosneft counterpart and Mr. Putin.

Tim Osborne, a director of Group Menatep, who owns a majority of Yukos shares, told The Independent newspaper that his group would pursue legal action if BP — or any other western company — succeeds in the Yukos auction.

While the U.S. State Department has complained the Yukos affair “raises questions about Russia's commitment to rule of law,” the Russian government insists Mr. Khodorkovsky and his associates were themselves corrupt and deny the prosecution was politically motivated.

The controversy over the Yukos bankruptcy is being rekindled as Canadian business people prepare to meet today with Russian counterparts in Ottawa for the first bilateral business summit.

Companies such as Petro-Canada, Kinross Gold Corp., and Bombardier Inc. are participating in sessions aimed at expanding trade and investment ties between the two countries.

Mr. Amsterdam had a cautionary note for would-be investors, urging them to steer clear of politically sensitive sectors that are increasingly falling under state control, such as energy and mining.

“Russia is an important country and one with which we should all do business, but we shouldn't do business their way,” he said.

In today's New York Times, Steven Lee Myers examines (and in a certain way, issues a moral judgment of) the public reactions to Russia's week of tragedies, which saw 180 people killed in a mine accident, a nursing home fire, and a plane crash. Even though Myers makes a strong point about silence equaling complicity in many regards, the last thing we need is for American newspapers to think they can tell Russians how to properly handle tragedies:

Photo by Sergei Ilnitsky/European Pressphoto Agency

Russians grieve, but they do so privately. They rarely demand public action — through the media, elected representatives or, in the extreme, street protests. A result is a lack of accountability, even impunity, that lets corruption fester, otherwise solvable problems mount and disasters repeat. ...

History might explain part of the country’s indifference. Russia has endured revolution and war on a scale that can be difficult to comprehend. A former commandant of the Army War College in the United States, Maj. Gen. Robert H. Scales, once recalled giving a Russian general a tour of Gettysburg. The Russian asked the American how many casualties the battle produced. Told that 51,000 soldiers were killed, wounded or missing, the Russian swept his hand dismissively. “Skirmish,” he said.

But Mr. Ganapolsky, the radio host, said history alone did not explain today’s Russia. Russians care, he said in an interview, but they stay home and express their anger or sorrow in private.

“Why do Italians come out into the streets?” he said. “Because they know they can change their government. Why don’t Russians come out in the street? Because they know they will meet the riot police.”

Today the Independent is running a story quoting Tim Osbourne of GML, who has issued a clear and stern warning to any oil companies seeking to participate in the upcoming auctions of Yukos assets:

The owners of Yukos have warned BP and other Western companies they face claims for billions of pounds in compensation if they participate in this week's auction of the former Russian oil giant's remaining assets.

The London-based GML is pursuing a $50bn claim through the European Union Energy Charter Treaty to try to recover its assets. Tim Osborne, the director of GML, said that if the claim failed, the investment group could target companies and banks participating in the Yukos auction instead.

"If anything goes wrong with the Energy Charter claim we would look very closely at who has bought the assets. We could look at a claim in the near future," said Mr Osborne. "All other Yukos shareholders will be looking very closely at any Western company who does acquire the assets. That would be an easy way to get money back. It's nice to know we have something to fall back on."

The first full hearing on GML's claim takes place in June. The court will decide whether to proceed with it by the end of the year.

Mr Osborne added: "No one participating in these actions can get good title. These are stolen assets. You can't get good title if you know the person selling it has not acquired it legally."

I came across this interesting 43-page paper prepared by the Finnish academic Kari Liuhto for the Pan-European Institute of the Turku School of Economics which examines the development of Russia's policy for strategic resources and outlines the changing role for foreign participation.

Here is the introduction:

A Future Role of Foreign Firms in Russia's Strategic Industries - Introduction

by Kari Liuhto

The Russian economy has expanded with exceptional speed during the past eight years. The average annual GDP growth during these years has been around six per cent. Private consumption has increased even faster, reaching double digit figures annually. The long economic growth in a populous market with more than 140 million consumers has started a genuine foreign investment boom. The annual foreign investment inflow to Russia has multiplied compared with the situation in the first half of the 1990s. During the period 19901995, the average foreign direct investment (FDI) inflow was slightly over one billion US dollars per annum (UN, 2002), whereas in 2005 the FDI inflow was nearly 15 times higher. Despite such a sharp increase, one should not forget that Russia’s inward FDI stock is still less than USD 150 billion, i.e. it is less than 10 per cent of the US stock (UN, 2006).

Experiences of foreign firms operating in the Russian market differ to a great extent depending on the industry in question. The majority of the foreign firms, for instance, in retail trade, have been very satisfied with the skyrocketing revenues generated by the domestic consumption boom. On the other hand, several foreign corporations operating in a natural resource sector, particularly in the oil and natural gas business, have expressed their growing concern over the strengthening grip of the state. The following quotation aptly describes the aforementioned situation in the oil and natural gas business.

“The Russian authorities’ attack on Royal Dutch/Shell and its Japanese partners at the Sakhalin2 project has been broadened, embracing three other major projects that are wholly or majority foreign owned. The moves seem intended to advance Russian interests on two fronts: to increase national participation in these four major projects3 and to revise the revenue sharing arrangements in Russia’s favour. … Legislation now in preparation insists that all ‘strategic’ oil and gas deposits be under majority Russian control” (BEE, 2006d, 12).

The growing direct involvement of the state in the so called strategic sectors of the economy has raised several questions, such as which industries are to be classified as strategic, what is the future role of foreign firms operating in these industries, which authority in Russia will be responsible for implementing the legislation on these strategic sectors, and how changeable are the laws dealing with the strategic industries in the future?

These questions puzzle many foreign companies operating or investing in Russia, and hence, the main objective of this article is to position Russia’s key industries in the strategic governance matrix, i.e. to analyze the growing risks created by the expanding political economy in Russia for a foreign investor.

On Saturday, the Associated Press on the crackdown by riot police of an anti-government rally held in Nizhny Novgorod. The protest, organized by Other Russia among other groups, was denied a permit by the authorities to hold the proceedings in the central square. The Kremlin also went to extraordinary lengths to prevent this public show of disapproval - for example, Marina Litvinovich, an aide to Garry Kasparov, was arrested twice and released on her way to the rally for the invented charge of driving a stolen car. Other protest leaders were arrested under terrorism charges for allegedly distributing pamphlets describing "how to make bomb." When the multitudinous rally convened, a large squad riot police were dispatched, violence erupted, and hundreds were arrested, according to news reports. Among the arrested were photographers from the AP, Reuters, and the New York Times. State-controlled news television gave no coverage to the story.

Below are some images and news clips describing the action on the scene. A video news clip of the crackdown can be watched here.

An Associated Press photographer saw dozens of protesters taken into custody by police and some beaten with truncheons. The photographer was briefly detained by officers, who later released him, saying there had been a mistake.

A small group of elderly people yelling “Fascists! Fascists!” tried to hold back a second wave of police officers, who charged the square after the initial protesters had been carted off. But they fell to the ground under the heavy police shields.

“Look, this is a democracy,” said one woman there who refused to be identified. “Under Stalin we had free education and free health care. Now we are not free to say anything.”

A police helicopter hovered over Gorky Square and adjacent roads were blocked by lines of riot police, several witnesses told Reuters.

City buses were used to ferry away those arrested and scuffles broke out as police wrestled with chanting protesters and removed flags.

Yesterday the International Herald Tribune reported that the German firm Wintershall, the energy division of BASF (and trojan horse for Russia to penetrate German foreign policy, thanks to Chancellor Schroeder), has announced a raft of investment projects with Gazprom totalling €3.5 billion. A significant chunk of this money will go toward the much disputed North European Gas Pipeline project, as well as €800 million in natural gas exploration and production joint ventures with Gazprom.

Reinier Zwitserloot, chairman of Wintershall, Kremlin owned and operated

And in Wintershall's Reinier Zaitserloot, Gazprom has found another European spokesman in the crass mold of Gerhard Schroeder. This troubling, but not entirely surprising, development underscores the fact that there is virtually no end to the impunity with which Western companies are racing to the bottom of corporate ethics - scrambling to make a buck in Russia no matter what damage their conduct is causing. In a month that has seen both ENI and BP sink to new lows, Wintershall came out to show it could go even lower.

The problem here is that in an obscene dialectic of opportunism and blindness to long-term interests, Western companies are continuing to signal that protection of private property is not a core value in respect foreign direct investment in Russia - and that's something that will come back to hurt all of us, inside and outside of the country. (Stay tuned for an upcoming extended blog article analysing the links between energy companies and foreign policy, otherwise called Putin Privatization and Public Policy Formation).

Here is Zaitserloot exercising his newly appointed duties as Kremlin energy policy apologist:

Despite concerns that President Vladimir Putin of Russia has used energy as a political instrument against some of its neighbors, Zwitserloot strongly defended Gazprom, calling it a reliable partner which Europe needed.

"There can be no supply without Russia," he said.

"Of course, one can criticize Russia. But we should not measure it with a different yardstick than we use for other suppliers. One thing is clear. Those who fear energy dependency on Russia should not look to Iran of all places."

Europe buys a quarter of its natural gas from Russia. Germany buys more than 35 percent from Russia.

Zwitserloot said the dependency was not one-way.

"Russia also delivers more than 60 percent of its exported natural gas in one direction. And in Europe, Germany is Russia's most important trading partner. Unfortunately, this is all too often forgotten," he said.
...
When asked if he had any concerns about the Russian authorities' own record of property rights when it recently reduced the stakes held by foreign companies, including Shell, in companies in Russia, Zwitserloot said that Wintershall always had an excellent relationship with Russia.

Robert Amsterdam was quoted in today's edition of the Independent:

BP accused of giving in to Kremlin 'extortion' By Saeed Shah Published: 24 March 2007

BP was accused of giving in to "extortion" from the Kremlin yesterday after the oil giant bid $9bn (£4.5bn) to buy a further stake in the Russian state-controlled energy group Rosneft.

The British company's participation in the highly controversial auction of assets that used to belong to the bankrupt oil company Yukos emerged on the day that BP's current chief executive, Lord Browne, and his successor, Tony Hayward, went to meet the President of Russia, Vladimir Putin.

The Russian government is running an auction of the remaining assets of Yukos, which used to be controlled by the jailed tycoon Mikhail Khodorkovsky. Those Yukos assets include a 9.4 per cent stake in Rosneft.

Mr Khodorkovsky has accused the Kremlin of stealing Yukos from him - analysts believe that Mr Putin moved against him because he started backing the political opposition. Robert Amsterdam, Mr Khodorkovsky's lawyer, said that BP's participation in the Yukos auction would lend legitimacy to the process and promote the British company's interests with the Kremlin.

"They [BP] are doing it for access. Everyone knows that auction is fixed and that BP won't win," Mr Amsterdam said.

BP, through its Russian joint venture TNK-BP, is currently in delicate negotiations over its giant Russian gas field Kovykta with the state-controlled energy group Gazprom. Officials are threatening TNK-BP with revoking its Kovykta licence. It is thought that the development of Kovykta will only be allowed to go ahead after Gazprom is given a large share of the project.

Mr Amsterdam said: "BP is rewarding the Russians for taking hostages. First they took Khodorkovsky. Now they're holding Kovykta. It is extortion ... We are walking into the Munich of energy appeasement."

Last summer, BP paid $1bn to take a 1 per cent stake in Rosneft in its London flotation, again helping to legitimise the process - Rosneft's biggest asset was Yuganskneftegaz, which was taken from Yukos in another forced "auction" in 2004.

BP yesterday insisted that it had made a genuine bid in the new auction, which is scheduled for Tuesday next week. It is thought that BP has put up a deposit of $1.5bn. "We're going into it seriously," Peter Henshaw, TNK-BP's vice-president for communications, said. "It's about building stronger relationships and acquiring a strategic asset."

The 2004 auction of Yuganskneftegaz assets turned into a farce after it emerged that the only and winning bidder was a company no one had ever heard of, which was registered in a provincial town. Yuganskneftegaz was quickly passed on to the ownership of Rosneft - that is, state control.

This time, analysts believe, the Kremlin has put pressure on respected international companies to participate in the auction - Italy's ENI is expected to bid for some assets. TNK-BP will be bidding against Rosneft itself for the Rosneft stake.

Some conspiracy theorists speculated that TNK-BP would actually win the auction but that would mean that, later, the Russian businessmen in the joint venture would be replaced by Rosneft.

The former shareholders in Yukos, represented in a holding company Menatep, have vowed to sue any companies buying its assets. Tim Osborne, director of Menatep, said: "There's a lot of risk attached to any Western company getting involved in these auctions. Because they're in receipt of stolen goods, they can never get good title."

At the meeting yesterday, President Putin, Lord Browne and Mr Hayward discussed the possibility of Russian energy companies co-operating with BP in countries outside Russia, as well as "various questions connected with the company's activities in Russia," according to the Kremlin spokesman Dmitry Peskov.

Mr Putin noted the successes of TNK-BP, Mr Peskov said. "The company is developing actively in Russia, where its reserves, production levels and profit are growing," Mr Peskov quoted him as saying.

[The attached press release from Robert Amsterdam was distributed via wire today. It can also be viewed here and here]

Western Participation in Yukos Auctions Must Be Investigated,
Says Khodorkovsky Attorney
---

LONDON, March 23 – Blasting the “immoral opportunism” of Western banks’ and energy firms’ participation in the upcoming controversial auctions of Yukos Oil Company assets in Russia, attorney for political prisoner Mikhail Khodorkovsky has called for a Congressional investigation.

Attorney Robert Amsterdam called for protests to senior management and an investigation following news reports that Citibank, ABN AMRO, Goldman Sachs, J.P. Morgan Chase and Morgan Stanley, among others, are providing loans of $22 billion to Rosneft to enable it to purchase the assets of Yukos, Khodorkovsky’s former company, in a highly contentious auction scheduled for late March and early April. In addition, today the Times of London reported that British Petroleum (BP) intends to participate in the auction through a subsidiary, despite sources quoted by the newspaper that BP’s name will likely only be used to give an appearance of competition to what many believe is a rigged auction to deliver these assets into the hands of the state.

“Two things are guaranteed: the auctions are fixed, and the value will be unconscionably low,” said Amsterdam. “Western participation to legitimize this farce, as manipulated by the Kremlin, only shines a light on the desperation of these firms to curry favor with the president’s gatekeepers. These groups are not backing the auction because they want the assets, which carry significant legal liability; they are participating solely to acquire access to a corrupt business model in Russia.”

The unlawful nature of the attack on Khodorkovsky and the forced seizure of Yukos assets has been widely recognized by numerous international bodies, including the U.S. Department of State. Amsterdam recently authored a seminal White Paper detailing the numerous violations of due process committed by the Russian state in the attack on Yukos, which argues that Russia’s rise as a hostile energy power is largely connected to the disputed nationalization of these assets.

“I call upon all U.S. shareholders of Yukos and concerned observers to request that Congressman Barney Frank and Congressman Tom Lantos investigate on the use of Western financial institutions and energy firms as instruments of Kremlin foreign and domestic policy,” he said.

Robert Amsterdam is the founding partner of Amsterdam & Peroff, and represents the former Yukos CEO Mikhail Khodorkovsky. This statement represents his personal views. Mr. Amsterdam maintains a blog at www.robertamsterdam.com.

Following a press conference held Thursday by Robert Amsterdam in Rome, the Italian press published the following articles:

Finanza Mercati: I Legali di Khodorkovsky a Romo contro Eni ed Enel

Finanza Mercati: Il round de Bonnani by Oscar Giannino

Messagero: Eni-Gazprom, l'avvocato di Yukos va all'attacco

Corriere della Sera: Eni ed Enel non partecipino alla falsa asta

And from Dow Jones in Italy:

ROME (Dow Jones)--A lawyer for Russian businessman Mikhail Khodorkovsky, the jailed founder of OAO Yukos (YUKO.RS), Thursday said Italian energy giants Eni SpA (E) and Enel SpA (EN) could face a U.S. lawsuit if they buy any Yukos assets.

Yukos' remaining assets, which include significant oil and gas reserves inside Russia, are scheduled to be sold in a series of auctions in coming months.

"I will not deny the possibility of a lawsuit, nor am I saying that I will do it," lawyer Robert Amsterdam told a press conference in Rome.

He said any subsequent lawsuit against the companies would be brought in the U.S., because Eni and Enel "operate there."

Eni has exploration and production activities in the U.S., while Enel has power generation operations in the country. Both companies have American Depositary Receipts traded in the U.S.

"This conduct (of Eni and Enel) is high-risk," said Amsterdam, adding that the companies' reputations would suffer if they took part in the selloff.

Yukos was pushed into bankruptcy last year after tens of billions of dollars of back-tax claims. The move was widely seen as a political showdown between the Kremlin and Khodorkovsky, who was arrested and then jailed by a Russia court.

"Enel confirms its interest in the ex-Yukos asset of ArticGaz," a spokeswoman for the Rome-based utility told Dow Jones Newswires.

An Eni spokeswoman declined to comment.

Eni and Enel are teaming up with Russian company ESN Group to bid for some of the former Yukos assets for which an auction is slated to take place in April.

ArticGaz is one of the assets up for sale. The company has 4.56 billion barrels of oil equivalent in proved, probable and possible oil and gas reserves.

Amsterdam said Eni and Enel would be participating in an auction that is "illegal" and that "legitimizes" the Kremlin's seizure of the assets.

"I am here today so that when Eni and Enel are called to account...they can't say they didn't have knowledge of the theft." The lawyer, a partner at Toronto-based law firm Amsterdam & Peroff, said he has not met with representatives of the companies nor of the Italian government, nor has he plans to do so.

The Italian state controls more than 30% of Eni and Enel.

Italian Prime Minister Romano Prodi and Russian President Vladimir Putin met in Italy last week to discuss various business deals, including in the energy sector.

Last month Russian prosecutors issued money-laundering and embezzlement charges against Mikhail Khodorkovsky, which could add 15 years to his eight-year prison sentence if he is found guilty.

Khodorkovsky was arrested in 2003, and was sentenced in 2005 to nine years in prison for fraud and tax evasion, a sentence subsequently cut to eight years.

Well it seems that Lord Browne's visit to Russia has been productive - the Kremlin has given him clear instructions on how he can salvage TNK-BP's stake in the Kovykta project, or at least make up for the loses incurred: lend BP's good name to the Yukos auction to give this rigged event an appearance of legitimacy (of course this is the second time BP has cowered before the bear - apparently the $1 billion investment in the Rosneft IPO wasn't sufficient).

What is remarkable here is that it seems that everyone, perhaps even BP included, is fully aware that this auction is absolute farce, and the only reason to participate is to purchase future access to a woefully corrupt Russian business model. The stated plans of BP, ENI, Enel, and a raft of Western banks not only perpetuates and props up a hostile energy empire that threatens EU security of supply, it is also funding the continued backsliding of Russian democracy and the piecemeal destruction of civil liberties for Russian citizens

From the Times - "TNK-BP to enter $7bn Yukos auction":

One City-based source said TNK-BP was likely to have been “invited” to take part in the Rosneft auction to ensure it looks competitive.

“It seems pretty clear that either Gazprom or Rosneft itself will win the shares,” he told TimesOnline.

This Russian energy blackmail and Western corporate opportunism represent a political cocktail that modern democracies can no longer afford to swallow. Watching this passion play of corporate greed and surrender to autocracy spits in the face of modern corporate governance – and underscores that the only thing green that these corporations understand is money.

Many times in the past I have written and spoken about the Kremlin's energy strategy, which is composed of elements of disaggregation, cooptation, and asymmetry. In Friday's Moscow Times, the excellent academic Janusz Bugajski has a piece which underscores the concept of disaggregation, citing the examples of establishing distribution points (or lack thereof) in Poland, Hungary, and Bulgaria to create strategic conflicts in the European Union.

File this one under required reading.

Hungarian Prime Minister Ferenc Gyurcsány turned his back on the EU

Influence Far Abroad

By Janusz Bugajski

Recent developments revolving around energy supplies and the future of Kosovo demonstrate how an emboldened Russia is intent on dominating the European agenda. Moscow's strategy toward the European Union consists of three core elements: disrupting EU consensus; gaining influence over key states; and preventing any further NATO or EU expansion.

In his landmark speech at the Munich security conference in February, President Vladimir Putin spelled out his priorities: to diminish the effectiveness of international organizations that obstruct Moscow's expansionist ambitions and to restore Russia's stature as a global power. Centralized control over growing energy revenues has enabled the Kremlin to accelerate the pursuit of these objectives.

Moscow greatly benefits from the absence of a coherent EU policy toward Russia. Formal mechanisms exist to regulate relations, but these have limited impact as long as member states can't agree on the details, as illustrated by the failure to renew the EU-Russia Partnership and Cooperation Agreement. Policy differences are most visible between newcomers to the EU in Eastern Europe and the French, German and Italian governments. While the former are fearful of Russia's resurgence and therefore prefer limiting the Kremlin's influence, the latter three are apprehensive about provoking disputes with Moscow.

For Paris, Berlin and Rome, commercial pragmatism prevails over geo-strategic calculations, thus reducing the effectiveness of any joint EU approach. For Moscow, increasing energy supplies and business inroads, especially in strategic infrastructures, will expand its political influence in key EU capitals. Conversely, Europe's growing energy dependence on Russia will undermine any unified response to Moscow's policies.

There are several telling examples of how Russia exploits EU divisions to its advantage. The planned Nord Stream pipeline under the Baltic Sea, contracted between Russia and Germany without an EU consensus, epitomizes Russia's approach. Nord Stream serves four objectives: to limit Russia's reliance on transit across Central Europe; to deepen West European dependence on Russia; to generate disputes between Germany and Poland; and to marginalize the Poles and Baltics within the EU by depicting them as incorrigible Russophobes.

The Kremlin not only manipulates divisions between older and newer members. It also aims to forestall any common policy among EU newcomers. Hungary and Bulgaria have become the primary targets among former Soviet satellites. The Kremlin is capitalizing on long-standing personal connections with Socialist officials in these countries to construct pipelines and distribution points that will pre-empt Europe's energy diversification.

Hungary's Socialist government has reportedly decided to support the extension of Gazprom's Blue Stream pipeline through Turkey to supply Caspian gas under Russia's control to the EU. If implemented, the project may scuttle the EU's planned Nabucco pipeline, viewed as essential in avoiding overdependence on Russian-controlled gas. Financial windfalls have lured Budapest, as Moscow promises to transform Hungary into a European hub for Caspian gas.

In the Balkans, the Kremlin is extending its control over Bulgarian and Greek energy infrastructures and thereby weaving another web to entangle the EU. In mid-March, the Bulgarian and Greek prime ministers signed an agreement with Putin to launch the Burgas-Alexandroupolis oil pipeline project. A Russian consortium, including Gazprom, will hold a 51 percent stake in the pipeline, with Bulgaria and Greece sharing the remaining 49 percent.

Once again, the goal is to make alternative routes and supplies redundant as Russia intensifies its control over Europe's energy needs. As the Bosporus is congested with tanker traffic, various proposals have been tabled to supply oil across the Balkans to the EU. The Kremlin supports the Bulgarian-Greek route as it calculates that Sofia and Athens will prove more politically reliable than other Balkan capitals.

Read the complete article here.

Slain Russian journalist Anna Politkovskaya speaks from beyond the grave (Reuters):

Slain Russian reporter chastises Russia in diaries

By Mike Collett-White

LONDON, March 22 (Reuters) - Slain journalist Anna Politkovskaya's diaries, published in English this week, paint a damning picture of a Russia where democracy is stifled, fascism is on the rise and ethnic minorities are brutally repressed.

For her, one man is to blame -- President Vladimir Putin.

Her hard-hitting account of Russian news and politics over two years, including the parliamentary elections in 2003 and the Beslan school siege in 2004, was completed shortly before Politkovskaya was murdered in Moscow in October, 2006, aged 48.

The 300-page collection of reportage and reflection, unpublished in Russia, is a reminder of why Politkovskaya was such a thorn in the Kremlin's side.

In the first of three sections, Politkovskaya describes the creation and success of the "phantom" pro-Kremlin United Russia party in 2003 parliamentary elections, which eased Putin's passage to re-election in a presidential ballot in 2004.

"Were we seeing a crisis of Russian parliamentary democracy in the Putin era?" she said. "No, we were witnessing its death."

Politkovskaya, her appeals unheeded in her lifetime by the majority who see Putin as a bulwark of stability, accuses those in power of undermining the opposition through intimidation.

She also voices her frustration at the opposition itself, saying it concentrated on wooing the wealthy while ignoring those below the poverty line, and at Russia as a whole.

"The Russian people gave its consent. The electorate took it lying down and agreed to live ... without democracy," she wrote on Dec. 8, 2003. "It agreed to be treated like an idiot."

Putin declines the totalitarian label, but says democracy must be adapted to Russian conditions and culture.

