Robert Amsterdam

Former world chess champion and leader of "The Other Russia" party Garry Kasparov speaks during a congress in Moscow. Kasparov was named Sunday as the Other Russia opposition party's candidate for next year's presidential elections.(AFP/Alexey Sazonov)

Suspicions that Vladimir Putin will run for a third term as president are “illogical from a close analysis of the country’s history.” Deputy prime minister Dmitry Medvedev said that Russia is now ready for a part-affiliated president. “I see nothing bad in existence of a party president,” he said in a statement that coincided with the beginning of the election campaign for United Russia, which is to include heavy involvement from Putin. Duma speaker and United Russia leader Boris Gryzlov is expected to outline the party's campaign strategy based on its pro-Kremlin platform, which is entitled "Putin's Plan". Regional Development Minister Dmitry Kozak has ruled out running for the presidency. Other Russia has chosen Garry Kasparov as its candidate for the March presidential vote. Kasparov’s running “will end in certain defeat”.

Total investment in Russia's economy in 2010 will reach $360 billion, 800% growth since 2000 and the highest growth rates for over 30 years. Russia will purchase over 50,000 Chinese cars by the end of 2007. Oil and gas blocks of the Sakhalin-3 project are to be auctioned off as strategic deposits, suggesting that foreign access to the project will be limited. Russia’s Audit Chamber has completed its audit of rocket engine maker Energomash, a process that has resulted in the arrest of two senior officials at the chamber, but will not disclose its findings. Russian gas monopoly Gazprom has paid $640 million to keep control of power generator OGK-2, "scaring off" other investors in a secondary share offering that ended up being almost halved. It is thought that Gazprom will go through a management upheaval this month. The assets of Rosoboronexport are to be consolidated into a new state corporation, Russian Technologies, in the next six months, according to company head and Putin ally, Sergei Chemezov.

Putin has announced that Russia has no intention of using its currency reserves to infiltrate Western economies or to invest improperly in Western equities. He said that Western investment in Russia should be coupled with Russia being allowed to enter Western markets without discrimination. Russia has been accused of being ‘anti-democratic’ due to its continued stance regarding Burmese sanctions. Writing in the Financial Times, Russian Finance Minister Alexei Kudrin said the International Monetary Fund will become irrelevant if it fails to give a greater voice to emerging nations. The statements were made after Russian-backed central banker Josef Tosovsky lost out to France's ex-Finance Minister Dominique Strauss-Kahn to head the IMF. Russia's foreign debt climbed by 33.24% to $384.8bn in the first half of 2007 compared to the same period a year earlier, according to the Bank of Russia. The US embassy in Moscow saw protests by pro-Kremlin activists against US “double standards” regarding the unrecognized republics of Abhkazia, South Ossetia and Transdniestria. The “nuclear renaissance” in countries including Russia could constrain the delivery of key reactor components, thereby possibly thwarting plans by the UK government to build up to 10 nuclear power plants in Britain over the next decade. Brussels will host a forum this month designed to foster dialogue between the EU and Russia, and stress the role of Europe's ethnic Russian community. The United States maintained its role as the leading supplier of weapons to the developing world in 2006, followed by Russia and Britain, according to a new report, “Conventional Arms Transfers to Developing Nations,” produced by the nonpartisan Congressional Research Service. Alexander Zhukov, Russia's deputy prime minister, said that Russian-Chinese trade could double next year to over $40 billion, but voiced concerns about the imbalance and commodity structure. "Against the backdrop of considerable progress in trade and business cooperation, certain disproportions have surfaced." The Patriarch of Moscow, Alexy II, will make his first official visit to France this month to meet with members of the Russian Orthodox Church in France, French political leaders, the Organization for Security and Cooperation in Europe, and leaders of non-Orthodox Christian churches. It is thought that, in his addresses, he will “put forward an alternative concept of human rights”.

Putin on Moscow’s 1964 Taganka Theatre: "The word Taganka is like a drop of fresh air... it played its role in preparing democracy in our country."

The breaking news today is that President Vladimir Putin has announced he will run for parliament, and that it is "entirely realistic" that he become prime minister.

My most immediate thought: as long as he is in government, does it really matter where?

Finnish Minister of Defence Jyri Häkämies speaks very clearly on Russia

From John Vinocur in the International Herald Tribune:

"The three main security challenges for Finland today are Russia, Russia and Russia. And not only for Finland, but for all of us.

"According to the Russian world view," Hakamies said, "military force is a key element in how it conducts its international relations."

While it would be foolish and mistaken to conclude that Russia will threaten Finland, he said, "we who have the responsibility for Finland's national defense have to draw certain conclusions."

Ah, conclusions. Hakamies was offering one in calling Russia out by name. And three times, to good effect.

This is uncomfortable, non-instinctive stuff in a country like Finland with so much of its complex Cold War history spent avoiding displeasing Russia. It was so unconventional that the prime minister chided Hakamies for his "unsuccessful" choice of words.

Not accidentally, Hakamies also gave wide berth to anything sounding like the current mantra, which says that Russia needs respect and to be washed of all its past humiliations.

He didn't say it, of course, but the fact is that in cash terms these days, the West gives Russia all the respect it can handle, while its humiliations are mostly of its own making.

President Vladimir Putin looks on while attending a congress of the United Russia party in Moscow, Monday Oct. 1, 2007, at which he suggested he could become prime minister, the strongest indication yet that he will seek to retain power after he steps down as president early next year. (AP Photo/Mikhail Metzel)

Today’s news has been dominated by the “bombshell” announcement, interpreted as “crass political manipulation” in a “quasi-democracy”, that Vladimir Putin will head the election list of United Russia in December’s parliamentary election, and could therefore also become prime minister next year. A transcription of his announcement can be found here. "The market will like it -- the market likes whatever Putin does,” commented one businessman. Putin’s announcement will, of course, deal a severe blow to A Just Russia, the other pro-Kremlin party: "A Just Russia is a tool that is not needed anymore”; and a United Russia victory in the next elections is “virtually guaranteed”. There is also a “Vladimir Putin” on the liberal Yabloko party’s regional list – part of a “rich tradition” of attempting to confuse the electorate. The press continues to profile Garry Kasparov, emphasising not the possibility of his party’s success, but of the importance of free elections. The most recent meeting of Putin and his government has been written up as a “pantomime”.

