Robert Amsterdam

Adrian Karatnycky of Orange Circle argues in the Washington Post that the US election could help bring forward European energy security as a potential side issue in some states. It's a pity that the United States seems more concerned with Europe's independence than member states themselves.

WaPo: Escaping Putin's Energy Squeeze

While capable U.S diplomats are trying to advance European energy diversification projects, these vital initiatives are being addressed primarily by deputy assistant secretaries of state and mid-level National Security Council staff. By contrast, when the Clinton administration sought to promote energy diversification through the now-completed Baku-Tbilisi-Ceyhan pipeline, that key initiative was spearheaded at the highest levels, by Stuart Eizenstat, then undersecretary of state and later deputy Treasury secretary.

There are two reasons for optimism on this matter. One is the diplomacy of the presidents of Poland, Ukraine and Lithuania and the increased interest of energy-rich Azerbaijan in reducing Europe's dependence on Russia. The second is the U.S. presidential campaign. With the next election likely to be decided in states such as Illinois, Ohio, Michigan and Pennsylvania, where millions of Polish, Ukrainian and Baltic Americans reside, the issue of a focused energy security policy for "Old" and "New" Europe is likely to get some attention.

It's not likely to be a major factor in the campaign, but as with NATO expansion into Central Europe in the 1992 election, it's a potential "side" issue that could resonate among tens of thousands of voters in states where such numbers might represent the margin of victory.

For some time I have followed the case of media baron Conrad Black with great interest. Today in the Guardian is an interesting piece by Nick Cohen, reminding us why the London Stock Exchange remains the preferred destination for Russia's IPOs.

Guardian: Guilty or not, Conrad Black points to the sickness in our City

Americans take capitalism far more seriously than Europeans do. On the one hand, there is less class envy of wealth. On the other, prosecutors pursue those who allegedly break capitalism's rules with a determination we never see in a Britain where serious fraud prosecutions are rarer than a rain-free Wimbledon and, unblushingly, ministers boast that 'light touch' policing of the City is making all of us rich.

I hate to say it, but they're right. No one can deny that Labour's refusal to impose strict standards has allowed the City and London to boom while Wall Street and New York stagnate. Taxes on financial services have helped pay for the explosion in public-service jobs and welfare payments of the Blair-Brown era.

But as everyone says, there's no such thing as a free lunch and the price Labour is paying for the new tax revenues is a weakening commitment to the rule of law. When British NatWest bankers are accused of participation in the Enron fraud, American rather than British investigators put them on trial. When BAE is accused of corrupt dealings with the Saudi Arabian royal family, the US Justice Department investigates while Labour's attorney general orders the British Serious Fraud Office to back off.

How soon will it be before the combination of 'light touch' policing and a glut of money produces a British Enron, a homegrown City fraud that dwarfs the alleged crimes of Conrad Black?

La Russophobe has posted an interesting translation of an Andrei Illarionov article on Publius Pundit.

Excerpt:

The Russian economy might have grown more quickly on account of its oil industry, but as a result of the government's breakup of Yukos, and other swindles, the annual growth rate in oil extraction has fallen from 13% to 2%. The Russian economy might have grown more quickly on account of its gas segment, but independent gas producers are being crushed by Gazprom, which has increased production over the past eight years by only 0.6%. The Russian economy might have grown quicker on account of its manufacturing sectors. But not a single sector of Russian manufacturing (with the exception of gas) has to this day exceeded the production levels achieved even in the time of the Soviet Union. For example, Russian machine building is now only one-half what it was in the time of the Soviet Union. So perhaps we should consider as an economic success for 2020 not the entry of Russia into the group of the top five economies of the world, but simply the resurrection of the volume of machine building to the level seen in 1990.

Russia nonetheless still has a chance to become a developed, attractive and respected country. But for this to happen much has to be done. Including a lot that will directly contradict what is being done by current forecasters of our "bright future." Russia has a chance, if it is ruled not by lawlessness but legal order. If all our citizens become genuinely equal before the law, if the judiciary deals with criminal conduct irrespective of whether it is by an entrepreneur, an officer of the FSB, or the son of a First Prime Minister. If government companies can refrain from stealing the property of others, strangling independent producers, and in the end are de-monopolized. If billions of dollars stop flowing from the pockets of Russian taxpayers into endless national project boondoggles, "miracle-weapons" and government "nanotechnologies."

Russia can save its historical chance if the current political path, being pursued by both Vice Prime Ministers, is curtailed. But Russia has no chance if it continues on this path.

The Coordinators from EWN

By Grigory Pasko, journalist

Just a couple of kilometers outside Lubmin is an industrial center – that’s what the name is now for the 25-hectare site of the huge Nord nuclear power station, which was decommissioned 15 years go. The site is owned by the company EWN (Energiewerke Nord GmbH), an name that is know not only in Germany, but outside it as well. The company is known not only because its specialists possess unique experience in servicing decommissioned nuclear power stations, dismantling the equipment, and creating long-term storage facilities for radioactive waste, but also because it is engaged in the coordination of work within the framework of the realization of a project to dismantle 120 nuclear submarines of the Northern Fleet of the former Soviet Union. The contract, which carries a price tag of 300 million euros, is part of Germany’s contribution within the framework of cooperation between G8 countries with respect to the question of non-proliferation of weapons of mass destruction. Memoranda about this were signed in 2003 in the Canadian town of Kananaskis. Then the western countries showed readiness to provide financial-and-economic assistance in such priority areas for Russia as the destruction of chemical weapons and the destruction of nuclear submarines that had been written off from the composition of the Navy.

Aerial view of the former Nord nuclear power station, now the industrial center where the pipeline with gas will make landfall

According to the agreements attained at the negotiations, Russia will be allocated 10 billion dollars. The United States, will add to this financing yet another 10 billion dollars, and, in such a manner, Russia will get a total of 20 billion dollars during the course of the next ten years.

President of Russia V.Putin declared after this: “We… consider that these declarations must be reinforced by practical action, first and foremost – the earliest possible approval of projects in priority directions of global partnership, the liquidation of chemical weapons, the destruction of nuclear submarines that are outdated and have been taken out of combat strength.”

With the help of EWN, these declarations are being “reinforced by practical action”.

As local activists-politicians later clarified, the fact that EWN commercial director Dieter Rittscher personally spoke with me during the course of an hour and a half testifies to the great attention that the company has given to a Russian journalist.

Photo of EWN commercial director Dieter Rittscher by Grigory Pasko

And indeed, I could feel this attention. Herr Rittscher told me in great detail about EWN’s participation in the North European Gas Pipeline project, about the plans of international companies to build two power stations – one running on gas, the other on coal – on the territory of the industrial center.

I asked: which station, in Herr Rittscher’s opinion, would be given preference – the coal or the gas one? The answer was quick: both would be built. Moreover, judging by the great confidence and certainty with which Herr Rittscher said this, it seemed to me that the question had definitely been decided already, and it was a done deal. And this despite the fact that local environmentalists, as well as Lubmin’s Bürgermeister, Klaus Kühnemann, are constantly manifesting concern about all the industrial projects, the construction of which is planned in this region.

