July 2008 Archives

La Russophobe emailed us suggesting we take a look at this article from Newizv.ru, which provides an interesting look into a proposal to build designated housing for foreign laborers, and the wider mistreatment and ghettoization of migrant workers. Below is an exclusive translation.

Ghetto for guest workers

The capitoline powers want to solve the housing problems of migrants with methods that are far from humanism

NIKOLAI KIREYEV

It is entirely possible that there will soon appear in Moscow temporary villages for labor migrants from the CIS countries and the far abroad. They will be designated in first order for housing-and-public-utilities workers. Such a proposal was advanced yesterday by the prefect of the South-Eastern Municipal District, Vladimir Zotov. They are planning to erect dormitories for arrival workers in the districts of Lefortovo, Maryino and Vykhino. If the prefect’s idea receives the support of the capitoline powers, construction will begin as early as next autumn. In the meantime, independent experts have met the bureaucrats’ initiative with bayonets. In their opinion, it could create the soil for inter-nationality conflicts.

Igor Yurgens, head of the Insitute of Contemporary Development and former Vice President of Renaissance Capital, has “lashed out” at Prime Minister Vladimir Putin for his public criticism of steel and coal group Mechel, signaling “a divide between the Putin and Medvedev camps”.

In an article in today’s FT, Yurgens, an adviser to President Dmitry Medvedev, is quoted in today’s FT as saying,

“It is not correct to destroy your own stock market ... and wipe off $60bn. It’s just not the right thing.”

Robert Amsterdam is quoted in today’s Telegraph in a piece on the situation now facing foreign investors in Russia. Vladimir Putin’s comments on Mechel have alerted investors, the article says, to the “Yukos risk” and its “mockery of justice”.

Robert Amsterdam, Mr Khodorkovsky's lawyer, said there is probably an ulterior motive behind the latest wave of probes. "We have reached a point in Russia where nothing can be treated as a one-off affair. There is a systemic raiding-mechanism directed by the top," he said.

"These types of attacks are usually combined with 'short-trading' by people inside the government, or they are a hard-ball tactic for extracting contracts. More broadly, I think foreign investors need to ask themselves whether they can trust the audited books of any company in Russia. It is impossible to conduct an independent audit," he said.

Read the full article here.

A Russian Lukoil executive detained in Libya has been freed “hours before Russian Prime Minister Vladimir Putin was due to host the country's prime minister.” It is thought that the two will discuss Russia’s hopes of joining a planned pipeline that will deliver Libyan gas to Europe. TNK-BP is to review its capital spending plans, with CEO Robert Dudley to work on the review from a secret location. A spending review is apparently “one of the points of contention” in the shareholders’ dispute, and The Times sees a potential review as “signalling a willingness to negotiate”. The Kremlin Labour Inspectorate has reportedly launched a second court case alleging violations of staffing laws at TNK-BP. Oil trader Gunvor has borrowed $370 million in its debut syndicated loan to fund "bold" expansion plans. The Kremlin’s extension of its antitrust probe to Evraz Group and Raspadskaya is, according to one analyst, “aimed at increasing control over the sector, as well as raising more taxes to fill in the gap left by recent tax cuts to the oil industry.” Russia’s South Stream gas pipeline, to be routed through Bulgaria, Serbia, Hungary and Greece, has been given an estimated cost of $20 billion. Kamchatka Gold, controlled by billionaire Viktor Vekselberg, plans to invest up to $270 million to increase output sixfold. A new study by Shell suggests that speculation is not a key factor in oil price volatility.

Today's UK Telegraph says that Prime Minister Vladimir Putin’s comments about Mechel have made foreign investors “extremely wary of the Russian stock market.” Russian machine builders are calling for state intervention to help them access the technology of foreign majors. Russia’s Home Mortgage Lending Agency’s potential plans to offer less to those buying mortgages financed at below 12% “would hurt the market and banks but bring interest rates on home loans in line with the international market”. “Conditions for Russian investment in the EU are far from perfect,” says one Russian journalist. “Some EU "open" tenders have turned out to be closed to Russian companies.” Inflation has finally slowed, with the economy going a full week without any consumer price growth. Norilsk Nickel shares jumped amid speculation that the company would enter merger talks with billionaire Oleg Deripaska's United Company RusAl, despite reports to the contrary.

TODAY: Mechel message could be a signal on the outcome of Khodorkovsky’s case; troops to be withdrawn from Abkhazia; Russian deputy in Cuba; Merkel to make mystery Russian visit next month; WTO membership would have a “substantial” impact on economic troubles; man given community service for online comments.

A Moscow Times reporter warns that “the court will have to carefully consider the importance of Prime Minister Vladimir Putin's [Mechel] message when it decides the Khodorkovsky case next month”, and that his comments were “a signal that this is not the time to be soft on corruption from big business.”

Russia is removing the last of the soldiers it sent to Abkhazia as part of what it claims was a “humanitarian” effort to repair a railroad. The withdrawal “ends a deployment that had angered Georgia and its Western allies.” Deputy Prime Minister Igor Sechin is in Cuba this week to discuss the growth of bilateral trade and investment with his Cuban counterpart. German Chancellor Angela Merkel will make her second trip to meet with President Dmitry Medvedev next month, although potential discussion topics have not been confirmed. US Defense Secretary Robert Gates has recommended that the US partner with China and Russia “in order to blunt their rise as potential adversaries”.

Standoff in Sochi has begun

Grigory Pasko, journalist

Last year, when I spoke with inhabitants of the Imereti Valley (the one that’s in Sochi) about their imminent eviction from their homes [because of the 2014 Winter Olympics—Trans.], many said to me that this would not happen. “Why are you so confident?”, I asked them. “Because”, the people answered, “Putin promised us.”

It is true, Putin sure does know how to promise. Like the wise men of old used to say: if you can’t do it, then at least promise. Putin can’t do. And that’s why he promises. First he promises, and then he doesn’t keep his promises. Then people get forcibly whisked away from their homes and locked up in jail. That’s democracy, Putin-style.

Sochi prepares for the Olympiad (photo by Grigory Pasko)

From the Wall Street Journal:

A senior Russian diplomat warned that Sen. John McCain's pledge to eject Russia from the Group of Eight leading nations could eventually lead to a breakdown in relations between Russia and the U.S.

Mafias and pop culture were made each other, at least judging by the international popularity of the Godfather, Sopranos, and countless other locally interpreted spin-offs of the organized crime genre - which often bleeds over into an appreciation if not sympathy for these activities among the public (just look at the Gotti reality show). Russia's mafia groups certainly have their popular appeal as well, as a very interesting New York Times article details the recent media obsession Vory v Zakone, a "mafia-like caste forged in the Soviet gulag," which recently suffered a highly public series of arrests that appear to have been staged for the media (suspects were nearly all later released). This is the same gang portrayed in last year's popular film Eastern Promises (photo). Very interesting reading.

Though the Vory’s influence appears to have waned, Russians have long had an affinity for the group, perhaps because it has come to symbolize opposition to the country’s often arbitrary political and legal practices, academics and other experts say.

After the Soviet Union collapsed, the Vory v Zakone “hit platinum,” said Andrei D. Konstantinov, a journalist and novelist who has written about criminal subcultures. “Everyone started to sing about this topic, to talk about it, to make television series, write books,” he said. “It became fashionable.” (...)

In modern Russia the Vory have a certain allure, in part because of their association with prison life.

“Very many people have passed through prison, even those who have had no special connection to the criminal world,” Mr. Konstantinov, the journalist, said. “This is a theme that has been very relevant for many families.”

This intimacy with imprisonment has spawned a pop culture particular to Russia, in which the Vory and other criminal elements have taken center stage.

Back at the height of the Cold War, the United States and Russia would vigorously compete to achieve the next greatest milestone in scientific achievement and exploratory bravado - best illustrated of course by the race to put a man in space. Lest you think these competitive ambitions for new conquests have died down since the fall of the Berlin wall, think again. As we learned from the pseudo-fictional submarine dive to the floor of the Arctic Ocean to plant a Russian flag, Russia is still very interested in proving that they can be the first to arrive to a difficult objective. Regardless of what you may think about the Arctic claim politically, most agree that it was an impressive feat of engineering, headed up by the photogenic veteran, explorer, expedition leader, and nationalist duma member Artur Chilingarov.

Chilingarov was back in the news this week, with yet another ambitious and bold expedition, this time not to plant a flag but to set a world record for the deepest freshwater dive aboard a mini-submarine. However, things did not go according to plan, and the submarines had to turn back before reaching their goal of 1,680 meters. That didn't stop the crew, however, from claiming to the media that a new record had been set, causing awkward embarrassment when Chilingarov had to retract the statements. The Guardian is carrying the best coverage:

But Russian experts said there was little possibility the scientists would find new or exotic life on the bottom of the lake, preferring instead to hail the dive as the latest example of Russia's resurgence.

Prime Minister Vladimir Putin has visited Elemash, a nuclear energy plant, to look at the production of nuclear fuel and “was interested to know why the plant had to resort to foreign help”. Russia's labour agency has asked a court to hear a case on labour violations against TNK-BP’s senior management. “Where next for TNK-BP?” BP chief Tony Hayward opened the company’s board meeting yesterday, saying “There'll be a present for the first journalist to ask a question that isn't about Russia.” He then went on to warn foreign investors in Russia to “tread with caution”. Robert Amsterdam is quoted on a Wall Street Journal blog on the Mechel affair. “The fact that [Mr. Putin] spoke a second time knowing the damage it would cause represents a matter of grave concern to all investors.” The Federal Anti-Monopoly Service says it will investigate coal miner Raspadskaya and a unit of Evraz Group over high domestic coking coal prices, along with Mechel. First Deputy Prime Minister Igor Shuvalov has tried to make assurances that Mechel will not suffer the same fate as Yukos. A Gazprom delegation has paid a working visit to Turkmenistan.

Seeking to limit the damages made by Prime Minister Putin’s comments on Mechel, President Dmitry Medvedev has expressed confidence in the prospects of the country’s stock market, drawing attention to openness and transparency. Analysts and tax experts argue that Mechel’s alleged practice of illegal transfer pricing is stuck in a legal gray zone due to Russia’s inadequate legislation. Insurance company Ingosstrakh collected $987 million in premiums in the first half of 2008. Vladimir Potanin has offered Vladimir Strzhalkovsky, an old ally of Putin, the post of CEO at Norilsk Nickel.

TODAY: Medvedev meets Olympic team; transparency report says Russia must fight political corruption; Lake Baikal dive “an advertisement”; nuclear rhetoric is “insanity”; Ukraine wants independent church; Russia’s criminal elite.

Russia’s Olympic team attended a Kremlin cathedral service this week and met with President Dmitry Medvedev “for a pep talk”. A new report by the Russian branch of Transparency International says that Russia’s fight against corruption won’t be successful unless the authorities take effective action against political corruption. Russia’s rhetorical position, implying a willingness “to start a nuclear war if its point of view is not accepted”, is viewed by one Russian journalist as “insanity”. A Russian Foreign Ministry official has shrugged off recent criticism from US Senator John McCain. “Let him first become the US president, and then we will listen attentively to him,” he said. Viktor Yushchenko is seeking to separate the orthodox churches of Ukraine and Moscow.

If you were worried about what Mechel means for Russian business, this was the last piece of news you wanted to hear: government officials are working hard to soothe fears of the company's collapse, and promising that Mechel will not suffer the same fate as Yukos. Presidential aide Arkady Dvorkovich has said "We consider it a positive signal that the company has all these weeks been co-operating with the anti-monopoly services," and that the Federal Anti-Monopoly Service will conduct its probe with the full compliance of the law.

With trading drying up faster than desert rain, it seems that the "Bad News Bears" isn't just a awful American movie anymore.

A denial of an attack from the state is in my opinion the worst news you could hear, meaning that Mechel's fate is sealed. For years I have been called crazy (and a variety of other colorful titles) for arguing that the methodological treatment given to Yukos and Mikhail Khodorkovsky by judicial and regulatory authorities had created a well-oiled mechanism for the exercise of arbitrary power in the business sector, one that would soon claim many new victims. With regard to the aggressive comments against Mechel, one editorial has pointed out "Fair or not, Yukos will always be the first name on everyone's lips."

Per the Yukos experience, we on the defense team came to regard the assurances from the state as veiled threats of opposite intentions. If you consult our White Paper on the case, we provide a long list of the instances in which government officials promised that nothing would happen to Yukos (see the PDF for the footnoted citations):

[Editor's note: Andrei Novikov is a Russian journalist, who at one point was subjected to involuntary psychiatric confinement after publishing articles critical of local government. His case first rose to international attention on this blog and was supported by Reporters without Borders. From time to time, he contributes opinion essays to us, such as the following, which takes a look at the interesting case of a doomsday cult led by Pyotr Kuznetsov, which has been featured heavily in recent Russian news.]

THE END OF JUDGES AND THE DAY OF PYOTR KUZNETSOV

Andrei Novikov, journalist

In Russia right now there is the interesting trial of Pyotr Kuznetsov, an ascetic from Penza who has declared the world to be ending.

I don’t know if he’s mentally ill or not.

There is a lot of interesting discussion regarding the motives and intentions behind the recent arrest of Serbian war criminal Radovan Karadzic, but perhaps one of the most unusual explanations comes from Andre Gerolymatos, who argues that there might be a business play factoring in to get the Russians to pay more for NIS (see more info here). If we observe the moves of countries like Hungary and Turkmenistan, there is a careful balancing act to play between Russia and the West in order to extract maximum concessions (and higher energy prices) from Moscow. Gazprom is all too willing to pay, and the European Union continues to remain rather clueless ... despite this, Serbia may fall into their lap.

However, recent events in Serbia have created new opportunities for the U.S. and the EU to check Moscow's energy chokehold over Europe. Earlier this month, the Serbs formed a new government that is less concerned about protecting indicted war criminals and more committed to bringing Serbia in the EU. President Boris Tadic understood that to end Serbia's isolation, it was essential to arrest Mr. Karadzic. Concurrently, Mr. Tadic could avoid selling Serbia's petroleum industry at bargain-basement prices to the Russians.

Mr. Tadic is gambling that quick admission to the EU will breathe new life into Serbia's economy and alter the extreme nationalist paradigm that led the country to chaos in the 1990s. Mr. Tadic's gesture has been hailed from Brussels to Washington as a positive move, and this good will towards Serbia will increase once the new regime hands over General Ratko Mladic, the second most wanted man in the country.