Putin’s announcement caused Russian stocks to rise in London as investors responded positively to the news that his economic influence would likely continue. Russian mutual funds have suffered losses this month of roughly 1.8bn roubles, possibly due to the withdrawal of money by top clients. MegaFon, Russia’s third-largest telecoms company, could supersede its competitors if its latest accounts are an indicator of future progress. Billionaire Alisher Usmanov denied a report saying that he is in talks with TeliaSonera about buying its stake in a telecommunications company that has a holding in MegaFon. Usmanov’s recent purchase of the Rostropovich art collection has been donated to a St. Petersburg presidential residence “on the orders of” President Putin. Russian state railway operator RZD is in talks with Deutsche Bahn to acquire a Polish rail freight company, thought to be PKP Cargo. Russian car dealer Motorika said it would build a $100 million factory in Ethiopia to assemble customized Lada Nivas to serve as ambulances in hard-to-reach rural areas. Metals tycoon Vladimir Potanin will buy out Mikhail Prokhorov’s stake in Interros, their joint-owned holding company, and the two are apparently in the process of separating their various business interests, which include stakes in Norilsk Nickel and Polyus. Polymetal reported a first-half loss of $7.7 million from a profit of $27 million the previous year as it battled with falling production. State control is spreading amongst Russian businesses and NGOs, with state funding being handed out to both: “Private businesses, like the NGOs, are feeling pressure to team up with the state as state companies snap up oil and gas assets,” and the Russian military have turned to one NGO, the Union of Soldiers’ Mothers Committees, for members to serve on its draft boards.

US Secretary of State Condoleezza Rice said that Washington is concerned about the "concentration of power" in Russia, and The new chief of the IMF, Dominique Strauss-Kahn, said that Russia will have to give up some of its power at the Fund as part of a much-needed reform. Russia and China may agree in November to build an oil pipeline. Russia has loaned its voice to the condemnation of recent militant attacks in Darfur, but has declared Georgia “anti-democratic”. Russia has sent technicians to upgrade Syria's air defense system, and Russian warplane exercises around Alaska and Canada have become routine in the past few months. The Second International Nuclear Forum will open this week in St. Petersburg. If the re-election of Yulia Tymoshenko in Ukraine is confirmed, Russia may cut off gas supplies to the region as it did in 2005.

Today the FT is carrying a report on Russia's booming advertising market - speculated to be the seventh largest in the world.

A walk through central Moscow is proof that advertising is big business in Russia. Across the road from Ms Yudina’s house is a huge hoarding promoting a mobile phone company. On top of a building down the street, enormous neon letters spell out Pepsi.

The advertising market in Russia is worth $6.5bn a year – not a massive sum by global standards, but the key is the growth. Since 1998, advertising spending has grown almost 30 per cent annually, and by 2012 is projected to reach $13.5bn. “That would rank it probably seventh in the world,” says Mark Tutssel, worldwide chief creative officer at Leo Burnett Worldwide. “In terms of potential, it’s colossal.”
...
The biggest driver of the industry’s growth is the economy. As it expands – and gross domestic product (GDP) has been growing at about 7 per cent a year for the past few years – consumers have more money for advertisers to chase. “The advertising market is an indicator and an accelerator of economic growth. And growth is booming,” says Mr Tutssel.

But there is more to it than just GDP growth. Brands such as Procter & Gamble, Kellogg’s, Nestlé and Unilever – the biggest buyers of advertising – are racing to win the loyalty of Russia’s emerging middle classes.

“I think it is very clear that brands want to reach this [market] and establish themselves as the economy is developing, so that people have brand awareness of their product before someone else gets into the market,” says Mary Kallaher, vice- president of Emerging Markets at Discovery Networks Europe.

There is another peculiarity about the Russian advertising market. Average incomes are about $500 a month – paltry compared with many other markets.

“But because of low income tax and subsidised housing and utilities, that means 70 per cent of Russian income is disposable,” says Mr Tutssel. “If you compare that to the western world … that [figure] is probably something like 40 per cent. So if you think of this disposable income now, it really is a great opportunity for brands to weave their way into the social fabric.”

Sonya Sceats, an Associate Fellow in International Law at Chatham House, has a new article about human rights legislation in the United Kingdom. Download the full paper here; see excerpt below:

The Human Rights Act, incorporating into law most of the rights in the European Convention on Human Rights, was adopted by parliament in 1998. Compared with other countries, where the arrival of human rights laws is usually greeted jubilantly by the press and public, this was in many ways a silent achievement. The Act was not a result of popular demands, or even a consultation process, and there was little public debate.

At the time, the Labour government chose not to create a statutory body to promote the legislation and support its implementation by public authorities. Looking back, this was fatal. Ministers announced that the Act was designed to foster a broad culture of respect for human rights, but no ‘guardian’ body would show how this could be done.
...
The public has never been helped to understand that the prohibition of torture, blamed for frustrating counter-terrorism and immigration policies, is the same human right that bans corporal punishment of children in school and degrading treatment of older people in care homes.

In this climate of security fears and poor understanding of human rights, there is a very real risk that the British public will unintentionally trade away the human rights that have defined British democracy and made this country such an attractive place to live. Internationally, this would be disastrous for Britain’s reputation as a human rights defender. It would also set a dangerous precedent for other states grappling with terrorism, signalling, arguably, the ultimate concession to terrorist demands.

