June 2008 Archives

I saw this interesting translation of a column by Semen Novoprudskiy (Gazeta.ru) on JRL, which argues that comments made by Vladislav Surkov, the ideological author of such recent Russian innovations as sovereign democracy and the Nashi, show that the Kremlin is increasingly concerned by efforts (among the clans or outsiders or both?) to drive a wedge between Vladimir Putin and Dmitry Medvedev. The level of Surkov's influence is hotly debated among insiders, who were watching his moves before and after the elections.

The Fears of Karabas-Barabas

Commentary by Semen Novoprudskiy

If there is a rifle hanging on the stage, in act three it is sure to be fired (a dictum of the playwright Chekhov). If the country is being run by two people instead of one, they must inevitably be separated. Apparently even the designers of the deformed political system in which you and I exist as mere pawns, cogs, and nuts have begun to recognize the truth of this axiom.

The main Karabas-Barabas (puppeteer; Karabas-Barabas is the evil puppet-master in the story of Buratino, the Russian equivalent of Pinocchio) in Russian politics, First Deputy Chief of Presidential Staff Vladislav Surkov, at a meeting in the Kremlin with part of his puppet troupe -- activists from the pro-Kremlin movement Young Russia and the New People organization -- tried to prove to his puppets that the Putinjugend (Putin Youth; allusion to the Hitlerjugend, Hitler Youth, in Nazi Germany) are necessary to the authorities and will be needed even under President Medvedev. The proof went something like this: "A rather complex phase of political changes is now in store for Russia because of the growth in unfriendly pressure from abroad and the attempts by certain destructive forces within the country to drive a wedge between President Medvedev and Government Chairman Putin."

More information and commentary forthcoming. From Reuters:

New charges against Russia's Khodorkovsky

Russian prosecutors have brought new charges against jailed former oil businessman Mikhail Khodorkovsky, his legal team said on Monday.

The lawyers said they had yet to establish what the new charges were but believed they were a version of money laundering charges prosecutors have been preparing for over a year.

This news clip from Al Jazeera English has some interesting and frankly conspirational interviews regarding the recent EU-Russia summit in Siberia - the type of commentary you'd be unlikely to find on CNN. The tired, old double standards argument gets thrown out left and right. This is not the first time we have seen Russia get a free pass on human rights and authoritarianism simply for the fact that abuses have been committed in places like Iraq and Guantanamo Bay.

Conservative pundit John Laughland appears to reside on an entire other planet in this interview.

The Financial Times has a sizable, multi-part energy report out today, with plenty of interesting material on Russia, Brazil, prices, demand, etc. that we'll be cherry-picking over the next few days. Of immediate interest is an article entitled "State takes big piece of the pie" by Catherine Belton, which reports that Russia may be heading for its first decline in oil output in a decade - not because there aren't plentiful new fields to tap, but because 80% export taxes and aggressive state harassment has discouraged much needed investments:

Oil exports are likely to be further hit as Russia's continued economic boom boosts demand for fuel domestically. Twenty per cent growth by private companies such as Sibneft and Yukos in 2002 has been replaced by industry-average growth of 2.5 per cent since 2005.

The slowdown has matched a state march into the oil sector that has seen direct and indirect control of the sector leap from 28 per cent in 2003 to more than 50 per cent now. (...)

Without a bigger commitment by the government, infighting over the size of the cuts probably means "the situation will get worse before it gets better", says Chris Weafer, chief strategist at Uralsib.

For a vision of the recent past in Russia, read this account of what Yukos did to achieve such high production growth before the Kremlin took on such a dominant role in the energy sector.

Is Gazprom's strategy political? The answer is a predictable "no," at least in the eyes of Alexander Medvedev, the company's deputy chairman. The article (in full after the cut) sets its sights on knocking down the European Commission's efforts to separate gas supply and distribution companies to enhance competition in the energy market, but may in fact be part of a new series of arguments accompanying the appointment of former Prime Minister Viktor Zubkov to the chairmanship of what many are already calling the world's largest company. The selection of Zubkov, as opposed to an official with business experience, is seen as a clear expression that the company will continue to be politically influenced - indeed Zubkov said as much during his appointment speech. On the positive side, at least he answered four questions at a news conference, something that Rosneft's Igor Sechin would never do. Perhaps transparency comes with baby steps.