The arrest of Mr. Karadzic is the result of geopolitical considerations - the Serbs want to join the West and the West now needs Serbia. In an ironic twist of events, oil and pipelines have lubricated the wheels of justice.

The gloves are off in Russia over the TNK-BP dispute, as CEO Tony Hayward is showing himself increasingly willing to speak clearly about the dodgy investment environment, perhaps with the goal of scaring off some FDI and reminding the Kremlin that they can persuade others not to invest in Russia.

This is a pretty ineffectual strategy: if you wanted to crash the Russian stock market, somebody already beat you to it.

During his speech in Berlin, the presumptive Democratic nominee for President Sen. Barrack Obama bowled over the swooning audiences with non-specific idealism and general statements of a renewed liberal internationalism - an exposition which his supporters declared as a major victory and his opponents shot down as avoiding the hard political realities that so many other American politicians spoke about at the Brandenburg Gate. One British paper carried the headline "He came, he saw, he sprinkled us with stardust."

Some observers are especially critical of Obama's apparent rejection of John McCain's calls to oust Russia from the G8, which is really about the only thing he has said about relations with Moscow. Who do you think would write the following?

The U.S. does not cede leverage with authoritarian governments when it confronts them about their crimes. Instead, the U.S. increases its credibility and influence with foes and friends alike. Placating regimes like those in Russia and China today only entrenches hostile, antidemocratic forces. (...)

Today, instead of communists there are deal-making capitalists and nationalists running the Kremlin and China's National People's Congress. They, and blowhards like Hugo Chávez, hardly represent the existential threats faced by Truman, Kennedy and Reagan. Yet Mr. Obama still is reticent to confront them, saying in Berlin that "we must reject the Cold War mindset of the past and resolve to work with Russia when we can, to stand up for our values when we must." But the Cold War ended and democracy became the global standard not because Western leaders merely defended their values, but because they projected them aggressively.

Well, none other than Garry Kasparov of course. I thought it would be most interesting to pull out the quote for consideration before disclosing the author, who suffers from a certain exhaustion from many Russia observers - a predisposition from many to not consider the merits of the argument.

Read Yulia Latynina on the Mechel affair: “It sticks out like a sore thumb that this is already Premier Putin’s second attempt at direct interference in the economy.” Putin yesterday accused Mechel of evading taxes by selling products at bargain prices through offshore companies. The situation “won't do anything to change investors' perceptions that the big names in government can do as they please with private companies that fall out of favor.” TNK-BP’s Russian shareholders are warning that Robert Dudley’s exiting Russia to try and run the venture from abroad could have serious tax implications, and are apparently demanding to know his whereabouts. BP has reported an almost 30% rise in second-quarter profits, boosted by TNK-BP’s “strong performance”. Militants in the Niger Delta attacked two major crude oil pipelines belonging to Royal Dutch Shell. Gazprom reportedly offered interest-free loans to Turkmenistan in an effort to keep the price of gas from the Central Asian country below European levels. OPEC has warned that oil could rise to $500 a barrel, but that it should be trading at a price of $70-80.

Prime Minister Vladimir Putin has publicly given support to a plan to spend $2.7 billion through 2015 to boost the chemical industry. Putin’s attack on Mechel has sent the Russian stock market to its lowest level since 2006. Hermitage Capital says that a senior director with Russia's Renaissance Capital bank has connections with individuals implicated in an alleged $230m fraud against the Russian state. Developer FinansStroiInvest is accused of carrying out raider attacks to force residents off of their properties. A Jordanian-Russian joint venture will reportedly manufacture portable Russian grenade launchers that can penetrate tank armor. Chinese honey is allegedly being shipped through Russia to disguise its origin and help it avoid US tariffs. Fertiliser company Acron has postponed its plan to list in London due to market conditions.

TODAY: Russia wants to swap NATO for EATO? Kasparov on Russia and Obama; military desertions drop; scientists attempt to reach bottom of Lake Baikal.

Russia wants to form a new bloc, currently being referred to as “EATO" – Euro-Atlantic Treaty Organization – which would replace NATO, “the main irritant in Russia's relations with the West today.” Russia’s NATO ambassador denies that the country has any intention of undermining the military alliance. “Our ideas are profoundly misunderstood.” Garry Kasparov writes in today’s Wall Street Journal, urging Barack Obama to take a stronger line on Russia, saying “Zimbabwe's Robert Mugabe and Russia's Dmitri Medvedev both came to power in blatantly fraudulent elections. The hypocrisy of condemning one while embracing the other destroys American and European credibility”.

The photo to the left shows Vladimir Putin, along with Viktor Khristenko and Governor Valery Shantsev, arriving last Thursday to Nizhny Novgorod to meet with the country's top metals producers (source: AP). A few hours later Putin would surprise everyone by singling out the steel and coal giant Mechel (not a common practice), and using unusually harsh language to attack their pricing policies, causing losses of more than $6 billion to the company and crashing the RTS at a particularly inopportune moment.

Since Putin's attack, Mechel has apparently put into place the standard operating procedure for nearly any company about to face obliteration by the Kremlin: agree with everything the state says, and reiterate your willingness to carry out whatever instructions the government may have at the expense of your shareholders (it worked so well for BP, didn't it?). Case in point, unimpressed with Mechel's statements that they would cooperate with the government, Putin shaved another 25% off in Mechel's value today by accusing them of tax evasion. Naturally, analysts are already using the Y-word to describe these events.

But what is behind this sudden attack against Mechel and its billionaire owner, Igor Zyuzin, who up until last week was known to maintain fairly positive if not close relations with the government? I put in a call to a trusted colleague of mine, who has a long history of working closely with the Kremlin to get some insider insight. What follows are some of his thoughts on the matter, outlined in four key questions we should be exploring to understand the possible motives behind the Mechel fiasco.

For quite some time we have carefully followed lawyer Boris Kuznetsov's clash with Russia's FSB as an emblematic case of the Kremlin's war on lawyers and the independence of the judiciary. Since being granted political asylum in the United States, Kuznetsov continues to fight his case and point to the damaging impact on the justice system of having lawyers and judges afraid for their jobs in sensitive cases.

There is a very interesting new article about this in U.S. News and World Report by Alistair Gee, which also makes mention of my experience and that of other Yukos lawyers. A few extracts follow after the jump.

Remarks on Russian reality

Grigory Pasko, journalist

1. Fools and roads

130 kilometers outside Moscow in Vladimir Oblast is the little village of Ileykino. From Ileykino to the nearest population center with shops, a hospital and school – is 8 kilometers. But neither hospitals nor schools, from all appearances, really interest the inhabitants of the village. They’re accustomed to treating what ails them with folk remedies. And there’s nobody to go to school – children only appear during the summer holidays, coming to visit the old folks from the cities where their parents live and work. A grocery-store-on-wheels truck comes by once a week: for the old people living out their days in Ileykino, that is enough.

True, there is one unpleasantness: the electricity is often turned off. But without it is difficult. Because the village doesn’t have gas (the kindness of Gazprom still hasn’t reached such faraway places – a whole 130 km from Moscow!), and there’s nothing to burn in the stoves.

As soon as the wind even starts to blow or the rain to fall, immediately – as if though by someone’s malicious command – the electricity in the village goes out. What haven’t the inhabitants done: they’ve written letters, made phone calls, travelled to the rayon center to the management to demand, tried to themselves collect (and did collect!) the money to restore the electric transmission lines… All senselessly. The power is cut off regularly, from year to year.

Steve LeVine has a good blog post up about TNK-BP, and how this business dispute will probably become the subject of academic study some day as a symbol of how the energy sector is changing. He quotes several analysts who recommend that BP should just cut its losses and get out of Russia completely, which would case the Street to beat down their share price dramatically, which could lead to an eventual acquisition or merger with a company like ExxonMobil. Or perhaps there are some new players who could buy BP...

Yet why are the Big Oil companies the only perceived merger partners? As Big Oil seeks access to China and the Middle East, wouldn't their national companies and sovereign wealth funds seek equal treatment?

Wow. Not even T. Boone Pickens had envisioned this when he declared "the biggest transfer of wealth in history."

Ariel Cohen and Ray Walser have a new article arguing that the Russian-Venezuelan energy alliance is a throwback to the Cold War era Cuban-Soviet relations, and that these leaders are "well-positioned to plan substantial international mischief."

Mimicking the Russians, Caracas relishes using oil for geopolitical leverage and influence. In recent months, Chávez has bolstered oil subsidies and a financing facility known as Petrocaribe. Using the oil bonanza, Chávez has pledged assistance that eclipses U.S. aid in the Western Hemisphere. Even democratic Costa Rica cannot resist the seduction of relief at the pump.

At the working level, Russia's energy giant Gazprom and Venezuela' national petroleum company, PDVSA, are cementing an energy partnership in South America. As the chief of PDVSA recently reported, "We want to make [PDVSA] like Gazprom, but with a social role." Chávez seeks to deepen cooperation with the Kremlin and its state-run enterprises. He has invited Russian firms to exploit the Orinoco River basin—potentially the world's largest oil deposit, holding 1.2 trillion barrels of extra-heavy crude. Gazprom is also involved in a proposed Venezuelan initiative to construct an 8,000-kilometer trans–South American gas pipeline that will link Venezuela's oil and gas fields to Argentina via Brazil, with potential spurs going to Bolivia, Paraguay, Uruguay and Argentina. According to Chávez, these Russian state-run firms are part of the vanguard of the Bolivarian revolution.

Some comments made by Sen. John McCain this weekend about his calls to eject Russia from the G8 has been making some news.

Andrew Langley at the Wall Street Journal talks with a lot of very pessimistic analysts following the market fiasco in Russia last week:

Although many observers in Moscow expect that situation to ease as Mechel acts on Mr. Putin's remarks and amid a consensus among analysts that a state-run energy company will buy the Russians out of TNK-BP, the already-flimsy confidence in Russia's market was shaken.

Indeed, investors are re-evaluating the risk premium they assign to Russia. "Applying the Yukos-era equity risk premium would lower our fair value For Russian stocks by around 25%," Renaissance Capital said.

"The current market P/E of 8.7 may no longer offer a sufficient discount," warned UniCredit, referring to the overall price-to-earnings ratio. P/E ratios are used as a valuation metric; by contrast, the Standard & Poor's 500-stock index in the U.S. has historically traded at a P/E in the mid- to upper-teens.

“TNK-BP's messy shareholder dispute has helped push Russia's indexes into a downward spin.” In what appears to be a change in tactics, prosecutors in Moscow have denied issuing legal proceedings against the venture’s chief, Robert Dudley, who has reportedly set up a secret European headquarters “to try to keep control of the company”. TNK-BP’s Russian shareholders claim to have seized majority control of the board. The UK’s Foreign Office believes the Russian shareholders “manipulated elements of the Russian state bureaucracy”. The Washington Post believes “the government intends to force BP to turn over control of the oil company and its reserves to a state-owned firm.” Yuri Fedotov, Russia’s ambassador in London, denies government involvement in the row. The head of BP insists that the company “will not be intimidated”. The Telegraph says that Dudley’s exit from Russia is a “tipping point” for foreign investors. Immigration authorities have agreed to grant a visa to TNK-BP Chief Operating Officer Tim Summers. “The four oligarchs who control AAR, BP's Russian joint venture partner, are deeply plugged in to some of the West's most prestigious corporations and institutions.”

China and Russia will strengthen a strategic partnership by expanding their cooperation in projects including oil trade and nuclear power. More than half of the coal mines in the Kuzbass region have been temporarily closed for safety violations. Lukoil has acquired Turkish firm Akpet, which accounts for about 5% of Turkey's oil retail market. Most of the big energy resource finds in the Arctic appear to be in areas already under territorial claim.

Russian authorities may apply an American racketeering law in a Moscow court in their attempt to recover billions of dollars in damages from the Bank of New York Mellon. A decision on the case is to be made today. Mechel, the company accused by Prime Minister Vladimir Putin of price-fixing, says it is ready to cooperate with the government. “Investors confidence was shaken if not shattered.” German auto giant Daimler is in talks to buy a 42% stake in truck maker KamAZ in a potential deal valued at $1.7 billion. Russian automotive group Gaz hopes to create a $1 billion joint venture with General Motors but is also looking at Daimler as a partner. Russia’s Federal Road Agency is concerned that a bridge intended to demonstrate the country's economic revival to a 2012 summit will not be built in time. The Guardian is running a case study of a successful foreign business operating in Russia. Alisher Usmanov’s Gallagher Holdings will buy a 27% stake in Strike Resources, an Australian company seeking to develop a $2.3 billion iron ore mine in Peru. Billionaire Nikolai Tsvetkov plans to build a $300 million film and television studio outside Moscow. Roman Abramovich has increased his stake in Russia-focused miner Highland Gold.

TODAY: Russia trying to weaken NATO; the Cuban Missile Crisis of 2008; Russia puts military-purpose satellite into orbit, plans to strengthen navy; Foreign Ministry says Bush comments insulted veterans; Russia to remake Britain’s The Office.

Russia has put together a set of proposals, which “clearly have no chance of being accepted by the United States”, that would weaken NATO and the OSCE and establish a broader security pact. Russia’s response to US plans for missile defense systems in Poland and the Czech Republic is being called the new Cuban missile crisis. Russia will revive its navy by building several aircraft carriers and improving its fleet of nuclear submarines. Russian space rocket Soyuz-2 has put a “military purpose” satellite into orbit.

Russia’s Foreign Ministry has responded to US President George Bush’s comments equating the evils of Soviet communism with Nazi fascism, saying that they were an insult to veterans of World War Two and would “feed the efforts of those, who for political and selfish ends are striving to falsify the facts and rewrite history”. US presidential candidate John McCain, meanwhile, says that prime minister Vladimir Putin is taking Russia down a “harmful”, autocratic path.

Back when the Czech Republic went forward and signed agreements with the United States for the installation of anti-ballistic missile shield sites, the Russians were justifiably furious that their protests, concerns, and counter-proposals were summarily ignored. Seething, the Kremlin promised a "concrete" military response, but it was unclear exactly what that would be. Then, a few weeks later Izvestia runs a curious report citing anonymous sources that the government was thinking of deploying nuclear bombers to bases on Cuba, causing a panicky debate among the Trans-Atlantic security camp.

