Robert Amsterdam

Russia to Belarus: No gas for you!

[Dear readers, my apologies for the quiet day - it's summer and I'm taking some time with my family, so please bear with me. - Bob Amsterdam]

For as much complaining as Russia does about the Western "conspiracy" to support civil society and democracy movements, encouraging a fearsome enclosing circle of democratic color revolutions, you would think that they would just love dealing with one of Europe's last remaining true dictators - Alexander Lukashenko of Belarus.

Not so fast. It may be a big secret, and I don't think we can expect Russia to stop its whining of the victim narrative any time soon, but it would seem that President Vladimir Putin strongly prefers working out energy deals with democracies - they are so much easier to screw over.

Case in point, Russia's dealings with Belarus are proving to be an endless headache. Once just an obedient satellite state of the Kremlin (reunification was even on the table for a few years), Lukashenko did not take kindly to having his energy subsidies cut, and started to become a real pain in regards to the new gas prices being demanded of him by Gazprom. Last January, Russia cut off the flow of gas to Belarus (see Gas War, Chapter II) after their refusal to pay nearly double the rates (Gazprom asked for an increase to $100 per 1,000 cubic meters, up from $55).

As energy analyst Derek Brower has written on this blog in the past, the fact that Gazprom is seeking market rates for its gas is of course not problematic in itself - what is sinister is that Gazprom was asking for an amount that it knew that Belarus could not possibly pay, which made them fork over control of Beltransgaz, the national pipeline monopoly, to Russia - which was of course the asset originally sought after in this dispute.

But natural gas prices weren't the only part of the ongoing energy fight between Minsk and Moscow - Transneft also sought to jack up oil transit tariffs, and accused Belarus of siphoning from the Druzhba pipeline. To show they meant business, Russia cut off the flow of oil to Europe without explanation, much to shock and outrage of European consumers.

And then on Wednesday - the latest threat came in after Belarus failed to negotiate its way out of $456 million debt - Gazprom says it will cut gas exports to Belarus by almost half starting Friday. Europe, which imports about 20% of its natural gas supply through Belarusian transit lines, has already registered its alarm, and while Gazprom has promised that supplies will not be interrupted, the damage may already have been done. As Vladimir Milov told the FT, "It doesn’t matter who is right or who is wrong in this dispute. The threat to cut off supplies will once again damage the image of Russia as a player on world energy markets.”

Stratfor speculates that the latest energy fight with Moscow puts Lukashenko between a rock and a hard place - with no more friends in the Kremlin, and the only help available from Europe, who would probably like to ask him to cut down on all those human rights abuses and allow for some minimal democratic freedoms:

With the natural gas reduction two days away, checked by the Kremlin on one side and his paranoia on the other, Lukashenko has only two options ahead of him. On one hand, he can go with his traditional pro-Russian instincts and crawl into the doghouse on the Kremlin lawn, giving Gazprom full access to Belarus' energy infrastructure and promising not to cause any more trouble. On the other hand, he can make a sincere overture to the West based on common energy concerns or the potential for economic and political reform, asking Europe to come to his aid and pay the debt. Neither option is optimal for Lukashenko, but given his previous behavior, he will accept the Kremlin's terms rather than risk being removed from office.

I'm inclined to agree with this analysis - like Turkmenistan, Belarus will probably feel safer working with a government that has no qualms about autocracy and repression. But is this really the outcome that would be most convenient for the Kremlin? Lukashenko has been problematic on energy time and time again, and as Yulia Latynina once pointed out in a Moscow Times column, the Belarusian dictator doesn't have much to lose, and knows how to play a strong hand. So while it may appear otherwise when he is hobnobbing with Hugo Chavez and Lukashenko, or getting chummy over their mutual rejection of the U.S. missile shield, Vladimir Putin is rumored to absolutely detest Lukashenko. The two men have zero rapport, and Moscow would probably fare better working with a government that could be more easily manipulated by propaganda, funding, and manipulation of public opinion. That is to say, maybe Russia would like Belarus to have a color revolution after all - a weak democracy would be so much easier to steal from.

On July 24, 2007, the Helsinki Commission of the United States Congress held a hearing entitled "Energy and Democracy: Oil and Water?" which featured witness testimony from experts on energy security. Although I was not able to attend in person, I was invited to submit a written testimony, which can be downloaded in full here.

The hearing was chaired by Rep. Alcee L. Hastings, D-FLA., and Sen. Benjamin L. Cardin, D-MD, who both made very interesting contributions to the record. Other commissioners on the bipartisan Helsinki Committee include Hillary Clinton, John Kerry, Chris Dodd, Sam Brownback, and Joseph Pitts. The other witnesses who came to testify were Simon Taylor of Global Witness (an organization much admired by this blog), and Roman Kupchinsky of Radio Free Europe/Radio Liberty.

I highly recommend that readers take a look at the unofficial transcript. Below are some excerpts:

Robert Amsterdam testimony:

Following the consolidation of state power over the energy sector in Russia, which included the Yukos Affair and the monopolization of pipeline infrastructure, the Kremlin embarked on an multinational “energy diplomacy” strategy to build close relations with other exporters and coordinate the markets they sell to. One of the most notable developments of the coordination strategy was Gazprom’s landmark swap agreement last year with the Algerian state gas supplier (the deal included debt forgiveness and a major arms purchase), which overnight put 69% of Italy’s natural gas supply under Russian control. Following this decision, Italian energy firm ENI found itself coerced into signing Russia’s largest gas supply agreement in all of Europe, and then later became the first foreign firm to purchase controversial assets in liquidation auctions, only to later hand them over to Gazprom.

In sum, we are faced with an activist Russian government with an established pattern of using energy supply to achieve economic coercion, and political objectives, in violation of Russia’s obligations under the Helsinki Final Act. As Mr. Roman Kupchinsky describes in his testimony to this record, “Russia is a country which is able and is willing to project its hydrocarbon power around the world.” The tactics through which this is accomplished can be viewed in three categories: cooperation, cooptation, and disaggregation, all of which carry serious ramifications for other energy exporters in areas such as Central Asia, and it will especially affect importers in Europe and North America.

Simon Taylor, Global Witness:

I think, for me, this is really why we come back to this kind of need of a cocktail of mechanisms. So we should see transparency as simply a component. It's actually quite a small component, but we're not even there in a lot of these different states we're talking about.

So the oil and gas companies, using this example, are one vehicle to get transparency, because they, after all, are responsible for large percentages of the revenue streams. And so requiring revenue transparency is a way of putting the information in the public domain and let's see how those mechanisms can work.

