September 2007 Archives

Russian Economy

English-language translation of statement of September 27, 2007 by Mikhail Khodorkovsky:

"Please inform all my lawyers that I am withdrawing the defence from participation in the court hearing about the extension of my custody. The reason for this refusal is the categorical conviction that it is pointless to rely on a judicial defence when the prosecutor's office and the court flagrantly and directly ignore the demands of the law. In such circumstances, I consider the presence of defence lawyers to be harmful, since it legitimates such arbitrary disregard for the law. Each of our objections has already been presented at the previous hearings. Nothing has changed since then."

From a Reuters article covering the extremism trial in Russia of the political analyst Andrei Piontkovsky:

In one of the book's chapters, the author imagines Putin walking along the beach in France, not long after the Cannes Film Festival, accompanied only by his black Labrador Koni.

The imagined Putin meets famed Russian director Nikita Mikhalkov, an Oscar winner in 1994 for best foreign language film, and tells him not to worry that his latest movie has failed to garner any awards.

"Nikita, brother, they didn't give you another Golden Palm? Russophobes! Keep your chin up, brother. Anybody who disses (disrespects) us won't live three days!"

Although we are a few days late, Eliezer Yudkowsky has an excellent blog post calling for a celebration to honor Stanislav Yevgrafovich Petrov, and admirable and courageous Russian who once saved the world from nuclear holocaust.

From Overcoming Bias:

Petrov decided that, all else being equal, he would prefer not to destroy the world. He sent messages declaring the launch detection a false alarm, based solely on his personal belief that the US did not seem likely to start an attack using only five missiles.

Petrov was first congratulated, then extensively interrogated, then reprimanded for failing to follow procedure. He resigned in poor health from the military several months later. According to Wikipedia, he is spending his retirement in relative poverty in the town of Fryazino, on a pension of $200/month. In 2004, the Association of World Citizens gave Petrov a trophy and $1000. There is also a movie scheduled for release in 2008, entitled The Red Button and the Man Who Saved the World.

Maybe someday, the names of people who decide not to start nuclear wars will be as well known as the name of Britney Spears. Looking forward to such a time, when humankind has grown a little wiser, let us celebrate, in this moment, Petrov Day.

From today's painful Bloomberg article: "Investors seek no 'post-Putin' Russia"

Even some investors who acknowledge the economic benefits of a still-powerful Putin say there are risks in the system's lack of transparency.

Nothing better than the money men of the West endorsing an autocratic future for Russia's citizens. Aspirin, please.

Andrew Kuchins from CSIS has a rather obvious article in the Washington Post today. Although he offers little in the way of new information, at least he seems to have done a better job resisting the regime's seduction at the Valdai discussion group, unlike many others.

The word among Moscow insiders today is that the Kremlin is looking very closely at the experience of four-time U.S. President Franklin Delano Roosevelt, the man who led the United States through the Great Depression and WWII. Putin may have convinced himself that he is the only one who could "save" the Russian nation, and the job is unfinished, as it was in 1940 when FDR decided to run for a third term. The problem with the FDR analogy is twofold. First, Russia is neither in the midst of a world war nor an economic depression; there is no need for a "savior" now. And second, unlike the United States in the 1930s, Russia has not established a tradition of transfer of executive power through free and fair elections. Building that tradition by stepping down matters a great deal for Russia's political evolution. In doing so, Vladimir Putin has a chance to make the most important contribution to his political legacy by walking away.

Complete article here.

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Sergey Lavrov, minister of foreign affairs of the Russian Federation speaks to the press at the presentation of Russia Today and Rusia al-Yaum English and Arabic news channels, Thursday, Sept. 27, 2007 in New York. (AP Photo/Dima Gavrysh)

In his first cabinet meeting since the reshuffle, Prime Minister Viktor Zubkov chastised Russian banks for failing to offer credit to domestic companies and said it was a "disgrace" they had to turn to foreign banks for loans. A senior United Russia official, on condition of anonymity, said that first deputy prime minister and presidential front-runner Sergei Ivanov could be put at the top of the party's federal candidate list for December's State Duma elections. "This is a really good option. We are seriously considering it." The transfer of supervision over the federal target programs, worth over 500 billion rubles annually, from the Ministry of Economic Development and Trade to the Ministry of Regional Development is not proceeding peacefully. According to a survey conducted by the Public Opinion Fund, 53% of Russians think that Zubkov should change government policy, although only 2% of Russians looked negatively on Zubkov's appointment as prime minister. Could Vladimir Putin support Valentina Matviyenko, the governor of St Petersburg, in next year’s presidential elections? Or has he convinced himself that “he is the only one who could "save" the Russian nation, and the job is unfinished”?

A court in east Siberia has extended the custody of Mikhail Khodorkovsky, ex-head of Yukos, for another three months over a new probe.

Steel pipe giant TMK said this year’s first-half profits had risen 26%. VTB Group reported a 12.5% drop in first-half net profits but is “well positioned to sit out the global financial crisis”. According to the Central Bank’s deputy chairman, local banks will increase mortgage-lending rates and some may temporarily curb mortgage lending because of the rise in borrowing costs. Russian carmaker Gaz Group is to team up with Canada’s Magna International, hoping to regain popularitythrough radical restructuring and modernization”. Russia is currently three to five times less efficient in its energy usage than Western European neighbors. Engineering company NPO Energomash, which makes rocket engines for U.S. firm Lockheed Martin, was approached by a lawyer for a €7m ($9.9m) bribe to reinstate its export license which was frozen in May, according to company spokesman Yury Korotkov. Another corruption scandal at the Accounting Chamber: chief inspector Sergey Klimantov and first deputy head of the administration of Vladivostok, Sergey Dubovitsky, were arrested for allegedly extorting $120,000 from a Moscow firm in exchange for removing violations from an audit. Surgutneftegaz will build a $6 billion refinery, capable of processing 12 million tons of oil a year, by 2011 to meet growing demand for gasoline and other oil products. The project to build a luxury island off of Sochi will taken on by Abu Dhabi-based Allied Business Consultants, who will spend $6.2 billion. Vladimir Yakunin, the president of Russian Railways, has been interviewed by the Moscow Times.

U.S. Secretary of State Condoleezza Rice and Russian Foreign Minister Sergey Lavrov exchanged harsh remarks over their stance on Iran at a working luncheon of G8 foreign ministers this week, due to “obvious tactical differences”. According to French foreign minister Bernard Kouchner, China and Russia will block any effort to impose further United Nations sanctions on Iran's nuclear program for as long as four months. Moscow wants to see a UN agency report on Tehran’s past suspicious nuclear work before it will consider new sanctions. The joint Russian-U.S. naval exercise Pacific Eagle 2007, which has started in the Amur Gulf, near Vladivostok, will include mine-sweeping and anti-submarine operations. Interceptor missiles deployed in Poland as part of a US missile defense shield would be fast enough to target Russian intercontinental missiles, contrary to US assurances, says Ted Postol, a US researcher at the Massachusetts Institute of Technology. India and Russia held discussions on the possibility of cooperation in space exploration, manned space flights in particular. Roscosmos head Anatoliy Perminov emphasized that Russia regards India as its principal partner in the development of such a program. Chinese President Hu Jintao has met with Sergei Mironov, who's chairman of the Russian Federation Council to discuss Sino-Russian ties. Hu Jintao says this year's "Chinese Year in Russia" has received positive feedback, and said he hopes legislators on both sides will work for the development of relations between the two countries.

A group of Saratov journalists has written an open letter to President Putin, asking him to protect them from persecution by officials of pro-Kremlin party United Russia. The letter cites a September report in the Saratovsky Rasklad weekly that State Duma Deputy Speaker Vyacheslav Volodin purportedly injured a woman with a spearfishin gun.

Putin on the 2014 Sochi Winter Games: “When we talk about the environment, we unfortunately have to admit that at this point in a city of half a million people there is no proper sewage system, electricity supply or infrastructure. All this will have to be resolved in preparation for the Olympics.

London is holding a new Russian Film Festival this fall. Papers released at London’s National Archives show that the British felt the need to protect Rudolf Hess, who spent 42 years in prison as a Nazi criminal, from Moscow's desire that he "drink his retribution to the bottom of the cup", and that Russia blocked UK plans to release him.

For all that is said about the enigma of Russian politics and the "impenetrable" opacity of Putin's Kremlin, much can be gleaned from their imagined history - the much ballyhooed new school textbook created by the government. The new official history, which among other fantasies declares Stalin as “the most successful Soviet leader ever," contains a revisionist portrayal of the color revolutions in the Ukraine and other countries in the region - arguing that these events were not genuine uprisings, but rather were perpetrated by the "foreign influence" of a malicious government intent on violating other nations' sovereignty. Ever since Russia lent her support to Viktor Yanukovych and succeeded in crushing what was left of the Orange Revolution, the possibility of further color revolutions within or near her borders has been couched in similar terms. If there is unrest, if there are protests in the streets, it must be due to "foreign influence."

This mentality rings painfully true this week at the United Nations. As the military junta completed its second full day of bloody repression of the spontaneous Saffron Revolution, a title hastily given to the enormously courageous protest marches of Buddhist monks in Burma, the chorus of condemnation across the free world has grown deafening. The images of thousands of robed monks marching, hands peacefully clasped in desperate appeal, is nothing short of historic and heartbreaking, capable of winning over the most dedicated isolationist.

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Photo: Reuters

But Russia, yet again provided with an opportunity to prove that they are the responsible semi-democratic nation that they claim to be, has shown its true colors in refusing to support the monks. Joined by China, the two nations have wielded the threat of their "Authoritarian Veto" to prevent the United Nations from issuing sanctions or even a strong condemnation. The reason? The Russian Foreign Ministry stated that "We consider any attempts to use the latest developments to exercise outside pressure or interference in the domestic affairs of this sovereign state to be counterproductive," and that Moscow believes that the situation "will be back to normal soon."

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A man gestures to members of the military after a crowd of thousands were fired upon while protesting in Yangon's city centre September 27, 2007. Russia and China are using their veto influence in the UN to protect Myanmar from international actions (Photo: Reuters)

Unlike the color revolutions in the Ukraine and Georgia, the Kremlin is going to have a tough time convincing anyone that these spontaneous uprisings were simply events orchestrated from abroad, which further underscores the crass insincerity of their position. Both China and Russia's willingness to block the international community from helping these people is grotesque and unmerited, and makes their political leadership complicit not only in the repression of their own people, but that of a foreign nation. Doesn't the "sovereignty" lie with the people? Isn't the threat of the authoritarian veto the greatest violation of sovereignty? As a Washington Post editorial quipped, "If the repression proceeds, Russian President Vladimir Putin and Chinese President Hu Jintao will have Burma's blood on their hands."

It is easy enough to see right through the diplomatic arguments and examine what's at stake. China, on its behalf, has long enjoyed being one of the only nations in the world to lack the scruples to do close business with the pariah state, and has turned Burma into a virtual economic colony. Russia, under Putin's leadership, has perfected the practice of targeted encumbrance in international institutions. Either out of its desire to repeatedly remind the world of its reasserted role as a heavyweight (yes, we get it already), or perhaps in a move to cause a problem, and then later extract a concession for helping fix it, Moscow has seen fit to make numerous international crisis issues even more difficult, from Iran to Syria to Kosovo, and now, to Burma.

However I don't think the Burma case is simple politics for the Kremlin. Here we have an international development that lays bare the core weakness of the regime: the fallacy of sovereign democracy. History has shown that invoking security and nationalism as the rationale for power grabs and oppression has a limited tactical shelf life. All these hysterics surrounding state sovereignty, especially in the absence of free media or a representative government, are becoming increasingly tenuous as it is made clear that not even those within the Russian government believe in their own legitimacy. The position Moscow has taken on Burma is a clear illustration of their fear, made especially acute during this election season. Moscow is terrified of the contagion effect of such social movements like the Saffron Revolution, and very well they should be. The Russian government's greatest adversary is not the United States - it is their own citizens.

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Photo: AP

Venezuelan President Hugo Chávez, during a visit to President Alexander Lukashenko of Belarus in July 2006: “There are many possibilities now for forming a strategic alliance to save the world from madness, wars and color revolutions.

Washington Post: Save Burma - Will China and Russia give a green light to a slaughter of the monks?

Yesterday Bob posted two different articles - one which linked to an article arguing that the world's autocrats "are learning to eviscerate their peoples’ civic choices incrementally," and another about the political trial of opposition member Andrei Piontkovsky.

In light of these observations, it is especially timely to consider the questions raised by the following passage from this week's Economist about the rapidly declining status of privacy and civil liberties in the age of terrorism - a difficult balance to strike in any country:

Ross Anderson, a professor at Cambridge University in Britain, has compared the present situation to a “boiled frog”—which fails to jump out of the saucepan as the water gradually heats. If liberty is eroded slowly, people will get used to it. He added a caveat: it was possible the invasion of privacy would reach a critical mass and prompt a revolt.

If there is not much sign of that in Western democracies, this may be because most people rightly or wrongly trust their own authorities to fight the good fight against terrorism, and avoid abusing the data they possess. The prospect is much scarier in countries like Russia and China, which have embraced capitalist technology and the information revolution without entirely exorcising the ethos of an authoritarian state where dissent, however peaceful, is closely monitored.

On the face of things, the information age renders impossible an old-fashioned, file-collecting dictatorship, based on a state monopoly of communications. But imagine what sort of state may emerge as the best brains of a secret police force—a force whose house culture treats all dissent as dangerous—perfect the art of gathering and using information on massive computer banks, not yellowing paper.

It seems to me that the erosion of many liberties in Russia has occurred in a gradualist fashion, which may explain in part the tragic apathy and lack of public outrage that political opponents of the government are facing jail time under an arbitrary extremism law.

Today Eurasia Daily Monitor ponders whether or not the recent resignation of the defense minister, later rejected by the president, was just a ploy to hide a new level of nepotism forming in the Russian government.

In Soviet times, close relatives were strictly forbidden to be in direct subordination to each other on all levels of Communist Party and government administration. There was a special term for such nepotism -- semeistvennost. The restriction was established as the Bolsheviks took power in 1917, and it was aimed at preventing the formation of family clans within the system. It also was a political rebuke of the practices of imperial Russia, in which members of the ruling Romanov dynasty and a handful of other aristocratic families had occupied high positions in the military and civil administration of the country, forming circles of kin relationships. In practice, the sons of high Communist officials were still appointed to important positions within the Soviet Union. There was one line that was never crossed, however -- direct subordination. It was acceptable if there was at least one other official in the line of command between father and son. ...

Putin has created an administrative system with such pervasive corruption that the country has become virtually ungovernable. Billions of petrodollars have disappeared without a trace, and Putin complains that his orders are not carried out. Zubkov, like Serdyukov before him, has been appointed to shake up the system. Together in government, they form a new strong clan in power that Putin may use to restrain other Kremlin clans (see EDM, September 19). Meanwhile Serdyukov's bogus resignation has exposed the opposition within the Defense Ministry and in the Kremlin. Baluyevsky maybe on his way out and others may follow.

In our ongoing effort to make information about the case of Mikhail Khodorkovsky, we have translated our White Paper into Portuguese. On the sidebar of this blog, there is a section where this document can be downloaded in English, Russian, French, German, Italian, Japanese, and now, Portuguese. Below is the introduction:

LIVRO BRANCO SOBRE ABUSO DE AUTORIDADE DO ESTADO NA FEDERAÇÃO RUSSA

AS NOVAS ACUSAÇÕES COM MOTIVAÇÕES POLÍTICAS CONTRA MIKHAIL KHODORKOVSKY

RESUMO EXECUTIVO

Na Primavera de 2003, o Kremlin decidiu que os pontos de vista e comportamentos de Mikhail Khodorkovsky a favor de uma sociedade civil vibrante e a competição no sector energético assente no mercado eram incompatíveis com a sua ideologia e objectivos políticos. A posterior prisão de Khodorkovsky, o seu julgamento-espectáculo e a desproporcionada sentença por acusações fraudulentas foram usados como pretexto legal para o encarcerar num campo prisional na Sibéria. Avaliações fiscais forjadas e exorbitantes foram usadas para encobrir o roubo dos activos principais da Yukos – a empresa energética mais bem sucedida da Rússia, presidida por Mikhail Khodorkovsky.

O Kremlin apresentou novas acusações contra Khodorkovsky por motivos que nada têm a ver com justiça, preocupações legítimas com a defesa da lei russa ou a punição de comportamentos criminosos. Estas acusações foram apresentadas para:

• Garantir que Khodorkovsky não seja libertado em Outubro de 2007, altura em que poderia sê-lo, à luz da actual lei e prática russas;

• Garantir que Khodorkovsky não tenha possibilidade de desempenhar um papel activo na formação do futuro político da Rússia, ou na oposição ao seu rumo actual;

• Legitimar a anterior campanha estatal contra Khodorkovsky;

• Legitimar toda uma série de aquisições fraudulentas, a realizar por empresas estatais, sobre os activos remanescentes da Yukos, no valor de 33 mil milhões de dólares; e

• Legitimar a apropriação de eventuais activos remanescentes que Khodorkovsky possa ter no estrangeiro, recorrendo ao artifício de acusações de lavagem de dinheiro.

Antes da sua prisão, em 2003, Mikhail Khodorkovsky apresentara publicamente uma perspectiva clara para o futuro da Rússia. Exerceu os seus direitos civis para se envolver na política, apoiando um sistema político mais vibrante. Empenhou-se no desenvolvimento da sociedade civil e tornou-se o primeiro grande filantropo russo moderno, apoiando programas pró-democracia. Dispôs-se a lutar quando se tornou claro que o Estado iria agir contra os seus pontos de vista e crenças. Podia ter fugido, mas manteve a sua posição, o que só testemunha o seu carácter e a convicção de estar inocente.

Mikhail Khodorkovsky desejou que a Rússia se tornasse uma democracia socialmente progressista e orientada para o mercado. Enquanto presidente da maior empresa petrolífera do país, defendeu a integração da Rússia no mercado global por via do livre empreendedorismo russo, em detrimento do monopólio de estado. Khodorkovsky promoveu uma série de iniciativas: a construção de novos pipelines com financiamentos privados para facilitar a exportação de energia para a China e os Estados Unidos da América; a liberalização e separação dos monopólios estatais; a adopção de padrões ocidentais de governação empresarial; e o aumento do investimento por parte de companhias internacionais, de forma a aumentar a produção off-shore. Khodorkovsky também se manifestou pela necessidade de extinguir a omnipresente corrupção estatal, que criou enormes distorções económicas. Esta visão chocava claramente com a agenda do Kremlin, e em resultado da perseguição a Khodorkovsky, a Rússia avançou não no sentido da democracia, mas do autoritarismo, não para a liberalização, mas para o monopólio, não para a justiça, mas apenas para tentativas de disfarçar a corrupção com ficções legais.

Os novos processos contra Mikhail Khodorkovsky representam uma má administração da justiça, no contexto de um sistema de total injustiça. Não há lugar na Rússia onde este réu possa ter um julgamento justo, porque aqueles que detêm o poder para controlar o sistema legal estão interessados, material e pessoalmente, em apontar-lhe a culpa.

Mais do que acontecimentos isolados, a perseguição de Mikhail Khodorkovsky e a expropriação da Yukos são passos fundamentais para a implementação da agenda política do Kremlin – a eliminação de quaisquer centros de poder adversários e erradicação de qualquer separação de poderes efectiva, através da consolidação de uma «vertical de poder» no Kremlin.

Para cumprir esta agenda política, o Kremlin tem:

• Consolidado o poder nas mãos dos chamados siloviki militares e de forças de segurança, que eliminaram ou marginalizaram as vozes a favor das reformas económicas voltadas para o mercado;

• Vindo a afastar-se do desenvolvimento da democracia, dos direitos humanos e do primado da lei na Rússia;

• Instrumentalizado o sistema legal para se envolver na apropriação de activos no sector energético, tanto de investidores internos como estrangeiros; e

• Manipulado os activos do sector energético para projectar o poder estatal russo para os países estrangeiros vizinhos e para a Europa, e destabilizado a segurança internacional através da venda descontrolada de tecnologia nuclear e de armamento, para ganhar vantagem perante os principais concorrentes no sector energético.

Em resultado disto, a corrente perseguição de que é alvo Khodorkovsky, o roubo da Yukos e a implementação da agenda do Kremlin têm vastas implicações para a comunidade internacional. Ameaçam a segurança nacional, a segurança energética e a estabilidade política de todas as nações democráticas empenhadas no primado da lei. Aqueles que lançam estas acusações contra Mikhail Khodorkovsky são responsáveis pelo maior roubo da história moderna – o roubo da Yukos. Destabilizaram os mercados de energia mundiais, extorquiram algumas das suas maiores empresas, cooptaram algumas das suas principais figuras políticas, e as suas acções depararam, em grande medida, com cumplicidade e silêncio. Voltaram a fazer da Rússia um país onde os direitos de propriedade são politicamente determinados e onde ocorrem regularmente assassinatos contratados de jornalistas e reformistas, tendo esta prática sido recentemente exportada. Um homem enfrentou-os. Este Livro Branco dá conta da sua sorte.

LIVRO BLANCO COMPLETO (PDF)

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Russian Prime Minister Viktor Zubkov holds a child during a visit to a children's home in Penza, some 650 km (405 miles) southeast of Moscow, September 26, 2007. (Photo: Reuters)

In a bid to boost his popularity, Prime Minister Viktor Zubkov visited the Russian city of Penza, presenting gifts of chocolate to children and pensioners. Elvira Nabiullina, the new Economic Development and Trade Minister, said that Russia’s membership of the World Trade Organization is essential to future economic expansion. "Our priority is to continue policies aimed at diversifying Russia's economy to ensure its stable and long-term growth." Deputy Prime Minister Sergei Naryshkin doesn’t think familial relationships between cabinet members will affect the overall performance of the government. Vladimir Putin’s new government is a family of his “old buddies”. Has his removal of German Gref put the the country’s economic stability at risk? And will Putin choose a successor at all? The Ministry of Economic Development and Trade made minor adjustments to the way it measures socio-economic development in the country, but has not yet published its inflation prediction. Duma speaker Boris Gryzlov said that parties running for election tend to “base their ideology and rhetoric on opposition to United Russia”.

Basmanny Arbitration Court ordered RusRating, an independent ratings agency, to pay damages to Russky Standart bank for harming its reputation with an analyst’s comment. The state oil company Zarubezhneft has increased its share capital by tenfold to $1.5bn in a settlement for the government’s share in the Vietsovpetro venture. The Russian government spent $200 million raising its stake in OAO RusHydro, the country's largest hydropower producer, to 1.9%. Severstal, Russia's largest steelmaker, has begun building a $100 million welded-pipe factory and says it plans to add a $60 million plant that will produce light-steel structures used in construction. Avtodor will complete construction on its upgrades to Russian highways by 2012, in a project worth over $160 billion. Novatek, Russia's second-largest natural-gas producer, bought a 50% stake in the Egyptian El-Arish oil and gas project. Oil producer Surgutneftegaz will build a $6 billion refinery in the Leningrad region by 2011 to meet growing demands. Russian conglomerate Sistema has entered the booming Indian telecom industry, buying a 10% stake in Shyam Telelink for $11.4m. Rostekhnadzor, the federal body that supervises ecological issues, has submitted proposed amendments to the law on ecological evaluation, which would make state ecological evaluation a requirement for anything built in ecologically protected territories.

Alexander Losyukov, a deputy Russian foreign minister, has denied reports that Russia sold North Korea aluminum pipes that the media said could be used to produce uranium enrichment centrifuges. "I can state absolutely that no deals have been concluded lately." Turkmen leader Gurbanguly Berdymukhammedov said that his country's talks with Russia on energy have been tense, and hinted that he was ready to discuss new gas export options. Georgia’s president, Mikhail Saakashvili, told world leaders that Russia interferes in its domestic politics and engages in “reckless and dangerous behaviour”. Russia, together with China, has blocked UN proposals that would impose further sanctions on Burma in light of this week’s bloody protests. Vladimir Popovkin, the chief of Russia's space forces, said Moscow would have to retaliate if others deploy weapons in space. The regional director for Europe and Central Asia at Transparency International says that corruption is worsening in most former Soviet Union countries partly due to Russia’s growing influence. The Indian Prime Minister, Manmohan Singh, plans to visit Russia in November. A report commissioned by the US-based Nuclear Threat Initiative cited significant progress safeguarding and removing vulnerable nuclear stockpiles globally, but said that dangerous gaps persisted in Russia.

The Prosecutor General's Office has declined to declare Nicholas II, the last emperor of Russia, and his wife and five children, victims of political repression.

A new film, "A Crude Awakening", leaves out too many inconvenient truths

By Derek Brower, journalist

OIL IS a finite resource, so the more of it the world's energy companies extract, the less will remain. On that, everyone agrees. One day, we will reach the mathematical peak of the world's reserves. When that day will be – or if it has already passed – is a question that continues to divide opinion.

"A Crude Awakening" claims to be a documentary about Peak Oil, as the theory is known, and follows the success of Al Gore's "An Inconvenient Truth" (2006), another movie for the green generation. In "A Crude Awakening" investigation and exposition of the facts are both casualties of the rhetoric, which seeks to tell us one big thing: the world has reached peak oil and civilization as we know it is about to end. The remaining 83 minutes want to scare viewers into accepting the dark prophecy.

It won't fall on deaf ears. Among the film-watching public, apocalyptic movies about the evils of the energy industry and the threat it poses to our way of life are becoming a genre of their own, complete with their own standard clichés and tropes.

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The good old days

Everyone knows that the US invaded Iraq to control oilfields, that a conspiracy among oil companies is preventing new alternative energies from gaining market share and that the public is being deceived by a cabal of shady policy makers in Houston and Washington DC.

They are all good stories, with grains – or perhaps mountains – of truth in them. So why let the facts get in the way? The inconvenient truth of films like "A Crude Awakening" is that things aren’t quite as simple as their arguments would have us believe.

This movie relies on interviews with several prophetic voices in the energy industry. The most powerful belongs to Matthew Simmons, a venerable investment banker and expert in the technologies oil service companies apply in drilling for crude. Simmons has been the oil industry’s Cassandra for decades. Compared with him, the apocalyptic tenor of Matt Savinar, who runs a website called www.lifeaftertheoilcrash.net and is one of the film’s most important voices, sounds frantic. He’s eloquent, but he also seems a touch demented. Unfairly, the film seems to mock him: wearing a green military sweater, he speaks from what looks to be a bunker, with boxed emergency supplies behind his head.

And then there are the deceptions that will be evident only to energy journalists like me who have had the misfortune to travel in parts of the world scarred by oil companies. Images of dilapidation in Venezuela's Lake Maracaibo and Baku, in Azerbaijan, are presented to show how the boom times have gone. Yet both places remain prolific oil producing regions. I’ve been to that oilfield in Baku. It’s ugly and a stain on the city. And it no longer produces much oil. But a few miles away are far more prolific oilfields, all brought on stream recently. Azerbaijan's oil production (654,000 b/d) is now about three times what it was 20 years ago.

A lot of statements go unchallenged, too. Simmons' argument about Saudi reserves, made in his book Twilight in the Desert (2005), was powerful. It said that the kingdom's upstream record had gone into sharp decline and that its largest find, the Ghawar field, was nearing peak and another like it would never be found. The book forced Saudi Arabia to offer the world more data about their reserves. But this film brooks no counter argument to Simmons’s claims and it relies exclusively on one methodology for calculating the depletion of reserves.

As Leo Drollas of the Centre for Global Energy Studies has pointed out, there is a crucial difference between “strict depletion” (the methodology adopted in ‘A Crude Awakening’) and “net depletion”. In the former, you take the reserves and production rate of the field and calculate how long it has left. A 300m barrel field producing at a rate of 50,000 barrels a day will last 16 years.

But reserves aren't static. They also increase (or decrease) over time, depending on the exploration of the reserve and technology improvements. “Net depletion” calculates the reserves of the field, plus the new reserves added, against the extraction of the oil.

It makes a crucial difference. Drollas says that from 2000 to 2006, gross additions to the world's reserves amounted to 43bn barrels a year. Gross production amounted to 25bn b/y. Net depletion in 2006 was positive, at 2.2%. That is, the world's reserves were 2.2% larger than the year before. Strict depletion calculations showed a negative: -2.3%.