Here's a familiar routine of dueling headlines from Russia's state-owned energy giant.

IHT: Gazprom acts to reassure Europe on natural gas

WSJ: Gazprom Threatens to Cut Ukraine Gas Deliveries

It seems that Moscow is delivering on its promise to punish the Ukraine for voting for Yulia Tymoshenko's coalition.

Gazprom says it is owed $1.3 billion for gas deliveries in the first nine months of the year and that if it doesn’t get paid by the end of the month, it will start reducing gas supplies to its neighbour.

Gazprom will cut gas flows to Ukraine if $1.3 billion in unpaid gas bills are not settled by the end of October, the company says.

“Gazprom will be forced to start reducing natural gas deliveries to consumers in Ukraine in case the debt is not settled by the end of October,” the Russian gas monopoly said in a statement, adding: “With the onset of autumn and winter, when gas consumption traditionally rises, we are mindful of the need to resolve this issue urgently.”

Gazexport boss Alexander Medvedev: the clock is ticking

An interruption to Russian gas flows to Ukraine might have a knock-on effect on Russian gas supplies to the European Union, which relies heavily on Ukrainian pipelines to bring in gas from Russia. Gazexport, Gazprom’s gas-export arm, says it does not expect any disruptions in supplies to European buyers because these are governed by separate contracts. But if Ukraine resorts to stealing gas from the transit pipeline to make up for any shortages in Russian deliveries, flows to Europe would be affected. When Gazprom shut off exports to its neighbour for just over a day in January 2006 – in a dispute over gas pricing often referred to as the gas war – pressure in transit pipelines feeding Europe dropped.

Gazprom says it has “repeatedly urged” RosUkrEnergo [the murky Ukrainian intermediary through which Gazprom supplies Turkmenistani gas to Ukraine] to pay the $1.3 billion, but claims “no action” has yet been taken. The Gazexport spokesman said he believed RosUkrEnergo is itself suffering from “a long chain of internal non-payments”.

Gazexport, however, says there is no excuse for non-payment. Ukraine pays around $135 per 1,000 cubic metres for its gas. Although this is a significant step-up from the $50/000 cubic metres it paid in 2005, it is well below the $230/000 cubic metres paid by Western European customers. “We consider this market price as perfectly acceptable to the Ukrainian economy and there is no problem for Ukraine to pay this gas price,” the spokesman said.

Gazprom is likely to be accused of timing its announcement to cause political disruptions in Kiev in the aftermath of Sunday’s inconclusive parliamentary elections in Ukraine. However, Gazprom insists that this is not the case: according to the Gazexport spokesman, the non-payment issue has been under discussion by the two sides for two months and Gazprom delayed making the problem public until early October in order to avoid accusations of attempting to influence Ukraine’s elections.

Gazprom is certainly in a difficult situation: no Western energy company would be expected to stomach non-payment on such a scale. Yet taking the politics out of the energy relationship between Russia and Ukraine is nigh on impossible.

Indeed, analysts say the result of Ukraine's elections may directly influence the price of gas Russia charges Ukraine. If – as the exit polls suggested – pro-Western parties are confirmed as having won the election, then there is likely to be a ratcheting-up of tensions between Ukraine and Russia. (For now, the main Moscow-backed party has refused to concede defeat and an investigation into alleged vote rigging in the pro-Russian east has been launched).

Nonetheless, Yulia Tymoshenko, Ukraine's firebrand opposition leader and one of the Orange Revolution’s leaders, seems likely to regain her post as prime minister, at the expense of the Kremlin’s favoured candidate, Viktor Yanukovych. Tymoshenko’s last stint as prime minister in 2005 was marked by trade wars with Russia, she is critic of the 2006 agreement that ended the gas war and wants to see RosUkrEnergo removed as the gas-sales intermediary.

“Gazprom may use a potential change in government and the decision to eliminate RosUkrEnergo's role as an excuse to hike prices for Ukraine,” says Global Insight energy analyst Andrew Neff. Before the election, he points out, Russia's ambassador to Ukraine, Viktor Chernomyrdin, was quoted by Interfax as saying that the price of gas Ukraine is offered by Russia in 2008 “will depend on who comes to the government and how they handle the talks".

This week marks the anniversary of the 1993 upheaval in Russia, when Boris Yeltsin order troops to storm parliament. Slate is running an excellent photo essay that I recommend to readers.

MOSCOW—The partially burnt out White House (Parliament building), which was stormed by troops loyal to President Yeltsin, as armored units were preparing to pull out, Oct. 6, 1993. (© Abbas / Magnum Photos)

(© Abbas / Magnum Photos)

(© Abbas / Magnum Photos)

As promised, the Kremlin-organized youth brigades are making life difficult for the Russian opposition - breaking up meetings, picketing their events, and threatening to violently crack down on any public demonstration. In this Reuters clip, one Nashi member says "We should kill them at birth, so they wouldn't implement their goals..." It is also interesting how the threat of another "Orange Revolution" continues to dominate the discourse.

Being back in the United States this week has me recalling my youth growing up in the Bronx, New York, where, like everyone else, I was a dedicated baseball fanatic. As it happens, today marks the 24th anniversary of the retirement of one of my favorite players, Carl “Yaz” Yastrzemski of the Boston Red Sox, whose brilliant 23-season career came to a close in back in 1983. I fondly recall watching Yaz’s last game, a historic event which sealed not only numerous statistical records, but also lionized him in the hearts and memories of fans.

Carl Yastrzemski's last victory lap

Yaz’s retirement capped off a phenomenal career, making an elegant concluding statement on a great series of achievements. He enjoyed a certain luxury in controlling the terms of his departure from this beloved sport, which is contrasted by a more recent example: this week’s unprecedented announcement by President Vladimir Putin to run for parliament and possibly assume the premiership.