BP’s chief executive has warned that the era of "cheap energy" is over. The Prime Ministers of Russia and Ukraine met over the weekend and will continue to seek an agreement on what Vladimir Putin described as “excessively politicized” natural-gas prices. Both sides currently appear optimistic, with Putin praising Ukraine for making its gas payments on time this year, although other stories focus on Russia’s negative rhetoric against Ukraine regarding Nato. Today is the last working day of the state energy monopoly Unified Energy Systems. Former Prime Minister Viktor Zubkov has made his debut at Gazprom. Engineering company Power Machines has signed a $171 million contract to supply thermal equipment for a nuclear power plant. Gazprom’s planned skyscraper will have a “green fur coat”. Sibir Energy reported triple full year pre-tax profits and “hailed the imminent resolution of a dispute with Gazprom”. A handful of big new fields due to come on line in Russia in the next few years “will barely make up for rapidly declining production at existing fields in western Siberia.” Rosneft is not interested in buying a stake in rival TNK-BP. Italy’s Saipem and Nord Stream have signed a €1 billion contract for laying the Nord Stream gas pipeline.

The Other Russia is reporting on a new study by Russia’s Federal Anti-Monopoly Service, which says that state corporations and monopolies pose a threat to economic competition. Mobile phone company MegaFon announced profit advances of 51% for the first quarter on increased usage. Amtel-Vredestein has bought Sibur-Russian Tyres, creating one of Europe’s biggest tiremakers. Diamond producer Alrosa plans to sell two oil and gas assets in Western Siberia worth $400-700 million. Record prices for crops have “sparked a surge of investment interest for farmland in Russia and Ukraine” this year.

TODAY: Medvedev “charms” EU officials at summit; United Russia meeting suggests Putin’s influence will continue; traffic arrest highlights corruption; Duma to create DNA database?; bishop dismissed for criticizing the Kremlin.

The first EU-Russia summit with Dmitry Medvedev “was indeed a very good and constructive one”, according to Jose Manuel Barroso. The Russian president’s “charm campaign” reportedly included his bringing gifts for top EU officials. But the summit reportedly uncovered tensions with Estonia and Foreign Minister Sergei Lavrov says Moscow is unlikely to make compromises with the EU over a wood tariffs dispute with Finland.

At a United Russia meeting, Boris Gryzlov said that the party is opposed to gubernatorial elections, preferring the “vertical of power”. Vladimir Putin implied that the party was willing to begin accepting ideas from other parties, emphasizing “dialogue” and saying that “real political leadership doesn't mean being isolated with your own ideas and instantly rejecting those of other people.” Putin suggested that he may hold call-in shows with the populace as part of his work as chief of United Russia, just as he did in his previous role as President. Putin insists that next year’s near-doubling of Russia's minimum wage will not significantly impact inflation. Public sector wages are due to rise 30%, and pensions by 16%.

Today, as expected, Robert Mugabe cruised to a landslide victory in his "one-candidate" poll amid a chorus of international outrage, disgust, and disbelief.

In all the publications I can find defending his victory, I sense a distinct similarity with that particularly high quality of pro-authoritarianism propaganda coming out of the Kremlin - it's as though Mugabe hired Vladislav Surkov, who advised him that focusing on Western examples of double standards is the key to whitewashing to poorly faked democratic process (however Zimbabwe did not have the luxury of bottomless resources to direct toward other forces such as the Nashi).

Read below and see for yourselves. Like all good propaganda, it contains an element of rhetorical coherence: they are right to complain about the West treating Mugabe differently than a leader like Putin.

Nigeria: Zimbabwe's Endless Descent

Vanguard (Lagos)

EDITORIAL - Lagos

AFRICA has the notoriety of bearing some of the worst rulers in the world. Zimbabwe, where Robert Mugabe has been President since 1980, is not exceptional.

At 82, Mugabe is unwilling to leave power. His 28 years have ruined Zimbabwe. These statistics give a hint of the peoples' trauma -- life expectancy is 37 years (men), 34 years (women) according to the World Health Organisation, orphans make up 25 per cent of the population, says UNICEF and it has the worst inflation in the world at 1,281 per cent last month.

Mugabe is typical of African leaders. His only offence is that he is tangling with Western interests over land. Had he been an ordinary dictator, the West would not have cared about elections in the country.

Ah, there's nothing better the beginnings of a catty new fight among Russia academics. A few days ago we had the Andreas Umland smackdown of Eric Kraus, and today, Juliet Johnson of McGill University in Canada takes a few light potshots at Marshall Goldman's bloated ego in a review of his book Petrostate. [I'll eventually do my own review of Petrostate, most likely during a summer vacation.]

Getting carried away with his own prose, he asserts, "President Vladimir Putin, with his control of Gazprom [the state gas monopoly] as well as another state-owned petroleum company, Rosneft, had become a real-life Dr. No - an archetypal James Bond villain, complete with a yacht and retinue." One pictures Goldman's Putin giggling evilly and stroking a cat, à la Bond's Cold War-era nemesis Blofeld. (...)

In another slightly overwrought moment, Goldman writes, "With its natural gas and oil pipelines that tie Europe to Russia like an umbilical cord, Russia has unchecked powers and influence that in a real sense exceed the military power and influence it had in the Cold War." While East Europeans may beg to differ, the oft-made point that Russia has re-emerged on the international stage as a force to be reckoned with is well taken.