Photo of the edge of the sea where the pipeline will be laid by Grigory Pasko

Herr Rittscher knows about the demands of the environmentalists and of environmental legislation. These demands, in his words, will be taken into account.

At the same time, for some reason he didn’t mention some numbers that unfortunately became known to me only later, or else I certainly would have inquired about Herr Rittscher’s opinion of them. Thus, the construction of the gas pipeline from Lubmin into the heart of Germany and beyond, to The Netherlands, will require the destruction of over 300 hectares of forest. And the coal-fired power plant will release over 12 million tons of carbon dioxide per year into the atmosphere of this lovely resort area. How will these circumstances be “taken into account”? Perhaps this question needs to be addressed not to an EWN director, but to the planners. But either way, the question remains open still.

It goes without saying that I asked Herr Rittscher his opinion relative to the reputation of their companion – the «Gazprom» concern. After all, it is known that «Gazprom» is engaged in non-core activities: it maintains hotels, newspapers and radio stations, and even fur-bearing animal breeding farms, not to mention the German soccer team «Schalke 04». To this ought to be added the buying up of YUKOS assets, the perpetual “gas wars” between Russia and the countries of the CIS, the shameless squeezing out of Shell and muscling in on the «Sakhalin-2» project, the conflict around the Kovykta field, and the refusal to partner with foreign companies in the project for the development of Shtokman… Let’s be honest – for a company that positions itself as open and adhering to the standards of doing business in the civilized world, «Gazprom» doesn’t exactly have a stellar reputation. So why are the Germans so careless in their choice of partners?

Herr Rittscher replied that they know «Gazprom’s» reputation very well. And non-core assets, of course, are not a good thing. But there is nothing dangerous for business in this: many world companies did so in their time. The situation should be evaluated as a vestige of the Soviet past. Look 30 years down the road, and «Gazprom» will have become a normal civilized company.

Photo of some of the pine trees on the edge of Lubmin which will need to be chopped down by Grigory Pasko

My next question didn’t catch the EWN commercial director unawares, either: about Germany’s increased dependence on Russian gas.

“I know”, said Herr Rittscher, “those people who talk about this dependence. These are those who do not explain how we are to solve energy problems. This is not a new discussion: we had the same one 30 years ago, when we had the first shipments of Russian gas to Germany. If now Germany consumes 40% Russian gas, then 10-20% more is of no consequence already. Liberal politicians understand that we have to work even more closely with Russia. We see ourselves that economic relations with Russia are becoming closer. We are only at the beginning of the development of new projects.”

The pipeline will hit land near the canal leading to the former nuclear power station (“KKW Greifswald” on the map) – right next door to a large nature reserve (the green zone on the top right of the map)

To my question relative to how far the Nord Stream project has advanced, Herr Rittscher replied thus: “There is already permission for a pipeline to Berlin with a diameter of 120 mm. We are proceeding from the position that construction will begin in the year 2009, and will end in 2010. Court hearings have already begun on permitting a pipeline along the direction to Leipzig and Osnabrück. The pipeline project fits nicely into the plan of common European networks that was started 10 years ago. Besides this, all the plans are in the strategy for the development of the Land [German Federal State] of Mecklenburg-Vorpommern.”

During our conversation, Herr Rittscher also told me about how EWN is participating in the project for the dismantling of Russian nuclear submarines, how it’s building a storage facility for radioactive wastes in Saida Bay, how it’s shipping equipment to the far East… This topic seemed to me to be so important and interesting that the two of us agreed to have another meeting in order to discuss it in greater detail, as well as to take a look at the storage facility that has already been built in Lubmin.

From the new issue of the leftist journal Dissent, a highly debatable article from Frederico Varese.

THE GRAPH THAT provides the best explanation of the Russian conundrum consists of three lines: the world oil price, the degree of democracy in Russia (political and civil rights) as measured by Freedom House, and the rate of corruption as measured by Transparency International. Once this graph has been drawn, the reader immediately sees illuminating correlations: every time the oil price goes up, the level of democracy in Russia goes down and the level of corruption goes up. For decades, political scientists have studied the so-called “wealth paradox” (most recently, Michael Ross, Steve Fish, and Peter Rutland); namely, the fact that countries that are rich in natural resources do not appear to be able to prosper economically over the long term. The classic example is that of Spanish colonization in the New World, which brought fabulous riches to the crown treasury but in the end produced economic decline. In the Spanish case, the American gold only produced powerful inflationary pressures.

There is very good reason to believe that political institutions also suffer a decline. The causal mechanism is as follows: large and unexpected profits from the export of raw materials erode the institutional barriers that separate government and the producers of primary resources. The executive has strong incentives to appropriate the profits and weaken the institutional structure that regulates the use of public funds. Various examples from the twentieth century demonstrate how the revenues are spent on ineffectual projects or simply pocketed by the political elite. A further effect of the wealth paradox is that the state can afford to reduce taxes, as has in fact occurred in Russia in recent years. The proceeds from gas and oil production are so high that tax extraction becomes a less important source of revenue. The reduction of tax pressure weakens the incentive among the population to participate in political affairs and so, paradoxically, it reduces the level of participation in the debate on how taxes should be spent.

Somehow I think it's going to take much more than a few lobster rolls to solve Kosovo and the missile shield, but this blog entry from NYT's The Lede is entertaining:

Tension? Critics? Food? A need for some comic relief? Sounds like a new answer to those strained ties between the United States and Russia, which are said to stand at the lowest point in Mr. Bush’s presidency.

Both sides not expecting any breakthroughs, but The Lede wonders — not at all seriously, of course — what effect a chef like Mr. Keller might have had on the proceedings.

Not much news has emerged from the meetings so far, but is there a potential for a Ratatouille Moment when all grudges are forgotten? Unfortunately, there was no sign of an attempt to Proust Putin on Sunday night’s menu:

First Course: Lobster on the Half Shell

Second Course: Marinated Swordfish with vegetable medley served with Brazilian Cheese bread

Dessert: Blueberry and Pecan Pie

Kennebunkport’s Clam Shack may have cooked up a decidedly American feast, but another dining establishment around the block made an attempt to touch Mr. Putin’s soul with drink. Two drinks, actually:

* The Hootin’ Putin: a mixture of raspberry vodka, lemonade and iced tea
* The Putin Punch: rum and fruit juice.

Alas, time appears to have run out. There were no reports of Mr. Putin pulling up to the bar at Arundel Wharf, the creative drink maker. And this morning’s breakfast was more of the same: pancakes and omelets.

Here is a short video clip from Vladimir Putin's visit to the Bush family home at Kennebunkport.

Today I was surprised to read the attached analysis of Gazprom's South Eastern Europe strategy published by ISN - usually a trusted source of high quality intelligence. The researcher simply mentions Gazprom's increased stakes in Sakhalin and Kovykta as though these were normal transactions, failing to discuss the invented regulatory pressures and the unlawful tactics used in concert with the authorities to seize control of these properties.