In between political reflections, Politkovskaya highlights the gap between Russia's rich and poor, allegations of arbitrary kidnappings and killings in southern Russia and of the torture and murder of a soldier by fellow recruits.

CONTENTIOUS THEORY

Politkovskaya wrote for a low-circulation liberal Moscow newspaper and was shunned by state-controlled media, making her less well known in her own country than she was abroad.

Several times in her memoirs, she argued that by resorting to what she called brutality and lawlessness in Russia's Chechnya province, the authorities under Putin were driving young people to take up arms against them.

"In the Chechen town of Urus-Martan, three boys have gone off to fight for the resistance," she said in 2005. "They left notes for their relatives explaining that they could ... see no other way to get back at the failure to punish evil-doers."

The mother-of-two also attacked Putin and security forces for botching the siege of a Moscow theatre in 2002 that left more than 100 hostages dead and that of a school in Beslan in 2004 in which more than 330 children and parents died.

Politkovskaya accused men loyal to Ramzan Kadyrov, confirmed as Chechnya's new president this month, of corruption and torture. Kadyrov has denied he ordered Politkovskaya's murder.

Politkovskaya's sister Elena Kudimova said investigators had narrowed the search for her killers to a few possibilities, but she could not predict if or when charges would be brought.

"She had quite a lot of enemies. There could potentially be a number of people who might have killed her," she told Reuters.

Kudimova added that Politkovskaya, respected internationally for reporting from troubled regions in Russia's south and tireless human rights campaigning, would speak again from beyond the grave with a new book to be published this year.

Politkovskaya started the book about an event in Chechnya in 2006 which Kudimova said contained "explosive" material. Kudimova will complete it with a chapter about her sister.

"She was very feminine, not just a warrior," Kudimova said.

From Russia Profile:

Diplomacy by Other Means

By Ariel Cohen

Russia’s Widening Energy Ties Rankle the West

Three major Eurasian energy developments announced this month have made Washington policymakers jittery.

First, Hungarian Prime Minister Ferenc Gyurcsany announced his country favors Gazprom's Russian gas pumped via Turkey to the much-lauded but long-delayed Nabucco gas pipeline project. Nabucco, spearheaded by the Austrians, was supposed to bring up to 30 billion cubic meters of gas per year (cm/y) from the Caspian to Europe through Turkey, Bulgaria, Romania, Hungary and Austria.

Second, Russia, Bulgaria and Greece signed an agreement to construct the Burgas-Alexandroupolis oil pipeline, which will bypass the Turkish-controlled Bosphorus Straits, a dangerous oil transport chokepoint. The project, which some call "the Orthodox Pipeline," will neutralize Turkey's control of the vital oil artery and reduce the danger of supply disruption stemming from a catastrophic event, such as a tanker fire or explosion in the middle of Istanbul.

In addition, the Burgas-Alexandroupolis pipeline will be 51% owned by three Russian government companies – Transneft, Gazpromneft and Rosneft – with the remaining 49 percent split between Bulgaria and Greece. Washington energy watchers noted the March 6 announcement by Vagit Alekperov, head of Lukoil, that his firm and Gazpromneft – the state-owned gas monopoly Gazprom's oil unit – will create a joint venture to develop a future project, which will also be 51 percent controlled by Gazpromneft.

Finally, British Petroleum hinted that its Russian partner TNK may sell out its share in TNK-BP to a Russian state-owned company. At the same time, Russia is developing plans for building the second Bosphorus bypass from a port on the Black Sea such as Samsun, to the Mediterranean.

Washington sees these projects as strategic moves. All announced within less than a month, they clearly indicate the Russian state is pursuing a comprehensive strategy that masterfully integrates geopolitics and geo-economics.

Complete article here.

Today the media is reporting that BP's Lord Browne and his chosen successor Tony Hayward are heading off to Moscow to prepare a massive charm offensive in an attempt to save one of the company's largest investments from what seems to be an aggressive interventionist streak by the state in Russia (see post on Premature Gasification). Their begging message: "Please, Mr. President, don't force us to give up majority control of the Kovykta field to Gazprom under clearly fabricated license violations." The likely response from Vladimir Putin: "We shall do whatever we please with your property despite law, contracts, rules, and procedures protecting your rights. And you shall accept it without complaint if you ever want to do business here again."

The most likely result: Because Lord Browne and Tony Hayward are so far behaving nicely, the private Russian firms will be the likely losers, forced out or have their shares reduced (Alfa Group consortium, Access Industries and Renova Group), and BP will likely see its stake diminish, but not nearly as much as Shell lost during the Sakhalin heist. However, in deals with Russian state owned energy firms, you never really know what will happen.

With the theatrics of legalism put on by environmental watchdog Oleg "The Hammer" Mitvol, the Kremlin has really developed a well practiced method of stealing energy assets in broad daylight. The Kovykta affair is really just the Sakhalin rerun with a new, tragic protagonist. All this makes Yukos look like a clumsy practice routine - who knows, maybe by the time that Total gets its starring role, the shareholders will begin waking up!

This RIA Novosti translation of a Vedomosti editorial really captures the Russian outlook on the matter: if Gazprom wants something, it will get it. "Pragmatic" companies will submit to this reality, and, like Shell, BP will likely exhibit pliability, rather than the temerity of defending its rights to its property. Notice the reference to Krasnokamensk in the article - those that dare to raise their voice against these state thefts will be put on a show trial and sent to the gulag like Mikhail Khodorkovsky.

Am I the only person who finds it extremely sad and disheartening that to be "pragmatic" in Russia is now equated with the tolerance of theivery and corruption? When did it become irrational to stand up for rule of law in Russia?

Vedomosti:

Russian gas giant Gazprom, which has started developing its oil business, has shown interest in TNK-BP, a successful private company. TNK-BP's present owners do not want to sell it (it is a profitable business for Russian shareholders and an opportunity to consolidate its subsidiary's reserves for BP).

Life shows that when a big state corporation (be it Gazprom or any other company) sets its eyes on an asset, it will get it. It depends on the owner's pliability how it happens.

Those who do not want to part with their assets may go to Krasnokamensk (in Siberia) or some other place far away. However, there are more cautious and pragmatic investors. They believe it is better to lose a part than everything.

The Anglo-Dutch Shell concern had no desire to cede control over the Sakhalin II oil and gas project to Gazprom.

The company has a low reproduction rate, that is, the new reserves/production ratio (it was 78% in 2005 against Exxon Mobil's 112%). It needs new assets, but it had to give up the old ones.
The company's pliability was rewarded. All Sakhalin II shareholders halved their shares and received $7.45 billion for them from Gazprom.

The project was immediately dropped by inspectors, who only a week prior to the announcement of the transaction had given it up for lost.

Farkhad Akhmedov, formerly the sole owner of the Nortgas private gas company, has given half of Nortgas to Gazprom.

BP is a pragmatic investor, like Shell. In the opinion of a BP manager, conditions in Russia are fine. People work even in Nigeria, where they may be killed at any time, he said.

That means that BP is likely to agree to the deal with Gazprom if it has no other way out. The question is whether there is anything that could frighten one of the world's largest corporations.

[Editor Note: Following the publication of Grigory Pasko's article on Chita, James Brooks (an Englishman living in Chita) left an extensive comment calling into question a number of the journalist's assertions. Here is Grigory's response to the comment in bold. (apologies for the delayed response - translation and other admin slows the process down a little bit)]

I was delighted to see an article about my sometime adopted hometown but the author has taken a lot of things at face value here. There is in fact plenty of construction going on, including along the main thoroughfare (Lenin Street),

Between January and March there has been virtually no construction in Chita. I visit many Russian cities and can say where it’s noticeable and where – like in Chita – it is in an unnoticeable state.

and to call the cathedral the “only decent building” suggests the author did not take the time to venture a short distance along the adjoining Amurskaya or Lenin Streets, or simply closed his eyes when passing the Shumov mansion. That’s not to mention the railway station, the Decembrists’ Church, the mosque.....

I agree with you fully: there are another 3-4 decent buildings of old construction besides the church. But in my article I was speaking about what has been built in recent years, and not in tsarist times. The church I mentioned – the Kazan Mother of God Cathedral – was in fact built recently. As concerns the mansion of the merchant Shumov, I am preparing a separate article about it: since 1937, the Administration of the NKVD/KGB/FSB had been located in it.

And if there are “more college places available than applicants”, why is there such competition for a place at Chita State University?

Because none of the surrounding regions (Buryatia, Amur Oblast) have their own universities; that’s why everybody comes to Chita. Besides, Chita Oblast itself has more than a million inhabitants.

The assertion that “only one of Chita’s hotels – and this one is located on the outskirts of the city – offers internet access” is simply wrong as the Hotel Zabaikalye, right on Lenin Square in the middle of the city, has a large and modern internet cafe.

Yes, that’s where I stayed on my second visit. The internet cafe is only open every other day, and only from 4 PM to 6 PM. And sometimes it’s just closed for no reason at all. And even when it is open, the internet connection is not reliable. The “Daurii” hotel doesn’t even have this. Internet is available at the “Panama-city” hotel – the one that is practically on the outskirts of the city. And that’s it. No other hotels. A new 30 room hotel is due to open soon. The rooms will be outrageously priced, but they are promising to have internet.

If you want a more considered perspective on Chita from someone who has actually lived there for some time, please visit my own page www.siberia.eclipse.co.uk .

I will certainly visit your website.
Sincerely,
Grigory Pasko

Last week, the Central Asia Caucasus Institute in Washington held a forum titled "Engaging Post-Turkmenbashi Turkmenistan," in which expert David Merkel commented on U.S. policy toward the region, energy relations, and the need to control Gazprom's ambitions for expanded influence in the country.

From Joshua Kucera in Eurasia Net:

Washington needs to act decisively to ensure Turkmenistan’s gas reserves do not remain under the near-total control of the Russian gas conglomerate Gazprom, a leading US expert on Central Asia said.

Most energy experts believe Gazprom will act aggressively in the coming months to expand its already considerable leverage over the Central Asian natural gas market, said David A. Merkel, who from June 2005 until last month served as the director for Aegean, Caucasus and Central Asian affairs on the National Security Council in the White House.

"The question is, for Gazprom to do what it wants to do - improve market share in Europe over the next several years - it needs to do one of three things: either make a lot of investments in its infrastructure three years ago, drastically change the domestic market of its gas, or have a stranglehold on Central Asian gas," he said at a March 15 event, "Engaging Post-Turkmenbashi Turkmenistan," hosted by the Central Asia Caucasus Institute in Washington.
...
Merkel said he believed substantial new gas fields discovered in Turkmenistan will boost that country’s gas-export capability to a level that far exceeds current expectations. "I think Turkmenistan’s reserves are often understated. I don’t subscribe to the idea that Turkmenistan has sold its reserves over and over again. I don’t have any definite proof, but I think a conservative estimate of the reserves puts it at closer to ten [trillion cubic meters] than to two to three," Merkel said. He said the US should encourage Turkmenistan to hire a European firm to do a geological survey of its natural gas.

While US officials are keen to encourage Turkmenistan to diversify its gas export options, Washington still opposes Ashgabat sending gas southward, to Iran. Merkel said that he believes that any firm that potentially helps build a pipeline to Iran could faces economic sanctions under US law, but that shipping oil through such a pipeline might not be.

S. Frederick Starr, the head of CACI and moderator of the event, said no country has suffered more than Turkmenistan from Washington’s policy toward Iran. He added that this policy may now hinder US and European efforts to encourage Ashgabat to send gas exports westward. "We, over a 15-year period, have said [to Turkmenistan] ’You have to swallow this, but we’re not going to give you anything compensatory,’" he said.

Merkel also said that the United States should not focus solely on the new president, Kurbanguly Berdymukhammedov. While there have been no signs as of yet of internal instability, that could change, he said. "It’s advisable to insulate ourselves from future personality changes and communicate not only with the president but also with others in the government," he said. [For background see the Eurasia Insight archive].

Demonstrative of the Kremlin's seemingly total incomprehension of the functioning of a proper justice system and a fair court, the Russian media is reporting today that President Vladimir Putin has signed a decree to force Pavel Laptev, the envoy to the European Court on Human Rights in Strasbourg, into retirement, and have him replaced by Veronika Milinchuk, an official in the Russian prosecutor general's office and protege of Vladimir Ustinov. The move is generally understood as part of the Kremlin strategy to handle the upcoming Strasbourg trials on the Yukos affair. It seems quite clear that regardless of the individual you put before the court, the merits of the case will have to speak for themselves - something that the Russian administration may fail to understand as they have become accustomed to "legalism a la carte" and the export of corruption.

From Kommersant:

However, human rights lawyers do not believe that the new Russian envoy to the European Court will have any influence on the outcome of the trials. "Unfortunately, the authorities [in Russia] think that the problem lies with a single person – Pavel Laptev. They simply do not understand that the problem lies with our justice system," said Irina Yasina, the former deputy chairwoman of Open Russia, the civil society organization founded by Mikhail Khodorkovsky. "They are used to the fact that in our courts you can cut some sort of deal, and they think that this will also be possible in the European Court. That is not true. If the Court in Strasbourg decides to review the matter of Khodorkovsky, then they will review his case, regardless of who is involved with the case in Russia, whether it is Laptev or Milinchuk, the presidential administration or the Ministry of Justice," she said.

Today in the Moscow Times:

Getting the EU Back Into Eurasia

By Raffaello Pantucci and Alexandros Petersen

German Foreign Minister Frank-Walter Steinmeier appears to be serious about carrying out his nation's plans to reorient European foreign policy toward Central Asia. This recalibration is a welcome shift from Germany, which under Chancellor Gerhard Schröder tended toward almost pusillanimous relations with Russia, to the detriment of other former Soviet states. Chancellor Angela Merkel's new Ostpolitik will continue to remain balanced carefully against national energy interests, but it seems that she is capitalizing on the fact that Germany holds the rotating presidencies of both the Group of Eight and the European Union to try to focus European (and world) attention on Russia's other, often unseen flank in Central Asia and the Black Sea region.
...
It is the presence of energy as an issue, however, that is one of the critical defining factors in this reinvigorated European interest, and that offers some assurance that this may be a genuine approach. While there are no easy solutions to Europe's dependency on energy (or that of the West in general), there are two fundamental things Europe can be do to re-craft the status quo: diversify and find alternative routes.

The‑first of these is increasingly a given for European governments and is feeding current complex political debates around the globe. The second, however, is often not rigorously addressed within the European Union.

Currently, the EU is reliant for almost half of its energy resources (a figure it has estimated will increase to 70 percent by 2030) on two unreliable routes from Russia, through Belarus and Ukraine. While it is looking at opening new routes, such as the Odessa-Brody pipeline from the Caspian Sea to Poland or the Nord Stream pipeline running directly from Russia into Germany along the bottom of the Baltic Sea, it has seemingly ignored the potential importance in diversifying its sources of supply by not looking toward concentrating more on Central Asia and the Caucasus.

Among European states, Germany stands out as particularly well-placed to drive this issue forward, both as a result of close ties with Russia, Europe's main energy supplier, and the fact that it is the only member state with embassies in all the Black Sea and Central Asian countries. Merkel reflected her particular interest in her first speech to the European Parliament, declaring that she hoped "especially to develop a neighborhood policy for the Black Sea region and Central Asia."

Is Chita Preparing for a Trial?

By Grigory Pasko, journalist

Mikhail Khodorkovsky’s lawyer Yuri Schmidt has already said many times that the next trial in the “YUKOS case” is going to take place in Chita. So far, this is only conjecture. But more and more facts are beginning to appear that clearly point to this being the case. Local taxi drivers in Chita have told me that the ways and means of closing off the central streets of the city during the time when Khodorkovsky and Lebedev are delivered to the Oblast procuracy for familiarization with the case materials have been worked out to the smallest detail. The policemen in masks and with machine guns, the snipers on the rooftops of buildings – all this, too, has been honed to automated perfection.

Photo of Oblast procuracy in Chita by Grigory Pasko

On Friday evening and all day Saturday, I observed the police posts on Amurskaya street, where the Oblast court and procuracy buildings are located. The post by the procuracy was even manned on Sunday. On top of that, on weekdays and on Saturday, on every street corner in the vicinity of the procuracy you could see two or three persons in security guard uniforms (either policemen in black [Russian police ordinarily wear a blue-grey uniform—Trans.] or some kind of security guards). They were jumping around from one foot to the other trying to keep warm in Chita’s beastly cold winter weather.

Unfortunately, I wasn’t in Chita long enough to see the procedure for bringing Khodorkovsky and Lebedev to the procuracy. Eyewitnesses have told of three GIBDD [road police—Trans.] vehicles as escort cars, one KAMAZ truck with police OMON fighters, of two “gazelle” vans, in which the actual bodies of the “big-time plunderers of the national wealth” are brought over. Not to mention the snipers on the rooftops… Khodorkovsky turns out to be more of a big shot than Putin himself: the latter is driven around Moscow with less pomp.

In general, Chita is a very convenient city for conducting Khodorkovsky’s next farce “trial” right here. Judge for yourselves. Concentrated all together in one spot are the administrations of the MVD and FSB, the SIZO [the prison where Khodorkovsky and Lebedev are being held—Trans.], and the police academy. The Oblast court and the Oblast procuracy. And the Ingodinsky Rayon Court is practically right next door to the SIZO.

Journalists who have been to Chita will tell you that this little town is a nightmare from the point of view of state and other services. It is nearly impossible to obtain official information, because the official organs see an Enemy of the People in every journalist.

Although, of course, a few things are changing for the better. For example, when I was in Chita the first time, there wasn’t a single normal restaurant in the center of the city. By my second visit, one had appeared. It’s called “Privoz”. A strange name, won’t you agree? [a rough translation is “what has been brought”—Rough Trans.] Could it have something to do with that procedure of “delivering” Khodorkovsky to the procuracy?

Photo of “Privoz” restaurant by Grigory Pasko

The restaurant’s business card indicates that it serves “Russian, Soviet, and Anti-Soviet cuisine”. Brave stuff for Chita. Not to mention that the restaurant is located on Lenin Street in the new wing of the old building of the Trans-Baikal Railroad Administration.

As has become my tradition, I spoke a lot with the local inhabitants. They didn’t love Khodorkovsky even before all this. But they love him even less now, after all those daily street closures. You see, they don’t associate the street closures with the cretinism of the local police/FSB authorities, but with Khodorkovsky personally.

Photo of Chita in the morning from Titovskaya sopka hill by Grigory Pasko

…The little old lady caretaker at the local museum tells me: “I worked all my life. My pension was 120 rubles [per month; she is most likely referring to pre-inflation times, when this was a very good amount (today it is worth about $4.50)—Currency Trans.]. And then these oligarchs came and it all disappeared. The pension became paltry. Prices for housing went up. In the stores everything’s expensive…”. All right, I say, but what does Khodorkovsky have to do with any of this? “But he’s stolen our oil”, she replies in the style of the procuracy-general. Okay, let’s say he did, I say. But has your pension increased now that Putin has locked Khodorkovsky up in jail? Have your housing and utilities costs gone down? Has your oil, your own dear mother, been returned to you? The woman is silent and looks at me intensely. And then, bending down, she utters that familiar and eternal Russian platitude: “All of them are scoundrels!”

One more businessman…

By Grigory Pasko, journalist

Yuri Mari lives in Chita. He is 49 years old, and he is a local entrepreneur, engaged in logging and the sale of timber by license to the Chinese. His business was growing successfully until competitors decided to grab it for themselves. As I understood it, the competitors are either people close to the police or maybe even are themselves police. But that’s not really so important. What is important is that Yuri was charged with taking the law into his own hands, resisting the law-enforcement organs. A criminal case was initiated and Yuri was thrown into an investigative isolator – the SIZO of the city of Chita. That same one where another businessman has been sitting since December 2006 – Mikhail Khodorkovsky.

To this should be added that after being detained by employees of the law-enforcement organs, Yuri has in essence turned into an invalid: he has problems with his spine, they had shattered his kneecaps, he moves around with difficulty and lives on injections.

Third Story: Yuri Mari

Photo of Yuri Mari by Grigory Pasko

Mikhail Khodorkovsky’s cell just happened to be right above the one where I sat for nearly nine months. I saw him only once, and then by chance. They’re hiding him from everybody, after all, he’s under very high security. When they drive him to the procuracy for familiarization with the case, the van is backed right up to the doors. And there’s always a lot of security. Like he’s some big Mafioso or a hardened old criminal.

This was my first time in jail. I immediately understood that conditions for human life don’t exist there. Everything is aimed at quashing what is human in a human being. For example, the medical assistance is bad. You can only get into the medical unit once every 24 hours. At the examination I say: my leg hurts. We don’t have medicines, they answer me.

To some extent it was simpler for me. Many knew me before I was imprisoned. In the Trans-Baikal region, the contingent of ex-convicts is large. I had many former convicts working on my crew. I was the manager of a logging enterprise.
When they tossed me in the SIZO, there were 50 people in the cell. I’m a sick man, and it was hard for me with such a quantity of people. I asked the administration to transfer me to a cell with fewer people. They empathized with a sick person and transferred me to a so-called BS cell (BS is the Russian abbreviation for “former employees”—G.P.). They’d beaten be seriously during the arrest, they’d gouged out the disks of my knees [probably the cartilage—Trans.], there were hernias, strong pain in the legs and the small of the back.

There were 15 of us in that cell. The medical assistance was a bit better. Reveille at 6 AM. They play the Russian national anthem. Like it or not, you get to learn it by heart. Breakfast right after that, because they bring the food – the gruel – up to the floor at 4 AM, and by 7 AM it gets cold. You can eat it if you want, or not eat it if you don’t want. And those who were intending to go to investigative actions or to courts were already taken out of the cells at 5 AM. They didn’t have breakfast at all. And they weren’t fed lunch either. Only one was given a meal in a bag, because he was complaining trying to secure observance of his rights.

The employees often do things the way it’s convenient for them, and not how it’s written in the law and the rules for the confinement of prisoners. The convoy guards have their own rules. They drive to the courts according to their own rules. For example, they’re not allowed to have laces on their boots, but in the prison these are permitted.

We found out our rights with difficulty, because the texts of the rules weren’t given to us, they hid them from us. And they began to observe these rules only with the arrival of Khodorkovsky. Probably because visits by various examination commissions became more frequent and, apparently, the administration was afraid of mass complaints about the conditions of confinement.

It’s probably too late to ever change some things. For example the crowding. There’s no sense in even talking about the 4 square meters per person that are prescribed by the conventions.
The old building was renovated especially for the arrival of Khodorkovsky. And we were transferred into this building. But it’s not habitable yet, it’s cold. Damp. It took us a long time to bring the cell into order. The alarm system was being installed there, the heating was being made to work.

Some of the changes that took place were for the better. The employees of the administration started being rude less often. The duty officer contingent was replaced. But some things got worse, too: before they’d turn the other way and pretend they didn’t see the “zeks” using mobile phones, but with Khodorkovsky’s arrival the jamming devices started working, they took phones away, constant searches in the cells.

I saw Khodorkovsky one time. He was walking from the call center [probably the visitation room—Trans.] with a notebook in his hands. He was being led separately by four people. And we were being led to the sauna. They yelled at us: up against the wall, no talking. I saw Mikhail Borisovich, nodded at him, greeted him: “Zdravstvuyte, Mikhail Borisovich!” I wanted to add “let’s connect”, but I came to my senses in time: he may have perceived this as a provocation, and it could even turn out bad for him.

The confining of Khodorkovsky and Platon Lebedev in the Chita SIZO has reflected on the appearance of the entire city. I say that so far, only two historical events have had a drastic impact on the life of Chita: the exile of the Decembrists in 1826 and the arrival of Khodorkovsky in 2006.

When they drive Khodorkovsky and Lebedev to the Oblast procuracy for familiarization with the case, they shut down the entire city. Snipers on the rooftops, police all over the place… Even when murderers were transported and gangsters, they didn’t shut down the city. A person who ran a gigantic enterprise, a company, turned out to be a criminal. Although he had been examined, but the examiners are free for some reason. How can this be?

I think that the trial will be in Chita, since they’ve got this kind of security, the investigators come in from Moscow… They’ve got the shutting down of the city all worked out already… And the new charges – this is obvious – are fabricated, so as not to allow any kind of participation by Khodorkovsky in the elections.

I was told about one incident. Anybody can make a purchase from the prison shop at the SIZO – all you need is money. Up to 2 thousand rubles per month. Everybody knows Khodorkovsky has 60 thousand rubles lying on his account. So he ordered cigarettes and water that he had had recommended to him. Both the water and the cigarettes were expensive. So after this, the operative workers [the special guards assigned to hound Khodorkovsky 24 hours a day—Trans.] actually went out of their way to have both this water and these cigarettes disappear from the shop. Just so Khodorkovsky wouldn’t buy them.