The Kremlin later denied this report with particularly strong language (angrily calling it a media hoax), and today Alex Rodriguez of the Chicago Tribune has an interesting dispatch which speculates that "The stories may simply be an awkward attempt at sending shock waves through Washington by using claims that would evoke memories of the 1962 Cuban missile crisis, which brought Washington and Moscow to the brink of nuclear war."

Over here on the blog we barely paid attention to the news as it seemed like a clear manipulation of public opinion and ridiculous fear mongering. However, the astonishingly daft Murdoch-owned media really helped out whoever planned the hoax by blowing up the issue; or as my friend would say, they really made a meal out of it. Somehow I doubt they gave the same sensationalistic coverage to the denial of the report.

A Wall Street Journal editorial from Saturday argues that the departure of TNK-BP's CEO Robert Dudley reflects poorly upon Russia as a reliable business environment. Duh. Although filled with mostly tedious foregone conclusions, there is one killer line.

Mr. Putin coined the phrase, "dictatorship of the law," and in the early days many investors endorsed his authoritarian policies as a path to stability. It turns out that something other than mere "stability" is emerging in Russia.

Local tax authorities and health inspectors are a power unto themselves, extorting large businesses (as in BP's case, directed from above) or free-lancing on their own against the medium and small. Their victims are mostly Russians, who won't be able as easily to conclude their property isn't safe and pack up and take their businesses, and jobs, elsewhere. No matter how much money there is to be made in Russia these days, it ultimately doesn't count for much the day a boyar or simple chinovnik decides to take it away.

Robert Amsterdam is quoted in today's Guardian coverage of TNK-BP:

Bob Amsterdam, a lawyer who specialises in Russia, says the dispute is a 'very regressive step' for Russia. 'I don't know how many conferences on corporate governance have to be held in Russia before people realise this idea of a rule of law is a myth.'

Browne knew, of course, that going into Russia was far from risk-free. For oil companies operating in such places as the Middle East and Africa, risk is an occupational hazard. And, in many ways, the deal has been a huge success: in 2004, the year after the venture was formed, TNK-BP generated income of almost $5bn, going a long way to paying off BP's original outlay.

Amsterdam claims that BP has also profited from other instances of 'corporate raiding', so cannot claim to be blameless. In 2006, it took a $1bn stake in Russian oil firm Rosneft after it inherited the lucrative assets of Yukos, which was destroyed by a state-orchestrated tax evasion campaign.

Neither side looks ready to back down or talk about compromise. Both insist that the day-to-day operations of TNK-BP are not affected but if the dispute goes on much longer, this is unlikely to remain the case.

The legacy of the Kremlin's systematic dismemberment of the Yukos oil company via selective legalism, regulatory harassment, and farcical judicial proceedings just doesn't seem to be fading away into that dark void of Russian memory. Instead, we are seeing the Y-word pop up again and again, from Royal Dutch Shell to Russneft to TNK-BP. The latest victim of a $5 billion tongue lashing from Vladimir Putin is the coal and steel giant Mechel, and as Vidya Ram of Forbes points out, there are serious fears that this company could suffer a similar fate as Mikhail Khodorkovsky's once illustrious business group.

Still, there was something about Putin's remarks that suggested Mechel's troubles amounted to far more than an antitrust investigation.

"The really striking thing was Putin's language, and the use of crude sarcasm, from which one can glean that there is more to the story," said Philip Hanson, an associate fellow at the foreign affairs think tank Chatham House.

Zyuzin had been invited to a meeting of metal producers in Nizhny Novgorod on Thursday, but had not turned up, claiming to be sick. At the meeting, Putin urged Zyuzin to, "get better soon... otherwise, we will have to send him a doctor to get rid of these problems."

"The heavy language is reminiscent of the kind of crude treatment of a business, that launched the Yukos case," said Hanson.

For several years now I have argued that Gazprom enjoys the support of extremely powerful lobbyists in European capitals - the local national energy champions themselves. In exchange for minority stakes in energy production projects, the Russian government often also asks that these companies, such as BP, Eni, Enel, E.ON, and Total, serve as advocates for Russian interests in relations with their home governments. Not a bad strategy, no?

Well it seems that I am no longer the lone voice out there bringing up this uncomfortably perilous development. The IHT is running an article today entitled: "Gazprom works to let business partners be its European lobbyists." Although the article focuses on Gazprom's reliance on these companies to fend off the European Commission, sources I speak with also mention that the same lobbyists pressure their governments to soften their criticism of Russia's human rights and democratic shortcomings.

Yesterday we reported on the return of former Deputy Finance Minister Sergei Storchak, whose unlawful pre-trial imprisonment on fraud charges is a focal point of the Kremlin clan wars between the liberal St. Petersburg economists and the hard-line siloviki.

Today we offer an exclusive English translation of the letter published by Gazeta from Storchak, defending his innocence and pleading for his release.

"The charges themselves serve as evidence of the crime"

Sergey Storchak has written a letter to a “Gazeta” correspondent

For eight months deputy minister of finance of Russia Sergey Storchak, charged with attempting to steal $43.3 mln from the budget, is found in detention. At first – in the “Lefortovo” isolator. Now – in “Matrosskaya Tishina”. It is from there that he wrote a letter to “Gazeta” special correspondent Maria Rogacheva, on the 10 pages of which he attempted to analyze the causes and effects of his criminal case, as well as telling about how he spends time in confinement and what he plans to be doing after release.

Storchak writes that until now, he has not found an answer to the most main question for him: who is standing behind the criminal prosecution?

Baltic states such as Latvia have been very busy reading the tea leaves from Dmitry Medvedev's presentation of the Russian Federation's new foreign policy concept paper.

I came across this interesting translation which illustrates some of the Baltic concerns over new and old priorities for Moscow in its near abroad:

The document says that Russia is "tended towards cooperation" with the Baltic States, but the issue of Russian speaking residents of Latvia "continues to be of fundamental importance." This is nothing new, unless we compare this formulation to the strategy which Russia's government approved in 2000. It stated that "respect for Russia's interests, including the fundamental issue of the rights of Russian speaking residents" was "a mandatory prerequisite" for improving relations. This is a notable difference, particularly given developments over the last few years. The situation of Russian speaking residents in Latvia has not changed substantially since 2000, but the political relationship between Russia and Latvia has improved. A border treaty has been concluded, other agreements are being prepared, the tone of the discussion has changed, and so on. The conclusion here is that the "clause on the rights of Russian speakers" does not mean that in Moscow's eyes, the current situation is an obstacle against the ongoing normalization of the relationship. Rather it is probably a signal for the Baltic States - if Latvia, Lithuania and Estonia were to take steps in other areas which are "unfriendly" for Russia, then the concern for the situation of Russian speaking people in our neighbouring country may suddenly increase once again.

Bureaucrats Behind Bars, or “Dictatorship of the law” – Putin-style

Grigory Pasko, journalist

On one of my business trips to Baikal last year, I made the acquaintance of the mayor of Listvyanka, Tatiana Kazakova. About Kazakova I had been told by an activist –an ecologist who had been an opponent of Kazakova’s plans to build in Listvyanka dozens of hotels, a business center and other facilities. In the opinion of the ecologist, this would cause very much harm to Lake Baikal, which is found but a short step from Listvyanka, and to the Angara River which flows out of it. And indeed, tiny Listvyanka just isn’t suitable for such a quantity of large buildings. Here are needed facilities of another type, but first you’d need to develop the infrastructure and build waste treatment facilities.

The first time I saw Ms. Kazakova was in the conference hall belonging to her hotel «Europa» (see photo below). Kazakova was meeting with local inhabitants and was talking about how in the budget of the municipal formation of Listvyanka there is no means for rubbish removal. What was being spoken of was a couple hundred rubles. In so doing, Ms. Kazakova’s hands were carelessly playing around with a mobile telephone of the firm Verty with a value, as people who know these things prompted me, of around 10 thousand euros.

The hotel «Europa» on the shores of Baikal (photo by Grigory Pasko)

Alexandros Petersen of ISS and CSIS has a short op/ed in the Boston Globe today pondering the "risks and rewards" or Russia's resurgence. I often feel increasingly isolated when I insist that Russia's return to the global power brokers' table can be good for the international community, so long as they are held accountable for their decisions and policies and drawn into the same rule-based systems of international law just like everyone else. So far, this is not what is happening, but more attention should be given to the "Vancouver to Vladivostok" security alliance proposal.

This is the new Russia talking - a phoenix that has risen from the ashes of the 1990s, when the former Soviet empire was plunged into chaos by robber-baron capitalism and shamed by an ineffectual (and often drunk) President Boris Yeltsin. The Russia rebuilt by former KGB operative Vladimir Putin in the past eight years has relied on its vast territory's immense energy wealth and on the export of arms.

It's a peculiar contrast: Americans are furious with the perceived recession in the economy, caused by bad mortgage debt, poor fiscal planning, high energy prices, and profligate government spending on war, among other factors. This week the Russian stock market is also experiencing a record-breaking crash, despite being based upon what are in my opinion rock-solid market fundamentals. Instead, these problems are being driven by completely avoidable state intervention and an arbitrary legal-regulatory environment. Which problem would you rather have to deal with?

TNK-BP CEO Robert Dudley was forced out of Russia following "sustained harassment." Will others follow?

It's been a pretty horrible week in business news over there, and a perfect storm of unrelated events has investors running for the hills.

TNK-BP’s chief, Robert Dudley, has been “forced” to leave Russia after being unable to get his visa renewed. BP says the move comes as a result of “sustained harassment”. Viktor Vekselberg said BP had brought too many of its employees on loan to TNK-BP, failed to train Russians to replace them and paid the expatriates too much. A Russian government official says that the move will help to resolve the row. The Telegraph is reporting that Dudley has fled to a secret location over fears for his safety. Read Dudley’s personal statement here. Igor Sechin plans to visit China for high-level talks on oil and gas cooperation.

Finance Minister Alexei Kudrin has reportedly compared the country’s inflation problem with nuclear war. Read more on what Hermitage Capital is calling a $230 million tax fraud in the FT and Telegraph. Mikhail Prokhorov’s Onexim Group has launched a new exploration company, Intergeo, and plans to invest $10 billion in the next five years in various mining projects. Dmitry Medvedev wants to develop measures to attract “scientific personnel” to Russia. Rostelecom, Russia's biggest long-distance telephone company, may list its shares in London - instead of New York as originally planned. Russia’s first open-pit gold mine has opened for production in Kolyma. First Deputy Prime Minister Viktor Zubkov has called for more innovative agricultural techniques and said that farm workers are not paid enough.

TODAY: Russia may withdraw OSCE funding; National Bolshevik web master jailed; court requests Khodorkovsky evaluation; Medvedev working on new personnel; Russia may retaliate with Cuba bomber base; religious battle with Ukraine.

Russia is threatening to withdraw its annual financial contribution from the OSCE’s Office for Democratic Institutions and Human Rights, criticizing it for a lack of democracy.

The Other Russia reports that Russian authorities have jailed an opposition activist, charging him with “creating and moderating the website of the banned National-Bolshevik Party”. A Siberian court has reportedly requested an evaluation of former Yukos CEO Mikhail Khodorkovsky's “behavior” in jail for consideration of his parole application. If released for parole, it is thought that Khodorkovsky would be banned from making any “political statements”.

President Dmitry Medvedev is reportedly working on building a new personnel of young and experienced candidates to work in the government as part of “one of the important components of the modernization that has been much talked about”. The Education and Science Minister has called for underperforming higher education institutions to be transformed into universities' affiliates or midlevel professional schools, saying that only 150 out of the country’s 1,000 institutions are “competitive”.

Marshall Goldman, Christopher Stewart, and Robert Amsterdam were featured on an hour-long discussion on Russia for Tom Ashbrook's show On Point. Listen to the broadcast here.

Russia, Riches, and the Law

Aired: Thursday, July 24, 2008 10-11AM ET

By host Tom Ashbrook

Mikhail Khodorkovsky was the richest man in Russia. Multi-billionaire. Oil-rich oligarch. No saint, but no worse a sinner, maybe, than many other Russian oligarchs.

Then he crossed Vladimir Putin. Ended up in a cage, on trial, and then in a prison in Siberia. Gilded life -- gone.

Now, an American attorney is fighting to free Khodorkovsky. He says it's Russia on trial here -- and whether or not a now oil-rich Kremlin believes in the rule of law.

Mikhail Khodorkovsky may be Russia's most well known political prisoner, but there's no underestimating the urgent centrality of former Deputy Finance Minister Sergei Storchak to the Kremlin's bitter clan wars. Storchak was a respected finance player among the liberal faction of the technocratic St. Petersburg economists in the Kremlin, and oversaw foreign debt negotiations among other high level duties. However, back when the clan wars kicked off in earnest following the Cherkesov statements, Storchak was placed under arrest and jailed in pre-trial detention with charges of embezzlement - a political persecution that was seen as part of an attempt to oust Finance Minister Alexei Kudrin. The Investigative Committee is leading the charge against Storchak and Kudrin, which is controlled by Igor Sechin's ally Alexander Bastrykin. Everybody we talk with is practically certain that Storchak has done absolutely nothing wrong, however it looks like his fate is sealed until the clan wars cool down.

The latest? Storchak (with his current Grizzly Adams prison beard) wishes to inform you that he remains unjustly imprisoned, like a knight removed from the clan war chessboard, with little glimmer of hope for due process. The Moscow Times is running a very interesting story about a recent letter Storchak wrote to Gazeta proclaiming his innocence and belief that his arrest is part of a campaign against state interests. We'll see if we can't be the first to get a translation of Storchak's letter.

One day you are delivering prestigious speeches at the G8 Summit and renegotiating debt with Libya, the next, you're stuck in gulag while the siloviki try to purge every competent economist from the Kremlin. At least they gave MBK a shaving kit.

[Editor's note: In light of Mikhail Khodorkovsky's recent parole request, we asked our correspondent (and former political prisoner) Grigory Pasko to share his experience going through the process of applying for conditional early release. See Part 1 here.]