That might all be too boring for a mass-market documentary. But it is an example of how the counter arguments get missed when convenient ones that support a lazier argument are available. There is much more mileage in the peak oil theory than I've described above, but its proponents need to be more rigorous in making their argument. It doesn’t help that, in this film, the oil industry’s claims are dismissed so flippantly. That might play well to the crowd, but intellectually it doesn’t build a solid case. Just because it is the big bad oil company making the argument doesn’t mean it’s wrong.

One example is particularly egregious. The Alberta oil sands, potentially the biggest oil reserve outside of Saudi Arabia, get barely a mention in the film. In fact, they are used to prove that the world is really running out of oil, because if the industry is going after such low-quality oil it shows just how desperate the situation really is. There is some truth to that. But it is also true that the Alberta oil sands are next door to the world’s biggest consumer of oil and are in a country, Canada, that presents neither geopolitical threats to consumer governments nor punitive royalty regimes to their companies (despite recent proposals). That makes them attractive. And whether the oil is low quality or not, it won’t stop another 2m-3m barrels a day from coming on stream in the next decade. Discounting Alberta’s reserves (and Venezuela’s – there’s lots of bitumen-rich oil there, too) from its argument is a rhetorical step too far. The oil sands are costly – in monetary and environmental terms – but they keep getting cheaper and in Canada alone they still hold up to 3 trillion barrels of oil.

There's another problem with the film. Any high-school student can show that “oil is a magnet for war”, as the movie states. Of course it is. It might even be a good reason for war. But glibly to suggest that the disastrous Iraq invasion was an effort to capture the country's oil reserves by deposing a popular leader undermines the film’s other serious claims. If the US really wanted to secure its supply of oil from Iraq, it went about it the wrong way, with the result that 3m barrels a day of production were immediately shut in. Far easier would have been quietly to drop the sanctions against Saddam's regime and do what the US does elsewhere in the Middle East: prop up a nasty regime in exchange for access to oil reserves. That doesn’t mean Iraq’s reserves weren’t the motivating factor – just that the question is complex.

Given the soft targets at which the film takes aim (the oil industry, the US government, Western consumerism) and the antipathy most of its viewers will already have towards the oil industry, "A Crude Awakening" will be popular. It has already won a host of awards and laudatory reviews. And it might prompt more debate about oil consumption patterns. The oil age will end one day. We’re no closer to knowing when that will be – the film says it has happened; the industry says it’s decades away – but we’re closer to the day itself with each barrel consumed. Something will have to give.

Alas, the film doesn’t tell us how to move from our oil-dominated lives to a post-crash existence. Some footage of an Amish man driving a horse-drawn carriage might be a clue. But the real conclusion – after biofuels and the possibility of technological advances in oil exploration have been hurriedly discarded – is that we need to harness the power of the sun and replace petroleum with solar power. That is laughably idealistic. Indeed, it calls to mind the comedy sketch in which Ali G wants to turn a skateboard into a “hoverboard”. But where is the science for the hoverboard, asks a venture capitalist. “That’s where you guys come in,” says Ali.

"A Crude Awakening: The Oil Crash" is directed by Basil Gelpke and Ray McCormack

www.derekbrower.com

Today Transparency International published their 2007 Corruption Perceptions Index, which ranked Russia 143rd out of 180. The full index and media kit can be downloaded here.

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Below are a few excerpts from a recommended article in the September/October edition of the American Interest by Peter Ackerman and Michael J. Glennon titled "The Right Side of the Law" which raises many points of debate over the Putin administration's conceptualization of sovereign democracy.

Even in our own age, which has moved closer than any before it to fulfilling Locke’s vision worldwide, the prerogatives of tyrants are still protected from Locke’s philosophical progeny—the states, groups and individuals engaged in promoting democracy, human rights and civil society. But this time, Putin, other modern-day authoritarians and their sympathizers rely on bromides dredged up from international legal antiquity rather than invocations of the divine.

Contemporary autocrats hide behind the principles of sovereignty and its corollary prohibition against meddling in a state’s internal affairs—international legal norms that emerged when moveable type was cutting-edge technology. Their argument no longer works as it did in Gutenberg’s day. State sovereignty remains an important pillar in the structure of international law, but the notion that sovereignty resides in the head of state gave way long ago to recognition that it rests in a nation’s people. The scope of sovereignty narrowed further in the 20th century, as a large body of law came to protect internationally recognized human rights. And with the number of electoral democracies nearly doubling in the past twenty years, an emerging right to democratic governance has become the centerpiece of human rights law.
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The risk of a tipping point arises because autocrats are learning to eviscerate their peoples’ civic choices incrementally, thereby avoiding the publicity that a frontal assault would generate. They “nickel and dime” the opposition, abridging only seemingly insignificant rights at first. A small town’s votes are not counted, a union or local cooperative is banned, a petition cannot be circulated, a book cannot be published, foreign travel is prohibited, a speech is outlawed, private assets are expropriated. The cumulative effect of individual choices can become a mighty force for freedom, and the reverse is just as true: If acts such as these are successfully suppressed, the ultimate result can be a dramatic regression in the direction of politics and civil society. The danger lies in the transference of the know-how of oppression from one tyrant to other tyrants around the world, thus putting multiple new democracies on the defensive.
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We do not suggest that democracy can spring like a tulip through autocratic concrete. Democracy works, or works best, when civil society not only exists, but is robust and united in a vision of its country’s future and in its strategy for getting there. Once victorious, new leaders must be willing to accept process as an end as well as a means, respecting outcomes with which they disagree. Those outcomes, after all, are the product of processes to which they did agree. They must be firm about procedure and therefore tentative about truth. They must be committed to enriching their people rather than themselves. They must be willing to leave office when they have agreed to leave. They must take pride in the slow and steady development of institutions. Not all oppressed people can expect a quick transition to such leadership. However, nearly all can, at least to some degree, drive positive change and build from one success to the next.

In meeting the claim that a given people are not ready for democracy, it is therefore essential to disaggregate the concept of democracy, to ask specifically what the people are not ready for. Not ready for television stations that lampoon apparatchiks’ heavy-handedness? Not ready to boycott a fake election? Not ready to write a blog criticizing corruption? Not ready to read Thoreau’s Civil Disobedience? When the issue of readiness is broken down into democracy’s component parts, it becomes harder to justify a specific infringement and easier to make the case for protecting other freedoms that might get lost in the fallout of political competition.

Yesterday began the trial of the political commentator Andrei Piontkovsky, whose critical books and articles were deemed by the Kremlin as “extremist,” allegedly aimed at inciting violence against Russians, Jews, and even Americans.

In the context of this absurd legal system, Andrei is guilty. He is guilty of possessing courage, independent thought, and a willingness to tell the truth despite threats and consequences. He is guilty of expressing his beliefs honestly, and guilty of declining to perform the kowtow to the Kremlin that so many commentators and academics have succumbed to – that sordid, silent deal that allows Russians to travel in exchange for their silence and acquiescence of the thefts being carried out every day by Russia’s leaders and bureaucrats.

Of these things he may be guilty, but of extremism, he is not. Press reports indicate that the prosecutors accuse him of inciting hatred by writing the words “incite hatred” in one of his books. An expert witness points out that Piontkovsky was quoting Putin in that section.

Such details are rather unimportant to Russian courts, which enjoy vast powers thanks to new extremism legislation. After the procuracy ran into difficulties during their interrogations of Garry Kasparov last April following a series of mass protests, new amendments were proposed to make the law more flexible and arbitrary for the state to deploy at will. In July, the president approved amendments to the law to allow the state to imprison someone for up to five years for displaying "hatred or hostility toward any social group" - without any definition of what that social group may be. The new amendments also ban the distribution of so-called "extremist materials", and give the authorities the right to confiscate such materials make arrests of anyone distributing them.

The NGO Article 19 has declared that Russia's new extremism law violates the International Covenant on Civil and Political Rights and the European Convention of Human Rights, to which Russia is a party and which - in Article 19 and Article 10 respectively - guarantee the right to freedom of expression. (It is no small irony that the Kremlin has used the extremism legislation to ransack the offices of a Nizhny Novgorod civil society group called "Support Tolerance").

Yuri Schmidt, who is representing Piontkovsky in this trial, told the press that "What we are witnessing here today is a consequence and demonstration of the atmosphere that the authorities have built in society, an atmosphere of persecution of political opponents and critics and those who think differently." He further speculates that the procuracy is probably acting on its own accord, without orders from the Kremlin, and that they "believe that they should guard the power totally, and if there is even the slightest manifestation of disagreement with the regime they should be on alert."

Another Russian journalist I knew would’ve likely been charged with this same crime, had she not been brutally murdered close to a year ago today. Anna Politkovskaya would’ve been able to see that this “extremism” case is another example of the “doppelgänger theory” – the Kremlin’s habit of charging their critics with the very activities in which they themselves engage. Therefore while Piontkovsky faces a Soviet-style show trial under the charge of extremism, the government actively goes about organizing the red-and-white-t-shirt clad Nashi brigades and quietly coddles the xenophobes and radical right, which has made Russia increasingly unsafe for minorities and those with alternative viewpoints.

This trial is an obscene gesture, which although it is likely to pass unnoticed in the West, serves as a powerful reminder that Russia will not be able to legitimately claim that their upcoming elections are even remotely democratic when those who express disagreement with the government can be imprisoned simply by the discretion of the procuracy. This addiction to counterfeit legalism is now well documented across numerous political cases, and further erodes any remaining belief that Russia has minimal rule of law or a functioning judiciary.

Andrei Piontkovsky had a choice – stay safe in Washington, where he was visiting when the charges were first issued, or go back to Moscow and fight for his country and for his innocence. His choice speaks volumes.

The energy industry is strongly opposed to proposed increases to oil and gas royalties in Alberta, Canada. Will its voice be heard?

The Canadian oil patch has been rattled by a government-appointed commission that says Albertans are not getting their fair share of revenues from oil and gas production in the province. The Alberta Royalty Review Panel says they should get substantially more: the overall state take, at a federal and provincial level, should be upped by 20%, it says. This would generate an extra C$2 billion ($1.97 billion) in revenues for the state, compensating Albertans more appropriately without putting off oil and gas investors.
Our Fair Share, the panel’s report, says: “Albertans do not receive their fair share from energy development. The royalty rates and formulas have not kept pace with changes in the resource base and world energy markets.”
Oil companies – predictably, you might argue – don’t agree. They say the proposed increases would put investors off, killing off some projects, especially in the high-cost oil-sands sector. Ultimately, claims the Canadian Association of Petroleum Producers (CAPP), this would undermine investment and harm the oil-dependent local economy and long-term job prospects.

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Oil sands operations are neither cheap nor small. Suncor’s oil sand is mined using shovels with buckets that hold 100 tonnes, loading huge 240 to 380 tonne trucks.

Nonetheless, the arguments in favour of adjustments to the royalty scheme are compelling. Times have changed: oil prices are much higher now than they were in the late 1990s, the last time royalities were updated. And the soaring social costs associated with the rapid pace of development in Canada’s oil patch – establishing the infrastructure and basic services needed to support exponential growth in the local workforce, for example – must be paid for. And many countries have changed investment terms in favour of the state in response to sustained high oil prices – in some countries, this has involved tweaking the percentages, and, in others, wholesale nationalisation. On this basis, it is no surprise that Alberta should seek to do the same, especially given that royalty reviews have been held regularly in Alberta in the past.
But does the report going too far? Perhaps. CAPP says it is prepared for some change in royalties, but that the proposed increases are Draconian. It says the review fails to strike a balance between ensuring a reasonable return for Alberta and maintaining an attractive investment environment. Conventional oil and gas production, which tends to involve small, high-cost discoveries with low rates of early production, would suffer under the proposed changes, it claims. And the review process has not properly taken account of the economic headache facing oil companies when tackling multi-billion dollar oil-sands projects. For example, the costs for a typical oil sands project are $10-11 billion, not the $5-6 billion figure given by the panel, says CAPP. Adverse currency movements have also not taken been into account, it says.
Spread across 80,000 square kilometres in the Athabasca, Cold Lake and Peace River areas of Alberta, the oil sands could contain up to 2.5 trillion barrels of oil. That's enough to meet domestic needs for 475 years, says Canada. And it means the oil sands hold more oil than all of the countries of the Middle East put together. The big difference with the Middle East is that Canada’s oil sands involve expensive, energy-intensive mining operations and produce bitumen, which is less valuable than crude. Costs in the oil sands, therefore, are scarcely comparable with costs in the conventional-oil industry.
Backing up CAPP's argument, Wood Mackenzie, a consultancy specialising in energy, suggests the proposed royalty increases might damage investment, increasing “the already high, economic break-even price of these projects, significantly raising the level of risk on what are huge initial capital outlays”.
Alberta premier Ed Stelmach is expected to decide how much of the report’s recommendations to implement by the middle of October. There is considerable public pressure to increase royalties. However, Alberta’s oil lobby also has significant political influence because of the oil and gas sector’s large contribution to the economy. And the government will be loathe to jeopardize the future of an industry that accounts, directly and indirectly, for about half the province’s GDP.
The likely outcome, therefore, is a more modest increase than the panel recommends.

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Russia's Deputy Prime Minister Sergei Ivanov (L) speaks to workers during the unveiling ceremony of Sukhoi's Superjet 100 at the aircraft manufacturing plant in the Far Eastern city Komsomolsk-on-Amur September 26, 2007. (Photo: Reuters)

Vladimir Putin has given control of Russia’s Investment Fund to its Regional Development Ministry, which is headed by Putin’s close ally, Dmitry Kozak. The fund, very little of which has been spent in recent years, has been allocated $4bn this year. Politicians and analysts say that Monday’s cabinet reshuffle has “packed the cabinet with [Kremlin] loyalists”. What will become of those who lost their government positions? Analysts say that the appointment of Elvira Nabiullina, a “clone” to replace German Gref as economic development and trade minister, will likely hasten the erosion of the ministry's influence. Russian Finance Minister Alexei Kudrin said his additional appointment as deputy prime minister was confirmation that the new government would continue current economic policy. Since the reshuffle, Putin dismissed Nikolai Pershutkin, the Interior Ministry’s top official responsible for policing street protests. A draft law on the creation of state-run Rostekhnologil has been created. If passed, it will give Rosoboronexport almost complete freedom of operation, including the ability to hold IPOs for the companies it controls. The bill was introduced by Putin himself - it is thought that previous Prime Minister Mikhail Fradkov had intended to oppose it. How important are “family values” in Russian politics?

According to a new survey by the World Bank, Russia is ranked 106th out of 178 countries in terms of how easy it is to conduct business there, while Transparency International gave the country a corruption grade on par with Togo, Gambia, and Indonesia. The take-up of Russian mortgages has risen 150% over the past year, heralding “the rise of the Russian middle class”.

Germany's Europipe and Russia's OMK have won contracts to supply pipes for the Nord Stream undersea gas link from Russia to Germany, in a deal that could be worth €2bn. After pulling plans for an initial public offering this year, Rusal said it was committed to floating its shares in London within the next three years, and that the postponement was due to turbulent market conditions. Dmitry Medvedev says that, although Russia’s economy is becoming increasingly integrated with the global financial system, effects on the country of the US financial crisis have been minimal. United Aircraft Corp., Russia's state aviation holding company, is in talks to buy a stake in European Aeronautic, Defence & Space (EADS), and AvtoVAZ, Russia’s biggest carmaker, could sell a stake to either Alexei Mordashov, the CEO of Severstal, or billionaire Alisher Usmanov. Hydro-OGK, Europe's largest producer of hydroelectricity, will apply for $1.7bn from the state investment fund for a new hydroelectric complex. Yelena Baturina, the wife of Moscow's mayor, won a lawsuit against the Russian version of Forbes Magazine over two phrases in of one of its issues, which implied that she received special treatment in Moscow when conducting business.

The new SuperJet-100, a passenger jet developed by state-run company Sukhoi in conjunction with Western partners, was presented to the public at a ceremony attended by First Vice Premier Sergey Ivanov. A new US Congress bill bans nuclear cooperation with any country that backs Iran’s nuclear program, and would thereby apply to Russia.

The President of the International Olympic Committee, Jacques Rogge, is in Russia to discuss the 2014 Sochi games. A new, artificial luxury island off the Sochi resort to be built in the shape of Russia will cost £3bn. The government is developing a revolutionary bird flu vaccine, according to Rosselkhoznadzor, the animal health watchdog. The announcement follows the culling of 250,000 birds in Russia’s Krasnodar territory following an outbreak. A new Russia-US treaty could allow Russian hunters the chance to shoot polar bears.

Yuri Schmidt, Mikhail Khodorkovsky's lead lawyer in Russia, was featured in an extensive profile interview in Spain's largest circulation newspaper, El Pais, on August 13, 2007. Below is an exclusive English translation of the interview - the original PDF of the article can be downloaded here.

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“Khodorkovsky has not lost his spirit or resistance”

Yuri Schmidt, lawyer for the magnate, says that the last remains of an independent judicial system in Russia have disappeared.

By Pilar Bonet, Moscow

The budding of an independent judicial system that emerged during the Boris Yeltsin era has disappeared during the Vladimir Putin era. The case of the oligarch Mikhail Khodorkovsky, who is serving a sentence of eight years for his political challenge to the Kremlin, “separates one Russia from the other,” argues Yuri Schmidt, the principal lawyer for the fallen multi-millionaire, who first became famous for his defense of Navy captain and environmentalist Alexandr Nikitin – the only scientist accused of espionage able to obtain an acquittal.

In October Khodorkovsky will have completed four years of imprisonment and “he hasn’t lost his spirit or resistance,” Schmidt indicated in an interview. The magnate “understands very well that it is still too early to hope to be reinstated. He is a strong person, and if he had been weak or cowardly, he would not have entered into conflict with the Kremlin nor would he have financed the opposition, and he would be living in freedom. We are dealing with a great man, practically brilliant,” he affirms.

The lawyers for Khodorkovsky have challenged all the attempts by the prison Administrators to incriminate him on disciplinary penalties. They were hoping that Khodorkovsky would be able to obtain his liberty by fulfilling half of his sentence and were also looking forward to the presentation of the case before the European Court of Human Rights in Strasbourg.

His anticipated release is problematic, because the Russian prosecutors have prepared new charges against Khodorkovsky, this time for tax evasion. Meanwhile the run-up toward the European Court is slow. In Strasbourg, there is no claim for monetary compensation, “but rather the right to a fair trial,” which would mean that “the prison sentence should be revised” if the judges decide in the oligarch’s favor. At the moment Khodorkovsky “wants the Russian courts to do justice.” Schmidt is more skeptical: “They have gone too far and it would be very complicated to return the confiscated property.”

Schmidt declares that Khodorkovsky didn’t want Russia to be excluded from the G8 because of his cause, but “his fear was unfounded, because the world just doesn’t care.” “I can’t forgive President [George] Bush for going fishing with and hugging Putin,” he points out.

The prison conditions for Khodorkovsky as “passable.” “The prison authorities try to observe the minimum international norms; there is not overcrowding in the cells, the latrines are separated by partitions, and furthermore there is a refrigerator and television.”

Does Schmidt fear for the future of the defendant? Yes, he admits. “In the beginning, I thought that the authorities weren’t going to allow anyone to touch a hair on his head, but when they attacked him with a knife, I thought that it was a test to see what the international reaction would be.” In his opinion, “only now is Europe catching on to the idea that there is a monster growing here, a rich country that is rearming and although less dangerous than the USSR and won’t wage global war, will indeed create tensions and big problems for the West.”

Two courts have rejected appeals against the prosecutors’ attempt to try Khodorkovsky in Chita, Siberia, more than 6,000 kilometers from Moscow, far from the international press. According to Russian law, hearings must be held where the crimes were committed. The case of Khodorkovsky appears to be held up, perhaps for the imminence of parliamentary elections in December and the presidential elections in March. Schmidt embraces the hope that “the Khodorkovsky card is played out among the distinct groups around Putin in their struggle for power.” Surrounding the leader are “enemies of Khodorkovsky, such as Igor Sechin, the engine of the persecution against the tycoon” and other high civil servants that are more neutral. “I hope that the fight that is currently going on behind the scenes breaks through the surface and that they argue in public.”

Schmidt, who is 70 years old, has a long career of service for human rights. When the captain Nikitin was acquitted in 1999, “the security organs tried to put pressure on the judges, but they fought back against these pressures.” Afterward, other scientists accused of espionage were condemned to prison sentences. The “halt and backtracking” began in 2002 and involved “a regression across all fields.” “Freedom of press and relatively free elections are over, and they attack civil society. When they attack the basic civil liberties of protesting and meeting, you cannot have hope in an independent judicial power, because this can’t exist in a vacuum,” Schmidt declares. “Like the communist system of the USSR, the Russiajn political system uses justice as an instrument. The judges can freely decide if the case doesn’t affect high political interests or doesn’t involve corruption. But the cases that affect the regional and federal authorities are not left to chance.”

Institutions theoretically independent like the judicial authorities and the prosecutor general have a practice of verbal orders, which are transmitted from the presidential administration. In the Soviet era, to be expelled from the judiciary or the procuracy was a tragedy, because “the market for legal services was very reduced.” Now, to resist the pressures, judges and prosecutors need a certain amount of courage and determination, but much less than in Soviet times. In some proceeding, it will on record that they aren’t to be trusted, which can be used in any moment against them. The judge that pardoned Mikitin resisted the enormous pressure from the security services, and sacrificed his chances to advance his career.

Ever since Putin took power, many of the good laws that were passed in the 1990s were altered with small amendments which reduced the level of defense for citizens and allowed a greater level of arbitrariness for the authorities. The category of “state secret, for example, is regularly used in an arbitrary manner by prosecutors to avoid publicity and monopolize information.”

In the Soviet era the procuracy was a “monster with multiple functions”, which opened proceedings, began investigations or transferred them to other authorities, such as the Ministry of the Interior or the KGB, and supervised. The procuracy could also protest any judicial decision. It was an overly powerful organization that inhibited the democratization of the judicial process. Now, a new law that will go into effect in September deprives the procuracy of its investigative functions, although, according to Schmidt, the measure does not reflect a democratic reform, but rather a dispute among Putin’s inner circle over spheres of influence.

Also the role of defense lawyers is under focus, according to a legislative proposal that would allow the Ministry of Justice to get rid of inconvenient lawyers, declares Schmidt. For the moment, whenever the authorities try to sideline one of his client’s attorneys, the final word goes to the Bar Association, which has been crucial to maintain the positions for Khodorkovsky’s defense team.

I'm pleased to express my warmest congratulations to my friend and colleague, Grigory Pasko, who was awarded the Erich Maria Remarque Peace Special Prize 2007 on Friday in Osnabrück, Germany, birthplace of the famous anti-war author of "All Quiet on the Western Front." Some media coverage of the award ceremony can be found here and here, and photos are attached below. Grigory, who joined us as a special guest blogger to this website last year, shared the ceremony by the highly respected historian, Tony Judt, author of the book "Postwar," among others.

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Grigory Pasko (left) speaks with Professor Tony Judt (right) following the awards ceremony for the Erich Maria Remarque Peace, in Osnabrück, Germany, Sept. 21, 2007.

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Freedom House has just published a new report "Countries at the Crossroads 2007" which warns against the dangers of the rising "authoritarian capitalism" state model currently seizing both China and Russia. The Financial Times has reported on the release of the study, as has the Associated Press. Below is an excerpt from the introduction, the country report on Russia can be found here.

The deficiencies the Crossroads analysis identifies in the Chinese and Russian systems do not by themselves suggest that either regime is in imminent danger of breakdown or implosion. Strong economic growth in both countries provides a considerable cushion for the state in the near to medium term. Russian and Chinese leaders are also quite adept at using the levers of state power to repress independent voices and institutions —with lethal brutality when necessary.

However, the reports do suggest that the inability of critical institutions to play a meaningful and independent role in these societies raises fundamental questions about whether genuine and enduring reform can be achieved, particularly in combating deeply entrenched corruption. Self-policing or reform by decree holds dim prospects for success in the absence of a well-functioning, independent judiciary, civil society, or news media, all of which are currently sidelined as independent actors in China and Russia.

The 2007 Crossroads report on China notes that over the past three decades, “the Chinese Communist Party (CCP) has been reshaping the PRC into a market-based and globally integrated economy, society, and culture. It labels this project ‘socialism with Chinese characteristics.’” The report further observes that “while producing gross domestic product (GDP) growth rates that are among the world’s highest, the party’s strategy has led to the sort of severe inequality, weak social-welfare system, worker exploitation, job insecurity, and environmental degradation that is associated with capitalism at its worst.”

The Russian authorities’ current governance experiment is also built on soft sand. The Crossroads report on Russia observes that “by 2005, having endured significant rollbacks of electoral rights, Russia could no longer be considered a democracy at all according to most metrics,” and that “the country has come to resemble the autocratic regimes of Central Asia more than the consolidated democracies of Eastern Europe that have recently joined the European Union.”

One of the stubborn threads that runs through the Chinese and Russian systems is the hard line the authorities consistently take toward news media. The precise methods for controlling politically consequential media content differ somewhat in the two systems, though the effects are quite similar. The ability of news organizations to report independently on the performance of officials and other powerful interests, scrutinize policies, and cover public health and other critical issues is severely limited.

Control of information and politically consequential discourse is a dominant feature of both systems. In Russia, “the media remain tightly controlled by the presidential administration, and over the last seven years Russia has been one of the three most dangerous places in the world to be a journalist (behind Iraq and Colombia).” Under President Putin’s leadership, the news media, especially television, have been brought under the sway of the authorities in some ways reminiscent of the Soviet era.

In China, “the CCP views the media as an instrument to articulate and support its policies; to mobilize, unite, and divert the people; and to manage the impressions it gives to its own citizens and the outside world.”

With the Chinese and Russian economies deeply integrating into the global system, it is not enough to control domestic media. International reputation matters, too. Both China and Russia have enlisted the help of high-powered Western public relations firms for image management purposes and, in certain cases, to deal with looming crises. China in particular has sought Western consultancies to help manage the scrutiny that accompanies the hosting of the 2008 Olympics. The recent consumer-product scandals’ threat to the “Made in China” brand has also caused Chinese officials to enlist the help of outside image managers. PR management alone, however, is unlikely to ameliorate the deep, structural challenges these two systems confront.

The limits of cosmetic approaches to reform are visible in the pervasive corruption that has defied reform edicts and state-directed media campaigns in China and Russia. Not surprisingly, official corruption is one of the greatest burdens to the two systems—and one of the greatest threats to the leadership in these countries.

Corruption is often a symptom of other systemic pathologies. Since dominant powerholders wield effectively unchecked authority, existing mechanisms tend not to be sufficient for addressing corrupt practices. Crossroads findings note the glaring gap in the efforts to combat corruption at all levels, especially the grand corruption that finds its way into the countries’ most lucrative, strategic sectors. The judiciary, which should be one of the frontline defenses against corruption, is kept on a short leash. The Crossroads China report notes that the country’s “judiciary remains a tool of the CCP, and it rarely shows signs of independence or autonomy. The courts, including the Supreme People’s Court, are answerable to the National People’s Congress.”

Russia’s judicial system has been subjected to an increasingly harsh campaign of manipulation and control in which executive branch interference in political or economically consequential cases is a regular occurrence. President Putin’s “dictatorship of law” has not made headway against the corruption and bribery that pervade the judicial process and drain sound judgment and impartiality from court rulings. As a result, average Russians have little faith in the system and see little reason to address grievances through the courts. This lack of faith has prompted many Russian citizens to seek justice beyond Russia’s borders—in the European Court of Human Rights—where by mid-2007, 22,700 of the pending 99,600 cases, or 22.8 percent, were Russian, a 400 percent increase over figures from 2000.

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Russia's newly appointed Health Minister Tatiyana Golikova, left, and Finance Minister Alexei Kudrin, right, are seen at a Cabinet meeting in Moscow, Monday, Sept. 24, 2007. (Photo: AP)

President Vladimir Putin's new cabinet has finally been announced. In a surprising development, the cabinet remains largely unchanged, with Sergei Ivanov and Dmitry Medvedev keeping their same positions. Finance Minister Alexei Kudrin was promoted to deputy prime minister; Putin’s longtime ally Dmitry Kozak was named regional development minister; and two women joined the cabinet. Putin refused to accept the resignation of Defense Minister Anatoly Serdyukov, who submitted his resignation last week because the new Prime Minister Viktor Zubkov is his father-in-law. The delay over the announcement of the new government remains unclear. A recent poll by the Yuri Levada Analytical Center indicates that Russians rank social issues as more urgent than economic issues in terms of what they expect from their new government. Sergei Mironov, the head of Russia’s upper house of parliament, said that Zubkov could become the next president, but added, "I want Vladimir Putin to be the president in 2012.” Garry Kasparov has been chosen as candidate for next year’s presidential elections by Other Russia.