A person from the camp majority

By Grigory Pasko, journalist

The external appearance of my next interview subject is typical of those who sit in Russian prison camps. Take a good look at his face – it bears the clear marks of a hard and difficult life. I have seen many people like this, both in the jail and in the camp. There was really only one thing about Alexander Platonov that amazed me – that he is raising a small child all by himself, without a wife. As I understood it, his wife is sitting in a prison camp – again. The family is the basic unit of society…

In fact, he lit one up immediately and began his tale.

Second story. Alexander Platonov:

Photo of Alexander Platonov by Grigory Pasko

I’ve been in twice. The first time, in the Ingodinsky District Court of Chita they gave me three years of deprivation of liberty. Before the trial, I’d sat for 9 months in the local investigative isolator (SIZO) (where Mikhail Khodorkovsky is today—G.P.). I did my term at “The Troyka” (correctional colony No. 3, not far from Chita—G.P.).

The second time I got busted, for Article 228 (unlawful acquisition of narcotics—G.P.), I was just plain stupid. They gave me two years. Here’s what happened. In the summer, some friends and I drove out to a field where hemp was growing. We came there and saw some guys standing next to a car. We decided that they’d come for the hemp too. We chatted, asked about this and that. They said they’d come for some grass too. Then we’re coming back from the field, and they’re already waiting for us with handcuffs. Turned out it was a sting. And that’s how I ended up in the “zone” for a second time in 2005. At first to Karymskaya, then they sent me to the Chita SIZO, and only later to Krasnokamensk colony No. 10.

It was hard that time in the SIZO. The cells were overcrowded, there were 50, sometimes 60 people and 12 beds. They say it’s easier now: 40 people or even less. Back then the old building still hadn’t been renovated. Earlier, juveniles and death row prisoners sat there.

The daily regimen in the SIZO is the same as in all jails. Reveille, shakedown (body search), breakfast, outdoor exercise… We had “masquerade shows” (the beating of prisoners by policemen in masks—G.P.) in 2005. Later they didn’t have them any more. Back then, we nearly had an uprising. They hushed it all up.

I was in Krasnokamensk from March 2005 through April 2006. A year and a month. They’re general-regime there. First two weeks’ quarantine. Then I was assigned to the 5th detachment. They appointed me to work in the construction shop. We worked outside the boundaries of the “zone”, on site. We made doors there, boxes for the mine, containers… I glued backgammon sets. Everybody did different things at the site: some worked for the administration, others for themselves.

In general, there is a sewing operation in the “zone” (that’s where Khodorkovsky worked when they brought him to your colony in 2006), they’ve got a garage there, a gang saw, a welding shop, where they cut metal from the uranium mines… We also made support columns for coal mines.

They brought Khodorkovsky in 2006. This news spread fast in the camp. Before that I had heard that he’d been arrested. I saw it on TV. From the TV we learned that they were bringing him to us. Of course, it was intriguing: an oligarch in the camp. We would inadvertently look to see where he was standing and what he was like. Then everybody got used to it. He was always reading books.

About the food transfers. Of course, you have to share whatever comes your way. They never used to throw you into the punishment isolator for that. And when Khodorkovsky didn’t make it to the sewing shop on time – they punished him for that on purpose. I used to see Khodorkovsky a lot: he was in a neighboring barrack across the street.

Did I ever talk with him? I didn’t. I’d often go into his brigade. He always had a book with him, he read a lot. Didn’t interact much with people. All kinds of dandruff – well, different people – they’d come up to him: gimme this, gimme that. With Khodorkovsky’s appearance, they started to tighten up the regime in the “zone”, they introduced work-off – do two hours of something for the camp – pick up litter, help out in the caboose [kitchen]. Before that, you could kick around a football in the stadium, go down to the neighboring barracks. Then they shut all that down.

We had a so-called feeding room in the barrack. But usually the mug-spoon were found in the nightstand next to the bed. With Khodorkovsky’s arrival the “trash” [camp guards—Trans.] started pressuring to have all this standing in the feeding room. But there isn’t enough room there for everyone. The cabinets are small. Drinking tea in an inappropriate place – that’s asinine. Everybody drank, and anywhere at all. But they punished only Khodorkovsky. For example, I’m chifiring [chifir: extra-strong tea, a prisoners’ favorite—Trans.], and the “trash” is all “Why aren’t your going out?” I’m all “Can’t you see I’m chifiring!” Khodorkovsky wouldn’t be able to pull that one off: they’d sweep him into the punishment isolator immediately. And they did… When he was drinking tea in a supposedly inappropriate place.

…Alexander Platonov told all kinds of things about the “zone”. He even forgot about his smokes. He talked about the procedures, about the work, about the different categories of “zeks”… He didn’t say much about Khodorkovsky. And I understood that there, in the camps, the fate of such people as Khodorkovsky concerns people even less than the fate of those around them. The world behind the bars is a cruel place, it’s every man for himself. That’s the law of camp life. But even there, there are examples of humanity manifesting itself. As a rule, these examples are from the side of the prisoners, and not from the sides of the employees of the administration.

But I’m thinking about how Mikhail Khodorkovsky is still going to be surrounded for a long time by people like Alexander Platonov. They are neither good nor bad. They are the typical “sitters” of Russian prison camps, the majority.

[We're pleased to offer this exclusive (as far we know) translation of an article on the situation of the accounting firm PricewaterhouseCoopers in Russia. - Bob Amsterdam]

PUTTING ON THE SQUEEZE, RUSSIAN STYLE: SENSELESSLY AND MERCILESSLY
(НАЕЗД ПО-РУССКИ: БЕССМЫСЛЕННЫЙ И БЕСПОЩАДНЫЙ)

Author: Nikolai PAVLOV, Source: Moskovsky komsomolets

Date: 16 March 2007

In whose interests are globally respected auditors being “eviscerated”?

At the end of last week, it became known that the office of the largest auditing company PricewaterhouseCoopers had been subjected practically simultaneously to no fewer than two searches, which were conducted independently of one another by brigades from the Procuracy-General and the MVD. Representatives of the law-enforcement organs then gave clarifications that they had come within the framework of completely different cases. But the coincidence of two different cases in one time and space allows one to assume with a great degree of confidence that there nevertheless is an undercurrent to the attack on the auditor from two sides at once.

As many observers consider, the objective of the siloviki is an aspiration to put pressure on the leadership of the auditing company, so that the top management of PricewaterhouseCoopers would admit the complicity of its organization in the tax trespasses of the company YUKOS. In all likelihood, the Russian law-enforcers urgently need new “evidence”, in order to fortify their claims and for the arbitrage court, in which the tax organs are now attempting to recognize as invalid the contracts for an audit of the oilmen. The taxmen assert that PricewaterhouseCoopers had made two different reports in parallel: one for the management of the client company, in which the auditors noted the unlawfulness of evasion from the payment of taxes, and another for broad use, where the non-payment of taxes was not mentioned.

If the court recognizes the rightness of the fiscals, then severe sanctions await PricewaterhouseCoopers.

In addition to a gigantic monetary fine, the case may even lead to a revocation of the license to conduct auditing activities on the territory of Russia. The auditors, to the extent possible, maintain their correctness. With variable success, this examination has been going on for not one month already. And, apparently, not everything is coming together well for our law-enforcers with the evidence, which is why they had to take extreme measures and spur the process on.
And the matter isn’t even about how the attack on a world-famous auditing firm will yet again reflect on the image of Russia and of our power abroad. Everything is much more serious. The logic of “silovik economic policy”, if it prevails over good sense, is such that after the law-enforcers say “a”, it is imperative that “b” will have to be said as well. And it is not a fact that the next sounds will be pronounced by the very same people who, instead of untying the “knots”, prefer to cleave them with a sword placed in their hands by the state.

Let me explain what I’m talking about. From the moment of its arrival in Russia, PricewaterhouseCoopers were the auditors of a large number of leading Russian corporations and even organs of state. Among the number of their clients: “Gazprom”, Alfa-Grupp, “KAMAZ”, and even the Central Bank!

All of their financial reports are certified first and foremost by the reputation of PricewaterhouseCoopers.

If the court rules in favor of those who desire to attain their own victory at any cost that the auditors had falsified the reports of the disgraced company, then this, to put it mildly, will cast a shadow on a sufficiently large part of Russian business. After all, the audit of all of its clients was conducted by PricewaterhouseCoopers according to one and the same set of standards.

The problem, I will repeat myself, is not even in reputational risks; in the final analysis, image is a learned matter. All the more so given that in our traditions, in order to build something you need to first break everything and render it totally useless.

What worries is something else. Everybody remembers the absurd story with the Swiss company Noga. The Swiss, on the basis of a doubtful contract with the Russian government entered into at the start of the 1990s, demanded some kind of astronomical sums of money from Russia and were constantly tormenting our country with lawsuits.

And although all these lawsuits were not satisfied on the merits by international courts, Russia constantly had to look over its shoulder and get boxed on the ear in the most varied countries. The law-enforcement organs of which were constantly freezing the foreign property of the Russian Federation in the capacity of an interim remedy.

We all remember the shocking television stories about the seizure of the sailing ship “Sedov” one day, the collections of Russian museums another day, and airplanes that had arrived for an aviation show the next day.

And now imagine how many logs the lovers of pettifogging are able to chop now, when they will have in their hands such a trump card as the revocation of the license of the country’s leading auditor?

Who will vouch that lovers of living high on someone else’s account will not all swarm to file suits against the Russian Federation, having learned that the Central Bank of the country was audited for many years, as is now becoming clear, by falsifiers? Or how is the leadership of large companies to fend off greenmailers-blackmailers, if all their financial reporting is now not worth anything?

Probably, for some kind of “higher state” interests, it was decided once again to revive the famous Russian saying about the law and the towbar and to convict PricewaterhouseCoopers. It is possible that somebody someplace on high did in fact adopt a decision to sacrifice PricewaterhouseCoopers, no matter what. Irrespective of how things really stand.

Andrey Volozhanin, Khodorkovsky’s former foreman: “Misha is a chance passenger there…”

By Grigory Pasko, journalist

You don’t necessarily need to try tasting prison gruel in order to understand the conditions in which a person finds himself in places of deprivation of liberty [formal Russian term for institutions where convicted prisoners serve their sentences; pre-conviction detention facilities are known as investigative isolators or SIZOs—Trans.]. It is enough to talk with those for whom life behind bars is a customary thing. For Andrei Volozhanin, resident of Krasnokamensk, his most recent term (or “round trip”, as the “zeks” say) was the eleventh in his 42 years of life. He has spent a total of around 20 years in prisons and “zones”. His area of expertise is fraud. When he ended up at “The Dime” [correctional colony IK-10—Trans.], the general-regime zone in Krasnokamensk, Mikhail Khodorkovsky was already there, working in the sewing shop. In July 2006, Volozhanin became the “brigadier” [foreman] of this shop. Naturally, he and Khodorkovsky interacted with one another. How, and about what, we’ll tell in a moment.

But first a small philosophical digression: a person is free, and freedom means nothing other than self-determination, i.e. the ability to act in accordance with one’s intentions, and not under the pressure of an outside force. And so, often these “external forces” are the people around you. I know from my own experience: I sat in mass cells, and in solitary, and in the zone…. I do not need to be told what Jean-Paul Sartre meant when he said that “Hell is other people”.

And I think there’s no need to explain the meaning of this phrase to Mikhail Khodorkovsky, either.

I offer our readers three small stories about people with whom I met in Chita and who sat in the colony of Krasnokamensk and in the Chita SIZO at the same time as Khodorkovsky. True, Mikhail Borisovich only had personal interactions with one of them – Andrei Volozhanin. Let’s hear what he has to say.

Photo of Andrei Volozhanin by Grigory Pasko

First story. Andrei Volozhanin:

We are the children of stagnation [the Period of Stagnation is roughly the last decade of Leonid Brezhnev’s rule, when the USSR was in a holding pattern of slow decay and cynicism—Trans.]. All my life I’ve been a swindler, I’ve got no calluses on my hands. Never have gotten in the habit of saving a kopek for a rainy day. What for? You gotta live for today. I spend all my money, what’s the point of living otherwise? Money brings happiness only when you spend it.

This time, as usual, they gave me a small term – 3, 5 years. I did half and got out on parole.

I’ve been a foreman, a “boss”, in many camps. At “The Dime” I also established myself as a boss at the sewing shop, from July of last year. I already knew that Khodorkovsky was working there. He was in the experimental shop – a packager – that’s what we called those who packed finished product in packages. What product? Bed linens.

There are five working rates at the shop. There wasn’t enough work for everyone who wanted it. Maybe about thirty people came out to work. They threw out the wages at everybody. Then they bought what was needed for everybody. Khodorkovsky reacted to everything without a word. They showed him, they explained – and he started doing without a word.

How did we meet? The way two guys usually meet. We had a cup of tea. True, he doesn’t chifir (i.e. drink extremely strongly brewed tea—G.P.). He immediately started to use the formal form of address with me. I’m all informal at him. I told him straight out: I was taught that you use the formal address only with superiors or with idiots. And which did he think I was? In short, I began to call him Boris’ich [a semi-formal form of address, using a shortened form of the patronymic; Volozhanin is probably using it sarcastically—Trans.], but with the familiar form nevertheless. To myself, I called him Misha.

Misha – he keeps himself to himself. A serious grown-up guy. People treated him with respect in the camp. He was usually reading books all the time. Some people like to talk, but he’d rather stick his nose in a book. He likes it. In that system he’s a chance passenger.

Of course, we did talk about the prospects of his case now and then. It told him the way I saw it: it will be your good fortune if Putin’s successor is kinder. And Putin? He’s trying to grab the money that was stolen. True, not from everybody, for some reason.

There wasn’t anything unusual, nothing I recall. The incident with Kuchma (when one prisoner slashed Khodorkovsky with a knife—G.P.) didn’t happen when I was around, but earlier. While I was there, they did throw him and two other people in the punishment isolator. He’s trusting. Apparently, he helped organize transfers for two prisoners. In the end, all of them did time in the punishment isolator – Misha and those two. 15 days they did. If this hadn’t involved Boris’ich, nobody would’ve paid any attention to it. I remember saying once: Misha, tell me, what can you do with your millions here? Nothing. But I can make something out of a hundred rubles. I’ll give them to a policeman, and he’ll do something for me. If you offer him a million, he won’t take it – he’ll be scared. But he will take a hundred.

Mikhail Borisovich helped how he could. Me, for example, he helped write a “super” (supervisory appeal to a higher-standing court—G.P.). He suggested how mitigating circumstances ought to have been taken into consideration in my case.

Well, what else can I say? A normal guy, that Khodorkovsky. The “zeks” treated him normal. He didn’t interact much with anybody. He usually walked around in the “local” (the little yard adjacent to the barracks building—G.P.), ran in circles around the barracks building… God willing, he’ll pull through the second term too. Although, of course, this lawlessness is totally over the top…

Looks like Lord Browne's efforts to placate the Russians over his company's investment in a Siberian gas field aren't working. Trutnev's comments today constitute the one the clearest threats yet to force BP to hand over majority control to Gazprom - lest we forget that TNK-BP hasn't been able to fulfill the license requirements precisely because of the Russian monopoly on the distribution infrastructure.

Yuri Trutnev, national resources minister, provides a veil of legitimacy for state theft

Despite the attack on Kovykta, multinational energy firms still want to throw their money into Russia? Unbelievable.

From RIA:

The Kovykta gas field in East Siberia operated by TNK-BP [RTS: TNBP] could be put up for auction excluding foreign companies if the operator is stripped of the license, Russia's natural resources minister said Friday.

"If the license is revoked, it [the Kovykta deposit] will be put up for auction as a strategic deposit, where foreign investment is not permitted," Yury Trutnev said, referring to the bill prohibiting foreign investors' control of major deposits, which is expected to be adopted this year.
...
Kovykta is important to the Russian government, which is pursuing an ambitious project to build a gas pipeline network to meet Asian nations' energy needs and to diversify its export destinations.

State-controlled Gazprom [RTS: GAZP] is interested in joining the Kovykta gas project. The Russian energy giant and TNK-BP are discussing a joint project to build a unified network for upstream and downstream operations, and gas transportation in East Siberia and the Far East.

Late last year, Gazprom acquired 50% plus one share in Sakhalin II, the vast hydrocarbon project in the Far East, from Shell and other companies involved. The deal came following months of pressure on the operator over environmental violations and financial issues, but was seen by many as part of the Kremlin's drive to regain control of mineral resources.

Another U.S. oil giant, ExxonMobil, and France's Total are also experiencing difficulties in Russia, with their projects - Sakhalin I off the Pacific coast and Kharyaga oil field in northern Russia respectively - being under scrutiny.

Reuters has reported that this week President Vladimir Putin has signed a decree which will merge the state media oversight body Rosokhrankultura, with the federal telecommunications and IT watchdog, Rossvyaznadzor, which many believe represents an attempt to extent the Kremlin's strict media control to online sources, targeting bloggers and news websites. Both of these organizations have a history of harassing media outlets.

Here's what Reuters reported:

Under Putin's rule, independent publishers have mostly been taken over by Kremlin-friendly businessmen. The domestic media are under heavy pressure not to criticize the government, making journalists suspicious of any official initiative.

Raf Shakirov, who was dismissed as editor of the daily Izvestia after critical coverage of the 2004 Beslan school siege, said Putin's decree could extend Soviet-style controls to Russia's online media, which have been relatively free.

"This is an attempt to put everything under control, not only electronic media but also personal data about people such as bloggers," he said.

Russians have increasingly turned to the Internet to find independent sources of information.

But the authorities have already fired a warning shot across the bows of one leading news Web site, www.gazeta.ru, which got an official warning last year for "extremism" after writing about cartoons that satirized the Prophet Mohammad.

Roman Bodanin, the political editor at gazeta.ru, said the new regulator could make it easier for the government to track and pressure independent media because the same agency would grant licenses and supervise content.

Andrei Vasilyev, editor of the daily Kommersant, saw the move as part of a Kremlin drive to consolidate power before parliamentary and presidential elections in the next 12 months.

"It's very dangerous to scatter the ownership of broadcasting frequencies and licenses between different institutions," he said about the Kremlin, saying he was speaking in a personal capacity. "There might be a loophole for some alternative information channel."

Government officials said Russia's media would benefit from the new body, due to start work within three months.

"The question of regulation will now be easier," said Yevgeny Strelchik, a spokesman for Rosokhrankultura. He dismissed fears about more control over the media as "journalists' fantasies."

Related: La Russophobe recently ran a lengthy series of translated articles about Russia's internet watchdogs called Commissars of the Internet.

I came across some chatter in the blogosphere which led me to a interesting lecture recently given by Stephen Kotkin, a major Princeton figure on Russia and author of books such as Armageddon Averted and Magnetic Mountain. The text of the lecture, which was given on Feb. 15, 2007 in Philadelphia, has been posted by the Foreign Policy Research Institute.

Prof. Stephen Kotkin of Princeton

Kotkin delivers some great and not uncontroversial material, covering a lot of ground in a very short period of time, so I will probably break this into two posts, each worthy of further exploration. To summarize, his main points are the following:

- Russia is in political stasis - not in transition toward democracy nor dictatorship.

- Western media is singularly obsessed with Vladimir Putin, and fails to capture the current Russian reality and instead contributes to false assumptions.

- False assumption #1: that the Kremlin is controlled by one united group. Quite the contrary - instead of managed democracy, Putin has arranged "managed fragmentation", which is integral part of Dictatorship 101.

- False assumption #2: that Russian society is wasting away. Not true - Russia is second in the world (behind the USA) in accepting immigrants, 20-25% of the population is solidly middle class and mostly apolitical, and the dynamicism of these groups contributes to Russia's under-appreciated stability.

- False assumption #3: Russia's assertive and resentful foreign policy is threat. Not exactly - Russia is notoriously clumsy and ineffectual in achieving its foreign policy objectives, Russia is friendless, and Russia is really only threatening to itself.

In this section, Kotkin discusses the illusion of Kremlin Inc.:

Kremlin Inc.

“Kremlin Inc.” is something that anyone can readily understand. It signifies that a KGB-dominated Putin group has taken over Russia and controls the country politically and economically. It’s a wonderfully simple story, now perhaps the dominate view among U.S. commentators on Russia. But Kremlin Inc. is one of those pernicious half truths.

The Russian political system lacks functioning political parties or other institutionalized mechanisms of elite recruitment. Instead it has an extremely personalistic system. Russian leaders appoint to positions of authority those people they went to school with, those from their home town, those from the places where they used to work. Vladimir Putin came from St. Petersburg. Moreover, he was at the top levels in Moscow for only a short period before he became president. To assert operative control over central state institutions and state-owned corporations, he seeks to appoint people who are loyal to him (sometimes he gets lucky and get both competence and loyalty, but often it’s just loyalty). Such people naturally will come from his hometown and former places of work, which happened to be the Leningrad KGB and the St. Petersburg city government.

(Note: There are two main public contenders to succeed Putin as president in 2008. One, Sergei Ivanov, comes from the Leningrad KGB, while the other, Dimitrii Medvedev, comes from the St. Petersburg city government. Most insiders suspect there will be a last-minute stealth candidate, in keeping with how Putin himself emerged and how he operates; others suspect that any Putin step-aside in 2008 will be more apparent than real. Only one person knows—if he in fact knows—whom he will be put forward as his successor.)

The popular idea of a KGB takeover of the Russian political system makes a certain amount of sense. The Soviet KGB was a huge institution, with massive personnel, and so, inevitably, a lot of today’s movers and shakers used to work there. But if Putin had worked in the defense ministry, the defense ministry would be “taking over” Russia. If he had worked in the gas industry, those who have made their careers in gas would be “taking over” Russia. It’s wrong to assume that because Putin comes from the KGB, and because that’s where his loyalists come from, the whole system is moving in the direction of a security regime by design. There is an element of that. Many of Putin’s colleagues sometimes do share a certain mentality—distrust of the West—but even more significantly, they belong to competing factions.

And that’s the key point. Whereas “Kremlin Inc.” implies a team, united in a collective enterprise, most high Russian officials despise each other. They’re rivals, in charge of competing fiefdoms with overlapping jurisdictions, and they’re trying to destroy each other. Dictatorship 101 teaches that a dictator needs officials to distrust each other, so that they’ll tattle to him about each other. The ruler will say “Don’t worry, I’ll take care of him, he won’t bother you anymore.” Sometimes the ruler will impose a temporary truce. Often, though, the ruler will instigate still more conflict, pitting already antagonistic interests against each other, so that they’ll run to him for protection and become dependent on him.

Putin’s regime falls far short of being a dictatorship—in the chaotic conditions of the dysfunctional Russian state and of Russia’s relatively open society—but Putin’s ruling strategy comes straight out of Dictatorship 101. To outsiders, the strategy looks like centralization of all power in a disciplined pyramid, but on the inside the strategy looks like making sure that the ruling “team,” far from being united, is at each other’s throats. Thus, “Kremlin Inc.” is a political system of surface stability but turmoil underneath. Its members compete incessantly, and in Russian politics, offense is the best defense, so they proactively go after each other’s property and people (in a so-called naezd) before waiting for rivals to go after them.

What keeps this divided, turbulent, unstable, misnamed Kremlin Inc. from spinning violently out of control is dependence on Putin. Remove that one piece and pandemonium breaks loose in full view, rather than remaining mostly hidden. But Putin has promised, many times, that he will not seek a third consecutive term as president, which the 1993 Constitution prohibits. Putin has made this frequent promise even though he could have kept quiet. He has done it inside and outside the country, in public and in private. Many talking head commentators speculate that Putin is going to create a crisis and then use the crisis to remain in power. In truth, he doesn’t need a crisis. He has something like an 80 percent approval rating—as elected officials go across the world, that’s mind-blowing this deep into a governing cycle. Putin can essentially do whatever he wants. He doesn’t need to violate the constitution. If he wants, the Duma will change the constitution in a heartbeat and he can have his third term, with broad public support. But he keeps saying publicly that he doesn’t want a third term.

Putin’s insistence that he is stepping down has been frightening Russian business, international business, and even many international politicians. These people are sincerely afraid that the president is actually going to step aside in March 2008. If he does, the factions of the supposed Kremlin Inc.—a bunch of scorpions in a bottle—will go at each other publicly. Some of them will refuse to be subordinated to a new person. Some will want to be the new person. Many insiders want Putin to remain, to avoid the uncertainty of a struggle to establish a new primus inter pares, or leading figure. To be sure, far from everyone hopes the president will stay, but Putin has gotten an enormous swath of Russia’s population to pray, literally, that he engineers a smooth “transition.” Because Russia’s political system is so fractious and dependent on a single person, however, anything can happen in March 2008. Anything except democracy and rule of law.

From the point of view of many Russian insiders, the issue is, how does Putin manage a transition in which he has exacerbated animosities as a method of rule but, when he removes himself, does not allow those animosities to get out of hand? Posing the question this way should not be taken as an argument for Putin to remain in power or against Russia holding a genuine election. This is simply an observation about the state of play: the regime is unstable because all authoritarian regimes are ultimately unstable, and because the president keeps insisting publicly that he will abide by the Constitution and step down, thereby exposing the tremendous instability that lies at the heart of his outwardly stable regime.