Conditional, very conditional….
Part 2

Grigory Pasko, journalist

For some reason they once called me to the chief of the colony. Practically all of his deputies had gathered there. The colonel showed a letter which I had sent to my wife two weeks earlier. “In your letter”, said he, “there is such a phrase: ‘If only I knew who the bastard was who had crossed me off the incentive list…’ We consider that this – is a use of a non-censorial [curiously, in Russian this means “censorable”—Trans.] word, an insult to the official persons of the institution and to state power as a whole. An investigation will be conducted and a report drawn up”.

The investigative isolator (SIZO) in Chita, where Mikhail Khodorkovsky is now found. He may be denied conditional early release for any absurd reason whatsoever. (Photo by Grigory Pasko)

Some good news out of Russia: no longer will they hold those famously non-transparent bidding processes with energy companies to award oil/gas exploration and production licenses, which usually ended with either Gazprom or Rosneft winning, and sometimes with a multinational owing a big political favor. Instead, why not just cut to the chase, and have the silovik-in-chief just make a private, discretionary choice on his own? That's what has happened with Igor Sechin recently, and Latynina is one the case with a column that speaks for itself.

Igor Sechin: The Great Arctic Conqueror

By Yulia Latynina

The vast oil deposits located in what the Kremlin believes to be an extension of Russia's continental shelf in the Arctic will be distributed solely at the government's discretion, without holding the usual auctions or tenders. In a meeting on Friday with Deputy Prime Minister Igor Sechin, who oversees the energy sector, President Dmitry Medvedev explained the decision, saying, "This was done consciously to ensure rational use of this national wealth."

In the opening chapter of Steve LeVine's interesting new book, he recounts a visit to the Russian human rights NGO Memorial in the late 1980s, whose offices and museum exhibits "buzzed with researchers, journalists, visitors, and foreign dignitaries" at a time when "curiosity about the Stalinist was intense." Fast forward to modern times, and we see Memorial's staff and budget slashed, and a variety of pressures pushing the organization into the margins. These days Stalin is voted as the Greatest Russian, while the Solovetsky Stone is being moved to a place of "restricted public access." Remembering Stalin, the purge, and the gulag has and always will be a painful politically charged activity - one that the current administration is not comfortable allowing to be uncontrolled.

But how to handle these inescapable politics of identity and history? How should Russia respond to calls from former Soviet states calling for reparations? Into the fold steps the Russian Orthodox Church, which this month has curiously called upon the government to denounce the Soviet communist regime. Masha Lipman is cynical about this move, and makes a very compelling point that there is a strong need for a comprehensive national effort to come to terms with the Stalinist past.

The church's call for de-communization helps the state further marginalize the public effort led by Memorial, the Russian human rights group that, since the late 1980s, has researched and published information on communist crimes. Unlike the Russian Orthodox Church, Memorial wouldn't keep denunciations of communism within "reasonable limits." Little wonder that the church's anti-communist campaign conveys the impression that the church is the only organization concerned with confronting communist horrors. (...)

Interest in the dark side of Soviet history is modest now compared with the nationwide yearning in the late 1980s for the truth about the Soviet regime's crimes. But it may be enough to make the Kremlin want to preempt or control such interest. If its plan is indeed to enlist the church in a mild anti-communist campaign while marginalizing Memorial, the government has abundant power and resources to do so. Of course, even a limited condemnation of Soviet communism is better than nothing, but these political half-measures cannot supersede a national effort to come to terms with Russia's history.

He may not be president anymore, and perhaps there's some uncertainty over what portfolios he covers as prime minister, but nobody doubts that Vladimir Putin can still crash the value of a company with a few swift words. That's what has happened to the Russian mining and steel firm Mechel, whose shares have crashed 20% today in New York markets following public accusations from the former president that the company has illegally used artificially high prices. Traders have already started comparing the threat to the Yukos attack, but I would bet that Mechel owner Igor Zyuzin probably just stepped on the wrong person's foot as his company grew so impressively in recent years (they do compete with Norilsk). As recently as last year the company was in good favor with the Kremlin, and was awarded a bid for the world's largest coal mine (Elga, in Siberia), while Lakshmi Mittal's company was prevented from bidding. This one should be watched closely as a rule of law barometer along with TNK-BP and the Khodorkovsky case.

"This (Mechel) was a benchmark stock for the sector, but now people are remembering what happens here when you come into conflict with the government," said Pavel Koryshev, trader at East Kommerts investment group in Moscow.

"The company could face corporate ramifications along the lines that we've seen before," he said.

A Moscow-based fund manager, who asked that he not be identified, said investors in Mechel were being scared off by Putin's comments.

"People are getting out of Russia. Putin had some very angry comments directed straight at the company and it is quite rare for Putin to specifically single out one company," he said.

With so much attention given to Gazprom's moves to seal up supply in Central Asia, Iran, Northern Africa, the Gulf of Guinea, and Latin America, it seems that many have overlooked Russia's quiet incursion into North America through the Canadian doorway. Two finance academics have an interesting column in the Montreal Gazette today detailing Gazprom's LNG joint venture near Quebec City, which is just the tip of the iceberg.

Count on Gazprom to work in best interests of Russia

Canada should be wary of dealing with state-owned gas giant

ART DURNEV and PAT AKEY

With gas prices at record levels, the announcement of Gazprom's signature of a letter of intent with a Franco-Canadian consortium to supply liquefied natural gas is a good thing, right?

The deal, as it currently stands, would have Gazprom, Russia's state-owned oil producer, supply 100 per cent of the LNG to the plant located outside of Quebec City. However, Russia's murky political scene and the highly charged nature of energy prices makes us wonder how good this deal actually is.

US government scientists estimate that the Arctic holds potentially a fifth of the world’s remaining oil and gas reserves - 90 billion barrels of undiscovered oil, and as much gas as all the reserves already known to exist in Russia. India’s “contentious” nuclear co-operation agreement with America will go ahead, despite opposition from the country’s Communist party. The absence of a global energy agency is “a glaring exception” in light of the energy crisis. Industry sources believe that the TNK-BP dispute could affect Russia’s oil production in 2009. The venture’s Russian shareholders have accused Robert Dudley of breaching his duties and warned they may seek damages of hundreds of millions of dollars. Meanwhile, a Siberian court has ruled that BP employees can not work for TNK-BP. Gazprom Neft will supply jet fuel to Transaero, the country's third-biggest airline, “to help bring down record prices by removing middlemen and deflect government charges of price fixing”.

Hermitage Capital Management and HSBC are alleging that fraudsters have stolen $230 million from the Russian tax authorities. Read a special report on the recent history of Hermitage and its owner, William Browder’s, series of run-ins with the Russian authorities. Australian-Russian infrastructure venture Macquarie Renaissance is reportedly eyeing St Petersburg's Pulkovo airport. Russia plans to raise export tariffs on steel scrap to €120-130 ($191-207) per tonne to prevent a potential deficit. Magnitogorsk Iron & Steel Works has completed a new galvanized steel unit, designed to produce 450,000 tons annually. Evraz Group is negotiating the takeover of Industrial Union of Donbass. A union would create one of the five biggest steelmakers in the world. “The US financial crisis highlights how misguided Russia's economic course has been.” June growth rates for wages, incomes, retail sales and capacity investment “all significantly missed market expectations”.

TODAY: Venezuela says media distorted Chávez comments; Russian bomber crews land in Cuba, defying US; Medvedev admits that government posts are up for sale; Putin delegates to federal structures; international elections monitors are spies, says Russia’s CEC; Storchak makes public appeal; Nashi “hates” Estonia.

Venezuela says the media, in reports like this one, distorted President Hugo Chávez’s words on his trip to Russia this week, and that his potential “welcoming” of Russian warships related to “a possible friendly visit” as opposed to a permanent deployment. Analysts say that a Russian military base in Venezuela is, in any case, “highly improbable”. Russian bomber crews have landed in Cuba to prepare for stationing nuclear bombers there, defying a US Air Force general’s warning that doing so would cross a “red line”. The Cuban President Raul Castro has kept silent on the matter.

President Dmitry Medvedev has publicly acknowledged the “outrageous” practice of selling government posts, and intends to tackle the problem by handpicking bureaucrats and senior officials. Prime Minister Vladimir Putin has implemented a new decision-making structure for the government under which more than 400 responsibilities have been transferred from the government to lower-level federal structures - to “save time”.

No one should be too surprised by the exceptionally warm welcome given to Venezuelan President Hugo Chavez during his recent visit to Moscow - these developments have been long in the making, and closely observed with appropriate concern (the European Commission circulated a paper on Russia's activism in Latin America back in 2006). The fact that the Kremlin has solidified its alliance with another authoritarian oil exporter, and stapled down significant deals in terms of arms ($5 billion over the next decade), energy (including a joint venture between PDVSA and Gazprom), and banking, is just the latest expression of Moscow's successful campaign to assume a greater role in global affairs.

But what is left unclear from Chavez's first meeting with Russian President Dmitry Medvedev is who is getting what out of the relationship, and whether the motives driving this policy of strategic partnership are being transparently understood. If we take a closer look at the regional ambitions of each country, we can see that the perceptions of this relationship by Washington and Brussels are almost more important than the actual substance of the Venezuelan-Russian strategic partnership. However each leader appears to want to spin it differently, which raises some conflicts.

Russian President Dmitry Medvedev (R) and his Venezuelan counterpart Hugo Chavez attempt to coordinate their comments during a press conference on July 22. Photo: REUTERS/Alexander Nemenov/Pool (RUSSIA)

Russia appears to be worrying about the arrest of Radovan Karadzic as being symbolic of Serbia's inclinations toward better relations the European Union. Some Russian bloggers are already wondering when the obligatory "Free Radovan" website pops up.

I am absolutely blown away by the impressive online exhibit Gulag: Many Days, Many Lives, a moving portrayal of the Stalinist prison experience brought to us courtesy of the Center for History and New Media at George Mason University, in collaboration with the Russian NGO Memorial. I highly recommend that readers give the site a thorough visit. There is such abundant and important material there that we will probably revisit many times for items of discussion. Below, a video and transcript depicting what it was like to be awoken in the middle of the night and dragged off to one of these dreaded prison camps.

It's been a little while since we have seen an extended analysis of the latest from the Kremlin's clan wars, and before I got the opportunity to spend a few hours on this, Gordon Hahn has already beat me to the punch. I agree with him that there is much to glean from the new round of post-election appointments, as many key siloviki have been given "golden parachutes."

Below are just a few highlights from his article:

Internal history: the hard-line siloviki faction began to move aggressively against softer-line siloviki and more liberal civilian clans in and around the Kremlin. Immediately after Zubkov’s confirmation, Anti-Narcotics Agency chief Viktor Cherkesov’s right hand man General Alexander Bulbov was arrested on corruption charges instigated by Sechin clan member and the Prosecutor General’s Investigations Committee chief Alexander Bastrykhin. Bulbov had led the investigation into the ‘Tri Kita’ (Three Whales) smuggling operation led by FSB and former FSB officers associated with Sechin. Then weeks later, two Anti-Narcotics Agency officers were killed in St Petersburg, and many in Moscow saw the Sechin clan’s hands in the affair. The Sechin faction also moved against the liberal Petersburg ‘financiers clan’ associated with Zubkov and Finance minister Alexei Kudrin. In December, Kudrin’s deputy minister, Sergei Storchak, was arrested and charged with attempting to embezzle the fantastic sum of $47 million. This was not the sort of behavior that helped ensure a glitch-free managed election campaign and presidential succession.

The knowledgeable Michael Economides and Nate Evans have a new article out in World Politics Review on Gazprom and Russian energy imperialism, arguing that the geopolitical motivations driving their policies are now clearly transparent. Recommended reading.

See the PDF version of this great map here.

Russia and Venezuela have signed deals allowing three large Russian energy companies to work in Venezuela's oil-rich Orinoco Belt, including TNK-BP and Lukoil. Regarding the Kremlin’s decision to allocate Arctic resources internally has Yulia Latynina wondering: Is deputy prime minister Igor Sechin “the sole guarantor of Russia's rational use of its national wealth?” BP has “reluctantly” recalled the remaining 60 foreign employees assigned to TNK-BP, and says that CEO Robert Dudley may supervise the joint venture’s work from London if necessary. The UK’s Telegraph newspaper maintains the view that the dispute is “political”. Turkey has signaled that it wants to boost energy cooperation with Russia, “ending a frosty period marked by differences over the Nabucco pipeline”. Gazprom CEO Alexei Miller has called for a long-term deal with Ukraine as the country faces higher gas prices.

US inflation was reportedly higher than that of Russia in June. Engineering and construction firm Stroitransgaz has won a $418 million contract to build a gas pipeline across the United Arab Emirates. Developers Diversified Realty Corp., an American company, plans to build three malls a year in Russia and Ukraine over the next seven years. Russia’s chief public officer has instructed state lawyers to explore the possibility of criminal prosecution of US tobacco companies for “pressing for medievally high levels of nicotine and tar in cigarettes to be set for Russia”. Acron's billionaire owner Vyacheslav Kantor is seeking to raise as much as $715 million by selling existing shares. “Russia's beer industry has reached a barrier,” with 2008 production rising at the slowest pace in four years. Billionaire Mikhail Prokhorov has filed a defamation suit against former business partner Vladimir Potanin and The Moscow Times to defend his business reputation, after Potanin claimed that Prokhorov reneged on an agreement to sell his stake in Norilsk Nickel to him.

TODAY: Chávez receives warm welcome in Moscow, offers Russia a military base in Venezuela; Sochi residents clash with police; Putin has new United Russia office; Karadzic arrest is “internal matter”, says Russia; McCain weighs in on Czech energy.

Dmitry Medvedev is optimistic about the prospects for Russia’s relationship with Venezuela. "Our cooperation is developing well enough and we've made a very serious move forwards," he said. It is thought that Venezuelan President Hugo Chávez would sign a $2bn arms deal with Russia for new missile defence systems and diesel-powered submarines. Chávez also extended a personal invitation to Prime Minister Vladimir Putin to visit Caracas, and said that Russia would be “warmly welcomed” if it wanted to deploy a military base in his country.

Sochi residents set to lose their houses to Olympic facilities have clashed with police, “armed with sticks and bottles of incendiary mixture”.

From the Editor: Mikhail Khodorkovsky’s lawyers have filed a petition with the Ingodinsky District Court of Chita on the conditional early release (that’s Russian for “parole”) of the ex-head of YUKOS.