Just as soon as everyone was getting to know the new prime minister Viktor Zubkov, who has spent recent weeks asserting his authority through various stunts, Putin swiftly stripped him of relevance with another unexpected trick. Unlike Yastrzemski however, Putin’s move to artificially extend his political career involves straining several constitutional and electoral rules to the breaking point, which I am reasonably certain he finds very uncomfortable.

While Russia’s constitution is not very clear on the shift of executive powers from the presidency to the premiership, there are some curious details at stake. For example, while in office Putin won’t be listed as a member of United Russia, even though he will run on their ticket as an “independent.” Also, as the FT points out, Putin doesn’t even have to enter the Duma, even if he leads the party to victory (though he would have to resign from the presidency after the election). In some imagined scenarios, almost nothing changes: he keeps his same office, same desk, same chair, same power, and gets a slightly different job title. His move will entail a radical deterioration of “managed” political competition. This announcement spells an end for the state-approved alternative party, A Just Russia, putting Russia on track toward a heavily corporatist one-party system like pre-2000 Mexico – the perfect dictatorship. In the past, most parties would propose their troika of preferred candidates – while this year the party faithful of United Russia will choose between #1 Vladimir Putin, #2 Vladimir Putin, and #3 Vladimir Putin. The expected result: a virtual constitutional majority.

Some analysts see confidence and stability in Putin’s decision to prolong his time in power, but I see this decision being made in dramatically more tenuous circumstances. I don’t think that Putin actually wants to stay in office, but rather has found that he has to - a consequence of this administration's failure to institutionalize any advances in rule of law or the establishment of independent centers of power. As anyone who has had experience working with Russia’s elaborate Byzantine bureaucratic structures, they will know that the fierce infighting among different parties can only be brokered and negotiated by very few people – and taking on such a role is not the power that it appears to be, but rather the captivity of an onerous duty.

Also, we know from past experience that the selection of a successor in Russia depends most heavily on that person’s ability to shield his or her benefactors from investigations and prosecution for their alleged legal peccadilloes. There is no shortage of such events during this administration that could intensify such concerns.

But we should never underestimate Moscow’s ability to sell the story they want told. In an effort to project this image of stability and strength, the Kremlin has resorted to instinct: more and more aggressive interference on international crisis issues like Iran, Kosovo, and Myanmar. Once again more doublespeak from Gazprom, promising to be good supplier to Europe while flexing political muscle on the Ukraine. In other words, everything looks like business as usual over there.

We know that it is extremely important to Putin that he is seen in a certain way. Consider for example the repeated invocations of the language of democracy in the United Russia speeches, and the reiterations of Putin’s narrative – how he “rescued” of Russia from the chaos of the 1990s, and his battles against Chechen terrorism and separatism. According to a Times editorial, when Putin met with foreign press at the Valdai Summit, “he spoke of the ‘moral influence’ a leader can have in Russia, comparing himself indirectly with those dissidents whose political power came from their moral standing in society. He says he wants to play that role to embed democracy in Russia.” (I myself have become accustomed to the dearth of cynicism among the media profession in response to such statements.)

The point is that no one would put so much work into painting their own image as a democrat if they didn’t also deeply care about the perception of their legacy – especially among the international community. Putin has legitimate achievements that he understandably wants to be recognized for, and it is a great source of discomfort that the conclusion of his second term is proving to be so difficult.

The president would prefer to gracefully leave office on a high note, like a champion athlete, but instead he finds himself without remedy, trapped within a system he created. There are numerous costs of this decision, reputational and otherwise. Mr. Putin said in his acceptance speech at the United Russia Party Congress that “it would be wrong to change the Constitution to suit one particular person, even if that person is someone I most certainly trust.” However, for the sake of Mr. Putin’s legacy, one would imagine that such an unprecedented political manipulation delivers a certain message: it’s not the institution, it’s the person.

Those who strive to argue that Russia is a real democracy need to understand that this embarrassment of succession demonstrates just how far it has to go.

Gazprom logo in front of Russia's government building in Moscow. Russian gas monopoly Gazprom has warned it would cut gas supplies to Ukraine, which transports 80% of Russian gas supplies to western Europe, if Kiev did not pay over a billion dollars in debt this month.(AFP/File/Alexander Nemenov)

There is speculation about how Vladimir Putin could manipulate a role as prime minister to his favour. His decision to head the United Russia party has “changed the country’s political structure”, but will not have come as a surprise to many Russians, who were polled a month ago by VTsIOM about whether or not they would vote for “Putin’s Party”. The positive reaction of global investors to Putin’s news has been criticized by Garry Kasparov. "In the short term, the benefits can be significant, but in the long term the country is going to be destroyed," he said. "Western bankers are looking for a profit, we're looking [out] for the country's future." David Clark, chairman of the Independent Russia Foundation, said that there remain some flaws in Putin’s plan. “Russia's strength is built entirely on energy, on oil and gas, nothing else. And that's all going to unravel in the coming years.”

As predicted, Russia found an excuse to threaten gas cuts to Ukraine following the results of its recent election in which it is almost certain that the Orange Revolution will come marginally ahead of Viktor Yanukovych. Following threats by Gazprom to reduce gas supplies to Ukraine, the Ukrainian energy minister has flown to Moscow to discuss the situation. Ukraine’s Naftogaz, the country’s gas importer, implied that the demand was unexpected. "We are studying the situation and why this figure arose in the statement by Gazprom," he said.