They will vary depending on the country and the opportunities and the extent to which it's possible to lean on them, if that's not an inappropriate term. That's one part of it.

Roman Kupchinsky, RFE/RL:

Most analysts will agree that Russia's natural gas industry is the most opaque sector of the Russian economy and that Gazprom, the Russian state gas monopoly, is a secretive corporation responsible only to the Kremlin. (...)

One of the reasons for the opaqueness in Russia is that Russia does not have a foreign corrupt practices act. Company executives, Russian company executives, especially Gazprom, let's get down to the bottom here, Gazprom executives are not bound by any legal restraints when it comes to their business practices abroad, and this is mostly evident in central Asia, as my colleague pointed out, a region where top officials have regularly been suspected of funneling money from oil deals and gas deals, above all, gas deals, into their hidden offshore accounts.

This lack of transparency has helped Russia gain control over the central Asian energy market, over the whole sector, and has been instrumental in keeping Western countries at bay, out of central Asia, out of the energy sector.

It's far more profitable for key officials in these countries, in Turkmenistan, Kazakhstan, Azerbaijan, to deal with Russia. Russia is far more amenable. Russian executives, Russian companies are far more amenable to giving kickbacks than to sign deals with an American company which is prohibited by law from doing so.

A German Approach and a Russian Slogan

By Grigory Pasko, journalist

When I first met with Energiewerke Nord GmbH (EWN) director Dieter Rittscher in June of this year, he reported that his company is taking part in the process of the dismantling of Russian nuclear submarines. Because important questions like this deserve more than just a passing mention, it was decided that he and I would have to meet again to give them the time they deserve.

And so it was that my interpreter Bernhard Clasen and I found ourselves once again in Lubmin – a small resort town located on the shore of the Baltic Sea not far from Greifswald.

The Energiewerke Nord GmbH office building in Lubmin (Photo by Grigory Pasko)

The office building of the company EWN is located on the territory of the former Nord nuclear power station. The large room where delegations are welcomed has a map of the gas pipelines of Russia and Europe. We were met by Dieter Rittscher and two of his assistants, Jürgen Ramthun, whom we’d met on our last visit, and the head of the nuclear submarine decommissioning project, Gottfried Barth. Herr Barth made a small report of sorts, from which it became clear that on the whole, EWN is satisfied with its cooperation with Russian partners (I would venture to guess that the Russian side has no reason to complain about the German colleagues, either).

What specifically have the Germans done? First, a storage facility for decommissioned nuclear sub reactor sections is nearly built. This is probably the most important component in the entire process of dismantling and disposal. I still recall the opinion of specialists from the times of my trips around the Pacific Fleet as a journalist: it makes sense to dismantle a boat only when there will be a storage facility for the reactors and radioactive waste. Today in Russia – both in the Northern Fleet and in the Pacific Fleet – all the storage facilities have been filled, as they say, up to the gills, for a long time already. Some of them are in need of urgent repair, and nearly all of them need upgrading. Before slicing up a nuclear-powered ship into pieces, you need to know not only where you will store the triple-partition blocks (the reactor section and the two adjacent “slices” of the submarine), but also why you’re going to store it: as is known, not a single country in the world has the technology for safely disposing of nuclear waste. In other words, all that can be done today with all those carved up nuclear innards (or, if you will, the legacy of the cold war) is to store them someplace safe until better days. For example, in specialized storage facilities, until such a time as our children or grandchildren finally figure out what to do with all that nasty junk that we, their dear parents, created for them.

In 2002 in the small Canadian town of Kananaskis within the framework of the G8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction initiative it was planned to allocate 1.5 billion US dollars out of the 20 million announced by all the participant-states in the meeting for a nuclear direction, the decommissioning of nuclear submarines, the rehabilitation of contaminated territories, and processing spent nuclear fuel. Russia’s contribution was 600 million dollars. Russia was constantly complaining that out of the planned 1.5 million it received only a mere 200 million approximately. Likewise Russian (apparently not without political populism) declared that it would dismantle its boats by the year 2010. If foreign partners give money, it goes without saying. But the partners weren’t anxious to give money for various reasons. One of them was, in fact, the absence of storage facilities for the reactors and radioactive waste. A second one, which for a long time was just about the main one – Russia demanded money, explaining most murkily where it would go. To the question “where?” it answered: this is secret information. Certain chekists got so enthusiastic about secretiveness that the entire decommissioning process came under threat. I recall how at one of the international conferences in Washington in 2005, dedicated to the realization of projects for the decommissioning of nuclear submarines, even a representative of the Russian embassy was forced to admit that secrecy gets in the way of the entire process.

Since then, they have begun – albeit very reluctantly – to allow foreigners (and not only specialists, but sometimes even Western journalists) to visit secret facilities. As before, however, it is customary to regard one’s own journalists as spies.

Mothballed Russian nuclear submarines (Photo by Grigory Pasko)

The situation these days is like this: Around 200 nuclear subs have been taken out of service in Russia. About 60 of them have nuclear fuel on board. The overall cost of all the work of dismantling them, in the opinion of Rosatom specialists, will comprise 4 billion dollars. The completion date of the process is the year 2010, under the condition of the dismantling of 18 boats per year. The bulk of them (13 out of 18), Russia promises to chop up by its own efforts, but for the remaining 5 subs per year it needs the financial assistance of Western countries (As S. Akhunov, a representative of Rosatom, which is responsible for decommissioning the subs, once said in a speech, “We need money. And preferably quicker and more!” This heartfelt cry of a bureaucrat seemed to me in fact to be the motto of the entire rule of V. Putin and his entourage).

And speaking of speeches… At one of the meetings of an expert-contact group under the aegis of the IAEA, the former deputy head of Rosatom, Sergei Antipov, said the following phrase: “If the Russian side clearly shows how much money has been received, then far from all the partners show how much has been spent by them.”

Fact is, usually the lion’s share of the funds that this or the other country promises to allocate for the dismantling of nuclear submarines, as a rule, remains in that country – in the form of expenses for expert studies and expert opinions and for the manufacture of equipment for the dismantling of the subs. But the Russian official’s phrase cited above contains the whole point of the mutual relations: Russia demands not only real money, but also a scrupulous answer with respect to the spending of the promised funds by the Western countries (and this is fair). But at the same time, Russia itself not only doesn’t say how much of the funds from those already allocated have been spent, but also on what specifically it has been spent and on what those funds that Russia is asking for will be spent.