The entire speech can be read at FPRI. We will probably weigh in with some critiques if time permits.

This week's Economist has an article on the regional elections:

The Kremlin's new cookbook

President Vladimir Putin has devised a win-win system of elections

SEASON your shashlik with onion, pepper, coriander and basil. Then marinate in the fridge for 12 hours, advises Dmitry Kuzmin, mayor of the southern Russian city of Stavropol, and also local leader of the Just Russia party. Posing in their pinafores, Mr Kuzmin and his fellow candidates published a leaflet of their favourite recipes as part of their campaign for the regional elections on March 11th. “Sell the Bentley—pay the alimony”, election posters urged the region's governor, who has had a nasty divorce and is aligned with United Russia, a rival party that dominates both the Duma, the lower house of Russia's parliament, and most of the regions. Trivial and dirty tactics these may be, but they are effective. Just Russia surprisingly topped the poll in Stavropol.

Does that point to a real political fight in Russia? Just Russia's strong showing was hailed by Sergei Mironov, its leader, as “a victory over fear”. But the party was created only last October, and like United Russia, it is sycophantically loyal to the Kremlin in general and to Vladimir Putin in particular. Both parties have the president's blessing and, rather like rival disciples to a prophet, both claim to be his true acolytes. “I support him completely,” says Alexander Babakov, Just Russia's top man in the Duma. Criticising the president, he adds, lies outside the purview of party politics. His party purports to be more social-democratic than United Russia. But in the regions, says Nikolai Petrov of the Carnegie Moscow Centre, the important divides are not ideological but between fractious elites vying for power and assets.

The votes held on March 11th in 14 of Russia's 86 regions (United Russia won in the 13 other than Stavropol) marked the start of a political season that will culminate in elections for the Duma this December and for the presidency next March. They suggested how the Kremlin's election-cooking recipe is likely to turn out: one of fake competition, conducted by candidates who are much less different than they try to seem. Undesirables will be nobbled in advance, by denying them access to state-controlled television, and by new laws on political parties and elections that make it difficult for them to run or to win seats when they do. (The head of Russia's central election commission, a placeman who nevertheless publicly doubted some of the new rules, was ousted from his job this week.)

In St Petersburg, for example, apparently fierce regional campaigning by United Russia and Just Russia generated such ruses as bogus death notices and the circulation of pornographic videos featuring candidate lookalikes. But Yabloko, a liberal party, was kept off the ballot, because (say its leaders) of its opposition to the governor and to Gazprom's plans to build a skyscraper in the city.

Regional governors are unlikely to stray from the Kremlin's plans. The regions have varying levels of autonomy and prosperity, but all their bosses are, in effect, now appointed by the president. The Stavropol result was probably in part a protest against an unpopular governor, whom voters cannot remove directly.

In the Duma elections in December, only four parties look likely to climb over the 7% threshold for seats: Just Russia and United Russia, which seem destined to emerge as the components of a simulated two-party system, plus the Communists and the misnamed Liberal Democrats. The Union of Right Forces, a liberal party that is less troublesome than Yabloko, may also just squeeze in.

As for the presidential election, rather than being a simple anointing of Mr Putin's chosen successor, it may turn out to be a contest between two principal candidates—albeit both approved by the Kremlin. This recipe is likely to work well enough to leave little need for the massive falsification and repression that mark elections in some of Russia's neighbours (although there was a polling day shoot-out last weekend in the Russian republic of Dagestan). But riot police will be available if necessary, as participants at a violently dispersed protest rally in St Petersburg on March 3rd were quick to discover.

“There is no political competition in our country any more,” says Mikhail Kasyanov, a former prime minister turned Kremlin critic, gloomily. To some, the situation is starting to look rather like the old Soviet Union, in which elections also took place. Indeed, in some places, United Russia is now behaving uncannily like the old Communist Party, with applicants for certain jobs required to be members. Even so, a closer analogy is probably with the pre-revolutionary period, when groups of powerful boyars—sort of barons—competed for the tsar's ear and favour. (During the civil war Ivan Bunin, a writer, noted the “extreme repetitiveness” of Russian history, “its fatal peculiarity of always moving forward in circles”.)

A case can be made that this arrangement works quite well. Witness Russia's economic progress under Mr Putin, and his still-stellar popularity—even if that is attributable in part to the Kremlin's media management, and to the widespread political quietism that followed Russia's stressful 1990s. Elections may be closed and phoney, but Russia's rulers are responsive to the popular mood in their own way, as in the nervous backtracking that followed big street protests against a reform of the benefits system in 2005.

But there are risks in a situation in which all politicians owe their positions to the Kremlin, not to the voters. Many of those voters continue to suffer horrifically from Russia's widespread poverty and inequality, which may explain the enduring appeal of the Communists, who came second by share of the vote in last week's polls. (Mr Babakov says they are not real communists but “just a group of people who are exploiting the brand”.) Add to this a catastrophic demographic collapse, mind-boggling corruption and a bloody crisis in Chechnya that may look solved but isn't. After Mr Putin leaves office, especially if the oil price falls and the material gains of his presidency fade away, ever more Russians may become frustrated with rulers who offer them recipes for shashlik but not for genuine change.

As expected, today in Athens Russia signed the Burgas-Alexandroupolis oil pipeline deal with the governments of Bulgaria and Greece, a $1.3 billion dollar project which will in theory break the bottleneck at the Bosporus Strait (as well as Turkey's control over this export route) and significantly increase Russian control over European energy infrastructure.

Another day, another deal

As reported in a Wall Street Journal article last year, the narrow and winding Bosporus Strait represents one of the world's most critical "chokepoints" for the transit of energy supplies. Numerous projects have been in the works to overcome this bottleneck, and the Burgas project directly competes with the U.S. backed Baku-Ceyhan pipeline project, an initiative which is also fraught with problems.

Andrew Kramer of the New York Times/IHT reports the following:

Still, in the strategic game of energy pipeline placements in Eurasia, where European countries and the United States are trying to both increase the export of oil and loosen Russia's grip on the trade, a kind of slow-motion chess match spanning a decade already, Russian control of the Bosporus bypass pipeline is a mixed blessing for Europe.

While raising supply, it also increases reliance on energy exported via Russian- controlled pipelines. Russia already supplies about a third of the oil and 40 percent of the natural gas used in Europe.

For Russia, it provides another way around troublesome pipeline routes through former the Soviet states of Ukraine and Belarus.

"There's an element of a double- edged sword here," Kupchan said.

Here is what Greek PM Konstantinos Karamanlis had to say about the deal:

It is a great pleasure and honour for both me and my country that you are visiting Greece for the second time in several months. And this meeting is certainly a further step that confirms the excellent state of Russian-Greek relations. This meeting is a milestone that marks the beginning of the implementation of a project with historical significance, the trans-Balkan Burgas – Alexandroupolis oil pipeline. And I am happy that in September 2006 when you were last in Greece, we showed proof of our resolve to see this project accomplished in a practical way and that we laid the groundwork for this positive result. I hope that both this project and other joint projects we are engaged in will always develop and progress successfully.

Welcome, Mr President!

Poor Romano Prodi. His victory over Silvio Berlusconi's coalition last year brought such high hopes to Italy after five years of disastrous government, and only nine months later, after having his resignation rejected, he barely won a vote of confidence in Parliament to keep his job.

"The Russian president and I share the aspiration to establish solid ties between Rome and Moscow, and between Russia and Europe," Prodi said.

Perhaps it is because of his weakened state that "Il Professore" Prodi neglected to stand up to Russia to defend the interests of the Italian people this week. Instead, the prime minister put on a tap-dancing show rivaled only by the inimitable rent-a-chancellor Gerhard Schroeder.

With the deaths of Anna Politkovskaya, Andrei Kozlov, Alexander Litvinenko, and Ivan Safronov all fresh in our memories, Mr. Prodi gushes with enthusiasm about his desire to get closer to Russia:

"This summit is the best evidence of (the existence of) a strategic partnership between Italy and Russia," Prodi said in a joint press conference with Putin.

With the continued plunder of Yukos, new fraudulent charges against Mikhail Khodorkovsky, the extortion of Royal Dutch Shell at Sakhalin, pipeline supply cutoffs, the squeeze on BP at Kovykta, and now the attack on PwC all still smoldering with blatant illegality, Mr. Prodi chooses this moment to triumphantly celebrate a whole raft of business agreements, including fighter jets, helicopters, and of course energy deals.

In the context of ever worsening human rights violations in Chechnya, a recent rigged regional election featuring a "managed" political opposition, and an escalating arms trade with unpredictable autocracies of the international community, "Il Professore" offered no criticism, failed to stand up for basic values, and in effect lent his signature of endorsement to the current Russian methodology.

But perhaps the enfeebled prime minister isn't the proper focal point of this week's summit at Bari. Also in attendence were Paolo Scaroni of ENI and Alexei Miller of Gazprom, who together have one of the largest gas import contracts from Russia to Europe. Aside from Italy being Russia's third largest trading partner (totalling $27.7 billion in 2006), ENI is also Gazprom's largest single client. By all appearances, Prodi was dispatched to Bari to speak not on behalf of Italian citizens, but on behalf of ENI. At a post-summit press conference, he said "...ENI and Gazprom work well together. And the existing agreement provides that they will continue their activities within the wide range of cooperation the two companies are engaged in." Vladimir Putin responded by saying "If a company such as ENI wants to expand its sphere of activities, including investment activities in Russia, then we will only welcome this. As far as I know, ENI is interested in doing so and considering the very positive experience of cooperation between our major energy companies and ENI, then I think that these plans can be realised. You know that Gazprom and ENI have signed the corresponding agreement. In my opinion, they act as literal proof of the possibility of implementing the principles contained in the Energy Charter." (In my opinion, the "literal proof" of the Energy Charter would be Russia's signature!)

While it is clear how Italy's enthusiasm to become Russia's No. 1 non-critical partner is devastating to the prospects of political reforms for Russian citizens, one may ask how Prodi's conduct at this summit goes against Italy's interest. Putting values of human rights and democracy aside for the moment, one can easily perceive the dangers posed by the Italian-Russian relationship in terms of markets competition and energy security. There can be no better proof of the dangers of having the majority of Italy's energy controlled by a handful of companies than the words of Scaroni himself, who before getting entirely into bed with Gazprom, exhibited a much more critical attitude toward the tactics of the Kremlin's energy arm. Addressing the European Parliament in April of last year, Scaroni warned of Gazprom's price coordinating with Algeria, saying that an alliance of the top three gas exporters would be as dangerous as a cartel, and remarking that "gas can be a formidable weapon when it comes to foreign policy."

In April ENI's Paolo Scaroni expressed serious concerns about Gazprom's agreements with other suppliers, but by November, he had no more complaints.

Now, after signing a huge deal with Gazprom in November and putting his company's name behind the next rigged auction of Yukos assets (a reckless and risky move I have thoroughly condemned), Scaroni marches to the beat of a different drummer:

Scaroni said that the question of his group''s interest in Yukos assets was a separate issue.

"We will participate in the bid for Yukos assets on April 4 but this has nothing to do with Gazprom," Scaroni said.

A newspaper report today said that the bid by Eni and Enel SpA, along with Russia''s ESN, for assets of bankrupt Russian oil producer Yukos are at risk due to the potential legal risks the operation would entail.

Scaroni said that if Eni won its bid for Yukos the gas extracted could be exported but then added that "the idea is to sell it there".

So it goes without saying that Prodi's orientation toward Russia is incredibly unhelpful in coaxing forth the more progressive elements within the government to guide Russia toward democracy. This maddening brand of cowardly subservience and sycophancy to the rule-breaking energy bullies in the Kremlin is exactly what fuels the fire and puts the rest of Europe (and the world at large) into a disadvantaged bargaining position. Without being able to borrow this illusion of legitimacy from Italy and the SPD in Germany, Russia would actually have to enact meaningful policy changes to improve their relations with Europe. In this respect, "Il Professore" Romano Prodi is Vladimir Putin's best friend.

However, the most compelling argument against Prodi's approach to Russia returns to the subject of values - something that was not overlooked by Italian observers. Russia expert Franco Venturini published a front page editorial in Corriere della Sera which urged the Italian government not to remain silent on human rights, even in the face of economic interests. "There is ... a duty to be true to principles that are not negotiable."

The Land Where You Sit: Pooh Corner

By Grigory Pasko, journalist

The trial of the mayor continues in Vladivostok. To a Canadian or American reader, this phrase will only say that yet another mayor is on trial in Russia, but no more. Just ordinary everyday news. All the more so since this is already the 13th or maybe even the 14th mayor who has been put on trial in Putin’s Russia.

Photo from the author's archives: former mayor Nikolayev in handcuffs

What is amusing is that this phrase doesn’t say anything at all to a Russian reader. The fact is that there are currently TWO former mayors on trial at the same time in Vladivostok. It seems to be a unique form of recreation in Vladivostok – putting mayors on trial.

Former mayor Yuri Kopylov is being tried for “committing actions that exceed the authority of the office and have entailed a substantial violation of the rights and lawful interests of citizens and organizations”. According to the data of the investigation, Mr. Kopylov had grossly violated a series of federal and local laws when he was head of administration of Vladivostok. He had arbitrarily entered into a contract with a Japanese company for the delivery of materials for the construction of a columbarium at a sum of around $4 million.

The more-recently-former mayor, Vladimir Nikolayev, is being tried for practically the same thing: the Putinite power today isn’t very creative in its choice of Articles of the Criminal Code. All the more so since the system created under Putin allows many mayors and governors – if not all of them – to be thrown behind bars for “committing actions that exceed the authority of the office…”. The whole point of the system is that you can’t commit any actions at all – even for the benefit of the city – without exceeding your authority.

A.A. Milne wrote a wonderful story about a teddy bear named Winnie-the-Pooh.

Russia’s law-enforcement organs and professional criminals have a long-standing tradition of giving people nicknames – “pogonyala” in Russian.

They say that Vladimir Nikolayev, the Vladivostok mayor who was just recently stripped of his powers and arrested, had a nickname too – Winnie-the-Pooh. After his arrest, the newspapers were suddenly brimming with references to this storybook character’s name, and were mentioning how Nikolayev, supposedly, was not only mayor, but also the kingpin of an organized criminal grouping.

You would think that the procuracy of Primorsky Kray had suddenly awakened after a years-long hibernation, the way it’s suddenly spewing out charges left and right against Nikolayev himself and his assistants at city hall. It has been reported to the public that city hall officials had allowed numerous gross violations of the law to take place in the disposition of plots of land. The rules for the disposition of municipal property were violated. In particular, the city administration did not conduct auctions for the right to enter into leasing contracts. The procuracy also found violations of budget legislation.

Nikolayev himself said shortly before his arrest: “Everything taking place in Vladivostok since February 12, 2007 is simply a full cynical ‘contract’. A contract on the part of highly-placed officials, who have given the law-enforcement organs an assignment to use any means whatsoever to decapitate the city of Vladivostok, under any fabricated circumstances whatsoever. Somebody wants to take everything away here and divide it up; somebody has apparently decided that the mayor of the city has become a liability; somebody wants very much to engage in spending the money for the upcoming summit of the APEC countries.”

I had written that Nikolayev would be arrested right here in this blog long before he was actually arrested.

Today, I will stick my neck out and make a conjecture about who will be the next mayor of Vladivostok. As I understand the situation in that city (and I’d lived there for 20 years), the man anointed to be the next mayor (after pretend elections) will be the son of an FSB general, Ruslan Kondratov. Daddy-the-general is at the present time representative of Primorsky Kray in the Federation Council.

Photo from author's archives: predicted future Mayor Kondratov, without handcuffs.

What do we know about daddy? In his day, Viktor Kondratov was the head of the FSB Administration for Primorsky Kray (on a personal note, I might add that he played a role in my own criminal persecution and ludicrous accusations of having spied for Japanese journalists). Then he was Putin’s plenipotentiary representative in the district. Then he was transferred to Moscow.

Summing up the activities of the FSB general in the post of Putin’s representative in Primorsky Kray, the head of the administrative department of the Primorsky Kray administration, German Zverev, wrote: “Mister Kondratov turned out to be unequipped to manage the socium. After all, resolving tasks associated with the activities of the FSB is one thing. But managing the economic process, seeking compromise with local authorities, striving for a way out of a crisis – this is something completely different… Mister Kondratov has already exceeded his limit of mistakes”.

It turns out that he didn’t, inasmuch as in the year 2006, he was appointed to represent the interests of Primorsky Kray in the Federation Council.

Kondratov’s son Ruslan did not follow the path of serving the fatherland in the gallant ranks of the secret police. But his ascent, as the local press wrote, began in 1997, when his father became the plenipotentiary representative of the president in the district. As the regional mass media of that time reported, Viktor Kondratov enjoyed the broadest of powers and could make use of the power resource for improving material well-being – his own and his family’s. Ruslan Kondratov and the general’s son-in-law Dmitry Dremlyuga undertook to cobble together a family fisheries empire from the remnants of the Primorsky Kray industry. As the press reported, a sufficiently simple scheme was used: functioning enterprises were artificially brought to bankruptcy, and then the assets were distributed among a narrow circle of creditors, one of whom was often OOO “Akvaresursy” or “Ogni Vostoka” – enterprises close to Kondratov and Dremlyuga. (It is noteworthy that the same kind of (apparently chekist) scheme is in place now with respect to the company YUKOS as well—G.P.)

Gradually, the “Akvaresursy” group of companies “privatized” a significant proportion of the Primorsky Kray fish (and not only fish) industry and was coming within striking distance of its most significant acquisition – the company “Dalmoreprodukt”, symbol of the fish industry in the far East of Russia. In August 2004, Kondratov finally got the remnants of «Dalmoreprodukt» firmly in his grasp.

The workers of the enterprise had their own take on Kondratov’s intervention. From a letter from the members of the OAO “Dalmoreprodukt” board of directors to the procurator-general of the RF: “A group of affiliated parties headed by the entrepreneur Kondratov R.V. conducted a machination unprecedented in the scales of the country – they bankrupted the largest company in the fish-catching industry on the basis of fictitious debts. …On the remnants of «Dalmoreprodukt» they organized several subsidiary enterprises, including the ‘Dalmoreprodukt’ Management company’. A short time later thousands of fishermen remained without work.”

In 2002-2003, running for deputy in the Legislative assembly of Primorsky Krai from Khasansky Rayon, Ruslan Kondratov thrice suffered a crushing defeat. Nevertheless, he still became a deputy.

At the present time, Ruslan Kondratov occupies the post of chairman of the committee for social policy and protection of the rights of citizens of the Krai’s Legislative Assembly. His constituent receiving office recently opened up on Oleg Koshevoy street in Vladivostok. Before this, reports about various kinds of good works by this personage of regional politics had begun to appear often in the local press. Even earlier, it was reported about how nearly 800 fishermen from the factory ships “Sodruzhestvo” and “Grigory Didenko” had decided to transfer their single-day earning to the Fund of Social Support of the Population of Ruslan Kondratov.

Answering the questions of a local newspaper, Ruslan Kondratov said: “Well, in the political life of Primorsky Krai I have already participated, true, nobody had asked about my desire to play political games. But seriously… Vladivostok is not an unfamiliar city to me, I do not plan to leave here, and its problems concern me in the same way as they do the other townspeople… – in the realm of finances and in the realm of fuel, I think, I have already achieved some kind of significant level.”

And another conjecture. 100 billion rubles will most likely be allocated by the government of Russia for the development of Primorsky Kray. This will not happen soon. But it will be Putin’s people who will be dividing up (or, in the modern Russian lexicon, “sawing up”) this money, not Nikolayev’s people or even those of today’s governor Sergey Darkin. What I’m trying to say here is that Darkin’s days are also numbered. Okay, maybe months – no difference. It is entirely possible that he won’t be locked up in jail, but merely moved, like a pawn, to another place on the political chessboard in Putin’s Russia.

Polish journalist Zygmunt Dzieciolowski has an interesting, if not somewhat pedestrian, analysis of the Kremlin's latest political maneuvering to create an illusion of competition and controlled opposition on Open Democracy:

The Kremlin-approved new opposition party Just Russia failed to satisfy the grievances of the St. Petersburg protesters.

From Open Democracy:

But, in a Russia characterised by secretive backstage political intrigues and a silent public opinion which can change its mind overnight, things are not so simple. An unexpectedly crowded pre-election "march of dissenters" in St Petersburg - when thousands of demonstrators clashed with police - signalled the first signs of frustration felt by the Russian public. The number of people upset that important decisions concerning their lives are being taken without observing democratising principles is increasing. They want more transparency, argues St Petersburg sociologist Maria Matskevich.

Now, the three more radical opposition leaders - Garry Kasparov, Eduard Limonov and Mikhail Kasyanov - say they will attempt to organise another demonstration (a "march of those who disagree"), this time in the capital, Moscow. They promise to do their best to bring as many people onto the streets as possible. If they succeed, it may signal that the triumphal mood of the Kremlin after these regional elections is a façade behind which more serious political calculations are underway.

Dmitri Travin is the editor of the St Petersburg weekly Delo. His criticism of the present Russian administration is always based on careful political, sociological and economic analysis. In a recent article he articulated concern over the country's political future by asking three important questions:

* what will happen if the electoral campaigning stimulates people's expectations to a level higher than the real possibilities of the economy?

* what will happen if Putin's successor lacks the current president's charisma and fails to secure equally high popularity ratings?

* what will be the consequences when the perpetual infighting among different groups inside the government, and their dirty character, become apparent to (so far) politically neutral or quiescent citizens?

It is the Kremlin's real achievement, Travin comments with characteristic irony, to provoke people to march in the streets in St Petersburg even at a time when the country is flooded with petrodollars. What will happen when the bubble bursts?

The three questions posed by Dmitri Travin will not go away. The right answers will be a key to Russia's political future in the last year of Vladimir Putin's presidency, and beyond.

Today Italy's largest circulation newspaper, Corriere della Sera, is running an article (PDF) featuring Robert Amsterdam's press release on the risks of Eni and Enel's involvement in the controversial auction of Yukos assets.

Excerpt from release:

All this while the latest accusations filed against Mikhail Khodorkovsky - still imprisoned in Siberia with complete disregard for legality - are increasing the concerns among the international community for the way in which the Russian government has used the law and the justice system. According to the Council of Europe, the Kremlin has on several occasions violated the Russian constitution and the European Convention on Human Rights in its treatment of Khodorkosky for political ends and for the purpose of gaining control of a strategic industry (see Council Resolution No 1418 of 2005, adopted by the European Parliament).

The Italian public should be aware that Eni and Enel, the 2 largest businesses in the country, are running the risk of becoming involved in the consequences of a criminal act, which sooner or later will come to light.

As an addendum to my interview with the former FSB spy, I dug up some interesting Soviet "cloak and dagger" propaganda posters from the Great Patriotic War:

"DON'T BLAB! Strictly maintain a military and industrial secret!"

"Blabbing is helping the enemy! (it rhymes in Russian)."

Are energy corporations capable of Freudian slips? It certainly seems so, after Enel published an advertisement in the Russian newspaper Rossiiskaya Gazeta trumpeting their decision to join together with Eni to take part in the "Gazprom" auctions - in reference to Act III of the destruction of Yukos.

Imagine if you will, a flustered Italian PR rep explaining away this one: "Gazprom?! Oops!!! Of course we mean Yukos, which will have a range of assets auctioned off in late March and early April. We don't mean to presume that this auction will be rigged to deliver Yukos assets directly to Gazprom - why that would be highly illegal and immoral!!! Certainly we would never endorse such theft and the human rights violations that have accompanied it! We would never dare expose our shareholders to this level of risk!!!"

From Reuters:

Enel Paper Ad Confuses Gazprom with Yukos

Italian energy firm Enel slipped up in an advertisement published on Tuesday that said it would bid for the assets of Gazprom, instead of bankrupt oil firm Yukos.

The glitch, which comes as President Vladimir Putin starts his trip to Italy on Tuesday, was made in a full-page advertisement in Rossiiskaya Gazeta, trumpeting Enel's plans to invest up to 4 billion euros ($5.27 billion) in Russia.

"Together with Italian oil group Eni and our Moscow partner ESN, Enel will also take part in auctions for the right to buy some of the companies of Gazprom, such as Arcticgas and Urengoil, which control large methane deposits," Enel said in the advertisement.

Happy Birthday to GULAG’s Descendants!

By Grigory Pasko, journalist

Photo of the wall of the Chita SIZO by Grigory Pasko

On one of the Russian websites you can read: “Celebrating professional holidays is a wonderful tradition that arose in our country back in the ‘years of stagnation’. Every professional holiday has its own special color. For example, on the Day of the Trade Worker, all sales clerks are smiling and attentive to buyers, while these, in their turn, are not stingy with compliments and purchases”.