The government’s lifting of price caps on electricity, due to growing demand, has benefited Russian companies – OAO OGK-6 has posted a first-half profit. Russia is to raise sugar duties in a bid for the industry to become “self-sufficient” in the next ten years, but falling domestic demand is damaging Brazilian exports into the country, and India also wants a slice of the market. The Chelyabinsk Zinc Plant, which produces over half of Russia's zinc, distributed 49 million new shares to stockholders to increase trading. Russian potash maker OAO Uralkali will start selling its shares as its main owner, Dmitry Rybolovlev, seeks to raise funds for other ventures. Absolute Bank says it will achieve growth and remain sheltered from the effects of the global financial crisis with help from its Belgian owners. Uniastrum Bank has narrowed its mortgage program, refusing to grant loans in foreign currency, most likely due to liquidity and refinancing issues, and the lessening popularity of dollar deposits. Norilsk Nickel is to buy 7.2% of stocks in Canadian Royalties Inc. for $25m, in order to provide nickel concentrate for its refinery in Finland. The overall value of supplies could surpass $450m. Unified Energy System is holding back plans to increase generation capacity until it has upgraded the country's grid system and secured fuel supplies. It is thought that Gazprom had influenced the decision with its reluctance to provide UES with subsidized gas. Kazakh state oil company KazMunaiGaz is expecting an agreement to be made on a new gas pipeline that would link Russia to Turkmenistan. Telecoms company MegaFon has launched its new commercial network ahead of competitors. Russian billionaire Alisher Usmanov has signalled his intention to buy Arsenal in a £120m investment, although it is not clear when the deal will go ahead. “We have no intention to bid for the club today.” Russia is home to a “growing group of very serious collectors who are buying contemporary art,” according to the Gagosian Gallery.

US scientists are concerned that the missile defence shield which the US plans to deploy in Eastern Europe may pose a danger to Russia's nuclear arsenal. Barack Obama has said that new thinking is needed over nuclear policies. "We'll work with Russia to take U.S. and Russian ballistic missiles off hair-trigger alert.”

President Putin has criticised Russian sports officials for attracting sportsmen from abroad instead of grooming homegrown champions. "Looking at our teams, one cannot immediately understand whether those are ours, or a team from Africa," he said. Russia’s religious leader Patriarch Alexy, has “assailed homosexuality as a sin”.

A simple, yet always resonant point from a Newsday editorial:

In a recent survey of foreign policy experts, Russia was picked as the ally that least serves U.S. national security interests.

That's partly Washington's own fault. Since the fall of the Soviet Union, Russia has been provoked and slighted with the expansion of NATO and the air war on Serbia. It's too late for President George W. Bush to have any influence, but the next U.S. president must persuade Putin that our goals and Russia's need not be in conflict, especially if Russia intends to play an ever-larger role on the global stage.

Ukraine will settle $1.3 billion in unpaid gas bills owed to Gazprom by 1 November, the Russian gas monopoly said in a statement today.

The announcement follows meetings at Gazprom’s Moscow headquarters between Gazprom’s chief executive, Alexey Miller, and Ukraine’s energy minister, Yuri Boyko.

“The parties agreed that the Ukraine government of the day regained control over the current problem and its resolution with the view of the debt repayment by 1 November 2007,” a Gazprom statement said.

Yuri Boyko saves the day

Yesterday, Gazprom threatened to cut gas flows to Ukraine if the debt was not paid off by the end of this month. It is unclear where in the gas-supply chain the non-payment issue has arisen, but, according to Gazexport, RosUkrEnergo [the intermediary through which Gazprom sells Central Asian gas to Ukraine] seems to be suffering from “a long chain of internal non-payments” within Ukraine.

Kyiv's decision to step in will be welcomed by the European Union, whose gas supplies from Russia could be affected by any cessation in Russian exports to Ukraine – if consumers in Ukraine were to resort to stealing gas from the transit pipeline that sends Russian gas to Europe via Ukraine to make up for any shortages in Russian deliveries. When Gazprom shut off exports to its neighbour for just over a day in January 2006 – in a dispute over gas pricing often referred to as the gas war – pressure in transit pipelines feeding Europe dropped.

However, there may yet be another ratcheting-up of tensions between Ukraine and Russia if – as the exit polls suggested – pro-Western parties are confirmed as having won last weekend's parliamentary elections. For now, the main Moscow-backed party has refused to concede defeat and an investigation into alleged vote rigging in the pro-Russian east has been launched. But if Yulia Tymoshenko, Ukraine's firebrand opposition leader and one of the Orange Revolution’s leaders, succeeds in forming a government at the expense of the Kremlin’s favoured candidate, Viktor Yanukovych, energy relations are likely to come under renewed strain and Ukraine may be asked to pay higher prices for gas supplied through Russia.

Tymoshenko’s last stint as prime minister in 2005 was marked by trade wars with Russia, she is critic of the 2006 agreement that ended the gas war and wants to see RosUkrEnergo removed as the gas-sales intermediary.

“Gazprom may use a potential change in government and the decision to eliminate RosUkrEnergo's role as an excuse to hike prices for Ukraine,” says Global Insight energy analyst Andrew Neff. Before the election, he points out, Russia's ambassador to Ukraine, Viktor Chernomyrdin, was quoted by Interfax as saying that the price of gas Ukraine is offered by Russia in 2008 “will depend on who comes to the government and how they handle the talks".

Eni CEO Paolo Scaroni (L) and Gazprom Vice-President Alexander Medvedev. Photo: Reuters

Back in June, ENI's CEO Paulo Scaroni told the Wall Street Journal that he was optimistic that the company would retain its stake in Gazprom Neft, which it purchased in the controversial auctions of Yukos assets. This article, which speculated that this would be "a coup" for ENI, also stated "At the time, it was widely believed the Italians were acting as a front for Gazprom."

Today's news brings us the latest developments.

From Forbes.com:

Gazprom to exercise right to buy Eni, Enel Russian assets by year-end - report

MILAN (Thomson Financial) - Gazprom has decided to exercise its call option to buy Russian oil and gas assets held by Eni SpA and Enel SpA before the end of the year paying more than 4.6 bln usd, the daily Finanza & Mercati said, without citing sources.

