April 2008 Archives

Last week we reported on the strange launch of a new magazine for Russia's ultra wealthy called "Snob." Now the wealth report blog over at the Wall Street Journal checks in...

At the American Express Luxury Summit in California recently, I got a scolding from a Russian billionaire.

Roustam Tariko, the fun-loving, vodka-insurance-credit-card-and-banking magnate, told me that I was being too dour about luxury demand. Far from entering a period of quieter consumption, he said, status spending was poised for a boom.

“People are still spending,” he said. “They want the biggest and the best.” He added: “Mr. Frank is wrong.”

Ever wonder where all that Russian capital goes? I found this to be an interesting look into investment in Russia. Notice when Beadle talks about high placed bureaucrats who have their eyes on certain energy assets, are sometimes unable to to seize them away from the private owners - marking a certain positive shift in the country's expropriatory trend.

Things were looking a little slow for Russian finance for a while there. No doubt many of those analysts pushing the "decoupling" argument got fired after the RTS tanked amid the credit crisis on Wall Street, and despite politicians boasting that the market was an calm oasis amid the storm, it still seems that when New York sneezes, Russia is prone to call in with a sick day.

Such a gloomy outlook caused many Russian companies looking to go public to pause, delay, and sometimes cancel their flotation plans. But just when we thought the IPO bonanza from Russia was over, several huge upcoming stock issues appear set to break records - bringing back the fun of 2006 to the London Stock Exchange - minus of course the infamy of the Rosneft scandal.

Of course we are talking about Globaltrans, Russia’s largest private train operator, and Rusal, the metals giant controlled by Oleg Deripaska. Today the Financial Times reports that Globaltrans has announced an expected $449 million to be raised in next week's IPO on the LSE. The share price implies an astounding market capitalization of $1.55 billion. Rusal, on its behalf, is still vague about the date and venue of its frequently delayed IPO, but company chairman Viktor Vekselberg has recently revealed that the offering will happen before the end of the year - no doubt bolstered by the rumors of an earth-shattering merger with Norilsk. Chris Weafer thinks that Rusal's offer could hit $10 billion.

I won't be the first to say that these are probably two very good buys.

Russia will increase natural gas exports to Pacific Rim countries from the current 3% to 30% of its total exports by 2020. Gazprom says Russia will be able to completely satisfy the growing demand for gas in Greece. The two countries have signed a deal under which Greece will join Gazprom's South Stream gas pipeline, saying that it will strengthen energy security in Europe. Gazprom is teaming up with Germany's Verbundnetz Gas to build and operate an underground gas storage facility in Germany. The Bush administration hopes to send a pact on civilian nuclear cooperation with Russia to Congress in the next month. Fuel crisis Q&A at The Times. BP has thus far received visas for 24 of 148 employees who were suspended from assignments to TNK-BP last month. Vladimir Bogdanov, the head of Surgutneftegaz, has denied controlling the firm, saying he holds a stake of less than 2%. AMEC, the international engineering and project management company, has been awarded a five-year contract for BP in Azerbaijan worth $500 million. Striking oil workers who have shut down virtually all Exxon Mobil's production in Nigeria have agreed to return to work while negotiations with the company continue.

The US Department of Agriculture says Russia has banned US pork imports from two Tyson Fresh Meats plants and two Farmland Foods plants as of May 5. VTB, Russia's second largest bank, has launched a $1 billion loan into syndication. Gold and currency reserves have grown more than 10% during the past 55 working days. “Russia appears to be struggling to secure any significant economic commitments from Tokyo.” Leading Russian mineral fertilizer producer Acron is set to raise $900 million from an initial public offering on the London Stock Exchange in July. As an anti-inflationary measure, the Central Bank of Russia has upgraded its refunding rate from 10.25 to 10.5 annual interest. The Natural Resources Ministry has sued Oleg Deripaska's Basic Element, demanding a $178 million fine for polluting Lake Baikal, and demanding that its Baikal pulp plant be shut down.

TODAY: Foreign Ministry threatens retaliatory measures for Georgia, denies it is preparing for military confrontation; Lithuania blocks Russia-EU progress; Boris Nemtsov’s white paper; Medvedev says Russian media has become “a bit boring” due to technological advances.

The European Union's foreign policy chief has warned Russia that its decision to send more peacekeepers to Abkhazia is “not wise”. Foreign Minister Sergei Lavrov denies that the extra troops are being sent in preparation for a military confrontation, although Russia has warned it will retaliate if Georgia uses force against its breakaway regions. Meanwhile, “experts” at Russia’s Foreign Ministry have concluded that the video of a Georgian spy plane being shot down is “forgery”.

Nord Stream – from a Finnish perspective: interviews with Heidi Hautala and Erkki Hollo

By Grigory Pasko, journalist

In one of the magazine articles, the author, clearly sympathetic towards «Gazprom» and its latest spawn – Nord Stream – wrote: “No, no, no!!! – the editorial in the newspaper Svenska Dagbladed exclaimed hysterically with respect to the gas pipeline project, frightening readers with a drawing of a Russian octopus”.

“Hysterically” – this is in the sick imagination of the author of the article. In actuality, I would say that the Scandinavian press (like, by the way, the Russian as well) is devoting remarkably little attention to coverage of the details of the advancement of the project. And as is known, the devil is in the details. Perhaps this is precisely the reason why so little is known about the actual details of the project?

It is known that Finland in the year 2004 began construction of a new reactor for a nuclear power station. In such a manner, dependence on Russian gas, the proportion of which in Finland’s energy supply comprises 11%, will be reduced. That is, Finland has no reasons to be declaring anything at all about Nord Stream “hysterically”, to use the words of the previously mentioned journalist.

Yes, that's right - Poland, the same country whose leaders have so regularly berated and criticized Vladimir Putin, is now declaring the second coming with the presidency of Dmitry Medvedev.

Polish Foreign Minister Radoslaw Sikorski has told the FT, "We should always give credit to a new leader and Mr Medvedev is an interesting person because he is the first Russian leader in my memory who doesn't come from the Communist party or the security services. It is a hopeful development," he said. (...) [He] also suggested that Mr Medvedev could be good for relations between Russia and the European Union because the new president was a lawyer and would be well placed to deal with such a law-based organisation.

This also comes on the heels of President Lech Kaczynski's "softening" of Russia policy - making clear that Poland would not connect the Ukraine-Georgia NATO membership talks to its veto over EU-Russian relations. Poland is one of Russia's main stumbling blocks in the EU, and if Medvedev is successful in winning over Sikorski like this, he wins greater political credit against the policy proposals of the hawkish siloviki in the Kremlin. The liberal factions need proof that playing friendly with the West produces results. Now, he'll have to do the same with Lithuania.

Giorgi Baramidze, Georgia's Deputy Prime Minister, has an interview with CNN in which he expresses exasperation with the strained friendships with Western governments, who have done little to help with Tbilisi's problems with Moscow. As a side note, it seems to be harder and harder to find any YouTube news videos that don't come from Russia Today.

There's an interesting interview with Tanya Lokshina, senior researcher at Human Rights Watch, on EurActiv.com dealing with EU-Russian relations and the "credibility gap" on human rights. Lokshina says that private domestic sources of funding for human rights NGOs has dried up because of the state's attack on the private sector: "The Yukos case and the imprisonment of the famous oil magnate Khodorkovsky, who dared to support both political opposition and human rights NGOs, certainly contributed to the fact that Russia’s business community does not want to risk anything."

Radio Free Europe/Radio Liberty, a U.S. government funded media outlet originally established to "promote democratic values and institutions by disseminating factual information and ideas", has experienced a lot of resistance over its 59-year broadcasting history. Its signal has been repeatedly jammed by Soviet authorities and its journalists attacked. According to an exhibition review from 2001, "Historians estimate the Soviets spent $35 million trying to jam the stations' signals -- double the cost of running both RFE and RL. Some politicians sent spies or even assassins: Romania's Nicolae Ceausescu succeeded in having his on-air critic Emil Georgescu murdered. A bomb tore through the Munich office in 1981, causing $2 million in damage. But the poison in the salt shaker scheme of 1959 failed, thanks to an alert counter-agent."

But with Gorbachev's perestroika, many believed the days of interference with RFE/RL were over. Not so fast.

Italian Prime Minister Romano Prodi has turned down a Gazprom offer to become chairman of the South Stream natural-gas pipeline. One article links the offer to Gazprom’s attempt to “muscle up politically”. BP says profit at TNK-BP rose more than fourfold in the first quarter. Greek Prime Minister Kostas Karamanlis arrives in Moscow today to discuss energy cooperation. A new survey says that state-run energy giants Rosneft and Gazprom rank higher than privately held LUKoil in terms of revenue transparency. Ukrainian Prime Minister Yulia Tymoshenko says that Ukraine has sent its last payment to Russia, “which completely settles the accumulated debt for natural gas.” Iran and Russia have discussed outlines for a package of proposals aimed at defusing concerns that Iran is using its nuclear program as a cover for weapons development. Iran has dismissed objections from big Western consumer nations to setting up an OPEC-style gas body. Russia and Iran have the world’s first and second largest gas reserves, respectively. As oil prices rose over the last years, “basic economics suggested that consumption would fall and supplies would rise as producers drilled for more oil.” But neither has happened. Russian oil firm Surgut says it may lose a third of production long term if the government does not alleviate its tax burden.

A new report indicates that the total volume of assets in sovereign wealth funds grew by 27% in 2007 and continue to exert influence on the world financial market. Consultancy Global Insight says that, if sovereign wealth funds continued to expand at their current rate, they would exceed the economic output of the United States by 2015 and the European Union by 2016. Finnish state-owned post and logistics firm Itella has agreed to buy top Russian warehouse firm NLC Group for around €300 million ($470 million). Highland Gold Mining has turned its first profit after 40% of it was bought by Roman Abramovich's Millhouse.

TODAY: New reports on media freedom and population; Abramovich was an “undeclared member of President Putin’s regime”?; WTO talks progress despite Georgian and Lithuanian reservations; Sochi land evaluation commission will be lighter than promised.

A new report by US-based democracy watchdog Freedom House says media freedom in Russia "saw continued and substantial declines" in 2007, and that the country has the same level of press freedom as Sudan and Yemen. Russia is doing too little to reverse a critical decline in its population driven by increasing alcohol abuse, poor diet and social change, according to a new report from the UN. The case brought by Boris Berezovsky against Roman Abramovich has reportedly brought documents to light which show that Abramovich “was an undeclared member of President Putin’s regime in Russia when he bought Chelsea Football Club in 2003”.

An announcement: In case you’ve been wondering what’s happened to our correspondent Grigory Pasko, he’s spent the past two weeks on assignment, filming and doing interviews in four countries – Finland, Sweden, Germany, and Denmark – in an attempt to get a grasp on what is going on with the project for the construction of the Nord Stream gas pipeline along the bottom of the Baltic Sea. I had a chance to catch up with Grigory in Berlin last week, where he told me that the project seems to have “frozen up” like a complicated computer. But here, why don’t I let him tell you in his own words? - Robert Amsterdam

Nord Stream, Scandinavian Style

By Grigory Pasko, journalist

Yes indeed, I can’t help but get the impression that despite all the bold declarations by representatives of the company Nord Stream, the project is starting to lose traction and spin its wheels, as it were. And this because of the position of certain Scandinavian countries. For example, because of Sweden’s position. The irony of Clio, the goddess of history, is that both the German city of Greifswald, where the undersea pipeline will end, and the Russian city of Vyborg, where it will start, were both Swedish cities in their day.

(Photo: The author and the sea – in Visby, Gotland. By Rolf Jonsson)

For fans of the iconic film "The Godfather," John Hulsman and A. Wess Mitchell's article in the National Interest, which proposes a mafioso view on dominant foreign policy paradigms, will be quite amusing. For anyone who's read a few more books about diplomacy and international relations, they'll find the satire a bit thin and perhaps even recklessly simplistic - but also amusing. It should be noted that Sean Guillory has already applied the rich theoretical insights of the Godfather to Russian politics...

"For in order to be successful, the consigliere’s diplomacy must be conducted from a position of unparalleled strength, which the family no longer possesses. Tom no longer has the luxury of always being the man at the table with the most leverage. The era of easy Corleone dominance is over. Power on the streets has already begun to shift into the hands of the Tataglias and Barzinis—the mafia equivalent of today’s BRICs (Brazil, Russia, India and China). Like the current international system, the situation that confronts the Corleone family is one of increasing multipolarity—a reality that is lost on Tom, who thinks he is still the emissary of the dominant superpower (a delusion that many Democrats apparently share).

Energy corruption and Gazprom’s job offer to Prodi

Ladies and gentlemen, we now have the official beginning of an ignominious trend in EU-Russia energy relations: the hiring of former heads of state to manage Russian gas and oil mega-projects they helped push through while in office. If only U.S. Rep. Tom Lantos were still around to put things into perspective.

For those who haven't been listening, Russia's got herself a new sovereign wealth fund - a $25 billion portfolio which will soon begin snapping up foreign company shares and corporate bonds all over the world, and no doubt raising some suspicion along the way. This fund, which is separate from the massive $130 billion stabilization fund overseen by the often-embattled Alexei Kudrin, has been the focus of much attention following highly public power struggles over access to the national piggy bank - climaxing with the jailing of Deputy Finance Minister Sergei Storchak on spurious charges. It's still not clear whether the stabilization fund was split as a compromise to ease tensions among the feuding clans.

Fred Hiatt has an opinion column in the Washington Post today entitled "The Gymnast and the Czar," which makes light of the damaging effect of Russia's creeping authoritarianism on emerging democracies in the post-Soviet sphere, and the refusal of the West to recognize these problems for fear of upsetting the entitled in Moscow:

It is no longer controversial to note that Putin "has led Russia into a harsh brand of authoritarianism with some fascist features," as French scholar Pierre Hassner said in a speech last fall. But it's worth recalling the methodical and patient way he crept toward dictatorship, because recent events raise fears that he is now creeping in the same way toward stifling the independence that Russia's neighboring states have enjoyed since the Soviet Union fractured in 1991.

Azerbaijan has blocked a Russian shipment of nuclear equipment to Iran. Iranian President Mahmoud Ahmadinejad will visit India and Pakistan this week to discuss plans for an Iranian gas pipeline. Gazprom CEO Alexei Miller could offer Romano Prodi, who steps down as Italy's premier in early May, a top post in the South Stream gas project. The Times discusses the “myth” that the world is running out of oil. Japan and Russia's governments have agreed to cooperate on oil exploration in eastern Siberia. Oleg Deripaska wants to form a partnership with Glencore International, the world’s largest commodity trader, to run Russneft if he succeeds in purchasing the crude producer. Reflecting Russia’s desire to have 25% of its electricity come from nuclear power by 2030, Uranium Holding, the state-owned mining company, may spend $8.6 billion to triple output with help from Deripaska, Canada and Japan.

Inflation is still a top government concern amid fears that a further spike in costs is on the way. Entertainment prices are also on the rise. Finance Minister Alexei Kudrin says inflation will not exceed 10% this year. Russia may invest as much as $25 billion from its national wealth fund in overseas equities and corporate bonds starting next year. Oleg Deripaska has indicated that he intends to float United Company RusAL in China rather than London. Following its purchase of 25% of the company last week, RusAl says it will seek to combine with Norilsk Nickel in the next year. Deputy Finance Minister Sergei Storchak, awaiting trial on suspicion of embezzlement, has been stripped of his duties as a deputy governor of the European Bank for Reconstruction and Development. UPM-Kymmene, Europe's second-largest papermaker, and Sveza Group, Russia's largest plywood producer, plan to invest €1 billion ($1.56 billion) in a joint venture to produce pulp, lumber and wood panels in Russia. A Russian rebranding consultant says the country is caught up in a “rebranding fever.”

TODAY: Deripaska in the spotlight; Iran tries to defuse nuclear row with Russia; talks with Japan, tensions with Abkhazia; Russian Easter; Gorbachev criticizes Russian democracy; football final threatens visa nightmare.