ISN: Gazprom eyes Southeastern Europe

Subsequently, Gazprom has intensified efforts to take over Russia's major gas deposits. On 15 June, Gazprom announced a deal to acquire a 63 percent stake in the giant gas field Kovykta in Eastern Siberian from the British Petroleum Russian arm, TNK-BP. In December 2006, Gazprom agreed to buy a controlling stake in Sakhalin Energy, operator of the world's largest liquefied natural gas project, Sakhalin-2, off Russia's east coast.

This seems like quite a gullible and misleading revisionist history of the events. It is a reminder that we are dealing with a government and state-owned firm with an established record of mendacity, misinformation, and overtly political motives - one cannot presume regularity in regards to statements made by the Kremlin or Gazprom. You may as well believe Medvedev's statements today that their strategy is motivated only by "economic factors" and that they have enough supply to meet their commitments. Many former Soviet states under Gazprom's hammer would beg to differ, and many energy experts would dispute that in fact Russia could very well face a gas shortage in the near future. Be more cynical.

Land at 50 Euros a Hectare

The environmental aspects of the Nord Stream gas pipeline

By Grigory Pasko, journalist

Representatives of Nord Stream assure the public that nature-protection measures have been provided for, both at the stage of construction and in the process of operation of the pipeline, including:

- maximum reduction in the width of the construction right-of-way;

- technical and biological recultivation of disturbed lands;

- elaboration and fulfillment of a program of compensational measures to redress damage to the environment;

- conducting of broad-scale ecological monitoring.

Let’s take a closer look at these promises. On the photographs that I took during the time of my on-site visits to Vologda and Leningrad Oblasts (see the first articles in this series), you can see that the width of the construction right-of-way of the land portion of the pipeline has pretty decent sizes – up to 50 meters and more. And it’s doubtful that the builders – precisely out of technical considerations, including the concept of safe functioning of the whole operation – will agree to a significant narrowing of this band.

Recultivation of disturbed lands, perhaps, is being carried out – someplace. But in Babayevo Rayon of Vologda Oblast’, for example, nobody had even heard of it. No doubt certain problems of an ecological character will arise as well during the organization of the crossings of such waterways as the Sheksna River (Vologda Oblast) and the Volkhov and Neva Rivers and the Saimensky Canal (Leningrad Oblast). A strip of forest around 500 kilometers long and 45-50 meters wide is going to have to be destroyed in order to prepare the right-of-way on the territory of Leningrad Oblast. The pipeline will certainly disturb the soil cover; agricultural lands will have to be taken out of cultivation. On the territory of Leningrad Oblast, the pipeline’s right-of-way will have to cross 40 automobile roads and 17 railroad tracks, and is laid in ledge rock in a 100 kilometer stretch.

These are all known facts. But the corporation Nord Stream has yet to present the broad public with an ecological picture of the impact of these facts on the environment, other than talk about how “everything will be taken into account”.

And now about the compensational measures. It looks like they’ll be limited to sweeping up the mess along the construction right-of-way and not much else. Here’s an example. Public hearings took place in Tikhvin last year based on the materials of an environmental impact assessment of the construction of the first and second phases of the North European Gas Pipeline. The organizers of the hearings spoke a lot about complying with ecological legislation. But when a concrete question was asked about the sum of the compensational payments to Tikhvin Rayon, the customers and authors of the project said that for now there are no such data. Later, certain data nevertheless were found. Thus, 336.5 hectares of land will be diverted in Tikhvin Rayon for the construction of the pipeline, while it is being planned that the budget will receive compensational payments of 495089 thousand rubles. In other words, for every hectare of land taken out of cultivation, Tikhvinites will get less than 1500 rubles – around 50 euros. (For comparison: in Moscow Oblast, the cost of buying a right to land comprises 250 thousands dollars per hectare. Even in Bolivia, a hectare of land costs 300 dollars).

Nor was there much of anything said about monitoring. In Gryazovets they said that an ecological laboratory would be created. More frequently mentioned in connection with monitoring are studies of the bottom of the Baltic Sea, which the Russian Baltic Fleet is supposedly engaged in. (I know all about how the Russian Navy engages in environmental safety from personal experience, when I wrote articles about the secret dumping of the Pacific Fleet’s radioactive waste in the Sea of Japan—G.P.) [Grigory Pasko spent 3 years in jail for his efforts—Editor]

Nevertheless, monitoring of the entire construction of the NEGP is vitally necessary.

The undersea portion of the North-European Gas Pipeline has been cause for concern, no doubt justified, by the countries of the Baltic region and in particular the ecologists.

It is known that the overall length of the undersea portion of the NEGP (from Portovaya Bay of Vyborg Rayon in Russia to the German coast in the vicinity of the town of Lubmin) will comprise 1198 kilometers. The designing of the undersea part of the pipeline is prescribed according to the norms of the Norwegian classificational society DNV, which is used in the world practice of the construction of undersea gas pipelines.

Photo of the beach near Lubmin where the gas pipeline will arrive by Grigory Pasko

Nord Stream will pass through the exclusive economic zones of Russia, Finland, Sweden, Denmark, and Germany, as well as through the territorial waters of Russia and Germany. These states, with the exception of Russia, are defined as “parties of origin” within the framework of the Espoo Convention. Russia has signed this convention but not ratified it; at the same time, Russia will appear as a “party of origin” to the extent that this is possible in consideration of national legislation.

Representatives of the NEGP continually pronounce one and the same mantra, that in accordance with the Espoo Convention, the stages of the environmental impact assessment process in a transboundary context include, in addition the submission of a notification of the project (already done, it seems), consultations with competent organs and the broad public, as well as the preparation of an environmental impact assessment program and report, field research on the basis of Helcom data with the aim of studying the marine environment of the Baltic Sea including flora, fauna, the composition of the water, and seabed sediments along the route of the gas pipeline. It is planned that the work on preparing the environmental impact assessment report will be finished in the autumn of the year 2007. The builders of the NEGP plan to receive final approval of the environmental impact assessment at the beginning of the year 2008.

Representatives of Gazprom insist that a survey of the bottom of the Baltic Sea for the entire length of the future pipeline with a strip width of 2 kilometers has already been carried out and that those places that need to be gone around have already been identified – this is sunken ships, fallen airplanes, trawl nets, large fishing tackle. It is tacitly implied that the right-of-way of the gas pipeline will not come anywhere near these. The project documentation says that there is a “conflict” between military training zones and the planned route of the NEGP off the coast of the island of Rügen in Germany and to the east of the Danish island of Bornholm.

As is said in the Nord Stream project documentation, in the years 1947 and 1948, at the instruction of the allies, nearly 11000 tons of chemical weapons were buried to the east of Bornholm, 1000 tons adjacent to Gotland. We’re talking here about poisonous gases and phosgene that had been placed in medium caliber shells, about aerial bombs, as well as “containers” or “barrels”.

In Greifswald I met with representatives of Greenpeace, the «Green» party, and the non-governmental organization BUND. They named different aspects of the construction of the NEGP that concern them. It is noteworthy that the chemical weapons turned out not to be on the priority list. The problems named were associated with the construction of a gas storage facility in the area of an industrial center near Lubin, the cutting down of forests, the disturbance of the soil cover, industrial fishing and others. But on the whole, the ecologists noted, they are not against the construction of the gas pipeline.