Putin is to appear in an advertising campaign for the Komsomolskaya Pravda tabloid, Russia's most widely-circulated newspaper.

There are increasing concerns that Nashi, the pro-Kremlin youth group, is becoming a militia of sorts. “When young, lively people are politically indoctrinated and given the backing of the State, they feel invincible. And that is very dangerous.” Moscow City Court has sustained the absentee arrest of Boris Berezovsky, who currently resides in London.

Steel magnate Alexei Mordashov is on a spending spree. He bought a 30.4% stake in Power Machines, Russia’s leading turbine maker, from Vladimir Potanin's Interros holding, out-bidding fellow Kremlin-friendly billionaire Oleg Deripaska. Mordashov’s Severstal also raised its stake in gold miner Celtic Resources by 4.6% in a deal worth over $12m, fueling speculation that the steel firm would make a full bid for the London-listed company. Celtic Resources, however, rejected Severstal’s subsequent takeover offer, saying it was too low. Uralkali, the world's fifth-biggest potash producer, has revived plans to list on the London Stock Exchange. Alrosa, which accounts for 97% of Russian and 25% of global diamond output, is to hold an initial public offering within the next 18 months. The Kimberly-Clark Corporation is planning to construct its first manufacturing facility in Russia.

Freedom House’s annual Countries at the Crossroads Report described Russia as having “a model of governance that denies basic political rights and shuns democratic accountability,” and said that Putin’s sovereign democracy “contains little in the way of genuine democratic governance”. Russia’s Federal Tax Service could be looking to crack down on tax evasion by the country's richest people through the creation of a new unit to scrutinize their financial activities, in a move to “check and control the oligarchs”, although such a unit would not be implemented for some time. Putin has also revised the structure of federal executive bodies as part of his desire to appear to be fighting corruption.

The website of Craig Murray, the former British ambassador to Uzbekistan, was taken down after billionaire Alisher Usmanov threatened legal action over allegations it made about his past imprisonment. The website of Boris Johnson, London mayoral candidate, was also affected, as his site was held on the same server as that of Murray. Johnson was not pleased, saying it was "unbelievable that a web site can be wiped out on the say-so of some tycoon."

The Russian delegation will hold negotiations in Geneva this week with Saudi Arabia regarding Russia's accession to the World Trade Organization (WTO), of which it has sought membership since 2005. Could Russia’s shared interests with Iran be clouding the issuing of sanctions? An increasingly assertive Russian stance is forcing Europe's Nordic nations to toughen up their traditionally accommodating approach.

The blog Darkness at Noon has been resurrected from its hiatus with an interesting post responding to today's news that the Nashi youth brigades will be deployed on city streets across Russia to crack down on any anti-government protests during upcoming parliamentary and presidential elections. Predicting violence, Rubashov laments the Kremlin's campaign to wipe out independent centers of influence:

As independent political centers are reduced, ordinary citizens are left with fewer and fewer means by which they can make their views known and influence the politics of their country. There comes a point at which their views can be expressed in the only place left open and unregulated: the streets. Thus, rallies, demonstrations, and protests are the last stand for those who wish to influence the politics of an authoritarianizing regime. It is no coincidence that as Putin's Russia has become more autocratic we've seen an increase in the number, frequency, and intensity of political protests. Nothing else can capture the attention of the regime, and it is now clear that the Kremlin's attention has been captured.

It is also clear now why Nashi and its Kremlin backers are so fearful of opposition and see the need to enforce order: public protests are the last means by which their power and control are threatened, and it is a threat which - like the Duma, the Federation Council, political parties, independent media, civic organizations, and oligarchs - must be contained. Russia's leaders have stated on several occasions that an "Orange Revolution" will not take place in Russia. Nashi's activists seem determined to make sure of it.

Below are some excerpts from David Remnick's extensive profile article of Garry Kasparov from the latest issue of the New Yorker (the full text of the article is available online for the time being). Remnick, the editor of the New Yorker, was a correspondent in Moscow for many years and is the author of the book "Lenin's Tomb: The Last Days of the Soviet Empire."

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New Yorker:

In recent years, Putin has insured that nearly all power in Russia is Presidential. The legislature, the State Duma, is only marginally more independent than the Supreme Soviet was under Leonid Brezhnev. The governors of Russia’s more than eighty regions are no longer elected, as they were under Yeltsin; since a Presidential decree in 2004, they have all been appointed by the Kremlin. Putin even appoints the mayors of Moscow and St. Petersburg. The federal television networks, by far the main instrument of news and information in Russia, are neo-Soviet in their absolute obeisance to Kremlin power. “Putin is no enemy of free speech,” Ksenia Ponomareva, who worked on his first Presidential campaign, told the St. Petersburg Times. “He simply finds absurd the idea that somebody has the right to criticize him publicly.” The business community must also obey the commands and signals of Putin’s circle. There are now nearly as many billionaires in Moscow as in New York City, but the arrest for fraud, in 2003, of Mikhail Khodorkovsky, an oil magnate who had been the country’s richest man, was a clear, ominous signal that wealth is dependent on Kremlin approval. Khodorkovsky, who dared to fund opposition parties, pronounce his own political ideas, and attempt to cut pipeline deals with China without Kremlin permission, is now serving an eight-year term in Penal Colony No. 10, in eastern Siberia.
***

In today’s Russia, demokratia as it emerged in the nineties has been derisively called dermokratia: “shit-ocracy.” The notion of liberalism, too—a belief in the necessity of civil society, civil liberties, an open economy—has been degraded. Of all the pro-democracy activists and politicians of the late eighties and the nineties, the only one remembered fondly—if not very often—is the physicist and human-rights activist Andrei Sakharov. And that may be because he died in December, 1989, two years before the fall of the Soviet empire. The liberal parties that began in the nineties, such as Yabloko (Apple) and the Union of Right Forces, remain tainted by their connections to the Yeltsin era and no longer have seats in the Duma. “The state lets the opposition exist so long as there is no coalition,” Mikhail Kasyanov, the former Prime Minister, told me.

***

Kasparov argues that Putin’s popularity is the phony popularity of dictators. “The support for Putin is a kind of passive resistance to change,” he said. “You cannot talk about polls and popularity when all of the media are under state control. I don’t want to give anyone any bad ideas, but with such a propaganda apparatus, backed up by an all-powerful security force, seventy-per-cent approval should be a minimum!”

***

“The vast majority of people enjoy the fact that for the first time in Russian history they have lived for fifteen years now without the constant pressure of totalitarianism in every aspect of their lives,” Vladimir Milov, an economist who left Putin’s government in 2002, said. “For example, you can travel abroad freely. The majority of people can’t yet afford to do this, but the most active and educated can, and this makes a huge difference. The authorities here let you exist so long as you don’t call them into question. In other words, the deal they offer is: You let us steal and we let you live.

***

“Here is how it will go: Putin will decide the successor and he will be elected without much struggle,” Vladimir Ryzhkov, a young (and very lonely) liberal in the Duma, said. “All the opposition will be put on as a show for stupid foreigners like you to demonstrate what a great democracy we are. And all the resources of the media will be employed to put on this show.”

***

Kasparov gave a version of the same speech that he had lately given in Washington and Toronto. There were a few notes of reassurance—“Putin’s regime is not a geopolitical monster”—but there was no shortage of stark warning. “The Cold War was based on ideas, like them or not,” Kasparov said. “Putin’s only idea can be concentrated into the motto ‘Let’s steal together.’ ”

***

In the hallway, Illarionov told me that it would be a disaster to take part in the March elections. The opposition would be crushed and coöpted. “Garry has invested his energies and his day-to-day life in this, and I respect him very much,” he said. “But this is a mistake and will lead millions of people into a dead end.” His fear ran deeper than mere defeat. As a tsar, he said, “Putin reacts traditionally. And, if they have no real enemies, they create them. They need enemies. They cannot live without enemies. If all enemies are destroyed, then there is Yabloko, the Republican Party, the Right Forces, the Other Russia—they’ll finish these enemies. It’s a natural law of dictatorship.” The best that Kasparov could do, in the short term, was to establish the idea of an opposition in the narrow margins provided by the state.

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While still well below the scale of Airbus or Boeing, Russia took a big step forward today in its quest to revive its position in the aeronautical industry with the roll out of the Sukhoi Superjet 100 - a 78 to 98 seat regional airliner designed to compete with established aircraft lines from companies such as Embraer and Bombardier. The Superjet is being manufactured with a major contribution from Italian firm Finmeccanica, including an after sales service contract for its subsidiary Alenia Aeronautica. Safran's Snecma unit is co-operating with Russia's NPO Saturn to produce the engines, while the avionics will be fit by French electronics firm Thales. Boeing is also said to give "symbolic" support to the development of the aircraft, following a titanium joint venture signed with a Russian company a little over a month ago.

The Superjet project is very much a presidential initiative, promoting the new state held aeronautical champion known as the United Aviation Corporation, which is under the direction of First Deputy Prime Minister Sergei Ivanov.

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Russia's team waves to the crowd during the rope medal ceremony of the group apparatus final at the 28th Rhythmic Gymnastics World Championships in the city of Patras, southern Greece, Sunday, Sept. 23, 2007. (Photo: AP)

There has been a delay in announcing the new Russian government. In the run-up to the elections, the pro-Kremlin youth group Nashi is teaming up with city police to keep the streets quiet and, many believe, to curb anti-Kremlin political protest. The Union of Right Forces has begun its election campaign, although absent from the congress was party stalwart Anatoly Chubais, who stayed away, it is thought, after Vladimir Putin insinuated that his position as CEO of United Energy Systems could make his political involvement troublesome. A Just Russia’s new election campaign calls for the creation of ‘Socialism 3.0’. Former Prime Minister Mikhail Kasyanov said his party would not participate in the elections because, "The elections for the Duma are just an imitation of the democratic process, and I have decided to boycott them."

The $1trillion program planned to modernize industry and infrastructure in Russia will include a major role for private and foreign investors, according to Putin.

Late Friday night, Russia prosecutors charged Shamil Burayev, a former Chechen politician with being an accomplice in the 2006 murder of Russian journalist Anna Politkovskaya.

London-listed Imperial Energy accused Oleg Mitvol, deputy head of the Natural Resources Ministry's environmental watchdog, of causing damage to the oil firm and its reputation after a misleading statement impacted its share price. Severstal, the Russian steel producer controlled by Alexei Mordashov, increased its stake in gold and molybdenum producer Celtic Resources Holdings Plc to more than 25%. Peter Hambro Mining, the second-biggest miner of gold in Russia, almost doubled its first-half profit because of higher bullion prices and production. Rusal’s decision to delay its listing on the London Stock Exchange will be a huge blow to City banks who had counted on profiting from it. VTB Venture Fund, Russia’s first venture capital fund, is ready to begin investment activity. Russian Standard Bank, the lender owned by billionaire Rustam Tariko, has stopped making cash loans to consumers amid soaring refinancing costs because of the worldwide credit squeeze. Andrei Vavilov, former employee of the Russian government, is looking to start a hedge fund in the US. Russian natural-gas exports to Europe fell in the first eight months of the year after mild weather reduced consumption in the country's main foreign market. Lithuania wants to buy its gas directly from Gazprom. Russia's Ministry of Natural Resources eased pressure on London-listed, Russia-focused oil firm Urals Energy, saying it had withdrawn its previous objections to the firm's reserves reporting figures. Arcelor Mittal, the world’s largest steel producer, is reportedly eyeing coal assets in Siberia. Russian oil firm Tatneft has chosen Royal Dutch Shell as a strategic partner in the development of a deposit of bitumen.

Russia interprets the US’ rejection of Russia’s offer to use its Gabala radar station in Azerbaijan as a threat. Foreign Minister Sergei Lavrov said, “I understand them very well: Gabala cannot scan Russia’s territory.” Responding to US accusations, Lavrov also defended Russia’s sale of arms to Syria against US criticism, saying that the sale does not disturb any balance of forces in the Middle East. With the independence of Kosovo as just one of several brewing disagreements, senior Bush administration officials increasingly see Russia as a rising strategic challenge. By Putin’s invitation, former French president Jacques Chirac and former German chancellor Gerhard Schroeder have arrived in the Russian Black Sea resort of Sochi on private visits.

The Moscow District Military Court has upheld an arrest warrant for Yury Gaidukov, an Audit Chamber employee who was detained on suspicion of receiving a $1.4 million bribe from Energomash. The court rejected an appeal from Yury Gaidukov's lawyers, who claimed his arrest was unlawful.

In a report on economic conditions in the regions, Rosstat said that the number of migrants entering Russia in the first half of the year was almost double that of the same period last year. The Georgians are quite miffed after the Russian Ambassador said that as small nation they face "extinction" in light of growing globalization.

From a long feature article on Venezuelan President Hugo Chavez:

The tinted window rolls down at a military checkpoint, and startled troops snap to attention when they see their president at the wheel.

"Fatherland, socialism - or death! Good afternoon, my commander-in-chief," a National Guardsman blurts out, saluting with an expression of shock.

"Why haven't you received the AK rifles yet?" Chavez asks, examining the soldier's outmoded weapon. Chavez says he will find out what's wrong because some of the 100,000 Kalashnikov rifles newly bought from Russia should be in their hands.

Let's hope they can track down those 100,000 Russian guns... More on Russia's burgeoning arms trade here.

From a RIA Novosti report on Lithuania's refusal to extradite a former Yukos shareholder to Russia:

"Upon analyzing the materials on the Yukos case, we have concluded that this case is politicized and Mikhail Brudno has been persecuted, may be because of other people involved in the Yukos affair, and we have decided that the charges against him are politically motivated," Laima Cekeliene said in a video interview with Lietuvos rytas daily.
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Photo: AFP

My well-informed contacts in Moscow have reported to me that a palpable sense of panic is sweeping many government ministries in Russia these days. It seems clear that the master plan for President Putin’s succession remains a very tightly-held secret. Prime Minister Zubkov’s theatrical performance last week, tearing strips off officials for not fulfilling various responsibilities, has caused officials high and low to fear for their jobs – and in many cases, their ill-gotten gains. The anti-corruption talk of the new Prime Minister is becoming hard to understand in the context of what everyone knows to be the most pervasively corrupt Kremlin in history. The cues and codes are all off, and officials are having a hard time reading what it is exactly that they can or should do. Certain kinds of corruption seem to be alright, whereas others can trigger serious consequences. No one wants to vex the incoming leadership, so many officials have decided that inaction is safest. So despite certain preordained laws and decrees being pushed vigorously through in advance of the upcoming elections, paralysis is spreading throughout the government. What does this mean for foreigners? It will be increasingly difficult for everyone outside Russia – from entrepreneurs to diplomats to foreign government agencies to NGOs – to get anything accomplished if it depends upon high-level approval or support. Looks like its time to dig in and wait, or devise back-up plans. As for the outcome of the succession process, there is an almost universal consensus that, ultimately, the succession will not really matter. President Putin’s clique will remain firmly in control. But when pushed as to the personalities in the running, about 25% say the next president might be Viktor Zubkov, about 25% say the next president will be Sergei Ivanov, about 25% say the next president will be someone else and the remaining 25% say the next president will be Vladimir Putin, again. Meanwhile, a couple of well-placed people said that Dmitry Medvedev might be filling the position of Gazprom CEO, though they could not explain what would be happening with the current CEO, Alexei Miller. Then again, a leading Kremlinologist would see Medvedev in the Prime Minister’s chair, shielded and bolstered by a Putin-clique-friendly cabinet – and with Sergei Ivanov as President. The mystery continues.

Below is a letter to the editor published in the International Herald Tribune in response to a recent Serge Schmemann opinion article.

Putin's dubious 'popularity'

Serge Schmemann's article "A visit with Putin" (Views, Sept. 17) presents a view of Vladimir Putin that reflects the public image Putin strives to project, but it is not an accurate portrayal of the Russian presidency. According to Schmemann, the "enormously popular" Putin has led Russia "from bankruptcy and despair to enormous wealth and power." Russians, he tells us, "are suddenly living better than they ever have."

To be sure, the Russian president enjoys a popularity rating that any Western leader would envy. But polls reflect the constant barrage of pro-Putin propaganda in the Kremlin-controlled media and the traditional Russian craving for a strong state that assures stability, rather than an improvement in the lives of ordinary Russians. With the average hourly wage in Russia at around $3 an hour, only a tiny minority of Russians (many of whom are corrupt oligarchs favored by Putin) enjoy the fruits of Russia's oil-based prosperity. Social welfare benefits, including health care, have been steadily eroding since Putin came to power, and the crime rate has been rising, with violent crime more than doubling between 1998 and 2006.

Although Schmemann acknowledges that Russians will not be able choose their political leader when (and if) Putin steps down, he seems to dismiss this as insignificant in view of the fact that "stores are overflowing" and that Russians enjoy unprecedented "personal freedoms."

But what does personal freedom really mean, when people are denied the right to have democratic elections?

Surprisingly, given that Schmemann is himself a journalist, he ignores the tragedy that has befallen his profession in Russia, where the independent media are under constant siege by the Kremlin. Instead, he lauds Putin for bringing stability to Russia, despite the fact that more than 20 journalists have been murdered there since Putin came to power.

Amy Knight
Basel, Switzerland

Today the Guardian has published a letter from Robert Amsterdam in response to Jonathan Steele's opinion article "Putin's legacy is a Russia that doesn't have to curry favour with the west," published Tuesday, Sept. 18.

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Guardian:

The solution to Jonathan Steele's "puzzle" as to why the Russian government feels the need for excessive political control is simple. The level of state theft and corruption in Russia is unparalleled in its history. Putin's regime has overseen the destruction of freedom of the press, created a new generation of political prisoners and made a mockery of the rule of law. If Mr Steele was to review the recent OECD and World Bank reports, the latter of which placed Russia on par with Zimbabwe in terms of governance standards, he will find Russia's decay under Putin is well documented.

Robert Amsterdam

Partner, Amsterdam & Peroff, and counsel to Mikhail Khodorkovsky

On Sept. 13, 2007, the Italian business paper Libero Mercato published a profile interview with Robert Amsterdam. Below is a rush translation - a full original PDF copy can be downloaded here in Italian.

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THE LIBERO MERCATO INTERVIEW: ROBERT AMSTERDAM

Kazakhstan and the Khodorkovsky Theory: “The Freeze on Eni is a message from Putin”

According to the lawyer for Mikhail Khodorkovsky, the former head of Yukos incarcerated by Moscow, the crisis in Kazakhstan is just a taste of what could happen to the Italians in Russia.

Sixteen years after the collapse of the Soviet Union, its borders are still obscured by the haze of oil and gas deposits. And anyone venturing forth to do business in these areas can end up purchasing assets in the dark, without knowing exactly what it may mean in the future to be “related” to certain former Soviet families.

This matter has been carefully studied by Robert Amsterdam, counsel to Mikhail Kordorkovsky, the former president of the Yukos oil company who has been sentenced to serve years in a Russian prison, despite many court rulings in his favor, including the European Court of Human Rights. In his view, the Kazakhstan energy dispute is just another stage for this drama to play out, involving the leading players President Vladimir Putin, the Managing Director of Eni, Paolo Scaroni and the President of Italy Romano Prodi. At stake is the crisis in relations between Italy and Kazakhstan due to alleged environmental violations at the Kashagan oil field. Robert Amsterdam sums it up thus for Libero Mercato: “He who lives by the sword, dies by the sword. Eni took part in the undemocratic carve up of Yukos assets and have gained a strong advantage, but conditions can change without warning.

What is your opinion on the events at the Kashagan field and the alleged environmental violations on Eni’s behalf?

“Right now this Italian company is very important for the Kazahk premier Karim Karimovich Masimov. Eni provides technology and know-how that are indispensable for the large Kashagan field, and as long as things stay that way, they will be able to stand firm in the country. Likewise, the Kazakhs are following an environmental and expropriation policy to support the very companies operating in their territory. Above all, Eni. But this is a transitional phase. Kazakhstan uses the same methods as Moscow. When a partner is no longer useful, they are discharged and expelled.”

How will this dispute be settled?

“Right now everything has been pushed back until the end of October. The Italian premier will visit Astana for negotiations. But he will still find an extremely complex situation. I believe that for Prodi and Scaroni to understand how it will work out, they will need to look in the mirror. They will be remined of what they did in the Yukos auction hall, and how they participated in dismembering the empire than Khodorkovsky has built up. What is happening now in Kazakhstan is only an appetizer – the first “dividend” that Prodi can collect. In other words, a warning from Putin: what happened to Yukos, is happening to Russneft. Do not doubt that in the future it cannot happen to others. Perhaps even to you Italians”

You say the same thing could also happen in Russia?

"Absolutely. As the the Moscow Times columinst Yulia Latynia wrote yesterday, the expropriation of many companies in Russia is going ahead very rapidly. The battle being fought over Russneft assets is not only of a commercial type. Vladimir Putin is distributing property to the state corporations held by his allies, just as Catherine the Great used to do with landholdings. As soon as the management of these state-held companies attain a sufficient level of technical know-how, there will no longer be any room for foreigners or old partners in the new “Soviet Empire”.

The elections held last September 7 seem to have given President Vladimir Putin absolute control of the Duma. Meanwhile in Moscow wagers have opened on who the successor will be, and with Putin dealing, there are new rules to the game. He has brought a threesome to the forefront in a recent cabinet shuffle: Sergei Ivanov, the former defense minister who was promoted to first deputy prime minister, Sergei Naryshkin, who was made deputy prime minister, and Anatoliy Serdyukov, a former taxman was moved to the highest military post. What do you think will happen next year?

“Firstly, it needs to be remembered that Russia is not a democracy. Furthermore the situation has become less and less transparent with respect to regulation and risk assessment, posing major difficulties to foreign investors. Italy, under the Prodi government, is actively supporting this anti-democratic system without, however, getting anything in return. Despite this, Italy thinks that Russia will always be in this position to the European market, so they will voluntarily provoke energy crises to benefit their own pockets.”

There are however other western countries also doing business with Putin?

“Certainly. In fact, a heavy attack on democracy and corporate governance rules is taking place widely across Europe. Take Hungary for example, whose government has made use of the delays in the European Project to smother the “Nabucco” gas pipeline, promoted by Brussels, and to favour the opposing “Blue Stream” project, thus for intents and purposes, becoming a base for Gazprom. Australia too is also selling huge amounts of uranium to the Russians without understanding that the final use may not only be for energy production, but also military use. If you have energy and arms you can take advantage of instability, or even bring it about.”

How do you see as your client’s future in light of the Swiss Federal Tribunal and the European Court of Human Rights rulings in his favour?

These rulings prove that Moscow’s legal system is a farce. Even the Russians are beginning to grasp this because the false accusations of tax evasion, unsupported by any evidence against my client, is always the worst kind of visiting card. I’m afraid however that it may be too late for a solution, and personally I fear for Kodorkovsky’s safety.

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Russian President Vladimir Putin, right, and First Deputy Prime Minister Sergei Ivanov seen at the investment forum in the Black Sea resort of Sochi, southern Russia, Friday, Sept. 21, 2007. (AP Photo/RIA-Novosti, Vladimir Rodionov, Presidential Press Service).

Despite promises not to adjust the power structure in his favour, Vladimir Putin sees his influence surviving after the 2008 Presidential Elections. Viktor Zubkov has handed Putin his list of proposed members for the new government, which is due to be finalised later today. Sergei Markov, a Kremlin-connected political analyst, plans to run for the State Duma with United Russia. Andrei Sychyov, the Russian army conscript who came to international attention last year as the victim of a brutal military hazing, also intended to run, but has been rejected on grounds of poor health. Sergei Ivanov says that the Russian government is planning to privatize the largest possible amount of companies supplying services to natural monopolies, saying that state investment in the economy could account for 4.5% of the country’s GDP in the next eight years. A poll by the Public Opinion Foundation found that two-thirds of Russians believe that it is "impossible" to root out corruption in the political system. Presidential candidate Vladimir Bukovsky said that Russia is currently witnessing “the return of the Soviet system”.

Putin has compared US meddling in the affairs of Eastern Europe to the Soviet Union’s occupation during the Cold War, and has opposed the plans to create an oil and gas monster by merging Rosneft and Gazprom, saying that such a behemoth would “dominate the economy.” Aluminium giant Rusal has pulled its plans for a 2007 IPO, originally scheduled for November. According to one analyst, the delay is not due to market conditions. Deripaska’s Basic Element is to construct a cargo port in the Imeretin bay, near Sochi, that will be capable of handling roughly 5 million tonnes a year in a project worth $3bn. His Russian Machines company will borrow as much as $1.23 billion from BNP Paribas to finance his acquisition of a stake in Magna International, Canada's largest auto-parts maker. A new report by ING Bank says that expectation of slower world economic growth in 2008 is reducing investment interest in developing countries, including Russia. The Russian Manager’s Association and Kommersant newspaper have released a list of Russia’s 1,000 Top Managers. Russian billionaire Alisher Usmanov is in talks to increase his 15% stake in OAO Telecominvest to tap growth in the telecommunications market.

A Saratov newspaper was issued with a formal warning after local officials ruled that an altered photograph it published depicting President Vladimir Putin as fictional spy Otto von Stirlitz was extremist.

Reacting to new EU regulations to curb gas monopolies, Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, said, "Such limits are against the free market spirit of the European Union and amount to state protectionism." Russia’s abstention in the vote on the extension of the mandate for US and NATO forces in Afghanistan could be related to Kremlin worries about the Taliban. Putin has said that the US should set a firm date for withdrawal from Iraq. Russia’s preferred candidate for the head of International Monetary Fund, Josef Tosovsky, is unlikely to win the post - it has been revealed that Washington continues to support the EU candidate, Dominique Strauss-Kahn. Russia and Cambodia signed a bilateral agreement on Russia's accession to the World Trade Organization (WTO). Deputy Foreign Minister Alexander Losyukov says that North Korea is not ready to close down its nuclear facilities. Russian Foreign Minister Sergei Lavrov has called on Estonia to avoid politicizing the Nord Stream pipeline after its government refused to approve surveys in Estonian waters.

In an attempt to claim Russia’s territorial right to Arctic, scientists are arguing that samples from a vast mountain range under the ocean prove that it is part of Russia's continental shelf.

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Roman Emperor Caligula once paraded his favorite racing horse through Senate to make his deputies bow to the animal, and is rumored to have considered nominating the horse for a seat.

An amusing story has been making its way around the blogosphere in recent weeks about the re-emergence on a vast scale of mysterious pro-government propaganda. These posters and billboards, which usually do not bear any official party logo or attribution to any sponsor, read "Putin's Plan - Russia's Victory!" Reasonably the bloggers are asking "What's the plan? Does anybody know?"

The answer to such questions seems extraordinarily irrelevant, as shown by the apparent blind trust in the current Kremlin's authority. Despite knowing almost nothing about Viktor Zubkov before his appointment, Russian voters have already entrusted him with "sky high" approval ratings that most democratic politicians would salivate over (the accuracy of these polls can of course be debated).

From a St. Petersburg Times story on the high Zubkov ratings:

Zubkov’s sky-high ratings have prompted some critics to recall a sarcastic 2003 event mounted during the gubernatorial election campaign in St. Petersburg. Pedestrians crossing Anichkov Bridge, which has statues of men straining to hold prancing horses on its four corners, were asked whether they would elect a horse if the president so requested it. They were invited to vote by putting an orange ball into one of two transparent containers. The container marked “yes” ended up twice as full as the one marked “no.”

Horse - 1, Democracy - 0.

UPDATE: Anything and everything you would ever want to know about what media and bloggers are saying about the Zubkov appointment can be found over at Scraps of Moscow.

Does the new EU package of energy policies really have any teeth? The Wall Street Journal doesn't think so, and argues that the open loophole to escape unbundling by appointing Independent System Operators (ISO) to manage gas and electricity transmission and distribution assets can easily be exploited by the current energy monopolies. As for Gazprom's fulfillment of the new regulations, the WSJ writes the following:

Anticipating an unbundling backlash from Paris and Berlin, the Commission offered a second option that effectively undermines its entire unbundling plan. This alternative allows a power company to maintain ownership of its network as long as it appoints a so-called Independent System Operator to run it.