Be that as it may, the process is moving along. In the words of Gottfried Barth, the storage facility in Sayda Bay is intended to hold submarine 120 reactor sections. It is planned to build a facility with the name “Regional Center for Disposition and Storage” – for 40 reactor sections and for 18 “large objects” – by which are meant ships of the auxiliary support fleet that had had problems or accidents but for the cutting up of which into manageable sections the technology does not yet exist. German money has been used to build cement “tombs” for the reactor sections and support platforms for these enclosures. Repair of a floating dock has been carried out. Two tugboats have been repaired for German money and one specially purchased in Greece. Much money has gone for the repair of the dockyards and equipping them with lift cranes.

At the first stage of financing, Germany proposes to assimilate 300 million euros. Another 300 million euros at the second stage in the period from 2009 through 2014.

And so we finally come to EWN – the German company that has been entrusted to use a billion and a half euros of German money for the dismantling of Russian nuclear submarines. I ask my first question:

Doesn’t it seem illogical to you that Russia, on the one hand, is asking/demanding money for the dismantling of its own nuclear subs, but on the other, without skipping a beat, is building new ones?

The answer is diffuse and, in my opinion, not convincing: The Americans, or so they say, are also arming themselves. And we Germans don’t like this. A balance is needed. (Strange logic, as it seems to me. If I live between two hostile neighbors, and both of them are arming themselves before my very eyes, then this shouldn’t make me calm, it should on the contrary make me doubly afraid.).

How do you protect your money from, to put it mildly, non-targeted use?

The answer was detailed and precise: We sign many small-scale contracts and count every euro. In the event of a change in the situation, we definitely reflect this in amendments to the contracts. We are audited by the German auditing chamber. We feel a sense of responsibility before the taxpayers.

EWN project manager Gottfried Barth talks about dismantling nuclear submarines in Russia (Photo by Grigory Pasko)

What do you know about those projects that other countries are carrying out?
Response: The international coordination committee, which monitors the actual process of dismantling and the participation in it of those countries that had signed the Kananaskis agreement. It is known that the Norwegians, the English, and the Canadians are going to finance the dismantling of the subs; the French – the support vessels «Lotta» and «Lepse»; on top of that, the English are going to participate in the reconstruction of the storage facility in Andreev Bay. The Italians have gotten the contract for the disposition of one nuclear sub at the «Nerpa» plant.

What things don’t you like about your Russian partners and what do you like about them?

Answer: We don’t like that the burden of the past continues to weigh so heavily: sometimes secrecy for no reason, other times distrust of partners, foot-dragging in certain processes. What we like is that there’s less and less of this. In addition, the Russians have learned how to write contracts. And also, we practically don’t have a language barrier: certain of our specialists not only know the Russian language, they actually studied in the USSR.

It should be noted that the EWN representatives literally illustrated all of their explanations and responses with documents, photographs, charts, and slides.

When the German businessmen offered me “Why don’t you just come yourself and see what we’re building and how near Murmansk”, I had to remind them of the “sometimes secrecy for no reason” of the Russians, and also about their pathological disease: they see spies looking everywhere. In actuality, of course, it’s not spies that certain Russian government officials are afraid of, but the truth, the openness of their business… If the Germans have nothing to hide, then they both show, and tell, if not everything, then just about everything.

By the way, I am going to try to continue my efforts to convince Rosatom that it is incorrect in thinking that journalists are its enemies.

After my meeting with EWN management, I visited a nuclear waste storage facility – one of the largest in Europe. Everything there is strictly scientific. All requirements are observed. The facilities are huge and clean. I was particularly impressed by the lift cranes with 200 and 400 metric tons of hoisting capacity and the carts for moving around the containers with the nuclear material (they were gigantic in the literal sense of the word). Even ordinary looking barrels for storing radioactive waste turned out to be of complex construction.

Radioactive waste storage facility in Lubmin (Photo by Grigory Pasko)

The question just begged to be asked: How much electricity was used to create these monsters that serve the nuclear legacy? And will somebody someday ever write at least one line somewhere in the laws about the need to take these expenses into account, as well as the expenses for the liquidation of the effects of nuclear accidents, when calculating the cost of a nuclear kilowatt-hour?!

But I guess these are just rhetorical questions. Rhetorical in certain countries of the West. And completely senseless in Russia: there, there was only a resounding “hurrah!” when the government (hurrah!) adopted a program for the construction of 26 new nuclear blocs in the next 10 years.

The time will come, and Russian specialists will come to Germany, for example to the company EWN, with a request to be taught how to shut down a nuclear power plant and how to safely store radioactive waste. But for now, the reigning slogan in Russia is: Give us money! More of it and quickly!

As we reported on the blog yesterday, Alexander Lukashenko of Belarus is in the middle of a considerably unpleasant energy dispute with Vladimir Putin and Gazprom.

Some observers argued that Lukashenko would either have to 1) seek help from Europe (and suffer through their criticism of autocracy and human rights) or 2) give in to Russian demands (and give up even more energy distribution assets). What few people expected is that the crafty dictator would turn to the Axis of Resource Nationalists - appealing for some emergency cash from his close friend Hugo Chavez of Venezuela.

Photo: Reuters

Very interesting indeed. Even though the two leaders share a mutual distaste for electoral process and free media, and despite Lukashenko claiming that the two countries share "absolutely identical" views on world politics, it seems doubtful to me that Chavez would do anything to damage his relationship with Putin. If Venezuela does end up loaning Belarus the funds, it will have happened with the Kremlin's blessing.

Then again if Chavez doesn't think it is Venezuela's job to prop up a former Soviet dictatorship, Iran will probably be next on the list - perhaps it is part of their new "strategic partnership."

An area twice the size of France, loaded with an estimated quarter of the world's oil and gas deposits (which are becoming increasingly feasible to access as global warming causes the ice caps to melt) as well as other minerals such as gold and diamonds, Russia's recent flag-planting stunt on the Arctic seabed is at once outrageous, comical, and impressive.

It is on the one hand an outrageous gesture for Russia to assert its claim to the Arctic in this manner, showing a transparent disregard for international law, and an openly provocative and belligerent projection of power. Russia, just like the other five Arctic Circle countries, have a legitimate claim to pursue in this territory, but here are rules, procedures, and legal structures for nations to navigate in regards to these kinds of territorial disputes. Consistent with the militarism and imperial exceptionalism which characterizes the rest of Moscow's energy diplomacy, this attempt at annexation reveals a contempt for its neighbors, consolidating Russia's re-emergence as "a global troublemaker."

The dispute goes like this: as established by the United Nations Convention on the Law of the Sea, a nation can lay claim to the underwater mineral assets of its own continental shelf, so each of the five Arctic Circle nations have a 200-square-mile economic zone. Russia set out on this expedition to collect geological samples to prove that the Lomonosov Ridge connects to their continental shelf, an enormous claim which could give them control over an area as large as Europe between their Northern coastline and the North Pole. Canada on its behalf is arguing that the Northwest Passage amounts to an inland sea, thereby under Canadian sovereignty (Ottawa is going all out to pay for the icebreaking vessels necessary to stake this claim).