(L-R) «Greenpeace» member Katrin Ganswindt, Greifswald «Green» party leader Luc Leippold, University of Greifswald faculty member and member of the BUND Dr. Ralf Doring. Photo by Grigory Pasko.

Noteworthy in connection with this is the opinion of Yevgeni Schwartz, head of the Russian branch of the WWF. He noted that construction of the NEGP along the bottom of the Baltic Sea is even useful from the point of view of resolving the problem with the submerged chemical weapons, inasmuch as it could bring the attention of the authorities of the region to this problem. I must admit that this seems to be the weakest argument in the ecologists’ reasoning to me. Here’s an example. For decades the ecologists have been “bringing the attention” of the Russian authorities to Lake Baikal, but a pulp-and-paper mill has continued to operate on its shore, and continues to operate to this day. And even the decision to bypass Lake Baikal during construction of the Eastern Siberia – Pacific Ocean oil pipeline, in my opinion, is more an example of the authoritarianism of president Putin than of the effectiveness of the actions of the ecologists.

Additional evidence that the ecological state of the Baltic Sea will not suffer, in the opinion of the designers, is that modern metallurgical technologies, high-tensile steels, pipes with enhanced anti-corrosion insulation, and so forth will be used during the course of construction. They cite the experience of the operation of undersea pipelines: for example, over a 30-year period of pipeline operations in the waters of the North Sea, the companies Statoil and Norsk Hydro not only haven’t had a single accident, they haven’t even had any breakdowns.

How can one not recall here the assurances of the designers and operators about the safety of the reactors at Chernobyl? It is said, after all, that a gun can go off one time on its own.

Photo of the Baltic Sea by Grigory Pasko

Of course, it is good to hear that the company Nord Stream is attentive to the concerns and recommendations of the countries of the Baltic Region and is obligating itself to ensure the compliance of the new pipeline with high ecological standards. It would be even better if the company would adopt such decisions in the case with the construction of the pipeline along Russian territory as well.

It is assumed that the result of all the studies with respect to all queries received will become a report about an environmental expert study, which «Gazprom» and its companions plan to submit in the beginning of the autumn of 2007. Okay, I guess we’ll wait for the report to appear. Perhaps it will contain answers to all the questions that interest society.

In the same week that Rosneft symbolically concludes the feeding frenzy on Yukos by acquiring the company’s 22-story Moscow headquarters from the shadowy front company, Prana, we are treated to the utterly surreal news that ratings agencies Fitch and S&P have both upgraded their outlook on this company's business profile to positive.

Such decisions are not only disappointing and reprehensible on a moral level, but actually pose significant dilemmas to the future credibility of global economic institutions.

Fitch and S&P have willingly ignored Rosneft’s long and firmly established record of playing outside the rules, and relying on the Kremlin to use arguably illegal tactics and regulatory/political pressure to advance its interests and outflank competitors. The ratings agencies have identified Rosneft’s recent acquisitions of major upstream and downstream assets as the central motive for upgrading their marks. However, if the acquisition of these assets is not accomplished by competition and managerial competence, than exactly what value are the rating agencies rewarding? Is there any credible analyst that actually believes that the state auctions of Yukos assets were free and fair? Even fewer analysts who are well versed in Russia’s business environment would deny that the seizure and subsequent potemkin auctions to pass the stolen properties to Rosneft were unconstitutional – the state was required under Russian law to sell non-core assets of Yukos first, but its refusal to do so highlighted the government’s role as a direct beneficiary of these measures.

The dilemma posed by these increased ratings is the message that it sends to corporations in emerging economies. Companies live and die on the market by the outlooks produced by these entities, and when certain tactics and decisions are viewed positively, it is an open encouragement to continue down the same path. In the case of Rosneft and Russia, Fitch and S&P have just welcomed the further dismantlement of transparency and rule of law, and the institutional approval of lawlessness and state intervention.

If the principle objective of ratings agencies is to provide shareholders with information and intelligence on how companies are being managed, it would seem to be extremely important that they support transparency measures. The following excerpt from a roundtable neatly summarizes the dilemma as it relates to Russia and state-owned companies like Rosneft:

“In stark contrast with these principles, the study revealed consistent differences in disclosure standards between the state-controlled and similarly sized public Russian companies. This is in line with the notion that transparency of state-controlled enterprises is hampered by the tendency of the Russian government and individual officials to use their influence on such companies to promote political or individual goals that often diverge from commercial motives and investor interests. High standards of transparency and disclosure, on the other hand, are a cornerstone in the foundation of good governance. They provide legitimate stakeholders--whether creditors, minority shareholders, taxpayers, or the general public--with the information they need to be able to begin to hold government decision-makers accountable for their actions.”

So from what source does is this information coming from? From economist Andrei Illarionov or another expert looking to rain on the Russia investing bull’s parade? No, actually this is a quote from a Roundtable hosted in Moscow by the OECD in 2005, prepared by Standard & Poor’s itself titled “Transparency and Disclosure by Russia’s State Owned Companies.” The report found Rosneft to be at the very bottom of the transparency rankings: “Rosneft discloses virtually no information on its basic principles of corporate governance, including its Articles of Association and dividend policy. The company does not file any statutory reports to Russian or foreign regulators that are public.” You may also recall how Rosneft’s prospectus for the IPO famously declared that there would be times in which the company would NOT pursue profitable activities – no wonder BP had to be blackmailed into buying the stock – but a lot of good that did them.

It appears that the ratings agencies are succumbing to Russia’s “new financial architecture” in a similar way to the oil and gas, mining, and accounting companies are: it is apparent that everybody has to change the rules when they do business with Moscow. Is everyone in the business community really so willing to stick their heads in the sand and sacrifice long-term consequences for a few short years of high growth? Giving Rosneft a positive rating is the same as Shell thanking the Kremlin for taking away Sakhalin, the same as Tony Hayward claiming BP’s is better off with a minority position in Kovykta, and the same as PricewaterhouseCoopers withdrawing ten year’s worth of Yukos audits “not because of government pressure” but because of “new information” that they refuse to disclose.

The common thread here is that everyone is denying an inconvenient reality. And by all appearances this same mass delusion has spread across the pond to Kennebunkport, Maine, where President Bush continues to slather Vladimir Putin with obsequious praise while at the same time the Russian president says that the human rights and freedom of press issues in Russia are identical to those of the United States. At the very least, as a courtesy Putin didn’t compare the Americans to Nazis again during the visit. But the entire series of preposterous circumstances demands the question: at what point do we snap out of this mass delusion? When will this exaggerated stereotype of kowtowing politicians and investors topple over on top of itself?

From Masha Lipman on PostGlobal:

As the two presidents meet at Kennebunkport, Bush is on a sharp decline, having completely failed to achieve what he proclaimed as his foreign policy mission. He has also largely squandered America’s moral authority as a pillar of democracy and freedom in the world. Putin, on the other hand, seems to have overachieved in his domestic agenda. He has full control over politics and increasingly over public life, he’s universally recognized as the ultimate arbiter of inner disputes and the uncontested decision-maker. The Russian nation has never lived as well as in Putin’s tenure, and his popularity rating at the end of his second term is about 80 percent.