The Financial Times has an editorial today about the EU-Russia Summit held at the end of this week in Siberia, commenting that if they can begin to "treat each other with the respect they deserve," then they can finally get over the years of zero progress and establish a framework for closer political and economic competition.

I suppose this argument assumes that Europe doesn't treat Russia with respect. Since when? If anything we've seen an extremely obsequious and placating attitude in various European capitals for the Russians, rolling out the red carpet and doing our best to turn a blind eye to authoritarian abuses, when in fact the last election looked a lot more like Zimbabwe's "one candidate poll." There's a major disconnect in Europe's perception of the Russian reality, and, in many ways, our dishonesty about what's happened there in recent years in fact creates an enabling influence to worsen conditions and entrench the Kremlin in these current positions holding back the next EU-Russia partnership agreement. I agree with the editorial's optimism though - I hope that the cards fall in the right way as a result of the clan infighting, providing liberal factions within the government an opportunity to purge the hawks. We'll see.

LEADER: Hope for a thaw from Siberia

A short trip to Siberia is not usually regarded as likely to inspire good sense, even in summertime. If the temperature is not freezing, then it is plagued by ferocious mosquitoes. But there is a chance that the latest summit between leaders of Russia and the European Union, held in a booming west Siberian oil town, could prove the exception. If it marks the moment when Moscow and Brussels start to treat each other with the respect they deserve, it will have been worth it.

Jim Hoagland of the Washington Post has a column today addressing Dmitry Medvedev's foreign policy ambitions, and Russia's attempt to create a "new world order" by fundamentally changing the postwar global security architecture.

For a variety of reasons, Putin is likely to come up as short in reshaping the world as Bush did -- if the next U.S. administration is smart about handling the challenges Russia intends to mount to America's lessening but still dominant role in European security and in international financial institutions.

In Berlin, Medvedev provided few details of Russian intentions. But Foreign Minister Sergei Lavrov, in a June 20 speech and a follow-up conversation I had with him here, outlined an ambitious agenda of change in a new era of "multipolar cooperation . . . and collective leadership" in international affairs.

A "new world order" cannot be based on "an Anglo-Saxon pattern that some have tried to establish for the rest of the world," Lavrov said. It would involve doing away with "the Cold War architecture for the security of Europe."

Today the Financial Times has some good articles on Gazprom, and below the cut is the full transcript of the paper's interview with CEO Alexei Miller. He sticks to his guns on $250 oil, the futility of OPEC, and other scary sounding ideas to divert gas away from Europe unless they shape up.

In other words, more of the same.

Today the terrific blog Global Voices links to a useful map explaining the Russia-Georgia disputes over Abkhazia.

From The Reference Frame:

Look at the map. Start with the yellow disk, a global perspective. We are discussing the piece of land (blue rectangle) in between the Black Sea and the Caspian Sea. There are Caucasus Mountains over there as well as many cacophonic pairs of nations. The region is as dangerous for the peace as the Balkans on the opposite side of the Black Sea. Note that Iran would have made it to the picture, too. Moreover, there is also Armenia & Azerbaijan as well as Chechnya on the East side of North Ossetia (inside Russia). ;-)

Garry Kasparov, tireless as ever, fires another missive slamming the Kremlin for soft censorship and repression of the press, citing the willingness of Western media to help paint a positively innocent picture of today's Russia. Like many of Garry's recent articles, it would be tough to tell when exactly this could have been written - but perhaps that's due to the unchanging nature of Russia's political stasis.

How Putin Muzzled Russia's Press

By Garry Kasparov

"How come I am still alive? When I really think about it, it's a miracle." Several years back so spoke Anna Politkovskaya, the late Russian investigative journalist who for years fearlessly explored the depths of war-ravaged Chechnya.

She is now the subject of the documentary "Letter to Anna" by Swiss director Eric Bergkraut. The film premiered in the U.S. last night at the Human Rights Watch Film Festival in New York. Politkovskaya reported conversations with families ripped apart by war. She was also the voice of Russian soldiers who were ashamed of the atrocities committed in their country's name. Her work made her the enemy of many powerful people, and on Oct. 7, 2006, the 48-year-old was gunned down in the foyer of her apartment building.

In May, Dmitry Medvedev took Vladimir Putin's chair, if not his power. At the World Russian Press Congress in Moscow on June 11, Mr. Medvedev pledged to "support media freedom." But the picture remains bleak.

The Moscow Times reports that Javier Solana's late arrival to Russia for the summit cost him dearly, as the state-run media had the obligation to cover Medvedev's simultaneous arrival:

But with Solana's late arrival, his plane landed at about the same time as President Dmitry Medvedev's -- leaving just one photographer and one cameraman from the gaggle of Russian and foreign journalists waiting to greet him.