There was also a nearly comical aspect of geopolitical theater. The meticulously organized media event of Russia planting the flag is totally unmatched by any other country, including marathon television coverage and a personal phone call from rock star arctic explorer Artur Chilingarov to Vladimir Putin. The rhetoric of all public statements on the matter has so far exceeded belief: "The Arctic is ours and we should demonstrate our presence," said Chilingarov. Such are not the words of an exploratory mission to gather evidence, but rather a crystal clear claim.

Canada's response has so far been the most vigorous: "This isn't the 15th century. You can't go around the world and just plant flags and say, 'We're claiming this territory.' ... There is no threat to Canadian sovereignty in the Arctic ... we're not at all concerned about this mission -- basically it's just a show by Russia. ... The question of sovereignty of the Arctic is not a question. It's clear. It's our country. It's our property. It's our water ... The Arctic is Canadian," said Foreign Affairs Minister Peter MacKay. (Siberian Light points out the hypocrisy behind this one, as Canada planted its own flag just two years ago).

But as law professor Eric Posner argues in the Wall Street Journal, this dispute will likely be settled by power, not international law, so it would seem that Moscow is probably just chuckling in response to the Canadian bluster:

Russia's expression of power is credible; Canada's is not. Canada cannot prevent other countries from sending ships up the Northwest Passage, as the U.S. has demonstrated from time to time for just this purpose. The melting of the Northwest Passage will significantly shorten the sea route between oceans, as well as open up access to energy resources. The U.S. does not want Canada to reap all the benefits of control of the passage, but this is a side show. The real threat is the Russian bear, not the Canadian beaver.

The world is divided into two types of space: areas controlled by states and areas that are uncontrolled. Oceans are mostly uncontrolled, with the significant exception of territorial seas, where states have been able to exert some control with naval resources. International law has long recognized states' control over their coastal seas (which extend about 12 miles), which means they can block and regulate foreign shipping in those areas. The high seas, however, are free to all.

The major naval powers have always advanced the principle of freedom of the seas for the simple reason that their naval forces dominate them. But "commons" are subject to overexploitation, and overfishing has been the predictable consequence of uncontrolled oceans. Predictable and unavoidable: If no one can control the oceans, then the problem cannot be solved by giving a country nominal title to them.

Where a state can exert control, it is best for it to do so, because this avoids the commons problem. It is in the world's interest for Canada to control the Northwest Passage, even if it will profit and has the formal power to keep the rest of the world out. Canada has an interest in protecting the passage and exploiting its resources, which the rest of the world can purchase. But given its military weakness, Canada cannot have this control without the support of the U.S.

Built in 1987, the Akademik Fedorov is a much admired icebreaker that allowed Russia carry out the polar mission. Canada and the United States are scrambling to purchase similar vessels.

Lastly, the Arctic mission is impressive from the standpoint of Russian technology. No other nation could match the polar flotilla which, at great personal risk to the crew members, cut through hundreds of miles of thick ice to send down two mini-subs more than 4 kilometers below the surface (interestingly, one of the subs carried two foreigners, the Australian eccentric Mike McDowell, and the Swedish pharmaceuticals millionaire Frederik Paulsen). As the Economist reported, "For outsiders used to stories of Russian bungling and backwardness, that was a salutary reminder of the world-class technical clout and human genius the Kremlin can still command."

Perhaps it was not unreasonable that when Chilingarov returned to the surface, he spoke with the awed reverence of just having landed on the moon. Russia certainly has come a long way since Stalin's polar fiascos (the sinking of the Chelyuskin), but it is such as shame that these celebrations of Russian ingenuity and accomplishment seem to always occur within a context of confrontation and hostility.

Thanks to a variety of rather unpopular policies of the current U.S. government (not to mention the Iraq war, Guantanamo, and Abu Graib), anti-Americanism has become a hot political commodity abroad, and a useful invective for any politician to seize upon as a useful distraction or any easy way to score points. Russia is certainly no exception, as the state's increasingly aggressive and well funded propaganda work to build public animosity toward the United States as enemy No.1 is really beginning to produce strong results.

Today the Washington Post reports on the latest Levada Polls, which shows that 64% of Russians aged between 16 and 29 years old describe the United States as an "enemy" or "rival." Additionally, 54% say that Stalin "did more good than bad" and 63% share the president's view that the collapse of the Soviet Union was the "greatest geopolitical catastrophe of the 20th Century."

Read the complete article here.

Earlier this year a Time Magazine reporter coined the phrase "Gazprom always wins" - a mantra which is proving to be no different this week as the Russians dragged Belarus toward the brink of yet another natural gas supply cut off.

As suspected, Alexander Lukashenko eventually gave in to Gazprom's demand that Belarus cover their outstanding debt, but he didn't do so quietly - after accusing Russia of attempting to seize control of the Belarusian economy, Lukashenko told the television media "I also was given a tip that I had to go to the Kremlin and kneel down. I won't go and I won't kneel."

According to the Moscow Times report:

Lukashenko, until recently a close Kremlin ally, has been unhappy about Russia raising prices for oil and gas supplies to Belarus at the start of the year. In February, he raised a transit duty on Russian oil going to Europe across his country by more than 30 percent.

"Today I gave an order to take the money from our reserves and pay $460 million," Lukashenko told reporters Thursday in Minsk. "Of course, we are draining reserves but our good friends, and Hugo Chavez in particular, announced they were ready to extend a loan on advantageous terms," Lukashenko said, Interfax reported. Western banks, he added, were also ready to help out.

Anti-U.S. allies Lukashenko and Chavez have forged close ties recently, with Chavez calling the Belarussian leader a "brother-in-arms" on his latest trip to Minsk, last month.

Lukashenko calls Chavez his "brother in arms" literally, not just figuratively. The two countries do about $1 billion trade in arms.

The attached letter to the editor by Robert Amsterdam was published in today's Financial Times:

LSE should encourage the rule of law in Russia

By Robert Amsterdam

From Mr Robert R. Amsterdam.

Sir, The thinly veiled seizure of RussNeft assets (report, July 30) is further testimony to the willingness of the Russian state to act with both commercial and political impunity within a deteriorating and corrupt regulatory and legal framework that provides no protection to foreign and domestic business in the face of state-sanctioned theft.