He did so by scrapping whatever fledgling democracy was emerging under president Yeltsin and pushing Russia back on its habitual track of the omnipotent state and the impotent society. He’s brought back the style of governance and some of the police state practices of the stagnation period of the 1970’s. His project for Russia is traditionally paternalistic and largely anti-modernization. But for the time being, the Russian people don’t seem to mind. Putin has been lucky with public attitudes, just as he has been with energy prices and, not least, with a disastrous U.S. foreign policy and the ensuing discord among Western nations. Within his country today he can get away with practically any policy move. The tougher he rejects U.S. foreign policy initiatives and criticism of Russia’s democratic record, the more popular he becomes.

There is also an interesting comment on this story that I would like to re-post:

Bill Mosby:

After working in Russia for a total of 6 months spread over 04 and 05, and meeting educated, hard working Russians at the government-owned uranium enrichment plants in which I worked, it became apparent to me that the Russian people have what it takes to "eat our lunch" economically if only their government would just stay out of their way for a couple of decades. Luckily for us, this is not likely to happen. I think I am correct in saying it has never happened before for that length of time.

July 3, 2007 1:41 PM | Report Offensive Comments

Many people are surprised to hear that the biggest opponent to Russia's ascension to the World Trade Organization is not the United States, it is not a competing market in Europe, and it most certainly is not the plot of restless exiles. Russia's biggest obstacle to trade is its lax enforcement of intellectual property laws, and there are many powerful groups such as the motion picture lobby and technology manufacturers such as Apple who are actively obstructing their entrance into the trade club.

But today there is news that Russia has taken a big step forward by shutting down the hugely popular (and illegal) www.allofMP3.com.

According to reports:

"Allofmp3.com violated copyright law in Russia and internationally by ripping off artists and creators, taking music that it had no right to reproduce and selling it worldwide," said John Kennedy, chairman of IFPI, the international music industry lobby.

"We would now like to see decisive action taken against similar copyright-infringing sites to show that the Russian authorities are indeed seriously committed to enforcing intellectual property rights."

The closure of this website represents a victory for rule of law in Russia, however, the same owners maintain a second website, MP3Sparks.com, which offers exactly the same service. Siberian Light relates a personal experience with the services, and argues that this crackdown is entirely cosmetic. If only now the Kremlin could respect the property rights of energy investors would we really have reason to cheer for the country's economic future.

The Pipeline in a “Communal Apartment”

By Grigory Pasko, journalist

I set off from Travemünde to Helsinki on a Finnlines ferry boat. This ferry, I happened to notice, is used primarily by Russians who come to Germany to buy used cars, ship them up to Finland, and then drive them into Russia from there for resale. But that’s a topic for another day. Today we’ll talk about something else.

The “Conditions Governing the Transport of Passengers” of this company, it says: “Finnlines reserves the right to alter prices and schedules without advance notification. Departure and arrival times and the length of the journey can not be guaranteed.”

Photo of the Travemünde quay by Grigory Pasko

When I read this, it was as if though I’d returned to the times of my youth, when I often had the chance to go to sea. The most tiresome thing before the start of any voyage is the time you spend waiting for permission to leave port. The operations control services, as a rule, are overly cautious. But you can understand why – the sea deals ruthlessly with carelessness. Which is why the company writes “can not be guaranteed”. They guarantee to provide you with a life vest, and nothing more. Even the generally calm Baltic Sea can be dangerous and even deadly: let’s recall the tragic fate of the ferry «Estonia» that sank together with its passengers in 1994.

This despite the fact that a modern ferry is much more than a floating hotel. It is an intricate complex of navigational, technical, and shipbuilding systems in which everything is subordinated to one goal – a safe voyage.

And still, tragedies are possible. Because you can’t make any guarantees.

And yet the planners of the Nord Stream gas pipeline are trying to convince us that everything has been taken into consideration, everything will be safe. The designers of the Chernobyl nuclear power station were just as convinced, by the way. Of course on can build, and most likely one should. But only if one observes the principle of the sea – it is better to be overly cautious than to celebrate your lack of concern.

...We finally left port after a three hour delay. Only three; the previous ferry had departed 12 hours late. My point here is that the construction of a gas pipeline along the bottom of the Baltic will doubtless not be nearly as painless as the heads of the Nord Stream concern imagine it will be. Even if the public and politics don’t manage to amend the project, the sea most certainly will.

Photo of ferry leaving Travemünde by Grigory Pasko

From antiquity right on down to the 1600s, the Baltic was known as the Varangian [or Viking] Sea. This is the world’s second-largest body of brackish water, a unique mixture of sea water and fresh water. Dictionaries write that this body of water is particularly sensitive to ecological changes in consequence of the long period of replacement of the fresh water (around 30 years), which is due to its semi-closed, narrow outlets.

Scientists point out that the slow exchange of water in the Baltic Sea is the reason why this interior sea is particularly sensitive to pollution. Pollutants that are flushed into the sea remain there for a long time, accumulating on the sea bed and in living organisms. In the year 2004, the Baltic Sea was declared to be a vulnerable marine region.

Nine states have access to the Baltic Sea: Russia, Estonia, Latvia, Lithuania, Poland, Germany, Denmark, Sweden, and Finland.

The route of the pipeline with a length of 1200 kilometers through the aquatic basin of the Baltic Sea looks natural for such a large project, in the opinion of the planners. At the same time, the pipeline will pass through the Finnish, Swedish, Danish, and German economic zones, as well as through 16 undersea cables, dozens of sunken ships, and thousands of sunken rounds of ordnance of the times of the Second World War. (The opinion of a representative of Wingas about the munitions on the bottom of the Baltic is interesting: “We”, Hans-Georg Egelkamp, the person responsible for the route at the firm Wingas, is convinced, “will deal with the bombs, grenades, and other explosive materials with maximum caution, most likely moving them aside, and not bringing them ashore.”).

The ferry route from Travemünde to Helsinki largely parallels the route of the proposed Nord Stream gas pipeline

It seems that the specialists do understand after all that the laying of pipes through the sea will, of course, cause damage to the environment. For example, at the coast of Finland, in order for the pipeline not to sag, whole reef regions are going to have to be flattened.

Let us allow that you can move something, flatten something, lift or lower something on the open sea… But what about the 12-mile economic zone? For example, in the vicinity of Lubmin, the steel pipe with a diameter of 1420 millimeters is going to have to be laid through several nature preserve zones. In so doing, they’re going to have to deepen the Greifswald lagoon – the depth of which comprises a mere three meters – so that a pipe-laying ship can work there. Clearly this is interference with the ecosystem of the bay.

Another question that is of no small importance in connection with the construction of the pipeline is that of commercial fishing. I observed fishing boats of various countries for the entire length of the ferry journey (indeed, the Baltic is quite “densely populated” with ships).