Oleg Deripaska, has said he is convinced Vladimir Putin will remain fully in charge of Russia until 2020. Read an interview with Deripaska here. Iran is apparently trying to defuse a nuclear row with Russia by offering a “package of proposals”. It is being reported that Russian military reinforcements were being deployed in Georgia's breakaway republic of Abkhazia over the weekend. Japanese Prime Minister Jasuo Fukuda has agreed with Putin to begin talks to resolve a territorial dispute over the Kuril islands.

From Garry Kasparov in the Wall Street Journal:

I used to compare our vanishing democracy to that of countries like Venezuela and Zimbabwe. But events have shown how wrong I was to make such comparisons – and how unfair I was being to Hugo Chávez and Robert Mugabe. Venezuela's Mr. Chávez, little more than an oil-empowered hooligan, actually lost a recent referendum on expanding his powers by 2%. Vladimir Churov of the Russian Central Election Committee would never have stood for such an embarrassment!

Even Mr. Mugabe, Zimbabwe's old-fashioned despot, is too shy to publish victorious results in the latest elections. Perhaps Mr. Churov can be rented out to other would-be dictators who wish to maintain pleasant relations with the champions of democracy in America and the European Union.

We’ve already published numerous exclusive translations from www.rbcdaily.ru, the internet version of the Russian newspaper «RBK daily», which is published in cooperation with Germany’s Handelsblatt. The reason we keep on publishing them is because the paper is clearly no longer the “daily business newspaper” it advertises itself as, but has become a Kremlin stooge, publishing flag-waving jingoistic propaganda articles on such topics as official recognition of breakway regions in Georgia and Moldova, keeping Vladimir Putin in power, Western spies lurking around every corner, and degenerate Western homosexual drug addicts who advocate population reduction, just to name a few. Here we offer the latest gem, about Russia’s threat to use military force in support of its claims to the Arctic and how the UN is supposedly an American running dog (which will certainly come as news to the Bush administration). Note also that the headline says “Putin”, not “Russia”, even though the events the article describes will take place no earlier than 2009, when he will (supposedly) no longer be running the country.

Source:

Putin Will Annex the Arctic
No one will be able to stop Russia

The area of Australia has increased by 2.5 mln sq. km – such a decision was adopted last week by the UNO commission that deals with continental shelf boundaries. Now the government of this country will be able to control oil and gas fields situated in the given areas, however Canberra will not have power over navigation and marine biological resources. This decision bears witness that Russia has all rights to the Arctic.

Interesting interview over at CFR today with Elizabeth Fuller of Radio Liberty/Radio Free Europe, which takes a look at how Moscow can reconcile support for Georgia's breakaway regions while managing separatist tensions within its own territory. She argues:

The more I think about it the more I am inclined to believe that Russia has never intended to recognize Abkhazia and South Ossetia. If Russia had done that, after it protested the recognition of Kosovo, it would have laid itself open to allegations of double standards. Russia had not let Chechnya secede. It would be difficult for Russia to argue that Abkhazia and South Ossetia have the right to become independent from Georgia but that Chechnya doesn’t have the right to become independent from Russia.

It seems like a cruel paradox that the same week in which the Russian government called for stricter media laws, allowing them to shut down a publication for printing libel, that billionaire Mikhail Prokhorov announces the launch of Snob Magazine, an exclusive-access elitist platform for Russia's nouveau rich to boast to one another of their latest bling. I have feeling that this kind of journalism is not about "comforting the afflicted, and afflicting the comfortable" - but maybe Prokhorov is just trying to distract people from the Norilsk news.

Then again, the country's president-elect has said that any amount of cash can be conjured with just a snap of the fingers.

Jane Armstrong shares some interesting views on Russia's fondness for ostentation:

"The rich in Russia are different," said Jane Armstrong, The Globe and Mail's Moscow correspondent. "What they try to do is display their wealth extravagantly, because they weren't allowed to for so many years."

Nicholas Eberstadt of AEI and Hans Groth of Pfizer have a column about Russia's demographic crisis in today's Wall Street Journal - and it appears that it is going to take more than giving away prizes of SUVs to pregnant women to fix the problem: "The causes of death are clear enough: Skyrocketing mortality from cardiovascular disease and injuries (accidents, poisoning, suicides and homicides). The underlying causes here are harder to pinpoint, but we can mention a number of plausible factors: Poor diet, lack of exercise, heavy smoking, and social stress. Russia's deadly love affair with the vodka bottle remains legendary, and looks to be another significant factor, with per capita consumption extraordinarily high.

Russia's "excess mortality" threatens to straitjacket Russian productivity and development. It is true that Russia has enjoyed robust economic growth rates over the past several years, but this has primarily been generated by oil and gas exports. In the modern world economy, a country's health profile is an essential element of its sustainable economic potential – quite arguably, the key element. How can Russia hope to be a vibrant modern economy with a dwindling and debilitated workforce and a life expectancy which is a full 12 years shorter than in Western Europe? No modern society can expect to enjoy an Irish standard of living on an Indian survival schedule."

This strongly worded letter to the Washington Post brings back the civilization-vs.-barbarism trope back into the Russia debate. We think this reader takes it too far, but can understand the frustrations of authoritarianism and the lies we are told about power.

Letters to the Editor Mr. Putin's Facade

It's nothing less than droll how Russian President Vladimir Putin oscillates [editorial, April 22] between trying to impress the world with the fiction of his and Russia's supposed urbanity and lashing out with such brutish tactics as the shameless attempts to undermine the political stability of two smaller neighbors, Georgia and Ukraine, knowing that he can blackmail his country's weak-kneed European gas customers, such as France and Germany, into rejecting even the idea of NATO's eastern expansion.

Alfa Group,Access Industries and Renova (AAR), the Russian shareholders of TNK-BP, have denied that they will sell their stake in the company. “Speculation and rumors of a planned sale by AAR of its stake in TNK-BP are groundless and have no basis in reality." Gazprom’s chairman met with the prime minister of Qatar to discuss possible energy cooperation. A report by United Energy System (UES) says that Mosenergo was the only electricity generating company to receive an "unsatisfactory" rating in a national survey on power-sector investment. UES auctioned off large stakes in two power supply firms, SamaraEnergo and UlyanovskEnergo, for a total of $92 million. Amid reports that oil production in Russia has peaked, one official says the country needs investment in new oil fields. BP has announced that it will invest $560 million in Brazilian biofuels, amidst criticism from environmental groups regarding the effects of biodiesel production on food supplies. Lukoil plans to invest $5.5 billion in gas exploration in Uzbekistan.

Oleg Deripaska, owner of Russian aluminium producer United Company Rusal, has successfully bought a 25% stake in Norilsk Nickel from Mikhail Prokhorov, its co-owner. It is thought that Prokhorov will receive a 14% stake in return. The deal is said to be worth $13 billion. More on the Inchcape/Musa deal. Russia’s plan to impose duties on raw timber exports could “potentially hurt its chances for a WTO entry.” An East Siberian court granted a request from prosecutors to extend a new probe against jailed Yukos co-founder Platon Lebedev until August 2.

TODAY: Russia-EU talks mandate: still no agreement; A Just Russia to hold annual congress; “PR battle” relations with Georgia worsen; the demographic trend of depopulation. Also: Japan, Iran, Prokhorov, Ukraine.

Talks in Brussels have failed to reach an agreement on a mandate for partnership talks between Russia and the EU, although diplomats are hopeful that a decision will be reached by the end of May. The Council of Europe's commissioner for human rights, Thomas Hammarberg, will meet with Vladimir Putin and Dmitry Medvedev today. This comment piece implies that Medvedev’s presidency and Putin’s premiership will be a change of roles that will allow things to remain the same. “Medvedev is to keep the throne warm for his master.” A Just Russia will hold its third annual congress today, and is expected to “expel thousands of members who were not aware that they were members”.

Not according to Anders Aslund. Corruption is becoming such a problem, that public outrage could potentially reach a tipping point.

Over the past eight years three major factors have defined the state of affairs in Russia. First, the country's gross domestic product has grown by 27 percent a year in dollar terms. Second, the country has moved from being partially democratic to authoritarian. Third, its level of corruption has not decreased according to the measurements of the World Bank, the European Bank for Reconstruction and Development and Transparency International, while corruption has abated elsewhere. In these regards, Russia is no longer normal, but extreme. (...)

Needless to say, a state as corrupt as Russia is far from being strong; it is dysfunctional and weak. Corruption poses a systemic threat to the quality of education, health care, and the stability of the state as a whole. The government's inability to carry out major infrastructure projects is a good example of its fundamental weakness. The country suffers a desperate shortage of qualified labor because much of the education system has been eroded by corruption, and the government has made no attempt to clean it up.

The New York Times has an editorial today about Venezuelan President Hugo Chávez and his latest wave of expropriations. One can read such an item and easily substitute "Russia" and "Vladimir Putin" to get a precise and devastating critique of what's gone wrong in both countries. That said, at least in Venezuela democracy continues to have a heartbeat, the media is free, the courts have more independence, and there aren't political prisoners. Really Chávez could lecture some of the siloviki on how to steal like a gentleman.

NYT:

What is certain is that the country’s economy will suffer. Mr. Chavez’s cronies have proved that they don’t have the skill — or the honesty — to run these businesses. Bungled management is responsible for a decline in production at the state-run oil company Petróleos de Venezuela, known as Pdvsa. The expropriations, added to exchange controls and price controls, are holding back much needed private investment. Even soaring oil prices aren’t helping. High global food prices and unfettered government spending have pushed annual inflation well past 20 percent, while price controls are producing shortages of basic foods.

Last year, Mr. Chávez forced foreign oil companies to give up control of oil fields in eastern Venezuela, and he nationalized the country’s largest telecommunications company and the electricity company serving the capital, Caracas. These new expropriations were another attempt to grab control of all of Venzuela’s economic and political life while providing more opportunities for patronage and corruption.

Some time ago, BP got into big trouble with the Russian authorities - call them a collateral casualty of the lawlessness kicked off by another well known expropriation. But clearly the corporation has been following a strategy to resolve this longstanding problem, dating all the way back to Lord Browne's tenure as CEO. Stay quiet, deny the existence of the problem, and hope that by placating the aggressive elements within the government (never for a moment assume that everyone in the Kremlin wishes BP such harm) that eventually the problem with resolve itself.

One can understand why BP has chosen to tread so carefully - subsidiary TNK-BP is responsible for almost a quarter of the company's oil production, and represents one of the most critical strategic growth markets for the corporation. However the back channel strategy has not worked, in fact, it is painfully failing, as we see from the recent reports of an oppressive new $256 million back tax claim, rumors that Gazprom will take over the company for $20 billion, and signs of increasing impatience over stalled production at Kovykta (see FT article after the jump). It might be time for Mr Hayward to consider a more public, political approach - before shareholders begin to ask the difficult questions.

Gazprom is to buy majority control of TNK-BP for $20 billion by the end of the year. It was reported that Gazprom had warned its patience was running out in the talks to finalize the purchase of Kovykta from TNK-BP. Serbian lawmakers will delay ratifying an oil and gas agreement with Gazprom until May 11 elections are held. Former electricity monopoly UES will postpone board meeting issues as setbacks threaten to stall Russia's vital electricity reforms. The company has just nine weeks left to sell its three large generating companies. The main provider of electricity to Moscow, Mosenergo, is failing to carry out its development plans and threatening the city's growth, according to UES. Zarubezhneft, “Russia’s oldest company active in the oil and gas industry” is reportedly seeking Iranian investment opportunities. “The advantage of oil at the present [cost] level is that it forces conservation.”

Former Yukos security chief Alexei Pichugin denied in court that he had ever been ordered to commit murder by Yukos shareholder Leonid Nevzlin, and claimed that Federal Security Service agents gave him psychotropic drugs in 2003. State-run Rostekhnologii wants multibillion rouble funding and industrial assets from the government. British-based Inchcape will buy a 75.1% stake in car dealer Musa Motors Group for $200 million. The number of cars on Russia's roads is set to double by 2015. General Motors will open its second plant in St Petersburg later this year, and Peugeot has announced raised revenue on increased Russian demand. Russia may lift a 5% import tariff on tin in order to increase output of tinplate. A new State Duma bill that will ensure majority state control over 42 strategic sectors, including energy, aerospace and telecommunications, could cause worry amongst foreign investors.

TODAY: Clashes during IOC visit in Sochi over housing. Military parade planned for May 9. Russia firm on support for Georgia’s breakaway regions. The Kremlin and the Russian Orthodox Church.

Practice for a May 9 parade of Russian military hardware on Moscow's Red Square, the first since the Soviet era, included over “100 tanks, rocket launchers and armored vehicles, flanked by 8,000 soldiers.” A retired colonel involved in the first parade in 1945 commented, “When you are dealing with other countries, you should not look weak.” A new television movie about Chechnya “has given viewers one more reason to believe Russia is under siege by foreign enemies with intricate conspiracies aimed at destroying their country.” Holodomor: “an anniversary that Russia will not commemorate.” Despite calls by Western powers, Russia will not rescind its plan to strengthen ties with the breakaway Georgian regions, saying wants to promote their economic development, not annex them.

Republican nominee for the U.S. presidential election, Sen. John McCain, is easily the most outspoken of the bunch on Russia, often making brave and provocative comments about his plans for relations with the Kremlin. But who has this nominee's ear on the day-to-day details of the relationship with Russia, and what is the ideological approach? The answer to this question was explored recently in an excellent Moscow Times article about the Russia advisers of all three candidates.

So who is Stephen Biegun, and what might we expect from him if McCain were to win the presidency?

The following news footage, which is refreshingly free of commentary, shows Vladimir Putin and Dmitry Medvedev attending the memorial service for Boris Yeltsin, who passed away one year ago today. According to news reports, Putin's speech was largely full of platitudes for Yeltsin's administration, yet there were some subtle messages asserting the new interpretation of Russia's post-Communist years. Reuters reports "In a symbolic moment at the memorial ceremony, a military band played a few bars of the national anthem introduced by Yeltsin, then switched to the Soviet melody that Putin reinstated as Russia's official anthem." The "Nobel Prize" awarded to Putin casts the Yeltsin legacy in a very different light.

Twelve years after the implementation of the Dayton Peace Accords in Bosnia, Richard Holbrooke goes back to review and criticize the progress toward the goals. On follow up, he awards Russia an "F" for running interference on the diplomatic efforts of Miroslav Lajcak. I doubt that the Bosnian model of Federalism will be pushed by Russia to help solve the frozen conflicts in Abkhazia and South Ossetia.

Follow-up. International Community: C- United States: C+ Russia: F

Many people I talked to made the same point: Political progress started to decline when it became clear that Bosnia was not a priority for the Bush administration. Washington must remember that without strong American leadership, the gains in Bosnia could still disappear. The decision to replace NATO with a smaller European Union military force was a terrible mistake, apparently dictated by then-Defense Secretary Donald Rumsfeld. A weak successor to Ashdown further undermined reform, thus emboldening opportunistic politicians to play the ethnic card again. The new high representative, Miroslav Lajcak from Slovakia, is a skilled diplomat, but he is not getting enough backing from Brussels, and almost everything he does is opposed by the Russians, who are trying to undermine the agreement they helped negotiate.

Blogger Tim Newman has a great comprehensive post about the staggering investment figures, often fudged and bandied about by state officials, that are required for Russia's energy sector to get production online at current and new offshore fields:

So what does all this mean? Have the Russians taken all these factors into account when coming up with their investment figures, confident that they can pull off without a hitch for 20 years what Shell have struggled with for the past 4? They did put a man into space, after all. Nobody knows, certainly not me. But this what I think. Consider for a moment that these figures of X-billion in developments and investments have been thrown about like confetti for the past few years, but as of yet nothing has really moved forwards, and if anything large steps have been taken backwards from actually preparing the ground for the years ahead. Who can honestly say that massive investment will be easier for the Russians to get in 2008 than it was in 2005?