The EU says it would mandate a certain level of neutrality for these ISOs to make sure they grant grid access and plan investments in a way that fosters competition. But member states are adept at shaping these sorts of laws to protect their national interests. One can hardly imagine the state-owned distribution arm of, say, Electricité de France being run in a way that truly threatens the 90% market share of its state-owned generating business.

This little opt-out is good for Russia, too. If necessary, Moscow will be able to make a Potemkin-style division of Gazprom to get around any future EU restrictions. A Commission spokesman says the EU will insist on verifying the separation of production and distribution units before signing a bilateral deal. But that will be difficult to enforce as long as Europe's own members are allowed to bend the rules.

Russia's new premier Viktor Zubkov gave quite the performance during his first address to the Duma this week, striking a notably disciplinarian tone (some papers called it a "Soviet streak") so as to leave little doubt of his new clout. He publicly excoriated one official and banished him to Sakhalin until earthquake relief efforts were completed, humiliated the customs administrator, and reserved the most severe tongue lashing for the transportation minister over a missed deadline, bellowing the following: "The president gave you that instruction two years ago. How can that be? The president's instructions! Who dared to correct the president's instructions so lightly?" The theatrics achieved the desired result - career bureaucrats were said to leave the meeting cowing like scolded children.

After setting this tone, Zubkov got the opportunity to play up what was expected to be his pet project - fighting corruption. Among other new bills, Zubkov pledged to double the government's efforts to wipe out corruption, citing new rules about banking transfers, clearing up murky transactions at the ports, and other increased oversight ideas. But it seems that so far, Zubkov has not convinced ordinary Russians that his anti-corruption campaign would make a difference, and he has not yet addressed specific mechanisms to curb such abuses. Below is a snippet of a report from Radio Free Europe/Radio Liberty, which quotes an expert opinion on the lack of external controls, and lists a number of reasonable ideas from Boris Nemtsov.

RFE/RL:

The Russian political system is ill-equipped for fighting corruption. The NGO Transparency International, which monitors and combats corruption around the world, notes that " corruption thrives...where institutional checks on power are missing, where decision making remains obscure, where civil society is thin on the ground." Speaking to RFE/RL's Russian Service this week, sociologist Georgy Satarov, director of the INDEM research group, stressed the systemic nature of the problem. "The key problem connected with the growth of corruption in Russia is the lack of control over the bureaucracy," Satarov said. He bemoaned the lack of "external mechanisms of control" over the government, the lack of "political competition, the lack of [a political] opposition, the lack of a free press, [the lack of] freely working public organizations."

Union of Rightist Forces (SPS) Political Council member Boris Nemtsov also offered systemic solutions when asked by "Ekspert" how his party would attack the corruption problem, specifically proposing to roll back some of the key political innovations President Vladimir Putin has introduced in recent years while building the so-called vertical of power. Specifically, Nemtsov's recipe includes "ending censorship so people would be afraid to take bribes," "term limitations for governors -- no more than two terms," "the restoration of gubernatorial elections," and "the restoration of political competition."

The FT makes their case for energy regulation, arguing that Gazprom needs to prove it can play by the rules in Europe to be treated as a normal commercial partner.

Financial Times:

Blocking Gazprom

Twice this week, European Union institutions have infuriated important trading partners.

On Monday, the Court of First Instance drew the wrath of the US by ruling against Microsoft. On Wednesday, the Commission roused similar anger in Moscow over its plans to restrict non-European companies’ ability to control energy assets in the EU.

For all the protestations from José Manuel Barroso, the Commission’s president, that the measures were not aimed at any specific target, it escaped no one that their greatest impact would be on Gazprom, Russia’s state-controlled gas company.

In taking this first step to curb Gazprom’s European ambitions, the Commission has acted bravely and correctly. It has not, however, gone far enough.

The Commission proposed that in an “unbundled” EU energy market, in which the ownership of energy transmission and distribution networks is separated from supply businesses, companies from outside the EU should not be able to own those networks unless they are themselves unbundled.

As the Kremlin would sooner restore the Romanovs than break up Gazprom, that would prevent the company taking control of Europe’s gas pipelines and power grids.

As a way to protect competition against the market power of a single powerful gas supplier, this is a sensible move – as far as it goes.

But the EU should also restrict Gazprom’s control over other critical components of the EU’s energy infrastructure, such as power stations and terminals to import liquefied natural gas.

The fundamental question is whether Gazprom will act like any other company, for example when making decisions on investment in new capacity. Given the close relationship between its board and the Kremlin, and its role as the national champion of Russia’s vast gas reserves, the EU cannot assume that the answer will be yes.

These additional limits on Gazprom’s expansion need not last forever. The company has the right to demonstrate, over time, that it should be treated as a normal commercial partner, although Russia would also need to offer reciprocal terms to Europe, including transit rights for EU companies to use Russia’s gas pipelines.

Until those conditions are fulfilled, Gazprom should be allowed to sell all the gas it wants in the EU, but not control how it is transported or used. Europe is dependent on Russian gas supplies, and becoming more so. But that does not mean it should not stand up for itself.

Brussels is getting bold. But will it work?

By Derek Brower, journalist

THE EUROPEAN Commission’s third package on energy liberalisation, released in Brussels yesterday, made an implicit threat to Gazprom’s ambitions to expand across the continent, calling for foreign companies that want to buy majority control of gas and power assets in the EU to provide reciprocal guarantees for European firms wishing to do the same in their home countries.

Jose Manuel Barroso, the Commission’s president, claimed that the reciprocity clause the Commission had added to its package was not directed at any specific country or company. But Gazprom’s spectre hangs over the new proposals.

The new statement was the boldest indication yet that Brussels plans to make it difficult for Gazprom to buy control of Europe’s energy sector. In attaching the new clause to its desire to see full liberalisation of the EU’s gas and power markets, the Commission made clear that it sees Gazprom’s expansionist aims in the Continent as a potential barrier to the fulfillment of that goal.

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Wulf H. Bernotat, CEO of E.ON, is opposed to the new EU energy policy proposal

But that is a risky strategy. The other proposals in the package are likely to face stiff opposition in Europe, especially in France and Germany. That could leave the reciprocity policy as collateral damage should the package be rejected for other reasons.

That’s because the Commission has not backed down from its call for member states to ensure that national energy champions fully unbundle their distribution and generation assets. When the Commission demanded the same in January, France and Germany swiftly rejected the proposals.

The latest iteration brought the same response. France’s economy minister, Christine Lagarde, said her country would do “everything [it] can to oppose” the proposals. Her German counterpart, Michael Glos, echoed that, and said he “strictly reject[ed]” the package, which was “too bureaucratic” and would compromise the “high quality and security of German electrical power networks”. E.On, along with EdF, GdF, and RWE one of the companies targeted by the liberalisation proposals, said that unbundling “doesn’t increase competition and doesn’t lead to higher investment in networks and doesn’t lead to lower prices”.

Analysts said that the Commission’s persistence with the unbundling drive was “courageous”, given that it knows it is unlikely to see it endorsed by the member states, as it must be before going into the law books. Recognising that, the Commission says that an alternative for companies that do not agree to full unbundling would be a beefed-up regulator that will oversee their activities, including their investments into infrastructure. Brussels would itself oversee that independent service operator.

But if the package is rejected outright, it will also leave the Commission’s strategy on Gazprom mired in difficulties. That being the case, said one analyst, an “unholy alliance” is likely to emerge in coming months between Gazprom, Germany and France in an effort to oppose the package.

It is also not clear how the reciprocity clause would be applied in practice. Although it could prevent Gazprom from buying outright a company like the UK’s Centrica, with which it has been linked, it would not prevent the firm from pursuing its strategy of bilateral joint ventures with other European firms. At the Baumgarten gas storage facility in Austria, for example, a deal with OMV gives Gazprom a strategic stake in that asset – but not majority control.

Furthermore, Gazprom is already engaging in some reciprocity. A recent deal with Eni gave the Russian company access to downstream customers in Italy. In exchange, Eni joined Gazprom in the Russian upstream. The deal might have been on Gazprom’s terms, offering little in the way of European energy security, but the company can still point to it as an example of a reciprocal swap of assets.

Ultimately, the Commission’s stance looks more like rhetoric than a new policy. Russian spokesmen have already rejected it as “protectionist”. And it could yet fall victim to the same problems that continue to beset the Commission’s attempts to fashion a genuine common energy policy: opposition from powerful member states. But on the rhetorical field, new battle lines have been drawn. Even if the EU’s member states aren’t serious about Russia and liberalisation, at least its civil servants are.

www.derekbrower.com

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We had no idea that this competition existed, but according to one expert, Estonia has beat out the heated competition from Latvia and Poland to become Russia's #1 most inconvenient neighbour.

Regnum:

“I can say, a kind of an international contest in deteriorating the relations with Russia was announced between Latvia, Estonia and Poland,” Mezhevich said and explained: “Latvia ceased the standoff, when it received consent for connecting its gas storage facilities to Nord Stream; a visit of the Polish president in Russia is a light, very careful, but still a step to meet halfway. The situation with Estonia is still the same as it was on the night of transferring the Bronze Soldier Monument.”

See also AP: Estonia Won't Allow Survey for Pipeline

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Russia's new Prime Minister Viktor Zubkov chairs his first government meeting in Moscow September 20, 2007. (Photo: REUTERS/RIA-Novosti/Kremlin)

In a signal that Russia intends to be taken seriously as a democratic entity, business leaders are predicting that tomorrow’s RSPP meeting with Vladimir Putin will be less politically oriented than those held by former President Boris Yeltsin; subjects such as cabinet reshuffling or structural changes are likely to be overlooked. It is thought that Anatoly Chubais, chief executive of Unified Energy Systems, could be appointed Energy Minister in the new Cabinet. The resignation of Defense Minister Anatoly Serdyukov, put forward due to his family ties with Prime Minister Viktor Zubkov, was not required by the law, sparking suspicions that the resignation was an effort to boost Zubkov’s image as a responsible leader. There remains the possibility that Putin will not accept the resignation. Zubkov meanwhile held a stormy first Cabinet meeting, during which he attacked several hapless ministries. He targeted the Transport Ministry in particular, which failed to meet a 2006 deadline set by Putin for the completion of a port development, growling, "Who dared to correct the President’s orders so easily?" A new party, People for Democracy and Justice, is being set up by opposition leader Mikhail Kasyanov, who separated earlier this year from Garry Kasparov's coalition. The Duma is currently debating the suspension of the Treaty on Conventional Armed Forces in Europe, saying that the document is outdated, although a Russian defense official said that the country would not use the suspension as a chance to build up arms.

US computer company Dell has opened a store in Moscow. Russia's three biggest mobile phone operators have asked the Economy Ministry for help obtaining licenses in China. The Russian government, together with companies such as Gazprom, Russian Railways and Unified Energy System, plans to spend $1 trillion through 2020 on infrastructure.

Strict new European Union regulations to ban non-EU firms from controlling European energy networks, aimed at monopolies such as Gazprom, have been announced by the EU Commission President, José Manuel Barroso. The new proposals are seen in Russia as “evidence of how skeptical of Moscow European leaders have become," and "could compel the company to divest its sizeable stakes in energy companies from Latvia to Italy." The Iraqi Foreign Minister says that Lukoil will have an advantage in the tender for West Qurna-2 oil field should it make a bid. Iraq will favour Russia in its oil and gas contracts as part of a deal in which Russia will write off 90% of Iraq’s $10bn debt. It does not appear that the US will reach an agreement with Russia over the Gabala missile defense radar. US Deputy Assistant Secretary of State David Kramer has forecasted that the upcoming Russian elections could negatively affect relations between the two countries. Russia abstained from a UN vote to renew its NATO troop mandate in Afghanistan due to "concerns over an expression of appreciation for the Japanese naval mission supporting U.S.-led forces in Afghanistan." The Estonian government said it will not allow a German-Russian consortium to conduct a survey of its exclusive economic zone in the Baltic Sea for a planned underwater gas pipeline. The Russian Foreign Ministry agrees with the UN secretary general that Israel should reconsider its position on the Gaza Strip. Russia has acknowledged that its aircraft violated Finnish airspace last week, but said that it was unintentional. Two new missile defense systems will become operable for Russian armed forces in the next years, because "over 50% of the [current systems] are obsolete."

Analysts believe that the slowing rate of Russia’s industrial production was due to a drop in Gazprom exports, the global sub-prime mortgage crisis, and the warm weather. Russian investment bank KIT Finance expects to gain almost $100m from an IPO on the London Stock Exchange next year. The 6th International Investment Forum, held in Sochi, has attracted about 10,000 Russian and foreign businessmen and, it is thought, will result in business deals worth over $5bn.

Ukraine has rejected a Russian proposal on how to determine the origin of the poison given to President Viktor Yushchenko three years ago, on the grounds that "the tests will only be valid if they are conducted on Ukrainian territory." Former Russian banker Alexander Konanykhin has been granted political asylum by a US court, despite the US government’s belief that Konanykhin is wanted in Russia for criminal, rather than political reasons. Russian scientists will claim 1.2 million square kilometers of Arctic territory, although the energy-rich area is likely to come under a number of disputes from different countries.

Call me a Euroskeptic, but in recent years I have become accustomed to watching many, if not most, controversial policy initiatives go before Brussels only to die, caught up in a web of extravagant bureaucracy that would make even Kafka shudder. Easily the most polemical proposal in recent times concerns the common policy on energy competition and regulation - an initiative seemingly doomed to fall victim to fatal inaction.

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Perhaps that's why I was astonished to find myself applauding yesterday's presentation of a new package of EU energy policies (click here to see the publicly available official documents), calling upon several of Europe's largest energy monopolies to sell off their electricity and gas distribution assets, and institute other measures to "remove obstacles" from energy competition. The real kicker of the new plan: non-EU companies would only be able buy transmission and distribution assets if they sign treaties with the EU (the Energy Charter comes to mind) to guarantee the unbundling requirements, and provide free market access for similar acquisitions in their home countries, among other provisions.

Bravo, President Barroso! This is the most impressive news out of Brussels in quite some time, and it sends a real wake-up call to Russia that Europe is sick and tired of the disaggregation game. According to one EU diplomat interview by the Wall Street Journal, "The attitude in the council [of EU member states] has changed enormously. ... A lot of countries are now trying to underline the need to have one voice in relations with Russia, which wasn't so before." The message is clear: It's time to begin a real conversation about a fair and equitable energy trade.

I suppose I should not have doubted the dedication of EC Energy Commissioner Andris Piebalgs and Competition Commissioner Neelie Kroes to see the unbundling issue through, although I am expecting this proposal to receive vigorous political opposition from Gazprom, with the assistance of France and Germany. Prepare yourself for a real war of rhetoric on this issue, as these titans of the energy industry make their pitch to protect their monopolies.

First, we can expect Gazprom's PR machine to hit hard and hit fast, just like they have been doing over the past year on this issue (oh wait, they've already responded! Accusing Europe of bringing down "The Energy Iron Curtain"). Gazprom will want to present this as a tit-for-tat type dispute, and paint themselves as victims of unfair suspicion in a familiar narrative that we have seen elsewhere. They will point to their record as a reliable supplier which is now become subject to the protectionism of a Russophobic bureaucracy. (never mind that Gazprom is staunchly against liberalizing the Russian energy sector.)

And in many respects, Gazprom's arguments are going to be quite convincing. As the supplier of 25% of Europe's natural gas, any comprehensive EU energy plan must naturally include active and significant Russian participation - to suggest otherwise is simply fantasy. And even though there are many recent examples of supply disruptions due to political interference in the energy trade from the Kremlin, that is aside from the point.

This new package of energy policies is not about punishing Russia, nor is it a technocratic revenge fantasy against E.ON or EdF. As President Barroso said during the presentation of the new rules, "We must not be naïve. Fair competition is different from protectionism. ... We need to protect the internal market from noncompetitive behavior coming from elsewhere."

The new policy is about rules and about monopolistic abuse - and these rules exist for a reason. Gazprom and the Kremlin unfortunately would have a tough time denying that they don't often break rules, violate contracts, breach treaties, abuse market position, and politically manipulate importing countries - the laundry list of egregious examples need not be repeated here. I spent the morning in Brussels today speaking with some MEPs who were even of the opinion that Russia, in some senses, enjoys the bad reputation they have earned, as they have successfully lowered expectations so far that Europe is pleasantly surprised with even the smallest of gestures. However being the "bad boy" of the energy sector also has its costs - their conduct over the past number of years has brought this about.

We also have to look at the general trend of Europe aggressively asserting consumer rights. If you are looking for any indication that demonstrates where the winds of change are blowing in Brussels, you may also take note of another major anti-trust decision that recently came through concerning a little American software company called Microsoft. On the very same day as the new energy package presentation, Competition Commissioner Kroes also offered a powerful rebuttal to US criticism of the EC decision to impose a fine on Microsoft for abuse of market position: "It is totally unacceptable that a representative of the US administration criticised an independent court of law outside its jurisdiction. The European Commission does not pass judgment on rulings by US courts and we expect the same degree of respect.

As German Chancellor Angela Merkel pointed out earlier this year, Gazprom should consider it "an honour to be treated like Microsoft," and others have commented that indeed the Russians may be somewhat confused to be dealing with a competition authority that they can't politically manipulate.

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Illustration by David Simonds (Economist)

So at this early stage, I think we are just looking at a best case scenario and a worst case scenario. In the best case scenario, Barroso, Piebalgs, and Kroes will continue to promote unbundling, possibly gambling their careers on the issue, and succeed in the very least by getting Russia to ratify the Energy Charter Treaty, allowing them to own some distribution assets, and normalizing the oil and gas trade through a non-political rule-based system. Even in the best case scenario, I think E.ON and EdF are far too strong to be taken apart by Brussels, and, at the most, they may give in to having their grids and pipelines partially owned and operated by third parties. Europe can protect itself from the abuse of this one particular Russian administration without necessarily having to totally break apart its national champions. In the worst case scenario, this policy package is just a ruse to get the Russians to offer a greater degree of reciprocity - something that with a lot of pressure from the French and German governments could put a token number of assets into European hands, yet make no positive impact on Russian rule of law. Analyst Katinka Barysch has argued that this is a pointless matter in terms of energy security given the fundamentally different conception that Europe and Russia have over the reciprocity issue.

Let us not forget that in coming months, the greatest threats to European energy security are not coming from the Kremlin (which frankly may be a bit preoccupied maintaining stability before the election), but rather from France and Germany (and possibly some help from Italy). EdF and E.ON are extremely unlikely to see the benefits of allowing competing energy companies access to the grids and pipelines, but with luck, the citizens of France and Germany will stand up and not allow their governments to trade security to maintain monopolies.

A Fist Full of Euros has posted the first in a series on the Frozen Conflicts in the breakaway Moldovan Republic of Transnistria. See also past blog posts by Edward Lucas and Lyndon at Scraps of Moscow.

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AFOE:

As for the conflict itself… well, it’s not so much frozen as dusty and abandoned. The original reason for it was that ethnic Russians didn’t want to be oppressed by ethnic Moldovans/Romanians. That has half disappeared. Moldova has promised autonomy and good treatment, and those promises are plausible; the Moldovans have treated their Russians inside Moldova pretty well, and have kept promises of autonomy made to their Gagauz. (The Gagauz are Christian Turks. Long story.) Also, while Moldova is still not exactly Switzerland, its prospects are a lot better than in 1991; it now borders the EU, trade and investment are picking up, and while it’s still the poorest country in Europe it’s comfortably more prosperous than Transnistria.

Also, Transnistria lacks other options. The country’s rulers would love to merge with Russia, and much of the country’s population would probably follow them. But Russia lacks enthusiasm for picking up another exclave. Especially one that is (1) hundreds of kilometers south of Russia’s current borders, (2) totally lacking in resources or strategic utility, (3) majority non-Russian, and (4) dirt-poor. Independence doesn’t make a lot of sense; Transnistria is small, ethnically divided, economically dependent on Russia, and geographically ridiculous.

Today in the Wall Street Journal there is an interesting op/ed which focuses on the urgent questions of sovereignty and foreign policy in the context of energy relations. Both India and China, widely acknowledged to be the world's two strongest growth economies over the next decade, have found themselves competing aggressively all over the world to secure steady energy supply agreements (without which, obviously, their industrial expansion would not be possible). Unfortunately, in many cases, governing regimes in exporting countries are finding it very easy to leverage this demand into a heightened tolerance for human rights abuses - the recipients of their gas and oil will be prohibited from "interfering" in that nation's "sovereign affairs." In other words, some exporting countries, Russia among them, offer a "moral discount" to importers - ignore our political prisoners if you want to do good business with us. Such is the context for India's Petroleum Minister's visit to Burma this week, inauspiciously timed to coincide with a period of rapidly increasing unrest from protesters.

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Burma's leading democracy advocate and most well known political prisoner Aung San Suu Kyi. India has been reluctant to speak out in support of her out of the fear that Burma will send more gas to China.

Wall Street Journal:

Instead of speaking out on behalf of Burmese democrats, Delhi has taken a page from Beijing's playbook. In answer to a question about India-Burma ties, Foreign Minister Pranab Mukherjee said Friday that "the cardinal principle of our foreign policy is non-interference in the internal matters of any country."

That kind of response might have passed muster three decades ago, when India's foreign policy was shackled to the Soviet Union. But as India's neighbors become increasingly unstable -- think Pakistan and Bangladesh -- it's not in Delhi's interest to exercise such limp diplomacy.

The irony here is that kowtowing to the generals has proven ineffective in the past. Last month Indian oil ministers said Burma had agreed to sell most of the gas from two hotly contested blocks to China -- reneging on an agreement it had made with Indian oil companies.

Burma's democracy movement has a long way to go. A little help from friends wouldn't hurt.

The Guardian is running an interview with Boris Akunin, AKA Grigory Chkhartishvili, who has become widely known as the JK Rowling of current Russian writers. His historical detective novels, based in the Tsarist era, have reached unprecedented heights of popularity among Russia's emerging middle class, and have also been made into several films. In the interview he expresses his disapproval of Putinist authoritarianism, but also expresses optimism for Russia's political future.

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Guardian:

He was born in Tbilisi but grew up in Moscow. Last year when relations between Russia and Georgia dramatically worsened, the tax police took a sudden interest in Akunin's affairs. Although he is not an opposition figure as such, it is clear the Kremlin does not like him. He is not a fan of Vladimir Putin either, he admits. "I do not know personally anybody who likes what's happening in my country politically.

"I would like to live in a democratic society, which Russia isn't these days," he says.

Akunin refuses to appear on Russian TV, which is controlled and censored by the Kremlin. (His last TV appearance was on a show for children.)

A historian by training he is, however, generally upbeat about Russia's future. He says he is not dismayed by Russia's current authoritarian leadership or by the stunning political apathy of its middle class.

"My impression is that Russian society is still moving in the right direction. For the first time in Russian history tens of millions of people are learning to work, not to expect anything from the state, to be providers for their families. It's a revolutionary experience for many people," Akunin says.

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Representatives of the pro-Kremlin United Russia party and the opposition Communist Party debate in the Interfax news agency office in Moscow on Wednesday, Sept. 19, 2007. (Photo: AP)

This week the Russian Union of Industrialists and Entrepreneurs, or RSPP, which represents the country's biggest business groups, will meet with Putin during a three-day investment forum in Sochi amid mounting speculation that major changes at the top of Russia’s economic ministries and state-run companies are being considered. Russian Defense Minister Anatoly Serdyukov has resigned from his position in a move that one Kremlin spokesman said “shows that Russia is a European country.” Serdyukov is married to the new Prime Minister Viktor Zubkov’s daughter. Lukoil CEO Vagit Alekperov, his wife and son have raised their holdings in the company, buying $22m of Lukoil stock.

A Public Opinion Fund Poll indicated that, at this stage, A Just Russia would not have enough support to win seats in the Duma elections. The Soviet era dissident and human rights campaigner Sergei Kovalyov has joined up as the #2 candidate of the Yabloko party.

Russian Foreign Minister Sergei Lavrov told visiting French Foreign Minister Bernard Kouchner that neither military force nor unilateral sanctions were acceptable in dealing with Iran's nuclear program. Following a meeting with his Iraqi counterpart, Lavrov said that Iraq was interested in expanding Russia's role in its post-war revival and pledged to ensure greater security for Russian companies. The European Commission proposed that energy giants sell off their power grids and gas pipelines in order to boost competition and investment and shield markets from outsiders such as Gazprom, saying that “foreign predators must be banned from EU markets”. The proposal was attacked by Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs as being “against the free market spirit of the European Union”. At a shareholder meeting of the recently seized company Russneft, former Itera and Sibneft senior executive, Alexander Korsik, was supposedly nominated to run the company by Oleg Deripaska. Deripaska’s Basic Element is still awaiting regulatory approval to complete the purchase of Russneft. Kommersant published a special report on nationalization in the Russian oil sector, focusing on the privatisation of shares in Rosneft and Gazprom. A unit of Gazprom has hired a group of international banks to raise $2.2bn for a three-year loan to expand its production and refining business. TNK-BP, Russia’s third-largest oil firm, wants to start hydrocarbon exploration and production in Venezuela.

Russia is not immune to turmoil in the global financial markets, but the Moscow Times argues that its position is "favorable" due to strong reserves and a fiscal surplus. A Central Bank of Russia poll reveals that Russian banks view credit issues as posing the greatest risks to the market and liquidity. Transtelecom, the communications arm of state-run Russian Railways, has opened an office in Beijing in an effort to promote its planned digital telecoms link with Asia. ST Towers is to spend $2bn on building a tower in Moscow that would be Europe’s tallest. Celtic Resources Holdings, a miner of gold, copper and molybdenum in Kazakhstan and Russia, has received a takeover offer. Analysts point to Severstal, which already owns 22% in the company, as the potential buyer. BHP Billiton has announced it will boost exploration in a number of countries including Russia. The Guardian revealed that Landsbanki acted as a broker for Usmanov’s investment vehicle Red & White Holdings in its purchase of a 21% stake in Arsenal Football Club.

After yesterday’s visit to the Russian-operated radar station in Gabala, Azerbaijan, US General Patrick O’Reilly, who led the “technical-level” delegation, said that the Pentagon was committed to cooperation with Russia on missile defense, but the director of the Pentagon’s missile-defense program said that the Soviet-era early warning system was incapable of replacing a tracking radar the United States had proposed basing in the Czech Republic. A spokesman for Putin responded that Russia was ready to upgrade the system to suit US requirements. Russia is to create a stock of enriched uranium worth $300m, to be kept in the International Centre for Uranium Enrichment in Angarsk, according to Rosatom, the Federal Atomic Energy Agency. The move was made in order to "further the cause of non-proliferation”.

A Russian diplomat said that a UN and World Bank Stolen Asset Recovery (StAR) initiative may enable Russia to recover up to $200 billion assets stolen by corrupt leaders, but World Bank chief Robert Zoellick said that the initiative was aimed at poor African countries, not Russia.

US Press Secretary Dana Perino apparently missed out on news of the vacuum bomb tested by Russia last week, while detective novels based in the Tsarist era are becoming wildly popular.

Today I saw this interesting article in Kommersant, which gives an overview of the Russian government's unlawful takeover of the oil sector. The reporters don't provide any new information, but for readers who are not familiar with this process, it is a good primer.

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One thing I would dispute in this article however is the authors argue that the public felt that it was "justified" for the state to seize back properties from these oil companies. Such a characterization is entirely misleading in these recent expropriation cases - including the Kremlin's strong-arming of its foreign partners at Sakhalin and Kovykta to achieve partial expropriations (resulting in controlling stakes in production joint ventures). If the Russian government were in any way able to point to the ways in which these thefts actually benefited their citizens, that would be one thing. But in fact, the theft of Yukos was largely the transfer of assets from one set of private hands to another set of private hands. (sorry to sound like a broken record - blogger Vilhelm Konnander and I had an exchange over Russian nationalization some months ago).

The article also glosses over the abuse of authority by the Russian prosecutors in the destruction of Yukos - it was not "refinement" of law, but rather outright violation, not to mention that Yukos was the country's largest taxpayer, contributing far more to state coffers than Gazprom (this is precisely why we are seeking discovery of Chevron's due diligence studies of Yukos - if such financial misconduct existed as the Kremlin claims, then surely the American multinationals would not have advanced so far in their acquisition negotiations). Furthermore, it is essential to note that Yuganskneftegas, the most critical Yukos production asset, was delivered into the hands of Igor Sechin's Rosneft through a rigged auction that was in and of itself a violation of Russian law (to sell a core asset first was in direct contravention to clear rules set forth by the Russian Federal Law on Executory Process).