Construction of the Nord Stream pipeline, in the opinion of the authors of ecological inquiries, could have a negative impact on the spawning grounds of commercially important varieties of fish. In response to this, the Nord Stream company has promised (read this carefully!): to gather the necessary information and draw maps of the spawning grounds of the fish, conduct research into the catches of various kinds of fish in the Baltic Sea with the aim of assessing their economic significance; to conduct research into the types, sizes, and principles of use of fishing gear and the possibility of it being damaged from contact with the gas pipeline; to assess the risk of damage to individual fishing enterprises.

I’m curious – does anybody seriously think that Nord Stream is going to do all that? This after the senior partner of the concern, the company «Gazprom», hasn’t even managed to build roads and a garbage dump during the course of several years in the Russian Babayevo! A garbage dump – that’s mere kopeks for the gas monopolist. The fishing business in the Baltic with the problems of Greifswald Bay and the nature preserves are going to cost more. Just conducting “research into the catches of various kinds of fish with the aim of assessing their economic significance” alone is something entire research institute would require YEARS to do!

Apparently, at the company Nord Stream they know the saying of the ancient sages: if you can’t do something, at least promise. So here they are, promising…

Photo of Helsinki harbor from the ferry by Grigory Pasko

…It was on a gray and rainy morning that our ferry boat approached the capital of Finland – Helsinki. Dozens of islands escorted us on our way into the harbour. By the way, the question of the Baltic islands and their feathered population is yet another problem for the gas pipeline.

So it turns out that the entire routing of the pipeline is one continuous problem?

Our ferry docked three hours late.

They’re promising to build the pipeline in three years. I’m curious – by how much will this schedule get delayed? And don’t the recent efforts by Russia and «Gazprom» to accelerate the progress of projects for southern gas pipelines clear evidence that the North European Gas Pipeline may never come about?

Over the past several weeks, our special correspondent from Russia, Grigory Pasko, has posted a series of 12 original articles with photos from his travels along the proposed route for the North European Gas Pipeline (Nord Stream). This controversial Gazprom project, which involved the outrageous appointment to the board of former German Chancellor Gerhard Schroeder, continues to exemplify Moscow's strategy to use energy as a political lever, and showcases their success in shattering the common EU energy policy.

For easier navigation and review, below I index Pasko's articles:

Part I: Russia's Natural Gas Wealth Inaccessible to its Citizens - an introduction to the series.

Part II: Media Relations, Gazprom Style - Grigory gets obstructed at every turn by Gazprom's public relations representatives.

Part III: Kilometer Zero: Gryazovets - interview with Alexander Konovalov, chief engineer at KC-17.

Part IV: What the NEGP gas pipeline might bump up against - Who opposes the pipeline?

Part V: 40% Satisfaction, Babayevo Style - Grigory visits Babayevo and interviews Oleg Tishin, head of Rayon.

Part VI: Whatever They Demand of Us, We Do - Grigory interviews three top engineers at a critical compression station (KC) about the construction of the pipeline.

Part VII: Portovaya Bay – a piece of nature still unspoiled - Grigory speaks with local residents in Bolshoi Bor who look forward to jobs but lament the coming environmental destruction of the project.

Part VIII: Two Worlds, Two Houses - Grigory attends environmental hearings and interviews city councilmen in Greifswald, Germany.

Part IX: Two Bürgermeisters – Two Views - Interviews with Greifswald Oberbürgermeister Arthur König and Lubmin Bürgermeister Klaus Kühnemann.

Part X: The Coordinators from EWN - interview with Dieter Rittscher, commercial director of utility EWN.

Part XI: Land at 50 Euros a Hectare - The environmental aspects of the Nord Stream gas pipeline.

Part XII: The Pipeline in a “Communal Apartment” - Grigory travels over the water portion of the pipeline on a ferry from from Travemünde to Helsinki.

Part XIII: Into the Pipe or Down the Drain? - Grigory takes a look at Gazprom's promises of transparency on the Nord Stream, and finds that the numbers don't add up.

The New York Review of Books has another excellent article on the plight of Russia's journalists, taking the persecution of Manana Aslamazyan as a point of departure.:

Putin Strikes Again

By Jamey Gambrell

Russian journalists have suffered crippling attacks in recent years, as Vladimir Putin pursues his policy of strengthening the "vertical" dimension of his administration's "power pyramid." The Kremlin's geometrical terminology means enforcing, from the top down, an ideology intended to align all sectors of Russia's "managed democracy" (another key phrase of the Putin era) into tidy, clearly demarcated, easily controlled zones of activity and influence. No strong minority views, no awkward revelations in the press are to mar the sleek façades of the state. The messy disarray normally associated with functioning democracy—the irritating criticism, noisy opposition, and inconvenient news uncovered by investigative reporters (what Russians proudly called glasnost a mere seventeen years ago)—has been summarily and sometimes harshly dealt with.

The techniques range from mild bureaucratic harassment of news organizations to physical attacks on individual journalists. The body count among Russian reporters is now thirteen murders in the line of duty since Putin has been in power. In each case the reporter was investigating or had published stories critical of government or business officials. No one has been convicted of these killings, even in the rare instances when the police have apprehended suspects. The murder last October of the brave, rash Anna Politkovskaya, about whom Robert Cottrell wrote eloquently in these pages recently,[1] got worldwide attention but others are little known abroad. The Committee to Protect Journalists found in 2006 that Russia was the third most deadly country in the world for reporters.[2]

Murdering journalists is simply the most visible manifestation of the constant campaign against the press. Far more effective are the economic, judicial, and administrative measures being used systematically to quash human rights and information-gathering organizations and other genuinely independent members of civil society. Frequent tax audits and expensive, time-consuming re-registration procedures have been among the weapons of choice. In recent months there have been raids on news organizations to confiscate "illegal software"; shuffles of top-level management between government-controlled and "private" national television stations that provide most Russians with their news; managerial directives to present 50 percent "positive" news; "stop lists" of politicians and activists not to be mentioned on the air; and an end to live, on-the-scene reporting and live talk shows.[3] Local television and radio stations are especially vulnerable to ad hoc attacks—e.g., the regional governor or big-city mayor who tells companies not to advertise on "disloyal" TV stations, the municipal authorities who suddenly discover problems with a lease, or violations of fire or sanitation codes.

One of the most recent victims of the Putin bureaucracy has been an NGO called the Educated Media Foundation (EMF), formerly known as Internews Russia. Over the past decade, this nonprofit organization has trained more than 15,000 Russian broadcast journalists, mostly from the provinces, in the best practices of journalism. It has, for example, conducted seminars, workshops, and classes for news writers, editors, managers, advertising directors, and program producers that have helped them to establish independent television and radio stations. It has given awards for documentaries of high quality, and worked out arrangements for sharing originally produced material among regional radio and television stations, thus encouraging the regions to report on themselves while achieving financial independence. The only "ideological" aspect of their work has been to explain and encourage internationally recognized ethical standards for fair reporting.

On April 18, EMF (whose headquarters are located in Moscow's famed House of Journalists) was raided by twenty officers of the Department of Economic Security of the Russian Ministry of Internal Affairs. During the eleven-hour "occupation," no one was allowed to leave, and the ministry police confiscated all of the organization's computer servers, in addition to all current financial and administrative records, from contracts to entries for an upcoming journalism award competition. EMF was effectively shut down and forced to suspend its programs indefinitely.