What holiday’s DON’T we celebrate in Russia?! The Day of the Employees of the Military Comissariats [Draft Boards—Trans.], the Day of the Military Automobilist, the Day of the Incassator [the people who drive money around in armored trucks—Trans.], the Tester, the Secretary, the Insurer, the Mechanical Engineer, the Intelligence Officer, the Accountant, the Appraiser, the Realtor, the Bank Clerk…

On average, there are ten such holidays of various sorts every month in Russia. Around a hundred a year!

March 12 was the professional holiday of Workers of the Criminal-Execution [Penal—Trans.] System (UIS) or the Ministry of Justice of Russia. In 1879, the Emperor Alexander III issued an Ukase on the creation of a gaols department, laying the foundation for a unified state system of executing punishments in Russia. The workers of the Russian GULAG practically dragged this event in from the street and turned it into “their” holiday. (It probably has nothing to do with Arbor Day, an official holiday that is celebrated on the same day in China. In China they only plant trees in the ground on this day, not people in jail.

Inside a Russian prison. Writing on wall reads: Solitary Movement Prohibited [i.e. all persons must be accompanied by another person] Photo NOT!!!! by Grigory Pasko.

The strangeness of the holiday of UIS workers is compounded by the fact that there is another similar holiday in Russia already – the Day of Workers of Investigative Isolators (SIZOs) and Jails. This holiday, as the prison workers themselves say, is a new one for Russia, and there are so far no traditions for how this holiday is celebrated. In certain prisons, they simply open up some of the nooks and crannies of their institutions and invite journalists to come see the ancient dungeons in which famous people once underwent punishment.

Inasmuch as readers of this blog have recently had numerous opportunities to read reports about the investigative isolator of the city of Chita, in which Mikhail Khodorkovsky is imprisoned, we felt it might be appropriate to send our holiday greetings to the employees of this institution on the occasion of their professional holiday. Who knows, maybe they, like the workers in the Russian retail sector, are kinder towards arrestees on this day?

In addition, we are pleased to offer you an interview (directly below this post) with a former jailer, currently a Chita taxi driver, Georgy Kozhanov.

A taxi driver from the GUIN system

By Grigory Pasko, journalist

“Why are you photographing all this anyway?”, the taxi driver asked me as I was once again stepping out of his Volga car in order to take yet another photo. I looked him in the eye and answered in the way a seasoned veteran prisoner had taught me to answer on my third day in jail: “For what purpose are you interested?”

My comeback question, it turned out, was the only correct thing to say in this situation. My taxi driver immediately introduced himself as Gosha Kozhanov, and announced that he had only recently been a captain of internal service from the criminal-execution [penal—Trans.] system of Chita Oblast. From all appearances, my phrase was well-known to him. Well, as they say in Russia, even an animal runs right at a skilful hunter. At any rate, after we made our introductions, the taxi driver agreed to answer a few questions himself. Here’s what he told me:

Georgy Kozhanov, taxi driver and former officer of the criminal-execution system for Chita Oblast:

I got caught in a staff reduction and was dismissed from service, although I still had a desire to keep on service. I was the commander of a squadron in a tuberculosis colony. I can tell you that the prisoners were fed well. So well that many of them didn’t want to go free after they’d served their sentences. Many prisoners don’t have any relatives, a hearth and home, or a job. So they come back…

Photo of Georgy Kozhanov by Grigory Pasko

I’ve also been inside the Chita SIZO many a time – I took part in the carrying out of searches. The conditions there are worse than in the camp. I remember there were sometimes 60 or even 70 persons in a cell intended for 30. They say it’s better now. But I don’t think it’s much better.

I’ve never been to the Krasnokamensk colony. I’d heard that Khodorkovsky was there. By the way, I’ve got this acquaintance, and he is right now part of the group of operative workers [See Translator’s note on “operative tracking group” at end of Grigory Pasko’s Exclusive Interview with Khodorkovsky Prison Informant] who are constantly, shall we say, working with Khodorkovsky. Of course, this is insanity, that such a large quantity of employees – spetsnaz, the “opers”… – are all attending to this one prisoner. If this were the president of the country, I’d understand, but this…

I think it’s orders from Moscow. But the overkill with the street closures – that’s local chiefs showing how loyal they are. This has reflected on the life of Chita – they’re closing streets. There’s a lot of talk about these subjects among the people. The people are saying: Okay, so the person stole, he didn’t pay up; someone needed him locked up, so they locked him up.

Let me tell you my opinion about those reprimands the colony leadership were laying on Khodorkovsky. I myself was a squadron commander, and I know how this is done. The chief of the colony would call me into his office, and he’d say: the situation in the camp is heating up, this or the other prisoner needs to be punished. That is, I would be given the order to put a person in the punishment isolator. But for what and why – they didn’t explain. No doubt it was the same thing in the case with Khodorkovsky. It was ordered, and they did it, they put him away. Someone put pressure on the administration, and it announced reprimands against him.

Photo of monument to revolutionaries by Grigory Pasko

But in general, I think the situation with Khodorkovsky is clear to everyone: they’re afraid of him. Hence the operative tracking of him everywhere. True, this all looks more like just window dressing. They couldn’t even convict him honestly.

And us, the rank-and-file citizens – they take us for fools, as if though we don’t understand anything. They think we’ll believe all this. That Khodorkovsky alone is a thief and a swindler, while the other oligarchs, the ones they didn’t lock up, are all squeaky clean.

…After this monologue, Gosha the taxi driver seemed to want to phone his friend the operativnik, in order to have a chat with him. But then he thought it over for some reason. On the way back to the hotel, he showed me the main buildings in the city and, in his words, a “monument to Decembrists who had been shot”. Upon closer inspection, the monument turned out to have been raised in honor of revolutionaries – the organizers of a railroad strike in 1906.

So is another part of the EU’s energy strategy

By Derek Brower

HUNGARY’S prime minister Ferenc Gyurcsany did the decent thing this week and admitted what many have known for some time: his country has no real intention of participating in the Nabucco pipeline project.

At least Verdi's version exists

"Nabucco has been a long dream and an old plan," he said in an interview with the IHT. "But we don't need dreams. We need projects." Instead of Nabucco, confirmed Gyurcsany, Budapest would back a rival project to import Russian gas into Hungary.

The €5bn Nabucco project was conceived to be the “anti-Russian” pipeline. Stretching from Turkey through the Balkans into central Europe, it would take some 30bn cubic metres a year of gas from Central Asia, the Middle East and Egypt into the EU. The European Commission, which instructed its development banks to finance the bulk of the project, prioritised the pipeline as key to reducing the continent’s dependence on Russian gas.

Hungary’s state energy company, Mol, is one of five companies in a consortium that was planning to develop the Nabucco pipeline. Mol might remain in the consortium – but without Hungary’s political backing for the project, it has no chance of proceeding.

That is because Budapest favours a rival pipeline project that would bring Gazprom’s gas through the Blue Stream pipeline – under the Black Sea between Russia and Turkey – and up through the Balkans into Hungary. It would target the same markets as Nabucco. Analysts rule out the possibility of both coming on stream. More likely is that the Nabucco developers will join Gazprom’s project.

On the face of it, Hungary’s motivation in backing Gazprom’s Blue Stream extension is clear. The country hopes to become a regional gas hub, building storage capacity and earning income from transit fees. But Gyurcsany’s opponents have also hinted at darker reasons behind his government’s backing for the Russian project. Hungary has become a refuge for several prominent Russian businessmen with shady histories.

But Budapest has simply done its sums, calculating that siding with Gazprom will guarantee its own security of supply – even if such a deal angers its neighbours, who are worried about increasing the region’s dependency on Gazprom. When they signed a memorandum of understanding relating to the project in the summer, both Budapest and Moscow emphasised Hungary’s future security of supply as a feature of the deal.
"The single problem with Nabucco is that we cannot see when we will have gas from it," Gyurcsany said. "If someone could say to me definitively, you would have gas by a certain time, fine, but you can only heat the apartments with gas and not with dreams." He added: “Blue Stream is backed by a very strong will and a very strong organisational power – and there is capacity behind it."

For Brussels, Hungary’s decision exposes yet again the failure of the EU’s member states to put the Union’s strategic interests ahead of their own. Berlin made a similar decision when the Gerhard Schröder government backed Gazprom’s Nord Stream pipeline through the Baltic Sea to Germany. Like Budapest’s cooperation with Gazprom in Central Europe, Berlin’s bilateral agreement with Moscow angered Germany’s neighbours, who felt that the pipeline would compromise their energy security. It also infuriated Brussels, which hadn’t seen so much as a feasibility study of the line before it was announced.

And Hungary’s decision exposes another failure of the EU’s common energy strategy. Although Nabucco was designated a “strategic priority”, in the words of energy commissioner Andris Piebalgs, its slow progress has undermined its viability. It is also questionable whether Nabucco’s ambition to secure supplies from the Middle East and North Africa was ever realistic. Iran’s export capacity remains limited for political reasons; and Egypt, the other potential supplier, would prefer to export liquefied natural gas or supply its own growing domestic market.

Gazprom has known that all along. And, having successfully separated Berlin from the rest of the EU to agree the Nord Stream deal, the company is aware of how empty claims about a “common voice” on energy in the EU really are. Gazprom has openly spoken about Germany and Hungary as “hub states” for its gas in Europe.

In November, Alexander Medvedev, head of Gazprom’s export arm, told me that Nabucco posed no threat to Gazprom’s plans to extend Blue Stream. “Nabucco is a virtual pipeline,” he said. He even had time to make a joke at its expense. Referring to the opera from which it takes its name, he said: “Unlike the Verdi opera, there will be no execution of this Nabucco.” Europe’s problem remains the same: Gazprom keeps having the last laugh.

www.derekbrower.wordpress.com

The Council on Foreign Relations has posted an analysis on the "unabated" human rights abuses in Chechnya:

Chechnya also remains a sore point in U.S.-Russian relations. President Bush, in meetings with Russia's President Vladimir Putin, is wont to raise the issue of human rights in Chechnya. Meanwhile, Putin refers to the conflict there as a “counterterrorism operation” and an internal matter. This March 2006 CFR Task Force report says “a problem that ought to encourage U.S.-Russian cooperation is made divisive by Moscow's preference for blaming outsiders.” The report adds that “nothing threatens the future of Russia more than a strategy that spreads the military disaster that has engulfed Chechnya to the entire North Caucasus.”

Complete text here.

Following the polonium poisoning murder of Alexander Litvinenko in Itsu, a London sushi restaurant chain, the competing Yo! Sushi chain has announced franchise agreements to open up locations in Russia. Let's hope their brand fares better!

From the FT:

Robin Rowland, Yo! Sushi's chief executive, was on a flight to Moscow last November when the story broke that Itsu, a UK rival, had been forced to close its Piccadilly branch at which traces of polonium-210 were found after the poisoning of Alexander Litvinenko.

Rowland's Russian hosts were greatly amused when he walked through the door. However, he insisted that their jokes about his coming to Moscow to make a payment for the nobbling of a competitor were merely an example of Russian black humour.

Today the Financial Times has published a letter I sent in regarding the recent harassment of PricewaterhouseCoopers in Russia.

Mikhail Khodorkovsky will never have justice in Russia

From Mr Robert R. Amsterdam.

Sir, There is a fundamental point that underlines the attack on PwC and most certainly the attack on Yukos ("Raid on PwC offices by Russian authorities", March 10). Those in the executive that have masterminded this massive state theft are desperate to legitimise their actions. Somehow they believe that the west will forget the Yugansk auction and believe witnesses who have been threatened or falsely incarcerated.

My client, Mikhail Khodorkovsky, will never have justice in Russia because those that have incarcerated him have profited personally. The stench of bias and corruption of the Russian authorities is only matched by the western bankers who do the Kremlin's illegal bidding.

The desire of these senseless Friday night raids was to continue the big lie tactics of a Kremlin that does not want to admit that the real corruption has nothing to do with my client but rather those directing his prosecution.

Robert R. Amsterdam,

Legal representative to Mikhail Khodorkovsky

Looks like I am pretty late to this, but Very Russian Tochka has posted a translation of a statement from the opposition Yabloko party, which was banned from participating in Sunday's elections in St. Petersburg.

NO to an Election without Choice! A Proclamation by Yabloko in St. Petersburg

READ AND PASS ON!

Dear Petersburgers!

The Legislative Assembly election, to be held on March 11, have been turned into a farce. YABLOKO, as the only real opposition to Governer Matviyenko, has been rudely and cynically thrown out of the election campaign. With references to a phoney “expert evaluation” (the fact that it’s “phoney” has been recognised even by the city court), we have been barred from registering.

The only real reason behind this refusal is our opposition to the governor. They’re taking revenge on us for our antagonism to the construction of the Gazprom City monstrosity [q.v. – Trans.], for our deputies’ voting against the extension of Matviyenko’s mandate for a second term, for our supporting independent transport operators, for our contending the rights of citizens – against the development of “condensation” housing, against the “inwash” on Vasilievsky [Island], against the phasing-out of retail trade at [public transport] stops.

We are addressing all Petersburgers – not only our supporters – say no to an election turned into a farce! Say no to an election in which the competing parties only differ in the degree of love for Governor Matviyenko and the degree of veneration of President Putin.

We are calling on you to actively express your protest against such an “election”.

If you don’t come to the election, others will vote instead of you. A “throwing-in” of votes also cannot be ruled out, if you don’t come.

If you do come, you will not be able to vote “against all”: this option has been dropped from the voting papers.

But you can come to the election and invalidate your vote.

A vote is considered invalid if more than one box opposite a party’s name has been checked.

We are calling on you to write in each of those boxes, from the top down, any word reflecting your position.

It can be the word “YABLOKO”. It can be the word “protest”. Or any other word.

Invalid votes must be counted separately and their number is mandatorily marked in the final protocol.

The more there are, the more convincing will be the expression of our joint protest!

No to an election without choice!

YABLOKO of St. Petersburg

[an address where these leaflets can be obtained for distribution]

Today Richard Holbrooke's column in the Washington Post is dedicated to the Russian threats to derail Martti Ahtisaari's proposed phased independence of Kosovo. Holbrooke makes a debatable argument that Russia's support of the Serbs does not actually represent a "fraternal" Slav-Serb allegiance, but rather an opportunity to gain geopolitical leverage and reassert their authority on the world stage:

Yet instead of working to avert violence in Kosovo, Russia seems to be enjoying the opportunity to defy key Western countries, especially Germany and the United States. Secretary of State Condoleezza Rice and her superb special envoy, Ambassador Frank Wisner, have told Moscow and Belgrade that the United States supports the Ahtisaari plan, but until President Bush weighs in strongly with Putin (as President Bill Clinton did a decade ago with Boris Yeltsin), there is a serious risk Moscow will not get the message. That message should be simple: If Russia blocks the Ahtisaari plan, the chaos that follows will be Moscow's responsibility and will affect other aspects of Russia's relationships with the West. ...

Now Kosovo is shaping up as the biggest international test yet of Vladimir Putin. If Moscow vetoes or delays the Ahtisaari plan, the Kosovar Albanians will declare independence unilaterally. Some countries, including the United States and many Muslim states, would probably recognize them, but most of the European Union would not. A major European crisis would be assured. Bloodshed would return to the Balkans. NATO, which is pledged to keep peace in Kosovo, could find itself back in battle in Europe.

Yesterday the Committee to Protect Journalists put out a release condemning the arrests and harassment of journalists covering Sunday's elections:

“Detaining reporters covering a newsworthy event such as a demonstration creates a chilling environment ahead of national elections scheduled in the next 12 months,” CPJ Executive Director Joel Simon said. “These incidents send an intimidating message to Russian journalists.”

The Russian Academy of Sciences, the nearly 300-year-old esteemed academic institution which once defied Soviet demands to expel Andrei Sakharov, is currently waging the battle of its lifetime to maintain its independence from government efforts to tighten control. If the new charter is drafted according to official requests, the Foreign Ministry will have oversight on the foreign policy thinktanks, the government will have the ultimate approval on academy appointments and assign budgets (or lack thereof) on research projects, and "greedy bureaucrats" will gain control of the Academy's valuable portfolio of real estate. Ultimately, the pressure seems to be on the institution to better commercialize itself.

From the Post:

Livanov, the deputy minister, said the academy could quickly squeeze much more money out of its operations, particularly by exploiting its real estate. "Not long ago, we analyzed the assets of the academy, and our results showed us that these assets, if used efficiently, could generate 35 to 40 percent more revenue," Livanov said. "We're not changing ownership. It is state property and will remain state property."

"Now I hear the bell ring," said Rogov, of the U.S.-Canada institute. "That academy building would make a nice trading center, and that one a nice bank, and that one a nice mall."

Russia: Italy stumbles over Yukos

White Paper published today in Italy on the abuses perpetrated by the Russian government.

London, 13th March 2007 - the sale of the Yukos assets is likely to become one of the most controversial cases in international law.

When the sale of the assets, estimated at a value between $20 and 30 million, is finalised, the purchaser will have to reckon with one of the greatest thefts in modern history by a sovereign state: the theft of Yukos from Mikhail Khodorkovsky and its shareholders.

In Europe only Italy, through ENI and ENEL, seems determined to enter the bidding for the purchase of the Yukos assets -in particular those lots which include Articgaz and Urengoil with estimated value of 2.5 bn $-, in consortium with ESN and with Gazprom's agreement.

This is a short sighted decision, which in the long term is likely to bring with it more problems than benefits. The reputational damage with the international community and the legal risks of the deal are potentially enormous.

It is no coincidence that no other European oil or energy major has so far expressed publicly any interest in what in normal circumstances would be a huge transaction.

The auction has no claim to legitimacy as the underlying seizure of Yukos was not even in compliance with basic russian legal norms. In addition the new auction is further tainted by the nomination of Eduard Regbun (Yukos’ liquidator) to the board of Rosneft, the state oil company that will participate in the auction of the Yukos assets. The firm Amsterdam & Peroff, which is defending Mikhail Khodorkovsky, considers the next auction of Yukos assets a fraud, as the past auction.

All this while the latest accusations filed against Mikhail Khodorkovsky - still imprisoned in Siberia with complete disregard for legality - are increasing the concerns among the international community for the way in which the Russian government has used the law and the justice system. According to the Council of Europe, the Kremlin has on several occasions violated the Russian constitution and the European Convention on Human Rights in its treatment of Khodorkosky for political ends and for the purpose of gaining control of a strategic industry (see Council Resolution No 1418 of 2005, adopted by the European Parliament).

The Italian public should be aware that Eni and Enel, the 2 largest businesses in the country, are running the risk of becoming involved in the consequences of a criminal act, which sooner or later will come to light.

To coincide with the visit of President Putin, Amsterdam & Peroff is today publishing the Italian version of the White Paper on the Khodorkovsky case. Downloadable online from www.robertamsterdam.com.

Speak Up, We’re Eavesdropping!

A technician “under the roof”

Conversation with an FSB officer (ret.) about the ins and outs of information gathering and information security

By Grigory Pasko, journalist

From Russia, with Tradecraft

My interview subject and I spent a long time discussing whether we should or shouldn’t use his real name. On the one hand, he’s still technically a reserve chekist. On the other hand, the “reserve” status of former FSB officers is a very relative term. In the end we decided that we’d change his name. According to the principle of “you never know…”. After all, his current job – heading a firm that uncovers information leaks and protects information – does depend on whether or not the “senior comrades” renew his license.

And that’s where we’ll start our talk, with bugs.

Pavel, there is a prevailing opinion that you can just stick a bug on whatever you want and wherever you want, and then just sit back and record the patter of the individuals of interest to you…

The fact of the matter is that only unprofessionals place bugs for a long period of time. And unprofessionals don’t sweep their workplaces for the presence of listening devices for a long period of time. Smart people use our services periodically. And by the way, we’re not really that expensive compared with the loss that could accrue to their business by ill-wishers – competitors.

Back when you used to work at Administration «R», did you engage in wiretapping apartments, houses, offices?

Other people engaged in wiretapping apartments. We dealt with communications intelligence, radio intercepts, identifying unknown transmission devices working on the territory of a region. In the main, these were training exercises, because there were no instances of actual radioelectronic espionage in our region.

But that doesn’t mean there wasn’t anything like this going on at all?

Maybe there was, and maybe there wasn’t. At any rate, the equipment we had was used effectively. We trained together with the neighboring region: we would set up devices on their territory, simulate their operation, and await a reaction. Usually, the neighbors reacted. But in the event of an error, punishment would follow without delay and most severely.

I recall a textbook case when bugs were discovered in the office of Primorsky Kray governor Nazdratenko back when he was involved in a standoff with FSB general Kondratov…

That was a murky story. Supposedly, the police, under the control of the governor, had placed the bugs in order to discredit the FSB by throwing the blame on it. And then the police themselves found them and, in violation of all the laws, invited journalists over and showed them these bugs. And only then did they invite specialists from Administration «R».

In actuality, there is a multitude of incidents similar to this one. The special services and their work methods have been and continue to be used to the hilt for attaining some kind of political objectives. It is enough to recall the “sauna stories” with the procurators-general…

It is known that during the time of the reform of the FSB, many specialists left for commercial, banking, and other “oligarchic” structures, creating their own mini–special-services there: with units for gathering information and protecting channels of information. It is enough to recall Gusinsky’s Media-Most with general Bobkov. How widespread was this phenomenon in Russia?

The same thing that was going on in the capital was going on in the regions. And the structures created on the model of the special services still exist today. Not as well-equipped technically as in Moscow, with more modest needs and appetites, but… with the same connections and practically the same capabilities that existed before. Of course, there are now fewer of these structures, because this business isn’t cheap. And only high-class professionals have remained in this market.

Was Russia lagging far behind the foreign special services in terms of technical equipment?

It was behind, and it remains behind. Moreover, in recent years the lag has increased. Because the specialized institutes have fallen apart; there wasn’t enough funding… The only thing keeping them afloat was their talent and enthusiasm. Under Putin, the process has moved in the other direction: the technical equipment has started to improve, money is being appropriated…

…The number of chekists is growing. But there haven’t been, and still aren’t any preventive measures against terrorism in place. What can and should the FSB technical services be doing to support the FSB in its duty to prevent terrorism in the country?

-The certainly should be doing this…

What law are you governed by in the work you do?

- Activities in the realm of information security – that’s really what we’re doing now – is regulated by the law “On information, informatization and protection of information”. It says that any information the unauthorized use of which may cause harm to its owner shall be subject to protection. In addition, it indicates that control over information security in the structures of state shall be implemented by the organs of state power. We aren’t part of the power, so that’s why we work only with non-state structures and private persons who are not associated with state secrets or limited-access information. For example, private banks, the editorial boards of newspapers and magazines… Structures of state are handled by the same kind of organizations as ours, only they’re state themselves. They’ve got different licensing, too, and are funded out of the state budget.

How do clients feel about your past – service in the KGB?

I never hide where I come from. And the client understands that a person who is not from there may not have the license or the work experience. That is, formally speaking, just anyone off the street could try to organize such a business. But for this he will need a recommendation from the head of the FSB of a Subject of the Federation [a Russian province, such as an Oblast or Krai—Trans.] If he can get that, it’s full steam ahead. But I am not aware of such cases.

What guarantees do you give clients that information about their activities won’t become known to competitors or to the FSB?

Just my word of honor.

I’ll be honest – that seems a bit thin.

All I can say is shop around. Try to find someone cheaper and more reliable. The fact is that my entire business depends on my reputation. If it goes, my business goes. It’s enough for one person to say, to insinuate, to start a rumor, that I’m handing over clients to “the office”, and I can just close up shop. But there haven’t been instances like that yet. Furthermore, I warn a client right from the start that information – if such becomes known to me – about his participation in distributing narcotics, preparing the murder of a person, trading in state secrets and other such things will be reported by me to the proper authorities.

And let’s say he’s engaged in fraud in the sphere of entrepreneurship?

Let those who know without me that this is what he is engaged in engage in this.

Do you have a “handler” at the FSB?

I retired from such a high post that there’s no need to even talk about a “handler”. My “handler” is my convictions and my work experience.

How much do you charge for your services to check if information is secure?

On average, to sweep a facility, for example, of 20 square meters [roughly 200 square feet—Trans.], for all possible kinds of information leaks costs the client from 300 to 600 dollars. But there is also an individual approach. If I see that an entrepreneur is trying to save his money, and that he works hard and honestly to earn it, then the price can be reduced by half.

What is the frequency with which people call on you for help?

We don’t keep statistics like that, but there is one peculiarity: the quantity of calls to us increased after the elections to the State Duma. There were fewer before the elections… And when the change of the membership of the Duma took place, there came a wave of calls. I think that the next change of rotation in the parliament will also entail an increase in the number of calls to such organizations as ours.

Who places bugs?