The Associated Press reports on a Council of Europe delegation currently visiting Russia on a fact-finding trip to ascertain whether or not the Federation is living up to its member obligations to the Council in terms of human rights:

Luc Van den Brande and Teodoros Pangalos, of the Parliamentary Assembly to the Council of Europe, met with law enforcers and human rights activists to gauge whether Russia is meeting its obligations as a member of the council, which Moscow joined in 1996.

"Human rights is not just a question of defense, but also of active promotion," Van den Brande said Wednesday. "Education is very important in this."

Van den Brande also said that Russia needs to adopt legislation that would allow independent rights groups to work effectively. "The country has to improve and empower civil society," he said.

The report didn't indicate whether or not the delegation would visit FSB chief Nikolai Patrushev, who has justified the state's crackdown on NGOs as a security issue - accusing them of housing foreign spies.

Russia's tax authorities have claimed $256 million in back taxes on TNK-BP, and the Natural Resources Ministry has extended its investigation into the company by one month. TNK-BP's co-owner has called on the Russian government to broaden tax breaks for the oil sector to prevent a decline in production. Shareholders of Sibur Management want to buy a controlling stake in Gazprom's petrochemicals unit. Gazprom is poised to unseat General Electric Co. as the world's fourth-largest company by market value. Lukoil and other buyers are in talks with Regal Petroleum about purchasing its gas fields in Ukraine “five months after a similar deal with Shell fell apart.” Norway’s $400 billion oil fund voted last year for tougher environmental standards at US oil giant Exxon Mobil than the Scandinavian nation imposes on its own oil major, StatoilHydro. Gas producer Novatek has signed a $800 million three-year syndicated loan.

The St Petersburg International Economic Forum, attended by up to 8,000 participants, will be held in early June. Aeroflot, the state-owned airline, would benefit from a takeover of Italy's Alitalia as its lack of planes currently prevents it from operating direct flights on many routes. Food retailer X5 Retail has launched a London offering of global depository receipts aimed at raising $1bn to fund the acquisition of the Karusel hypermarket chain. Alrosa has obtained a $225 million license to develop four iron ore deposits in the country's northeast. National Mediagroup is buying the majority stake in National Telecommunications, Russia’s largest cable television operator, in a deal worth $1 billion. The International Monetary Fund believes that Russia’s Central Bank needs to raise interest rates further as “there are strong signals that the Russian economy is overheating”. The country may allow its currency to appreciate by as much as 5% this year in a move to contain inflation.

TODAY: Russian journalists hold convention on crisis; Russia says Georgia flight over Abkhazia violated UN agreements, Georgia blames NATO for current troubles; IOC inspects Sochi.

The Russian Union of Journalists is holding a convention in Moscow to discuss a crisis manifesting itself “in a deterioration in quality, declining trust, a reduction of the role of journalists in society, and shrinking media freedom in our country.”

Russia says a Georgian unmanned reconnaissance flight over the rebel region of Abkhazia, which it still denies shooting down, “violated United Nations cease-fire agreements”. Georgia’s deputy prime minister says that NATO leaders unwittingly gave Russia a "window of opportunity" to cause trouble in Georgia when they failed to grant the country a timetable for membership. A Russian newspaper is reporting that the country has threatened to sue China for copying its Sukhoi Su-27SK fighter and intending to export it at a reduced price. Read a special report on corruption in Russia. Communist members of the State Duma are trying to set up temporary accommodation for non-residents lacking ID papers, in order to prevent them from being detained.

These are indeed tough times for energy, and not just for spiraling oil prices and the burden of filling your gas tank. It's been almost a year and a half since now we first started blogging about Russia's perceived efforts to form a natural gas cartel, kicked off by the FT's coverage of a secret "gasfinger" memo being circulated by NATO economists.

Analysts were initially skeptical about the gas cartel: given the regional markets aspect of natural gas, prices on the spot market could never be manipulated by production quotas as they are with oil. Others, such as our own expert energy blogger Derek Brower, see the gas cartel as a big threatening bluff used by the Russians as leverage for other deals. Both Gazprom and Putin have oscillated with alarming swings between denial of the cartel and vague promises, depending on whether they were meeting with the ayatollahs or the EU competition commissioner. I've always argued that the cartel is not about controlling prices, but is about carving up markets and diminishing competition.

Regardless of which view you subscribe to, the issue of gas cartel is back in the news yet again following Vladimir Putin's symbolic visit to Libya, and the announcement in Kommersant that the Russians are preparing to take a draft charter for a gas OPEC to Iran for revision.

It's tough to think of another country whose intelligence services are as deeply involved with foreign investment and private sector business than Russia. From Reuters:

Russia has also been strengthening its hand with a proposed law on foreign investments in strategic industries, including energy, which could give it very significant powers should it decide to use them.

"If strictly interpreted, then this piece of legislation seems to be very far-reaching, with potentially most acquisitions becoming subject to FSB (Russia's Federal Security Service) approval," said Steve Wardlaw, a lawyer at Baker Botts, specialised in Russia and its former satellites.

"In reality, we would hope that its interpretation is limited to the kind of strategic review process that exists in countries such as the United States."

The current trend does not indicate this conclusion.

There's a strong editorial in today's Washington Post on Russia's shooting down of a Georgian drone. Inasmuch as recognizing Kosovo, building missile shields, and talking about MAP status for Georgia and Ukraine at the NATO summit in Bucharest was seen as a "test" of Russia's intentions, Moscow has decided to run its own tests against NATO's bluster - correctly assuming that in general, the West is unwilling to stand up for the sovereignty of former Soviet states when the costs run too high.

Russian President Vladimir Putin read NATO's ambivalence exactly as Georgia's president predicted he would -- as a sign of weakness. He has responded by escalating Moscow's campaign against Georgia's sovereignty, intended to force it back into the Kremlin's sphere of influence. ...

Yes, it seems that Russia is still using the same fighter jets from the 1986 film "Top Gun."

Robert Conquest, the author of one of the most seminal works on the horrors of Stalin's gulags, has a new essay reflecting on the republishing of this work almost 40 years later, and the tragic arc of Russian history. Conquest remarks that although Soviet economics have been abandoned, Russia is experiencing "reform without liberalism" in the style of Pyotr Stolypin, leaving the country still very far away from rule of law.

"My book has been faulted for giving too little attention to the context of Russia and of the Russian historical and mental backgrounds. We find what seem to be contradictions. Any reader of the country’s great literature may feel an especially Russian humanism arising from the depths of the “national character.” On the other hand, Ronald Hingley (in his classic The Russian Mind) saw the fictional and the real Russian as living in great dullness interspersed with, or accompanying, extreme outbursts, but also possessed by a view of the country’s past and present as deplorable yet containing as recompense a wonderful future with some sort of national glory compensating for everything. A complementary trait often reported is the fear that a Russian, or Russia, is being deceived or cheated—the sort of thing we see in Nikolai Gogol’s Dead Souls and in Soviet xenophobia."

If given more freedom to invest, Russia “could soon follow the Middle Eastern sovereign wealth funds and invest billions of dollars in direct overseas investments.” Deputy Finance Minister Dmitry Pankin says Russia should keep investing its oil and gas revenues abroad rather than trying to use them to prop up domestic growth. Analysts are concerned that crude oil supply disruptions in Nigeria will reduce the amount of US gasoline available over the summer. Angola is now the biggest supplier of oil to China, surpassing Saudi Arabia. One UK journalist comments on Russia’s gas dominance in the EU: “Europe, which relies on Russia for a quarter of its gas, has been dreaming of divorce since January 2006.” A Russian journalist writes about Gazprom’s grip on the EU. The company announced that it is negotiating the details of an accord with Italy’s Eni to jointly develop a natural gas project in Libya. The European Bank of Reconstruction and Development will pay €175 million ($277.6 million) to buy a stake in Russian power producer OGK-5. Russian proposals to create a "gas OPEC", which would involve creating a “universal pricing formula”, will come under scrutiny at a meeting of officials from gas-producing countries in Tehran next week.

Russia’s annual economic forum in London saw the country praised as “an island of stability” and “a rainbow in the storm”, although the hall was half-empty, sparking further speculation that the Kremlin had “actively discouraged Russians from attending the event last year.” Peter Hambro Mining, Russia's second-largest gold miner, “surprised shareholders” by announcing its first dividend. Prime Minister Viktor Zubkov will hold a meeting to discuss improving tourism on the Black Sea coast. Alexei Pichugin, the former head of Yukos security, has been transferred to Moscow to testify in the case against former Yukos shareholder Leonid Nevzlin. Barclays wants to build on the recent $742 million acquisition of Russian retail and commercial bank Expobank.

TODAY: Russia-Georgia row escalates after spy plane is shot down, Russia-Kyrgyzstan relations worsen. Moscow play banned; wireless devices to be government-registered; US presidential candidates show anti-Russian sentiment; US pastor sentenced.

The UN Security Council agreed to a Georgian request to hold a special meeting this week regarding the latest dispute with Russia, which intensified after Tbilisi released footage of what it claimed was a Russian fighter jet shooting down a spy plane over a breakaway region. Russia has denied the allegation, with one newspaper saying, “Georgia has again tried to shift the blame for its own internal headache onto the healthy.” The country is engaged in a new diplomatic row with Kyrgyzstan after a Russian soldier was shot by a Kyrgyz policeman. One journalist sees Vladimir Putin’s acceptance of the United Russia leadership as “an act of desperation”.

Today it was announced that President Vladimir Putin has been awarded the Nobel prize for his service for Russia, celebrated by the selection committee for having stopped the "robberies and murders" that took place during the "chaos and lawlessness" under the Yeltsin administration.

Don't worry - it's just the fake Nobel prize.

What is more alarming is the apparent insatiability of Putin's lust for the cult of personality which has reached such towering heights in recent years. When will enough be enough for this leader's ego? We've had Time magazine controversially declare him person of the year, vodka brands ride the coattails of his brand name, worldwide half-naked photo spreads like a supermodel, tabloid rumors like a Hollywood star, and all measure of various paraphernalia for the fans.

Nope - this is not enough - why not arrange for someone to award the outgoing president a Nobel prize? This affinity for ongoing manufactured accolades does not bode well for the emergence of the next president's independence.

Keeping in mind that this clip comes via Russia Today, the Kremlin's version of Fox News-style partisan pro-government coverage, it is nevertheless an interesting interview with Finance Minister Alexei Kudrin - a man with many enemies among the siloviki.

It appears the answer to this question depends on the audience. The Harvard historian Prof. Richard Pipes has a letter published in today's FT pointing out two very different statements made by president-elect Dmitry Medvedev with regard to Russia's ability to function as a parliamentary republic.

LETTERS TO THE EDITOR: Two statements hard to reconcile in today's Russia

From Prof Richard Pipes

Sir, Quentin Peel ("Soviet echoes only with sharper suits," April 16) quotes Dmitry Medvedev, the recently elected Russian president, to the effect that the new arrangement by virtue of which Vladimir Putin will be both prime minister and head of the United Russia party will "strengthen co-operation between the legislature and the executive. The government will rely on parliamentary support".

Articles in the Moscow Times, Times of London, and now, the Guardian have commented on the blogger/statistician Sergei Shpilkin's analysis of Russia's presidential election returns - a study which found that a disproportionate number of polling stations reported results ending in a 5 or a 0, allegedly creating an unlikely pattern indicating manipulation. Luke Harding of the Guardian writes, "Medvedev's election victory was clearly much smaller than claimed - despite his endorsement by Putin, and despite relentless and favourable coverage from Kremlin-controlled television. Given that he was going to win anyway, one wonders why the Kremlin went to so much trouble to manicure his victory."

Tim Osborne, a British solicitor and businessman challenging the Russian government over its break-up of Yukos, has blamed the Kremlin for restrictions on his foreign travel. Producers are struggling to meet oil demands. Russia closed down a reactor that had been producing weapons-grade plutonium for four decades, “marking a milestone in US nuclear nonproliferation efforts.” Russia is urging Serbia to finalize a “much criticized” key energy deal. Italian oil company Eni has announced that it is bidding for new oil development contracts in Iraq. Foreign oil majors operating in Russia are facing “turbulent times”. Shell has been warned by Iran that it must commit itself to developing a $10bn gas field in the country by June or risk the project being handed over to a rival. Unified Energy System is ready to delay the sale of electricity producer OGK-1 by up to two years if it cannot sell “above the market”. Meanwhile a lawsuit filed by Rosneft against UES is causing a rift between the two companies that Dmitry Medvedev is reportedly trying to heal.

Bank of Moscow, the bank controlled by the Moscow government, plans to raise as much as $380 million selling new shares to increase lending. “European wood prices are shooting up as Russia raises export tariffs.” As part of a global railway boom, analysts believe that at least $50 billion will be invested in Russia’s railways over the next five years. Following Vladimir Putin’s meeting with Silvio Berlusconi, it has emerged that Aeroflot could make a bid for troubled Italian airline Alitalia.

TODAY: Paper that alleged Putin was to re-marry is shut down; Boris Berezovsky launches lawsuit against Roman Abramovich; Russia to ease tensions with Georgia amidst US “concern”.

Following accusations by Vladimir Putin of “snotty noses and erotic fantasies”, the Russian tabloid responsible for starting the rumor that Putin had left his wife and was planning to marry a 24-year-old gymnast has “suspended operations”. The paper’s deputy editor commented, “We proved that Russia is not a democracy.” The paper, Moskovski Korrespondent, part of a company owned by billionaire Alexander Lebedev, is claiming that the suspension is “a business decision”.

Boris Berezovsky has launched a $4 billion lawsuit against Roman Abramovich, Russia’s third-richest man, claiming he used "threats and intimidation" to force him to sell shares at a knockdown price. Read a special report on Dmitry Rogozin, Russia’s “firebrand” envoy to NATO.

We shouldn't overestimate or take too seriously the frequent references made by German officials to Russia's public interests, argues Dr. Andreas Umland in an interesting comment piece on rising hostility to Germany in the Ukraine. Berlin's famous "special relationship" with Moscow is "long gone" and in real terms, all Germany is doing is playing the role of "good cop" within Western policies on Russia. Umland goes on to propose that there is a serious informational gap in the Ukraine as to why the country should be a part of NATO, and what the organization is about - and that the onus is on NATO itself to overcome this (although Umland doesn't mention that not even NATO itself knows what its purpose is any more). But wait - there's also a delicious media conspiracy at work in the Ukraine, involving German-backed Kremlin apologists which add fuel to the fire:

In this particular regard, Germany, namely the influential Hamburg magazine DER SPIEGEL, does play a rather dubious role: DER SPIEGEL lends its name and reputation to one of Moscow´s major publication projects in Ukraine - the infamous weekly "Der Spiegel - Profil". This coloured high-circulation journal is edited by Mikhail Leontev, a well-known Russian anti-Western propagandist, former "persona non grata" in Ukraine, founding member of neo-fascist Alexander Dugin´s "Eurasia" Movement, etc. (see, on this issue, my German-language open letter to DER SPIEGEL).

There's been quite a lot of discussion in the blogosphere in recent weeks responding to an article by Michael Idov in the New Republic. It is an impressive piece of writing that makes some interesting points as well as unavoidably glossing over some of the more complex issues in contemporary Russian politics, yet the article succeeds: not since Perry Anderson's article way back when in the London Review of Books have I seen bloggers of such different political backgrounds see validation of their views in this report. ...And that's always a sign of good journalism.

However, there are still some fundamental problems with Idov's portrayal of Kremlin politics for me. Although his prose is watertight (all the guys over at SRB love that Idov says reporting on Russia requires the avoidance of "a heap of memes" left from the Cold War - language that grad students eat up), this florid depiction also conceals a flawed assumption about the teleological unity, purpose, and coherent direction of events in the Kremlin. Anyone who has spent time trying to work with the Russian government knows that this image, actively promoted by the executive, is a myth, and that political power and influence in Moscow is extremely fractured and overwhelmingly accidental.