"What a disgrace. He probably won't forgive Russia for that," quipped a cameraman for a Finnish television channel.

Another journalist said: "Don't arrive at the same time as the Russian president!"

The video below contains no narration, but has plenty of interesting footage of Medvedev, Solana, and Barroso chatting and posing for photos.

In a move that is unlikely to ease UK-Russia tensions, Scotland Yard has reopened its investigation of the 1978 murder of Bulgarian émigré Georgi Markov, who was famously assassinated via a poison pellet believed to have been delivered by a spy's umbrella while walking across Waterloo Bridge in London.

The Economist has a good story comparing the level of cooperation of the Bulgarian government with that of the Kremlin following the Litvinenko murder: "Bulgaria’s co-operation contrasts sharply with Russia’s intransigence over the murder of Alexander Litvinenko, a British citizen and vociferous critic of the Kremlin, who was poisoned in London in November 2006 by a rare radioactive element, polonium. British officials are convinced that Russia’s security service, the FSB, was involved in the murder. The prime suspect, Andrei Lugovoi, is now a celebrated Russian parliamentarian. (...)

Whether or not the Soviet KGB ordered Markov’s murder, their close Bulgarian allies would certainly have shared details of such a risky operation. Bulgaria asked Russia to declassify its Markov files in 1991 but did not pursue it. If the new man in the Kremlin, Dmitry Medvedev, truly wants to thaw his country’s icy relations with Britain, he could do worse than pass on whatever the closely-guarded archives of the old KGB contain on the Markov murder."

If upheld by a court, AAR’s new accusation that a recently elected TNK-BP board is “illegal” could cripple BP's ability to manage its Russian assets and refineries. Stan Polovets says that the last straw before the current row was a dispute over an oil project in Iraq. OGK-1, majority owned by Unified Energy System, has created a joint venture with TNK-BP, which UES chief Anatoly Chubais hailed as "a sign of a positive future" for the embattled oil firm. In an interview with the FT, Gazprom chief Alexei Miller says OPEC has, effectively, “lost control of the market” and has no control over prices. He also reiterated his widely-criticized opinion that oil prices will rise “dramatically”, and said that state energy firms are poised to dominate the global fight for new resources. Gazprom plans to invest $3 billion a year exploring for gas at Russian deposits between 2008 and 2010, and is proposing opening a chain of filling stations using natural gas as an alternative car fuel across Europe.

Moscow's arbitration court upheld a $10 million tax claim against German airline Lufthansa’s Russian operator, despite its attempt to appeal. The Bank of Cyprus has clinched a deal to buy 80% of Russian bank Uniastrum for $576 million. The net worth of Oleg Deripaska’s Basic Element almost doubled last year.

TODAY: EU-Russia summit begins amid row over wood tariffs with Finland; Russia’s “image problem”; Georgia suggests splitting Abkhazia; Kremlin funding pro-government movies?

First reports from the EU-Russia summit say Dmitry Medvedev is “striking a softer pose” than predecessor Vladimir Putin, although the summit is already seen as being “overshadowed” by energy disputes and a wood trade dispute with Finland over “crippling” tariffs. A group of UK politicians have written an open letter criticizing Russia’s “bilateral hostility towards the UK”.

The Moscow Times today writes on Russia’s image problem, quoting an analyst at a Kremlin-backed think tank: “Whatever Russia is doing is reported in a stereotypical way.”

I think Sen. John McCain's (or perhaps more accurately, resurgent neocon Robert Kagan's) proposal for a "league of democracies" is both unrealistic and very interesting. It's unrealistic in that I don't really believe that the campaign is serious about this proposal in its pure form - anyone who has as much experience as McCain in the U.S. Senate has a deeper, more complex understanding of diplomacy and the importance of the United Nations in the international system - despite the frustrations and flaws of authoritarian vetoes. Countries as large and economically important as Russia and China tend not to like it when they aren't invited to dinner - after all, what good are nuclear weapons if not to serve as golden tickets to negotiating table? I do appreciate the fact that the creation of a group of democracies would put pressures on authoritarian states to carry out reforms and at least imitate some minimal democratic practices ... but ultimately, such changes are only successful when carried out by the will of the sovereign people. I believe there are better, more constructive ways to achieve these changes.

What could conceivably happen is that a "community of democracies" voting block could appear within the U.N., but that's far different from the marginalization of China and Russia as foreseen in McCain's bold words.

But I do commend McCain and Kagan for at least opening up discussion on the growing cooperation between authoritarian governments and their coordinated activities within international institutions, often with the aim of subverting grassroots liberty movements within their own countries and in neighboring territories. For the moment, the League of Democracies seems as fictional to me as the Justice League, however as soon as the conversation begins about why we might need such an exclusionary body, already we are making progress in confronting some ugly truths that have long laid unsaid and diplomatically buried.