The siloviki structures – the UBOPs, the RUBOPs, the OBNONs… [Administrations for Fighting Organized Crime, District/Regional/Republican Administrations for Fighting Organized Crime, Branches for Fighting the Unlawful Turnover of Narcotics—Trans.] There’s a total of eight structures that have the right to do this, just in the MVD [Ministry of Internal Affairs—Trans.] system. The things the FSB places are practically impossible to find. And then… Anybody at all can place a bug. The main thing is how to make use of this later. The FSB needs this to present in court. That means you need to do everything legally, get permission through a court. That’s why “the office” doesn’t waste time on trivial stuff. But the cops do fool around with this. Either for kompromat, or out of some other self-interested considerations. But we figure out their bugs quickly. At the same time, let me note: we work in the interests of the client absolutely within the confines of the law.

What is the first question you ask a client?

Who could be working against you? If it’s the MVD, then they’ve got their techniques and methods. If it’s gangsters – they’ve got their own “signature”. The siloviki structures have their own equipment, the gangsters use other kinds… Not necessarily worse.

Why do you get requests from the editorial boards of newspapers and magazines?

To determine if they’ve got information leaks. We’ve had that several times in our practice. And each time it was already too late. We calculated that the information had already been taken out, that is before our arrival. That sort of thing happens when the editorial board, for example, has a conflict with the administration of the region. Or when, with their publications, journalists have stepped on the toes of some commercial structure that can afford to organize a wiretap.

Can the FSB listen to everybody and everything, to monitor electronic dispatches?

You can’t have total eavesdropping. This is, first of all, constrained by financial reasons. The equipment for total control would cost a fortune. Besides, someone needs to service this equipment. That is, again, you need people. Their labor needs to be remunerated. And that’s money again. To monitor email, the internet, is possible in principle. But the possibilities are limited by financial considerations, the availability of the necessary quantity of people.

But you could always recruit a hundred hackers…

And the likelihood of information leaks would increase a hundred-fold. Even in the USA, with the financial potential of the NSA, total control didn’t work out.

What are the sources of information leaks?

Data on hard disks is stolen, as a rule, by the system administrator. Sometimes he gets himself hired on purpose and then takes his time skimming off the information and selling it. This is physical theft of strategic information. Then there is tactical information – necessary today, at this hour, day. For example, a firm is in litigation with someone, and information is needed for counteraction in court. Or a transaction is about to take place at any moment, while competitors have decided to sabotage it.

The actual cost of a radio bug is around 15 dollars. You can pick up a perfectly decent selection of listening devices at any market for a relatively small price.

What do you think, is your business ever going to die?

In a country like Russia, it will either live forever or, as happened before, the state, as represented by the security service, will take it into its own hands.

Several stories from Pavel Mikhailov’s experience:

“I once got an order from the wife of a big businessman. She asked me to install video surveillance cameras in the apartment to find out if her husband was cheating on her. For several hours, while we were installing the equipment, she was fooling around with her lover… practically right before our eyes.”

“There was this time we were sweeping the office of a businessman – a big place and littered with all kinds of junk all over the place. He was walking around despondently because he had lost his bank card. When we went through a mound of paper, the scanning device suddenly went off. In order to find the source of the electronic radiation, we had to literally take apart this mountain sheet by sheet. And that’s how we found the bank card.”

“I advised one entrepreneur to have less furniture in the office and apartment for security purposes. After sweeping his office, I went to sweep his apartment at his request. Can you imagine my amazement when I saw… absolutely bare rooms. It turns out that he and his wife had rigorously followed my advice and were using a minimum of furniture and furnishings in the apartment.”

“Here’s one thing that’s etched in my memory. In the desk of a businessman, one of those “new Russians”, there was a book. Now, that’s already something highly unusual for this type of person. And the name of the book was – “Jokes About the Intelligentsia”.

From the Ottawa Citizen:

Russia faces a choice

No G8 democracy should be on the list of danger spots for journalists. It's shameful that Russia occupies second place on that list, after Iraq.

The ranking comes from the International News Safety Institute, which says there were 88 journalists killed in Russia over the past 10 years.

The list of bizarre deaths linked to Russia grows by the month. There was the murder of Anna Politkovskaya, a journalist investigating rights abuses in Chechnya. There was the poisoning death in Britain of Alexander Litvinenko, a former intelligence agent and critic of the Kremlin.

Earlier this month, Ivan Safronov, a journalist for the daily Kommersant, fell to this death from a Moscow apartment. Apparently he was working on a story claiming Russia planned to sell weapons to Syria and Iran.

Also this month, an expert on Russian intelligence who blamed that country's government for Mr. Litvinenko's death was shot (but survived) near Washington, D.C. Now there's news that two women, U.S. citizens, have mysteriously come down with thallium poisoning in Moscow.

It's possible Mr. Safronov fell out of the fifth-storey window, or committed suicide, or was pushed by someone with a personal motive. It's possible the shooting of Paul Joyal in Washington was simply a criminal act. The same could be true of the poisoned women.

But the sad reality is that Moscow is turning into the usual suspect in these cases. The very fact that allegations of official Russian involvement are plausible, even to those who normally resist conspiracy thinking, suggests the sorry state of Russia's international reputation.

In its 2006 human rights report on Russia, released this month, the U.S. State Department decries the "erosion of the accountability of government leaders to the population." President Vladimir Putin's apparent nonchalance about the fact that his critics have a habit of falling from windows and succumbing to exotic poisons strengthens his mob-boss image.

Not only is Mr. Putin seemingly unconcerned with the freedom of his own people, he's also been reckless in international affairs, supporting strongmen and dubious regimes.

Russia's increasingly sinister reputation is not only an internal problem. It threatens trade, diplomatic relationships and international security.

Democratic governments ought to express publicly their concern with the direction Russia has taken, and outrage at the treatment of non-governmental organizations and journalists. The world is facing a number of serious threats: global terrorism, climate change, AIDS and other epidemics -- to name only the biggest. Without Russia on side, it will be difficult to win the big fights of our era.

Democracies must lead, directly and by example. They must be above reproach when it comes to human rights. They must understand the delicate relationship between security and freedom.

Russia can, if it chooses, be among the lights of the world in the 21st century. Or it can slide back into darkness.

Tonight the FT is running an editorial on the results of Sunday's regional "elections" titled "Russia’s tame parties are no safety valve for social discontent."

Excerpts:

In the event, Just Russia has performed rather well for such an artificial party. Indeed, there is a danger for the Kremlin that in creating what is supposed to be a token opposition, it may create a real one – at least in the regions, where personality clashes dictate political divisions, as much as any ideology.

A bigger problem with a managed democracy is that it provides no safety valve for social discontent. Living conditions are miserable in many parts of Russia, and sanitised political parties are not going to fight for the money needed to alleviate them. They are more likely to line their own pockets.

On top of that, tame parties do not help Mr Putin with his biggest dilemma: how to find a reliable, competent and reasonably popular successor to follow him. That is the question causing the most nervousness in the Kremlin. Everyone expects Mr Putin to anoint his successor. It would be so much easier if he could leave it to a genuinely democratic choice.

[Note: We are pleased to welcome this exclusive guest column from the well known Russian ecologist Albert Kalashnikov, who reports from Blagoveshchensk on how hydroelectric power generation stations are causing a public health epidemic and vast environmental damage. - Robert Amsterdam]

Report from the Regions: Extreme Energy Zone

By Albert Kalashnikov, ecologist, Blagoveshchensk of Amur Oblast

There are several large electrical power generating facilities located in Amur Oblast – the Zeya and Bureya Hydroelectric Power Stations, the Raychikhinsk State District Electric Station, and Blagoveshchensk Thermal Power Station No. 1. The generation of electricity is increasing year-to-year at noticeable rates, since certain power stations are still not completely built or are undergoing reconstruction. After completion of all these upgrades, their total generating capacity will increase to 4000 MW. According to forecast, Amur’s hydroelectric power stations are supposed to produce 12 billion kW/h of electricity in 2007, which will comprise around 86% of the total volume. At the same time, production of electricity in the Oblast has exceeded consumption since as far back as 2004. Power generation in 2004 comprised 7.404 billion kW/h, correspondingly an excess of 1.519 billion kW/h (the “surplus” was sold to China).

According to official documents, 6 to 6.5 billion kW/h of electricity will be transported outside the boundaries of the Oblast by the year 2010, including 3 billion kW/h to neighboring regions of the Russian Federation.

Photo: Bureya Hydroelectric Power Station

All of the power station projects enumerated were designed back in Soviet times, and each design had its own flaws and problems beyond the environmental impact of their operation. For example, the Oblast center turned out to be downwind from Blagoveshchensk Thermal Power Station No. 1, which is coal-fired. As concerns the Zeya and Bureya Hydroelectric Power Stations, these deserve special mention, in order to dispel the myth about “ecological cleanliness” invented by local “professional ecologists”.

The formation of the Zeya Reservoir during construction of the dam was accompanied by a change in the parameters of the climate surrounding the territory with an elevation in humidity, especially in the winter period of the year, an increase in the quantity of fogs, a rise in the air temperature (and this is a zone of many years of frost!).

The change in the climatic peculiarities of the territories adjacent to the dam, especially the combination during the course of a lengthy time of the year of low temperatures of the environment and elevated humidity, create unfavourable preconditions for the appearance and acceleration of the advance of diseases of the respiratory organs.

On the whole, the filling of the Zeya Reservoir increased the morbidity rate 1.4 times. Thus, for the town of Zeya alone, the number of incidents of diseases of the respiratory organs comprised from 385.0 to 548.7 persons per 1000. For Zeya Rayon, the corresponding figures were from 235.9 to 395.3 persons. The rates of increase comprised 42.5% and 68.1%, respectively. At the same time, substantive changes in morbidity did not take place in areas of habitation of the population to which the influence of the Zeya Reservoir did not extend.

Also obvious is the sharp increase in the incidence of bronchial asthma among the adult population of the town of Zeya. The prevalence of asthma in the town of Zeya has increased 5 times, while in Amur Oblast as a whole it has increased by nearly 4 times.

The engineers at the Zeya Hydroelectric Power Station performed an idle discharge of water from the dam at the end of August 2006 (according to unofficial information, Chinese partners had not bought up all of the volume of electricity that had earlier been planned). Inhabitants of the village of Ovsyanka of Zeya Rayon suffered as a result. Wells were flooded, which impacted the quality of the drinking water, the harvest and stockpiles of firewood were destroyed, residential houses and outbuildings were flooded, a bridge was destroyed, utility lines were damaged.

Great damage was caused to the environment in the zones of the Zeya and Bureya Hydroelectric Power Stations and to Amur Oblast as a whole. Forests of the highest category suffered seriously. Tens of thousands of hectares were submerged. The clearing of the forests in preparation for the filling of the reservoirs was carried out indiscriminately, due to the absence of boundaries of the flooding zone of the reservoir forests beyond its boundaries were cut down, that is the watershed-preservation forests of the future reservoirs were partially destroyed. The area of commercial growing stock timber decreased by no less than 10 percent. The bogginess of surrounding territories greatly increased.

The list of environmental costs can be continued, but that is not the main objective of the publication. From what has already been cited above it is clear that changes in the ecosystem in the region have an irreversible character. After all, at RAO «UES» [the Russian state electric company—Trans.], they’re planning to build another no less than ten new large hydroelectric power stations and…several “non-ecological” coal-fired thermal power plants in Amur oblast.

RAO «UES», like any other monopolist, is striving to make use of the economically expedient fuel-and-energy potential in full. The political situation in the country, expressed in the strictly subordinated vertical of power, is ideally favorable for this. So a system gets created under which optimization of sales will not depend on some kind of limiting factors in the future. This includes everything from changes in federal legislation, to international contracts, to, finally, the notorious reform of the power industry. As concerns the after-effects of the reform, it is more than likely that as a result of it, the consumers of Amur Oblast will be forced to buy more expensive electrical power from Yakytia, while the relatively inexpensive electricity will go for export, bringing excess profits to a small group of “managers”.

And such a prospect awaits all of Russia. Hence the conclusion: in the conditions that have been created, electric power tariffs in the country do not depend on the quantity of new generating capacity being brought on stream in the structure of the monopolist. Therefore, any illusions about economic growth in connection with this are baseless. Power stations are being built today in such a quantity because there are surplus funds in the country from oil-and-gas import [sic]. And this is only one of the opportunities to exploit them. It is characteristic that at the same time, budget expenditures are not being recouped even by taxes. Thus, for example, hydroelectric stations being built in Amur Oblast are exempt from the property tax! At the same time, even non-commercial civic organizations of invalids here are forced to pay the given tax, which is levied on the office equipment necessary for them in their work.

As concerns electricity tariffs in the region, they increased yet again in 2007 (by 10-11% on average). While in the furnace rooms of the housing-and-utilities complex… steam locomotive boilers of 1940s vintage continue their long service. After all, it’s more reliable to continue using coal than to install electric boilers and fall into servitude to RAO «UES».

Unfortunately, it has turned out that there are no independent civic organizations left in the region, with the exception of the Amur Environmental Club «Ukukitkan», that might together be able to effectively withstand the hydroelectric expansion of RAO «UES». All the rest are found to one degree or another under the control of local government officials, who in their turn depend on the power industry. As concerns the “official ecologists” from the various scientific-research institutions of the region, they gratefully serve the interests of RAO «UES» in exchange for subsidies.

In the conclusion of a speech before a group of newly promoted security officers at the Kremlin on Friday, President Vladimir Putin made a surprising reference to comments made by former US Secretary of State Colin Powell upon the decision to withdraw from Anti-Ballistic Missile Treaty as a measure of Russia's resurgent power and military might. Putin also used the opportunity to announce that $190 billion has been earmarked for arms through 2015.

Care to re-evaluate your opinion of the Russian military, Mr. Secretary?

From the speech:

I recall at this moment how in these very halls a few years ago we held discussions with our partners on the Americans’ decision to withdraw from the Anti-Ballistic Missile Treaty.

I will not go back over all the details, but the reaction to our discussions then had a continuation in the discussions our American partners had with their allies. I remember how one of our extremely agreeable partners, one of the few genuinely very agreeable partners among the U.S. officials, Colin Powell (at that time U.S. secretary of state), said to the Europeans: “What are we arguing about? What missile defence? Defence against what? They – that is us – don’t have anything left now. They’ve got no missiles either now, just a load of rusting metal, that’s all. This whole dispute is purely theoretical”.

With the Armed Forces in the state they were in at that time, with what was essentially an ongoing civil war being waged, continued bloodshed in the Caucasus and the country’s national wealth being robbed on an unprecedented scale as millions of people looked on, the picture appeared to be of a country with no future ahead of it.

But dramatic change has been achieved over these last years, and this is thanks to your efforts too.

Two thoughts occur to me: 1) This wouldn't be the first time that Colin Powell was mistaken about weapons, and 2) if only the Putin administration could make such progress on the problem of "wealth being robbed on an unprecedented scale as millions of people looked on," then we would really have something to celebrate.

An RA reader in Paris has forwarded us this photograph of a street sign, taken today on Boulevard Lannes right near the Russian Embassy. In an apparent gesture of protest, someone has plastered on a poster which has renamed the street "Boulevard Anna Politkovskaia." This guerilla dedication also reads "1959 - 2006 Russian Journalist." Part of the poster has been ripped away, so there may have been more text.

Today the Economist Intelligence Unit is running an analysis of the situation of BP in Russia, specifically the Kremlin's campaign to seize majority control of the Kovykta gas field through invented "violations" of its operating license (headed up by none other than the dragon slayer Oleg Mitvol). The writers conclude the obvious: that the most likely outcome of the Kovykta heist will be a negotiation to pass Gazprom a huge stake in the project. The other potential outcome is that the environmental ministry will simply revoke the license, and the Russian state will commit an outright quasi-nationalization (read theft) a la Yukos. The sheer possibility that the Kremlin could even consider an outright theft of Kovykta is entirely based on the cowardly acceptance with which the Western financial community has greeted the mauling of Yukos, the hustling of Shell at Sakhalin, and the pipeline cutoffs to the former satellites.

From the Economist:

Speaking at a March 6th press conference, Anatoly Ledovskikh, the director of Russia’s federal subsoil resources agency, Rosnedra, said that he was “100% certain” that Rusia-Petroleum would be unable to correct the licence violations at the Kovykta gas field by the May deadline. Rusia Petroleum is 62.4% owned by TNK-BP. For the last ten years it has held the licence to Kovykta, which has gas reserves estimated at 1.9trn cubic metres. Since the Yukos affair, however, the Russian state has used its administrative resources to ensure a greater role for its proxies, Gazprom and Rosneft, in the oil and gas sectors. As the tide of energy nationalism has risen in Russia, Rusia Petroleum’s difficulties have multiplied. It hoped to establish a partnership with Gazprom that would permit the large-scale export of gas from Kovykta to China; Gazprom, however, has thus far refused all offers. Now Rusia Petroleum is in trouble for failing to produce the target volumes specified in the licence, and of having broken Russian norms with regard to pipeline construction.

Mr Ledovskikh also alluded to the fact that Gazprom is in negotiations to secure a stake in Kovykta, and observed that he believed the issue would be settled. Negotiations have been held periodically over at least the past two years, as TNK-BP sought to persuade Gazprom to build a pipeline to China so that the majority of Kovykta’s output could be sold profitably, rather than on the low-priced domestic market. BP and its partners in Rusia Petroleum have even offered Gazprom a majority stake in the field in return for the gas monopoly’s participation, which is presumed to come with a guarantee that the official attacks on Kovykta will end. The sticking point, seemingly, is that Rusia Petroleum wants Gazprom to enter on commercial terms—and the Russian giant isn’t minded to do so.
...
There are a few arguments why outright loss of the licence is a possibility in the case of Kovykta. First, in contrast to Sakahlin-2, the project is not protected by a production-sharing agreement (PSA). Second, Rusia Petroleum has not invested huge sums—a couple of hundred million dollars, rather than billions—so arguably full forfeiture of the licence would be less controversial. Third, Kovykta is purely a gas field and thus is firmly within Gazprom’s primary sphere; Sakhalin-2, by contrast, has a large oil component and the oil sector in Russia is more competitive. Finally, Gazprom has greater leverage over Kovykta because it controls domestic supplies and exports; at Sakhalin-2, Shell and its partners have the ability to export without recourse to Gazprom or another Russian state firm.

These factors could just as easily point to Gazprom entering the Kovykta project on highly preferential terms. The major constraint on the ambitions of Russia’s energy nationalists is presumed to be the fear of an international backlash. However, six months ago most observers would have been shocked at the extent of the concessions wrung from the foreign consortium operating Sakhalin-2. Nor has there been much of a downside for Russia as a result of this behaviour: Shell’s bruising experience seems not to have deterred others from seeking greater exposure to the energy sector, as ConocoPhillips’ recent bid to participate in the Shtokman project with Gazprom demonstrates. In this climate, it should not be a surprise if sooner or later one foreign company with a coveted asset loses everything. BP must hope that day has not yet arrived.

The White Paper is now available in Italian.

LIBRO BIANCO SU L’ABUSO DI POTERE DA PARTE DELLO STATO NELLA FEDERAZIONE RUSSA: LE NUOVE ACCUSE, POLITICAMENTE ORIENTATE, NEI CONFRONIT DI MIKHAIL KHODORKOVSKY

Fred Hiatt of the Washington Post says the United States:

Instead, U.S. officials too often treat Russia like a touchy adolescent that shouldn't be provoked. Last week Rep. Tom Lantos (D-Calif.), chairman of the House Committee on Foreign Affairs, complained that for the fourth year in a row the administration has proposed "devastating cutbacks" in programs to assist democratic and civil society groups in Russia.

That's something for which the United States should be blamed. Or, as Lantos said: "At a time when supporters of democratic reform, the rule of law, and human rights are being assassinated or carted off to the gulags of Siberia, we should not be starving these groups of vital support."

More on Lantos's comments on cutbacks to Russian NGOs in the Moscow Times.

“The land where you sit”

By Grigory Pasko, journalist

The news was recently reported that Mikhail Khodorkovsky, who is currently sitting in a cage in Chita, has decided to subscribe to EVERY local newspaper in the city. I should state right from the start that this did not require a large amount of money, because there just aren’t that many local newspapers. But this does raise an intriguing question: what possible reason would Mikhail Khodorkovsky have to know about the local realities? The answer suggests itself immediately: because this particular prisoner is interested not only in what is going on in the world, but also in what is going on just beyond the bars of his cage. He does not intend to stay in that cage forever, and has no intention of separating himself from life so far and for so long as to lose all sense of reality in the here-and-now.

Chita hasn't changed much in recent years - photo by Grigory Pasko

But not all prisoners have the opportunity to subscribe to dozens of newspapers and magazines. And this gave me an idea. In Soviet times, nearly all Soviet newspapers had a local news section entitled “The land where you live” (or, in military newspapers, “The land where you serve”). So, here’s my idea – why not create a new column in all the newspapers called “The land where you sit”? [Russian prisoners “sit” in the same way as American prisoners “do time”—Trans.] I’m sure you’ll agree that the nearly 900 thousand people sitting behind bars in today’s Russia have the right to know about the past and present of the places they’ve been sent to serve their sentences. They need subscribe to only one newspaper, but it should have a section like this. And for starters, I propose setting up such a column on our blog. Let’s start with some current events taking place in Chita Oblast.

Inasmuch as much has already been written about the end of the investigation in the new “YUKOS case”, we won’t address this issue for now. Although a multitude of events are taking place around the “case” itself that don’t concern Khodorkovsky and Lebedev directly. For example, the hearings that took place on February 22 in Chita in the case of Sergey Taratukhin – the priest who took part in a picket in support of Mikhail Khodorkovsky on February 8 in Chita. Taratukhin first became famous last year, when he was the parish priest of the Russian Orthodox church in the city of Krasnokamensk, where Khodorkovsky was serving his sentence. Father Sergey met with Khodorkovsky, in his professional capacity, and then made the mistake of speaking kindly of Mikhail Borisovich in public, for which indiscretion he was first exiled to a small village parish in a faraway corner of China Oblast, and subsequently defrocked, depriving him of the ability to earn a living in his chosen profession.

At the end of February, the local news agencies were reporting stories with such headlines as “My mother, the policewoman”, “Policemen compete in wittiness”, “February 23 – a holiday of the entire Russian people” [The Day of the Defender of the Fatherland, formerly known as Red Army Day—Trans.], and “Military financiers tally up results”… You get the impression that the whole region east of Lake Baikal is a land of policemen and soldiers. Actually, this is even true to some extent.

Chita, photo by Grigory Pasko

Of course, it will come as surprise to anyone to learn that the local news agencies reported absolutely nothing about the trial of Father Sergey, the former priest who had once dared to speak out in defense of Mikhail Khodorkovsky and now to attend a rally in support of him.

And now for some “ordinary” news, all taken from Chita newspapers in February. Chita was recently honored by a visit from Iosif Kobzon, a prominent State Duma deputy well-known as a singer of patriotic songs. Outside the country, he is best known for having been denied entry to the US because of his supposed ties with the Russian mafia. Personally, I am perplexed by this prohibition, because it’s quite difficult to determine in today’s Putinite Russia just who ISN’T connected with the Russian mafia, or even what exactly the “Russian mafia” is, if mayors, members of parliament, generals and officers, and so-called “werewolves in uniform” from the ranks of the police are routinely being thrown in jail.
So why was “Russia’s Frank Sinatra” visiting Chita? The local media write that the meeting between Kobzon and his entourage and the inhabitants of Chita had been organized by the “United Russia” party and had been held under the slogan “United Russia” For A United Region. Iosif Kobzon appeared before activists of the Trans-Baikal region with a call to take active part in the referendum of March 11, 2007 on merging the Oblast with the Aginsky Buryat Autonomous Okrug [see my February 5, 2007 article “Chita – A Little Island of the Soviet Union”].

A few words about the “merger”: According to the local newspaper “Chitinskoye obozreniye”, the difference in time between the arrival of the Russians and the Buryats in the Trans-Baikal region comprises a mere 40 years. Until that, many generations of Buryats were seeking for their ancient homeland. And they found it – in Iraq. So Russia has now found justification for considering Iraq part of its own sphere of influence, and not just that of the US.

Also in February, the director-general of one of the local power companies conveyed holiday greetings to Trans-Baikalians on the occasion of the lunar new year (known to the local Buryats as “Sagaalgan”, and in the Western world as “Chinese New Year”). In the opinion of this director, the holiday has great significance not only for adherents of Buddhism, but for the entire Trans-Baikal region as a whole, and helps “rally the people and beautify life”.

Let me put in my own two kopecks’ worth here: I recently visited Chita and the Trans-Baikal, and didn’t notice any particular indications of any “rallying of the people and beautification of life”. The only “rallying” by the locals is done, in the main, with the aid of a bottle of vodka. And the only “beautification” that stands out is the Kazan Icon of the Mother of God Cathedral and the ice city, built by Chinese hands (I will hold my tongue about the architecture of yet another “beautifying” institution, the local SIZO investigative isolator prison).