I sort of feel sorry for the press corps covering the Berlusconi-Putin Spaghetti summit in Sardinia - it must be difficult to constantly think up new questions that will not receive any substantive answers. That's not to say that there weren't tremendous issues at stake for Italians and the rest of the European Union: The perennial showman Berlusconi, whose adventures in plastic surgery seem to be intensifying, offered his Russian guest unprecedented opportunities for Gazprom to take over Eni's assets in Libya, sell gas directly to Italian consumers, grease the wheels for Aeroflot to swallow up Alitalia, and significantly deepen economic ties between the two countries so that Italy, not Germany, can act as the Kremlin's ambassador and problem solver in the EU. The only good idea Berlusconi had was the proposal to scrap the harsh and unfair EU-Russia visa regime.

But did reporters press the two leaders on these important issues? No, instead we were treated to a show of masterful banter by the two politicians-for-life, fending off questions about Putin's alleged romance with a gymnast while Silvio pretended to "gun down" the probing journalist. After the cut, see the frighteningly hilarious scene of authoritarian bravado...

Reciprocity is quite a loaded word in the energy debate, but essentially the concept calls for equitable, comparable, and fair terms of access into the energy markets of two partners - namely, if Gazprom can purchase distribution and sales assets in the European Union, than European companies should be allowed major stakes at oil and gas production sites in Russia.

However it becomes much more complex than that, as Katinka Barysch of the Centre for European Reform has indicated in many of her analysis papers. She writes, "The trouble is that Europeans and Russians mean completely different things when they talk about reciprocity. The EU wants a mutually agreed legal framework to facilitate two-way investment. The Kremlin wants assets swaps. Europe wants openness, Russia wants control. For now, reciprocity is working in Russia's favour."

Remember back in the heady days of Russian IPOs - when companies like Rosneft and Sberbank, among dozens of others, led the charge in new stock listings on the London Stock Exchange? Alas, the past couple quarters have not been so robust due to the global credit crunch, and many blockbuster IPOs coming out of Russia have had to delay their plans for new share issues while they wait for sunnier weather in the markets (Rusal being a prime example). Although Russian banks and financial institutions which issued IPOs near the end of last year have not been performing well, the IPO slowdown may soon experience a reversal of fortunes with a mega-offering from Globaltrans, a Russian freight railway operator, which is looking to raise over $500 million on the LSE. Additionally, the supermarket chain Magnit is looking to raise $480 million.

According to a report in the Wall Street Journal, analysts believe that the timing of both these large scale IPOs shows that the business community is settling into the post-election scene, and are no longer afraid that politics will overshadow their efforts to raise funds. Back to business as usual?

Presidential hopeful John McCain recently gave Georgia's President Mikheil Saakashvili a call to discuss the accusations that Moscow is attempting to annex parts of Georgia. Below is his statement on the issue.

"I spoke today by phone with Georgian President Mikheil Saakashvili about Russia's moves to undermine Georgian sovereignty over two secessionist regions. Moscow has announced that it will establish governmental links directly with Abkhazia and South Ossetia without the approval of the legitimate Georgian government. Such a move is in violation of international law and deserves strong condemnation by all countries committed to the rule of law.

Investors believe oil prices could hit $125 a barrel over the coming weeks amid fears of supply shortages and a continued fall in the value of the dollar. Rising prices have triggered “a buyout scramble in the sector”. Gazprom and UES have ended a stalemate over a lack of gas supplies which left a $375 million power turbine idle for months. Gazprom has already signed a Memorandum on Cooperation with the National Oil Corporation of Libya, and Eni says that Libya's 'Elephant' oil field is among the asset options offered to Gazprom as part of the accord the two energy companies signed in 2006. Analysts say Gazprom is “undervalued”. BP’s head says the company is “too bureaucratic” and burdened by costs. Kazakhstan, which holds more than 3% of the world's oil reserves, is imposing a tax on crude exports. Dmitry Medvedev has ordered the formation of a working group to resolve a dispute over a share sale by power producer TGK-11.

The Finance Ministry offered up to 300 billion rubles in government funds to Russian banks, but total borrowing at the final auction reached just 23.6 billion. The Economic Development and Trade Ministry has raised its inflation forecast for 2008 to 10%. Billionaires Mikhail Prokhorov and Vladimir Potanin have finally agreed on how to split their assets in a “mutually beneficial agreement”. Norway's Telenor says a $3.8 billion lawsuit filed by Farimex Products, a fellow shareholder in mobile firm VimpelCom, is groundless. Interfax and LexisNexis have formed an agreement to jointly promote their information systems in Russia.

TODAY: Presidential election results rigged? Russia’s Communist Party investigating validity of Putin’s United Russia plan. Putin in Sardinia with Berlusconi, writes off $4.5 billion Libya debt. Georgia responds angrily to Russia’s support of breakaway regions. Sochi head resigns.

A computer programmer conducting a study on the Presidential election results says his findings show that up to a third of votes were likely to have been rigged, and that turnout was 56%, not the 69.7% declared by the Central Election Commission. Russia’s Communist Party has requested a copy of the amendments to the United Russia’s Charter that the Congress endorsed on April 14, suspecting that Vladimir Putin’s leadership of the party was only made possible by bypassing the law. The Economist wonders whether or not a Putin-Medvedev joint rule will work.

Putin is in Sardinia with his “old friend and political ally” Silvio Berlusconi, having just written off Libya’s $4.5 billion Soviet-era debt, receiving in exchange a number of contracts with Libya which could secure billions of dollars for Russia’s state corporations. The French Foreign Minister has joined Germany in urging Russia to back reforms for the European Court of Human Rights. Georgia has demanded that Russia drop plans to forge closer ties with two rebel regions of Georgia.

There's an interesting interview with Andrei Piontkovsky over at CFR.org in which the commentator argues that Russia is nearing the end of its "confrontational cycle with the West" - however, it's not because Medvedev is the golden boy:

"There is a theory that Putin was a bad guy and that Medvedev is a good guy, but the fact is that they are members of the same clan. There is some reason to expect a kind of improvement in U.S.-Russian relations, [but] not because a “good guy” has come to power. It was a collective decision to improve slightly relations with the West. Medvedev is very loyal to Putin; otherwise he would not have been appointed. I think it is vice-versa: They appointed Medvedev, a person with a more liberal image, because they collectively decided that it is now time to make some improvements in their relationship with the West."

"Annexation" is not a word heard frequently in the Russia debate, but it surfaced this week after Moscow established official relations with the separatist states of South Ossetia and Abkhazia - a move they had threatened to make if the West recognized Kosovo statehood (which they did). The former prime minister of Estonia, Mart Laar, has a column about the issue coming out in tomorrow's FT. Here's an excerpt:

Russia’s “representations” will be less than official consulates, although consular services will be offered from offices in neighbouring bits of Russia. “Representation” is a euphemism to soothe western fears that Moscow may recognise the independence of Abkhazia and South Ossetia in tit-for-tat retaliation for western recognition of Kosovo. However, in Moscow’s insidious gambit, the “representations” will be among the final steps toward annexation of the two Georgian territories.

It has become shorthand for journalists to describe Russia as "resurgent" and dramatically "more powerful" than it was in the year 2000. We generally accept this fact because of its impressive average economic growth of 6.4% over the past five years, swelling the GDP to $1.6 trillion. We also are led to this conclusion because of Russia's increased foreign policy activism: how Moscow is working to build closer, independent relations with governments near and far, and wielding its UN Security Council veto with greater assertiveness to build a role of influence in global affairs. We see Russia's muscle after natural gas cutoffs by Gazprom revealed their ability to choke Europe, and we're reminded that this is the second largest oil producer in the world after every visit to the gas pump.

Moscow has been very keen to project this image of power and renewed strength, but how much of a gap is there between economic and energy influence and hard military power? Judging by the recent incremental "tests" put against Russia's policy preferences by the West (recognizing Kosovo, missile shield sites, and discussions of NATO enlargement), the Kremlin probably isn't satisfied with the "respect" that it believes it deserves.

Further complicating the metrics of Russia's role as a new global power are the peak oil advocates, recently bolstered by comments made by Leonid Fedun, the vice-president of Lukoil, to the Financial Times. Russia, it seems, after years of increased state intervention in the oil sector, may be facing declining oil production - a frightening announcement which sent supply jitters across the trading floors and may cause some policymakers to reevaluate the dynamic of confrontation with Moscow.

Here's a news clip about the "Herculean" effort to transform Sochi for the Winter Olympics - at a potentially high cost to local residents.

Russia's Finance Minister Alexei Kudrin is an interesting character. Thrust into the center of the clan wars for holding the keys to the country's massive stabilization fund, the occasionally outspoken technocrat has openly contradicted Vladimir Putin in public not once but twice, and is known for saying exactly what Western finance loves to hear from a government official.

Kudrin was able to narrowly escape the siloviki witch hunt which snagged his #2 man Sergei Storchak by splitting the stabilization fund and creating a separate sovereign wealth fund (of a "modest" $32 billion), allowing some of his opponents some state resources to play speculation games with in foreign securities and strategic assets.

Today Alexei Kudrin speaks with the Financial Times, and yet again openly criticizes Putin's economic policy (on the freezing of food prices). The interview depicts Kudrin as fighting against powerful forces within the Russian government to keep spending down, despite the ballooning state coffers from high oil and gas prices. “Russia’s economy emerged from the Communist command economy, so some people lack an understanding of market mechanisms,” he says. “They think if the state has money it can solve any problem.”

It takes quite a uniquely influential person to disagree with Putin so publicly so often.

Oil prices continue to surge, and have reached almost $115 a barrel. Gazprom has agreed to set up a joint venture with the National Oil Corporation of Libya. The company also announced it will close a deal to buy a controlling stake in Serbia's oil company Naftna Industrija Srbije (NIS) after the Serbian parliamentary election in May. Together with Rosneft, Gazprom will split the resources on Russia’s continental shelf. The EU has is reportedly weeks away from signing an energy accord with Iraq to bring more gas and oil to Europe. Metals and mining company Mechel has acquired 95.69% of shares in the UK-based Oriel Resources, which owns assets in Russia and Kazakhstan. Rosatom, the nuclear energy company, wants to build a nuclear power plant in the Kaliningrad territory. Aluminum producer Rusal has agreed to sell a 50% stake in two coal mines in Kazakhstan for $345 million to Samruk Holding. Private equity firms Candover and Alpinvest have agreed to buy British oil services company Expro International $3.16 billion.

St Petersburg will open a competition later this month to select private partners for the planned $1.28 billion overhaul of Pulkovo airport. Oleg Deripaska has lost a court case brought by Czech fund PPF Investments over his insurer Ingosstrakh, after the court ruled that a company shareholder decision was not legitimate. Basic Element, which holds 60% of the insurance company, intends to appeal. The government wants to attract over $50 billion of investment into the country's forests by 2020. Yevroset, the country's largest mobile-phone retailer, has denied media reports that it was planning to sell a stake in the company to mobile operator MTS.

TODAY: Russia announces support for Georgia’s breakaway regions. Interview with Russian Foreign Minister. NGOs to face stringent new regulations. Russia and Libya deals could be worth $10bn. Putin to re-marry? Rumors persist...

Russia announced that it was broadly expanding support for the breakaway areas of Abkhazia and South Ossetia in neighboring Georgia, and that it would establish legal and trade links with them. The move has prompted “sharp criticism from Georgia and the West,” but the decision is supposedly “aimed at strengthening security and stability in the Caucasus.”

Critics say that the controversial US missile shield, an ongoing source of tension with Russia, would not even work. Read the transcription of an interview with Foreign Minister Sergei Lavrov, which discusses the US missile shield, NATO, and Dmitry Medvedev’s potential impact on foreign policy. The majority of Russians still widely identify Medvedev “as Mr. Putin’s loyal aide, and approvingly so.” Anthony Brenton, London’s ambassador to Moscow, says Britain hopes to make a fresh start in its difficult relations with Russia after Medvedev becomes President.

That's what the Financial Times is reporting following Russia's announcement that Moscow would establish official links with the separatists regions of Abkhazia and South Ossetia. I may be wrong, but I think this would be the first formal annexation since Saddam Hussein made Kuwait part of Iraq in 1990, getting the ball rolling on a series of events which continue to roil international relations. Some clever jabs about Kosovo should be forthcoming from Moscow any minute now... excerpt after the cut.

Yesterday Bob sounded off on the election of Silvio Berlusconi as Italy's prime minister for a third term - despite what the New York Times describes as his "shockingly meager achievements in office."

Now there's this bit from RFE/RL which speculates that Italy's stagnating economy could drive Berlusconi to think up some innovative uses of his "special relationship" with oil-and-gas rich Vladimir Putin:

But economics is likely to play a major role in Berlusconi’s calculations. Italy’s economy is stagnating and many expect the country to head into a recession. Which is why analysts think Berlusconi will emphasize his special relationship with energy-rich Russia.

During his last tenure as Italian premier, Berlusconi forged close ties with Russian President Vladimir Putin, defending Moscow’s actions in Chechnya and building close economic links with Russia. And Putin will be the first foreign leader Berlusconi welcomes, when the two men meet for talks in Sardinia on April 17.

We've done several blog posts here about the geopolitical importance of Iran in terms of EU energy security vis-à-vis Gazprom's dominant position, and the careful dance between Moscow, Tehran, and the international community over nuclear issues.

Today, as world leaders meet in Shanghai to discuss Iran (and likely not make much progress), one of the issues of enormous concern to Moscow, but not picked up by many in the media, is the proposal to boost the EU-Iran energy trade. Analysts argue that Moscow has an interest in making sure these bellicose tensions between Iran and the West last as long as possible to stall progress on Iranian gas (hence their moves in China today) - but they are not so committed to Tehran that progress on the Bushehr reactor site isn't slowed by every imaginable bureaucratic snag.

The Other Russia blog reported yesterday that the state's Mass Media, Communications and Cultural Protection Service (Rossvyazokhrankultura) is looking to make registration mandatory for every owner and operator of a WiFi (wireless internet) device - which won't exactly help Russia adopt new technologies...

They write:

Vladimir Karpov, the deputy director of the agency’s communications monitoring division, told the newspaper that wireless internet users must obtain permission to use the radio frequency involved in Wi-Fi transmitting, and must register any electronics that use Wi-Fi technology. Wifi hotspots, personal home networks, and even laptop computers, smart-phones and Wi-Fi enabled PDAs would be affected. ...

According to Karpov’s statement, registering a PDA or telephone would take 10 days. Then, only the owner of the device would be licensed to use it. Registering a Wi-Fi hotspot, on the other hand, would be more difficult. Anyone wishing to set up as much as a personal home-network would need to file a complete set of documents, as well as technological certifications. Networks in Moscow or St. Petersburg would also need approval from the Federal Security Guard Service (FSO) and the Federal Security Service (FSB).

Talk about a discouraging and unnecessary bureaucratic measure, sure to choke economic growth and modernization - not to mention the Orwellian side of the state's incessant need to monitor society. Sometimes the strong state has its costs...

Oil prices have surged to a new high, reaching $114 a barrel. Diamond company De Beers will acquire a large stake in the Verkhotina diamond deposit from LUKoil, ending a six-year legal dispute. The European Union sees Turkmenistan’s offer of gas for Europe as a “breakthrough”. Unified Energy System will delay its sale of OGK-1, a deal potentially worth $7 billion, by at least a month. Greece has agreed to join the Kremlin-backed South Stream gas pipeline project. Four of the five mines at Rusal's bauxite mines have resumed operations as more than 5,000 miners agreed to return to work. Electricity trader Inter RAO wants to take part in a $2.5 billion project to build power stations in Turkey. Small, foreign-owned oil and gas firms operating in Russia are having trouble financing their projects.

Russia and Brazil have signed an agreement to jointly develop a fifth-generation fighter jet. Globaltrans Investment, the privately owned freight rail operator, expects to raise up to $509 million floating a 29% stake on the London Stock Exchange, and food retailer Magnit expects to raise up to $480.25 million in a rights issue of new stock. German truckmaker MAN is to expand its share of the “booming” Russian market. The US Department of Justice has endorsed the purchase of the Sparrows Point steel mill, near Baltimore, by Russia’s Severstal. PricewaterhouseCoopers, already facing back tax claims, is to be the subject of a further investigation by the Russian authorities.