Kommersant: How Russia is Nationalized: The Oil Sector

By the second half of 2003 three tendancies had merged together: a desire by the officials to strengthen the state’s role in the oil industry, resentment towards Yukos and societal confidence in the justice of nationalizing profitable industries. A radical decision was made: to return Yukos to state property. The means was found immediately: unpaid taxes. Formally, Yukos had been using tax minimization as allowed by current law. And they were not alone in doing so. The judges had to apply maximum flexibility and refinement in order to legally validate the political decision.

No one doubted that realizing this decision would be a long and hard process. One can’t just take a controlling packet as payment for debt: the threat of trials by foreign owners or their heirs would hang over the deal like the sword of Damacles. It was decided to take the main oil-producing subsidiary, Yuganskneftegas, as payment for the debt. Without Yuganskneftegas Yukos wouldn’t be able to manage with the rest of its back tax claims and eventually go bankrupt and have to be liquidated.

Completing the task took four years. Yuganskneftegas was sold in late 2004 and Yukos was liquidated in August of 2007. All significant shares were purchased by Rosneft, which turned into the undisputed industry leader by all volume indicators (reserves, production, processing). Its important to point out that …

In 2004 not only Rosneft was competing for Yuganskneftegas, but Gazprom as well. Gazprom, however, was denied. The reason (or the excuse) is perfectly respectable. Gazprom has too many shares abroad; lawsuits by upset American stockholders of Yukos could put them under attack. On the other hand Rosneft had no foreign shares and therefore any lawsuits against it would stand little chance. After this defeat the gas monopolist became even more insistent on acquiring oil shares. Their explanation is logical: all large energy companies in the world (ExxonMobil, BP, Shell) have both gas and oil production units.

Its general knowledge that at one time Gazprom was looking to Rosneft to be its “second leg”. Chairman of Gazprom’s board Dmitry Medvedev voiced a suggestion to merge, paying the state in shares of a supposed additional placement and thereby increase the state’s stake up to a control figure. This option never materialized. The complaints of Gazprom were, in our opinion, justifiably considered excessive.

Fortunately for Gazprom, its decision to acquire oil assets coincided with the wishes of Sibneft’s owner Roman Abramovich to leave the oil business. Perhaps they consulted with him. But whatever happened, the purchase of Sibneft by Gazprom please everyone. This took place in the middle of 2005 by real market prices – about $13 billion.

With a Rosneft drunk from Yukos and a Gazrpom beefed up on oil, the state has become the key player in the domestic oil industry, able to dictate its conditions to private traders by way of the market, without resorting to state regulation, which is frowned upon by developed countries.

A Doormat for his Masters’ Feet…

By Grigory Pasko, journalist

Senior Investigator for Particularly Important Cases of the Procuracy-General of the Russian Federation Salavat Karimov, who had headed the investigation in two criminal cases against Mikhail Khodorkovsky, has announced that he is retiring. The simple explanation is that he was asked to turn in the Khodorkovsky and Lebedev case files and vacate his office. Alexander Bastrykin, Chairman of the Investigative Committee Attached to the Procuracy-General of the RF, would not employ Karimov in his agency, and when Procurator-General Yuri Chaika offered Karimov a position as an advisor as a consolation prize, the latter refused it as not commensurate with his experience.

He commented on the decision adopted thus to his colleagues: “After wiping their feet on me they still think I’m going to stay..."

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Salavat Karimov (photo from www.newsru.com)

It is known that it was none other than Karimov who was the author of the formula of the accusation against Khodorkovsky and Lebedev, according to which they had stolen practically all the oil produced by the subsidiary production enterprises “Yuganskneftegas”, “Samaraneftegas”, and “Tomskneft VNK” in the years 1998-2004, and had legalized the greater part of the incomes revenues from the theft through foreign offshores. In the meantime, the lawyers of the accused Khodorkovsky and Lebedev have called this prosecution theory delusional.

Nevertheless, the lawyers refused to comment on the reason for Karimov’s retirement. Apparently professional ethics in the given instance stopped them.

In my case, though, it is precisely professional ethics that force me to speak my mind about Karimov and his ilk.

In my opinion, Karimov does not give the impression of a total idiot. Even though he did come up with such a groundbreaking piece of jurisprudence in his formula for the accusation as the theft of all the oil produced. All the more’s the pity for such a person who, even though he’s a rational human being, was not able to foresee that he would become a doormat for others to wipe their feet on. Actually, they’ve been wiping their feet on everybody. Using them like a certain latex product, and then tossing them out. God almighty, how many such cases there have already been in Russia’s history!

No need to delve deep into ancient history, either. I recall “my” case. The investigative brigade consisted of 24 persons – employees of the administrations of the FSB for Primorsky Kray and for the Pacific Fleet. After the completion of the first trial in the case of “the spy Pasko”, just about every one of them received awards and commendations and promotions in rank. But after the second trial, nearly all of them changed their duty postings, and some were even completely discharged from the service. They had become doormats on which others had wiped their feet. They had been used, like those same latex goods, and simply discarded.

True, the head of the investigative brigade was given a nice, cushy position in Moscow. But after a couple of years they made this position redundant. Where this “spycatcher” is today is of no interest to anyone, just like the man himself is of no interest. Because he’s just… a latex product.

I think that nobody will remember Karimov’s name in a couple of years either. Latex goods don’t have names. Just sobriquets or numbers – at best.

But it seems that this doesn’t bother the Karimovs of the world. Especially in their moments of fervent and devoted service to those who use them.

Then why should they feel offended later! If you’ve committed yourself to taking part in an unlawful business, then you’ve got to be ready for the possibility that you’ll be treated the same way yourself. And if you don’t go quietly into the good night, but start whining instead, you might just disappear. They will say: there never was such a person, he was just a figment of your imagination.

Besides, since when have latex articles been allowed to complain? It’s not their lot to whine, only to be used and discarded. Like Karimov, for example…

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Vladimir Zhirinovsky has some choice words for Britain at a news conference for Andrei Lugovoi's Duma campaign in Moscow on Tuesday, Sept. 18, 2007. (Photo: AP)

Media are beginning to debate the legacy of Vladimir Putin’s eight years in power, with a strong focus on the dramatic changes in the economy and Russia's new foreign policy. Ahead of the EU-Russia Summit scheduled for next month in Portugal, Swedish Foreign Minister Carl Bildt said "Everybody agrees that at the moment we don’t have a strategic relationship with Russia. We all wish it would be there," while German energy firm E.ON is on a spending spree in Russia.

Vladimir Zhirinovsky's ultra-nationalist Liberal Democrats party are supporting the nomination of Andrei Lugovoi as a Duma candidate because it is likely to generate publicity; while others think attacking the West will now be even more politically popular than attacking the oligarchs in the upcoming parliamentary elections. True to form, Zhirinovsky gave the media no shortage of anti-West quotes, accusing Britons of being “bandits and criminals."

Optimism that the US will reach an agreement with Russia over a missile shield in Poland is fading, although US and Russian experts will investigate the possibility of using Russia’s Gabala radar instead when they meet in Azerbaijan today. The French Foreign Minister, Bernard Kouchner, is in Moscow to clear the way for Nicolas Sarkozy’s visit next month. Kouchner is in talks with Russian Foreign Minister Sergei Lavrov, who today added his voice to the growing concerns over possibly military action in Iran, whilst the Deputy Foreign Minister, Alexander Losyukov, said that a US attack on Iran would have “catastrophic consequences”, and issued a heartfelt apology to Iran for the unrelated murder of a diplomat's son in Moscow. Polish President Lech Kaczynski signalled that it may be time to renew Russian and Polish relations on a visit to the country, saying, “We have a democratic Poland and we have a new Russia.” Tajikistan is to officially propose that Russia grant an immigration amnesty to Tajik citizens working illegally in Russia.

LUKoil, Russia's second-largest oil producer, plans to build a refinery in Venezuela with the South American country's state company. US Counter-Intelligence officials are complaining that Russia and China are spying on the US “nearly as much as they did during the Cold War” - which they rationalise as proof that wider domestic spying privileges need to be given to the government.

Rosneft has announced that it expects to refine almost 40 million tonnes of oil in 2007. London-listed miner Aricom has concluded a cooperation agreement with Oboronimpex, a unit of state arms export monopoly Rosoboronexport, to explore opportunities in strategic raw materials, including titanium, molybdenum and tungsten. The rise in Russia’s industrial output has slowed to 3.8%, and the Russian government has suspended import duties on rechargeable batteries for cell phones and word processors for nine months, in a move that could entice electronics contracts to the country. Russia’s auto industry could soon be monopolised, with the possible consolidation of AvtoVAZ, KamAZ and GAZ. It is thought that political action taken against VinLund, a shipping company, and its employees, was due to its owner's support of investigative journalism (Peter Vins, owner of VinLund, is a former Soviet dissident).

The Guardian reported that a sale of Russian art was cancelled on the eve of the London auction at Sotheby’s when a Alisher Usmanov, the Russian billionaire who also now owns a stake in Arsenal football club, stepped in and bought the entire collection of the late musician Mstislav Rostropovich, paying over £25m.

The Russian Internet passed a milestone as the millionth .ru domain name was registered.

Columnist Anne Applebaum has a new piece out on the appointment of Viktor Zubkov:

All of which goes a long way to confirm something I've maintained for some time: The identity of the next president of Russia doesn't actually matter. Though a lot of analytical effort has already been wasted on careful pre-electoral scrutiny of the potential candidates, their opinions, views, alleged pragmatism, or alleged chauvinism are much less important than the nature of the coming presidential selection process itself.

If Zubkov (or someone else) becomes president following an orchestrated media campaign, falsified elections, and with Putin hovering constantly in the background, we'll know he really is a place-holder. If Zubkov (or someone else) manages to garner some genuine support, both among voters and within the Kremlin, we'll know to take his views seriously. If Putin remains president—well, we'll know what that means too. Already, the fact that no one outside the Kremlin's inner sanctum has any idea what the succession will look like is a bad sign. It's hard to talk about "rule of law" in a country where power changes hands in such a thoroughly arbitrary manner.

Please visit the JURIST website to read an update I wrote on the Mikhail Khodorkovsky case, discussing recent decisions in Switzerland and Russia.

The great Serge Schmemann of the IHT has published quite a compelling opinion article on objectives and perspectives of Vladimir Putin:

The implication is clear - those quaint times are behind us. He does not disown the Soviet Union, which he served as an agent of the KGB, but the Russia he repeatedly invokes is a great, powerful, divinely ordained state that stretches back a thousand years. He is there to restore its glory, its power, its faith, and above all its proper place in the world.

And that is the unifying context of his presidency: Russia will be great and strong. It explains the repeated contradictions in the world view he expounds: Russia must have a multiparty democracy, but it cannot exist without a strong president. The economy is free, but the state must control its wealth. He is prepared to cooperate with the West, but promptly switches to confrontation when he senses a snub.

He freely criticizes the West, but bristles at suggestions that Russia is backtracking on democracy. Such criticism is a ploy, a diversion, he declares: "Of course, we see efforts to exploit the phraseology of democracy to influence our internal politics," he says. "This is dangerous, this is not proper, it undermines faith in the basic principles of democracy. If you need something from Russia, you need to talk about the substance, not to approach it from another angle. If you need to resolve Kosovo, talk about Kosovo. If you need to resolve the nuclear issue with Iran, talk about Iran. Not about 'democracy in Russia.' "

There are distinct echoes of the Soviet Union in this blend of bluster, insecurity, hypocrisy and pride. But Putin's Russia is definitely a new hybrid. There's no threat of a new Cold War, no ideology of world domination in the new Russia. The president enjoys a level of popularity and legitimacy Soviet leaders never had. However authoritarian Putin's rule might be, argues Grigory Yavlinsky, an opposition politician highly critical of the president, his rise is a logical consequence of the brutal disappointment of the Russians with the course of events since the collapse of Communism - the hyperinflation, political wars, crony privatization and the financial crisis of the 1990s, along with the humiliations - perceived and real - inflicted by the West, from NATO expansion to endless preaching.

Now, Russians are suddenly living better than they ever have. They have a combination of personal freedoms and prosperity they've never had before. They can travel abroad and surf the Internet to their heart's delight; the arts are booming; stores are overflowing; they can make money. Lots of it. Politics? O.K., there's a problem there, but in this new Russia, with its glittering streets and fast pace, who cares?

This is Putin's Russia. No matter that the oil boom is in great part responsible for his successes; he has brought a measure of stability and pride where Boris Yeltsin, the "democrats" and the West all failed. He will not be preached to. He will not be pushed around on Iran or Kosovo. He will be treated with respect, whether at the Group of 8 summit meeting or fishing at Kennebunkport.

So look for more Putin. In what guise, we will soon learn. But with what goal and style, there is no doubt.

Meet Roustam Tariko, owner of the Russian Standard vodka brand, and king of consumer credit lending in Russia - one of the country's most promising areas of economic growth alongside retail. Today the International Herald Tribune is running an interesting profile of his businesses, and the changes currently unfolding as Russia's banking system matures into that of a developed economy.

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Tariko in the IHT:

"I believe the market for consumer lending will become more professional, more transparent, rates will go down and there will be less risky products," he said. "I am expecting consolidation pretty quickly as smaller operators will exit the business. All these things will be beneficial for Russian Standard."

In this 25-minute radio interview with ABC Australia's Monica Attard, Robert Amsterdam discusses the Khodorkovsky case, Russia's energy relations, and the business climate.

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From ABC:

MONICA ATTARD: Now Khodorkovsky is going to face another raft of charges quite soon, is he not?

ROBERT AMSTERDAM: Yes.

MONICA ATTARD: And what will they relate to?

ROBERT AMSTERDAM: Well it's what I call trial by headline. They will call it money laundering. I've reviewed the charges and I can certify to you that no-one on Earth could understand these charges. They are, they make absolutely no sense. The dollars utilised have no relation to reality and these are simply bogus charges in an attempt to try the man by headline and keep him in horrific conditions in jail long enough so that he could have an accident and die.

MONICA ATTARD: He was originally sentenced to 10-years. How much longer does he have to run on that 10-year sentence?

ROBERT AMSTERDAM: Originally to nine, then reduced to eight, and he would actually be out on parole, given normal practice, this October.

MONICA ATTARD: But you highly doubt that he will be?

ROBERT AMSTERDAM: Oh, absolutely. I doubt it completely.

MONICA ATTARD: Is the intention, do you think, that they just simply keep him in jail?

ROBERT AMSTERDAM: Well they've stolen his company. Many of the people involved in, you know, at the highest levels in the Kremlin, have actually stolen it. I want to make sure people don't use the term "nationalisation". I use the term "theft". They've pocketed literally billions of dollars. These people are criminals and they're incredibly incompetent. So they're not even good crooks, as you can see in the...

MONICA ATTARD: But it has to be said, this was a private company, was it not? This was a company held by Khodorkovsky and his own personal family interests.

ROBERT AMSTERDAM: That's right and they trumped up. Well, no, it was... there were other shareholders. Khodorkovsky was a shareholder of a public company. There were others. Then they trumped up these tax charges on Yukos itself so that they could steal the company.

MONICA ATTARD: Do you think that you can ever run a case where you can attempt to get Yukos back?

ROBERT AMSTERDAM: I think we will ultimately obtain compensation for Yukos. There is a case...

MONICA ATTARD: From the Kremlin?

ROBERT AMSTERDAM: Ah, well, yes. There is a case under the Energy Charter for $50-billion that is pending in arbitration. Look, we just got a decision from the Swiss Federal Court. For the first time in Swiss history, the Swiss Federal Court has stated that it will not allow the Swiss prosecutors to cooperate with the Russian prosecutors because of the political nature of the case against Khodorkovsky, and because they felt the case was discriminatory.

It was an incredible slap at the face of the very legitimacy of the Russian process. I would have never thought imaginable we would get that decision from the Swiss. After getting that, I think ultimately suggesting that compensation will be granted to the individuals from whom the Kremlin has stolen all this money, isn't that big a leap.

MONICA ATTARD: Now, you were expelled from Russia in 2005. Can you tell us a little bit about what happened there? Police burst into your hotel room.

ROBERT AMSTERDAM: Well firstly, let me say, and it's more important than my own arrest, that two Russian lawyers that I know are still in jail. One of them, Svetlana Bakhmina, her apartment was broken into at five in the morning - 32-year-old woman taken in front of her two young children, interrogated 'til she collapsed, ah, then charged with completely fraudulent charges, driven to the point of near insanity and not allowed to see or speak to her children, and then sentenced to seven years so that her minor children and her could not be reunited. Had it been six years they could have been. And she's now in a labour camp in the Ural Mountains, a hostage for her boss, who the procuracy wants to have brought back to Russia.

Another individual lawyer, Alexanian, is again in jail, I think starting his second or third year. So, when I was arrested, Bakhmina was already in jail. So I had no idea as to where this was going to lead but I was very fortunate in that having a passport of a foreign country, um, I was able to, you know, be deported as opposed to thrown in jail. But, frankly, when they come for you at one in the morning, you're never quite sure where you're going.

Click here to read the full transcript.

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Astronauts Faiz Khaleed (R) of Malaysia, Michael Fincke of the U.S. (L) and Salizhan Sharipov of Russia wave as they start their exams in Star City Cosmonaut Training Centre outside Moscow, September 17, 2007. (Photo: REUTERS/Sergei Remezov)

Backing his assertion that the race for the presidency is wide open, Vladimir Putin has discussed five possible successors to his presidency, including Victor Zubkov, Yabloko’s Grigory Yavlinksy, and the Communist Party’s Gennady Zyuganov, although he did not mention Sergei Ivanov or Dmitry Medvedev without prompting. The Guardian reported that analysts believe Putin might want a weak one-term president so that he can return to power in 2012, and the BBC reported that Putin is likely to remain an influential political figure. An International Herald Tribune editorial argues that Putin’s Russia shows “distinct echoes of the Soviet Union”. The Times asserts that the next President will be the candidate with Kremlin backing, and Radio Free Europe discusses the siloviki’s control over Russian political life. Investors are remaining “cautious” as they await the appointment of the new government. Yabloko’s Yavlinsky spoke optimistically about his party winning a spot in the next Duma, and in “full-scale PR action”, the United Russia party held a Day of Jogging on the weekend, attracting 10,000 participants. It has emerged that Denis Manturov, a close ally of Putin and head of Oboronprom, was appointed deputy industry and energy minister the day before the resignation of Mikhail Fradkov. It is thought that First Vice Premier Dmitry Medvedev will vacate his post, and is expected to replace Alexey Miller as Gazprom CEO.

Whilst France is warning the world to prepare for war with Iran, it has been reported that enriched uranium fuel is ready to be shipped from Russia to Iran's first nuclear power plant. On leaving his post as Indian Ambassador to Moscow, Kanwal Sibal said that “Moscow will be the first to benefit from nuclear cooperation between India and the United States.” Finland’s Defense Ministry suspects Russian IL-76 military-cargo of intruding on Finland’s airspace. The Sunday Times wrote that Britain “is finding the reshaped Russia uncomfortable to live with,” and ponders the possible onset of a new Cold War.

The Independent reported that Putin said Russia has no intention of cutting oil and gas production, and regional energy reports are predicting increased gas output from Siberia. Gazprom and German utility E.On have agreed to spend a combined $8.6bn gaining control of two power generators belonging to United Energy System, the national utility being split up by the state. British energy minister Malcolm Wicks is in the Caspian region this week to lobby for a gas pipeline that would supply Europe directly with gas – and bypass Russia. Rexam’s $297 million purchase of Russia's Rostar was blocked by the country's antitrust body which said the combination would distort competition in the beverage can industry, although its real reasons for blocking the move likely have more to do with the fact that Rostar is owned by Oleg Deripaska. Bankers are speculating that the recent rush of Russian IPOs could be hit by the turmoil in global markets. Russia’s cellular giant MTS has paid €310 million to buy out 80% of K-Telecom, Armenia’s biggest operator.

The big story in the UK press today is that Andrei Lugovoi, the former Federal Guard Service officer wanted in Britain for the murder of Alexander Litvinenko, could soon have immunity from prosecution, as he intends to make a bid for a Duma seat, thanks to some help from Liberal Democratic Party leader Vladimir Zhirinovsky.

Salavat Karimov, who led the investigation of Mikhail Khodorkovsky, is retiring from the Prosecutor General’s Office. Nezavisimaya Gazeta said it feared the authorities were trying to silence its critical reporting by arresting its deputy editor, Boris Zemtsov, last week on extortion charges. Moscow’s Basmanny Court has detained Shamil Buraev, the former chief of Achkhoi-Martan in Chechnya, on suspicion of “arranging” the murder of Anna Politkovskaya.

And from the BBC today: Russia blasts gerbils into space

Below is an excerpt of exclusive translation of a long investigative article from German magazine Stern by journalist Hans-Martin Tillack. The article may be somewhat over-dramatized (characterizing Gazprom's acquisitions as an "invasion" really misses the point), but nevertheless contains excellent and detailed information on Gazprom's diverse shareholdings in Germany. The original German version can be viewed here, and a seven-page PDF of the complete article can be downloaded here. For those interested, a February interview I did with Stern can be found here.

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A tale of gazoviki, money and greed

Dubious methods and shady partners

The managers of the Gazprom corporation are casting a network of front companies over Europe – but in whose interests?

By Hans-Martin Tillack, Stern Magazine, Sept. 13, 2007, page 192

This is the story of an invasion. A massive campaign, planned well in advance. The General Staff is located far away in the east, in Moscow, the capital of Russia. The target area is Germany – and the rest of Western Europe.

The invasion is about gas. But, even more, it is about large amounts of money. Large amounts of money for very few people. People who want above all to remain anonymous.

This is the story of Gazprom, the Russian gas giant. With a market value of 180 billion euros – more than double that of Siemens – Gazprom is the biggest company in Europe and, at the same time, one of the least transparent. Indeed, Gazprom seems to have elevated concealment to the rank of a business principle.

For former German Chancellor Gerhard Schröder (SPD) it was a “point of honor” to accept 250,000 euros a year for sitting on the shareholders’ committee of Gazprom’s subsidiary Nord Stream. According to Schröder it was in the interests “of our country and of Europe.”

But the story of this invasion is teeming with ex-Stasi officers and shady figures. It is a story of letterbox companies that do not even have a letterbox, of companies nestled within companies. The overriding impression? That they are concealing flows of funds.

In Russia, they call Gazprom’s managers gazoviki. Many of them come from the KGB, or from other friends of the Russian President Vladimir Putin. In their own country, they sustain losses due to state-controlled prices for gas. So the gazoviki have to turn to the European end consumer.

Those in the know call this “moving downstream.” According to energy expert Andreas Heinrich, “you can make bigger profits downstream.”

The invaders have already made excellent progress.

Gazprom Gas has a market share of more than 40 percent, which could rise to 60 percent in the coming years. Other countries – such as Finland – are already 100-percent dependent on gas supplies by Gazprom.

The gazoviki have established their first bridgehead on Berlin’s Markgrafenstrasse.

Here resides Gazprom’s German subsidiary Gazprom Germania. In Germany, Eon and BASF are Gazprom’s two most important partners. Together with Gazprom they are constructing a pipeline through the Baltic Sea at a cost of six billion euros, with planned completion in 2010.

Under former German Democratic Republic gas functionary Hans-Joachim Gornig, Gazprom Germania has built up for its Moscow bosses a complex network of shareholdings in companies that stretch right across Europe. Gazprom Germania also invests enormous sums in public relations – up to 125 million euros in the case of the German Bundesliga team Schalke 04. And when rumors appear about share acquisitions at RWE or Ruhrgas, the alarm bells start ringing in Germany.

And with good reason. “It is very difficult to find a company that is not on our watch list,” says Gazprom Vice President Alexander Medvedyev.

Continue reading the full article here.

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Who says I'm colorless? New Russian Prime Minister Viktor Zubkov holds flowers at the parliament in Moscow on Friday, Sept. 14, 2007. (Photo: AP)

The Duma has approved Viktor Zubkov, Vladimir Putin’s surprise Prime Minister, a move which is being compared to Boris Yeltsin’s appointment of Putin as PM in 1999. Zubkov addressed the final configuration of the previous government line-up prior to the vote, placing emphasis on rebuilding Russia's military-industrial complex and on combating corruption, calling it a "major issue in our efforts to increase the effectiveness of the state administration." Analysts are more skeptical. “Corruption is ubiquitous in Russia. It is the very texture of Russian life,” Masha Lipman told the MT. The Times of London reports that the reshuffle could strengthen party politics in Russia, and an editorial in The Guardian argues that “Elections in Russia are less about offering genuine choice than providing a chance for voters to affirm a candidate who has already been anointed.” Putin implied today that Zubkov was in the running for the presidency. Also today, Putin has dismissed the commander of the Russian Navy.

Russian cities Norilsk and Dzerzhinsk are on an annual list of the ten dirtiest places in the world, as compiled by US ecological organization the Blacksmith Institute. Rosneft, Gazprom and LUKoil have all made it into Platts’ annual Top 250 Global Energy Companies list. The number of Russian companies in the rating has almost doubled since last year. The Magnitogorsk Iron & Steel Works is to receive a $507m loan for its largest investment project this decade, announced a consortium of banks including Deutsche Bank and ABN Amro. In anticipation of a possible buy-out, Oleg Deripaska’s, Basic Element has been “aggressively” acquiring bonds of fallen oligarch Mikhail Gutseriev’s Russneft. The vice president of Transneft, Yury Lisin, has been made acting head of the company after Semyon Vainshtok stepped down in order to take over preparations for the 2014 Sochi Winter Olympics. The deputy head of the Federal Service for Financial Markets has called for the state to tap the phone lines of financial institutions to help crack down on insider trading.

Plans for a US missile shield in Poland and the Czech Republic have hit obstacles in Germany, Austria, Slovakia and Slovenia - Russia is already an opponent of the plan. The debate over ownership of Arctic territory is set to arise in May 2008. José Manuel Barroso, President of the European Commission, says that proposed procedures to bar foreign investors from buying energy assets in Europe are not targeted at the Russia’s state-run energy companies, but it is thought that limits could possibly affect the Gazprom monopoly. Russia’s intention to withdraw from the Conventional Forces in Europe (CFE) Treaty has provoked the German Foreign Minister, Frank-Walter Steinmeier, to call for a conference on the matter, pleading that the treaty is in Europe’s interests. Due to impending gambling restrictions, the owners of Ritzio Entertainment, Russia’s largest gambling operator, are in talks to buy franchise rights to Virgin Megastores. An editor at a Russian newspaper has been detained on suspicion of blackmailing a senior official. And a Moscow-based political think thank, the Middle East Institute, has called US President George Bush’s announcement of a partial withdrawal from Iraq “a pure PR move."

The global media is obsessed with the beginning of the trial of the "Bitsevsky Maniac" - Moscow's worst serial killer in decades (49 murders), who would routinely lead his victims to the corner of Bitsevsky Park to visit his pet dog's grave before bludgeoning them with a bottle. America's biggest diaper company announced plans to build a factory in Russia.

Sometimes the best indication of what Gazprom is going to do is what they specifically insist they won't do. Perhaps for this reason, rumors on European markets that Gazprom is interested in acquiring the French steel pipe manufacturer Vallourec simply won't die down, despite the Russians' repeated statements that they are not interested in this acquisition.

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The Daily Mail, which was one of the first papers to carry the rumor, reports that Vallourec may be prepared to accept an offer from Gazprom for 280 euros a share, and the FT Alphaville Blog estimates that this acquisition could cost Gazprom upwards of 12 billion euros (a small price to pay to contribute to Russia's revival as a world power). An analysis from Forbes, excepted below, speculates that although Vallourec makes perfect strategic sense for Gazprom, the Russians are especially interested in doing more business in France as opposed to Britain for political reasons. As this potential deal develops further, we are sure to see further controversy and concern.

Forbes:

Nomura analyst Xavier Grunauer said that the fact that Gazprom had actually issued an outright denial - often it allows such speculation to waft over it - was itself interesting. "Something may be cooking," he said.

One possibility could be a tie up between the two companies, by which Vallourec supplies Gazprom with specialist services and equipment. Some of Gazprom's ventures have taken it into inhospitable conditions such as the Shtokman project in the Barent Sea, for which Vallourec could provide steel products.