Other news... It has been decided to revive the system of “camps of labor and rest” in the Trans-Baikal region. This news story carries a great deal of meaning for Russian people who remember the days of the USSR. Camps of labor and rest were not merely places to occupy children’s time in the summer months. They also taught collectivism and obeying orders, quashed individualism, and were, in their own way, a first step on the path into the army.

By the way, this story is definitely from the “ordinary” category. Many old Soviet institutions have already been reborn in one form or another in Putin’s Russia – the Komsomol, the “druzhinniki” (voluntary helpers of the police), the “Zarnitsa” war games (part of the regular curriculum for schoolchildren), etc.

As Chita prepares of the trial of Khodorkovsky and Lebedev (it’s being said that the trial will take place right there), the Chita garrison’s military court has issued a verdict against colonel Nasimi Nazarov. According to the decision of the court, the defendant has been sentenced to one year of deprivation of liberty, suspended. The colonel had been charged with real estate fraud, unlawfully setting his wife up in a non-existent job on the base, unlawfully leasing military equipment to outside organizations, as well as assigning the soldier Rudenko into exploitation (read: slavery) for money to a Chita businessman. A one-year suspended sentence for slavery. In the land of policemen and soldiers.

And speaking of Russia’s Defenders of the Fatherland, on February 23, the Day of the Defender of the Fatherland, a lecture took place in the Chita Railroad Workers’ House of Culture on the subject of “Buddhism today”. It was read by a disciple of the Lama Ole Nidala. The lecture took part within the framework of a journey across Russia by a group of Buddhists.

As we can see, Chita Oblast, which after the March 11 referendum will no doubt be renamed Zabaikalsky [Trans-Baikal] Krai, leads an active life: it gets visits from parliamentarians and Buddhists, tries and convicts colonels gone bad, and likes to celebrate New Year several times a year… In short, if journalists decide to come to Chita for the YUKOS trial, they’ll find plenty here to keep them from getting bored. And prisoners too, if they regularly read the “Land were you sit” column in the newspaper.

Khodorkovsky and the Subconscious

By the Polittechnologist

In response to a number of questions I’ve received about whether Russia is ready to take on the Western model of existence, with all of its values, I can answer with great certainty – nyet! Russia is not ready to do this, because Russians are afraid to do the things they actually want to do. They fear their subconscious.

I won’t be saying anything much today about politics and politicians, because everybody knows everything about them anyway. Let’s talk about psychology instead. I should immediately state, in the interests of full disclosure, that my knowledge in this field can only be described as strictly amateur.

In truth, almost nobody in Russia has any real interest whatsoever in how much Khodorkovsky supposedly stole or how. They can’t even imagine what a billion dollars is, let alone 25 billion. The Russian people are more interested in geography. Nowadays, many Russians have rediscovered for themselves that we’ve got a city named Chita. And they’ve learned that political prisoners have always lived there, starting in the mid-1600s with the Protopope Avvakum [one of the founders of the Old Believer sect—Trans.], who dared to question the correctness of the policies of the first Russian Emperor, Peter the Great. Now Chita is home to Khodorkovsky, and the newspapers and glossy magazines have begun to write more about the place. Chita has become cool. To talk about Chita means to talk about Khodorkovsky, and that means being a little risqué – like the thrill you get from smoking marijuana in a public place or crossing the street on a red light or sneaking a glance at your boss’s hot wife.

Protopope Avvakum with other Old Believer martyrs murdered for their opposition to Peter the Great

Khodorkovsky has taken up residence in the Russian people’s subconscious. They have unexpectedly taken a fancy to him – because he’s prohibited. They’re afraid to admit this to themselves, but one way or another their true thoughts come to the surface. Khodorkovsky is beginning to acquire the traits of a mythological hero. Neither Putin nor Berezovsky – and certainly not anyone in Putin’s inner circle – will ever be that. Russians find former procurator Ustinov gruesome and unsavoury. Nobody has ever made a joke about him. But there are many jokes in circulation about Khodorkovsky – and in Russia, you know someone’s arrived when the people start telling jokes about him.

People will never reveal what they really want. We’ve already heard this in one of “The Godfather” movies, where Michael Corleone gives another mafioso some sage advice to “never let anyone know what you’re thinking”. Russians never let anyone know what they’re thinking either. They have always lived in a country that was run by something not very different from a mafia; and they were afraid. Now the mafia has returned, and in one of its worst incarnations. But today the people have Khodorkovsky, and the worse things get in the country, the more myths and legends will be created about him. Khodorkovsky’s photo alone, glimpsed on the page of a magazine, will be enough to create an immortal myth about the man, beloved of all the people, who was so unjustly punished.

His enemies will never understand this, because they are cowardly and greedy.

If Khodorkovsky is being kept out of the news, then he shows up unexpectedly in the movies. One recent Russian film has been holding the rapt attention of moviegoers even during the final credits. Ordinarily, the audience leaves the theatre during the credits, but in the case of this particular film, everybody stays. Why? Because the credits roll against a background of many small photographs, one of which is clearly of Khodorkovsky. If you can’t find Khodorkovsky in the official newspapers, you can catch glimpses of him between the lines, in someone’s remark or personal opinion – if the reporter is clever enough to slip it past the censor, of course. And if the real-life Khodorkovsky is sitting behind bars, he seems to be all over the place in the virtual world of the internet. Go ahead – do an internet search on the word “Ходорковский” in any search engine and see how many hits you get.

And so we have a most entertaining paradox before us. Instead of some myth about a united Russia or whatever else the Kremlin’s political technologist Surkov has concocted and is trying to impose on the Russian people from above, the Russian people have begun to create their own myth – about Khodorkovsky. They keep Khodorkovsky hidden away in their subconscious, afraid to let him out lest someone punish them. As long as the Russian people remain afraid of being punished for their true desires, they will remain enslaved. But as soon as the Russian people lose this fear of prison – a fear that eats away the soul – we will see the Russian people at their absolute finest. I’m saying this in response to the polemical question about whether it is worthwhile to allow Russians into Europe. It is very worthwhile indeed. They won’t set up camp there like other migrants. They will simply realize what they really want after all, and will return home. If I’m not mistaken, Khodorkovsky wanted – and wants – the same thing for Russia.

A Lawyer and his Defense: an interview with Sergey Brovchenko

By Grigory Pasko, journalist

The pressure being put on the lawyers participating in the so-called “YUKOS case” is but a continuation of a long-established system of ignoring the very profession of defender in Russia. Here’s a typical story. A lawyer is successfully defending a client. In the end, he himself becomes a victim of persecution on the part of the investigative organs. I know of such examples both in Vladivostok and in Moscow…

Sergey Brovchenko became a lawyer after leaving the KGB. In 1996, he started to defend a person against whom the charges had been fabricated. His client was acquitted. However, a criminal case was initiated against Brovchenko himself, and he was sentenced to deprivation of liberty for a term of 9 years.

Photo of Sergey Brovchenko by Grigory Pasko

The sentence he received was repealed three times upon the protest of deputy chairmen of the Supreme Court of the Russian Federation. Nevertheless, the lawyer was held in confinement for more than six years without a sentence having entered into legal force. He has officially restored his status as an Advocate [equivalent to “Member of the Bar”]. However, justice has not yet triumphed fully: his complaint against Russia is currently at the European Court of Human Rights.

In November 2003, Russian human rights advocates declared S. Brovchenko to be a political prisoner of Russia. In February 2004, Brovchenko became the defender of another former FSB officer turned lawyer: Mikhail Trepashkin, the criminal case with respect to whom had also been fabricated and who is being held in confinement to this day for supposedly having disclosed a state secret.

From the biography of Sergey Brovchenko: In 1988 entered into military service in the organs of the KGB of the USSR. After completing Higher Courses of the KGB of the USSR in the city of Kiev, he was sent for undergoing service to the Administration of the KGB of the USSR for Chernovtsy Oblast, where he underwent service in the capacity of an operative plenipotentiary [operupolnomochenny. See Translator’s note on “operative tracking group” at end of Grigory Pasko’s Exclusive Interview with Khodorkovsky Prison Informant], and later an investigator. After the breakup of the USSR, he filed a report on transfer into a civilian organization. Has been working as a lawyer since 1992.

I recently caught up with lawyer Sergey Brovchenko, and asked him to answer certain questions.

Sergey, if an officer of the KGB or the FSB leaves for the bar, is that good or bad?

Nobody will tell you. I left the organs because circumstances just turned out that way: the breakup of the Soviet Union and, essentially, the breakup of the KGB system. And I left by transfer into a civilian organization. By the way, in his day Vladimir PUtin also left the KGB by transfer.

Okay, I understand. That is, not because you had dishonoured the high calling of a chekist, not for any other bad reasons, but because you had no other choice, so to speak. And what were you doing while you were with the KGB in the Ukraine?

In Chernovtsy, among other things, I was involved with the cases of former Ukrainian nationalists. The kind of documents I studied convinced me that many people had been prosecuted unlawfully, without the proper grounds. There was one interesting incident. I was having a talk with one woman in the same office where she had been interrogated by NKVD officers many years before. She even told me that they’d beaten her in this office. So after incidents like that, I understand those who took weapons in hand and fought against those who persecuted them.

Do you see any analogies with what’s happening today?

Yes, Chechnya. This is a delayed-action mine. Russia’s policy in Daghestan, in Chechnya is a mistaken policy. I’d spoken with many FSB officers and told them that a specific policy is needed to extinguish the conflict. What we’re getting is an embittered populace that is negatively disposed towards the Russian authorities.

Did you know Politkovskaya?

Yes, I worked together with Anna Politkovskaya in Daghestan: she as a journalist, and I as a lawyer. I was defending the human rights advocate Osman Boliyev then. Fortunately, Osman was acquitted, but he was forced to leave Russia. Now he’s received political asylum in Sweden. Anna was writing about this case then. And she wrote, as always, honestly. She was respected for that. And for this, I think, she was killed by those who had no respect. She had a great deal of credibility, because she wrote the truth. I saw how she interacted with the chief of the FSB Administration for Chechnya. I do not believe the FSB was involved in Politkovskaya’s murder. It was other forces…

According to independent investigators of her murder, the tracks could lead to Chechen president Ramzan Kadyrov and his circle.

Quite possible. She did a lot of writing about the lawlessness of Ramzan’s circle. Kadyrov Junior [his father had been president before him—Trans.] was hostile to what Anna was doing – many people know about this. She was killed for her professional activity. People are afraid of Kadyrov. He’s his own god and judge over there. Russia’s made a mistake in placing its cards on him in that region.

What do you think about the so-called “death squads” that could have been involved in killings of recent years, in particular the poisoning of ex-FSB officer Alexander Litvinenko?

I don’t believe in the death squads, and especially that they have been created by the FSB. Although I do allow that certain former officers might be dissatisfied with something or somebody. This needs to be investigated. There are decent people in the FSB. The youth isn’t bad. There are decent FSB administration chiefs in the regions.

I’ve got my own experience in dealing with FSB officers, so I could argue strongly with you about the youth and the chiefs. But we’re not here to talk about that. What do you think about the attempt on Chubais and about the role in this story of the former officer of the main investigative administration (GRU) of the Ministry of Defense, Kvachkov?

You can find thugs anywhere. It’s quite possible that Kvachkov is an ideological fighter. A spontaneous desire to take revenge on Chubais as the head reformer and, in the opinion of many, the organizer of all of Russia’s misfortunes, could have been taken up by certain parties with the aim of somehow taking revenge on Chubais, so to speak, in the name of all the people and their suffering.

Would I be right in guessing that you don’t believe Litvinenko was killed by his colleagues, either? Although there is an example: Yandarbiyev’s killers, I think, aren’t feeling very uncomfortable within the confines of Russia.

I believe that Litvinenko was murdered, poisoned. This case needs to be thoroughly investigated. All the theories need to be studied, including the involvement of former FSB officers, and the Chechen trail… Yes, I think the killers of Zelimkhan Yandarbiyev are quite comfortable, ostensibly sitting in places of deprivation of liberty. Our GULAG is a very secretive system. Over there in Chita the new trial is starting in the YUKOS case. And our justice, too, is inscrutable.

It is known that you are the lawyer of Mikhail Trepashkin, former FSB officer, convicted for disclosing a state secret. It has been known for a long time that such a charge, as a rule, has nothing to do with reality and serves merely as a means for ruthlessly dealing with an unwanted person. How are things with Trepashkin right now?

If one can say that the KGB has a soul, then that soul is Trepashkin. We are doing everything possible to get him released so he can return to work at his profession as a lawyer. The next court session to challenge the reprimands laid on by the prison colony administration Mikhail is supposed to take place on March 9. Trepashkin is a very knowledgeable jurist, a top-notch lawyer. He defended the Morozova sisters, connected with the apartment house bombings in Moscow. All of his former KGB colleagues speak positively of him. The charges against him are absurd. So phoney that, for example, the one involving the planted pistol fell apart in trial. It’s possible that this is someone from the military procuracy and FSB leadership taking revenge. Trepashkin told about his conflict with the FSB leadership. They’re lynching him for having taken an active position. You can see that there’s a contract that’s been put out to deal harshly with him. We are hoping that the next court will find the reprimands laid on him to have been unlawful.

Like it was with Mikhail Khodorkovsky, when the courts repealed the reprimands laid on him during the time he was in the colony of Krasnokamensk? What do you think of the YUKOS case anyway?

I understand that this is unlawful prosecution, without grounds. This is clearly a lynching. Only the European Court of Human Rights, probably, will be able to change something in this case. That is, it will place on record the facts of violations of the European Convention. This will serve as grounds for a re-examination of the entire case.

We do not have a good court system. And the procuracy investigates cases itself and oversees their investigation. This is not right. If a person has been sitting in confinement for some time [before trial—Trans.], then 99 times out of 100 he will be deprived of liberty [sentenced to a prison term—Trans.]: just so the procurators and judges wouldn’t be punished [for having put an innocent person through the ordeal of arrest and trial—Trans.]. The investigation function needs to be taken away from the procuracy. An independent organ needs to be created – an investigative committee. Court chairmen need to be elected by their fellow judges, so judges wouldn’t be dependent on the chairman.

In your opinion, what do you think, has the FSB changed today?

The FSB is a part of the existing system. Many have left for various reasons, including because they didn’t want to work in the existing system. In our country, the FSB, the MVD, and other siloviki structures are unjustifiably closed off from society. So closed off that at times you get the feeling that even the president doesn’t know the true state of affairs in these organs. And all we can do about this is regret it.

Once again the Kremlin has pulled out its trusted old move of doing a highly unlawful raid late on a Friday night, right in the dead zone of the global media cycle. This time the victim is the accounting firm PricewaterhouseCoopers, whose offices were raided by KGB-style goons in an apparent new probe alleging tax evasion, part of the effort to further tighten the screws on Yukos and Mikhail Khodorkovsky.

The message to Moscow is the following: no one believes you. The truth is out, and no matter how many more Friday night fiascos you pull, no one is fooled by these outrageous KGB tactics.

There is no limit to what the Russian Federation is willing to do to desperately try to make the Yukos case look like a real Enron. The transparent intimidation and harassment of witnesses that has already been so well documented is simply demonstrated further by these actions. To put things into perspective, this raid on a leading accounting firm comes the same day as the FT trumpets the return of Western bankers to Russia. It seems that the lunatics have truly taken over the asylum.

From the FT.

Moscow raids PwC over Yukos back tax

By Neil Buckley in Moscow and Catherine Belton in London

Russian investigators raided the Moscow office of PwC on Friday, stepping up pressure on the “big four” audit firm ahead of a crucial court case over allegations that it signed off on false accounts by Yukos, the bankrupt oil company.

About 20 law enforcement officials from the prosecutors’ office and interior ministry combed PwC’s offices for documents relating to Yukos, and questioned senior managers including Mike Kubena, head of PwC in Moscow, the company said.

Interior ministry officials also announced they were launching a criminal probe into alleged tax avoidance by PwC in Russia.

The search came as PwC prepared for a court hearing on Monday in a lawsuit filed by Russia’s Federal Tax Service alleging PwC concealed tax evasion by Yukos in 2002-04. PwC denies all the accusations.

The pressure against the audit group is seen as a key element in the state campaign against Yukos as the government prepares to sell off the oil company’s remaining assets and fight off multibillion-dollar lawsuits filed by Yukos’s former owners in courts in The Hague and Strasbourg. Prosecutors last month brought new charges against Mikhail Khodorkovsky, Yukos’s founder, of laundering more than $23bn in oil sales, which could add 10 years to his sentence.

The raid appeared to be an attempt by Russia to press PwC into taking its side, which could help the government win its legal cases internationally, a former senior Yukos executive and lawyer said.

Much is at stake for PwC. If found in violation of accounting procedures, it could lose its Russian licence and valuable clients including big state-controlled companies such as Gazprom, the natural gas giant, Sberbank, the savings bank, Russia’s central bank, and Unified Energy System, the electricity monopoly.

PwC said on Friday it did not understand why the raids had been launched.

The tax case against the company itself is an extension of an ongoing lawsuit that PwC lost in court last year. The firm said it had already paid charges for non-payment of taxes worth Rbs243m ($9.2m) in full, and was appealing against the ruling.

The tax service last December brought further legal action claiming PwC had issued two different audits of Yukos in 2002.

PwC refutes the charges.

Who’s Lining Up for the YUKOS Assets?

By Grigory Pasko, journalist

When Russian president Vladimir Putin was in Munich at a conference on security, his last meeting was a meeting with the president of Allianz AG, Michael Dieckmann. Officially, this was reported as follows: “As concerns Putin’s meeting with the president of the company Allianz, the talk at it will be about the business-partnership of Russia and Germany”.

Michael Dieckmann

Let us note: it is not with any old president and with any old company that the Russian president meets and has a private discussion. What is it about Germany’s Allianz that is so attractive to the Russian side?

It is known that the Allianz corporation is an international financial company that works in the spheres of insurance, banking activity, and asset management. (Altogether, the company has over 60 million customers in 70 countries of the world). In the year 2005, 85% of Allianz’s employees worked in European countries, while the company’s operating profits in Europe comprised approximately 5.5 billion euros. Based on the results of the first 9 months of 2006, the company’s net profit comprised 1.59 billion euros.

Allianz considers the Russian market to be one of the most promising and high-priority. In 1991, the company Ost-West Allianz became one of the first foreign insurers to enter the Russian market and obtain licenses to engage in insurance activity.

It was recently reported in the press that business isn’t going all that well at Allianz: the “ball and chain” dragging the company down is Dresdner Bank, which Allianz picked up three years ago for $20 billion. The decision to buy the bank had been made by the previous president of Allianz Group, but to clean up the mess was left to today’s president, Dieckmann, a veteran of the insurance market who took the helm at Allianz on 29 April 2003.

Dresdner Bank (or, more precisely, one of its units, the investment bank «Dresdner Kleinwort Wasserstein») is known in Russia because of its participation in the appraisal of the assets of the company «Yuganskneftegas». In December 2004, «Baikalfinansgrupp», a company nobody had ever heard of before, with a charter capital of 300 US dollars, won «Yuganskneftegas» with an uncontested bid of 9.35 billion US dollars. At that time, «Yuganskneftegas» had been appraised by the «Dresdner Kleinwort Wasserstein» bank at a sum of from 14.7 to 17.3 billion US dollars. Later it became known that the state company «Rosneft» had bought a 100-percent block of shares from the unknown shareholders of «Baikalfinansgrupp», becoming, in such a manner, the owner of the main production enterprise of «YUKOS».

On the eve of that transaction, Mikhail Khodorkovsky too had his say, in a letter from his lawyer Robert Amsterdam addressed to Dresdner Bank. “I call on you to observe ethical standards in economics and not take part in this” wrote Amsterdam to bank head Herbert Walter, Dresdner Kleinwort chief Stefan Jentsch, and Allianz boss Michael Dieckmann.

Matthias Warnig

What else does the public know about the German bank and its role in the Russian economy? The head coordinator at “Dresdner Bank” for Russia, Matthias Warnig, obtained a leading position in the large-scale project to build a German-Russian gas pipeline under the Baltic Sea. This became a new demonstration of the close relations between this bank and the Russian state gas giant OAO “Gazprom”. Analysts asserted that Warnig would most likely keep his official post at “Dresdner Bank”, but would be devoting the greater part of his time to the North European Gas Pipeline. “Gazprom”, as is known, owns 51 percent of the equity in the pipeline project, while the rest is divided among the companies E.On AG and BASF AG. The first phase of construction is supposed to be completed in 2010.

It is also known that “Dresdner Bank” has maintained close relations with “Gazprom” since the 1990s. («Gazprom», as certain mass media outlets have written, is also a realistic participant in the upcoming sale of YUKOS assets).

Newspapers have also written that Warnig has maintained personal relations with Russian president Vladimir Putin. The Wall Street Journal has reported that, in the words of former colleagues, Warnig and Putin first made each other’s acquaintance at the end of the 1980s in Dresden, when Warnig was an officer in the East German secret police, the “Stasi”, and Putin was an officer of the Soviet KGB in Germany on assignment.

In such a manner, we see that there was plenty of reason for Putin’s Munich meeting with the managers of Germany’s «Allianz». We can even presume that one way or another, they spoke of the possible participation of «Allianz» through «Dresdner Bank» in the purchase of YUKOS assets.

The Financial Times wrote about the role of certain Western banks in the Russian economy in 2004: “Western banks are taking direct part in an obvious attempt at the renationalisation of the Russian oil industry by means of ‘Gazprom’. The bank ‘Dresdner Kleinwort Wasserstein’ was used for appraising the market capitalisation of ‘Yuganskneftegas’ before its placement at auction and together with ‘Deutsche Bank’ and other banks is ensuring the granting to ‘Gazprom’ for financing its bid a syndicated loan in a size of 10 bln. Euros. From its side, ‘Deutsche Bank’ likewise recommended to ‘Gasprom’ that it acquire ‘Yuganskneftegas’.” The newspaper, I seem to recall, asked the following question: “Does ‘Deutsche Bank’ realize sufficiently what a risk this could entail for its reputation?”

You can probably talk about reputation with respectable people and structures. The upcoming sell-off of YUKOS assets will show just who is respectable, and who has their own notion of reputation.

In Russia, for example, everybody who was involved in some way in the ruination of YUKOS has in one way or another been promoted. Recently, the former head of the Federal Tax Service, Anatoly Serdyukov, was made Minister of Defense. His most famous achievement became the “YUKOS case”: under Serdyukov, the tax agency had filed record claims against YUKOS. We know of another incident. In 2005, Serdyukov reported to Putin that in the first half of 2005, the tax agency had collected taxes in an overall sum of 1 trillion, 317 billion rubles, 22% more than planned. Seryukov was honest in naming the two main reasons for overfulfilling his plan: 50% was due to the effect of rising oil prices, and 50% due to some kind of uniquely Russian phenomenon that Seryukov called “the YUKOS effect”. “After the audit of ‘YUKOS’, practically all the oil companies defined their numbers for the payment of taxes more precisely and started to pay sufficiently larger sums”, Serdyukov elucidated then. It can now be seen that the elucidation from two years ago was most convincing indeed.

From a history of oil company sales in Russia

1997. Sale of 40% of the equity in the Tyumen Oil Company. According to the conditions of the tender, the purchaser of the paper was supposed to pay 88 million dollars on top if he did not possess a certain 16 patents. These belonged to «Alfa-grupp», which subsequently became the winner.

2002. Sale of 74.95% of the equity in «Slavneft». 7 companies were allowed to take part in the auction; 6 of these were associated with TNK-BP or «Sibneft». And it was they who ended up buying «Slavneft» on a parity basis.

2004. Sale of 7.59% of the equity in «Lukoil». 3 claimants were allowed to bid. A certain «Springs Holdings» offered 54 million dollars right from the start (against the 6 million of one of the competitors), and the bidding was stopped. Then it turned out that «Springs Holdings» was affiliated with the American ConocoPhillips – earlier, president Putin had said that he knows of plans by Americans to invest in Russia and welcomes these plans.

It is not difficult to guess that YUKOS’s assets (and this is approximately 22 billion dollars) will be sold along similar lines: with dummy companies, unknown parties, and strange conditions… Really, can something that is initially dishonest result in something honest? That was a rhetorical question.

So absurdly dangerous has the situation become for journalists in Russia, especially journalists critical of the government, it has become material for comedy. The latest to lampoon this unfolding tragedy is the popular U.S. satire news program, the Daily Show, hosted by Jon Stewart. The Daily Show has given increasingly significant coverage to Russia issues over the past year - if only the mainstream (non-satire) media could follow suit.

And just a few days earlier, Jon Stewart's colleague Stephen Colbert interviewed New Yorker journalist Michael Specter - author of an opus on violence against dissidents in today's Russia.

From the Washington Post:

Mr. Putin's Enemies

It's becoming more and more dangerous to be one of them.