TODAY: Putin to lead United Russia. Advertising near the Kremlin banned. Storchak arrest could hamper arms deals with Libya. Ukraine won’t give up NATO membership drive. Sochi’s space monkeys.

The biggest news today is that Vladimir Putin, “surprising no one”, has accepted United Russia’s “unanimous” leadership offer, “consolidat[ing] his longterm grip on power” and giving him “sweeping powers over the Duma”. One report says the decision will “drain authority from the President-elect, Dmitri Medvedev”, and earlier this month, Boris Gryzlov “made what many saw as a political faux pas by suggesting that Medvedev would not be eligible to join United Russia.” Medvedev has declined a more recent offer to join the party. Could Putin’s new role lead to an “overhaul of the country's political system”?

When Vladimir Putin's best friend in the European Union, Gerhard Schröder, left office he headed straight into employment for his friends in the Kremlin, taking a cushy seat on the board of the Nord Stream pipeline project. When Putin's other best friend Silvio Berlusconi left office back in 2006, similar job offers were probably on the table, but Italy's third most wealthy man held on tight for his next chance to return as Prime Minister.

Having sailed to a comfortable victory in the elections on a wave of garbage (both literal and figurative), the ostentatious Berlusconi made it clear who is #1 for him, announcing that Vladimir Putin will be the first foreign head of state he will meet with, inviting the outgoing president for a dinner this weekend at his lavish Sardinian villa. It will probably be the most fun these men have had together since hanging out with Jean Claude Van Damme to watch an ultimate fighting championship, where they repeatedly expressed their mutual admiration of each other, and perhaps shared tips on successful neo-populism.

But the similarities don't end there for these bosom buddies.

Here's another exclusive essay from the youth movement leader Oleg Kozlovsky, who has written for this blog several times. - Robert Amsterdam.

The Big Integration

Oleg Kozlovsky, Coordinator of Oborona movement

Early April marked a new wave of opposition coalition building. Three events took place in each of the three main political camps. Liberals gathered in St. Petersburg on 5 April, the leftists met in Moscow on 6 April and the nationalists had their convention on 12 April. The goal of each of these events was to unite the majority of political forces of the corresponding wings.

One of the participants in the conference on «The new agenda of the democratic movement» that took place recently in St. Petersburg was the well-known lawyer Yuri Markovich Schmidt. Our Russia correspondent, Grigory Pasko, who was present at the event and has already filed several reports from it, took advantage of the opportunity to get another exclusive interview with Mikhail Khodorkovsky’s defense attorney.

Yuri Schmidt: “Medvedev needs to be given a chance…”

Interview by Grigory Pasko, journalist

Yuri Schmidt (photo by Grigory Pasko)

During a speech to the Council of Europe, German Chancellor Angela Merkel called upon Russia to not interfere with the reform process of the European Court of Human Rights (ECHR), which is currently backlogged with tens of thousands of cases - one quarter of which come from Russia.

From the Financial Times:

Merkel appeals to Russia on human rights

By Tony Barber in Strasbourg

Angela Merkel, Germany’s chancellor, urged the Russian parliament on Tuesday to show its commitment to human rights by allowing important reforms to go ahead at the European Court of Human Rights, an organ burdened with a backlog of tens of thousands of cases.

”The court needs to be properly reformed, as that is what the whole human rights protection system in Europe hinges on,” Ms Merkel said in a speech to the Council of Europe, the 47-nation organisation that promotes democracy, human rights and the rule of law around Europe.

It is being reported that Gazprom was “handed” one of Russia’s biggest oil and gas fields in Yakutia without an auction, “acting on orders from President-elect Dmitry Medvedev”. The win marks “the first time in post-Soviet Russia that a company has received a field without having to fight off rival bids”. It is also being reported that Prime Minister Viktor Zubkov, who approved the handover at a Cabinet meeting, has been nominated by the government for Gazprom's board. Turkmenistan has agreed to supply the European Union with 10 billion cubic meters of natural gas from next year, helping the EU “reduce its reliance on gas imported from Russia.” Serbian power monopoly EPS and Russia's electricity trader Inter RAO have signed a wide-ranging strategic partnership deal that could see them build power plants together, and possibly join forces abroad. Lukoil’s vice president says Russian oil production has peaked and may never return to current levels. Baghdad signaled it was prepared to sign five oil field services agreements covering its biggest fields.

The Moscow District Arbitration Court has rejected a second appeal by PricewaterhouseCoopers's Russian unit against a $16 million back tax claim. Steel maker Severstal is splitting its business into three divisions and considering further acquisitions in North America, Europe and Africa. Alexei Mordashov will retain control over the company. Wal-Mart to expand into Russia? Kazkommertsbank has signed an agreement with Russia's Export-Import Bank to guarantee the supply of capital equipment from Russia to Kazakhstan. Real estate developers blame the disparity between construction costs and sale prices for Moscow apartments on a range of "administrative expenses". The “huge disparity” is said to be the result of a combination of official fees and unofficial payments - “a euphemism for bribes”.

TODAY: Medvedev mastering yoga, will be offered United Russia seat. Head of Russian Juice Producers Union beaten to death. Storchak has not been questioned since his arrest. Ban Ki-moon allegations “fabrication”. Bird flu; Stalin’s weird science.

The past two Russian presidents “have launched tennis and judo trends”, and now Dmitry Medvedev is reportedly “mastering yoga”. Medvedev is to be offered a seat by the United Russia party. Meanwhile the party has opened a two-day congress in Moscow “that is expected to set the tone for how the country will be governed once Vladimir Putin leaves the presidency.” A report on Moscow’s “blossoming” contemporary art scene.

The head of the Russian Juice Producers Union was beaten to death by “unidentified assailants” on the grounds of his Moscow home. “The domestic juice industry has been linked in the past to criminal groups.” A Chechen crime boss with links to the murder of Anna Politkovskaya has been abducted in Moscow. Russian investigators have “failed” to question Deputy Finance Minister Sergei Storchak since his embezzlement arrest last November. A 19-year-old who sent an anonymous letter warning of an attempt on Medvedev’s life has been charged for providing “knowingly false information about a terrorist act”. Has the privatization of federally-registered monuments in St. Petersburg begun?

Brazil’s upstream prospects continue to brighten, as the state-controlled company makes another massive find

Petrobras’ latest find could contain as much as 33 billion barrels of oil equivalent, according to Haroldo Lima, head of upstream regulator Agência Nacional do Petróleo (ANP). If confirmed, the prospect would be one of the largest oilfields in the world, the biggest discovery in around 30 years and would transform Brazil’s potential as an oil exporter.

However, the state-controlled company, operator of the Santos basin’s block BM-S-9, with a 45% share, has not confirmed ANP’s claim, saying “more conclusive” data are needed. Petrobras plans to drill further wells in what it is referring to as the Carioca area and to conduct other tests before estimating the size of the discovery.

ANP was first informed of the presence of hydrocarbons in the block in September, after the drilling of an initial well. In March, Petrobras began a second well and although this has not yet reached its target area, the indications must be extremely positive. It is more good news for Petrobras and Brazil – as well as a boost for the block’s other shareholders, the UK’s BG Group, with 30%, and Spain’s Repsol YPF, with 25%.

Perhaps Russia's prosecutors and their silovik owners are packing in the fun before Vladimir Putin moves over to the premiership and Dmitry Medvedev assumes the presidency - but whatever is happening, legal nihilism appears to be deepening in Russia since the election, not abating.

Case in point, today the Moscow Times reports that the lawyer Boris Kuznetsov is being charged in absentia with divulging state secrets, though he is safely living in political asylum in the United States. His lawyer Viktor Parshutkin is quoted in the article: "The charges against Kuznetsov are groundless. According to Russian law, any document that testifies that someone's rights were violated cannot be a government secret."

Kuznetsov faces this farce of a trial for doing nothing beyond carrying out his lawful duty to defend his client, the former Sen. Levon Chakhmakhchyan, who was the target of a bribery investigation sting operation by the FSB. Kuznetsov later filed a complaint that the state security officials were using an illegal wiretap against Chakhmakhchyan, which was the beginning of all these problems (see my post from last summer).

With the possible exception of Musharraf's Pakistan, it is hard to think of a more dangerous or hostile environment for lawyers than Russia.

In tomorrow's Financial Times, columnist Gideon Rachman visits Georgia, and argues that "It would be nice to believe that the argument about extending Nato membership to Georgia and Ukraine was purely about principle. But, in reality, it is also about power."

A Gazprom meeting considered the prospects for cooperation in Slovenia and discussed the Republic’s possible participation in the South Stream project. Iraq's oil ministry has published a list of 35 companies qualified to bid in the first licensing round for oil and gas contracts, including Gazprom and Lukoil. A full list can be found here. Evraz’s steel mill in Oregon is running at full speed, “illustrat[ing] the rampant global construction program for energy pipelines.” French and German energy giants EDF and RWE remain frontrunners in the battle to buy the $22 billion UK nuclear power group British Energy, despite the emergence of new potential bidders, including Swedish group Vattenfall. Eurasian Natural Resources, the Kazakh miner, has been given a month to make a firm offer for copper miner Kazakhmys or walk away from a potential deal for six months. An ENRC-Kazakhmys tie-up would create a national mining champion for Kazakhstan worth more than $40 billion. “Rapidly rising food and energy prices are seen as the biggest economic problem facing European countries - and are provoking far more concern than unemployment.”

Russia’s metals oligarchs are feuding over company shares - but at least the disputes are non-violent, points out one journalist. It is being reported that Alisher Usmanov and Vladimir Potanin will try to block Oleg Deripaska from amassing a controlling stake in Norilsk Nickel. Russia will begin placing budget funds among commercial banks to support liquidity in the banking system, says Finance Minister Alexei Kudrin. Banks will be allowed to bid for as much as $25.6 billion) in budget funds. Deputy Finance Minister Dmitry Pankin has announced that Russia plans to repay a $3 billion World Bank debt ahead of schedule, using windfall revenue from energy exports, and to halve current World Bank borrowing. Kudrin predicts that the economy will expand faster than initially forecast this year. Israeli food and beverage maker Strauss Group will buy the coffee brands of Cosant Enterprises in Russia and Ukraine for $93 million.

TODAY: Putin to lead United Russia? Japanese Foreign Minister in Russia. GM activists; Supreme Court judge shot; Moscow to spend $64 on stray dog castration.

Vladimir Putin’s acceptance of United Russia’s invitation to be its leader would “significantly entrench his power”. The Kremlin has not indicated whether Putin will accept.

One UK journalist writes that the UK is the favored destination for Russian money because its regulations are less stringent than those of other countries. The article also accuses Angela Merkel of being “frightened of Russia’s control of Germany’s energy”. Japan hopes that a meeting with Russian foreign ministers will improve the chances of the two countries signing a peace treaty. The Japanese Foreign Minister started his Russian visit with a trip to the new Toyota factory in St Petersburg. British Prime Minister Gordon Brown is to press US President George Bush to begin negotiations to renew the Start nuclear arms treaty with Russia, which expires next year. Dmitry Pankin, the Deputy Finance minister, announced that Russia’s decision to write off 93% of Iraq’s debt earlier this year “was made at the government level”.

Next Wednesday, April 16, ABC’s Charles Gibson and George Stephanopoulos will moderate a debate between U.S. Democratic Presidential Candidates Barack Obama and Hillary Clinton at the National Constitution Center in Philadelphia.

The time will be short, the issues numerous, and the questions probing the candidates’ positions on foreign policy … likely only a handful.

There is no disputing the urgency of other foreign policy issues, such as the war in Iraq, threats from Iran, stability in Afghanistan, or the China-Tibet issue, but a narrow focus on only these areas would be a mistake. We cannot afford to have the next president of the United States ill-prepared to deal with the ambitions of a resurgent Russia, strengthened by the state’s grip on oil and gas, nuclear armed, and rapidly slipping away toward authoritarianism while obstructing U.S. policy preferences across the globe.

Quo vadis, Anatoly Chubais? It is with morbid fascination that I observe the tenacity and staying power of this politician's career, somehow surviving, sometimes laying low, and then thriving yet again throughout all the dramatic reversals of fortunes and seismic shifts in Russia's political landscape in recent years.

Although he hails from Belarus and cut his teeth as an economic adviser in the administration of St. Petersburg Mayor Anatoly Sobchak alongside Vladimir Putin and Dmitry Medvedev, he also was for a short period a co-leader of the Union of Right Forces, Boris Nemtsov's liberal political party. Chubais has always displayed a very rare ability to survive, even after bruising confrontations with a variety of opponents, ranging from Boris Berezovsky, Gennady Zyuganov, and even Vladimir Putin himself (he was one of the first to publicly demand that the president explain what was happening to Mikhail Khodorkovsky after the arrest on live TV).

But if Chubais is Russia's ultimate political survivor, then the latest opponent he has in his sights, Igor Sechin, chairman of Rosneft and the highest ranking silovik hawk, must be the country's #1 cancer ... and a very dangerous man to pick a fight with. Has Anatoly used up his nine lives?

Edward Lucas of the Economist has some suggestions for Europe to lessen its dependence on Russian natural gas. 1) They should push for more non-Russian pipelines like Nabucco, 2) drive a harder bargain on the gas that it does buy, and 3) start treating Gazprom like a normal company (like Microsoft) and insist on more liberalisation and transparency.

He writes: "The intricate economics of the gas business may seem less exciting than the Star Wars technology of missile defence. But for Europe's unity and security, they matter more."

For more ideas about how Europe can ease dependency, please read our prescription paper.

Today prosecutors filed espionage charges against Werner Franz G., a 44-year-old man from Bavaria who is alleged to have sold highly sensitive information and technological secrets to Russian intelligence between 2004 and 2006. The feds state that the German handed over documents on "highly developed technical products that can be used predominantly for civilian purposes but also for military purposes."

For as much as Russia constantly reassures the West of its international goodwill and how they don't want to see the return the Cold War, these frequent espionage activities in Europe are not indicative of trust-building or sincere alliances.

Jeffrey R. Nyquist reads Sergei Tretyakov's book and gets some good quotes from Andrei Illarionov about the disturbing new pattern created by authoritarian capitalism:

Yet there is a rule, if you can call it a rule: The Kremlin regularly seizes control of companies that are making the most money simply because they are cash cows – ready to be milked. “The criteria,” said Illarionov, “is to take companies that can generate cash.” He further explained: If society develops from nomadic banditry to stationary banditry to a civilized state, then Russia is going backwards. ...

“In Russia,” said Illarionov, “we see an enormous destruction of civil society, but sometimes we see very impressive economic growth. We see one of the fastest growing economies in the world.” According to the best theories of political and economic science this shouldn’t be happening. “So we have to ask if some new law, new pattern, is observable in Russia.”

Oxford Analytica has a great piece up quoting political scientist Dr. Alena Ledeneva of the University College of London, who says that investors are pulling away from BP's despite the company's insistence that their assets in Russia are safe. Ledeveva says there is growing fear of "suspended punishment" for foreign investors:

Ledeneva believes the official rules governing investment in the Russian economy are deliberately opaque, mercurial, and inconsistent. Merely participating in the economy means inevitably transgressing one law or other, nolens volens. Everyone is under threat of punishment, but actual punishment is 'suspended', ready to be enforced at the whim of those in authority.

In this regulatory imbroglio -- Russian capitalism at its most unruly -- any number of transgressions can be invoked to clamp down on an individual or firm, ranging from the mortal (tax evasion) to the venial (getting fire regulations wrong).