Anyways, the whole reason for this rant is a column by Robert Skidelsky, a member of the British House of Lords, who argues that "I am all for spreading Western-style democracy, but not at the cost of making the world more warlike. Peaceful coexistence between different political systems is an attainable objective, and one to which all the world's major powers can sign up."

There is plenty I disagree with in this Skidelsky piece - and those who read this blog often enough should be able to spot what I am talking about.

...at least for a while. As I am posting this video, the final minutes are ticking away in the Euro 2008 semi-final match between Russia and Spain, which looked much more like a replay of the stinging defeat suffered by Guus Hiddink's squad two weeks ago. Up until tonight, however, Russia was basking in a long series of victories, from Zenit St. Petersburg to Eurovision up to the defeat of the formidable Dutch team in the quarterfinals. I was also pulling for the Russians, and share that devastating feeling of disappointment. Nevertheless, the semi-finals of the Euro Cup is nothing to sneeze at.

However, an important notice to Spain: We could be predicting a very cold winter in Madrid, especially if Gazprom seeks revenge for this defeat by cutting off the flow of oil and gas to the Iberian peninsula - Mazeikiu Nafta style...

We've been waiting for more news to come out following the the blockbuster accusation from the Alfa-Access-Renova consortium that BP was conspiring with the Russian government to force them out of their stake in TNK-BP - the core issue of the contentious shareholder dispute. Other than the expected denial by BP of a Kremlin link and some news about an Iraq deal, the best response comes from Yulia Latynina at the Moscow Times:

When BP first entered Russia in the '90s, it used the powerful Alfa Group to gain a foothold in the country. Now the situation has changed, with state-owned oil companies calling the shots. Shortly after the joint venture's moratorium on the sale of shares by either side expired on Jan. 1, BP started talks with Gazprom on a number of joint projects.

An AAR buyout with Gazprom's participation would create a new, profitable configuration for BP in which the state would effectively force AAR's private shareholders out of the oil and gas business using BP's money. In return, BP would gain the right to represent Gazprom in foreign markets. Put more simply, Gazprom would replace Alfa as BP's new partner.

BP would have beaten AAR to the punch if it had struck a deal with the state to use government resources to trade one Russian partner for another. But AAR shareholders are getting the last laugh by showing that they are more skillful than BP at the quintessential Russian game of "knock your partner's teeth out with the government's help."

Back in May Andreas Umland published an article entitled "Gorbachev Number Two: Dmitry Medvedev," which put forward a rare argument for the potential future of Russia's new president playing a Gorbachev-like role as a reformer. He writes: "Gorbachev´s experiences as a young man, his political rhetoric before becoming the Soviet Union´s leader, and his democratic reforms once he felt secure enough to launch them correspond with each other. A similar fit between rhetoric and action is to be expected in Medvedev´s further rise should the office of the President of the RF retain, at least, a part of its current prerogatives. (...) Nevertheless, sooner or later it is to be expected that Medvedev´s deeper political beliefs – his apparently liberal and democratic views – will come to the fore."

This argument of Medvedev-as-reformer was jumped on by Vladimir Frolov, who used it as a starting point of debate for one of his peanut galleries of pundits he frequently moderates over at Russia Profile.

Much more interesting is Umland's long-awaited qualifying retort to the various opinions voiced in the debate - containing no shortage of "fightin' words." Why bother with punditry if you're not going to predict, he asks. Umland reserves the biggest burn in the piece for Eric Kraus and his limp defense of authoritarianism, but just about everybody gets a slap in this polemic.

This is about as close as we get to a "smackdown" in the, ahem, civilized English-language debate on Russia, so take advantage...

The following is a translation from Russian of an Interfax article about Mikhail Khodorkovsky's 45th birthday today.

Chitan supporters of Khodorkovsky prepare to congratulate him with 45 years

Chita. 25 June. INTERFAX-SIBIERA

Supporters of ex-head of NK "YUKOS" Mikhail Khodorkovsky will celebrate on 26 June in Chita the day of his birth. As deputy head of the public committee for support of M.Khodorkovsky Marina Savateyeva reported to the agency "Interfax-Siberia", a picket in support of Mikhail Khodorkovsky and Platon Lebedev will take place closer to the evening on Revolution Square.

In her words, the organizers have purchased 200 greeting cards for M.Khodorkovsky. "Anyone who wishes will be able to congratulate Mikhail Khodorkovsky on his birthday. A part of the cards are already signed by representatives of the public committee", she said.

The organizers of the picket intend to pass all the congratulations on to M.Khodorkovsky.

This one comes from the Associated Press - more info available at the mbktrial.com website.

Lawyer says Khodorkovsky may appeal for early release after presidential change in Russia

The Associated Press

MOSCOW: A lawyer for the jailed founder of the Yukos oil company said Thursday he he has advised his client to appeal for early release from his Siberian prison now that Vladimir Putin is no longer Russia's president.