At a recent press conference in Moscow, lawyer Yuri Schmidt particularly underscored that every prisoner has the right to conditional early release, and that such a request does not seek pardon or amnesty. In the words of the defense, neither admission of guilt nor contrition are required of a prisoner for the submission of a petition on conditional early release.

In the meantime, the chief of the administration of the Federal Service of Punishments for Chita Oblast, Yunus Amayev, commented that “Conditional early release has to be earned”. And he added: “…To be granted parole people need to work, to behave well, not to violate the rules.... There is no other way."

We asked our correspondent Grigory Pasko to tell us about how the procedure of conditional early release from Russian places of confinement usually takes place. Grigory replied that he had described this procedure in detail in one of his publications in the magazine «Nevolya». We decided that our readers would also find this article interesting, and offer it here in two installments. Read Part 2 here.

Editor's note: Recently the Syktyvkar city court in northern Russia found local resident Savva Terentiev guilty of inflaming social discord with his comment and sentenced him to one year of deprivation of liberty, suspended.

Terentiev claims he did not leave this comment just out of the blue. “On 14 February employees of division «K» of the MVD [Ministry of Internal Affairs, of which the police are a part—Trans.] of the republic rolled up to the editorial office of the Inta newspaper «Iskra» and seized hard disks with supposedly counterfeit software. Boris Suranov's blog included a link to this article," he said. “I left a comment on this account.”

A very interesting column by the talented Mark H. Teeter in the Moscow Times ponders whether or not it is appropriate for people to casually extrapolate the term "gulag" for application in vastly different cases, and under whose ownership, if any, should such a tragedy of such immense scale lie. Teeter concludes that every historical case of mass exterminations is shared both collectively and individually: "When such slaughters occur, all mankind pays a price. The proportions and malevolence combine to recalibrate what it means to be human, redefining the race downward through our shared failure either to perceive or prevent them."

The article also points us toward a very powerful and important new Website Exhibition entitled "Gulag: Many Days, Many Lives" created by The Center for History and New Media at George Mason University. You'll be hearing about this one again from us.

It happened to Estonia in the midst of the Bronze Soldier fight, it happened to Radio Free Europe, and now it looks like it might be happening to Georgia, as the UN takes on the Abkhazia issue. This first attack, not yet confirmed in origin, looks like the warning shot.

From SC Magazine:

The official site of Georgia's president, Mikheil Saakashvili, was taken down by the attackers on Saturday and Sunday, say researchers. The attacks were first recorded in the early hours of Saturday morning and continued into Sunday.

While researchers could not pinpoint the exact source of the attacks, early evidence points to sources within neighboring Russia. Arbor Networks chief analyst Jose Nazario reported that one of the messages sent in the data flood read "win+love+in+Russia."

Meanwhile, researchers with security group ShadowServer noted that the botnet controlling software used in the attacks has also been linked to Russian botnets.

After helping sweep Putin's political party United Russia to another overwhelming victory in the last presidential elections through a series of intimidations and harassment incidents, what's left to do for the state-funded youth groups? Start protesting within the public health debate of course, and attacking those who advocate methadone treatments for heroin addicts as "paid agents of the West."

The New York Times has a very peculiar story today about the rise of Russia's public health nationalism, narco-propaganda, and the country's crisis of HIV/AIDS and drug addiction. It seems unclear whether or not the Youth Guard has a real, vested interest in pushing one health solution over another, or whether the government is interested in keeping them busy with side issues should they be needed again to mobilize against the slightest murmur of a color revolution among the moribund civil society.

Who knows what cause we'll see these idle groups thrown into next?

Every once in a while we hear a Kremlin critic argue that the country's recent pattern of behavior mirrors that of pre-war Germany, characterized by truculence and rejection of the world order, nationalistic authoritarian capitalism, and aggression toward neighboring states. But rarely do we see such historically weighted claims come from credible and authoritative voices. Today we do, as the Harvard historian Richard Pipes has a surprising letter published in the Financial Times:

LETTERS TO THE EDITOR: Russian aggression towards Georgia fits the pattern of Germany's prewar tactics

From Prof Richard Pipes.

Sir, Peter J. Rooney (Letters, July 17) urges us to abandon the "insignificant statelet" of "tiny Georgia" to Russian aggression because its defence may lead to a military confrontation with Russia. This advice reminds me of Prime Minister Neville Chamberlain's willingness in the autumn of 1938 to sacrifice "tiny" Czechoslovakia to Nazi Germany because it was a "quarrel in a faraway country between people of whom we know nothing".

As it soon turned out, Germany's aggression against Czechoslovakia was a prelude to her invasion of Poland, which unleashed the second world war. Aggressive large powers tend to begin their expansion with "insignificant statelets" in order to test the world's reaction before going after bigger fish. I think Russia's behaviour toward Georgia fits this pattern. It should not be ignored.

Richard Pipes,
Cambridge, MA 02138, US

Prime Minister Vladimir Putin has ordered the guarantee of full oil supplies to the Czech Republic in an attempt to show that the previous cut was not made for political reasons. TNK-BP chief Robert Dudley has written to the country's immigration department saying that he will soon provide them with a valid employment contract. Dudley will continue working until the issue is resolved. The Times is incredulous at the Kremlin’s “feigned disinterest” over the TNK-BP affair. Gazprom has signed a memorandum of cooperation in oil and gas production with the National Iranian Oil Company. China has warned ExxonMobil to drop an exploration deal in the seas off Vietnam which it sees as a breach of Chinese sovereignty. Hugo Chavez wants Russia and Venezuela to become strategic partners in the oil sector.

Is Russia facing an economic slowdown? The owner of miner Mechel will seek to buy 3-5% of the company’s stock from the market to drive its price up ahead of a planned share offering. The latest Russian military technology “can't match the speed and stealth of the latest US fighter”. British property firm Raven Russia has purchased the AKM Logistics warehouse complex in St. Petersburg for $216 million. The investment company of Alexei Mordashov has increased its stake in German shipping giant TUI. Governors favour big businesses “because it is far easier to collect taxes from them than from small and medium-size firms.”

TODAY: Chavez in Moscow; Poland and US move forward on missile defense; Nashi looking for a new purpose; Kremlin to curb “dangerous” teen fashion; UN Ambassador moves to defend Sudanese president; postwar artists, heroin addicts, presidential portraits, Jehovah's Witnesses.

Venezuelan President Hugo Chavez is in Moscow for a visit that is expected to focus on arms trade and strengthening government ties. Chavez believes that cooperation with Russia “will guarantee the sovereignty of Venezuela, because we are now threatened by the United States." The Moscow Times says Chavez is “unlikely to gain Kremlin support for his trademark attacks on the US”. Russia has put its fifth German satellite into orbit. Poland and the United States are “drawing closer” in their efforts to forge a deal on a US missile shield. President Dmitry Medvedev has reiterated his stance on the shield, saying that it would harm regional security. Russia’s pact with China over a border dispute resolves an issue that has been troubling the two countries “for more than three centuries”.

This year’s summer camp for political youth group Nashi included “included a wedding of 20 couples who were then told to go and procreate to solve Russia's demographic crisis”. The group is said to be losing focus now that Medvedev is president, and organizers are “struggling to find a new purpose”. The Kremlin may pass a new bill aimed at curbing “dangerous teen trends” - such as goth fashion.

Dear Readers,

The previous entry on Spanish-Russian energy relations represents the 3,000th English-language blog post we have put up on this site since our inception in September 2006. On February 11th, 2008, we published our 2,000th post, and on August 9, 2007, we hit 1,000, so it looks like things are speeding up. We also have 1,732 posts in German featured in our archives, as well as 460 in Polish, 406 in Spanish, and 275 in French.

I am very proud we have reached this milestone and continue strong as ever (at least in terms of our own enthusiasm), and I express my deep gratitude to all our loyal and occasional readers who have made this sometimes thankless work a worthwhile, ongoing learning experience. I'd also like to thank the valuable time contributed to this modest project by my two editors, the intrepid journalism of our correspondent Grigory Pasko, and all the other important contributions made by our regular guest bloggers.

I'll also take advantage of this milestone to reiterate a very important fact that seems to be often overlooked or forgotten: the opinions expressed on this blog under my signature are mine and mine alone, and do not represent in any way the opinions of any former, current, or prospective clients, including Mikhail Khodorkovsky. Hopefully most of you already clearly understand this important difference - but it is imperative that no one is misrepresented.

Looking forward, we've got a lot of dramatic changes planned, including a head-to-toe redesign on this site, which will make it easier to use and interact, as well as an expansion of coverage to a number of other countries of interest to continue exploring related themes. If you have any suggestions or comments for me, I welcome you to send me an email anytime (which is always the best way to reach me).

Thanks again for your support and interest,
Bob Amsterdam

Today's news that Spanish energy champion Gas Natural has signed an LNG deal with Gazprom for the Shtokman Field comes at a crucial time for the energy security of the country vis-a-vis Russia. The agreement, which will allow for faster, easier spot market transactions of LNG from Gazprom (as well as possible future pipeline deals), was signed within the context of Moscow's rapidly advancing energy strategy to encircle the EU, staple down control of supply of natural gas from North Africa (where Spain gets 1/3 of their supply from) as well as push for a bigger future role in the LNG trade, everywhere from the Barents Sea to Bolivia.

According to Zoe Grainge of Global Insight, this deal might be an "in" to the Iberian market, which could springboard to a raft of future deals. An analyst from Dresdner Kleinwort quoted in the same article argues that "the beauty of this deal is that it is giving Gas Natural access to a significantly higher portfolio of natural gas. From Gazprom's point of view, it is getting access to the tankers of Gas Natural."

Up until quite recently, Spain was relatively isolated from Gazprom's occasional political bullying, mostly thanks to its advanced LNG market (one of the largest in Europe). However, the Spaniards do receive close to 1/3 of their natural gas supply via two pipelines - one which brings Norwegian gas from France, and the other being the critically important Maghreb-Europe Gas Pipeline from Algeria via Morocco. According to a 2007 survey by the EIA, Spain represents one of the fastest growing natural gas markets in Europe, with consumption tripling between 1994 and 2004 related to the rise of numerous combine cycle electricity generation plants.

No matter who takes office following the upcoming presidential elections in the United States, he had better start making relations with Russia a top priority, argues an editorial in Sunday's Boston Globe:

The next U.S. president will have to deal with an energy-rich Russia that bears little resemblance to either the vanished Soviet Union or the economic basket case of the immediate post-Soviet years. Though run by a mafia of Kremlin-connected moguls and KGB veterans, Russia has an abiding interest in cooperating with the West. Yet so far, John McCain and Barack Obama have paid too little attention to Russia and how it sees its role in the world. (...)

Because the Bush administration's mishandling of relations with Russia may be easier to rectify than some if its other blunders, Obama and McCain ought to be talking about their plans for the future of US-Russian relations. Russia can act either as a crucial partner or a troublesome spoiler on nettlesome security issues - the safeguarding of nuclear weapons and materials, nonproliferation, terrorism, and energy security. (...)

Bush's successors should relieve these Russian grievances. In return, the next president should be able to count on firm Russian support in preventing Iran from becoming a nuclear power, combating terrorism, and managing the transition to a global economy bereft of cheap oil and natural gas. That should be America's game plan.

The New Republic has a very interesting book review of a new translation of Maxim Gorky's biographical writings and other materials, which provides a fresh perspective on the Russian Revolution through the eyes of a literary titan.

Gorky may have been his own greatest character, but the story of the character Gorky is one of the most disappointing and upsetting in modern literature. It is, in fact, the sort of story against which Gorky himself protested all his life: a story of disillusionment and "low truths," of a revolution wildly off its course. (...)

Whereas Tolstoy's work, especially War and Peace, is shot through with protest against the idea of the "great man," Gorky's life and work record an ongoing search for just such a figure--a "Man with a capital M," as he called Lenin. "I think that such men are possible only in Russia," Gorky wrote, "whose history and way of life always remind me of Sodom and Gomorrah." In his literary portraits, Gorky is so drawn to his subjects that his admiration at times verges on chameleonic impersonation. In one uncanny photograph from 1920, Lenin stands in front while the much taller Gorky, in an identical suit and with his head shaved, leans diffidently to one side behind his idol, like an uncertain, elongated mirror image. The scene is right out of Zelig--Gorky the remora, the parrot, the perpetual acolyte. (...)

Will Stewart at the Evening Standard points out that many foreign interests in Russia will be closely watching the handling of Mikhail Khodorkovsky's parole request as an indication of the safety of doing business in the country:

Analysis: Anxious investors in Russia

Will Stewart, Evening Standard

Mikhail Khodorkovsky, the oligarch jailed under the then Russian President Vladimir Putin, has launched an official plea for parole. In what will be seen as a test of new President Dmitry Medvedev's bid to make Russia more attractive to outside investors, Khodorkovsky's defence formally asked that he be released on parole from his eight-year sentence.

Khodorkovsky's imprisonment, and a raft of further charges and curious refusals of parole, echo some of the treatment meted put to BP's embattled joint venture in Russia, TNK-BP.

In recent months, TNK-BP has also been beset by a string of dubious official interventions, implemented, it is believed by official friends of TNK-BP's Russian partners.

The Khodorkovsky case and BP's travails, are the two most high-profile tests of Medvedev's pledge to strengthen the rule of law in the country and rid Russia of undue interference from high-ranking officials. And, although he is trying to distance himself from Khodorkovsky's case - as he is with the BP affair - the eyes of the world are on the new President to see how he deals with the problems.

A new law signed by the State Duma will reportedly empower the government to “hand-pick companies” to develop the vast oil reserves thought to be in the Arctic shelf. TNK-BP chief Robert Dudley has been barred from working in Russia, and will not be granted a work visa unless he can present a “valid contract”. Dudley’s contract ran out last year, and AAR shareholders deny that it has been automatically extended. “We have no proof that it has been prolonged,” the migration service said. It is alleged that Viktor Vekselberg had urged the migration service not to renew the visa. BP meanwhile has hired Vladimir Putin’s former legal advisers to assist them in the ongoing battle, and maintains that Dudley "has a valid employment contract”. Mikhail Fridman says, “I don’t think this conflict is bad for Russia’s image. It’s important to send the right message to foreign investors. Russia welcomes foreign investment but only that which helps Russian companies to grow.” He also claims that Dudley refused to do business with nations hostile to the US, including Cuba. The Moscow Times accuses BP of having blocked a $1.8 billion dividend to the joint venture, but the decision was reportedly backed by AAR. “Oil companies enjoy approximately the same public approval rating as drug dealers and arms traders.” Gazprom will buy a 25% stake in gas transport firm DalTransGas from Rosneft. Transneft is optimistic about its new board of independent directors. Senior Democratic senators in the US are trying to pass a new bill to limit the stakes speculators can take in the oil and gas markets.