"There may be an opportunity for the French company to help Gazprom in their endeavors," he said. "It is possible that they may be included in something fairly significant."

One reason that the rumors are refusing to die is that the acquisition of Vallourec would make strategic sense for Gazprom or any energy company trying to tap into new crude supplies as current reserves dry up. Vallourec already provides specialist vertical piping - used for drilling rather than long distance transportation - to some of the world's leading petroleum companies, such as Total (nyse: TOT - news - people ), Exxon Mobil, Petrobras (nyse: PZE - news - people ) and Royal Dutch Shell (nyse: RDSA - news - people ). One possibility is that the acquisition could be made not by Gazprom directly but by a company linked to it.

The fact that it is a French company also counts in Vallourec's favor when it comes to speculation about Gazprom. As Russia's relations with Britain have chilled recently, relations with France have got increasingly cosy. A meeting with President Vladimir Putin and France's President Nicholas Sarkozy was thought to have helped Total score a major victory in becoming the operator of Russia's Shtokman fields.

Below is a BBC newsreel covering the major shift in government in Russia. Not much new information, and lots of the old theories get circulated here, but we are also treated to some of the strangely staged footage that was aired on Russian television.

Just saw this in the FT:

"Kremlinology is not an exact science."

Gee, thanks for imparting that bit of wisdom.

“It was too early to put Putin in. Someone else had to fill the gap. I needed someone to serve as decoy.” - From Boris Yeltsin’s memoir “Midnight Diaries” (page 284) on the appointment of Vladimir Putin as Prime Minister. Putin was Yeltsin’s favored successor as early as March 1999, but in order to protect him from the attacks of his opponents, Yeltsin appointed Sergei Stepashin to fill in as PM for the dismissed Primakov.

There’s nothing quite like a good September political surprise from the Kremlin (though it’s tough to top Yeltsin’s move on the Duma 14 years ago). Few people, perhaps not even the new premier Viktor Zubkov himself, could say they were expecting yesterday’s events.

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So what does this all mean? Does the dismissal (technically a “resignation”) of Mikhail Fradkov and the entire cabinet signal the true beginning of the election season? Has anything been revealed in regards to Putin’s choice of a successor? Does the rapid appointment of the relatively unknown Zubkov show confidence and stability? In my opinion, no, no, and no.

First and foremost, as I have commented earlier on this blog, the very execution of Fradkov’s “immaculate resignation” was done in such a way as to invite immediate speculation that we were not getting the full story. Fradkov reasoned that he should resign in order to give the president “full freedom in…decisions on the shape and organisation of the power structure in connection with the upcoming political events.” Putin vaguely referred to “mistakes and glitches” as though Fradkov had failed to fulfill his duties. What these “mistakes” exactly were, no one seems to know – it only takes a pedestrian comparison with the resignation of the embattled Japanese PM Shinzo Abe on the same day to immediately grasp the kind of political opacity we are going to be dealing with through the succession period.

In other words, given the paucity of good information, I don’t think that anybody can really be sure of anything of this point, yet everybody is talking. Putin’s Zubkov shuffle has been a feast of fodder for the pundits, and theories have flourished. Unlike many commentators out there, I’ll do my best to refrain from making broad sweeping statements with regard to the true political meaning of this shuffle, and just share a few ideas that occur to me.

The case for Zubkov being a placeholder? The succession question has been debated vigorously at great length in many different forums, and it seems that everybody has their favorite horse – Viktor Zubkov is likely not one of them. With so little reliable information to draw upon, most analysts point back to the examples of both Boris Yeltsin and Vladimir Putin rising out of obscurity, so there is certainly credibility to the dark horse theory – especially a dark horse that certain elements believe will protect them from investigations down the road.

Furthermore, it doesn’t add up that we have one puppet replacing another puppet – Fradkov was un-influential, obedient, and pliable (though some theories had already eliminated him from the succession race simply for being bald). Zubkov, by all indications, is largely similar in this respect, even if Putin is reputed to have a lot of respect for him. (It should be noted that Zubkov is not as much of a total unknown entity that many are claiming he is – although he kept a low profile, his record of performance is respected among some groups.) This does not appear to be similar to the removals of Primakov or Kasyanov, who were both dismissed as their independent political support grew.

I also think it is far too early for Putin to tip his hand. If he learned anything from his rise up through the ranks of power, he would understand that Russian political leaders wait until the last minute possible to reveal their preferred successors, and promote decoys to attract the attacks of their opponents.

However, some will argue that Putin enjoys a level of popularity that may allow him more maneuverability than his predecessors. Writing in the Economist, Edward Lucas seems to support the theory that the loyal Zubkov could make for a nice proxy president while Putin continues to govern as the head of Russia’s Security Council (I am only assuming Lucas wrote this article because he is fond of using the phrase “nyet faktov, tolko versii” – no facts, all theories). However I think there is far more turbulence inside the Kremlin than most are able to see, making this theory unlikely.

The resignation of Fradkov largely appears to have been requested by one of the various competing blocs within the Kremlin. But instead of appointing a clear silovik prime minister (most agree that Zubkov is unlikely to have ever worked for the KGB), it seems possible that this selection may signal the growing influence of a new group – a group not necessarily tied the former ruling core linked to the FSB (although some think Zubkov is a plant). There have been other indications of a quiet sea change happening inside the Kremlin, including Yulia Latynina’s argument that Rosneft’s Igor Sechin is facing tough opponents (who may have blocked him from acquiring Russneft assets) as well as the recent shake up at the Prosecutor General’s office.

All things considered, optimists may have some grounds to think that Zubkov’s appointment can be welcomed with some hope for the moment. Perhaps Zubkov will be able to carve out some autonomy from the power struggles that will begin playing out with increasing intensity, and bring some fresh thinking to a government that currently finds itself in crisis in its domestic freedoms and international relations. At the very least, on the surface, he has the resume of a pro-business corruption fighter, and he is believed to marginally more free from the mentality of paranoia and suspicion that has dominated siloviki policy. Clearly we must scrutinize his participation in the politically motivated campaigns led by the tax and anti-money laundering agencies at the behest of the government. However, there are precedents of the dark horse establishing an independent support base.

Indeed, through his prior role as anti-money laundering czar, one must assume that Zubkov is by no stretch a weak figure. He surely has detailed knowledge of sensitive information about virtually all of the leading Russian officials who have established political power bases upon riches and influence attained via their stewardship of state-controlled energy companies. Zubkov may be a more powerful arbiter of the Kremlin’s competing clans than many are assuming him capable of.

All in all, it is far too early and there is not enough information to make reliable predictions at this point – but what seems clear to me is that the fighting between the Kremlin’s competing groups is getting more and more intense, and Putin’s status as a hostage to these disputes makes for a powerful reminder of the most critical weaknesses of Russia’s model of sovereign democracy and the vertical of power. Attempts to conceal the considerable instability in the halls of power may have had some success to date, but the potential for the situation to spiral out of anyone’s control, including Putin’s, remains high.

Putin and his Relatives

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By the Polittechnologist

The new appointment of a prime minister, seeming so strange to many, actually fits perfectly into the logic of the recent actions of Russian President Vladimir Putin.

Vlad loves himself very much and aspires to live up to his name (“Vladimir” comes from the Ancient Russian “Vladei mirom” – rule the world). He understands that in order to rule, you’ve got to have weapons and armed hirelings. That’s why he travels to the Muslims in Indonesia and the United Arab Emirates and brings them weapons as gifts. He thinks they won’t betray him any more, like at one time with the Chechen partisans.

Vlad understands that you mustn’t give up the power you have now – nobody’s going to give it back to you. Vlad is afraid he’ll be betrayed and denied access to the cherished suitcase containing the nuclear button. If you’ve got this suitcase, everything else in Russia comes to you automatically – the money, the glory, and the success. But if you let go of it even for a moment, you’ll never be able to get it back again. Take a look at Ivanov and Medvedev – what kind of “successors” are these??? Vlad doesn’t trust them – they’ll take away the button and won’t give it back. Furthermore, they might even release Khodorkovsky from jail in their enthusiasm. This is very bad for Vlad. He locked him up – now he’s got to keep a watch on him.

Vlad has come up with a brilliant plan. Bring a third force into the Kremlin – unprepossessing people who even seem to be devoid of any substance at first glance. But they will be loyal to him (so he thinks) to their dying day. Imagine if you’re the director of a furniture factory and suddenly you’re appointed Minister of Defense??? Having gotten your hands on tanks and planes and the largest budget, you’d be ready (by the way, this depends on the person’s individual traits, because a furniture factory director with any decency would have refused such a position) to kiss the backside of your benefactor, because you’re nothing in this world now without him.

And what if you were transformed from a collective farm chairman into the prime minister??? I think it will take the Western reader a great deal of time to understand just what a collective farm chairman is. If you can’t, just write and I’ll explain. I’ll keep silent about the details of the gratitude on the part of the former “man of the earth”. But at 66 years of age, it truly will know no bounds.

Vlad is surrounding himself with small people who make up for their short-sightedness with a fierce loyalty. People like Zubkov and Serdyukov. He thinks that they, like the Muslims, will not betray him and will help him hold on to power. He’s creating a new “family” around himself. At first I’d thought that his family was Sechin and Ustinov, whose respective children are already living together in marital bliss. Now I’m seeing a new family. Serdyukov (minister of defense) and Zubkov (prime-minister) are also related by marriage. The premier is the father-in-law of our top soldier. The St. Petersburg papers wrote about this several months ago already. And Vlad needs just such a family – loyal and without any ambitions. After all, Vlad’s college buddies might just recall that they had once gotten better grades than him and decide that they deserve better now. But former subordinates who have suddenly been so unexpectedly blessed won’t. Nor will they release Khodorkovsky. So I feel I can say with a great deal of confidence that our President has decided to go for a third term. You’ll see…

From Stratfor:

Russia: Protesters Light Themselves On Fire September 13, 2007 14 06 GMT

Two Russian activists from the Yabloko opposition party set themselves on fire Sept. 13 in protest of what they call "Operation Successor," the Russian practice of allowing the president to appoint his successor, as President Vladimir Putin seems likely to do. The protesters, Ilya Yashin and Aleksandr Shurshev, were driven to a Moscow hospital by ambulances stationed at the demonstration. They suffered minor carbon dioxide poisoning, according to Ekho Moskvy radio.

Yashin maintains a blog here, where a video of the protest is posted.

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Russian President Vladimir Putin feeds a calf while touring a milk farm in the village of Zorinskiye Dvory in the western Belgorod region of Russia on Thursday, Sept. 13, 2007. (Photo: AP)

Reactions to Vladimir Putin’s surprising new choice of Prime Minister have been mixed. Viktor Zubkov, described by some as "colorless," is simultaneously seen as good and bad for the economy. Zubkov and Putin are old acquaintances who have remained personal friends since working together in St Petersburg City Hall in 1992. Many view the appointment a ‘pre-election power ploy’. Zubkov himself says he has not ruled out the possibility of running for the presidency.

The Moscow City Court presidium has upheld a ruling that an investigation of new charges against Mikhail Khodorkovsky was unlawful. Ukrainian President Viktor Yushchenko has named three suspects who may have poisoned him. Following Yushchenko’s complaint to the UK media that an investigation of his case was being blocked, Moscow has agreed to establish an expert commission to participate.

Just two days after accumulating a blocking stake in Norilsk Nickel, Mikhail Prokhorov is said to have done the same with Polyus Gold. LUKoil’s second-quarter profits have risen 8.4% to a new record. VimpelCom has agreed to form a joint venture in Vietnam with a $1bn investment to develop the country’s mobile network. The Duma is modifying its restrictions on foreign investment. Power Machines stock denied to Siemens could be sold to Severstal owner Alexey Mordashov. Kholmogorneftegaz, a subsidiary of Gazprom’s oil-producing arm, has won a tender to develop two oil fields in Eastern Siberia.

In Cold War-style, details of a top-secret new Russian nuclear submarine were “inadvertently” posted on a public website. Russian and US defence ministers will discuss the joint use of the Gabala radar Russia currently leases from Azerbaijan. Sergei Lavrov, Russia’s acting foreign minister, will visit Paraguay this week to discuss ‘cooperation between our countries’ including a possible Russian Embassy in the Paraguayan capital.

From Yulia Latynina in the Moscow Times, we are reminded of the bulldogs fighting under the carpet in the Kremlin - be it over billions stolen from Yukos, or the fresh kill of Russneft:

Moscow's Tverskoi District Court, for example, froze the assets of oil company Russneft on Aug. 9. Why? Two people were trying to get hold of Russneft -- Igor Sechin, deputy chief of the presidential administration and chairman of state-owned oil major Rosneft, and Oleg Deripaska, the Kremlin-friendly tycoon who heads the holding company Basic Element. With Putin's blessing, Deripaska wants to buy Russneft.

Deripaska would likely sell Russneft to the state later. So why arrest the shares?

One reason may have been concern that, should either of the first deputy prime ministers, Dmitry Medvedev or Sergei Ivanov, become president, Deripaska might turn around and sell Russneft to a company controlled by Sechin. Preventing Deripaska from selling after the elections could diminish Sechin's political clout.

This analysis suggests that the battle for Russneft is not just commercial in nature: At stake is the political influence of people within Putin's political circle -- influence measured in the billions of dollars.

With Mikhail Fradkov's carefully prepared resignation speech, we are reminded that Russia is desperate to at least "go through the motions" of appearing like a functional democracy. It is astonishing that we are being asked to believe that this is a normal, voluntary, and legitimate resignation speech, rather than a docile employee following orders from his owners. More commentary on these developments to come.

From Kremlin.ru:

PRIME MINISTER MIKHAIL FRADKOV: Vladimir Vladimirovich, the country is on the eve of important political events. First the State Duma election and then the presidential election lie ahead. The Government is playing a well coordinated part in this process and working hard in my view. I understand the political processes taking place at the moment and I would like to see you have as free a hand as possible in making decisions, including human resource decisions. I think that the right course of action would be for me to take the initiative and ask to step down from the office of prime minister in order to give you full freedom in your decisions on the shape and organisation of the power structure in connection with the upcoming political events.

I would like to thank you for the confidence and full support you have given me in my work as prime minister over more than three-and-a-half years, and I ask you to please accept my resignation.
...
MIKHAIL FRADKOV: Thank you, Vladimir Vladimirovich, for your high assessment of the Government’s work and for the support and trust you have shown me personally. I think that this is the right decision. It is an objective decision and it will help to ensure continuation of the current policies and maintain stability in our country.

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A new ordnance, claimed by the Russian military the world's most powerful non-nuclear bomb, explodes in a giant fireball during a test in this undated television image shown by Russian Channel One television, Moscow, Tuesday, Sept. 11, 2007. (Photo: AP)

A special report at The Economist is forecasting at least 7% growth for Russia’s ‘rosy economy’ this year, but says that the rate of expansion in the oil and gas industry will be slower than it was earlier in the year. Russia’s metals and mining industries continue to go from strength to strength. Polyus Gold said that it had become one of the world's top five gold mining companies in terms of proved and probable reserves. Russian metals giant GMK Norilsk Nickel is creating an international mining and metallurgical division to be headed by managers of Canada’s LionOre. Severstal-Avto and Fiat are putting together a venture to focus on distribution. Rosneft has declared it won’t renew its crude supply contract with China’s CNPC after 2010 unless the terms are changed. Apparently Rosneft has stolen enough refining capacity from Yukos to enable them to meet the demands of this initiative.

Russia's antitrust agency has denied a request from German conglomerate Siemens AG to expand its stake in Power Machines, Russia's leading turbine manufacturer. The authorities said that if Siemens were allowed to dominate the market for equipment for the electricity generation plants, there would be a ‘reduction in competition’, although Russia is prepared to allow foreign companies to control up to a quarter of its electricity generation industry. A partner with Ernst & Young said that as many as 90% of foreign investors are prepared to expand their businesses in Russia.

With three months still to go before the elections, there is no shortage of gloom and panic in the media, with one journalist announcing that, “A lack of transparency is the distinguishing feature of politics under Putin.” Fulfilling this prophecy, Putin surprised everyone today by dissolving the Russian government a few hours after testing the world's largest non-nuclear bomb (see photo above). Russia’s Prime Minister, Mikhail Fradkov, sweetened the blow with a strangely triumphant resignation speech full of admiration and awe for the president, saying that he wanted to provide Putin with as much freedom and flexibility as possible. In this power vacuum, Putin took off on a scheduled trip and asked the Duma speaker announce Fradkov's replacement - an almost entirely unknown money laundering watchdog from St. Petersburg named Viktor Zubkov. A Kremlin aide told Reuters that a change of president should give no cause for worry to foreign investors, as current pro-market policies are ‘firmly established’.

Topping up military tension between Russia and the west, Russian military have successfully tested a lethal, air-delivered ‘Father of all Bombs’ - claimed to be four times more powerful than the US ‘Mother of all Bombs’. It is not surprising that attempts to draw up a new agreement to replace the Strategic Arms Reduction Treaty are hitting difficulties due to ‘very serious’ differences between Russia and the US. Iran's foreign minister is likely to press Russia to complete construction of its Bushehr nuclear plant. Russia is said to be stalling because it does not fully trust President Mahmoud Ahmadinejad’s intentions.

The world press is having a field day with the news that workers in the Ulyanovsk region, Lenin’s birthplace, have been given the day off work today to procreate in exchange for prizes. ‘The Day of Conception’ was announced in a bid to boost the birth rate. A 4x4 will go to couples who give birth to a child on June 12th, Lenin’s birthday and Russia Day. As the International Herald Tribune puts it, ‘Make a baby. Win a car.’

The Times is reporting that a leaked document from Gazprom of a few months back suggests that the company was aware of “anti-Gazprom” attitudes in the UK. Supposedly, after reporting on the Gazprom/Dow Jones bid, a member of staff at The Times’ was robustly interviewed by someone from a Russian radio station who persistently tried to find out the story’s source.

Former German Chancellor Gerhard Schröder is back on the scene following a quiet summer, doing what he does best - working hard as the Kremlin's most expensive public relations rep (the price tag for these services was of course a chair on the Nord Stream board).

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Germany's former leader Gerhard Schroeder speaks during a presentation of the Russian edition of his book 'Decisions. My life in politics' in Moscow, September 8, 2007. REUTERS/Sergei Karpukhin

Last May I called Schröder a "Rent-a-Chancellor" after he tap danced for the press corps in Helsinki, declaring Vladimir Putin to be a "model democrat," and emphasizing the familiar and exhausted apologist argument that because of the tremendous and very real noble sacrifices made by Russia in WWII, their present autocracy and lawlessness must for some reason be welcomed and tolerated by the West (unfortunately this logic is still deployed with regularity). This week he has resumed his book tour (with a special guest in tow), using each and every media opportunity to chide Poland and the Czech Republic for being such troublesome neighbors, and encouraging Europe to ignore their concerns over security and energy and forge closer relations with Russia:

Speaking to press at a book-launch in Moscow on Saturday (8 September), he described Poland's outstanding veto on a new EU-Russia treaty as "narrow-minded nationalism" and called the US missile scheme "politically dangerous."

"For the good of Europe it's sometimes necessary to forget about the interests of individual [member] states," he said. Poland imposed the veto in late 2006 in reaction to a Russian ban on Polish meat exports.

"It is Germany's responsibility...to persuade the United States to abandon these plans," he added, on Washington's push to build two rocket and radar bases in Poland and the Czech republic by 2012.

Russian first deputy prime minister Dmitry Medvedev - also attending the book-launch - echoed the statement, saying it addresses "real worries" that Germany is no longer a "bridge" in east-west relations.

It doesn't take an expert historian to understand the rather troubling implications of a former chancellor of Germany making such comments about Poland. In many ways, Schröder's betrayal of Europe, comprising its energy security in exchange for personal profit from Gazprom, bears some similarity to the Molotov-Ribbentrop Pact - in that we once again have secret agreements between two governments that will have an enormous impact on the energy security of former Soviet states. If there is no longer any Cold War, then why must we think in terms of "spheres of influence"? Former Soviet states, whether they are new EU members or not, have earned their independence. A constructive and positive relationship with a stronger Russia should be possible without having to sacrifice the hard-earned sovereignty of these young democracies, as Schröder recommends that Europe do.

Then again we are dealing with man who used his political position to set up the largest energy deal on the continent, only to accept a lucrative position for that Russian company after leaving office - a man who sees little difference between the U.S. political system and Islamofascism. No wonder Rep. Tom Lantos called him a "prostitute". (hat tip for the video to Ray Drake)

Dennis Ross, author and fellow at the Washington Institute for Near East Policy, has the following column running in the New Republic.

Back in the USSR

by Dennis Ross - The New Republic

When surveying the challenges we face internationally, it is easy to put Russia on the back burner. Consider what the next president is likely to inherit internationally. In Iraq, disengaging in a way that contains the turmoil from spilling over into the region and still preserves some prospect of a political transition will be the new administration's first priority. Iran is also likely to be a major preoccupation, both because of its influence on what happens in Iraq and because it will likely be able to enrich uranium to weapons grade by some time next year, putting the country in a position to generate fissile material for nuclear warheads. In its last year, the Bush administration will have to choose either to live with a nuclear Iran or to militarily act to prevent this eventuality; whichever option it chooses will have profound consequences for its successors. Then, of course, there will be other challenges that demand our attention in the Middle East, from Hamas's consolidation of power in Gaza, to Hezbollah and Syria's positioning themselves for more conflict with Israel. And, if all this were not enough, China's rise will continue to affect the international landscape on issues as diverse as climate change, the world economy, and Darfur.

Russia tends to pale in comparison to these other concerns, and the tendency will be to pay it little heed. That would be a mistake. The less attention we pay to Russia, the more incentive we give Vladimir Putin and his successors to demonstrate that they are a power to be reckoned with and to act in ways that will be increasingly problematic. Already we see Russia staking out claims to the Arctic and its riches; manipulating its oil and gas supplies for political purposes; supporting separatist movements in neighboring states or what it calls the "near abroad"; and selling arms to rogue regimes like Iran and Syria. (The Russians are in the process of upgrading significantly Iran's air defense and have also been providing Syria large numbers advanced anti-air and anti-tank missiles; when the Syrians turned over some of these weapons to Hezbollah, the Russians looked the other way.)

To understand Russia's behavior and develop the right strategies for dealing with it, we need to appreciate the impact that lost status has had on the Russian psyche and the imperative it has created to restore the country's standing as a world power. Few non-Russians mourned the passing of the Soviet Union, but within the country, there is deep resentment of the United States for winning the cold war. Putin has called the collapse of the USSR one of the greatest geopolitical "tragedies of the twentieth century."

Today, the perception in Russia is not only that the United States sought to exploit Russian weakness but also to keep it weak. Expanding NATO into Eastern Europe might have been one thing but to extend it to include the Baltic states was something else. And President Bush's decision to abrogate the Anti-Ballistic Missile Treaty at the beginning of his administration was one final crushing blow. Here was a pillar that had established the Russians as the strategic equal of the United States, and we dismissed it--and the Russians were powerless to do anything about it.

But they are not powerless any more. They are an energy super-power, and they can throw their weight around. They can oppose U.S. initiatives whether in Europe or elsewhere. They can suspend arms treaties. And they can flout all the democratic norms domestically--with Putin re-establishing the Kremlin as the only source of power and law. Now it is we who appear to be able to do little about it.

But are we really so powerless when it comes to dealing with Russia--particularly given our other preoccupations? Russia's strength is actually deceptive. The ex-KGB cronies who now run Russia, including the large oil and gas conglomerates, seem better at seizing assets than at knowing how to use them. While the government is accruing enormous reserves given the high price of oil and natural gas--estimates run at over $460 billion--the money is not being invested in building new infrastructure to extract these hydro-carbons or transport them. Nor is it being invested domestically in education to build a knowledge-based society that does not depend only on extracting natural resources. Rather it is enriching the small Kremlin-based elite. Within the next few years, the Russians will face declining oil and natural gas outputs and will need help from the outside to preserve their current economic growth--which, of course, is also preserving public support for the Kremlin.

That help should not be provided cost free. We need to strike a balance that recognizes the Russian psychology but also requires adjustment in Russian behavior. Without transparency and laws that are not revoked when it suits the Kremlin power structure, there won't be necessary foreign investments. Similarly, if the Russians want to be seen as playing a leading role on the world stage, they have to be responsible. The Russian role need not be a given. We have no interest in humiliating the Russians, but if they want to be obstructionist on issues like Kosovo or Iran or Hamas or Syria, it will have consequences for how we will treat Russia and its interests.

Coordinating closely with the Europeans on the approach to the Russians will be essential for convincing the Russians that they have much to gain from cooperation and much to lose from staking out competitive positions. The desire for standing and global recognition can be a double-edged sword; it gives us something both to hold out to the Russians and also to deny. While the Bush administration may be either too preoccupied or too damaged internationally to approach Russia this way, the next administration will need to do so.

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US Ambassador to Russia William J. Burns, center, holds a candle during a liturgy at St. Catherine Church of Russian Orthodox Church Abroad to mark the sixth anniversary of Sept. 11 in downtown Moscow on Tuesday, Sept. 11, 2007. (AP Photo/ Mikhail Metzel )

Vladimir Putin has completed his visit to the United Arab Emirates. Putin's visit to the country's capital, Abu Dhabi, underscored Russia's influence in the region, where the United States has come under fire from all sides over its occupation of Iraq, with Putin appearing to gain ground in areas where the United States has long been unchallenged. Russia opposed the US over its invasion in Iraq from the outset. Putin’s opening discussion with UAE President Khalifa Bin Zaid Al-Nahayyan concerned modern Russian weapons, and it has emerged that in exchange for Russia’s $500m debt to the country, an agreement will be drawn up to allow the UAE to use the Russian GLONASS satellite navigation system, in which its primary interest is military. Russia’s Deputy Finance Minister, Sergey Storchak said, “We will give back part of the debt in products of heavy industry, including heavy equipment and you-know-what.” On his visit to Abu Dhabi, Putin defended the recent $1bn loan granted to Indonesia for arms purchases, saying that “Indonesia is an absolutely solvent country.” The Guardian reported that Russia is building an Akula-class nuclear submarine at its Komsomolsk-on-Amur shipyard for lease to the Indian navy which is expected to be ready for trials in 2009. The third round of talks on missile defense between Russia and the US is set to take place in Moscow in early October.

Senior investigator Salavat Karimov, who led the Prosecutor General's Office's two investigations of Mikhail Khodorkovsky, has been fired, after the head of Russia’s powerful new Investigative Committee, Alexander Bastrykin, declined to hire him. The new Committee will assume jurisdiction of over 60,000 criminal cases, including those of Litvinenko and Politkovskaya. In today’s Times, Ukrainian President Viktor Yushchenko accused Russia of blocking the investigation into the plot to assassinate him with poisonous dioxin.

The Moscow Times says that a new freeze on work permits for Moscow expatriates is unlikely to result in significant repercussions for the foreign investment climate, challenging the government’s commitment to promote foreign investment. Direct foreign investment is likely to surge in Russia and China in the next few years, however, although the growth could be undermined by protectionist sentiment in emerging and developed markets, according to a report by the Economist Intelligence Unit and Columbia University. A new report from Standard & Poor’s says that the global credit squeeze may negatively affect Russian banks in the second half of this year, and could weaken the financial achievements already made by the bigger banks in the region due to their challenges of increased operating costs and fewer opportunities to attract capital. But the country is seen as a safe haven for debt amidst the current credit crunch, with loans to Russian companies by American banks hitting new highs. At the World Social Security Forum in Moscow, First Deputy Prime Minister Dmitry Medvedev said that the demographic problem in Russia is limiting economic growth. Cambridge Energy Research Associates, a leading energy consultancy, has said that that European Commission’s efforts to liberalise Europe’s energy markets and reduce dependence on Russian gas imports will increase the risk of supply insecurity as the relationship with Russia deteriorates. Gazprom is going ahead with the South Stream gas project that aims to export Russian natural gas to the European Union. Turkmenistan, the second-largest natural-gas producer in the former Soviet Union, may back two additional pipelines to break Russia's hold on its exports.

A special report in today’s Moscow Times on the December election says that the most recent election was won with the help of Khodorkovsky’s arrest and United Russia’s policy of ‘redistribut[ing] national resources’. The article foresees Putin fishing in public opinion for a third term, and says it is an option which, if it proved to be popular enough, would easily merit the changing of the law to allow it.