Gazprom is poised to become the world's second-most profitable company, generating a net income of $41.5 billion, topped only by global leader ExxonMobil. A presidential spokesman for the Ukraine announced that monopoly natural gas operator RosUkrEnergo will continue to supply Russian gas to Ukraine despite Kiev's pledges to axe intermediaries in the gas supply scheme. The main shareholder of Yukos, holding company GML, has filed the largest arbitration claim in Russian history against the Kremlin for the seizure and forced auction of Yukos assets under the Energy Charter Treaty, a claim which could come in between $50 and $100 billion, says GML director Tim Osborne. The Moscow Times reports that the state siege on TNK-BP, which has included espionage arrests, new environmental audits, and denied visas for 148 employees as part of an effort to seize control of the Kovykta field, may be an "inside job." "We never had any problems with them, any complaints," Konstantin Poltoranin of the federal migration service said, commenting on the visa issues. "Go to the company if you have questions. They have their own problems within the company."

Industrial giant ArcelorMittal has completed the purchase of three coal mines in Russia from Severstal for a total of $651.8 million. Merrill Lynch Chairman and CEO John Thain says the group is placing its bets on growth from abroad, citing strong growth potential in countries such as India, Brazil and Russia. A subsidiary fund of the European Bank for Reconstruction and Development (EBRD) is pouring $15 million in investments to develop a WiMax network with the company Tascom, and later hold in IPO for the group in about three years. Trade Minister Elvira Nabiullina is challenging Sergei Chemezov's push for Russian Technologies (the state arms exporter) to gobble up government stakes in more than 500 companies. Nabiullina is demanding that Chemezov explain why the state corporation seeks stakes in passenger airlines and a 38% stake in the truck maker Kamaz. Gazprombank has reached a $47.7 million deal with the Canadian mining group Fortress Minerals to take over 51% of the production of the major Svetloe gold deposit.

TODAY: Russia promises a response if Ukraine and Georgia enter NATO, helps Mongolia go nuclear, making deals on grain, Kosovo is worries about Ban Ki-Moon, and a major court decision limited property seizures.

The Russian Army's chief of staff Yuri Baluyevsky said on Friday that the country "will take steps aimed at ensuring its interests along its borders ... These will not only be military steps, but also steps of a different nature," if Ukraine and Georgia are allowed to join NATO. Baluyevsky's comments follow upon similar statements from Sergei Lavrov and Vladimir Putin, who have promised to aim Russia's missiles at the Ukraine if NATO military installations were ever built there. On the same day, the head of Russia's Air Force announced an overhaul to boost the country's air defenses.

Vladimir Milov: “Nord Stream – this is an reckless project”

By Grigory Pasko, journalist

Recently, information was placed on the website of the company Nord Stream about how the technical maintenance of the Nord Stream gas pipeline is feasible without the use of a service platform that the consortium had earlier intended to build near the Swedish island of Gotland. [italics mine—G.P.]

In such an unexpected manner did the company react to a request from the Swedish government concerning the provision of additional documentation with respect to the construction of the service platform.

Here is an interview with Andrei Gaidamaka, Director of Strategic Development for Lukoil, Russia's largest private oil producer. Gaidamaka talks about $100 oil, demand forecasts, and away from the plummeting dollar.

Today Lukoil also posted a +27% profit for 2007, and with Alexei Kudrin's plans to slash oil taxes, we could see a rally on the company's stock, which some believe is under-valued.

This blog has carried several posts about the trials and travails of William Browder and Hermitage Capital in Russia, a surprising story about how the largest foreign holder of Russians stock and a highly regarded goodwill ambassador of the government became a victim of state theft, harassment, and even violence. Blogging over at Foreign Policy's Passport, Blake Hounshell, who has been spending some time at the Salzburg Global Seminar’s session on Russia: The 2020 Perspective, argues that if Medvedev wants to work on improving rule of law and property rights, the Hermitage fiasco is a measure of just how much work he has in front of him.

So, what was going on? Hermitage alleges that "a more sinister agenda" was at work. The real purpose of the Kameya raid was for Moscow Interior Ministry officials to get their hands on documents that could be used to seize the fund's assets.

Here's how the attempted scam worked.

Michael J. Economides and Donna Marie D’Aleo have written an important chapter for a new Energy Report published by Transitions Online, which takes a comprehensive look at the early legacy of Yukos - even going so far as to tell the story of American oil experts Joe Mach and Don Wolcott, who came aboard to help the company in the 1990s to turn around its production miracle. Many people forget that when Mikhail Khodorkovsky acquired Yukos, the company was unprofitable, on the brink of bankruptcy, saddled with debts, and producing below 10% of capacity. Under his management and the technical expertise to these men, they turned around a declining oil company to achieve 20% growth in production annually for three years. Economides and D'Aleo write "Such a feat has never been seen before, nor is it likely to be repeated by any oil company, anywhere."

Here is just an excerpt from the article, and below the full text:

There is an interesting and telling story about the Khodorkovsky/Yukos saga. We conducted an informal (and admittedly non-scientific) poll of 30 Russian oil executives, both native and expatriate, for this book, asking: “What was Khodorkovsky accused of?” Without exception, all answered tax evasion or fraud by Yukos. In fact that was not the case. The criminal charges against Mikhail Khodorkovsky were based upon claims that he acted illegally to acquire a fertilizer company known as Apatit during its privatization in the 1990s. All did acknowledge that his fate had nothing to do with anything other than the hubris Khodorkovsky demonstrated toward Putin. There it is then. If punishment is intended to serve as deterrence for others, this punishment served its purpose. But this was not the traditional notion of justice preventing a similar crime, but rather this: insult the powers that be, and receive your comeuppance in return.

The biggest Russia energy story of the day comes from the International Herald Tribune, reporting that Gazprom and Eni are preparing to join forces to build a natural gas pipeline from Libya to the European Union. The IHT reports: Some analysts describe Gazprom's moves in North Africa as a "pincer" attack on Europe. They say if Gazprom succeeds in Libya and in Algeria, where it is already competing for contracts, it could end up dominating the supply routes to Southern Europe. Germany's RWE is "heating up" the race to acquire UK nuclear producer British Energy, which is seen as part of a wave of acquisitions to "bulk up" the company to avoid being swallowed up by Gazprom. The Russian government is considering slashing oil taxes to counteract stagnating production levels, which for the first time may decline this year. French paper Le Figaro is reporting that two Russian regions are suing oil company Total, claiming $35-$85 billion in loses from a breach in a drilling contract made during the Yeltsin era. Timan Oil & Gas Plc reports that it is at an advanced stage to secure financing and will resume trading soon.

The Commerce Department is reporting that U.S. exports to Russia shot up by more than 45% from Feb. 07 to Feb. 08, while a survey report of 300 international retailers ranked Russia third (22%) as a preferred destination for new franchises. There's no shortage of drama in Kazakhstan's mining sector, as Kazakhmys appealed to the Takeover Panel to flush out compatriot ENRC, which is attempting a takeover. Russia's booming steelmakers such as Severstal and Evraz Group are scrambling to buy up as many U.S. steel assets as possible. As the U.S. dollar plummets below 24 rubles, the Central Bank of Russia (CBR) registered the record demand for foreign cash in February, causing speculation of an upcoming devaluation. Russia's VTB bank has reported that 2007 profits rose 28.4% to $1.5 billion, however CEO Andrey Kostin warns of tough times ahead for the financial sector. One of the country's leading land-line telecommunications providers, CenterTelecom, reported a 77.5% growth in net profit during 2007, while market share grew to 20% of Russia's population.

TODAY: The Merchant of Death, Russia pressures the UN on Kosovo, problems with Poland, nationalizing the airport, Moscow Mayor looks to climb, and a look at Putin's PM power play.

Reputedly one of the world's most prolific arms dealers, the Russian citizen Viktor Bout, has appealed directly to Moscow for help from his jail cell in Thailand. "I, Viktor Bout, call on the government of Russian Federation as a Russian citizen, and ask them to take measures for my liberation, as I am jailed under fabricated charges," he said. The state news agency also reports that Bout's brother is claiming that U.S. officials tried to extradite him to the United States without the move being sanctioned by a court. Bout's extradition hearings will take about 60 days, but the Russians insist that they never ordered his capture in the first place.

The following is an exclusive translation of breaking news from Lenta.ru. It appears that the offices of the civil society organization "For Human Rights" - headed up by Lev Ponomarev (photographed at right during 2007 protest arrest), the individual responsible for exposing torture practices in Russia's prisons on this blog - have been attacked.

Representatives of the movement «For human rights» have reported of an attack on their office

Representatives of the movement «For human rights» have reported that on Wednesday late in the evening, persons in civilian clothing burst into the apartment on Maly Kislovsky pereulok, where the office of the human rights organization is situated, demanding that the premises be vacated.

A report from the conference of democratic forces of Russia in St. Petersburg

By Grigory Pasko, journalist

The weather in St. Petersburg on the morning of 5 April was glorious – a rare occurrence for this city. And already in the morning, access to St. Isaac’s Square was through police cordons. Since a blog is not officially considered a mass information media outlet in Russia, and I write for a blog, I had to show all the policemen my membership card in the journalistic organization «Reporters Without Borders» to prove I was a journalist. They let me onto the Square. It was teeming with joyful young people all waving blue flags inscribed «Samsung» or carrying red balloons inscribed «Coca-Cola». “What are you waiting here for?”, I asked. “They’re going to be carrying the Olympic flame of the Chinese Olympiad”, they jubilantly explained. “But why are you here? What have you got to do with it? What do Samsung and Coca-Cola have to do with it?”, I persisted. The young people fell silent, clearly at a loss – they hadn’t expected such a question. Someone finally shouted out: “For the heck of it!”

The Olympic flame, brought to you by… (photo by Grigory Pasko)

RFE/RL has an interesting interview with Yelena Tregubova, a journalist and author who was forced to flee to asylum in the United Kingdom following death threats in her native Russia for government-critical reporting.

"In fact, the strange thing today is that the Internet is playing the role of publisher of samizdat," Tregubova says. "I think that the future journalism textbooks will reflect this. Have a look, for example, at the grani.ru website -- content-wise it is human rights-oriented per se. In fact, this is just what existed before -- underground 'chronicle of the current events' or chronicle of what was going on during the pre-reform times in the Soviet Union." ...

EurActiv has an interesting interview today with Fraser Cameron, director of the EU-Russia Centre, who argues that "Russia is a master of 'divide and rule'" tactics, and says that "The key message is that the EU must be far more confident in its strengths in dealing with Russia and recognise that speaking with one voice, although it is difficult in some areas, is likely to produce far greater benefits than trying to cut bilateral deals."

Here is just one excerpt:

As a matter of fact, Mr. Medvedev's election was not a 'real' election. Or at least, the EU stated that the election process in Russia did not allow for truly competitive elections.

Obviously it was not really an election, it was an appointment. As soon as Putin had selected Medvedev as his successor, it was clear what the result would be. Having said that, there seems to be a lot of support in Russia for this kind of "managed democracy" at the present time, whereby people seem to prefer stability and economic growth rather than, as they see it, the chaos under Yeltsin in the 90s. But you can certainly have economic growth with greater democracy.

Putin's mistake is - and this is why history will not be so very kind to him - is that he had a great opportunity to keep moving Russia along a more democratic path. He enjoyed very favourable economic conditions with the oil prices rising all the time, but he went back on the genuine democratic freedoms Russia enjoyed in the 1990s, and I think for that reason one has to be rather critical about his time in office.

There's a very interesting opinion article in the Wall Street Journal today about Europe's efforts to bring Turkmen gas directly to the EU without first going through Russia, arguing that the new President Gurbanguly Berdymukhammedov offers the first cautious optimism in decades. If Europe can summon the political will to land this deal, they argue, it "would loosen Moscow's inordinate power over the Continent's sources and import routes for natural gas."

Europe's Caspian Opportunity By ALEXANDROS PETERSEN and MANJA VIDIC April 9, 2008

Talk of a trans-Caspian pipeline to bring Turkmenistan's vast natural gas reserves through Azerbaijan to the European Union has gone on for over a decade. So far, it has remained just that – talk – while Russia and China have been busy making actual deals for Turkmen gas.

BP stands to lose up to $20 billion to Gazprom as the government seizes control of a larger stake in the production project at TNK-BP's Kovykta field. Rosneft's fourth quarter net earnings leaped from $603 million last year to $2.98 billion this year, fueled by the controversial acquisition of Yukos assets. The company's debt was cut from $26.3 billion to $23.8 billion. Anatoly Chubais, the chief executive of the utility UES, announced that TransNeftServis-S is the last serious bidder for power generator OGK-1 after EdF and RWE pulled out of the race. The privatization of Russia's electricity sector is entering its final phases. "From a market point of view, it's very sexy," said James Fenkner, chairman of Red Star Management, a hedge fund based in Russia. "You are going, all of a sudden, from a system of government controlled inputs and outputs to a market based system with more potential for profit." Sweden has blocked Gazprom's plans to build an offshore platform as part of the Nord Stream pipeline project for environmental reasons, but the project managers say they can continue the pipeline without service platforms. Enel has signed a major gas deal with Egypt's state company EGAS for exploration and sales, which could eventually help Italy diversify away from Algerian and Russian supply. Lukoil has announced a sizable investment to develop six fields in the North Caspian Sea, which should help peak production reach 13 million tons of oil by 2016.

The IMF is predicting a cool down in Russia's surging economic growth. They write in the World Economic Outlook, "In Russia and Ukraine, where banks borrowed heavily in international markets to finance rapid growth in domestic lending, spreads on external debt have widened. ... The failure to act swiftly to contain inflation pressures could result in wage and price expectations ratcheting upward, putting at risk the hard-won gains from earlier disinflation policies" The Duma passed a new bill on foreign securities regulation today on its first reading, simplifying the rules and terms of access for premium foreign equities to the Russian stock market, creating a regional trading center like that of Germany or Switzerland. Yesterday the board of Norilsk Nickel voted against any change in the company's board of directors, which is seen as a victory against Mikhail Prokhorov's attempt to sell his blocking stake to Oleg Deripaska's Rusal. Today the European Union approved Renault's $1 billion purchase of 25% of Avtovaz, giving the company access to the world's most desirable automotive market, and three seats on the Avtovaz board. Although Apple's popular iPhone product does not have a service agreement with any Russian carrier, thanks to smugglers, local sales of the device are booming. Rambler Media, a leading Russian Internet media and services group, said on Wednesday its net income for 2007 totaled $6.08 million - recovering from last year's heavy losses. Big Four accounting group Ernst & Young has been brought into court in Russia to dispute a sizable back tax claim - making them the second auditor after PricewaterhouseCoopers to experience problems with the Russian government. Antigenics, the maker of a drug (Oncophage) that stimulates the immune system against kidney cancer, won approval to market the product in Russia after a study failed to meet the statistical standard in the United States.

TODAY: Tanks on Red Square, Ban Ki-Moon visits Russia, big business pleads before Medvedev, China buying less weapons from Russia, castration for pedophiles, and the seven-year presidential term.

The May 9th Victory Day parade in Moscow once again features parades of tanks and other displays of military might reminiscent of Soviet times - which poses extraordinary damage to the cobblestones of the UNESCO-protected Red Square. This year the tanks and vehicles will be fitted with rubber soles to ease the damage. Reuters writes that "The decision to revive the tradition is regarded by some observers as a sign the Kremlin is flexing its military muscles." Others are more skeptical: "This is a military in crisis; there's no other way to describe it," said Stephen Blank, a security expert at the U.S. Army War College. "And it's a crisis 17 years in the making."

...or at least one of them. To whom will Prokhorov's stake in Norilsk fall? So far everything has been civil in this epic business drama, with the normal use of lawyers and contracts instead of bureaucratic favors, but many are wondering how long the Kremlin will wait on the sidelines. The Times reports:

This is where Moscow watchers say the rivalry between the oligarchs starts to get really complicated.

Mr Potanin is said to be proposing to use Norilsk shareholder funds to buy a 25 per cent stake in Gazmetal, allowing Mr Usmanov to use this cash to then buy out Mr Prokhorov.

This has concerned a number of London financial institutions who hold minority stakes in Norilsk as they will effectively be subsidising the acquisition of their own company.

Here is an interesting bit of raw news footage, without commentary, of the Putin-Bush meeting.