ANOTHER RUSSIAN journalist critical of the government of Vladimir Putin has died under mysterious circumstances. Ivan Safronov, a 51-year-old military specialist, had just returned to his apartment building after shopping for oranges last Friday when he fell from the window of a fourth-floor stairwell. Authorities quickly labeled his death a suicide, only to be contradicted by Mr. Safronov's colleagues at the newspaper Kommersant, who said that he had no reason to take his own life -- but that he had been preparing an explosive story disclosing plans by Russia to sell advanced missiles and fighter jets to Iran and Syria.

Normally it would be unwarranted to speculate that Mr. Putin's security services might have had something to do with the journalist's death -- or, for that matter, with the shooting of Russian specialist Paul Joyal outside his Prince George's County home March 1. But the instances of violence against journalists in Mr. Putin's Russia and of the brutal elimination of his critics both at home and abroad have become so common that it's impossible to explain them all as coincidences. Since the Russian president took office in 2000, 13 journalists have died in contract-style murders, according to the Committee to Protect Journalists, which ranks Russia as the third most deadly country in the world for reporters.

Mr. Safronov's death was preceded by the slaying in October of Anna Politkovskaya, a fierce critic of the war in Chechnya who was gunned down in her apartment building. The exiled Russian dissident Alexander Litvinenko was investigating Ms. Politkovskaya's death when he died of poisoning in December; British authorities have been unable to reach the two leading suspects in his death because they are being shielded by Mr. Putin's government. Mr. Joyal was shot in the groin days after appearing in a television documentary about Mr. Litvinenko. In it, he had said that the message to Kremlin critics was "no matter who you are, where you are, we will find you and we will silence you in the most horrible way possible."

We hope Prince George's police and the FBI will soon be able to determine who shot Mr. Joyal and why. It's hard to be optimistic that the case of Mr. Safronov will ever be cleared up, especially given that no one has been held accountable for any of the other murders of journalists in Russia. In the meantime, it's interesting to note that these strange events have coincided with a new effort by the Bush administration to reach out to Mr. Putin, following the Cold War-style diatribe he delivered at an international conference last month. Some blame Mr. Putin's ugly mood on the United States, which is said not to have done enough to ease Russian resentment over such initiatives as NATO expansion and missile defense. Perhaps so; but, then, what explains why so many Russian critics of Mr. Putin are dying?

Today the Wall Street Journal is reporting on Russia's most popular TV show Zhdi Menya (Wait for Me), which seeks to reunite families that were broken apart by Stalin's reign of terror. Running for nearly a decade now, the show achieves a curious mix of historical reckoning suffocated under heavy layers of emotion and sentimentality - although numerous questions are posed about contemporary Russian history, the show is ostensibly apolitical.

This article, and the peculiar dynamic of Zhdi Menya itself, serve as potent reminders of the fragility of Russia's current cultural politics - the acceptable ways in which Russians are allowed to interpret the legacy of the Soviet era, whether with pride, regret, shame, or passive understanding, is struggling to find space in the public sphere.

Below I borrow the clip from the WSJ, and below that, an excerpt from the article.

Excerpt:

This focus on the victims of the communist regime contrasts with most mainstream media, which these days tend to humanize Soviet-era leaders and gloss over their crimes. A TV drama, "Stalin.Live," has been panned by critics for portraying Stalin as a sympathetic old man.

"There's a lot of pseudo-historical stuff on TV these days," says Irina Petrovskaya, a television critic. "'Zhdi Menya' is different because it's totally authentic. That's why it's so popular."

Pyotr Leontiev wrote to the program in 2001 in search of his brother. He had spent years trying to trace him through official channels, but was rebuffed at every turn.

The Leontiev family had been devastated by war and terror. Their father, drafted in 1941, was declared missing in action in 1943. Their mother was arrested on charges of "speculation" -- neighbors informed on her for selling a few pounds of tobacco and she was packed off to the Gulag with Sergei, her youngest son, still a babe in arms. His siblings had only his cradle to remember him by.

Researchers at "Zhdi Menya" contacted police in Karaganda, Kazakhstan -- the site of the mother's prison camp -- and after trawling archives they found a Sergei Leontiev whose records matched Pyotr's description. Within weeks they had tracked down Sergei, a retired carpenter. After a childhood in orphanages in Karaganda, he'd spent most of his life, impoverished, in workers' barracks.

In the studio, Pyotr told his story: "The tragedy that befell our family wasn't unique." He described how his mother was wrenched from her children, how their last sight of her and baby Sergei was on a prison train bound for the steppes. "We never heard from them again." The children, raised by a 19-year-old sister, were lucky: Children of "enemies of the people" were often separated, their names changed, and sent to orphanages thousands of miles apart.

To the strains of Mozart's Requiem, Mr. Kvasha spoke to the audience: "It's hard to imagine how many stories there are like this. They didn't just take away people's husbands, wives and parents. They deliberately destroyed archives, concealed people's names. They took away their memory."

In a heart-rending moment, he led Pyotr Leontiev to his brother, who was sitting weeping in the audience. The two embraced.

Pyotr had mixed feelings about the encounter. The joy of seeing Sergei was clouded by the revelation that his mother had been worked to death in 1943. "It was very hard, a very sad day," says Pyotr.

The two men broke down and looked deeply into each other's eyes. "We survived," Pyotr said to his brother. "We survived."

[Introduction from Robert Amsterdam: We're proud to feature this unprecedented interview with one of Mikhail Khodorkovsky's cellmates, which illustrates like few other sources the day-to-day life inside the contemporary Russian gulag, courtesy of the great human rights hero Grigory Pasko. It is a testament to Pasko's strength of will to track down this informant and delve into these issues, as he himself languished unjustly for many years in a Russian prison.]

Khodorkovsky with a “Brood Hen”

By Grigory Pasko, journalist

Obligatory foreword

The thought suddenly occurred to me: why aren’t there any interviews anywhere with those who at various times and in various places shared a cell with Khodorkovsky? I know from personal experience: tell me who you did time with, and I’ll tell you HOW you did your time. In short, I found a whole bunch of people who had been together with MBK in the Krasnokamensk “zone” and in the Chita “isolator”. Not everyone agreed to be interviewed on tape. Andrey V., the former foreman of the sewing shop at correctional colony IK-10, did agree. Our talk was long and detailed. Right at the start of our conversation, he told me “I already know all about you…”

At first I wanted to call this article “An interview with a brood hen”. But then I decided that it would be more logical to write it in the form of a monologue. And so, I give you the man who sat in the same cell with Mikhail Khodorkovsky in the Chita isolator from early January through early February 2007.

My name is Anton Morozov. I’m 24 years old. I was born and raised in Chita. I finished high school, but couldn’t get into college anywhere – I’d gotten my first jail term. For fraud. I was a steward. (Author’s commentary: In the camps, a person who becomes a steward or gets appointed to some other position by the administration becomes “knitted” or “red” [a “trusty” in English]; that is, obligated to cooperate with the administration of the “place of deprivation of liberty” of his own volition.)

… In the isolator, a person from our operative unit said to me: “Sit a while with a person…” Oh, and there were also two colonels from Krasnoyarsk and one from Moscow… “You sit, keep an eye on the person, see what’s what. Don’t try to pull anything out of him. Just report what he says himself to us. But be careful – he’s already an experienced person.”

They put me in a security cell. (Author’s commentary: a security cell is one where the security regimen established by the Internal Regulations is strictly and rigorously observed, which happens rarely.) Reveille at 6 AM, inspection… Naturally, I’d heard about Khodorkovsky before this. The cell was in the old building on the third floor. They’d done the building up specially; there’s a special burrow (corridor) there. It’s all very hush-hush: the cell doesn’t even have a number on it. The duty officers are all with the rank of captain or higher. The system is that they live a month, and then get replaced. They’re not locals; they’re from Krasnoyarsk. They don’t tell the innkeeper (prison warden) anything.

They put me there in January, early in the month, and on February 2 they released me. That whole time Khodorkovsky and I sat there together, the two of us. The cell has a television, and it’s all neat and clean. Six shkons (beds), two-level. Bedside tables.. Nothing European or anything, just the typical stuff. There’s a video camera in the cell. From what I was told, the images are somehow sent to Moscow… One window. Double pane, bars, another double pane, and more bars.

The administration keeps things under very serious observation. They even measure the temperature in the cell. Sauna once a week, right there on the same floor.

There’s two guys sitting with Platon (Lebedev). I was told they were supposed to put one more person in with us, in order to divert suspicion from me. They told me: “The lawyers are going to poke holes in (examine) you, so don’t stick your neck out, don’t set yourself up, just sit tight.”

He’s using the formal form of address with me. At first I was using the informal, but then I switched to the formal too. We washed the floors ourselves, taking turns. We ate gruel, but he’s got the means, so he buys everything in the prison shop. Doesn’t smoke.

At the very beginning, we didn’t talk for three-four days. He loaded (offered) books on me.. . He reads Pikul, Chase, newspapers in English, “Times” for example… He gets publications from there.. He’s got four children, a son who’s finishing up his studies in America A daughter, another two sons…

A lawyer comes to see him, not one but many. They sit there 4-5 hours at a time, discussing.
I ask how come they stay so long. He says that they’re working on problems, both with the investigation and with the firm. He told me how he’d started with a cooperative, rose up by selling computers, occupied a post in the Komsomol, earned extra money working as a janitor, a carpenter, he used to repair windows on high-rises in Moscow… He told me about pyramid schemes, how some people rise up (get rich).

Maybe in a week or so he started to make contact with me. Asked about life in the camps, what things are like there. I’d already been in IK-3 before. He told about the attempt against him happened. He was friends, or rather, he was just associating with this one person; they had a trusting relationship. Yes, yes, with Kuchma. Mikhail Borisovich said: “I’m sleeping, and I woke up because I’d sensed the glint of a knife. A shoemaker’s knife. Kuchma had wanted to get me in the eye, but glanced off the bridge of my nose instead.” Now he (Khodorkovsky) has a scar on his nose. He lucked out, in other words. Well, and they’ve told me the situation is the same as in the whole camp system. There are men of status (polozhentsy), overseers (smotryashchiye). Apparently, Kuchma had a conflict with the blatnye (full-time professional criminals) and he agreed to do this, with Khodorkovsky, so they’d get him out of the “zone”. That’s possible. But I also heard from one of the officers that Khodorkovsky had set this whole thing up, and that one hundred thousand dollars had even been transferred to Kuchma’s account. Do I personally believe this? No, I don’t. Oh yeah, and then there was this dirty rumour that Khodorkovsky was supposedly making passes at Kuchma. There couldn’t have been any intimate relations there, of course.

…We’re different people, naturally. There wasn’t really anything else we could talk about. Just about life in general… In short, those who had put me in the cell with Khodorkovsky didn’t get anything from me. I was released. Before trial: my trial’s still coming up. My lawyer took care of things. They wanted information out of me. I explained that Khodorkovsky won’t give it, he’s not a stupid person. They told me to watch how he behaved, what he’s like when he comes back from the lawyers, what he writes and to whom. Keep an eye on him, maybe he’s ready to commit suicide, to set us up. They never did get anything serious out of me. He controls the situation well by himself; education and life experience help.

He talked about politics… that a tax – I don’t remember which one – well, anyway, he’d been fighting for taxes. If they’re going to be a lot bigger, then they won’t be able to work. When they, the businessmen, got together – I don’t remember the names – someone proposed a new tax, but he got up and said: “I know who will benefit from this, into whose pocket this tax will fall. He argued about it; in short, they didn’t adopt the tax. And because of this he got in someone’s way. Someone decided that he was going to nominate himself for the post of president.

We also talked a bit about the case. As I understood it, they’d filed new charges against him for stealing 15 billion dollars. Mikhail Borisovich told me that all of this money had gone exactly where it was supposed to go, not into his personal pocket. And all the reports were laid out on the company’s website. He said that if he’d agreed with the charges against him, he’d have gotten a suspended sentence. “But I”, he says, “can’t lie.” That’s the kind of person he is. He understands that they’re going to add on a new sentence.

Photo of Anton Morozov by Grigory Pasko

What’s the daily routine like? The usual. We got up at 6 in the morning. Khodorkovsky doesn’t eat breakfast, just some juice, fruits, biscuits. He eats everything at lunch. He doesn’t complain about the food. We’d start the cleanup, wash the floors, taking turns. I could have done it myself, but I didn't offer, so I could be at least a little bit equal with him. We watched TV. Mostly the news for him. Inspection at 8 AM sharp. Stripped to the waist. The inspection is conducted by all the top brass, the superintendent colonel who, as Khodorkovsky told me, travels everywhere with him. Between 9 and 10, they drive him to the procuracy. Here, in Chita, such a big deal, six escort vehicles, three of them from the road police.

They don’t feed him lunch at the procuracy. He mutinied about that. I didn’t even ask him about that. He looks normal. He exercises, lies down to sleep, gets a good night’s rest… Well, he does take some tablets to calm him down now and then. Always taking notes… I snuck a peek at what he was writing: need to reply to such and such a letter, write a complaint – he scribbles everything down, keeps notes. He writes letters. He gets a lot of letters. Definitely at least 60 a week. From all over the world. His friends have scattered all over, they all write to him.

Ice him? They might. He’s got loads of information about everybody, I don’t remember their names. My head was spinning just from being with such a person.

Why did I decide to give an interview? I sympathize with Khodorkovsky. My opinion: everything that’s going on around him is the scheming of our politicians. My opinion: he’s good, simply as a person… Never lies.

Well, I also came to you because… Well, you know how I accidentally ran into Andrey, and he offered… Not for the money, just… I mean, I can’t even tell you anything like that anyway, really. I don’t even remember the names.. . If they lock me up again, they’ll come to me again and say that I’ve got to sit with Khodorkovsky. They didn’t promise me anything. I just went along for the ride to take a look, to have a chat… Two people in a cell is better than forty, after all.

Yes, maybe the trial will be here. This is lawlessness. He’s writing complaints about it. But it’s hard to fight with our system.

Obligatory afterword

As Morozov himself has said, he is not a novice in the prison system. No doubt he understands that he’s not going to get praised for telling how he had been instructed at being a “brood hen”. But they probably won’t do anything nasty, either: the connection between the nastiness and this interview will be too obvious.

The proposal to meet with me was made to him, as I understand it, by a respected person in the criminal world. And as Anton says himself, he didn’t tell me anything “like that” anyway. But he did say the main thing: Khodorkovsky’s operative tracking group (and I found out about the existence of such a group from various sources) places “brood hens” in his cell, and is watching him constantly. No doubt they look through not only all of his mail, but all the case documents, too. What kind of real defense can you talk about in such conditions?

[Translator’s note: The term “operative tracking group” may sound somewhat confusing. Under Russian law "operativny" refers to something akin to ordinary criminal police work – investigating crimes, conducting surveillance to find fugitive criminals, etc. There is nothing in the law, however, about 24-hour video observation, opening mail, prohibiting visitations, planting informants, etc. without the sanction of a court, as is being done with Khodorkovsky. Ordinarily, a prison will have an “operative group” in-house, to manage the team of informants, among other things. It is unprecedented that a special “operative tracking group” has been created just to keep watch on a single prisoner and never let him out of its sight.]

And one more thing. Naturally, I phoned one of Khodorkovsky’s lawyers and asked if the name Morozov was familiar to him. Yes, I was told, there had been someone by that name sitting with Mikhail Borisovich in the isolator in January.

I also found a person who knows Morozov. Businessman Yuri Mariy said that Morozov had once stolen items from his apartment– a television, a large sum of money… “He is a drug addict”, said Yuri. “He always needs money. He’ll do anything to get his next fix...”

It seems that disagreement over the U.S. plans to deploy anti-ballistic missile sites in Poland and the Czech Republic is causing delays between Russia and its partners in regards to energy deals, including the Bourgas-Alexandroupolis oil pipeline project - which is a critical strategy for the Russians to break the Turkish control over export routes to the Mediterranean. It now appears that Russia, Bulgaria, and Greece will sign agreements next week.

From the Sofia Echo:

RUSSIA, BULGARIA AND GREECE TO SIGN BOURGAS-ALEXANDROUPOLIS AGREEMENT IN MID-MARCH

The Bourgas-Alexandroupolis oil pipeline agreement will probably be signed in Athens on March 14 or 15 2007 during the Bulgarian-Russian-Greek summit.

The agreement had to be signed on March 6 2007, but the procedure was postponed.

Greek media said that the delay resulted from different positions of Russia and Greece on US anti-missile system to be located in Europe.

Bulgaria’s Regional Development and Public Works Minister Assen Gagauzov, Russia’s minister of industry and energy Viktor Hristenko and Greek Minister for Development Dimitris Sioufas will sign the agreement for construction and utilisation of the pipeline, Russian news agency ITAR-TASS said.

Russian and Bulgarian presidents Vladimir Putin and Georgi Purvanov and Greek prime minister Kostas Karamanlis will be present at the signing, ITAR-TASS said.

Bourgas-Alexandroupolis will transport oil from Russia through Bulgaria to Greece, bypassing the busy Bosporus Strait in Turkey.

The pipeline will be 312 km long and will transfer 30 to 50 million tons of oil per year. It will cost nearly $700 million and has to be finished by 2010.

{ed: see related article here]

The silence of yet another ambassador – this time the German one

By Grigory Paso, journalist

I had sent my questions concerning the possible participation of foreign companies in the purchase of YUKOS assets to the Extraordinary and Plenipotentiary Ambassador of Germany's Ambassador to Russia, Walter Jürgen Schmidt, by fax. Having ascertained that the fax had indeed been received, I started waiting for a response. By the way, here they are, my questions:

1. “In a recent interview with ‘Deutsche Welle’ radio, Mikhail Khodorkovsky’s lawyer Robert Amsterdam had declared that ‘the assets remaining in the ownership of the company YUKOS may soon be put up at auction – for the repayment of many billions in debts. The ESN group has expressed an interest in the assets. But, in the opinion of analysts, this group most likely represents in the given instance the interests of “Gazprom”. “Gazprom” intends to obtain loans in the West, employing German banks among others, in particular the German Dresdner Bank’. In Amsterdam’s opinion, any bank in the world should avoid participating in what is an egregious and systematic violation of human rights. But Germany, represented by the banks, may get into the expropriation business.

2. “It is known that this is not the first time Mr. Amsterdam is accusing Germany of collusion with the Russian leadership: he had also done so when, in an interview with the British newspaper ‘The Independent’, he had declared that Germany was helping the Kremlin in the sale of YUKOS assets. In the lawyer’s opinion, Deutsche Bank, which took part in the preparation of the auction for ‘Yuganskneftegas’, was acting as a representative of the German government. In Amsterdam’s opinion, Deutsche Bank’s actions as representative of the German government resulted from the close relations between Vladimir Putin and Gerhard Schroeder. It is noteworthy that in answering the questions of journalists at a «Gazeta.Ru» online press conference, your colleague Mr. von Pletz, essentially did not respond to these reproaches.

3. “What is your opinion with respect to Mr. Amsterdam’s accusations and suspicions? Will German banks be participating in the buy-up of YUKOS assets?

4. “It is known that on the eve of her recent visit to Russia and meeting with president Putin in Sochi, German chancellor Angela Merkel refused to call Putin an “irreproachable democrat”, in contrast to former chancellor Schroeder. Mrs. Merkel no doubt has grounds for such an opinion. Do you consider, Mr. Ambassador, that undemocratic trends in the actions of today’s Russian leadership and Mr. Putin personally are one thing, and relations with Russia and with Putin in business, in particular the energy business, are something entirely different (as the English say, ‘this is another pair of shoes’)? Is not, in your opinion, Russia’s position in relations with a series of countries of the West speculative precisely because of the dependence of these countries on Russia in deliveries of hydrocarbons?

5. “Just before Christmas, Mikhail Khodorkovsky received a letter of greeting in which around 30 members of the European Parliament expressed their support to him. In January of this year, in an interview with the publication ‘Netzzeitung’ (11 January issue), the German Federal Government Commissioner for Human Rights Policy and Humanitarian Aid, Günter Nooke, declared: ‘Human rights are being violated in Russia, but nobody is talking about this. On the one hand, information about violations is lacking; on the other, perhaps nobody wants to talk about them any more. For example, the YUKOS trial in Russia can in no way be associated with a functioning judicial system’. In November of last year, about 30 members of the Bundestag came out in support of YUKOS ex-head Mikhail Khodorkovsky in an open letter addressed to the Russian ambassador in Germany, Vladimir Kotenev. It is known that Mrs. Merkel too has expressed her concern about the conditions of Khodorkovsky’s incarceration in a prison colony beyond Lake Baikal.

6. “Could you, in connection with this, cite other concrete examples of the participation of German society and politicians in helping Russia to adhere to a democratic path of development and human rights?”

The fax with the questions was sent to the FRG ambassador on 5 February 2007. On 10 February, counsellor 1st class, chief of the press and public affairs section of the FRG embassy in Russia, Wolfgang Brett, reported to me that the ambassador would be there only on 12 February. Starting with 12 February, Mr. Brett assured me daily that he remembers about me and my questions. On 16 February I telephoned yet again. Mr. Brett’s secretary answered that she had sent me an email. I said that I had not received any emails. “How can we telephone you”, she asked. I told her that my phone number was indicated in my letters to the ambassador. Then the secretary answered that there was a resolution about my letter: “interview with the ambassador is not possible”. I said that I wanted to know the reason for such an impossibility and would like to speak either with the ambassador or with Mr. Brett. Unfortunately, neither the one nor the other responded to my request.

In commenting on this latest refusal of this latest head of this latest embassy to answer questions associated with the sale of YUKOS assets, I will note the following. First, I have formed the impression that the foreign policy agencies of certain countries of the West have a kind of veto over the expression of an opinion with respect to the YUKOS case. Second, the veto is so powerful that they refuse even to comment on questions not directly associated with the YUKOS case. Third, such a position of the ambassadors forced me to remember the words of president of Russia Putin, said by him at the recent conference on security in Munich: “Russia – we – are constantly being taught about democracy. But for some reason those who teach us do not want to learn themselves.” In the given instance, I want to say that my questions, in consideration of the attitude of the Western countries to the role of the press in the establishment and development of democracy, should have received at least an affected diplomatic response.

And finally, I was inclined least of all to quote Putin. But the gentlemen from the embassies give me no choice: I had wanted to quote them, after all, and not a well-known demagogue.

[Editor's note: We're proud to bring you the first in a series of exclusive translations of recent articles regarding the Khodorkovsky case from the Russian publication "Kommersant Vlast."]

A Case of Overshooting the Mark
(original Russian version here)

№5 [709] OF 12.02.2007

By Ekaterina Zapodinskaya

Фото: АНДРЕЙ ШЕЛЮТТО

On 5 February, the Procuracy-General filed a second charge against Mikhail Khodorkovsky and Platon Lebedev, sentenced to an eight-year term of imprisonment, threatening them with an analogous term at minimum. The former owners of YUKOS were alleged to have stolen more than $23 bln from its production enterprises and laundering part of this money by way of charitable works. With the help of the new charge, the Procuracy-General will attempt to deprive Khodorkovsky, Lebedev, and their émigré comrades-in-arms of a financial base.

One of the main National Projects—removal of Mikhail Khodorkovsky from the political field—turned out to have been accomplished only in part after he was sent off to a colony beyond Baikal. In the Kremlin, they are extremely irritated because, as they assert there, “Khodorkovsky’s money keeps on working all over the world”. It is precisely this that highly-placed officials use to explain the fact that the PACE continues to speak out in defense of YUKOS, American senators and influential European politicians speak about the political subcurrent of the case against Khodorkovsky. While in Russia, something on the order of twenty experienced highly-paid lawyers work for the imprisoned Khodorkovsky and Lebedev, and have already written six applications to the European Court of Human Rights about the wrongfulness of the criminal prosecution of their clients. Two of these, already communicated (that is, proceedings have in fact already begun on them) in Strasbourg, promise serious moral losses for the Russian side.

The filing of new charges against Mikhail Khodorkovsky and Platon Lebedev in the Chita Oblast Court (photo) had the character of a police special operation (Photo: ITAR-TASS)

The administrator of “Khodorkovsky’s money” after his arrest became Leonid Nevzlin, the extradition of whom from Israel the Russian Procuracy-General is striving to obtain for a third year already.

The procurators see as the reason for their lack of success that “Nevzlin bought himself Israeli citizenship and indeed bought half of Israel with financial gifts”. Employees of the procuracy seriously believe that if Leonid Nevzlin could be denied access to the monetary funds of the Gibraltar offshore Group MENATEP Ltd. – in which he is a shareholder and through which billions of YUKOS dollars passed in the years 1998-2003 –the chances of seeing him on a Russian prison bed would suddenly increase.

Mikhail Khodorkovsky’s and Platon Lebedev’s first sentence helped the state take YUKOS’s main asset, OAO “Yuganskneftegas”, in consideration for tax arrears, fines, and penalties. However, the offshore Group MENATEP Ltd. Was mentioned in the tax episode of the verdict only in passing – as the company into which YUKOS’s “capital was taken out”.

This was not enough for the investigation to be able to ask the courts of foreign states about the fr