Severstal confirmed that it has doubled net profit this year, and outlined plans to spend $6bn on domestic expansion and $4bn on projects in Italy and the United States. Billionaire Mikhail Prokhorov has accumulated a 25% stake in Norilsk Nickel, and could sell it to someone other than co-owner Vladimir Potanin, with BHP Billiton, Roman Abramovich and Oleg Deripaska named as possible buyers. At the Reuters Russia Investment Summit, financier and former media magnate Boris Jordan speculated that Surgutneftegaz, one of the country’s biggest oil companies, could be bought out by either Gazprom or Rosneft, predicting that only three oil giants will remain in Russia in the long-term. Gazprom has offered to buy out the remaining shareholders in Moscow utility OAO Mosenergo for $5.1 billion, seeking to gain a third of the country's electricity industry.

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With the latest reports that entry to Russia has been denied to yet another politically inconvenient individual (this time an American lawyer who was helping organize dock workers at the Kaliningrad port), it seems that the Kremlin is slowly erecting a modern version of the Iron Curtain in preparation for the elections.

Elizabeth Vladeck, a Columbia Law School grad who is married to a Russian citizen, was a recipient of David. W. Leebron Human Rights Fellowship, and was working at the Kaliningrad Human Rights Center in Russia. According to a press release from Columbia, her work consisted of the following: "training and educating unions on the legal tools available to them in bargaining. She also will represent workers before international bodies in legal proceedings under the labor code and the laws governing trade unions."

Vladeck's "crime"? To be associated with a group that receives some funding from the Ford Foundation and USAID. Not only does her case illustrate the Kremlin's intolerance of foreign funded civil society groups, but also serves as a reminder of their willingness to crush independent labor unions outside of the control of the Federation of Independent Trade Unions.

As the Washington Post report points out, the list of those denied visas is growing at an alarming rate:

In December 2002, Irene Stevenson, who worked for the AFL-CIO in Russia, was turned back at a Moscow airport "based on information provided by the FSB," the successor security agency of the KGB, according to a 2003 letter sent to a member of the Russian parliament by the Federal Border Service.

In recent years, Western attorneys for imprisoned oil tycoon Mikhail Khodorkovsky have been expelled or barred from Russia. Journalist Thomas de Waal, who wrote extensively on the strife-torn Caucasus in southern Russia, was denied a visa last year. A British lawyer, Bill Bowring, who worked with Russian plaintiffs appealing to the European Court of Human Rights, was turned back at a Moscow airport in 2005, as was William Browder, the largest foreign portfolio investor in Russia, the following year.

European energy policy remains confused and that is good news for Gazprom

By Tom Nicholls

At least with the French government you know where you stand. It doesn’t much care for the European Commission’s energy-liberalisation programme, especially the part about breaking up national champions in order to allow competition to take root.

In fact, instead of splitting up its big, bruising utilities – Gaz de France (GdF) and Electricité de France (EdF) – as Brussels would like, it seems hell-bent on making them bigger and more bruising.

The GdF merger with French utility Suez is back on – after 18 months of uncertainty. That uncertainty was largely the result of political opposition. Unions didn’t like it because it would result in the state being reduced from majority to minority shareholder: privatisation, in other words.

And it is back on because of political intervention: French president Nicolas Sarkozy has finally decided the merger is in the national interest and has strong-armed the Suez board into a new deal. (He wasn’t always so sure: when GdF was partially privatised in 2005, Sarkozy promised the government would retain 70% of the company, but that will not be possible under the present deal, which will see the state’s stake watered down to under 40%, but above the minimum of a third required by French law). Even the origins of the deal are political: it was conceived, in February 2006, as a blocking tactic against Enel’s attempted swoop for Suez.

And executives are duly singing from the government’s hymn sheet: Jean-François Cirelli, GdF's chief executive, has since described energy as a “strategic sector for all states. Nowhere are governments completely absent from the energy sector.”

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France's preferred position in the energy hierarchy

The result is undoubtedly a company of impressive size. The deal is worth an estimated 70 billion euros and creates the world's third-largest listed power firm, Europe's biggest gas buyer and gas seller, and the continent's largest LNG importer and buyer. Political motives notwithstanding, there is robust industrial logic to the deal – the two companies’ assets are largely complementary. Competition may even benefit too, even if this is not quite how Brussels would prefer to go about it – GdF will be able to challenge EdF in France’s electricity market by offering power supplies to its 10m customers using Suez’s electricity network.

The European Commission would like to see greater unbundling and less state involvement in energy. But it seems that it will have to accept a new politically driven market vision, with more activities being bundled into the portfolios of a small number of energy giants and with states retaining a strategic influence. It is a matter for debate whether the emerging oligopoly serves consumers any better than the monopoly system it replaced, but, for better or for worse, that is the market structure that the liberalisation drive seems to be creating.

It may yet prove effective, although, so far, as envisaged under the Commission’s liberalisation programme, competition has largely failed to flourish. Among the Commission’s complaints is that the continued dominance of the big boys – and their inclination to protect their patch – keeps new entrants out of the market. Cross-border trade is minimal, partly because there have not been the investments in infrastructure to enable it to happen and partly because new entrants are struggling to make their mark.

For the most part, the vision of a pan-European energy market has failed to emerge. Policy continues to be decided on a national basis and trade is largely restricted to within national borders. There is a possibility that the emergence of Euro-champions may result in a more coherent Europe-wide investment strategy, but, for now, Europe’s energy policy remains largely fragmented along national lines.

That market structure plays to Gazprom’s advantage. It can continue to appeal to narrow national interests, as it has done, for example, in Germany and, more recently, in Italy.

One solution to Brussels’ lack of clout would be to endow the Commission with the authority to set Europe-wide energy policy. But this is unlikely to go down well with the many governments that see energy as matter of vital national security and not something to give up lightly.

Even if the political will existed to support such an idea, it would, given the EU’s famous bureaucracy, take a very long time to implement. But in any case Europe-wide agreement on energy matters seems a distant prospect: the vested interests and energy needs of individual countries vary too widely for a solid consensus to form. There is, for example, no agreement on the role that nuclear energy should play going forward – and the European Commission ducked that very question when it revealed its energy strategy at the start of the year. This is a very big gap.

The Commission must now adapt to reality: it will have to drop its vision of a vibrantly competitive, interconnected Europe and do what it can to maximise competition within the constraints of the market structure favoured by the likes of France and Germany. That could, for example, involve finding ways to encourage greater investment in cross-border infrastructure, developing a consensus on nuclear power and encouraging investment in power plants fired by energy sources other than the natural gas that Russia is peddling.

But for now, European energy policy remains disjointed, confusing and in disarray, if indeed it can be said to exist at all.

A very thoughtful and supportive comment about RA guest blogger, journalist and environmental activist Grigory Pasko from Australian journalist Jill Singer:

Today, the Russian journalist Grigory Pasko is on a flight back to his homeland after visiting Australia during the APEC summit. Pasko was here to warn Australians of the danger of selling uranium to Putin.

Pasko served many years in a Russian labour camp for reporting on Russia's illegal dumping at sea of nuclear waste.

Shortly before his flight home he told me of his fears that he would be arrested upon his arrival home.

Why?

Because he had the guts to tell Australians of his concern that we are being hoodwinked and that Putin will not use our uranium exclusively for peaceful purposes.

If the likes of Paul Keating and John Howard really care about the Russian people, they should have the courage to stand up for the likes of Pasko, rather than cloak Putin in false glory.

I suppose that if we can thank APEC for anything, it is the revelation that our world is no longer divided along old-fashioned notions of communist red and conservative blue.

Today, it seems there is only one colour that counts, the colour of money.

Today the academic Robert Horvath has a column running in the Australian newspaper The Age which provides a rebuttal to former prime minister Paul Keating's recent apologist article advising Australia to embrace Vladimir Putin because of Russia's contributions in WWII. Horvath isn't the only one to disagree with Keating on this one. (hat tip - La Russophobe).

The Age:

IT WAS ironic that Paul Keating's exhortation for us to extend a warm welcome to Vladimir Putin was published in The Age on September 5, the anniversary of one of the most tragic events in Russian history.

It was on that day in 1918 that the Bolshevik regime issued its decree on the "Red Terror", which authorised the secret police, the Cheka, to conduct extrajudicial executions and to incarcerate "class enemies" in concentration camps. Many decades later, prisoners in the Gulag would mark that day with ceremonies in memory of the victims of the "Red Terror", which they understood to be the source of the violence that culminated in the mass slaughter of the 1930s.

In honouring Putin, Keating would like us to remember the sacrifices of the Russian people during the Second World War, but he forgets that Putin is a product of a repressive apparatus that has also devastated the lives of tens of millions of Russians.

Full article here.

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President of the United Arab Emirates Sheikh Khalifa bin Zayed al-Nahayan (R) presents Russia's President Vladimir Putin with the country's highest award in the Mushrif Palace in Abu Dhabi September 10, 2007. (Photo: Reuters)

In response to last week’s British interception of Russian aircraft, NATO Secretary-General Jaap de Hoop Scheffer has said that the alliance wants "a solid, trustful" relationship with Russia, and that it was up to Moscow to clarify whether it wanted the same. The British Foreign Secretary, David Miliband, has called for a tougher EU line on Russia, with emphasis on “responsibility,” saying that the approach should be “firm but not macho”. This is perhaps a veiled allusion to recent photographs in which Putin appeared bare-chested on a fishing trip, which British journalists have not taken kindly to. The Times referred to Putin’s look as “less Cossack and more cowboy.” The Independent today has run a profile piece accusing Putin of orchestrating “the recent and audacious acts of Russian belligerence.”

The big story in the UK today is that Israeli police have uncovered a neo-Nazi ring of Russian immigrants responsible for carrying out attacks on Jews and foreign workers. The story made The Guardian’s front page. Other startling news today is that Gazprom was revealed to have held talks over mounting a rival $5bn-plus offer for Dow Jones.

A reported 4,000 activists from Yabloko and the Other Russia coalition, including Garry Kasparov, marched against a skyscraper in St. Petersburg planned by Gazprom. "This skyscraper is ugly. It is absolutely clear it is an absurd, shameless and a disgraceful idea," Grigory Yavlinsky said. UNESCO also recently voiced concern about the project. Kasparov’s Other Russia meanwhile continues to struggle to come up with a single opposition candidate to challenge an expected Kremlin-backed candidate in the March presidential vote. Reuters today has said that the next election “promises to be a carefully orchestrated succession to President Vladimir Putin next year”.

Putin has announced that Russia’s policy towards key partners in Asia will not change when he leaves office, congratulating Chinese President Hu Jintao at the APEC Summit that "You and I have achieved the highest level of Russian-Chinese relations." The Russian President has just arrived in the United Arab Emirates to discuss “the development of trade and economic investment cooperation.” He told journalists on arrival in UAE that he still hoped to reach a compromise with the United States over its plans to deploy a missile shield in Eastern Europe.

Russia’s Economic Development Ministry will submit a draft ruling this week to speed up the promulgation of new export duties on crude oil and petroleum in an attempt to prevent oil firms exploiting a loophole that currently saves millions for oil firms. The Duma has reportedly completed its energy reforms, and Russia’s Industry and Energy Ministry has approved an Eastern Gas Program to create a unified system for gas supply and production in Eastern Siberia and the Far East, although the deal still needs China’s approval to seal the program’s export component. Approval seems certain, however, given that LUKoil and China National Petroleum Corporation have just signed a cooperation agreement. LUKoil has also announced that it will invest $1bn in a new plastic and petrochemicals facility at Ukraine’s Karpatnaftokhim. In other business news, Severstal is expected to more than double first-half profits for the year, with results to be released tomorrow. Electricity and thermal power group OGK-2 plans to raise $1.1bn through a secondary listing on the London Stock Exchange. The company is owned by UES, of which Gazprom holds a 10% stake. Rusal has announced the signing of a Letter of Intent with the Venezuelan Guayana Corporation to jointly explore opportunities to develop raw material and aluminum projects in Venezuela. Russia’s Alfa Group is in talks to buy Turkish supermarket chain Migros, and Rosneft has announced that it paid $42m for a Cyprus-registered company that owns filling stations in the Moscow region. A senior central banker has said that Russia’s oil and metals firms hold the key to current liquidity problems in the banking system.

Anna Politkovskaya has been posthumously nominated for the European Union's top human rights award.

There is a very interesting article by Fred Weir over at Christian Science Monitor about Mikhail Gutseriyev and the Russian government's attack and subsequent seizure via Basic Element of his oil company Russneft. As could be expected, there are some misunderstood references to Mikhail Khodorkovsky. CSM also has a short audio interview with the journalist about the story.

Robert Amsterdam is in Chile this week to debrief politicians and journalists on the Mikhail Khodorkovsky case. Below is a profile article from their leading newspaper, El Mercurio. Translation is forthcoming. Also, we are preparing to launch a Spanish language blog so that those interested can obtain more information related to these issues.

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El Mercurio:

Abogado del ex dueño de Yukos está en Chile y dice temer por vida de su cliente

Robert Amsterdam dice que detrás de todo está la KGB, que ha vuelto a gobernar Rusia

Germán Maldonado

"Es uno de los mayores robos de la historia", afirma el defensor de Mijaíl Jodorkovsky, cuya empresa petrolera estaba valorada en torno a los US$ 100 mil millones. Está preso desde hace 8 años en Siberia acusado de fraude al fisco.

Ha siso arrestado, amenazado y muchos de sus amigos y colegas en Rusia han perdido sus trabajos e incluso tiene a dos en la cárcel, uno de ellos en Siberia.

Robert Amsterdam, abogado del ex dueño de Yukos, el multimillonario Mijaíl Jodorkovsky se encuentra en Chile para sensibilizar a la opinión pública y denunciar las condiciones en las cuales se encuentra su cliente, privado desde hace ocho años de la libertad y enfrentando acusaciones de lavado de dinero.

Asimismo, para acusar la situación de Rusia, país donde, dice, la KGB gobierna y donde el 70% de los puestos claves son ocupados por integrantes de esta policía secreta.

No tiene pelos en la lengua para afirmar que las acusaciones contra su cliente ocultan tras de sí uno de los robos más grandes de la historia ya que le sustrajeron entre US$ 80 a 100 mil millones, algo que se hizo, dice "mediante remates falsos de activos que se fueron a una empresa donde el número dos de Putín, Igor Sechin, es el presidente".

Amsterdam dice que su cliente está preso en Siberia, "ha sido acuchillado, mantenido en un campo de Uranio, confinado a prisiones de aislamiento y en octubre debiese poder tener una salida. Sin embargo, ahora se le está acusando de lavado de dinero. Todo para mantenerlo en prisión".

Para Amsterdam detrás del desmantelamiento de Yukos está la pelea entre el libre mercado y los que quieren volver al antiguo régimen. "Jodorkovsky creía en el libre mercado", dice precisando que los actuales gobiernantes son precisamente los ex y actuales KGB. Señala que todo los días la vida de su cliente corre peligro y que si está vivo es porque sería muy difícil para el Kremlin negar su responsabilidad porque está dentro de una de sus cárceles y porque la KGB está muy encima del caso.

El hombre que fue símbolo de Rusia

Jodorkovsky con apenas 26 años, en 1989 creó el primer banco comercial de la extinta Unión Soviética. Su banco, el Menatep, adquirió los activos de la petrolera Yukos en 1995 y una tras otra compró las otras empresas del sector hasta formar un gran imperio que rozaba los US$ 100 mil millones. Pero su estrella se apagó cuando Jodorkovsky entró a la política y se hizo público que financiaba a opositores a Putin. En 2003, fue acusado de fraude y evasión tributaria.

The New York Times has a rather amusing article today about the Russian version of the American sitcom "Married with Children" - which, along with many other examples of cultural exports, has been a runaway hit among Russians. Does the popularity of U.S.-style sitcoms and other entertainment illustrate a gap between the Kremlin's fiercely anti-American mentality and everyday reality in Russia?

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(Photo: _dorothy_ on Flickr)

New York Times:

A drumbeat of anti-Americanism may be coming from the Kremlin these days, but across Russia people are embracing that quintessentially American genre, the television sitcom, not to mention one of its brassiest examples. And curiously enough, it is the Russian government that has effectively brought “Married With Children” to this land, which somehow made it through the latter half of the 20th century without the benefit of the laugh track.

The show’s success says something not only about changing tastes here but also about Russia’s standing. Sitcoms are typically grounded in middle-class life and poke fun at it. The popularity of Russian versions of “Married With Children” and other adaptations of American sitcoms suggests that Russia has gained enough stability and wealth in recent years that these jokes resonate with viewers.

“ ‘Married With Children,’ with its satire on the American middle class, fits the style of our channel well,” said Dmitri Troitsky, a senior executive at the Russian channel TNT, a Gazprom-owned network whose programming bent is roughly similar to that of the Fox network in the United States. “It seemed interesting and topical for us to do a parody on the Russian middle class.”

Full article here.

The following column by Robert Amsterdam was published in today's Charlotte Observer, among other McClatchy publications.

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From the Charlotte Observer:

Investors should know their venture rests on the whims of Putin

ROBERT R. AMSTERDAM

McClatchy-Tribune News Service

LONDON -- Foreign investors are increasingly wondering whether investing in Russia is worth the risks. As recently as 2003, Russia was a promising emerging market. Yet in the last four years, alarm bells have been ringing so often and so loudly that the most likely response of most foreign investors will be to seek opportunities elsewhere.

On one hand there are the success stories -- investors who have made a fast buck on the ballooning Russian stock markets and companies that have staked out a solid market share in an increasingly affluent Russia.

Yet on the other hand, there are illegal expropriations, the imprisonment or deportation of entrepreneurs, show trials and contract killings.

In Russia, law has become an instrument of the increasingly hubristic and corrupt political elite. Today's Kremlin disregards laws with impunity, while simultaneously using legal pretexts such as tax or environmental regulations to obtain what it wants. Russia is the most thoroughly corrupt among major powers in the world today.

Imposing tax liability is one of the Kremlin's favored means of pressuring businesses to do its bidding. The law is irrelevant.

To this day, the Kremlin stands behind the tax bills imposed on the Yukos Oil Co., including the 2004 tax assessment that drove the company into bankruptcy.

To break up and repossess Yukos Oil and to justify jailing CEO Mikhail Khodorkovsky, the company was charged $8 of tax per $1 of revenue in 2004. The company collapsed and billions of dollars of shareholder value evaporated as a result of the Kremlin's desire to retake control of the oil industry.

The Kremlin also tears up business deals at will -- even huge investment agreements with foreign companies that have poured billions of dollars into Russia. These companies are put in a chokehold until they surrender whatever it is that the Kremlin is after. Their CEOs will put on a brave face and tell shareholders that they have rescued a few billion dollars worth of assets, despite a state-sanctioned theft of billions more. No one is above the extortion tactics of the Kremlin.

With government and the justice system in severe disrepute, the market and the rule of law have lost out to a free-for-all. The Kremlin does not seem to care enough about the reputational costs of the manner in which it treats investors, and it should not be surprised to find that foreign investors no longer want to take risks in Russia.

In such a climate, Russia's own people have been betrayed by their leadership. Both entrepreneurs and the rest of the populace have been and will continue to be the first victims of foreign investors' decisions to seek better investment conditions elsewhere.

Whether or not Russia's leadership will wake up to the country's true market potential is an open question. There is still hope for that potential to be unlocked, not by thievery but by real economic fundamentals. For the time being, however, the Russian leadership has a long way to go to win the confidence of foreign investors.

Robert R. Amsterdam is founding partner of the law firm Amsterdam & Peroff. He is international defense counsel for jailed Yukos CEO Mikhail B. Khodorkovsky.

I have to confess that there is a certain admirable elegance to the criminal adventures of the Russian government - not only the strategies through which they drag other foreign corporations and politicians into their sticky webs of corruption and ill-gained profit, but also the style with which they do it. Take for example Gazprom at Sakhalin. One would be hard pressed to find another company with such atrocious grades on corporate governance, transparency, and social responsibility - yet when they decided to carry out a partial expropriation of the joint venture to secure the controlling stake, they sent in Oleg Mitvol, the state's environmental watchdog. What an exquisite irony! Here we have the "socially responsible" Russian government valiantly flying the Green flag, storming in on the big evil foreign investors to cripple them with regulatory attacks while claiming to be protecting their citizens from environmental damage. You gotta give to the Russians - unlike Hugo Chavez or the Algerians, when they steal, they also send a message.

A new article in Ethical Corporation today addresses the mysterious "disappearance" of environmental problems at Russian energy projects the moment that a state company takes control. The victims are not just shareholders and investors in these cases - there are real and legitimate environmental concerns that must be addressed - and I don't know about you, but I would feel more optimistic that corporate social responsibility could be achieved when you are dealing with a firm that actually listens to its shareholders...

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Extract from Ethical Corporation:

Gazprom – Moscow’s tightening grip on energy supply

Russian regulators are conducting environmental inspections at the now Gazprom-run Sakhalin pipeline project. But the Kremlin’s commitment to green standards remains in doubt
At the end of last year, Shell was forced to cede control of the Sakhalin oil project to Russia’s Gazprom. The move was prompted by the suspension by the Russian authorities of a key environmental certificate. Although real environmental concerns did exist, Shell’s forced demotion was widely seen as a political move by the Kremlin to reassert its control over vital resource assets.

Certainly, this political explanation seems to have been borne out by subsequent events – the environmental objections to the project seem largely to have evaporated since Sakhalin II entered Gazprom hands. This has left campaigners frustrated. “I cannot say that anything is OK. Everything is probably worse than it was before,” says Dmitry Lisitsyn, the head of Sakhalin Environment Watch, an environmental group based on the island.
...
It would seem unwise therefore to assume that developments in Sakhalin mean either that the Kremlin has decided to take environmental issues seriously, or that Gazprom is being disciplined in the same way as international companies. A more likely explanation lies in the fact that Shell is still involved in construction at Sakhalin II, and it, not Gazprom, is being blamed for the alleged construction violations. These events seem therefore to demonstrate not a change in Putin’s policy but, rather, more of the same from Moscow’s hard-man.

Following some brief talks at the APEC Summit in Sydney, Presidents George Bush and Vladimir Putin gave a short press conference, saying they discussed "important issues" and that the conversations have been "constructive" and "positive." In other words they said nothing at all.

However, in response to a little quip from Bush that during the Kennebunkport visit, Putin was the only one of the two to catch fish, the Russian president extended the following invitation:

PRESIDENT PUTIN: And we also agreed that we will go fishing not only in the United States but also in a Siberian river at some point.

Uh oh, George! You know what that means! Macho time with the Russian Marlboro man!

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(Reuters)

George better start working out - It seems that thanks to Putin, "fishing trip" has a whole new meaning. Perhaps Vladimir was feeling charitable toward his embattled colleague, who spent most of the summit making a colossal fool of himself.

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Maria Sharapova of Russia reacts during her match against Casey Dellacqua of Australia at the U.S. Open tennis tournament in Flushing Meadows, New York, August 30, 2007. (Photo: Reuters)

After Australian Prime Minister John Howard made it clear that he would be cautious regarding any sale of uranium to Moscow, it has been revealed that Australia will indeed be supplying uranium to Russia for processing and for use in the country’s nuclear reactors. Vladimir Putin said that there was no question of the uranium being put to military use, and that such an idea was "intentionally injected [...] to prevent cooperation." According to Putin, Russia intends to continue its talks with the United States regarding the ongoing dispute about US plans to deploy missile defense elements in Central Europe, and US President George Bush has called on Russia to engage with attempts to encourage Myanmar to take “concrete steps toward democracy.” India has suspended the payments on its $150m contract with Russia’s Rosoboronexport, saying that the new Sea Dragon systems installed into five II-38 patrol aircraft “failed to correspond to the technical design assignment.” UK newspapers are continuing to discuss yesterday’s RAF interception of eight Russian bombers, noting the cost of the exercise (estimated at over £160,000) and calling it “the biggest aerial confrontation between the two countries since the end of the Cold War.” The Times says that the exercise is “the latest example of Mr Putin’s ability to irritate the West with bold strokes that cost the Kremlin little and delight many ordinary Russians, who enjoy seeing Nato discomfited.” The BBC meanwhile is helping to promote Russia’s Lake Baikal as a tourist destination, running a story on “the Pearl of Siberia”.

The fiasco behind the rigged auctions of stolen Yukos assets took a few more turns for the worse, as former management have told the FT that they were approached by the American buyers Bob Foresman, vice-chairman of Renaissance Capital and Richard Deitz, president of US hedge fund VR Capital a few days before the sale and were offered a deal to drop their attachments to the assets. David Godfrey, a co-director of Yukos Finance BV, said that Mr. Deitz "sought my assurance that, if he did buy these assets, that we would participate and hand over the keys to him to all the underlying subsidiaries. ... He pressed me to articulate what it was we would accept [in exchange for dropping the lawsuits]. I declined to enter into that debate. ... He kept saying wouldn't you rather be dealing with us rather than Rosneft."

As the main political parties in the country compose their federal and regional party lists, speculation is mounting that Putin himself could head the list for the United Russia party. A political analyst said that "Putin's appointment at the head of the list would create two centers of power: The Kremlin and the State Duma," with the Moscow Times referring to the Duma a “redundant body”. In business news, Russia’s metal giant Severstal is buying up the country’s gold-bearing deposits, winning the tender for the Uryakhskoe deposit, outbidding competitors after increasing the starting price by over five times. Russia is to spend $5.15bn closing several of its old nuclear reactors in the hope that it will spark “a change of perception from Western companies, and Gazprom has announced that it will set up OOO Gaznadzor, its own environmental inspectorate, to coordinate with Russian agencies, after meeting with a flurry of ecological complaints regarding its involvement in the Sakhalin-2 project.

Greetings from the land down under. As I come to the end of my visit to Australia, I thought I would take a moment to put down some thoughts for my blog readers.

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It has been a very interesting week here, both for the perceptive and talented people I have had the opportunity to meet, as well as the important developments currently unfolding in Australian-Russian relations. As the APEC Summit in Sydney approaches, political tensions are high. Perhaps more than any other time over the past year, the world's attention is focused on Australia and its regional leadership role as both President George Bush and President Vladimir Putin both make state visits.

Amid this atmosphere of heightened interest, the highlight of my visit was the Sydney Summit on Russia held on Tuesday, where I gave the keynote address along with my colleague Grigory Pasko. Among the talented academics I was able to speak with were Professor Graeme Gill of the University of Sydney, the author Stephen Fortescue (whose excellent book is a must read for Russia observers), the analyst Dr. Alexey D. Muraviev, and many others. I had the opportunity to present a short new paper entitled “The Foreign Policy of the Siloviki,” which generated some interesting discussions and vigorous debate – though most of the proceedings were overshadowed by questions about Australia’s upcoming deal to send uranium to Russia.

As many of you have already gathered from the media coverage of the event, both Pasko and I took the logical but surprisingly “controversial” position that the extraordinary lack of rule of law in today’s Russia poses significant risks to global security, as whatever safeguards over the uranium trade offered by Kremlin cannot be taken at face value. Personally I was very surprised by the strong reaction from some sectors – illustrating a growing gap between public opinion and political support for the deal. Almost immediately following our comments, a rebuttal came from Foreign Minister Alexander Downer, later followed by the same sentiment expressed by U.S. Secretary of State Condoleezza Rice. Finally the embattled Prime Minister John Howard chimed in to state his trust and confidence in the Putin government.

So why, if a clear majority of Australian voters oppose selling uranium to Russia, would the Howard government back the deal? The answer is no doubt complicated, but it is in part due to the enormous business opportunities Howard’s supporters are envisioning – even at the cost to Australian sovereignty. While Russian investment in Australia is only about $6 billion and growing, exports from Australia to Russia more than doubled over the past year and a half – and the Kremlin is practically begging for more investment.

What some fail to understand is that the uranium deal is part and parcel of a much larger investment agreement: Sergei Novikov, a spokesman for the Russian Atomic Energy Agency, said that the agreement is “a political document … It just opens the possibilities for our companies to buy and to sell products and services, to exchange technologies, to work in the science sphere together.

But For Russia, the uranium deal is key; a core component of their strategy to further project their power and influence globally through energy relations – the goal is the generation of energy dependence leading back to an ever-shrinking group of decision makers not accountable to a voting public. Russia is currently in discussions to build and run nuclear power plants in China, India, Egypt, Morocco, Namibia, and Vietnam – not to mention their ongoing work at the Bushehr plant in Iran. Combined with gas and oil exports snaking through their pipelines to Europe, and soon to come LNG tankers supplying global markets, the extension of a nuclear power system across various nations will provide Russia with even further clout.