Yesterday the largest ever private equity deal in Russian history was announced, as TPG, the U.S. leveraged-buyout giant, is buying half of SIA International Ltd., a major pharmaceutical distributor in Russia, for $800 million. Finance Minister Alexei Kudrin announced that "Russia's economic imbalances are likely to result in slower economic growth in the next 15 years" and that "the country will face a slowdown even despite high oil prices due to a shift in its economic cycle." Rosstat reports that inflation jumped up 1.1% in March, and 3.2% in the year to date. Mining group Mechel has announced the purchase of 100% of Romania's Ductil Steel for $221 million. In a surprise move Onexim Holding, a company owned by billionaire Mikhail Prokhorov, acquired 32 percent of the utility TGK-4 for $500 million from state-owned UES - foreign investors were expected to win the bid. Knight Frank has released a study ranking Russia 3rd in the increase of real estate prices despite the credit crunch: "Quite different trends were seen in Russia, Singapore and Hong Kong. Singapore, Hong Kong, Moscow and St. Petersburg are large, developing cities that attract real estate buyers from many regions. They provide stability and offset the negative influences of mortgages and the financial crisis." The Moscow Arbitration Court postponed until May 13 a money-laundering case against the Bank of New York, which is charged with helping the illegal transfer of $7 billion out of Russia. An affiliate of Russia's Azimut Hotels Company has bought 20 three-star hotels in Europe, and plans to spend 80 million euros on acquisitions and development over the next two years.

Today: The race for global position technology, Sergei Storchak emerges in court, Russia sends the first Korean to space, dividing the Ukraine, a question about missiles, and a wave of hate crimes.

Today the Financial Times reports that a new three way space race between the European Union, Russia, and the United States is "taking off" as competitors to the GPS, Glonass and Galileo, made separate announcements to speed up their projects. The Russian system, built by the state-owned company OAO Information Satellite Systems, plans to launch 18 satellites for domestic coverage this year, and 24 satellites for global coverage next year.

The former Deputy Finance Minister Sergei Storchak, who has been held in prison under pre-trial detention under embezzlement charges since November, appeared in court today to hear that his ruling will be delayed until July. "We will definitely appeal today's decision,' Storchak's lawyer, Marina Nikolskaya, told Reuters. "The prosecution did not put forward a single argument in favour of keeping Storchak behind bars." The investigator leading the Storchak probe is himself under investigation.

Here's an interesting outlook on the Russian economy from an analyst at Credit Suisse. More expropriations, greater regulation, and higher tariffs to come...

Financial Times:

Government intervention in Russia should be a focus for the stock market as the state’s direct involvement in the economy and various industries is likely to grow once Dmitry Medvedev takes office as president, says Vladimir Savov, Russian equity strategist at Credit Suisse.

There's an interesting post over at the Foreign Policy Passport blog about a conference in Salzburg dedicated to figuring out what Russia will be like in 2020. Blake Hounshell writes "If oil-company CEOs can't predict the future accurately, what about the oil futures market? In theory, oil traders ought to know better than anyone where prices are headed, since their livelihoods depend on making sound decisions. In reality, though, oil futures prices are almost always just an extrapolation of today's prices into the future. If oil is $10 a barrel today, the futures market will guess that it will be $10 tomorrow.

The obvious implication here is that anyone trying to forecast Russia's future is in big trouble. Another implication is that Dmitry Medvedev is only going to be able to shape Russia's development on the margins. More on that soon."

It is interesting that the blogger focuses only on the price of oil, rather than Russia's tremendous inflationary pressures and demographic crisis - despite the signs of the country's first baby boom.

This opinion column appeared in the International Herald Tribune on Friday before President George Bush and Vladimir Putin "danced" together at the Sochi summit. The author, Oksana Chelysheva, is a journalist and director of the Nizhny Novgorod Foundation for the Promotion of Tolerance and a spokeswoman for the Russian-Chechen Friendship Society.

Confront the Kremlin

By Oksana Chelysheva

As President George W. Bush prepares to meet with President Vladimir Putin and President-elect Dimitry Medvedev in Sochi on Sunday, I hope he will remember the pledge he made in his second inaugural address in 2005. In that memorable speech, he promised that the United States would not ignore oppression and that it would stand with those who stand for liberty.

On Friday, BP's CEO Tony Hayward met with executives of Russian oil major Rosneft this week, including its powerful chairman Igor Sechin. Hayward said it was a regular meeting to discuss joint projects with the Russian company, while others speculated Hayward met with Sechin to make a deal to end the state's harassment of TNK-BP. Lukoil has announced plans to build its own oil refining tanker to replace the company’s current use of Rosneft’s “Belokamenka” by year 2010, as well as plans to boost oil shipping through the Barents Sea from its new port of Varandey. The Wall Street Journal argues that Gazprom's move into Libya may be more motivated by commerical desperation than political motives to control European energy sources: "So the Russian company's push into North Africa makes industrial sense. This is one of the last gas-rich regions in the world to remain open to competing foreign investors. The type of asset swap it is considering with Eni also will enable the Italian group to broaden its Russian presence, so Gazprom isn't getting into Libya for free. Once again, paranoia won't be the cleverest way for Europeans to react to the Russian bear's moves." Iran has called upon OPEC to stop selling oil in dollars, proposing that OPEC and oil producing nations form a joint bank and common currency for the oil trade. Gazprom's sale of a giant bond tranche totaling $1.5 billion could signal the start of fund-raising from emerging countries, corporates and quasi-sovereigns that have held off bond issues hoping for an end to recent market turmoil.

Russia's second largest mobile phone operator VimpelCom became the first carrier to offer the popular BlackBerry mobile email service in the country - a technology which has previously been slowed to market by regulatory hurdles and other IP issues. Viktor Vekselberg, one of Russia’s richest entrepreneurs and a shareholder of the troubled TNK-BP, has increased his share in the Swiss high technology company Oerlikon to more than 24%, representing a split with other Austrain raiders and triggering a possible change on the board. Denis Bugrov, chairman of the board of Sberbank, says that the group is confident that it can become one of the world's top ten financial institutions in capitalization by acquiring corporate and retail businesses overseas - today just 1% of Sberbank's revenues come from abroad, and the plan is to raise this to 20% by 2014. Tomorrow Norilsk Nickel will hold an extraordinary meeting which should determine whether owner Vladimir Potanin can convince his former partner Mikhail Prokhorov to sell his 25% stake in the metals giant to Alisher Usmanov rather than to Oleg Deripaska's Rusal. Minority investors in Norilsk such as Blackrock and Fidelity stand to lose out if the Rusal deal passes.

Today: Putin gets a new job, Bush plays nice in Sochi, South Korea and Russia agree on North Korea projects, more spy games in London, and Europe pressures Moscow on human rights in Chechnya.

Despite sweeping several elections on an independent ticket, Vladimir Putin has never been an actual member of his own supporting political party, United Russia. That may change, as today party leader and speaker of parliament Boris Gryzlov, announced that when Putin becomes Russia's prime minister on May 7, he will have another job to offer him: "I will propose to Vladimir Putin that he takes over the leadership of United Russia." This move, which could deeply strengthen the party's dominance over Russian politics, could happen as soon as April 14.

Stephen Kotkin, a Princeton University professor, is not the type to avoid controversy on Russia. His writings and opinions are often surprising and original, even when I disagree with the arguments. Such is the case with his latest piece in Prospect Magazine, which takes a macro look at the radical differences between the economic and political liberalization which have (and haven't) occurred in Russia since the fall of the Soviet Union. Kotkin, though not your typical Putin cheerleader, selects as his opponents Edward Lucas, Michael McFaul, and Kathryn Stoner-Weiss, and a tired and oft-repeated counter-argument to the supposed "myths" of Russia ensues.

Although there is much argued in the Prospect piece I disagree with, Kotkin does provide an impressive overview of Russia's recent political experience which is well worth a read:

A conceptual adjustment to Russia's seemingly impossible reality is now under way, but the process is painful and slow. "When I worked in Moscow in 1994 and 1995 for the National Democratic Institute, an American NGO, I could not have imagined the present situation," confessed Sarah Mendelson, a senior fellow in Russian affairs at the Centre for Strategic and International Studies, in the American Scholar recently. "We thought we were on the frontier of a democratic revolution. We weren't. We were witnessing a market revolution." This basic understanding, so long in coming, is not yet widespread. For the most part, pathetic cries about how "the west," whatever that is, has (again) "lost" Russia, and how the west must somehow "resist" Putin, persist.

Germany's Foreign Minister Frank-Walter Steinmeier is Dmitry Medvedev's worst enemy, yet he probably doesn't even realize it. As the SPD's primary foil to Chancellor Angela Merkel, the foreign minister has enthusiastically advocated a Schröderian policy line on Russia, counted upon by the Kremlin to support their positions.

This was most recently demonstrated by Steinmeier's efforts on behalf of Russia to prevent the Membership Action Plans (MAPs) for Ukraine and Georgia to join NATO. He told the Leipziger Volkszeitung that the West "had gone to its limits" already in its relations with Moscow by recognizing Kosovo, and urged that there was "no compelling reason" to further antagonize the fearsome Russians by offering MAP to Ukraine and Georgia at the Bucharest Summit. Germany was shocked and embarrassed - for this was the first time an official deviated from the previous explanation that NATO enlargement should not include these two countries because of domestic political conditions, and was a confession that instead Berlin was simply pandering to Russia.

Leaving aside for a moment whether or not NATO enlargement is a strategically desirable move, and leaving aside the contentious Kosovo issue and the legitimate grievances of Serbia, the fact that the Foreign Minister of a leading European Union member so actively acts as an Ambassador for Moscow's interests - in striking contrast to the principles-based policy of Chancellor Merkel - is extraordinary example of how obsequiousness weakens the position of reformists within the Russian government.

For many years, William Browder has been one of the most enthusiastic advocates of investment in Russia, bullish and confident even while others have recoiled in the face of increased state interference. Once a well known supporter of President Vladimir Putin, he was also known for his occasional (and naturally in my opinion, misunderstood) public attacks against my client Mikhail Khodorkovsky.

But despite his goodwill, Browder now finds himself on the other side. After some quiet protestations about minority shareholder's rights and published research about asset stripping and corruption in Russia's state-held companies, Browder committed the unspeakable offense of criticizing opacity and poor management at Gazprom (even though in 2004 he described Gazprom's locally traded stock as "the single greatest investment in Russia"), turning him into a most unlikely victim.

From the Financial Times:

Just a decade after its financial crisis, Russia is the world’s third largest holder of foreign exchange reserves. The most recent estimate of $500bn puts these behind only China with $1,650bn and Japan with $980bn. The dollar value of Russia’s forex reserves has shot up by more than 5 per cent since the beginning of the year and is expected to continue growing. Capital Economics estimates that about three-quarters of this year’s increase comes from currency fluctuation: Russia holds 45 per cent of its reserves in euros, which have appreciated sharply against the dollar. But high oil prices and a resurgent economy have also played a role, as the government has sought to contain upward pressure on the rouble.

What is Russia going to do with all that money?

The following is an exclusive translation from the Financial Times Deutschland (the original article can be read on our German blog). See our earlier post of another story from the German press.

Berlin Turns Into Russia’s Lawyer

Foreign Minister Steinmeier Urges Consideration of Moscow in NATO Enlargement • Berlin and Washington on a Confrontation Course

By Hubert Wetzel, Nils Kreimeier, Berlin, and Fidelius Schmid, Bucharest

Russia’s adamant opposition to the admission of Georgia and Ukraine to NATO was apparently an important motive for the German government to pit itself against the U.S. government and to prevent the two countries from being declared candidates for accession at the alliance’s summit in Bucharest. The West has already “gone to the limit in its relations with Russia” by recognizing the independence of the Serbian province of Kosovo, something vehemently rejected by Moscow, Foreign Minister Frank-Walter Steinmeier (Social Democratic Party) told the Leipziger Volkszeitung.

A polemical opinion column written by San Francisco State University's Andrei Tsygankov has set off a series of debates over the use, misuse, and misunderstanding of alleged "Russophobia" in the U.S. presidential campaign.

The most comprehensive critique I've read on the article comes from blogger Lyndon Allin over at Scraps of Moscow, whose opinion I highly value. He writes, "I found this column disturbing enough to be worthy of such a lengthy response because it appears in the Moscow Times at a moment when the bilateral relationship appears to be at a fork in the road, and some in Moscow may believe that Tsygankov's kaleidoscope - in which isolated critical comments about Putin by McCain and Clinton are multiplied by reflection into a full-blown campaign of "increasing" Russophobia - is a valid lens through which to view the American political and media scene, which could bolster the arguments of those in Russia who would prefer to prolong the nostalgia-inducing atmosphere of Cold-War-style posturing which has gone on for too long already."

Check out his full critique here. Thanks, Lyndon.

The following is the first installment of a series of short policy papers we have prepared, outlining some recommendations for the European Union to reduce dependency on Russian natural gas, increase competition, and deepen energy security. You can download the full version of the paper here. Below is just the introduction.

A PRESCRIPTION FOR EUROPE

Part 1: Options and Opportunities for Europe to Ease Dependency on Russian Natural Gas

Robert Amsterdam, Derek Brower & Tom Nichols
April 4, 2008

I. Introduction

There are myriad factors contributing to the European Union’s addiction to Russian natural gas, but a lack of awareness is not one of them. In recent years, there have been serious policy efforts and various business initiatives designed to reduce this dependency, yet most have largely failed. Voluminous research and analysis from well known think tanks and knowledgeable individuals have made very clear warnings, yet there is a relative paucity of viable policy proposals. What has prevented the European Union from successfully diversifying its energy suppliers (and thus deepening security), and why should consumers and citizens be concerned about Russia’s domination of the market? What options and opportunities are available for the European Union to improve energy relations with Russia?

Oil company Yukos, declared bankrupt in a $30 billion tax claim, overpaid its tax bill by more than $3.8 billion. Lawyers say it would be impossible to recover the money. Yukos Finance, a subsidiary of the company, could sell its stake in pipeline operator Transpetrol to Slovakia.

Gazprom and Siemens have signed an agreement on strategic partnership. Gazprom could take control of BP's stake in the vast Kovykta field by the end of the month, following a meeting between the companies’ heads. BP’s chief also met with the head of Rosneft to discuss the fate of TNK-BP.

WORLD ENERGY

British Energy Group, the UK's biggest nuclear power producer, rose in London trading after it was reported that Electricité de France's board approved plans to make an offer for the company.

Hermitage Capital claims it has been the victim of an attempted fraud and theft of hundreds of millions of dollars by individuals connected to the Russian Interior Ministry. Documents seized by the Interior Ministry during a tax investigation were later allegedly used to engineer a complex fraud intended to extort $367 million from the fund. One newspaper calls the case “another reminder of the risks” of doing business in Russia. Globaltrans Investment, Russia's biggest non-state rail shipper, is planning an initial public offering in London this summer. Russian Technologies Corp., a state holding company, plans to form 33 divisions and hold initial public offerings for most. Eurasian Natural Resources, the Kazakh ferrochrome producer that started trading in London in December, completed its $210 million acquisition of Russian alloy producer Serov. Billionaire Alisher Usmanov sold his 19.5% stake in Australian iron ore producer Mt. Gibson Iron. Sberbank is considering acquiring a large east European bank as part of its global expansion plan.

TODAY: NATO result a "diplomatic victory" for Vladimir Putin. Ukraine says bid to join not directed against Russia. Bush and Putin to discuss missile defense. Russia’s liberal forces to meet this weekend. Baby boom. Medvedev offers his opinion on internet policing.

Georgia and Ukraine were not given NATO Membership Action Plans this week, but they were offered “a pretty firm commitment of eventual membership”. Although this offer was seen by Russia to be “a huge strategic mistake”, the Kremlin seemed by all accounts to be pleased with the outcome. UK papers called it a “major diplomatic victory” and “a huge diplomatic success” for Russia, but one wrote, “there is no reason we should accede to Russia's demands”. Ukrainian President Viktor Yushchenko has reassured Russia that its bid to join NATO was not “destined [to be] against any other country”. NATO leaders have issued a statement urging Russia to lift its moratorium on the CFE Treaty.