In an editorial published in late May (during the conference of the International Federation of Journalists, held in Moscow this year), Vedomosti, a prestigious Russian-language business daily produced jointly with The Wall Street Journal and the Financial Times, wrote:

Yet another trend has made itself abundantly evident in the situation of "Educated Media." It is not unusual for Russian law enforcement agencies to engage in "inverse ad hominem" attacks in which they transplant charges brought against a private citizen onto the organization run by that person even when alleged transgressions are nothing but a private act.

The ostensible reason for raiding the offices of EMF was a minor personal infraction of customs laws by the EMF's president, Manana Aslamazyan. In January of this year, she returned to Russia from a trip abroad, entering the country without declaring 9,550 euros, or some $12,900; by doing so she slightly exceeded the legal limit of $10,000. Though this would normally incur a small fine, it was transformed into a criminal charge of transporting "contraband" and used to close down the entire organization.

Ms. Aslamazyan is a well-known and highly respected figure among Russian journalists; she has been a member of the Russian Federal Broadcast Licensing Committee and has received numerous awards. After the raid halted the EMF's programs, over two thousand journalists from throughout the country signed an open protest letter to President Putin, among them Russia's most prominent television journalists, including Sergei Dorenko, Mikhail Osokin, Leonid Parfenov, Vladimir Pozner, and Svetlana Sorokina.

Despite this unprecedented show of solidarity and support, it is unlikely that the protest will have any effect. Everyone recognizes that the government's aim was to "manage" another aspect of Russian "democracy": i.e., NGOs that have received funding from foreign sources—in this case, USAID, TACIS, and numerous American and European foundations. EMF had also been supported by the Open Russia Foundation, established by the billionaire businessman Mikhail Khodorkovsky, whose political ambitions, many feel, led to his present internment in a remote Siberian prison camp for allegedly committing fraud in his business dealings.

The impact of this single episode may appear negligible—after all, no actual TV stations were closed, and EMF did no more than train and advise journalists; it wasn't itself a news-gathering organization; but the tactics being used are much the same as those employed to dismantle Yukos, the oil company run by Khodorkovsky, and to prevent anyone even remotely related to it from exercising the constitutional freedoms guaranteed in the Russian constitution. In a May 30 article in the paper Novoe Vremia, titled "Why Manana?," Irina Yasina, former program director of Open Russia, now chairperson of the Regional Journalists Association, explained the rationale behind the recent actions against EMF:

What are the driving forces of yet another pogrom on the already sterilized landscape of Russian television? Why was one necessary in the first place?... This is all about making an example of one to scare others. No need to kill off an entire pack of wolves if... you can just take out the alpha male, right?... Others will simply get the message well in advance and do what is expected of them....

It is difficult to keep track of what is going on regional television from the Kremlin. There are way too many regional TV outlets in the country.... People watch their programming simply because they can no longer take all the propaganda rushing in from the channels controlled by the federal government. In order to... "streamline" the broadcasting on all the [recalcitrant regional] channels without incurring too high an expense for staff censors, one fires a single shot across the bow to scare them all into submission at once....

For this to have the desired effect, the target of choice has to have iconic status in regional journalism. If you simply trump up some charges against a reporter or even an editor-in-chief from Siberia, people elsewhere— for example, in Stavropol'ye or in Lipetsk—may or may not perceive that as a threat to them....

Choosing Manana Aslamazyan for the role of a "whipping girl" is dead-on accurate. The taming of the "old NTV" [the formerly independent TV channel] was a perfect choice. It was all a slam dunk from there. The case against Mikhail Khodorkovsky, Russia's wealthiest and most successful businessman, was a perfect choice as well. Now, all business leaders, from the very prominent to the most obscure, see in their sleep the chilling visuals of the Krasnokamensk correctional facility.[4]

The authorities twice extended the "criminal investigation" beyond the original sixty-day timeline for filing charges established by Russian law. Lawyers for Ms. Aslamazyan and the Educated Media Foundation's founders (the Russian equivalent of trustees) are continuing to pursue a legal remedy through the courts to prevent the case against Ms. Aslamazyan personally from being expanded to include the organization. The damage, however, has been done. A criminal indictment for "contraband" was handed down on June 19. Ms. Aslamazyan has decided to resign from EMF and to accept a consulting position with the Internews Network. See her open letter to friends and supporters on www.internews.org/russia.

The attack on EMF—and on organizations like it—deserves attention from writers, editors, and civil libertarians outside Russia. Links to the Open Letter to President Putin and a list of its signers (in English and Russian), as well as to numerous other articles in the Russian and Western press, can be found at the Internews site. Writers, editors, and others concerned about press freedom wishing to sign the international version of the petition can find it at the Global Forum for Media Development, www.gfmd.info.

We'll have a more in-depth post on the Sochi victory later this weekend.

From the FT:

Public-private partnerships are not new in the world of mega sporting events. But in modern Russia they can take on unusual dimensions when tackled by the full force of Russia Inc, the network of state-controlled companies and the new breed of Kremlin-loyal oligarchs. For example, Gazprom, the state-controlled energy conglomerate, is stepping up as a resort developer and has taken it upon itself to build lifts for 50km of planned pistes. Perhaps it can also try to prevent the kind of power failures that are common today.

And for a logo for the event, how about this: the Gazprom flame atop the Olympic torch.

Peter Foster of Canada's Financial Post argues that the Kremlin's continued lawsuits against the Bank of New York is thin cover for legal extortion.

From the Financial Post:

Wielding lawsuits like blunt objects is in no way strange to the Kremlin, where bullets and polonium lattes are other judicial options. This case is being heard in the Moscow Arbitration Court, which has hardly ever been the domain of Blind Justice (unless the blindness came from having acid thrown in her face). It was here that the former head of giant oil company Yukos, Mikhail Khodorkovsky, an oligarch who made the mistake of trying to go straight and challenge Mr. Putin, lost both his company and his freedom in a put-up case. Yukos was crushed by claims for tens of billions in back taxes, but Mr. Putin hasn't finished with Mr. Khodorkovsky yet. Yukos' former auditor, PricewaterhouseCoopers, is also now being sued by the Russian government for allegedly being party to tax evasion. The accounting firm recently withdrew its Yukos audits for the past 10 years.

Former world chess champion Gary Kasparov said in Toronto last month that "Russia today is a police state masquerading as a democracy." Russia recently refused to extradite Andrei Lugavoi, the former KGB agent who is the prime suspect in the poisoning in Britain of Alexander Litvinenko. Mr. Putin meanwhile wants to have Russia's most distinguished human-rights lawyer, Karinna Moskalenko, disbarred. The state has used various forms of harassment against her Moscow-based International Protection Center. Among its more boldfaced charges is that Ms. Moskalenko failed to present one of her clients properly. The client was Mikhail Khodorkovsky!