In an interview with the Financial Times (July 13), Oleg Deripaska, the middle man in the RussNeft transaction, went as far as proclaiming that he could not be separated from the state.

However, on the one hand, what the owner of Rusal, set to become London's first Russian primary listing, and all Russian business must understand, is that the Russian government is blackening its international image and therefore directly affecting its global ambitions.

On the other hand, foreign investors cannot close their eyes to the degree to which the Kremlin, which has bullied such giants as BP and Shell into accepting unfavourable deals, is exerting its influence in establishing a new type of corporate state in Russia.

The recent acquisitions of both Rosneft and Gazprom make no economic sense and will only exacerbate a level of inefficiency and corruption that is the despair of Russia's managerial elite.

In July, the World Bank issued a report that placed Russia on a par with Zimbabwe in terms of governance standards and measured no improvement in the past decade. It is in everyone's interest (and none more so than the London Stock Exchange) that the rule of law is encouraged to develop in Russia.

The LSE's silence on this issue speaks volumes about its willingness to win the self-defeating game of regulatory arbitrage.

Robert R. Amsterdam,

International counsel to Mikhail Khodorkovsky

Below is an excerpt from the testimony of Zenyo Baran, Senior Fellow and Director of the Center for Eurasian Policy, Hudson Institute, made before United States House of Representatives Committee on Foreign Affairs “Central and Eastern Europe: Assessing the Democratic Transition”, July 25, 2007. The full testimony is available for download here.

Zenyo Baran:

I believe it is not possible to have a meaningful discussion of political and economic reform in Central and Eastern Europe without also looking at the region's energy situation—especially because Russia is currently using its position as the primary supplier for many countries to influence political and economic developments. I am grateful, Mr. Chairman, that you have already raised this issue before Congress: at a hearing in March, you declared that “[a]s long as Russia uses its energy sector as a foreign policy instrument, it will continue to enjoy the upper hand.” Accordingly, my testimony will focus on the vitally important question of energy security. In many Eastern and Central European countries, the energy sector occupies a dominant position in the economy. Ties between the energy sector and state tend to be very strong. More often than not, there is a single state-owned (or partially state-owned) oil and gas vehicle, which is the largest and most profitable company in the country. Corruption and a lack of transparency in the energy sector actively retard development in other sectors of the economy and in society as a whole.

The task of reforming the energy sector—and therefore of securing the democratic transition—in such countries is made all the more challenging because of their overwhelming dependence on Russian oil and gas supplies. It is frequently argued—in Congress and elsewhere—that America’s dependence on foreign energy must be reduced if not eliminated altogether. More specifically, there is considerable fear that such dependence leaves America beholden to countries that might not share our values. In Eastern and Central Europe, the degree of dependence far outstretches our own. Oil from Saudi Arabia and Venezuela combined comprises 25 percent of American total imports. However, according to Eurostat, no fewer than 7 countries in Eastern and Central Europe rely on Russia for more than 90 percent of their total oil imports. Three more countries in the region receive more than 60 percent of imports from Russia—including Bulgaria, which is 89 percent dependent.

The degree of dependence is just as significant, if not more so, for natural gas. Five countries in the region depend on Russia for their entire natural gas imports, while six others depend on Russia for over 60 percent of imported supplies. The natural gas aspect of energy dependency attracts little attention in the United States, since it is not really a concern for us—while over 90 percent of our natural gas supply comes from Canada, our northern neighbor does not represent a significant threat to American interests.

Ron Liddle at the Times registers his concern over Russia's Arctic claim in regards to the country's dismal environmental record:

There’s another little nugget of information to wonder at with Russia: despite, or perhaps because of, possessing one of the lowest population densities in the world, it has wreaked easily the most environmental havoc and misery of any country on earth. From Kamchatka to the Gulf of Finland, Russia is still a land of acid rain, heavy metals and plutonium. Stick a pin in a map of Russia and you are likely to alight upon a poisoned river or the rusting hulk of a nuclear submarine, an irradiated steppe, some chemically defoliated birch trees or a gently glowing peasant with a life expectancy of 34 years.

Karl Marx would have been impressed, I suppose, that in the great battle between man and nature, the Soviet Union succeeded in wiping from the map almost an entire sea - the Aral, now largely a toxic desert - and turning the world’s deepest freshwater lake, Baikal, into a borscht of cadmium and mercury deposits. Shorn of its dumb and vindictive state socialism it was blithely assumed that Russia would improve, but there was nothing in Russia’s history to suggest this would be the case.

Another less than encouraging bit of news from Russia's burgeoning "strategic cooperation" with Venezuela:

Russia to Start Work on Venezuela Kalashnikov Plants in October

Aug. 6 (Bloomberg) -- Russia will start building two plants in October to make Kalashnikov assault rifles in Venezuela, the first country to win a production license for the guns since the fall of the Soviet Union.

Production of the AK-103 in Venezuela is scheduled to begin "by the end of 2009 or the start of 2010,'' said Vladimir Grodetsky, head of state-run arms maker Izhmash. One plant will produce AK-103 assault rifles and the other will produce .762 caliber bullets, Grodetsky said in an interview today in Izhevsk, the central Russian city where Izhmash is based.

Full article here, RIA Novosti coverage here.

Below is a very compelling article from Lilia Shevtsova of the Carnegie Moscow Centre published in the Moscow Times.

Anti-Westernism is the New National Idea

By Lilia Shevtsova

The Russian political elite has long dreamed of finding a national idea capable of rallying the people. Former Soviet leader Mikhail Gorbachev tried to consolidate the country with his idea of socialism "with a human face." Former President Boris Yeltsin roused the people around anti-communism.

And President Vladimir Putin came to power under the unofficial slogan: "Let's put an end to the Yeltsin-era chaos." Now the elite is pushing a new national idea to rally the nation. It can be stated as follows: "We will protect the country from external enemies and establish a new global order to replace the one that so humiliated Russia in the 1990s." To put it more simply, Putin's motto is: "Russia is back!"

The closer we come to the end of Putin's second term, the more the Kremlin needs to find an idea that would preserve everything it has achieved during the past eight years. Searching for enemies and casting the West in the role of the principal foe has turned out to be the most successful method for rallying the people. Russia has adopted an aggressive foreign policy rhetoric; Putin's fiery Munich speech is a classic example. Anti-Western sentiment has become the new national idea, and national revival has taken the form of revisionism.

The arguments supporting the new national idea are plain and simple: "The West is interfering in our domestic affairs and attempting to weaken Russia. By promoting democracy, the West is really advancing its own interests."