TODAY: Medvedev’s new (old) foreign policy; China and Russia end territorial dispute; Muslim council protests literature ban; troubled Abkhazia rejects German peace plan.

Dmitry Medvedev’s stance on foreign policy “suggests a resentment of unilateral actions by the United States and a determination to shape a multipolar world order regulated by the United Nations and international law.” The Moscow Times says “the text of Medvedev's foreign policy speech [...] was drafted while Putin was still president.” Russia may send military aircraft back to bases in Cuba in response to US plans to deploy elements of a missile defense system in Europe. China and Russia have resolved a 40-year-old dispute over their border, with Russia pledging to return 67 square miles of territory. Prime Minister Vladimir Putin is to attend the opening ceremony of the Beijing Olympics.

A Moscow court has ordered former Yukos vice president Vasily Aleksanyan, who is being treated for AIDS-related lymphoma, to remain under armed guard until October 23, despite his lawyers protestations that any attempt to flee the hospital would be an “act of suicide,” due to his poor health.

It’s people who make the system

Grigory Pasko, journalist

Если Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда.

The chattering continues… I’m talking here about the fact that a command has obviously been given to the Russian mass media to hype the thesis of the newly-sprung president Medvedev about “legal nihilism” and the necessity of struggle for an independent judiciary.

And so it is that even the procurator-general himself has revealed his word to the people. In Russia, said Yuri Chaika recently, thousands of people are unlawfully brought to criminal liability every year. Of course, what forgot to mention was that this lawlessness is happening largely through the fault of none other than procuratorial workers. And I’m interested: what was it that kept Chaika from proclaiming such a well-known truth earlier, before Medvedev said that thing about “nihilism”?

Chaika also said this: “…annually as a result of an outright defect in the work of preliminary investigation the number of persons having the right to rehabilitation after criminal prosecution continue [sic] to number in the thousands. “If in the year 2006 the right to rehabilitation received 6234 persons, then in 2007 - 5265. In so doing more than a quarter of them were held in detention”, underscored the procurator.

Photo: Procurator-General Chaika (source)

Lest we were worried about the relevancy of the blogosphere, it appears that the PR department at the Nord Stream headquarters in Switzerland has been carefully following Grigory Pasko's copious original coverage of this pipeline project, which is a pleasant reminder that even the highest ranking businesses can still be open to starting a dialogue. In response to one of his columns which posted a number of questions, Grigory just received the attached response from Jens Mueller, who handles communications for the consortium.

We naturally have some opinions about many of these statements, which I imagine are self-evident, but I am grateful to Herr Mueller for taking the time and effort to join the discussion. Below I attach the unedited response direct from Nord Stream for readers to formulate their own opinion over this important project (download here a copy on the Nord Stream letterhead).

Answers to 10 Questions by Grigory Pasko

Correspondence from Jens Mueller, Director of Communications, Nord Stream

1. Will Nord Stream actually be able to provide the Swedes and the Finns (and that means all of Europe) with a land-based alternative of the pipeline?

I have written about it several times on this blog, often to the vocal disagreement of some readers: The United States has really bungled a lot of opportunities with Russia in recent years, caused undue frustration and distrust among key members within the Kremlin, and inadvertently empowered the more hawkish elements over the people we want to be calling the shots. This isn't an excuse to justify authoritarianism or the violation of rights, but it has happened. Here former Ambassador Jack Matlock talks about what kinds of attitudes are getting in the way of more constructive cooperation with Moscow on the nuclear issue, among other views that raise many questions about how the relationship could change in the next administration.

Nobody had any illusions about Angela Merkel's visit to Algeria this week. Although the official reason for the visit was to oversee the signing of deal to build a major landmark mosque in Algiers (rendering shown - talk about corporate foreign policy!) and call for the deepening of economic ties between Germany and the North African nation, the message was plainly telegraphed to President Abdelaziz Bouteflika: It's critical to European security that you boost independent supplies to the EU, and avoid too close a relationship with Gazprom.

Whether or not the German government perceives a threat from Russia's long-standing embrace of Algeria's state-owned gas company Sonatrach, aided by debt forgiveness and large arms deals, the country has legitimate concerns about becoming too reliant on Russian supply (about 70% of oil and gas to Germany come from Russia, and that figure should climb significantly with the building of the Nord Stream pipeline). Even a technical problem in the delivery infrastructure, independent of politics, could produce a considerable economic hiccup in Germany.

But I do take note of the timing of Merkel's visit. Only two weeks ago, Gazprom shocked the energy sector by making a very public offer to buy ALL of Libya's natural gas at significant high market prices, a deal which, among others, arguably makes the Russian company a self-sustained independent global gas cartel, sewing up another potential energy competitor along the Southern flank of Europe. I think it is fair to say that Germany has a reasonable concern over Algerian-Russian energy relations.

However Merkel's strategy to court the Algerians seemed a bit off-target. If we have learned anything from Moscow, she shouldn't have traveled there with a delegation from E.ON and RWE - but rather with the defense contractors from EADS.

I have recently been in touch with the blogger Vitaliy Voznyak of The 8th Circle - although I haven't yet had the chance to peruse more than a half a dozen entries, I recommend that readers check it out. For example, there is an interesting piece on this blog about Gazprom's pipeline bullying actually producing a push for greater energy efficiency and transparency in the Ukraine. I wonder if this debate would even be occurring without the price disputes with Russia....

Faced with an unstable energy supplier ought to prompt Ukraine into action. While it should continue replacing and updating its nuclear infrastructure and securing new oil and gas contracts, Ukraine needs to increase its energy efficiency and further develop its own renewable energy potential. (...)

The demand side hides an even larger problem with Ukraine’s current state of affairs – its inefficiency. To measure an economy’s fuel-and-energy efficiency, statisticians use primary energy consumption to GDP ratio or GDP energy content. Staggeringly this indicator for Ukraine is 2.6 times higher than the global average. Whereas Poland’s ratio is at 0.34, Ukraine’s is at 0.89 (“ESU: General Provisions” pg. 9). This inefficiency is driven by at least two factors discussed in the next section: below market prices, and lack of transparency in the energy market.

Russia's federal migration service is “refusing” to replace TNK-BP’s CEO Robert Dudley's visa, which runs out tomorrow, meaning that he will have to leave Russia within 10 days. Dudley says that struggle for control of TNK-BP is tearing it apart. “As a manager, we are fed up with him,” says Russian shareholder Elvardi Stafilov. Transneft has become the first large state company to see a change on its board to accommodate new independent directors. E.ON says that its new power station in Russia, when completed, will be the biggest in the world. Israel is close to an agreement with Russia that would secure natural gas for a planned pipeline project between Turkey and Israel. Bulgaria has sent a shipment of its remaining highly enriched uranium to Russia for “safeguarding”. The founder of a Russian company involved in trade with Iran has been charged with trying to smuggle a restricted metal into the country. Gazprom will lose 10% of its Moscow staff to “cut costs”. Rosneft is about to repay the last outstanding part of a $22 billion bridge loan it took on last year in order to acquire assets of bankrupt Yukos.

Norilsk Nickel may buy back $2 billion of its own shares. Apple still has no plans to market its iPhone in Russia, despite growing demand and increased US imports appearing on the market. Fertilizer maker Eurochem has signed a $634 million deal with an international group of contractors to help it develop a potassium deposit. Business group Delovaya Rossia plans to lobby the government over corruption hindering small businesses. “Russia's military technologies have slipped so far behind the United States and other Western nations that the country's share of the global arms market could start shrinking soon.” Russian Technologies says the country's defense industry lacks the resources to meet all its arms export contracts.

TODAY: Medvedev puts emphasis on technology’s role in halting corruption; 50,000 pieces missing from Russian museums; former Senator convicted of fraud; Russia and Georgia begin military exercises.

Dmitry Medvedev has emphasized the government’s need for modern communications technology, and said that, if the government carried out more of its work online, it would make corruption more difficult to conceal. A government audit ordered by Vladimir Putin has revealed that up to 50,000 pieces worth “several million dollars” are missing from Russia's museums.

Russia’s Zimbabwe veto “recalls the bad old days,” says The Economist. Moscow City Court has convicted former Kalmykia Senator Levon Chakhmakhchyan of fraud and sentenced him to nine years in prison, amid promises from his lawyers to appeal and criticism that the trial was not made public.

Not only are they slowed by the Soviet-era mentality of efficiency, but also lack basic IT skills. Poor old bureaucrats: Looks like they had better study up before Dima gives them the boot...

From Associated Press:

Russia's new 42-year-old president showed frustration with government officials who do not know how to use a computer and warned Thursday that they could soon be out of a job.

"They either should learn or, as they say, goodbye," President Dmitry Medvedev said. "We don't hire people who can't read and write. Computer literacy today is the same."

Kommersant and the Moscow Times report that for the second time during a month, the RF Justice Ministry has replaced the country’s representative to the European Court of Human Rights (ECHR) in Strasbourg. Georgy Matyushkin, ex-deputy presidential envoy to Privolgie Federal District, will go to Strasbourg instead of St. Petersburg Legislative Assembly lawmaker Viktor Evtukhov. According to lawyer Vadim Prokhorov, the most probable reason of this movement of bureaucrats is that, on the threshold of a number of comprehensive trials in Strasbourg, the cases of Yukos, Nord-Ost, Beslan, suits of SPS and other parties related to election violations, the Kremlin has reasoned that it would be better to have not just “a good man” but “a working professional” in Strasbourg.

The Moscow Times reports that President Dmitry Medvedev has unveiled a new foreign policy strategy that grants unprecedented rights to Prime Minister Vladimir Putin and shows that the Kremlin will maintain the tough course set during Putin's presidency. The foreign policy strategy, was signed to coincide with a keynote speech to ambassadors, says the prime minister will be allowed for the first time to implement foreign policy measures, a right previously assumed to be monopolized by the president. Amid speculation that presidential powers would be weakened after Putin left the Kremlin, Medvedev said immediately after his election in March that he would retain the presidential right to control foreign policy. Dmitry Trenin, political analyst with the Carnegie Moscow Center, said: "The vague and somewhat incomprehensible expectations that there might be some kind of liberalization in foreign policy" under Medvedev have proven unfounded.

Below is a video of Robert Amsterdam's July 15 appearance on Italian news channel Sky TG24, speaking ahead of the visit by Giorgio Napolitano to Russia. He comments that "We ask President Napolitano to engage the Russian President on the Khodorkovsky issue. We confide in Italy and in its’ history made of battles for human rights, so that all cases of political prisoners who are imprisoned in Russia are addressed, the issue of gulags that still exist and of Khodorkovsky that is in prison in Siberia and not in the region of Moscow, close to his family. In Russia there are still massive violations of fundamental rights, such as restrictions on freedom of the press, or the unexplained killings of journalists. We hope that all these issues could be visited during this meeting.”

A transcript of a longer interview on the same network follows after the cut.

This bit comes from the BIAC Newsletter, June 2008:

From a survey conducted in early 2008 following the release of the roadmaps for OECD accession country candidates, BIAC member organisations identified various aspects of the Russian business environment as major concerns that the OECD should include in its accession talks with Russian government officials.

Recognising that these negotiations may take several years, BIAC initiated and organised a consultation with OECD Deputy-Secretary General in charge of accession issues, Ms. Thelma Askey, and several senior OECD staff members, in order to build towards a strong business dialogue with the OECD throughout this process.

Led by Ms. Brenda Horrigan, from Salans, and Chair of the BIAC’sTask Force on Russia, and by Mr. Gary Campkin, from CBI, and Co-Chair of the BIAC MNE Committee, BIAC highlighted the overarching concerns about the Russian business environment, including: the weaknesses in the rule of law and lack oftransparency; burdening bureaucracy and extensive corruption; as well as limitations for investment in so-called “strategic sectors”.

Author, journalist, and blogger Steve LeVine visits Google's Mountainview, California headquarters to discuss his new book.

From the Washington Post:

In a statement to the court, released by his lawyers, Khodorkovsky said: "I understand that, if need be, I can appeal directly to the president of our country. However, respecting the law and the judicial branch as one of the constitutional pillars of society and the state, I deem it necessary first to use the judicial procedure to exercise all rights."

Yulia Latynina expresses her regret that a seemingly merit-less lawsuit brought by Michael Cherney against Oleg Deripaska of Rusal is accepted by a London court due to the fact that there are doubts about the functioning of the Russian legal system:

At the same time as these events were unfolding, the London court agreed to hear the claims of businessman Michael Cherney against oligarch Oleg Deripaska. Cherney accused Deripaska, his former business partner, of failing to pay the full price for his shares in Russian Aluminum.

I don't want to guess the outcome, but I think Cherney's claims aren't worth the paper they were written on. Cherney's industrial empire, in which Deripaska once participated, was built upon extremely informal connections between the various players. The ownership documents Cherney has in his possession, and which both he and Deripaska have signed, are quite typical for such shady transactions -- that is, they might carry some validity in the criminal world, but not in a British court of law. Nonetheless, the British court agreed to hear Cherney's case on the rationale that he was unable to obtain justice in Russia. It is truly a sad testament to the current state of affairs when a London court considers Russia's reputation as being worse than Cherney's.

A group of employees at TNK-BP have filed a lawsuit against Robert Dudley, the firm's chief executive, accusing him of mismanaging the company. A decision will be made regarding the renewal of Dudley’s visa over the weekend. Gazprom says it may sue Belarus over unpaid debts for gas supplies. E.ON has begun construction of two gas turbines at a power station in Russia. Australian energy firm Nexus Energy plans to spend $975 million on exploration over the next three years to secure more gas reserves.

The Russian government is concerned that inflation above 15% (Russia’s annual rate is currently at 15.1%) could harm investment, and is emphasizing the need to reduce prices. Bank Hapoalim, one of Israel's largest lenders, will acquire 76% of midsized Russian SDM-Bank.