Ms. Moskalenko has emphasized the reign of terror that Mr. Putin is attempting to install by legal harassment, and worse. She has said that "it isn't necessary to put all the businessmen in jail. It is necessary to jail the richest, the most independent, the most well-connected. It isn't necessary to kill all the journalists. Just kill the most outstanding, the bravest, and the others will get the message."

Not only is the Kremlin above the law, it is not above attempting to use the law, even U.S. law. Russian prosecutors have suggested that if they win, damages against the Bank of New York Mellon will be collectible via the U.S. legal system. Good luck with that one.

Below is an exclusive translation of an important article from the German press.

DIE WELT: "Der Schröder war schon öfters so peinlich"

EU ACCESSION UKRAINE

“Schröder was quite often so embarrassing.”

The topic was supposed to be Ukrainian accession to the European Union. But at the Yalta European Strategy Conference, Ex-Chancellor Gerhard Schröder campaigned instead for partnership with Russia – and in doing so made himself unpopular with his hosts.

Foreign policy elites everywhere around the world love conferences – best of all in exotic places. Then their representatives, the “gentlemen callboys” – as the philosopher Isaiah Berlin once mockingly called them – swarm together to talk sombrely about this and that. Those who travel more frequently always see the same characters. Berlin called them nametag-wearing “marzipan piglets” who call each another by first name. Alongside them surface former heads of government who find retirement chilling. They consider themselves important enough to bestow their views upon the world as has-beens, even if they are no longer of any relevance.
At Yalta, in the Crimea, one could inspect several members of both groups up close. Nevertheless, the fourth Yalta European Strategy Conference differed from most of these gatherings. The Ukrainians are still inexperienced on the international parquet and, for precisely this reason, free of diplomatic turns of phrase.

At issue in Yalta was Europe, more precisely, the not exactly surprising desire of the Ukrainians to become a member of the European Union – and they really argue for realizing this request by 2020. Will they succeed? After the conference in the Livadiia Palace – where Stalin, Roosevelt, and Churchill convened a good 60 years ago – one worried in unison with them. One may not really believe it could happen, at least not anybody who observed the fury with which the representatives of political parties laid into one another – even in front of an international audience – and wished each other an untimely end. They were able to agree only in two areas: a) We are all Ukrainians, b) We want into the EU. Even the September election, from which Brussels finally expects peace, will not have the desired effect. The Ukrainians are at loggerheads with one another, with no feeling for strategic necessities and no sense of what is important in the region.

Perhaps they will listen to former Polish President Aleksander Kwasniewski, who read the Ukrainians the Riot Act in fluent English: “How long is Europe to endure your domestic political crisis? It has to stop. Yes, we need you in the EU, maybe even as soon as 2020, but not in this situation.” Maybe the contribution from Viktor Chernomyrdin, the Russian ambassador and former prime minister under Boris Yeltsin, will help; he made it clear that Moscow had no objections to the accession of its western neighbour to the European club. Unfortunately, these astonishing words from a Russian mouth seemed to be in vain – and the reason for that lay in the performance by a German with the name Gerhard Schröder.

As in his heyday, the former federal chancellor knew how to leave behind his audience. This time, however, not in a state of admiration but one of vexation. With a statesman’s air, Schröder appeared before the audience as a Gazprom lobbyist, spoke no more than three minutes about his “dear frränds,” only to go on to praise Russia’s reliability as an energy supplier in the very county whose gas supplies Vladimir Putin cut off in January 2006. “Of course, I understand that there is a debate about dependency on Russia. But that is completely wrong. Who can guarantee that oil and gas are provided? Iran, perhaps Algeria? Only Russia can.” Ukraine in the EU? That seemed to interest Schröder, a member of the supervisory board of the company building the Baltic Sea pipeline, as little as the price of Coca-Cola in Burkina Faso. Not once did the ex-chancellor utter the words “Ukraine and EU” in the same breath. Schröder spoke of a good “neighbourhood policy,” of Ukraine as a “bridge” between east and west, of Germany’s help for Kiev during his chancellorship, only to conclude at the end of each passage: “It is important to strengthen the partnership with Russia” and to build precisely the pipelines that Gazprom is planning.

Schröder dismissed interjections to the contrary. They ricocheted off his armour of self-satisfaction like foam arrows. In the end, they struck the remaining Germans, who could do nothing else but remind the scandalized listeners that he is no longer chancellor. At least, the French, in the form of Pierre Lellouches, a close associate of President Nicolas Sarkozy, came to their aide: “Schröder was quite often so embarrassing.”

Below is an excerpt from Michael Barone's opinion column "Two Troublesome Powers."

The Russian political system has come to resemble the political system of Mexico from 1929 to 2000, which was something of an absolute monarchy, with term limits. The candidate of the ruling PRI was always elected president, the legislature was a rubber stamp, and the incumbent president chose his successor. How this worked in practice is the subject of "Perpetuating Power: How Mexican Presidents Were Chosen," a fascinating book by former Mexican Foreign Minister Jorge Castaneda. He interviewed four Mexican presidents, who discussed frankly how they had been selected by their predecessors and how they, in turn, chose their successors. Only someone as well connected as Castaneda, who grew up as part of the PRI elite (his father was also foreign minister) could have elicited the almost Shakespearean accounts.

The continuing theme was that the outgoing president sought to exert power in the reign of his handpicked successor -- and failed. The pattern was set early on. The originator of the PRI system, Plutarco Calles, tried to run things after his choice as successor, Lazaro Cardenas, took office. Cardenas called Calles into his office and told him that he had to stop and he could no longer live in Mexico. Calles moved to California, although he was eventually allowed to return to Mexico.

My guess is that Putin, as he decides whom to choose as the new president, hopes to continue to exert power himself. And that he will probably find himself shut out, as Calles was. Or as Boris Yeltsin, who single-handedly chose Putin to succeed himself in 1999, was.

The problem for the United States is that this kind of regime will tend to behave less predictably than the collective regime of China. In Putinist Russia, as in PRI Mexico, each new leader may lurch from policy to policy. Many such changes will not be predictable, because politicians contending to be selected by one man for a position of paramount power will not show him anything they think he doesn't want to see. As Castaneda's book shows, one-man rule tends to produce a sycophantic court and new leaders who do things no one expected.

Thus, Putin has veered off Yeltsin's course, suppressing the free press, menacing independent leaders in former Soviet republics and opposing efforts to keep Iran from developing nuclear weapons. We can only hope that the next Russian president veers off Putin's course, as well.

Finnish-Russian Civic Forum in Helsinki: Looking at Russia

By Grigory Pasko, journalist

[editor's note: last week Grigory Pasko and Robert Amsterdam attended the Finnish-Russian Civic Forum and met with and interviewed prominent members of the opposition. Video footage of the proceedings will be made available soon]

…As we walked the streets of Helsinki, we couldn’t help but recall that at one time this city and this country were a part of the Russian Empire. Today, Finland is a free and democratic state that is quietly going about building a good life without complaining about weather and climate conditions or about the need to build its own unique kind of democracy, distinct from the European model, the way Russia does. Finland’s very existence literally demonstrates to Russia that you can be a normal country even without large reserves of oil and gas. And Russia is often irritated by such a demonstration. It is probably precisely for this reason t