Yuri Schmidt said on Ekho Moskvy radio Thursday that tycoon Mikhail Khodorkovsky, who turned 45 Thursday, hasn't made up his mind on the issue yet.

It's an exciting day for Russian sports fans as the national selection takes on Spain for the semi-final of the Euro Cup. The historic achievements of the squad, led by famous Dutch coach Guus Hiddink, have riveted the public, and certainly has not gone unnoticed by the Kremlin. We've blogged in the past about the state's overlap with various sporting events for political purposes, and today the New Republic has an interesting article about how Russian politicians are doing everything possible to ride on the coattails of the team's popularity - it's sports nationalism at its best, Putin-style.

There's much to be said for healthy sports nationalism, and it's certainly not unheard of, particularly in Russia, to use sport as a means for promoting love of country. But Russian politicians are now doing it so overtly that the team seems irretrievably infused with the animating spirit of Putinism--one part inferiority complex, two parts rising superpower. Said then-prime minister Viktor Zubkov before Russia's critical October qualification match against England: "They have 11 players, and we have 11 players. They have two arms and two hands and one head each, and we have the same. But do you know what the most important thing is? We, Russians, won World War II. And we were the first in space." After Russia came from behind to win, pro-Putin parliamentarian Alexander Babakov exulted, "This victory will only boost Russia's rebirth."

One Russian report says Russian shareholders will attend an annual general meeting of TNK-BP today, despite speculation that they could boycott the meeting, or that the venture’s Russian directors would be pulled. Viktor Vekselberg says the venture’s Russian partners won’t sell their 50% stake because they expect that high oil prices and lower taxes will boost returns. Dmitry Medvedev has rejected suggestions that Gazprom had considered investing in TNK-BP, contradicting claims by Stan Polovets that BP views Gazprom as a preferable partner. An overview of "Robert Dudley and the oligarchs". Gazprom is reportedly looking into building a gas pipeline to Georgia's breakaway Abkhazia region. The company will cut its stake in Gazprombank, once its main banking arm, to 25% from 42%. The chief of Rosatom says Russia is prepared to welcome foreign investors into its civilian nuclear power sector.

Severstal entered a merger agreement with US producer Esmark after boosting its takeover offer by 13% to $775 million. Russia's iron reserves, the largest in Europe, promise “a long future for iron mining”. Rosoboronexport’s military-technical cooperation with European companies has reached $120 million a year. “The quantity of agricultural land in Russia is shrinking: 23 million hectares of arable land have been abandoned since the end of communism.” Finance Minister Alexei Kudrin says a tax cut favored by cabinet rivals could hurt Russia's ability to fund its nuclear deterrent. “Such a reduction of the VAT is an absolutely destructive decision,” he said. “Might [Russia] not use sovereign wealth, and especially giant state industries, to acquire political leverage?” Nitrogen fertiliser producer Acron is reportedly about to announce its intention to float on the London Stock Exchange. Food retailer X5 Retail Group has signed a $940 million deal to acquire Karusel hypermarket chain. Real estate empire AFI Development is looking to benefit from the credit crunch. First Deputy Prime Minister Igor Shuvalov says investment in transportation infrastructure for Moscow would require $212 billion, more than double the planned government spending for the project.

TODAY: Merkel says Germany is concerned over Abkhazia; Kremlin won’t budge on frozen conflicts; EU-Russia summit begins today; Khodorkovsky’s birthday to be marked by protests; anti-corruption plans submitted to Medvedev; Human Rights Watch focus on Ingushetia.

German Chancellor Angela Merkel says Germany shares Georgia's concerns about Russian actions in the breakaway region of Abkhazia. The EU’s External Relations Commissioner Benita Ferrero-Waldner says Russia should play a more constructive role in resolving Georgia's frozen conflicts “to ensure a stable environment for the 2014 Sochi Winter Olympics,” but the Kremlin says it won’t compromise. Dmitry Medvedev is departing for the EU-Russia summit today, to be held in Russia’s Khanty-Mansiysk region which contains 7.5% of the world's oil reserves.

Officials from the European Union are gathering over the next two days with their Russian counterparts in Khanty-Mansiysk, Siberia, holding a series of "framework discussions" to prepare for the beginning of negotiations on a partnership agreement on July 4th. Representatives were planning to run the gamut of issues, discussing everything from political cooperation and economic integration to more difficult issues, such as energy security and the Georgia issue.

However the goal of having a new EU-Russia Partnership in place by July 2009 is already looking unlikely, and the Europeans have no one to blame but themselves for the all the disorder within their own house following the failure of the Lisbon Treaty. This time we are talking about more than just veto grandstanding from Poland over banned meats, or Lithuania's small state diplomacy preventing successful negotiation. Instead we're looking at deeply fragmented Europe suffering a crisis of identity and purpose.