TODAY: Khodorkovsky appeals for early release, challenging Medvedev’s promises of reform; Communist Party not surprised by ruling on election annulment; bill submitted could improve prisoners’ rights; Fedotov says veto is not a contradiction; Italy warms to Russia; Germany to send minister to Abkhazia and Russia.

Mikhail Khodorkovsky’s lawyer, Yury Schmidt, speaking in relation to his client’s decision to request parole, says he has “much hope in the words of Medvedev on the independence of the judiciary.” “The case could be the first test of Dmitry Medvedev's desire to enforce the rule of law in a country that consistently ranks near the bottom of corruption rankings,” says one report. In an interview with a Russian newspaper, Khodorkovsky’s mother has appealed to Medvedev for her son’s release. Garry Kasparov’s United Civil Front opposition party plans to stage protests this weekend in support of imprisoned party members. The Communist Party is “not surprised” by the Supreme Court’s rejection of its request to have the results of the State Duma elections annulled.

A Wall Street Journal article argues that change in Russia may best be measured by who gets placed in charge of the state-owned companies:

But in some areas, particularly economic policy, Mr. Medvedev has begun to deliver on some of his liberal campaign rhetoric, in the process undoing some of Mr. Putin's legacy. One of his first steps has been to start replacing government bureaucrats on the boards of major state-owned companies with independent directors.

"It's the first sign that the government is changing its ideology," says Alexander Filatov, executive director of Russia's Independent Directors Association, which has been pushing for the change since 2002. (...)

"Don't expect things to change overnight," says David Aserkoff, chief Russia strategist at Moscow-based brokerage house Renaissance Capital.

Mr. Medvedev has cast himself as a modernizer. In one of his first campaign speeches in February, he said, "A significant share of the functions carried out by state organs should be given over to the private sector."

JURIST has an interesting column today by David Scheffler, former US Ambassador at Large for War Crimes Issues (1997-2001), now at Northwestern University School of Law, about the 10th anniversary of the establishment of the ICC:

True to its anti-treaty philosophy, the new administration abandoned any credible effort and took the unprecedented step of de-activating my signature and launching an assault on the court that realists in Washington only recently have begun to roll back. The neo-cons stoked such paranoia about the court and international justice that the administration’s self-destructive plunge into criminal conduct against detainees in the so-called war on terror demonstrated a hideously consistent attitude.

In Washington many lost sight of the court’s aim to bring to justice political and military leaders who orchestrate massive atrocity crimes against thousands in lawless regions where national justice fails. The court, entering its seventh year of work, struggles to meet that challenge in Darfur (with Sudan’s President Bashir now facing a possible arrest warrant for genocide), Uganda, the Democratic Republic of the Congo, and the Central African Republic.

As the American negotiator I argued that the court would need the United States to function effectively on the global stage. But following years of misconduct under the Bush administration, one might ponder whether it is the United States that needs the International Criminal Court to help restore its credibility and reassert fundamental principles of humanity.

The Associated Press quotes Khodorkovsky's lawyer Yuri Schmidt with regard to the submission of a request for parole: "We wish Dmitry Anatolyevich (Medvedev) success absolutely sincerely," Shmidt said at a news conference. "If he manages to achieve real independence for the courts, it would not be reform. It would be a revolution."

The Irish Times also has coverage:

"This is not an admission of guilt, not a confession," Khodorkovsky's chief defence lawyer Yuri Schmidt told a Moscow news conference of the appeal. Khodorkovsky has consistently rejected all accusations against him.

Khodorkovsky (45), once Russia's richest man, said in his appeal "my quarter-century work record, successful job experience in various capacities and large family all guarantee my proper settlement after release."

He said he met the conditions for early release, including having served more than half his sentence, as well as "diligently having worked in prison," but emphasized throughout that he was neither admitting guilt nor asking for a pardon.

In June Mr Medvedev told reporters in Germany that "the procedures for a pardon are open to any and all citizens convicted of one or another crime, including Khodorkovsky."

Mr Schmidt said he expected opponents of Khodorkovsky to obstruct his request for early release, despite Mr Medvedev's call for judicial independence.

More at Kommersant, the BBC, AFP, and the Moscow Times.

The technical problems affecting Russia’s oil supply to the Czech Republic “don't seem to have touched Poland, Hungary, or Slovakia, all of which are also supplied by the same pipeline.” This may be because Tatneft, one of the two key suppliers of Russian crude to the Czech Republic, said it had reduced deliveries in order to re-route volumes to Turkey, where it would get better prices. TNK-BP oil has won a court ruling overturning an injunction preventing it from using 148 foreign employees. Roughly half of the venture’s foreign staff have now received their work permits, with the rest having to leave the country. Chief executive Robert Dudley’s visa reportedly expires at the end of July and may not be renewed. Moscow has reiterated that it is “surprised” at attempts to politicize the TNK-BP situation. Gazprom is reportedly considering a $4.7 billion increase in spending this year.

Alisher Usmanov has abandoned plans to take control of Kazakhmys through a reverse takeover “amid concerns over the opacity of his business affairs,” and is searching for another way of merging. Russian industrial production rose last month at the slowest pace since January 2003. Acron, the Russian producer of nitrogen-based fertilizers, is marketing 10% of its equity in London. A Russian ban on meat imports from eight countries, including Germany, France and Italy, begins today. Aeroflot agreed to buy five A321 aircraft worth a total of $452 million from European manufacturer Airbus.

TODAY: Medvedev grants Putin foreign policy implementation rights, admits Russia has no independent judiciary; Khodorkovsky to seek parole?; 90th anniversary of Czar Nicholas II’s death; NATO calls Russia over Georgia.

This week’s hardline foreign policy statements from Dmitry Medvedev are being taken as evidence that the new president “will not stray from the often contentious course set by his predecessor.” Crucially, the new foreign policy strategy “grants unprecedented rights to Prime Minister Vladimir Putin” to implement foreign policy measures, a role previously only granted to the president.

It is being reported that former Yukos chief Mikhail Khodorkovsky, who “has become a symbol of the country's politicized legal system”, may request parole this week. The Justice Ministry has replaced Russia’s representative to the European Court of Human Rights in Strasbourg twice in one month. Yulia Latynina on the Cherney/Deripaska case which is to be heard in London: “It is truly a sad testament to the current state of affairs when a London court considers Russia's reputation as being worse than Cherney's.”

There's an interesting letter to the editor in the Washington Post today from two former Ambassadors disputing Henry Kissinger's recent article. Garry Kasparov has also recently clashed with Kissinger, whose renewed interest in the Russia debate has been followed closely on this blog.

Misreading Russia

Tuesday, July 15, 2008; Page A18

In his July 8 op-ed, "Finding Common Ground with Russia," Henry A. Kissinger made two questionable points.

He asserted that the emergence of two centers of power under President Dmitry Medvedev and Prime Minister Vladimir Putin may herald "an evolution toward a form of checks and balances." But that will depend far more on a strong civil society, with private property rights and an independent press, judiciary, legislature and nongovernmental organizations.

Russia insists that its oil supply cuts to the Czech Republic are related to technical, rather than “political” reasons, despite fears that it is trying to punish the Czechs for their role in the US missile defense shield. But it appears we’ve heard this line before...and the evidence is not especially encouraging. From Judy Dempsey in the International Herald Tribune:

"Three years ago, Russian oil destined for a Lithuanian oil refinery was also halted for technical reasons. Transneft, the Russian monopoly responsible for sending the natural gas through the pipelines, said at the time that the pipeline had been ruptured and would take a few months to repair. Oil deliveries to the refinery still have not resumed."

In the first meeting of its kind, Dmitry Medvedev has spoken to Russian ambassadors about his stance on foreign policy, focusing mostly on US plans for a missile defense shield in the Czech Republic. Russia Today, of course, does not tell us anything new when it reports that the main focus of Russia’s foreign policy is “to protect its interests while trying to avoid conflict”, but see the video below to hear some snippets from Medvedev’s speech, which accuses the US of “aggravation”.

Russia is receiving a battering in the press over its refusal to support new sanctions on Zimbabwe. An article in today’s International Herald Tribune provides a couple of possible reasons for this refusal. Despite the shift in public image, the article says, former President Vladimir Putin’s foreign policy is no different to that of Dmitry Medvedev, and reminds us that “Putin's top foreign policy adviser, Sergei Prikhodko, is now Medvedev's top foreign policy adviser, and accompanied Medvedev to the [G8] summit.”

Irina Filatova, writing for the UK’s Guardian, is in agreement, listing a number of positive developments in Russia’s home policy under Medvedev which, she says, clash with foreign policy moves:

“[...] while the jury is still out on Medvedev's democratic credentials at home, his foreign policy has been a direct and straightforward continuation of his predecessor's line: no change in relations with Georgia and practically none with Ukraine, no change in relations with Britain or the US. The latest development is the shameful veto of UN sanctions against Mugabe's illegitimate and murderous regime.”

The Czech Republic is reportedly suspicious of Russia’s claims that oil supplies have dropped due to technical reasons. There is speculation that the cut is a “punishment” for Czech involvement in US missile defense plans. “Up to date, Russia has never used energy as leverage against any EU member state, and we do hope that the Czech Republic is not being used to set the precedent.” Russia’s audit chamber says that several energy projects, “all of which have foreign participation”, did not achieve production targets last year. TNK-BP’s ongoing shareholder disputes have reportedly left it “without an approved 2008 investment program or an interim dividend”. AAR, the Russian shareholders in the venture, have reportedly expressed interest in buying BP’s 50% stake as a last attempt to gain control. Indian oil and gas company ONGC intends to buy 100% of shares in Imperial Energy, a British company operating in West Siberia and Kazakhstan. Following Total’s pulling out of Iran’s South Pars gas project, Malaysia’s Petronas is reportedly also assessing its involvement.

Saudi Arabia has offered to award major arms contracts to Russia in return for Moscow curtailing cooperation with Iran. President Dmitry Medvedev has approved the transfer of the state's assets in 426 companies to Russian Technologies despite reported resistance from the Kremlin. Prime Minister Vladimir Putin has called on the government to change its approach to regulating businesses after revealing that it spends nearly $7 billion per year investigating companies for procedural infractions. The Duma will begin to prohibit all banks, except those that are at least 50% owned by the state, from having names that incorporate the word ‘Russia’. Private lender Alfa Bank is to borrow $3 billion abroad this year for acquisitions ahead of a potential initial public offering. Metalloinvest is in $50 billion merger talks with copper miner Kazakhmys “as part of plans to build a natural resources business to challenge the dominance of western firms.” Kazakhmys says it is not planning a reverse takeover.

TODAY: Georgian president urges West to intervene on potential Russia conflict; Russia sends warships into Arctic waters, swaps Tajik debt for space-tracking system, seeks delay in action against Sudanese president; Name of Russia vote.

Georgia’s president has urged the West to confront Russia to prevent a potential conflict in its breakaway regions, saying that Russia’s actions are “killing international law”. The United States is “deeply troubled by Russia’s statement that its military aircraft deliberately violated Georgia’s internationally recognized borders”. In turn, Russia has announced that it will “take steps to neutralise the threat” of the US’ planned missile defense system.

Russia is sending warships to patrol Arctic waters “for the first time since the breakup of the Soviet Union”, in a move to increase the country's global military presence. One analyst commented that the move was "flag-waving, and that's basically it." Moscow vetoed Zimbabwe sanctions because “declaring UN sanctions over elections would set a precedent that Moscow has no desire to see established, given its own record in conducting elections, not to mention the record of its allies,” says a Russian journalist. It is being reported that Russia, together with China, is seeking a delay in action against Sudanese President Omar Hassan al-Bashir on charges of genocide, warning that it could have an adverse impact on the peace process in the region.

I have just finished reading the spectacular book "Judging Russia: Constitutional Court in Russian politics, 1990–2006" by Alexei Trochev, and wanted to take the opportunity to recommend that all those with an interest in Russia's future pick up a copy.

Don't let the title throw you off - Trochev's approach is not encyclopedic, but rather it is intuitive and conversational, and I don't think I will be the only one who found it hard to put down. This is the very first in-depth study of how the Russian Constitutional Court has gone through drastic changes in the post-Communist period, while shedding light on critical legislative-executive conflicts that lie at the heart of legal nihilism. It doesn't address all the questions that are out there (which would be impossible to cram into just one book) but it does provide a riveting exposition on the interplay between law and politics in contemporary Russia which rarely sees the light day.

For those looking to get beyond the commonly broad generalizations found in many legal studies on Russia, this book stresses the fact that Russia is not alone in feeling its way through the confusing morass of post communism. It is clear that Trochev's trenchant legal and political analysis comes from someone with no ax to grind, leading us into areas where few have ventured. I am currently in the middle too much work to give it a longer review - so for now, a recommendation will have to suffice.

I salute this author [who is not a member of my family nor someone I have even met] for this rare accomplishment.

Kommersant reports that Russia has warned of one more action aimed at preventing an American missile defence system in Eastern Europe. Russian Foreign Minister Sergey Lavrov announced that the Iranian missile threat was “implausible,” and so there were no reasons to install antimissile radar in the Czech Republic and interceptor missiles in Poland. Simultaneously, and without explanation, Russia reduced its oil deliveries to the Czech Republic by almost half. The Czech Republic signed an agreement with the United States on the location of part of its missile defence system on its territory last week. Kommersant adds that according to Deputy Foreign Minister Sergei Kislyak, “With all responsibility, I declare that gas trade with the Czech Republic or with any other traditional partner in the field is in no way tied up with sorting out the problem of deploying the third position site of the U.S. missile-defence system in Europe.” Kommersant adds that Senate Armed Forces Committee Carl Levin has said that the missile defences being formed by the United States “are not a defence against Iranian missiles” and the administration of George W. Bush should stop “putting a stick in the Russian eye.”

In an interview for Wirtschaftswoche Lukoil vice president, Leonid Fedun comments that his company can not compete with the Russian state because "the state can do everything". Fedun also expresses doubts in the interview that "state run" Russian companies can develop offshore fields. He states that the shareholders are behind the state intervention in the TNK-BP conflict and that internal circles having called for the Russian state. He speculates this move could be directed towards the sale of the company or get or out of the oil business because to his mind no-one was really interested in TNK.

You may recall that December of last year marked the 60th anniversary of the Universal Declaration of Human Rights, and so far into 2008, we have seen some steps forward as well as some steps back in terms of major events in international law.