Last April the EniNeftgaz consortium, comprising Eni (60 pct) and Enel (40 pct), paid 5.8 bln usd for a series of former Yukos assets.

Independently Eni bought 20 pct of Gazprom Neft.

Gazprom has an option to buy the Gazprom Neft stake held by Eni and 51 pct of the Russian assets held by EniNeftgaz within two years.

F&M said that in recent months Russian banks have expressed scepticism about Gazprom exercising the options because of a lack of cash.

But the paper added that Gazprom's management has decided to go ahead and exercise the rights before the end of the year.

From Zygmunt Dzieciolowski on openDemocracy:

This speculation notwithstanding, it was clear from the beginning that the solution to the Russian presidential puzzle would have to meet some basic conditions. The huge concentration of powers in the Kremlin's top job meant that it could not be allowed to fall into the hands of a dangerous reformer: somebody who might inaugurate changes that led to a redistribution of power and wealth between oligarchic clans and structures. The late-18th-century precedent involving the Emperor Paul's efforts to depart from the legacy of his mother Catherine II was a warning to be avoided. Even worse, the merest prospect that a successor to Putin might initiate some kind of democratic thaw that could pave the way for the early release from prison of the ex-oligarch Mikhail Khodorkovsky was enough to cause Kremlin bureaucrats sleepless nights.

Complete article here.

For those in the Washington DC area, we welcome you to come out for Robert Amsterdam's speaking engagement on Thursday, October 4th at Georgetown University's Human Rights Institute.

Human Rights and Rule of Law in Russia:

A Status Report One Year after the Assassination of Anna Polikovskaya

Thursday, October 4, 2007

2:00-3:20 McDonough 588

All are welcome!

Please join us for an important talk by international human rights lawyer Robert Amsterdam on the status of human rights and the rule of law in Russia.

One year after the assassination of Anna Polikovskaya, Mr. Amsterdam will discuss the meaning of that event and focus attention on how the United States government, other Western states and international organizations, and multinational corporations, can act in furtherance of efforts to promote rule of law in Russia today.

Today economic adviser to the Kremlin Arkady Dvorkovich is quoted in the Moscow Times, making some pretty compelling and rational statements on the pernicious rise of state corporatism in Russia, particularly those proposed to control the fishing industry, build roads and produce medicine:

"I view the fashion of creating state corporations as being extremely dangerous, particularly for the industries being proposed," he said at a business forum, Interfax reported. ... "That makes you think that the state is not even trying to understand that private business could do all of that," he said. "It's a path toward setting to nil the growth of the Russian economy." The majority of people in the government, Dvorkovich said, realize the importance of private business. "But risks do exist as well," he said.

We haven't heard a Kremlin adviser make this much sense since Andrei Illarionov called for the deregulation of Russia's gas and electricity sectors, not long before his resignation.

Is Dvorkovich just paying lip service to these reformist ideas, or is he the new Illarionov? If so, let's hope that they listen to him.

[See also: a transcript adaptation from a 2006 event at Cato Institute with Andrei Illarionov and Robert Amsterdam.]

Below is an excerpt from a blog post on YaleGlobal explaining the trade and security interests of China, Russia, and India in Myanmar which has prevented international action in support of the pro-democracy protests:

Russia has also supplied Burma with military hardware. In late 2002, Burma purchased eight MiG-29B-12 air-superiority combat aircraft and two dual-seat MiG-29UB trainers from Russia, at a cost of about $130 million, and the nation negotiates to purchase Russian air-defense systems. In May, Russia signed a deal to build a 10-megawatt nuclear-research reactor in Burma – and Russia, like China and India, shows interest in energy cooperation with Burma. Hardly surprisingly, Russian President Vladimir Putin said on September 28 that although he was “sorry about civilian deaths” in Rangoon, it was “premature” to speak about sanctions.

See Bob Amsterdam's earlier post on Russia and Burma.

(L-R) Russia's Tanya Lokshina, head of human rights group DEMOS, Oleg Orlov, head of Memorial Human Rights Center and Sacha Koulaeva, head of FIDH Eastern Europe and Central Asia Desk, address a joint news conference in Brussels October 3, 2007, one year after the murder of Russian journalist Anna Politkovskaya. REUTERS/Thierry Roge (BELGIUM)

Yesterday a group of 11 civil society leaders from Russia met with the human rights committee of the European Parliament in Brussels. Lev Ponomarev, a human rights activist whose work has been exclusively translated to English on this blog, sharply criticized Europe's complacency and lack of progress on its human rights dialogue with Russia:

"We believe that the existing consultations with the European Union are not effective," Ponomaryov said. "In a certain sense, now that they are being held for a [sixth] time, they have reached a dead end. What is the main problem? The main problem is that it is a dialogue between the deaf and the blind. We say one thing [to the EU] -- and [Russian authorities] do not attend our talks with our Western interlocutors -- and [EU officials] say another thing at their talks with their Western colleagues where we are not present. After all that, there is no follow-up."

A file photo taken in 1957 shows the world's first artificial satellite Sputnik I, launched by the Soviet Union. Russia marked the 50th anniversary of the launch of Sputnik, the tiny satellite whose crackly beeps started the Space Race between the Cold War superpowers.(AFP/Tass/File)

Russia may be “again becoming an authoritarian society,” although this does not seem to be hurting the economy. “Why should a successful president be held back by some constitutional formality?” Mikhail Gorbachev has defended the policies of President Putin. "Russia is a country with which America can get along. This is a reliable partner, but of course it will defend its national interest." Opposition leaders comment on Putin’s intention to run for United Russia in the upcoming elections.

Gazprom has reached a deal with Ukraine over a large gas debt after threatening to reduce supplies, but Kiev continued to deny that it owed as much as the $1.3 billion cited by the company. The European Commission will convene a co-ordination group to evaluate the dispute. Ukrainian President Viktor Yushchenko proposed forming “a broad ruling coalition” between Yulia Timoshenko’s Orange Revolution and Viktor Yanukovich's Party of the Regions. There is speculation over the link between Yuskchenko’s announcement and Gazprom’s earlier threats to cut off Ukraine’s gas supply: “The president made his announcement 20 minutes after Gazprom announced that the conflict over natural gas had been settled.”