In the recent past, the Kremlin has feasted upon these divisions in Europe to advance their energy interests and leverage political influence among key states. But this time it might be Moscow who is hoping that the EU can get its act together and make progress on the accord.

Remember back when BP Chairman Peter Sutherland spoke with remarkable candor about the assault on TNK-BP? Back when he dismissed Alexei Miller's $250 oil prediction as an "apocalyptic" joke and then "insulted" the Russian government? It appears that when you are in the twilight of your chairmanship, you are allowed to say whatever you want - and it seems in recent weeks that Sutherland has grown tired of all the fawning compliments of Vladimir Putin and the Russian market he had uttered over the years. Now with the scheduled departure of Sutherland next March, the FT has a new job advertisement:

BP needs a chairman

Situation (still) vacant: Two or three days a week. Salary half a million quid a year. Must be willing to travel. Knighthood optional. Background in natural resources helpful. Experience of sticky situations in, say, Moscow a distinct advantage.

TNK-BP is all over the news once again today, but no story is more surprising (if not unbelievable) than a scoop picked up by the Wall Street Journal, which quotes representatives from AAR (Fridman, Vekselberg, and Blavatnik) accusing BP of conspiring along with the Russian government to force the sale of their stake. Stan Polovets, chief executive of the Alfa-Access-Renova consortium, said that BP would be "more comfortable having a state company as a partner."

That's an interesting theory... If BP was in cahoots with the siloviki to divest the poor billionaires of their property, it's odd that it was the British company, not AAR, which faced the extraordinary bureaucratic harassment, office raids, arrests, and visa denials. However, if AAR is telling the truth, then it would also make sense that the office raids against BP sought Gazprom-related documents, and how Igor Sechin has made himself a player in the dispute. This is getting really, really messy, and I'd hate to be the one to fill that job announcement...

Russia's best finance mind Alexei Kudrin is trying out a new argument in his opposition to slash value-added tax from 18% to 12%, notably pointing out that it could hurt the country's nuclear parity with the United States:

Kudrin said the cut in VAT, which accounts for about one- third of budget revenues, will require a reduction of expenditure, including on national defence and security, which currently stands at one third of budget spending.

"Russia is the only country in the world, which has a nuclear parity status with the U.S.," Kudrin told a tax conference. "The nuclear war cannot start as long as there is nuclear parity... Russia's mission is to carry this burden." (...)

Kudrin and his supporters argue the economy, currently growing at a rate of 8.4 percent, is overheated and may be heading for a hard landing as inflation is running at 15 percent. His opponents say Russia needs to cut taxes to achieve higher growth rates.

I think this is Russia's version of how Washington plays the terrorism card with regard to spending - however the smart money is on Kudrin being right on inflation.

Usually when we hear the term "Dirty War," we immediately think of dictatorial Argentina in the late 1970s and early 1980s, when the military junta dispatched its opponents with extreme prejudice, widespread fear and violence, and unimaginable cruelty (torture interrogations and dropping prisoners out of airplanes over the ocean were just a few methods). In short, it features among the very worst human rights cases in contemporary Latin American history.

Whether it is appropriate or not, Human Rights Watch has just produced a new report on the Russian government's policy in Ingushetia, which uses the term "dirty war" to describe the state's tactics in fighting the insurgency.

Russia's flag-planting stunt on the seabed of the Arctic Ocean appears to have only been the beginning. A rather shocking quote from Lt. Gen. Vladimir Shamanov, who oversees Russia's military training:

"After several countries contested Russia's rights for the resource-rich continental shelf in the Arctic, we have immediately started the revision of our combat training programs for military units that may be deployed in the Arctic in case of a potential conflict. (...) [modern] wars these days are won and lost well before they are launched."

So much for the UN Convention on the Law of the Sea - Russia appears to be going back to its earlier hostile tone on its territorial claim, which Sergei Lavrov had agreed to soften back in May. CanWest reports that Shamanov has announced that Russia will extend the "operational radius" of its northern submarine fleet, a move which has experts quite worried. Surprisingly, there is still a dispute over whether or not to take Russia's arctic games seriously. We would argue that yes, Moscow is not just working on symbolism here.

Two more videos after the cut.

The director for energy at UK Trade and Investment spoke about the potentially promising nature of energy cooperation with Russia, but avoided mentioning TNK-BP. Mikhail Fridman says TNK-BP's Russian co-owners will not sell out for at least two years and will put more pressure on BP to boost performance. Yulia Latynina says that the venture’s AAR shareholders “are getting the last laugh”. Dmitry Medvedev has commented on the TNK-BP row, saying, "I can only call illegal attempts to use the state to resolve internal corporate disputes. Neither the Russian partners nor the British partners should resort to such policies." Meanwhile AAR have again threatened legal action. Gazprom will consider inviting South Korean and Japanese partners to process gas in Russia’s Far East.