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A Russian technician works inside the nuclear power plant in Bushehr, south of Tehran, April 3, 2007. (Photo: Reuters)

In order to meet its stated goals on nuclear energy both at home and abroad, Russia badly needs help from Australia. In determining the Kremlin’s intentions, it is illustrative to examine the strategies used by Gazprom in Europe to co-opt at the source. Just as Gazprom wasn’t content to just sell gas, but rather own midstream and downstream distribution assets, the Russians are looking to vigorously invest at all levels of minerals, mining, and processing, and eventually buy Australia out (just look at Victor Raznikov actions with FMG, or the takeover of LionOre Mining International Ltd by Norilsk Nickel – and of course don’t forget about Rusal, who is also getting in on the action down under).

Yet despite this geopolitical encroachment on Australia, and the rapid rise of Russia's militarization of the region - most recently capped off by the $1 billion arms giveaway from the Kremlin to Indonesia (which must have made Downer a little embarrassed to have been defending Russia's peaceful motives only 24 hours earlier), the "regional titan" is looking quite complacent and hesitant to act. One news story even carried the headline "The Russians are coming, but Australia isn't worried."

There’s a huge new game in Asia, and it is very fluid. With 60% of the world's economy meeting in Sydney and a clear demonstration that Russia is intent on building its presence, this is not the time for Australia to miscalculate who their friends are. I do believe that the government understands that in the end, Russia is becoming a major competitor, a country that wants to take on the role as the price setter for the minerals and energy trade. But is the Howard strategy of engagement the right one? Is realism in this case politically possible? I can't purport to know all the answers, but as an outside observer, I think it says a lot when a president, who should be coasting on very high approval ratings following a successful APEC Summit, is instead losing points to an opposition that is mired in a humiliating strip-club fiasco. Now that says a lot about what Australian voters want.

Today the Financial Times is reporting that the American entities who purchased stolen Yukos assets in August actually approached former management in an attempt to clear the titles. If this isn't the most clear demonstration of complicity to a crime, than I don't know what is. More comments on this story to come...

Investors made backdoor Yukos approach

By Catherine Belton in Moscow

A group of western investors that bought the final set of Yukos assets, which included Dutch unit Yukos Finance BV, approached the oil group’s former management to obtain assurances about the assets just days before the bankruptcy auction, former Yukos management said.

“We’ve made it clear for the past several weeks that this auction is totally illegal,” said Bruce Misamore, Yukos’s former chief financial officer and former director of Yukos Finance BV.

“It is a strange situation when someone wins an illegal auction and comes to you in advance and tries to grease the skids.”

US real estate company Monte Valle bought the last lot of Yukos assets on August 15 for $305m via a former unit of Rosneft, the Russian oil group.

Mr Misamore and two other Yukos executives, David Godfrey and Daniel Feldman, told the Financial Times that the group of investors behind the Monte Valle bid included a representative of Moscow investment bank Renaissance Capital and another from US hedge fund VR Capital.

They claimed that two members of the group, Renaissance Capital vice-president Bob Foresman and VR Capital president Richard Deitz, had called to ask them to unwind the legal attachments protecting the assets from the bankruptcy sale, saying that in return, state-run Rosneft would drop its creditors’ claims on the Dutch holding.

Mr Feldman said Mr Foresman had called him two days before the sale, “to know if there was a way to make a deal that would provide them with comfort”.

“He called the day before the auction and said you have to understand if we can work out a compromise you can come back and work in Russia.” Mr Feldman left Russia in February, fearing arrest.

The claims could not be fully verified: Mr Foresman declined to comment. Mr Deitz said he did not recall all the details of his conversation with Mr Godfrey.

Mr Deitz said he had “never in his life” met with Rosneft, while Monte Valle owner Stephen Lynch also said he had no talks with Rosneft or the authorities prior to the sale. The allegations are the latest twist in a bankruptcy process marred from the outset by claims it has been rigged in favour of Rosneft.

The oil group snapped up most of Yukos’s remaining production units and refineries at a knockdown price after rivals bowed out just minutes into the sales.

The Dutch subsidiary, which holds $1.5bn in cash proceeds from the sale of Yukos’s stake in a Lithuanian refinery and a 49 per cent stake in Slovak pipeline operator Transpetrol, is still at the centre of a complex legal wrangle for control between the Yukos Finance BV former directors, Yukos’s liquidator and Rosneft.

Yukos Finance BV’s former management claim that while court proceedings are in train the buyers of the Rosneft unit have no title to the Dutch assets.

Here is a short BBC news clip about Russia's decision to lend the government $1 billion for the purchase of major weapons systems in a move that is widely interpreted as an extension of the Kremlin's political clout in Southeast Asia. According to Juwono Sudarsono, the deal was preferable over buying weapons from the West because they tend to attach many conditions related to human rights. No such inconveniences with this deal!

Washington Profile has published an extensive interesting interview with Nicholas Eberstadt of the American Enterprise Institute about Russia's demographic crisis. For more info about these troubling birth rate and mortality trends, we also have a 45-minute documentary film on the subject.

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Excerpt from Washington Profile:

Washington Profile: What is the alternative? If there is no public outcry and if business continues as usual, to what extent could demographics have an impact on the economic and social development of Russia in the next 15-20 years?

Eberstadt: Russia’s current survival schedule is about the same as India’s. Overall life expectancy in Russia and in India are similar today—in fact, India’s may now be higher than Russia’s. The Putin government promotes the goal of long term Russian growth to reach Portugal’s income levels, i.e. western European levels, but you can’t generate Irish levels of productivity on Indian levels of health. In the modern world, health and wealth are very closely connected. This fact is being disguised in the Russian case to some degree by the oil and energy boom, the bubble that is favorably affecting public finances and GDP numbers right now.

In the long run, for any modern economy, wealth lies in human beings, not in the ground. If the human capital of Russia is becoming increasingly debilitated, and if human numbers are steadily decreasing, Russia’s economic power cannot be steadily increasing. Russia risks prolonged relative economic decline, in a world where many of its neighbors are growing very rapidly: of course I am thinking of China and India, but there are others as well. What would it mean for the Russian population to be shrinking steadily through severe excess mortality in a world of more or less steadily improving health standards? From a Russian standpoint I’d think that would look pretty grim and pretty dangerous.

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A Chechen woman stands at the window of her flat which was ruined during more than a decade of separatist fighting in Chechnya, in Grozny, Russia, Wednesday, Sept. 5, 2007. (Photo: AP)

Russia’s Supreme Court has overruled a decision from a lower court that found the investigation against Mikhail Khodorkovsky was being illegally conducted in Siberia. MI5 has told the UK Government that among the foreign intelligence services operating to some degree against British interests, Russia, alongside China, is of greatest concern, and today’s big story in the UK is that British fighter jets scrambled to intercept eight Russian Bear reconnaissance aircraft in the second such incident in recent weeks. Vladimir Putin says he has resumed the cold war practice of sending bombers on long-range flights in response to security threats by other military powers. Meanwhile the Russian president has signed a major arms deal in Jakarta, agreeing a £500m credit arrangement designed to reduce Indonesia’s “dependency on the United States”. As an enticing bonus to the arrangement, Kremlin loyalist Oleg Deripaska's company Rusal will develop a mining complex in a joint venture with Indonesian company Antam. Russia and the US will hold missile shield talks in Paris, and Russia and Iran have agreed on fixing a timetable for nuclear fuel delivery.

Russia’s Economic Development and Trade Ministry’s chief forecaster has warned that the global liquidity crunch could hit consumer lending and the real estate sector, although Russia’s GDP growth is due to accelerate this year. Magnitogorsk Iron & Steel Works will invest over $1 billion in a US plant to supply to the automotive sector. Siemens’ desire to acquire 30.4 percent of Power Machines doesn’t mean it will emerge as the principal owner, as sources say Siemens will resell the stocks to Deripaska's Basic Element, a company which appears to have the green light to take over Russneft’s seized stocks. Meanwhile Russneft’s former chief and current politically persecuted fugitive, Mikhail Gutseriyev, is supposedly now living in London. The Times published a hostile feature Mr. Deripaska today, while officials from Germany are reportedly trying to “link Deripaska to the Russian mafia.” This correlates with a new US survey, carried out by nonpartisan institution the German Marshall Fund, which reveals that Europeans and Americans have concerns about a resurgent Russia, with Germany at the forefront in doubting Russia’s intentions. The Duma’s election campaign has begun amidst reports of poor organization, and the United Russia party is off to a bad start after having missed an internal deadline to select candidates for its party list. Russian police searched the Moscow headquarters of Alfa Bank, the country's biggest private lender, and seized documents for a probe into Sodbiznesbank. Foreign oil and mining companies operating in Russia have seriously overstated reserves. Political influence over Gazprom is being blamed by Poland as it foresees problems with future gas supplies from Russia, and in other news, Gazprom is still thinking about letting more foreign companies help out on the Shtokman Field project.

New in Russia: Starbucks; HSBC; and a possible new Russian version of the FBI. A Siberian Mayor has banned his bureaucrats from using the phrase "I Don’t Know."

During a session at the Economic Forum in Krynica the Polish Minister of Economy warned that future energy supply disruptions from Gazprom were likely given the political control over the company. A representative from the Czech government also warned of problems as Gazprom enters a "showdown" with Belarus, and the issue of declining production.

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"It will be interesting to see if Russia can keep up production levels given the fact they opened only one major field in the past 20 years," - Vaclav Bartuska, special envoy of the Czech Foreign Ministry

From article: Poland expects future problems with gas supplies due to political influence on Russia's Gazprom

"If we had guarantees that Gazprom is playing only by market rules, things wouldn't be a problem," Wozniak said during the Economic Forum in Krynica. "But Gazprom realizes the policy of the Russian government. The nation's strategy by 2030 says clearly that the fuel and gas sector are tools that support the Russian foreign policy.

"This is why we must be anxious and aware of obstacles in cooperation with Gazprom, since the company has to act on political orders," Wozniak said.

Price disputes between transit countries Belarus and Ukraine have over the past few years led to temporary reductions in supplies of natural gas to Western Europe. Experts in the region believe such situations are likely to be repeated in the near future because of price disagreements and Gazprom's plans of taking over transport infrastructure in transit countries.

"Gas has started to be a pressure tool on companies and governments in order to take over transit infrastructure and control of transit routes," said Tomasz Chmal, expert at the Warsaw-based think tank Sobieski Institute.

"I'm pretty sure we'll soon see a showdown with Belarus," added Vaclav Bartuska, special envoy of the Czech Foreign Ministry.

Bartuska also said Russia may begin to cut gas exports in the future years because of the probable decline in production levels.

"Unless Russia opens a new major field, it's difficult to see production levels maintained at current levels," Bartuska said. "In the medium term, it will be interesting to see if Russia can keep up production levels given the fact they opened only one major field in the past 20 years."

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The Australian:

Uranium 'not safe with Putin'

Cameron Stewart

THE Howard Government will announce a multi-billion-dollar deal on Friday to sell uranium to Russia at a time when Moscow is seeking to restore its military might across the globe.

But Foreign Minister Alexander Downer has strongly rejected claims there are insufficient safeguards to prevent Australian uranium being diverted to military use or on-sold to rogue nations.

The deal will be signed by John Howard and Russian President Vladimir Putin on Friday, and Mr Downer yesterday rejected claims by a prominent Russian journalist, human rights groups and the Australian Greens that Russia could act like a rogue nation with Australian uranium.

"Russia would have absolutely no interest in breaching a safeguards agreement and creating a massive diplomatic confrontation, not just with Australia but with most of the Western world, over something like that," he said.

"Russia wouldn't contemplate it. To think that they would is just to demonstrate complete ignorance about diplomacy, and about Russia."

Russia and Australia have been negotiating a nuclear safeguards agreement to allow the sale of Australian uranium for domestic use in Russia. Mr Downer said the deal was looking likely but would not give further details until it was formally announced.

Russia would be able to use the uranium for its civilian nuclear power program but not for military purposes, nor to on-sell it to third countries such as Iran.

The deal comes only a month after the federal Government's controversial decision to allow uranium sales to India, despite it not being a signatory to the Nuclear Non-Proliferation Treaty.

According to government figures, Australia exported about $630 million worth of uranium in 2006-07. That is expected to rise to $814 million this financial year.

Speakers at a conference in Sydney yesterday issued strong warnings against the deal, saying Russia under Mr Putin had becoming increasingly maverick and anti-democratic and that it could not be trusted to stick to the terms of the agreement.

International human rights lawyer Robert Amsterdam said there was no way for Australia to keep Mr Putin accountable on the deal, given the President's growing disregard for the rule of law in his own country. He said there was a genuine danger the uranium would be on-sold to countries such as Iran, which is building a nuclear weapons capability.

"Mr Putin stands shoulder to shoulder with Iran," he said.

"If (John) Howard wishes to do business with Mr Putin, he needs to understand the kind of company he is keeping."

Russian journalist Grigory Pasko, once jailed for revealing that Russia was illegally dumping radioactive waste into the Sea of Japan, said Australia could not accept Russia's guarantees, despite it having signed the NPT.

"I don't believe for a moment that Australian uranium will be used for totally peaceful purposes," he said yesterday.

Greens spokeswoman Christine Milne said the agreement was "purely an export dollar deal for some of the very large companies in Australia".

But Mr Downer said such arguments were "just a cover for the basic argument that these people are making, which is we don't want to export uranium".

"If you don't want to export uranium, people should say so. That's their position. My view is you can put in place a good safeguards arrangement with Russia," he said.

[In our ongoing effort to become your one-stop shop for what's going on in Russia, we are going to begin a daily posting of a digest linking to all (or at least most of) the top stories across the web.]

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Russian President Vladimir Putin spent the day bowling at the Vilyuchinsk submarine base (Reuters)

The Moscow City Court has sustained legality of the absentee arrest of former Russneft chief Mikhail Gutseriev. According to former colleagues of Anna Politkovskaya, the lead investigator into her murder has been replaced, in what is thought to be political interference by the siloviki. Elsewhere it was reported that Politkovskaya’s case has been taken under the personal control of head of the Prosecutor General's Office special investigative unit Sergey Ivanov, the same department which investigated the case against Mikhail Khodorkovsky. Deutsche Bank has sold a new synthetic collateralized debt obligation bundling credit derivatives traded on Russian companies, proving investors still have appetite for such risky complex debt instruments despite recent credit turmoil.

Meanwhile the United States has urged Russia to join the missile defence race, and a Ukrainian news source says that Gazprom will drive up gas prices on supplies to the CIS. Elsewhere, Gazprom mounted pressure on ExxonMobil to drop gas exports to China, saying it needs gas from Sakhalin-1 for domestic use; and a project off Sakhalin island by BP and Rosneft has prompted the companies to call on Russia to ease the tax regime for offshore projects. VTB Group’s finance costs on $5 billion in loans will rise by 1 percentage point due to the credit crunch; and VTB’s 13% share price drop will postpone the bank’s merger with Promstroibank. Garry Kasparov has accused his Russian publishers of axing publication of his new book due his opposition of Vladimir Putin; and in other news, Putin has lashed out at Economic Development Minister German Gref and ex-Prime Minister Mikhail Kasyanov. Oleg Deripaska’s investment vehicle Basic Element has finally submitted an official request to the Federal Anti-Monopoly Service to buy Russneft - the most recent private oil company to be stolen by the Kremlin. Sedmoi Kontinent, the supermarket chain owned by Vladimir Gruzdev and Alexander Zanadvorov, has signed an accord to be bought by US buyout firm TPG. A bureaucratic glitch is being blamed for the delay in publication of a presidential decree, causing the late start of the Duma election campaign. In the Duma’s last session, Duma Speaker Boris Gryzlov vowed to resist populist principles, warning deputies against submitting bills that would increase social spending.

Meanwhile the Duma has ratified Russia’s border treaty with Latvia, and has passed a new law on Stastistical Accounts, requiring businesses to provide Rosstat with any information it deems required. The Russian Standard Bank has lost 6 billion rubles in profit due to orders from the Prosecutor General's Office not to collect supplemental commissions for consumer credit. Gennadi Kryuchkov, a religious leader of the Soviet Union, has died. Australia will sign a multi-billion-dollar deal with Russia on Friday to supply uranium for civilian uses.

RFE/RL journalist Roman Kupchinsky, who also testified before the Helsinki Commission on Russian energy imperialism earlier this summer, has an interesting article today giving a short history of how Gazprom became a "state within a state" - the underpinnings of their consistent reputation problems.

Gazprom

RFE/RL:

Gazprom's image problems date back to Viktor Chernomyrdin's leadership of the company following the collapse of the Soviet Union.

His close relationship with President Boris Yeltsin was instrumental in getting the company special status with generous tax benefits, and set the groundwork for making Gazprom a "state within a state."

Under Chernomyrdin's leadership a corporate culture that rewarded opaqueness set in, spawning Gazprom's reputation as a company that operated outside the law.

After Chernomyrdin was succeeded by Rem Viakherev, Gazprom was implicated in a number of corruption schemes. In one, the gas giant was accused of involving its fully-owned insurance company, Sogaz, in insurance scams that served to enrich Gazprom's top management. Western reinsurance companies largely bore the financial losses from these schemes.

Gazprom's most controversial era began in 2001, with the arrival of Aleksei Miller as Russian President Vladimir Putin's hand-picked CEO of the company. A colleague of Putin's in the St. Petersburg governor's office during Yeltsin's presidency, Miller was in good standing with the future president and with other city officials who would soon reach high positions in the Kremlin. Among them was Valery Golubev, a former KGB agent who recently became the deputy head of Gazprom's management committee.

Following Miller's appointment, Gazprom executives conceived a new scheme to transport Turkmen gas to Ukraine.

With Miller's and Putin's approval, they created a Budapest-based company named Eural Trans Gas, which began acting as the middleman for Turkmen gas exports to Ukraine. The opaque company soon became the subject of a number of investigative reports in the Western media.

The negative publicity Eural Trans Gas generated forced Putin and then-Ukrainian President Leonid Kuchma to dissolve Eural in July 2004 and replace it with a similar company called RosUkrEnergo headquartered in Switzerland.

Gazprom later came under severe criticism for its handling of a gas-pricing dispute with Ukraine in January 2006 when, with great fanfare, Gazprom briefly shut down the pipeline carrying supplies to Ukraine -- and inadvertently to Europe. Many in the West saw Gazprom acting at the behest of the Kremlin, which, many claimed, was taking its revenge on the newly elected, pro-Western Ukrainian President Viktor Yushchenko and his Orange Coalition.

During the Ukrainian election campaign of 2005 Putin had lobbied vigorously in support of pro-Moscow Viktor Yanukovych's bid for the presidency. This raised suspicions that by pressuring Yushchenko on gas prices in January 2006, Putin was underscoring the vital impact Russia has on Ukraine's economy. Many in Kyiv saw Gazprom and Putin's actions as blackmail.

Western observers became alarmed when Gazprom insisted that Ukraine give up its sovereign right to buy gas directly from Turkmenistan and do so only through the services of the mysterious RosUkrEnergo, controlled by Gazprom.

However, the worst publicity for Gazprom was generated by a series of questionable deals presided over by the Kremlin -- the apparent goal of which was to bring under its direct control most of the country's oil and gas industry.

Beginning with the questionable license revisions for Western oil companies developing the Sakhalin 1 project and followed by the ouster of BP/TNK from the Kovykta gas field, Gazprom benefited enormously.

During his visit to Australia, Robert Amsterdam and Grigory Pasko stopped by for an interview with Australia's number one news broadcaster, Alan Jones of 2GB (Macquarie National News), to talk about Australia's trade relations with Russia and the uranium issue. The audio recording of the interview can be heard here, and a few excerpts are below.

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AUDIO: Russia is not a state to sell uranium to: Pasko, Amsterdam

Australia is being urged not to sell uranium to Russia, because there are no safeguards in place.

Russian president Vladimir Putin will be attending the APEC Summit in Sydney this week, amid claims his country is riddled with inequity and corruption.

Human rights lawyer Robert Amsterdam has told Alan Jones, Mr Putin is a law unto himself and the international community is turning a blind eye.

“The complicity of Western governments and their silence up until now has presented a false image of Mr Putin,” he said.

“People inside Russia understand the loss of freedom that has occurred and the absolute lawlessness within the country. There is simply no one accountable.”

“Without the rule of law you simply can’t trust, what is presented as a government, to protect its citizens - let alone the people of the world - from the kind of nuclear risks that will ensue with this uranium.”

[Today, before his speech at the Syndey Summit on Russia, Grigory Pasko published the attached op/ed article in the Sydney Morning Herald]

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Dining on yellowcake with the devil

Grigory Pasko

Russian nuclear power stations account for 16 per cent of the country's electricity production. Last year the Russian President, Vladimir Putin, demanded the proportion be increased to 25 per cent by 2030. These ambitious plans have already raised a storm of indignation from environmentalists in Russia. First and foremost because Russia is doing practically nothing to develop alternative power sources, following a path of least resistance and imperial desire to develop an industry that will be useful for military purposes as well.

Meanwhile, the press has already reported that economically viable reserves of uranium in Russia are enough to last only until 2015. To fulfil exports and to supply its own nuclear plants, Russia has to buy uranium from other countries.

The founders of Atomenergoprom, the state atomic holding company, do not rule out partnerships with Western investors to develop uranium deposits in Russia. In their opinion it is possible that companies such as Japan's Mitsubishi, Canada's Cameco, and Australia's BHP Billiton and Rio Tinto may eventually become minority shareholders.

Vladimir Smirnov, the head of the nuclear import-export company that forms a part of Atomenergoprom, has already reported to the media on negotiations with the Australians, confirming meetings were held during a visit to Australia on October 13 to October 20 last year. Smirnov underscored that there was great interest by Australian companies in working with Russia.

A working group has been created in Australia under the leadership of the Prime Minister, John Howard, to conduct an analysis and prepare a report on the prospects of developing nuclear energy in Australia. The Russians have proposed Australia take part in the work of the International Centre for the Enrichment of Uranium in the Siberian city of Angarsk. The first participant, with Russia, is Kazakhstan.

So Australian intends to sell uranium for the Russian nuclear power industry. In the words of the Australian Foreign Affairs Minister, Alexander Downer, the countries have achieved "substantial progress" in negotiating the agreement. In fact Howard and Putin are expected to sign the deal this Friday.

How should we react to such agreements? If we look at them strictly from a business aspect, then our reaction should be positive. After all, Australia possesses one of the richest deposits of radioactive minerals in the world, but does not have its own nuclear power plants.

But we cannot allow ourselves to forget that Australia is dealing with not just any country, but with Putinite Russia. Those politicians and businessmen who want to have dealings with today's Russia need to always remember they are working with a country where human rights are trampled on and the principles of democracy are violated. If this does not faze the Australian gentlemen, then I suppose they have the right to do business with anyone they please, even with the devil himself.

One argument heard in favour of a possible deal is that Russia has split up its military and civilian nuclear programs, and has placed its peaceful nuclear facilities under international monitoring. Downer says this has become decisive in influencing Australia's decision to conduct new negotiations with Moscow.

Who will verify this separation between military and civilian programs on the ground and how? Australian law bans the sale of uranium if it can be used for military purposes. Is Australia absolutely sure that Russia will not use Australian uranium in its weapons programs?

I have grave doubts about Angarsk being "totally civilian". At any rate, journalists are not allowed there, just like before. I tried to arrange a visit to this "open" enterprise, but got nothing beyond promises. Even when I actually travelled to Angarsk, I was not allowed beyond a "prohibited" sign on the road well before the entry gate to the plant. As for nuclear waste, how exactly is it going to be processed and disposed of?

Russia can also export the uranium it buys. Where is the guarantee it will not sell uranium to Iran? Nowhere. Instead we have a statement by the deputy head of the Federal Atomic Energy Agency, Nikolai Spassky, about how Iran "has the right to enrich uranium for peaceful purposes". He said: "Any country, according to the nuclear non-proliferation treaty, can develop potential in the realm of the peaceful atom. Iran, after settling its problems with the [International Atomic Energy Agency] and answering all questions, also has this right".

After all this, are Australian politicians and officials still not concerned about the imminent deal with Russia?

Grigory Pasko is a Moscow journalist and environmentalist. He was named an Amnesty International prisoner of conscience after being jailed for treason in 1997. He will address the Sydney Summit on Russia today.

Today in Australia Robert Amsterdam was featured as the keynote speaker at the Sydney Summit on Russia. Below is the coverage from the Australian daily newspaper The Age:

Voters oppose uranium sale to Russia

More than half of voters are against the federal government's plan to sell uranium to Russia, a survey has found.

Prime Minister John Howard and Russian President Vladimir Putin are expected to sign a deal during this week's APEC summit which would see Australian uranium sold to Russia for domestic use.

Released at the Sydney Summit on Russia on Tuesday, the survey showed 66 per cent of Australians would vote against the deal if a referendum were held on the issue.

The survey of 1,200 voters undertaken by Research International found 41 per cent of people were concerned the uranium may end up in the hands of terrorists or rogue states, while 20 per cent feared Russia would use the uranium for nuclear weapons.

Summit keynote speaker and international human rights lawyer Robert Amsterdam said Australians were right to be concerned about the deal.

"If the Australian uranium is only going to be used for civilian purposes, then what you're doing is you're freeing up the Russian uranium to be used, to be sold on, to Iran," he told reporters in Sydney.

"Mr Putin stands shoulder-to-shoulder with Iran.

"If Mr Howard wishes to do business with Mr Putin, he needs to understand the kind of company he's keeping."

Mr Amsterdam said without the rule of law there was no accountability.

"There is no one that will check Mr Putin's people when it comes to that part of the uranium that isn't being monitored by the international nuclear organisation," he said.

"The additional point to all this is the dramatic challenge to Australia that Russia represents.

"Russia is restructuring its economy in a very dramatic way, it is moving to creating massive corporations, particularly in the mineral sector, and they will be competing with Australia on many different levels.

"There's a lot of geo-political thinking that needs to go on and my question to the Howard government is whether due diligence has been done both in respect to the rule of law issue, but also even further with respect to the whole geo-political question of competition for Australian companies."

Australian Greens energy spokeswoman Christine Milne told the summit Australia could make the uranium sale conditional on clauses covering human rights, democracy and the rule of law.

"The prime minister and foreign minister talk about global security but when they actually do have an opportunity to leverage, on the basis of a sale, some outcomes in terms of higher standards and verification of human rights and the rule of law, they have abandoned it in favour of maximising profits," Ms Milne said.

"The concern I have is that all these free marketeers say that by allowing business with these countries like China and Russia, we will draw them into international mores in terms of the rule of law.

"However, that will only be the case if countries with whom they do business have a respect for the rule of law and if the countries like Australia actually require compliance and enforcement.

"And they don't, Australia turns a blind eye to human rights abuses in China every day and it will turn the same blind eye to what's going on in Russia."

Russian journalist Grigory Pasko, who has spent 25 years working in his homeland, said Russia should not be blindly trusted.

"I don't believe for a moment that the Australian uranium is going to be used exclusively for peaceful purposes," he said.

"The Russian authorities have already so often deceived both the Russian people and the foreign community.

"I honestly think it's not a good idea to blindly trust them over something so serious.

"I feel that Australia can and should be selling its uranium but before doing so, you should ask yourself, to who."

From the Moscow Times:

Khodorkovsky to View Chevron Data

Bloomberg

Mikhail Khodorkovsky, the jailed former Yukos CEO, won a U.S. court ruling for access to Chevron research on Yukos as he prepares to defend himself against new charges in Russia.

A U.S. district court judge in northern California on Friday accepted that Chevron may have "valuable evidence" that could help Khodorkovsky refute charges of embezzlement and money laundering, lawyers for Khodorkovsky said on their client's web site.

"This is just the beginning of a global evidence-gathering process that is necessary because the procuracy of the Russian Federation is not a fact-gatherer but rather an enforcement arm of a Kremlin bent on consolidating the state theft of Yukos," lawyer Robert Amsterdam said in a statement.

Amsterdam did not say exactly what kind of information Chevron had that may be useful.

Khodorkovsky, once the country's richest man, is serving eight years in a Siberian penal colony for tax evasion and fraud, charges he has repeatedly denied.

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This blog was created to express views which may stimulate debate and discussion on topics of international interest. I believe that we live in a world of unchallenged impunity, and this blog is ...

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