It seems that even pro-Western analysts are trying to convince themselves and the world that Russia should play by its own rules, and that the responsibility for the crisis in Russian-Western relations lies with Western capitals. Some of them even believe that NATO expansion, U.S. President George W. Bush's export of democracy and Washington's plan to install elements of anti-missile batteries in Europe is the main -- and perhaps even only -- reason for the failure of Russian democracy. Yesterday's moderates and pragmatists today have joined with professional anti-Western political analysts -- such as Vyacheslav Nikonov and Alexei Pushkov, the host of a popular analytical television program -- in singing the same song. Being pro-Western in Russia today is not only unpopular, but also dangerous because it necessarily means being anti-Russian.

What is behind the new national idea? Anti-Western ideology has become an important factor that legitimizes the highly centralized state. The Kremlin has to offer some kind of explanation for the concentration of authority in so few hands, the elimination of political pluralism, the expansion of the state's role in the economy and the redistribution of property. The search for enemies and the cultivation of a "siege mentality" have always been used to justify "iron-hand" regimes in Russia. To be sure, the Kremlin also has created smaller enemies, such as Georgia, Ukraine, and the Baltic states. In addition, liberals and certain unpopular oligarchs serve as convenient adversaries. But a great power should not be shooting at sparrows with a cannon or focusing so much attention on "small fries," as one Russian analyst said. The West, and especially the United States, has proven to be the most convincing enemy.

But the crisis in Russian-Western relations is not purely based on a fundamental lack of shared values and principles. After all, communist China has much less in common with the West than Russia does, but U.S.-Chinese relations are quite friendly, and, in the economic sphere, they resemble a strong mutually beneficial partnership (notwithstanding the numerous difficulties). China, in seeking out its own prosperity, has chosen to pursue a policy of rapprochement, successfully making use of the West for its own modernization. Russia's ruling elite has taken a different path, trying to establish its global role by distancing itself from the West.

Russia's elite uses the anti-Western national idea because it believes it is giving the people an attractive ideology. But, at the same time, Moscow wants to pursue a partnership with the West for the sake of its own development and global integration.

The attitude toward the West has become a litmus test of loyalty to the authorities and the system. Verbal attacks have become synonymous with patriotism. As a result, the numerous so-called "liberal Westernizers" of the 1990s dwindled down to a tiny group. Only the most desperate, such as Garry Kasparov, still attempt to voice their liberal sympathies. Everyone else understands that it is not advisable to show too much reverence for the West. That would be considered as unpatriotic behavior.

Let's consider the most popular cliches of the new national idea:

• "Russia has recovered from the humiliation of the 1990s."

But why must this be achieved by spoiling relations with the West? Germany and Japan overcame their postwar humiliation by transforming themselves into great economic powers and by integrating into the global economy and adopting liberal-democratic values.

• "Russia has the right to pursue an independent policy."

If Russia takes this desire to its extreme, it would have to withdraw its membership in and application for all Western clubs and international organizations that place limits on its sovereignty, such as the Group of Eight, the Council of Europe and the World Trade Organization.

• "Russia is an energy superpower and Europe's dependence on its energy will increase."

This dependence cuts both ways. One of the most humiliating forms of dependence is an exporter's dependence on the importer, and the Kremlin has yet to fully understand this.

• "Russia wants to be integrated into the West on its own terms."

This is music to the patriots' ears, but they don't explain how they can be equal partners when Russia is building its society on anti-Western principles.

It must be admitted that the proponents of the anti-Western ideology succeeded at their goal of preserving the interests of the ruling class. This is a case when the West, which does not entirely understand events in Russia and does not have a strategy for dealing with a "revisionist" Kremlin, has allowed itself to be used as a "negative" factor in Moscow's drive to mobilize the people behind an aggressive national ideology.

The anti-Western ideologues are joined by the pragmatists -- the pundits who until recently had independent political positions but today support the new national idea. They advise the West by saying: "Accept Russia as it is and base your policy on mutual interests, not on values." Perhaps they sincerely believe that realpolitik will lead to future rapprochement between Russia and the West and will help build Russian democracy.

But then why has Western realpolitik resulted only in a crisis in its relations with Russia? Don't these "realists" understand that they are encouraging the West to build relations with Russia according to the same model that the West pursues with China?! If this is indeed the case, then Russia must leave the G-8 and the Council of Europe, whose membership is conditioned upon adherence to democratic principles and institutions.

Russia's ruling elite has let the genie out of the bottle and it will be very difficult to put it back again, especially because there is no resistance to anti-Westernism even in intellectual circles.

Fortunately, the majority of people have managed to avoid getting caught up in the anti-Western hysteria. Polls show that 70 percent of Russians still consider Europe to be a partner. But there are definite consequences to the Kremlin's heavy anti-Western propaganda. The elite, which has built a political and foreign policy program based on anti-Western ideas, cannot easily switch back to the opposite position. That is the legacy Putin leaves behind -- a legacy built by everyone who today shouts with such enthusiasm, "Russia is back!"

It's true -- Russia is back. But it has only returned to the past.

Lilia Shevtsova is a senior associate at the Carnegie Moscow Center.

Georgia's relationship with its big neighbor to the north took a sharp turn for the worse this week as disputes opened up with Gazprom over transit fees, followed by an accusation today that Russia fired a missile into Georgian territory.

In regards to the transit fees, Georgia is demanding that Gazprom pay them $2 million cash for transit fees to Armenia over the past three months. According to the structure of the agreement, the Georgians can either take 10% of the gas as payment or receive the cash equivalent. Apparently Gazprom has wasted no time in responding to this demand, and has rejected Georgia's debt claim arguing that they are strictly compensated for transit fees through supply - not the cash equivalent. RIA Novosti has quoted an unnamed Gazprom official who acknowledges that Georgia did not use its alloted quota of gas (having received sufficient supply from Azerbaijan), but denies that there is any agreement regarding compensation.

Georgian officials carry away the engine of an alleged Russian missile (Photo: Reuters)

Then today Tbilisi accused Russia of firing a guided missile into its territory near the village Tsitelubani, about 40 miles outside of the capital. Russia has denied that it violated Georgia's sovereign airspace, but Interior Minister Vano Merabishvili called upon the Ambassador for discussions, and took a group of reporters out to the site to examine the debris, where the remains of the unexploded missile revealed Cyrillic writing on the fins and other parts. Eduard Kokoity, the leader of Georgia's separatist South Ossetia region (backed by Russia), has accused Tbilisi of firing the missile themselves: "It was a provocation staged by the Georgian side, aimed at discrediting Russia."