The Kremlin's economic adviser, Arkady Dvorkovich, has warned against the creation of more state corporations as a way to boost economic growth. "I view the fashion of creating state corporations as being extremely dangerous, particularly for the industries being proposed," he said at a business forum. Investors buying into Russia's newly liberalized electricity market should face strict monitoring, and a state body such as the Energy Ministry should regulate the market before it is opened up to free competition, according to Anatoly Chubais, head of former power monopoly Unified Energy System, which is soon to be dismantled. Russian billionaire Oleg Deripaska’s Basic Element and Strabag SE, the Austrian construction company, will pool their cement assets in eastern Europe. Russia’s housing, coal, agriculture, auto and mining industries all received good news today. Polish flooring maker Barlinek SA will spend $97m on a Russian factory; Magnitogorsk Iron and Steel Works bought 11% of coal producer OAO Belon; Black Earth Farming is planning to raise $300m in a public offering in Stockholm; Inchcape Plc, a UK chain of global car dealerships, bought Audi and Peugeot outlets in St. Petersburg for $43m; steelmaker Mechel, Russia’s sixth-largest, boosted first-half net profits by 169% to $489.5m; and the CEO of London-listed Peter Hambro Mining said that difficulties with the Natural Resources Ministry's environmental agency were now past, that the current investment climate in Russia was the most favorable that it had ever been. The state rail monopoly, Russian Railways, has begun a campaign as part of its $500bn plan to re-develop the country’s railway infrastructure by 2030. PricewaterhouseCoopers in Russia has been threatened with the loss of its license for the second time in six months. Russia is to limit Polish meat and dairy imports, requiring production plants to be certified by Russian health inspectors. Russia's foreign currency and gold reserves, the world’s third-largest, have climbed for a fifth consecutive week to a record $425.1 billion.

A new pan-European thinktank, the European Council on Foreign Relations, launches this week, with one of its projects being an evaluation of the EU's relations with Russia. Moscow and Washington resumed intensive negotiations on missile defense issues, with chances of the two reaching a compromise seeming slim. Russia’s Deputy Foreign Minister Alexander Grushko has spoken about the dangers threatening Europe if the US missile defense system is built there. Leaders of 11 Russian civil-society groups told the European Parliament's human rights committee in Brussels that the bloc's efforts to engage Russian authorities in a meaningful rights dialogue have failed. Lev Ponomaryov, chairman of the For Human Rights activist group, said, "We believe that the existing consultations with the European Union are not effective." Western rights groups Amnesty International, Human Rights Watch and the International Federation for Human Rights urged the European Union to be more consistent and transparent in promoting rights in Russia. Russian and US space chiefs have signed agreements to cooperate on missions to search for potential water deposits beneath the surface of the moon and Mars. ''These two projects demonstrate the commitment by our countries to continue to look for opportunities where it's mutually beneficial to cooperate,'' said Michael Griffin, NASA Administrator. Meanwhile Russia is holding a series of ceremonies to mark the 50th anniversary of the start of the space age and the launch of Sputnik. Defense Minister Anatoly Serdyukov told the State Duma that the armed forces would reduce the compulsory term of service from 18 to 12 months next year.

The UK market for homes priced at £5 million or more remains buoyant despite uncertainty in the financial markets largely due to overseas buyers from Russia and the Middle East. The man Britain wants to charge for the murder of ex-spy Alexander Litvinenko has sued Russian newspaper Kommersant, accusing it of damaging his reputation in a July article that linked him to the killing.

Interesting column today from Quentin Peel in the Financial Times:

In Russia, politics means business

By Quentin Peel

All politics is business in Russia today, and all business is acutely political. There is no dividing line between the two. Gazprom, the giant state-controlled gas monopoly, is the perfect example.

Take its dramatic announcement on Tuesday, warning gas customers in the European Union that a dispute over unpaid debts with Ukraine might force it to start reducing gas supplies to that country - the main transit route for Russian gas to central and western Europe. The statement came just as the counting of election votes seemed to indicate that the next Ukrainian government would be a pro-western coalition, to replace the outgoing Russia-friendly regime. "We are not dealing on behalf of the [Russian] government," a spokesman said. "This is a purely commercial issue. Gazprom is a commercially driven company."

Another official admitted the company held off making any announcement during the election campaign for fear of being accused of political interference. Its very silence was political.

If Gazprom wanted to be seen to be totally even-handed, it should have announced that Ukraine owed it more than $1bn (€710m, £490m) in unpaid gas bills at the same time it accused neighbouring Belarus of owing $456m, says Christopher Granville, Russia analyst at Trusted Sources. That was at the end of July. Alexander Lukashenko, the Belarus president, rapidly paid up. But the timing might have been embarrassing for Viktor Yanukovich, the outgoing Ukrainian prime minister, two months before the poll. So Gazprom said nothing.

Yet it is hard to fathom what purely political purpose is served by landing an incoming government in Kiev with such a hot potato. If anything, it seems likely to get anti-Moscow forces to close ranks. Given the bitter relations between Viktor Yushchenko, the president, and Yulia Tymoshenko, his erstwhile ally in the Orange Revolution, that would be no mean achievement.

Let us assume for a moment that Gazprom was driven entirely by commercial motives. Any company would naturally want to collect a debt running at $1.3bn, by Gazprom's account. But who allowed it to reach such a huge amount, and why?

The behaviour of the Russian supplier reminds one of the detested "gombeen man" in colonial Ireland, a sort of rural loan shark who allowed his customers to run up big debts at usurious interest rates, which could be paid off only by selling him their land.