Leaders of the Russian Union of Industrialists and Entrepreneurs have complained about the Kremlin's lack of interest in establishing a real dialog with business. "Big private companies are only emerging, while the state-run firms, which enjoy 100 percent support from government bodies, don't play by the market rules," commented one. EU officials are said to be upset that Russia is barring chicken and pork imports from 70 European companies. Russia's federal anti-monopoly body has still not ruled out the possibility that charges of price collusion could be brought against Russia's major aviation fuel suppliers. Speaking at a meeting with VTB, Dmitry Medvedev said that, “in a period of global financial instability, we need to press ahead with the strategic objective of making the ruble one of the regional [reserve] currencies.” At a speech outlining Russia's 2009-2011 budget, Medvedev emphasized the need to cut inflation and reform pensions, healthcare and education without excessive budget spending.

TODAY: Medvedev interviewed by Reuters; Moscow court fines businessman over blog entry; Chavez thanks Putin; new report focuses on Russia’s “passion investments”.

In an interview with Reuters, reportedly his first with the Western media since taking power in May, President Dmitry Medvedev said that poverty and corruption are the biggest threats to security, and that Russia wants to reduce the state's role in the economy and curb government spending to combat rising inflation. Reuters has posted clips and excerpts from the interview.

The Other Russia is concerned that a Moscow court has “set a precedent” by finding a wealthy Russian businessman guilty of defamation in a blog entry and fining him roughly $1200. The Moscow Times writes on what to expect from next week’s EU-Russia summit, with the EU reportedly seeking a better relationship with the country under Medvedev. One UK journalist says the summit “presents a window of opportunity because, well, Putin won't be there.”

We used to seeing advocates of many different stripes mounting vigorous defenses of Gazprom's activities in Europe - even their partners in E.ON and EdF have joined in to bash the European Commission's unbundling proposal for its Gazprom clause. The pitch isn't hard to master: Gazprom, a "reliable" company which always meets its contract obligations, is the victim of unfair political discrimination in Europe, and is not allowed the reciprocity it deserves.

What I couldn't have predicted is that the next proponent of this victim narrative would be none other than Anatoly Chubais, the maverick liberal with uncanny political survival skills, most recently surviving a direct confrontation with Igor Sechin over the privatization of UES (not many can say that). Neil Buckley has a terrifically fascinating report on comments made by Chubais about Gazprom in tomorrow's FT, and I am left wondering who Anatoly owes a favor to... Never try to predict what this guy is going to do.

Nevertheless, the argument still has the same gigantic holes in it. Gazprom does not function like a normal company, reciprocity is a vastly misunderstood topic, and, as many officials at the European Commission have pointed out, Gazprom should consider itself lucky to be given the same treatment as a respected global titan like Microsoft. Unlike in Russia, regulatory activities in Europe aren't just instruments of intimidation.

Russian hits at EU fear of Gazprom

By Neil Buckley in Moscow

One of Russia’s leading liberal reformers has accused the European Union of trying to limit access to its natural gas market for Gazprom for political reasons, motivated by misguided fears about the Russian gas giant.

There's a very interesting op/ed in the Wall Street Journal today entitled "Genghis Putin" by Michael Auslin of AEI, focusing on the raft of business deals the Russian government is stapling down in Mongolia. Auslin's concern is that a stronger presence from Russia could do much to undermine the country's scrappy and stable democratic system.

Auslin argues "If the next American president ignores Moscow's inroads, democratic development in Asia will come under threat and the United States may soon be faced with a strategic challenge in one of the world's most resource-rich regions. (...) If Russia succeeds in blackmailing Mongolia into economic subservience, then it can try to extend this tactic to other Central Asian nations."

Strong stuff. Check it out after the cut.

The international human rights NGO Freedom House makes no attempt to hide the fact that about 80% of the funding comes from the U.S. government (as stated in each of their annual reports), something that causes many foreign governments to recoil in disgust and react with vituperative rants to any critical report the group may produce. Some say that this association with Washington affects their research choices, but does that necessarily mean that what they publish isn't true? Out there in the irascible blogosphere on Russia, Freedom House is most frequently a protagonist in the double standards narrative of human rights apologists.

Having met many senior officers and researchers from Freedom House, I have always held their professionalism and fairness in high regard, and thoroughly believe that they publish very good work and are not as tied to the presidential administration as you might suspect. Yet when I read over the country report on Russia in their latest Nations in Transition 2008 report (written by Robert W. Orttung of the Jefferson Institute), I must admit that I found parts of it spotty with unfair or unbalanced opinion.

Konstantin Sonin, who also has written some great material on resource nationalism, has a column in the Moscow Ti