NATO and Russia will sign a land transit agreement allowing the alliance to use Russian land to deliver non-lethal supplies to its troops in Afghanistan. Russia has outlined a potential deal with the US on Washington's planned missile defense system in Europe, and the leaders of the two countries will meet a number of times over the weekend to discuss the issue. “The two presidents appear hard-pressed to show that the[ir] previous meetings have meant something.”

Parallel worlds

By Grigory Pasko, journalist

Sometimes I watch Russian television. In prime time, they show me stories about events in the world – mainly about how bad things are OVER THERE, and about events in Russia. The main events in Russia: the voluntary encloisterment of inhabitants of Penza Oblast under the ground; the training of dogs to search for narcotics; the cleanup of roads and houses from the winter mud and dust… Before this, naturally, two requisite stories: one – about Vladimir Putin, the second – about Dmitry Medvedev. That’s it. There don’t seem to be any other events in this huge country.

Television personality Vladimir Pozner was a prominent apologist for the Soviet regime on American television during the cold war (photo courtesy of www.liplus.ru)

It's no secret that Russia's political opposition is in a state of nearly complete disarray and disagreement over tactics. Today, the Wall Street Journal takes a deeper look...

I'm sure that this isn't intended to be funny, but at this model NATO summit run by some students, we hear a remarkably accurate argument for Russia's position on energy security with Europe. One word (Gazprom) and one piece of advice (settle down and do nothing).

The following is an exclusive translation from the German press on the most popular Russia story of the week. Read a summary on our German blog here.

Concept of the enemy wanted

With the prospect of Ukraine and Georgia for NATO membership Russia ably understands how to split old and new Europe

By Klaus-Helge Donath, Die Tageszeitung, April 2, 2008

Munich still gives NATO officials the shivers. At the 2007 Munich Security Conference, President Vladimir Putin gave the West a vociferous dressing down. The Kremlin boss formulated what had long ago become the guiding principle of Russian foreign policy: controlled confrontation with the West. The NATO leadership this time refused to tolerate such crassness, and the Kremlin is said to have given assurances of its good behaviour.

The last time Gazprom played around with deals and "memorandums of understanding" in North Africa, it was the con of the decade: The preemptively announced cooperation agreement with Algeria's state-held exporter Sonatrach, which terrified Europe and cornered Italian companies into hasty agreements with Gazprom. Never mind that in the end the scary deal turned out to be a bluff - but by then it was too late.

Today's news might be more substantial...

Swiftly following Vladimir Putin’s meeting with a group of Italian businessmen, Italian power company Enel has announced that it plans to invest around €9 billion ($14 billion) in the Russian economy over the next five years. The staff at OGK-4 and OGK-5, both bought out this year by European investors, are complaining of heavy-handedness from their foreign owners.

Evraz, a Russian coal producer and steel maker, said annual profit rose 53% on 2006, to $2.2 billion. One British journalist builds a case against shifting to coal.

Gazprom has placed $1.5 billion in Eurobonds under its program of foreign borrowing to raise funds for corporate development and short-term debt refinancing. The Chief Executive of BP is on his way to Moscow for a meeting with Gazprom. Industry sources say that security officers who raided TNK-BP's headquarters last month were looking for files relating to Gazprom. The company’s Director General, Alexander Medvedev, has announced that “Russia is the only country that can substantially increase gas supply to Europe”.

Mikhail Gutseriyev, the billionaire former head of oil company Russneft, is “hiding in London from Russian police who want to arrest him for tax evasion”. Russian police have charged the British head of Hermitage Capital Management investment fund Bill Browder with tax evasion in absentia, and the Russian manager of the fund is wanted on similar charges. Russia's largest mobile operator, Mobile TeleSystems, has offered $1 billion for 97% of regional operator SMARTS. Automobile company GAZ is reportedly looking at India as its next overseas market. Special report on the armed Eldorado tax raid.

TODAY: NATO summit to take place tomorrow, unlikely that invitations will be extended to Georgia and Ukraine. Russian reporter granted political asylum in the UK. Suspended official tries to link Berezovsky to Politkovskaya murder.

Time to disband NATO? One British journalist says that Russia has “legitimate grievances” with the alliance. Is Moscow's NATO strategy political or economic? UK Prime Minister Gordon Brown has “sided with more cautious EU allies against President George Bush” over US support for the admission of the former Soviet republics of Georgia and Ukraine into NATO. A NATO spokesman says he does not expect the two countries to be granted future membership at the alliance's summit in Bucharest. One newspaper calls this a diplomatic failure for Bush.

Here's a HUGE scoop from Reuters, who has found out from inside sources that the recent police raid on BP's affiliate offices in Russia was only interested in seizing documents related to Gazprom, further indicating that this mess has Igor Sechin's fingerprints all over it.

Agents "hunted Gazprom documents" in BP Russian raids

By Conor Sweeney and Dmitry Zhdannikov

MOSCOW (Reuters) - Russian security officers who raided BP's Russian venture's headquarters last month were looking for files relating to state gas monopoly Gazprom, industry sources told Reuters.

"They were scanning through pages of documents, looking for the word 'Gazprom'," said one source familiar with details of the investigation.

"The only thing that seemed to interest the officers, based on their questions, was information on Gazprom," a second source said, commenting on March raids by 78 officers at TNK-BP's central Moscow offices.

British Prime Minister Winston Churchill, President Franklin Roosevelt and Soviet Premier Joseph Stalin in Russian Crimea (now Ukraine) at the 1945 Yalta Conference, where the leaders discussed post-World War II organization of Europe. (AP / November 18, 1999)

Today the Hartford Courant is running an interesting historical/academic piece about the launch of a $1.3 million online archive of Joseph Stalin's personal documents undertaken by Yale University. This arduous process has involved the digitalization of more than 40,000 documents, including remarkable items such as a letter from Stalin to author Upton Sinclair, claiming responsibility for the disappearance of a film producer by the state security forces.

Jonathan Brent, the editorial director of Yale University Press who has been working on this project for many years, told the New York Times last year that “It’s like the Dead Sea Scrolls for the Stalin period,” providing “a sense of Stalin the individual, his psychology, his growth as a leader.”

"This is a man who received correspondence literally two years beyond his death in 1953," Brent said. "The question of studying Stalin has moved beyond, from love him or hate him, to literally why Russians still revere him after he killed 20 million people in the Gulags and six million in the famine."

Ariel Cohen of Heritage has a few suggestions for President Bush before his next (and likely his last) meeting with Vladimir Putin:

Before the Sochi summit, President Bush should request that President-elect Dmitry Medvedev join the talks. He should also reiterate U.S. support for eventual NATO membership for Ukraine and Georgia while clarifying that such membership would not endanger Russia. Bush should also discuss the participation of Russian observers in the United States' limited missile defense system in Central Europe.

President Bush should call for a more robust cooperation with Russia on limiting Iran's nuclear weapons, uranium enrichment, and ballistic missile programs. Washington and Moscow should explore Russian weapons transfers and training for Afghan military and security personnel. Finally, the two sides should launch a discussion of terms and conditions for allowing the investment of Russian sovereign state funds in the United States.

Much more right here.

Yevgeny Kiselyov of Ekho Moskvy radio wonders why the Kremlin is making such a fuss over NATO, and points out that this is creating tensions between many Russian elites (who may enjoy frequent travels to the West) and the government.

Since the country's presidential elections are over, what purpose would it serve now to continue frightening voters about a fifth column and supposed enemies who have encircled Russia because they do not want to see it get up off its knees?

The average Russian actually cares little about NATO expansion. But if you stop him on the street and ask him, "Are you for or against Ukraine joining NATO?" he will probably answer "against." That is how he has been taught to think. This is not surprising considering that state propaganda has hammered into his head for decades that NATO is an aggressive bloc that once menaced the Soviet Union and now threatens Russia?

But if you were to ask him to list his fears and concerns, I would guess that NATO membership for Kiev and Tbilisi would never enter his mind. Instead, he would mention inflation, rampant corruption, abuse of power by the police, a lack of justice, traffic jams and a host of other issues without ever mentioning NATO.

Back tax claims and fines caused Russneft to suffer losses last year of over $500 million. Russneft has yet to be sold to Oleg Deripaska’s Basic Element due to “legal complications”.

The Australian Takeover Panel is blocking plans by Russian oligarch Alisher Usmanov to sell his 20% stake in Mount Gibson to Chinese steelmaker Shougang, because the sale breaches Australian mergers and acquisitions rules.

Electricity producer OGK-1 posted a profit of $1.9 billion last year, a 240% increase on 2006, reportedly due to “the electricity market liberalization”. Finnish power and heat company Fortum has acquired the Urals-based generating firm TGK-10.

Is Moscow’s real estate bubble about to burst? KamAZ, the country's largest truck maker, may sell one-quarter of its shares for $1.25 billion this year to a strategic investor from the European auto sector. Sberbank's net profit for 2007 increased by "about 100 billion rubles" ($4.2 billion) according to international financial reporting standards, and not by the $4.9 that German Gref had originally claimed. Rambler Media, owner of the Internet's third-largest Russian-language search engine, sold 51% of its advertising arm to Video International Group. Finance Minister Alexei Kudrin has called for a cut in federal spending. “Russia's top economic policymakers disagreed publicly on whether the economy is overheating, highlighting a growing rift over strategy.” President Vladimir Putin is scheduled to meet Enel’s CEO, Fulvio Conti, together with executives from Eni and Finmeccanica, in Moscow.

TODAY: US and Russia in now solid opposition on a number of issues including NATO and Litvinenko, leaders to meet on Sunday. Russia shows further opposition to Kosovo and Ukraine as Bush calls for push of support for Ukraine and Georgia. Survey suggests public perception of Russia improving.

Russia has sent its first planeload of humanitarian aid to Belgrade for delivery to the Serb minority in Kosovo. This is thought to be a retaliation by President Vladimir Putin to President George Bush’s announcement that the US would supply Kosovo with arms. Foreign Minister Sergei Lavrov says Russia will not allow Kosovo to become a member of the United Nations, and Russia has reiterated its opposition to Ukraine joining NATO, just as Bush urged NATO members to “send a signal” in support of independence and democracy for Ukraine and Georgia by welcoming their bids for membership in the alliance. One British newspaper accuses him of “throwing down the gauntlet,” and another says that Bush and Putin appear to be “on a collision course”. “[S]ome Western diplomats in Moscow say they are dismayed by the American-led push to get Ukraine and Georgia into the Nato club right now”.

On the Russian people and individual democrats

By Grigory Pasko, journalist

Last year, I visited Samara and told readers of the blog about the surroundings in which the Germany-Russia summit was taking place. One of the articles was fully devoted to Samara’s roads – probably the worst in all of Russia.

In my article, in particular, I cited such numbers: according to official data, 3 billion rubles were directed from the federal budget to the Samara budget on the eve of the summit in a targeted allocated for the repair of roads. 800 million rubles for repairing roads was allocated from the oblast budget. The city itself promised another 40 million rubles from its own funds. All in all – 3 billion 840 million rubles. That’s $154 million dollars.

Towards the beginning of the work of the summit, a PIECE OF ONE road leading from the airport to the city had been built – no more than five kilometers.

A month after the summit, I telephoned an acquaintance of mine and expressed interest in the state of the roads and the process of their repair. He responded: if in the days of the work of the summit at least the cracks in the pavement were being filled with tar, nowadays no works whatsoever are being conducted.

The eternal Russian question: where did the budget money disappear to? The eternal Russian answer: it was pilfered!

[Photo: Vladimir Putin and Grigory Yavlinsky, RIA Novosti]

This news clip shows that President Bush is preparing to confront Russia over Ukraine's NATO bid.

Here are interesting headlines and extracts.

From Der Spiegel: Moscow Investors Go on Shopping Spree for German Companies

Putin decided some time ago that his country's future lay in "going West." "We are not arriving with Kalashnikovs," he said during a visit to Germany two years ago, "but with money." His successor Dmitry Medvedev, who takes office in May, has already announced that he plans to continue the same course.

For Medvedev, it is the "government's obligation" to support Russian companies "in the global competition, especially in the fields of high technology and energy." KM, a popular Internet portal, summarized the president-elect's strategy: "Medvedev is calling upon Russians to buy the West."

From the Financial Times: Germany blocks ex-Soviets’ Nato entry

Among the European Union’s larger member states, Germany has been most willing in recent years to take into account Russia’s security worries. German officials were sceptical on Monday about the US view that Nato membership for Georgia and Ukraine would help bring stability and added security to the region.

“We have to weigh up how much security we will win and how much we will lose,” one person familiar with Berlin’s stance said. Berlin fears that a deal on Map status would lead to Russia being less willing to find accords with the US and Nato on key missile defence and disarmament issues.

According to Forbes, wealthy lawmakers holding office in the Duma make the Russian Federation the richest government in the world - with 12 billionaires holding seats, totaling a net worth of $41 billion.

Heidi Brown writes: "Of course, wealth and political power are as old as the institution of government. But the scale of wealth in Russia's government is unparalleled anywhere else on Earth. These men, mostly entrepreneurs, often swear their motives are altruistic, but the overriding factor is likely the personal benefit they enjoy from being closer to the center of power. Most are affiliated with Vladimir Putin's United Russia party--compared by some political pundits with the old Communist Party: Membership has many privileges."

So far it hasn't been a problem for the billionaires that Russian law prohibits Duma members from running businesses - controlling shares are just diverted to family members.

See the photo essay here.

Gazprom has warned that plans to boost gas production at home depended on signing long-term contracts with Europe.

Tatneft is considering a joint project with Chevron after the head of the US oil major's Russian operations met the president of Tatarstan.

According to Finance Minister Alexei Kudrin, Russia received an additional $475 billion in revenue as a result of high global oil prices between 2000 and 2007.

Deputy Prime Minister Alexander Zhukov says that “there will be no financial crisis in Russia”. Russia will increase timber export duties this week despite strong objections from the European Union and the risk it could hurt its chance of entering the World Trade Organization. The World Bank and the Russian Ministry of Regional Development held a joint seminar entitled “Strategies for the Economic Development of the Regions” yesterday in Moscow. Diamond miner Alrosa said it would vie for control of African resources, including diamonds, oil and gas. Sberbank, Russia's largest bank, is no longer one of the top 3 Russian companies in stock market capitalization thanks to the mortgage crisis. The bank’s net profit rose by over 50% last year, and it is planning to expand in Eastern Europe, the former Soviet Union and Africa in order to become a “truly global player”. Renault and Avtovaz plan to buy a factory in Kaliningrad from Russian manufacturer Avtotor. Russian Railways could raise the average rail fare by a further 8%. The government will look again at its planned hikes in domestic electricity prices for business users because the unregulated prices are rising more quickly than anticipated.

TODAY: Russia will not “veto” Nato meetings, says Bush, Putin remains firm on expansion. Kremlin may build tunnel link between Putin and Medvedev. Journalist murder said to be not political.

The Kremlin is considering an “ambitious plan” to dig a tunnel linking Dmitry Medvedev's Kremlin and Vladimir Putin's White House. Russia's lower house of parliament could approve Putin's candidacy for the post of prime minister on May 8. “We all know that the newly elected president will put forward Vladimir Putin's candidacy," says Boris Gryzlov.

Russia opposes Ukraine’s ambition to join Nato, but pro-Russian Ukrainians consider Nato to be an “enemy organisation”. US President Bush is currently in Ukraine, and has said that he “strongly supports” Ukrainian membership. Vladimir Putin, meanwhile, has been unyielding in his opposition of Nato expansion, and could strongly influence any decision. France opposes membership bids by Georgia and Ukraine, concerned that it will deepen tensions with Russia. German Chancellor Angela Merkel opposes Georgia’s Nato membership because it is in conflict with a neighbour, and Ukraine’s membership because most of its citizens are against memberships. One British newspaper says the alliance is facing “a damaging split”.