Gazprom has been trying to gain control of the pipelines through Belarus and Ukraine to western Europe. It has succeeded in taking 50 per cent ownership of the line through Belarus but has failed in Ukraine. Could that be the motive in allowing the debts to accumulate?

The pipeline is on the books of Naftogaz Ukrainy, the state gas distributor whose financial plight is behind the non-payment of debt to its supplier Ukrgazenergo, which in turn owes RosUkrEnergo, which owes Gazprom. Naftogaz has to supply municipal heating and housing bodies that are themselves all but bankrupt, as well as individual consumers who are also unreliable in paying their bills.

The Ukrainian parliament, however, passed a law last February forbidding the sale of the pipeline to any foreign buyer, precisely in order to prevent control passing to Gazprom. "They want to own the pipeline, but they know it is not going to happen," says Jonathan Stern of the Oxford Institute of Energy Studies.

Instead, they may be looking for stakes in other Ukrainian assets.

Professor Stern admits Gazprom does not take any high-profile action "without the OK of the Kremlin" but also wonders if western Europe is not excessively suspicious of the company's motives. "When you call in your credit is a business question," he says.

Some sort of deal seemed to have been reached yesterday, at least for the Ukrainian government to take responsibility for the debt. But the detail of any settlement is what matters. Gazprom's aim may be commercial: to grab control of a bit more of the Ukrainian economy. And that, of course, would be supremely political. So watch the small print.

We're pleased to bring you this exclusive translation of an opinion article from one of Germany's leading newspapers, the Süddeutsche Zeitung, which discusses Putin's move for the premiership and reminds us of the importance of appearances. The original version can be read at the SDZ site or on our German blog. Check out previous translations from this paper here and here.

Süddeutsche Zeitung
Editorial Page, Thursday, October 4, 2007
Lead Article, Germany, p. 4

Putin’s Virtual Democracy

By Daniel Brössler, Süddeutsche Zeitung

These days in Russia, several theatres are preparing to put on plays whose hero is named Vladimir Putin. Not one of these performances can be better than the reality being staged by Putin. The president likes to see himself as director and actor; Russia is his stage. The president’s omnipotence goes so far that he also almost completely directs the public. There is applause when Putin wants it. That also goes for his newest and probably most daring idea as director. Putin’s decision to run as the lead candidate for the Kremlin party One Russia in the December parliamentary election and so position himself for the office of head of government is being celebrated in Russia as a stroke of genius. After almost eight years in power, the president can be pleased with himself and his work.

It is worth noting that Putin is now being praised for his loyalty to the constitution, and his plan is being celebrated as a contribution to greater pluralism in Russia. Upon superficial consideration, the situation looks approximately like this: Putin is sticking to the letter of the constitution and is not running for president for a third time after the end of his second term of office. Instead he his putting himself at the head of the largest political force and in doing so is strengthening the party system. If he then also takes over the function of minister president as well, he is promoting the emancipation of the government, which has up to now been directed by the Kremlin. This could open the way for the transformation of Russia from absolute presidential rule to parliamentary democracy. This all sounds good. Only it has nothing to do with reality.

Western observers are tempted to take Putin at his word. How senseless this is was shown by the coronation mass at which a lead candidate was made out of a president without party affiliation. Putin vainly presented himself as the creator of One Russia, but he insisted at the same time that he remain unaffiliated with any party. This obvious nonsense does not post any trouble for the zealous extras in Putin’s play. At short notice, they changed the party’s statutes in order to make it possible for the allegedly independent Putin to be their lead candidate. The president puts great store in the fact that on a formal level nothing fishy ever takes place. He will stick to this approach in future as well. Every additional step he takes towards maintaining power will also be covered by laws. In the event of an emergency, they will simply have to be written.

Why then does Putin not simply have the constitution changed in order to allow a third term of office in the Kremlin? The question is justified. This is probably explainable only through the considerable importance that the president attaches to proper appearances. He did not want to act as crassly as the Kazakh Nursultan Nazarbayev. Nazarbayev had the constitution simply amended with a little addition that the limit to two terms of office did not apply to the “first president of Kazakhstan.” Putin can afford to act in a more refined way. Supported primarily by the secret service, Putin, during his presidency, has been able to perfect that virtual form of democracy which is to be encountered in almost all of the former Soviet republics. It is a play, in which parties, institutions, and the media are nothing more than scenery. The actual struggle for money and influence take place backstage out of the public’s view.

In this situation, it is hard to make predictions. Compared with the present-day situation, the Kremlin astrology of Soviet times is an exact science. A completely unknown figure could never have been able to become general secretary in the Communist Party. Putin’s capriciousness in personnel policy, however, knows no limits. Therefore, is also in no way certain what will now happen next. It would appear that Putin will have Minister President Viktor Zubkov – who he pulled out of a hat – elected president in order then to be appointed head of government. But that entails risks. Putin knows from his own experience how much the Kremlin changes a person. There exists unforeseeable danger that Zubkov changes from marionette to puppeteer. It is also easy to imagine that Zubkov would rather quickly have to give up the office once again on account of illness. He would then be succeeded constitutionally – as a caretaker at first – by the minister president, that is to say, by Putin. After a short interlude, he could then have himself elected Kremlin boss yet again – completely in accordance with the constitution.

However, Putin could also have the constitution changed to shift power from the Kremlin to the White House, the seat of government. That would not be without an element of comedy, for it was of course Putin – even more so than his predecessor Boris Yeltsin – who concentrated power in the Kremlin. The list of other variations under discussion is long. Any one of them could become reality, if Putin wanted. He has shown that he is in a situation to push through any decision in the style of a secret commando operation. U.S. Secretary of State Condoleezza Rice’s warning against the concentration of power in Russia sounds almost touching.

Russia may look stable at present. But a stability that depends on a single person is no stability at all.