Both the price dispute with Gazprom and the accusations of airspace violations underscore the enormous tensions surrounding the Georgian government's efforts pull out of the orbit of Russia's political influence. As we know from exceptionally clear statements from the Kremlin, Georgia and most other former Soviet states are considered to be part and parcel of the renewed Russian empire - and Moscow has already demonstrated the extent of their willingness to reassert this influence.

This week the Russian procuracy, with its infinite fictional legal authority, successfully won an appeal to increase the sentence given to former Yukos security chief Alexei Pichugin on murder charges from 24 years to life in a hard labor gulag. Prosecutors have openly admitted that the case is a ploy to open proceedings against Leonid Nezvlin.

As I said in an interview published today with the Financial Times, these fabricated charges form part of a larger relentless and ruthless campaign against anyone and everyone involved in the Yukos Affair and anyone who happens to get in the way of the state's theft of the company's assets - be they a major auditor like PricewaterhouseCoopers or simply an innocent member of the legal team like Svetlana Bakhmina.

We all recall how in 2004, the prosecution's case against Pichugin was so entirely lacking in merit (they had no forensic evidence whatsoever, and only the testimony of a totally discredited imprisoned multi-murderer), that when it became clear that the jury was going to acquit him of these murder charges, the trial was suspended and the jury was dismissed. (See this BusinessWeek article from 2005 by Jason Bush). Subsequently several jurors came forward to the press and acknowledged that they were unconvinced by the procuracy's case (interview with Russky Kurier).

As Grigory Pasko noted in his profile of Pichugin he wrote for this blog, Alexey Venediktov, editor-in-chief of Echo Moskvy Radio, made the following comments about the case in December of 2005 on his show "Essence of Events.":

“The verdict of the court that found Pichugin guilty did not convince me… They did not prove to me that he is a criminal. Several books have come out dedicated to this case, so to speak, to the so-called murder. There are no bodies. All the clues – this has been proven in the trial records – were found a year after the murder. Moreover, they had looked and not found anything, and then they found them in the very same place – in the same place, on a little stone. Everything else is based on the testimony of people who have been sentenced to life imprisonment. They find people in the prison camp who say ‘Yes indeed, he gave us instructions’. Many years after the event. For me, this is not convincing… There is a rule ‘No body, no case’. In the given instance, this is maybe even the only instance where this rule was overridden. Why such an exception? Whence such an exception? Why did such a thing happen? Super-such [sic]. How many murders in Russia, how many disappearances in Russia – and there are no such cases. And here, this is the only one, unique, and it just happens to be associated with ‘Yukos’.”

There's no mistaking that the new sentence given to Pichugin is meant to send a strong message from the Kremlin. Not only are we preparing for the newly invented charges which have been preposterously added to Mikhail Khodorkovsky's case (suspiciously timed to prevent his parole), but we must also prepare for literally any kind of invented criminal charge - because it has been shown repeatedly that a lack of evidence has never stopped the procuracy before. Perhaps I should even look into the Great Chicago Fire and the Srebrenica massacre to make sure the Russians don't try to accuse my client of involvement?

Photo: AP

Celebrity Arctic explorer and Duma member Artur Chilingarov deplaned in Moscow today to a hero's welcome, bearing a Russian tricolor and a stuffed polar bear. Putin personally congratulated the expedition, and the team made direct references to reject the Canadian criticism ("I don't give a damn what all these foreign politicians there are saying about this," said Chilingarov). Canada, on its behalf, is still grappling to come up with a coherent response, and is beginning a hasty tour of the Arctic nations to represent its interests.

Dr. Ariel Cohen at Heritage has an interesting op/ed in the Washington Times on the matter:

This latest move by Moscow is also a chilling throwback to the 1930s Stalinist attempts to conquer the Arctic during the years when the U.S.S.R. was seized by fear and hatred. Stalin and his henchmen executed "enemies of the people" by the hundreds of thousands in mock trials and in the basements of the Lubyanka secret police headquarters, or in unnamed killing sites in the woods. Those not yet arrested were forced to applaud the "heroes of the Arctic": pilots, sailors and explorers, in a macabre celebration of Stalinist tyranny.

To the regime's critics, today's expedition is a chilly reminder of the brutal era when millions of Gulag prisoners were sent to the frozen expanses to build senseless mega-projects for the power-crazy dictator.
...
A crisis over Russian claims in the Arctic would be perfectly avoidable, if Russia is prepared to behave in a more civilized manner. If Moscow suggested exploring the Arctic's wealth in a cooperative fashion, in partnership with the United States and other countries aboard, this could become a productive project that furthered international cooperation. However, the current rush to dominate the Arctic Ocean and everything under it indicates that greed and aggression characterize the new Russian polar bear.

Read the complete article here.

Is Magna concerned that Oleg Deripaska and Basic Element could become a trojan horse for the Russian government to become a minority shareholder in the corporation?

On August 28th, the Canadian automotive parts manufacturer Magna International Inc. will be holding a shareholders meeting to vote on the "Arrangement" between Magna and Russian Machines (owner of GAZ), a company owned by billionaire Oleg Deripaska's holding company Basic Element. As first reported by the Moscow Times, Magna has filed a Management Information Circular / Proxy Statement with the Securities and Exchange Commission in the United States, outlining the risks posed to shareholders associated with doing business in Russia.

The language used in this SEC filing shows that the lawyers were paying attention to a recent Deripaska interview in the Financial Times, when he addressed the nationalization issue and his close relationship with the state, commenting that "If the state says we need to give it up, we'll give it up. ... I don't separate myself from the state. I have no other interests." Magna's unease was likely reinforced by the state's attack on Russneft and subsequent application to purchase by Basic Element.

The following excerpt is from page 77 of Magna's Proxy Statement dated July 25, 2007 - the full document can be downloaded here. (emphasis in the last paragraph is ours).

Magna’s proposed Russian strategy involves making investments, and carrying on business and operations, in Russia, which will expose Magna to the political and economic risks and uncertainties of that country and which could, in turn, have an adverse effect on Magna’s ability to implement its proposed Russian strategy and on Magna’s financial results.

Since the break-up of the Soviet Union in December 1991, Russia has undergone a profound political and economic transformation that has led to federal and regional political instability. There is no assurance that the political, economic and market reforms will continue, remain unchanged and not be rescinded. Nor is there any assurance that the final result of the reform process that began with the break-up of the Soviet Union will lead to a Western-style democracy, rule of law and free market economy. The unstable political climate and ongoing political trends in Russia could have an adverse effect on Magna’s proposed investments, earnings and financial condition to the extent derived from or relating to its Russian strategy.

In addition, the fundamentals of the Russian economy have been relatively unstable since economic reforms were launched in the early 1990s. Despite attempts to adopt economic and market reforms, many basic economic and legal issues remain unresolved. There are no assurances that recent Russian economic trends — including GDP growth, a relatively stable rouble and slower inflation — will continue. Recent fluctuations in international oil and natural gas prices, the appreciation of the rouble against the U.S. dollar, and the consequences of a more deregulated monetary policy could have an adverse impact on the Russian economy.

The speed with which or whether the Russian economy transitions from state control to a Western-style free market approach will be a function of the country’s political climate. There are no assurances that the Russian economic reform will continue. Nor is there any consensus that the country as a whole will embrace the free market. Certain political forces continue to call for the results of economic reforms, including the privatization of Russian enterprises, such as Basic Element, to be reversed. Moreover, the government is continuing its efforts to control certain key industries. Thus, the outcome may be nationalization of Russian enterprises. If companies controlled by Basic Element and/or Russian Machines were nationalized, the governance arrangements between the Stronach Trust and Russian Machines would be terminated and the Russian Government could, indirectly, become a minority shareholder of Magna.

The attached short letter from Robert Amsterdam was published in the Globe and Mail on August 4.

Polar Bear Warning

ROBERT AMSTERDAM

Amsterdam & Peroff LLP

August 4, 2007

Toronto -- In response to your editorial (Pushing Ahead On The Arctic Seabed, Aug. 3), I would urge your readers not to take Russia's claim so lightly.

As a lawyer who has been involved in both Russia and Canada throughout my entire career, I can assure you that the comic symbolism of the flag-planting stunt is more than just theatre. The hostile belligerence of this mission, much ballyhooed in Russia, presents a direct threat to the legal status quo governing High Arctic territorial claims.

Given that the region contains more than a quarter of the world's undiscovered oil and gas deposits, Foreign Affairs Minister Peter MacKay's quips are far from a sufficient response, and could even be seen as hypocritical, given how Canada planted its own flag on Hans Island in 2005.

Former Russian Spy Oleg Kalugin says he had a change of heart about the KGB when he was transferred to the domestic service.

Below are a few excerpts from an interview by the magazine Foreign Policy with the Washington DC-based former KGB senior operative, Oleg Kalugin. We haven't heard much out of Kalugin since the shooting of Paul Joyal - a story that the media has chosen to forget.

From Foreign Policy (OK refers to Oleg Kalugin):

FP: When you were in St. Petersburg working for the KGB, you counted Vladimir Putin and Nikolai Patrushev, the current head of the FSB, Russia’s domestic security agency, as your subordinates. What memories do you have of these two men?

OK: Nikolai Patrushev was my subordinate for years in Leningrad. One day he brought a report about one dissident in his district and said, “We must take care of him, maybe arrest him.” I said, “Why? Give me the case.” I read the file of this man, and it showed that he was honest about the lack of food, long lines you have to stand in for food, the bureaucracy of the Soviet party and government institutions. When Patrushev brought it, I said, “Why do we have to put him in jail? What is this case?” Patrushev’s first desire was to put the guy in jail because he would spread his discontent and unhappiness among his friends and colleagues and that was dangerous.

Putin was too small to report to me directly. He was an operative; he was five steps below, so he never reported to me. He was one of 3,000 guys. He was just a gray, nonentity walking in the corridors. He was like all subordinates who had no confidence in themselves.
....
FP: What in your mind then is the difference between the system Putin operates and Soviet Russia?

OK: Putin has partially restored the old Stalinist methods. The difference is Stalin used mass repressions. He would imprison and execute hundreds of thousands, millions. In Putin’s case, it is more selective: individuals who he finds too hostile or harmful for his rule. Putin has actually put the country back to the authoritarian state; it’s not as bloody but just as criminal as Stalin’s regime.

FP: At what point did you begin to become suspicious of Putin, and what pushed you to become more outspoken against him?

OK: Putin? Well, I was always outspoken about him. I know this man’s background better than many others. I do not talk in details—people who knew them are all dead now because they were vocal, they were open. I am quiet. There is only one man who is vocal, and he may be in trouble: [former] world chess champion [Garry] Kasparov. He has been very outspoken in his attacks on Putin, and I believe that he is probably next on the list.

Today from Reuters: "Another theory circulating in the media is that the next president will have plenty of hair on his head. This is based on an analysis of Russian history since revolutionary leader Vladimir Lenin: Kremlin leaders who are balding have always alternated with more hirsute successors."

As the Reuters article points out, the only problem with "Hair Apparent" theory is that most of the contending successors indeed are not balding. I suppose only dark horse candidate Mikhail Fradkov is eliminated by this theory....

Today the Financial Times and other media sources are reporting that Oleg Deripaska acquired close to a 5% stake in General Motors worth more than $900 million last year.

Last October, when rumors of this stake first circulated, Deripaska's company Basic Element issued a denial stating "The information divulged by Manager Magazine suggesting that Oleg Deripaska has acquired General Motors shares does not correspond to reality."

Apparently there are several different realities.

We are pleased to feature the attached exclusive translation of an article from the German newspaper Frankfurter Allgemeine Zeitung, August 7, 2007 edition, page 3. The full original is also posted on our German blog.

“The Panicked Terror of the Organizers”

In the Yukos Affair, Platon Lebedev Does Not Reckon with His Early Release or That of Mikhail Khodorkovsky

By Reinhard Veser

FRANKFURT, August 7. From the point of view of the Russian prosecutor, what Platon Lebedev is being accused of is quite simple to explain: Over a period of years, he is said to have stolen crude oil on a grand scale as part of a “organised group” and legalized the profits by means of money laundering. Lebedev’s defence attorneys by contrast find it hard to explain what criminal act is supposed to have occurred. His lawyer, Yelena Liptser, can think of only one word in response to the charges: “Absurd.”

The organized group to whose leadership Lebedev belonged was called Yukos, and at the time of the crime, it was Russia’s largest oil company. At Yukos, Lebedev was the second man after company founder and main shareholder Mikhail Khodorkovsky. Together with Khodorkovsky, Platon in spring 2005 was sentenced by a Moscow court to eight years in prison for tax evasion on a grand scale. The two were taken to penal camps in the polar circle and in eastern Siberia. After several demands for payment running into the billions from the Moscow tax authorities, it was determined that the company was bankrupt and a liquidator was appointed, who then set in motion the sale of the most lucrative parts of Yukos to the state oil company Rosneft.

This July four years had passed since the Yukos affair began with the arrest of Lebedev in a Moscow hospital. With that, half of his prison sentence had been served, and according to Russian law, Lebedev could have been released from the penal camp – that is if things stopped with the conviction for tax evasion. But since February, Platon and Khodorkovsky,