On the positive side, we are seeing dramatic advancement in the prosecution of some of the world's most long standing human rights abusers, involving former heads of state everywhere from Latin America to Southeast Asia. Khmer Rouge leaders, for example, are finally being brought to trial in Cambodia (stemming from the establishment of a joint Cambodia-UN tribunal in 2006 to try former officials for crimes committed during the regime), albeit despite the fact that Ieng Sary, the former Khmer Rouge foreign minister, is now frail, in his eighties, and struggling to get through days in court.

The most stupendous development for human rights that has emerged this year is the US Supreme Court's ruling last month to reinstate habeas corpus for prisoners at Guántanamo Bay. The ruling means that prisoners will now be able to challenge their detentions in US courts, whereas previously they could be locked up indefinitely without trial.

Although we eagerly welcome this ruling, it is a shockingly overdue attempt to rectify what has long been a gross abuse of the most basic human rights.

John Lloyd, the former Moscow bureau chief of the Financial Times, had an interesting dispatch this past weekend about the unknown fate of numerous American prisoners in Stalinist Russia.

Cold-shouldered

By John Lloyd

When, in 1992, I travelled to the far northern Russian city of Vorkuta - established as the administration centre for a vast hinterland of labour camps - I met a young Polish diplomat. He was on a mission to unearth the files of the many thousands of Poles who had been imprisoned there. As we talked in a café, I noticed an old man hovering a little way away, clearly wanting to communicate but torn between eagerness and fear. Finally, he plunged towards my acquaintance, explained that he had heard his compatriot's Polish accent, and that he had been a zek, or convict, and stayed on.

That many Poles had been seized from their eastern territories which the Soviets occupied after the Nazi Soviet pact was well-known. That Americans - three generations of them - had been inmates of the Soviet death camps, much less. In The Forsaken, Tim Tzouliadis' clear, strong narrative discloses the terrible fates which awaited those - committed communists and apolitical innocents alike - who wandered into the Soviet sphere. Most never re-emerged.

Sean Guillory is disappointed with Russia's decision to block international action from the UN against Zimbabwe's Robert Mugabe: "Maybe it’s some kind of gangster code. All gangsters, of whatever stripes, stick together."

I fully agree.

Jonathan Steele has a column in the Guardian today which some of our readers may find controversial:

Now we have Medvedev insulted on his international debut, and pilloried in Britain and the US for allegedly backing down on sanctions against Mugabe (though the G8's threat was a good deal vaguer than Downing Street claims). Much ink has been spent in analysing whether he will be a force for change or continuity, but the answer depends in part on how he is treated by the west. If you want a new Russia, don't play the old tricks. (...)

How weird that western leaders punish the very man who wants to make Russia "one of us".

Quite an unusual story in the Moscow Times today that Vladimir Putin publicly criticized Alexei Miller of Gazprom regarding the company's monopoly over pipeline exports. The dressing-down of this ally was practically Zubkov-ian: "I would like to draw the attention of ... Miller to the fact that oil and gas companies still experience certain problems with access to your pipelines," Putin said, looking at the Gazprom chief executive. "They do, don't shake your head."

Whether or not this was just for show or represents new intentions, it seems that Igor Sechin of Rosneft was cashing in on an owed favor with this comment. Has access to the pipelines become a focal point of the clan wars? This push by some siloviki to break Gazprom's monopoly by law over pipelines could create some problems and challenges for Medvedev's reform plans.

The following news clip covers Gazprom CEO Alexei Miller's trip to Tehran to establish a cooperative relationship with the Iranian national gas company.

Peter Finn of the Washington Post has an interesting piece today on President Dmitry Medvedev's anti-corruption efforts:

On the way to the apartment, the professor and the student settled on the terms for everyone, recounted Alexander, 22. Each student would pay 500 rubles, or approximately $22, for each missing piece of work, and an additional $170 for a 4 -- the Russian equivalent of a B -- on the final exam. Alexander said he ended up paying about $280.

"It was reasonable," Alexander said. "You have to pay for your own stupidity."

From birth to death, corruption courses through the lives of Russians -- a phenomenon that newly elected President Dmitry Medvedev recently said has become "a way of life for a huge number of people."

Vladimir Putin has “scolded” Alexei Miller over companies’ access to Gazprom pipelines. Putin made a tour of a new oil rig in the Arctic. “The Russian pipelines of Nord Stream (in the Baltic) and South Stream (across the Black Sea) form an effective pincer movement, eagerly backed by key Russian allies such as Germany and Austria, leaving Ukraine and Poland open to Russian energy blackmail.” Gazprom is looking for new business opportunities in Iran after French oil major Total froze investment in a major Iranian field, citing political risk. The company warned that its import bill for gas purchases from Central Asia may more than double next year. TNK-BP’s Russian shareholders are “disappointed” that BP representatives rejected their proposals, and there is currently no immediate resolution to the disputes, but one UK paper reports that the partners are “back on speaking terms”.

Russia’s Finance Ministry says that troubles at US mortgage giants Fannie Mae and Freddie Mac do not pose a threat to the country's gold and foreign currency reserves. Russia holds about $100 billion in US agencies' debt, but says it has no immediate plans to reallocate. German Gref says that global financial turmoil will help Sberbank become one of the world's top 10 banks by market capitalization in the next five years. Sukhoi will announce 30 new orders for its Superjet-100 passenger aircraft this week. Trade between Russia and Belarus could top $32 billion in 2008 compared with over $26 billion in 2007. Mobile holding company Sistema is seeking to buy an operator in Bangladesh.

TODAY: Medvedev vetoes Zimbabwe sanctions; British press attacks Russia over spying allegations and possible nuclear weapons plans; in-depth look at corruption; Reverend Philip Miles returns to the US; Communist Party still fighting; Georgia vows to shoot down Russian fighter jets.

Dmitry Medvedev is Russia's “first post-Soviet leader”, says one British journalist, taking Russia’s side against “creeping expansion of the American military empire.” Another defends Russia against “furious public finger-pointing” over its refusal to vote for United Nations’ sanctions for Zimbabwe, which has drawn criticism from the US and UK. The US ambassador to the UN said, “the U-turn in the Russian position is particularly surprising and disturbing ... [and] raises questions about its reliability as a G8 partner,” and the British foreign secretary called the veto “incomprehensible”, although one article defends the move, saying that sanctions are “ineffective”. One journalist speculates that new Russian allegations of British spying are just “part of the usual tit for tat”. Another is concerned that “Russia is thinking of aiming nuclear weapons at western Europe for the first time since the end of the cold war.”

[Note from the editor: On 11 July, the Chita Oblast Court satisfied a petition of the Investigative Committee alongside the Procuracy (ICP) of the Russian Federation to extend the pre-trial detention of former Yukos head Mikhail Khodorkovsky until Nov. 2.

In his latest dispatch, our Russian correspondent Grigory Pasko takes a look at the methods used by the prosecutors and investigators, at times severely pushing the envelope of the law, with the aim of putting additional pressure on accused and their defenders.]

The “trifles” of life

Grigory Pasko, journalist

There are in the papers that Russian investigators of the MVD, FSB and procurators, as well as court secretaries (naturally, with the silent blessing of the judges themselves), fill out about their victims certain “trifles” that literally poison life for persons being investigated, accused, or convicted, as well as for their lawyers. In reality, these “trifles” are the grossest violation of criminal-procedural legislation. But, despite this, they have existed for decades, and representatives of the investigation of the MVD, FSB and procuracy are in no hurry to get rid of them. Because they’ve gotten accustomed to lawlessness. Because they know: the state is on their side – on the side of lawlessness.

Running a civil society NGO in Russia is incredibly difficult. Not only do basic operations for the smallest of outfits require more paperwork than a nuclear power plant, they are straddled by costs exceeding the establishment of a corporation and are hounded by inflexible visa laws.

Not only do these independent minded citizens have to deal with this, but also the occasional campaign of slander and smear attacks in the state-owned media (and I'm not just referring to Putin accusing them of being a pack of scavenging jackals). The website of the Finnish-Russian Civic Forum reports on the State's efforts to target a Nizhny Novgorod NGO, calling one organization a group of "swindlers only interested in foreign money."

Let's hope that this is not the pre-text for another shutdown.

Anne Applebaum has a new book review out of Peter Pringle's "The Murder of Nikolai Vavilov." Vavilov's story is a poignant reminder of the enormous potential of achievement of Russian minds, and the state's consistent ability to stand in the way of it.

Concentration camps, mass murders, wars, starvation: The history of the Soviet Union is not short of large-scale tragedies and crimes. But in cataloguing these events or counting up the dead, it's sometimes easy to forget that the Bolshevik Revolution left more than physical damage in its wake: It also destroyed culture, literature, art and science in ways that are not always simple to catalogue, to count or even to explain.

Though it is also the story of a man who was physically destroyed by Stalin's secret police, The Murder of Nikolai Vavilov is primarily an account of these subtler forms of damage. Its hero, Nikolai Vavilov, was one of the greatest of all Russian scientists, a botanist whose work led him, in the early decades of the 20th century, to the cutting edge of the then-new science of genetics. Yet even before his death in a KGB prison in 1943, he had been mentally destroyed by a twisted scientific establishment that valued quackery and political correctness over true science.

It was a terrible waste of an extraordinary mind.

Continue reading here.

Some of you may be too young to remember, but back in the late 1970s, the American oilman Nelson Bunker Hunt sought to protect his windfall profits from developing Libyan oil fields against inflation by teaming up with his brother, William Herbert Hunt, to corner the global market on silver.

Twenty-eight years later, it appears we have finally found the long-lost Hunt brother: Alexei Miller of Gazprom, who appears to be well on his way to cornering the global market on natural gas. Here's just a brief selection from Miller's greatest hits: a $2 billion exploration deal in Bolivia in the middle of a civil conflict, a multi-million dollar pipeline deal and exploration licenses in foreigner-unfriendly Venezuela (Kremlin arms deals helped grease the wheels), the Nigerian mega-offer which is seen "one of the boldest forays in the global fight for African energy assets," cooperation agreements and a new office in Algeria, attempts to purchase all gas from Turkmenistan at double the price, a joint venture with Kazakhstan, mid- and down-stream assets all across Europe, and finally - the blockbuster offer to take over all of Libya's gas. It seems that Miller has never met a gas market he hasn't wanted to buy.

But so far, the long lost Hunt brother doesn't look to be following a path toward the ill-fated demise experienced by his silver-speculating predecessors. Nelson Bunker and William Herbert came close but ultimately failed to corner the world's silver market when a spectacular crash occurred on March 27, 1980, when they failed to make the margin call on "Silver Thursday." Their fortunes were wiped out, they were banned from trading, and their names went down in history as being tied to one of the most egregious abuses ever seen in commodities markets.

Will Gazprom's global, monopolistic intentions lead to a similar fate?

Con Coughlin has a column in the Telegraph today, which argues that "before Mr Medvedev gets too carried away riding roughshod over Western interests, whether by obstructing Georgia's attempts to join Nato and the EU, or assisting Iran's nuclear programme, he would do well to understand that Russia needs the West more than the West needs Russia."

The author also mentions Mikhail Khodorkovsky, and suggests that if given the chance, this is exactly how the Russians would prefer to solve the TNK-BP problem. However Coughlin makes a couple factual errors that I have seen widely re-produced in the media. He writes that Khodorkovsky currently "earns a meagre 43 pence a day working in the prison's concrete factory." This is simply not true - he is not sewing mittens, sewing slippers, packing mittens and/or slippers, nor mixing concrete - he is being held in the pre-trial investigative isolator in Chita (the SIZO). The pretrial facility has no labor program, and Khodorkovsky hasn't been involved in these types of activities since December 2006 when he was held in Krasnokamensk.

Excerpt:

Russia's prison camps may have improved since Alexander Solzhenitsyn penned The Gulag Archipelago, but they are no holiday camp. Temperatures regularly fall to -33C in winter, and violence is an ever-present feature of the grim daily routine. Khodorkovsky was recently slashed across the face by a fellow inmate.

More on Gazprom’s interest in Libyan gas. One analyst says the company is “cornering all the resources”, and another report says the move will “thwart US efforts to limit Moscow's use of oil and gas as political weapons.” Gazprom has registered a 28% stake in power producer TGK-1, which it acquired last year. Serbia's government supports the sale of 51% of state-controlled Naftna Industrija Srbije to Gazprom, but thinks the price is too low. Rosatom has halted construction of Russia’s first dry storage facility for nuclear waste. French energy group Total has withdrawn from the giant Iranian South Pars gas field - part of the US campaign to pressurize Iran into abandoning its uranium enrichment program. Iran has downplayed the loss. Prime Minister Vladimir Putin will chair a meeting today on lowering the oil industry’s tax burden.

The labor union at Norilsk Nickel reportedly wants the company's board to reappoint billionaire Mikhail Prokhorov as its chief executive. Russia has begun replacing its state-run companies’ bureaucrats with independent directors. Russia's civil aviation industry expects to win contracts worth at least $1.5 billion at the UK's Farnborough Air Show. Russia may overtake Germany this year as Europe's largest automotive market by sales. State arms operator Rosoboronexport has pledged to sell $6.1 billion worth of weapons this year.

TODAY: More UK-Russia rows; population problems threaten economic security; Kasparov in the FT; new democratic political program; regulations for setting up NGOs “more complicated” than those for companies; Russia-Georgia conflict shows no signs of improving.

Adding to an already teeming list of “tit-for-tat accusations”, Yuri Fedotov, Russia’s ambassador in Britain, has accused the media of running an organised anti-Moscow campaign, and demanded a government response, after Whitehall sources accused the Kremlin of being involved in the death of Alexander Litvinenko on the same day that prime minister Gordon Brown met with Dmitry Medvedev to try and improve relations. One newspaper says that Britain is trying to “defuse” the row by “playing down” the claims. Another argues that Russia’s tactics will harm its future prosperity. Meanwhile Russia has “ignited a new row”, accusing British diplomat Chris Bowers of espionage. “Britain and Russia have uniquely bad relations with each other.”

Russia’s shrinking population “poses a serious threat to future economic growth and security”. A government incentive for mothers giving birth on Russia day supposedly saw “labor artificially induced on a mass scale.”

After the news that Russia has offered to purchase every cubic inch available of Libya's natural gas (this follows upon a similar, less publicized offer to Azerbaijan), is it even possible to identify any difference between Gazprom and the future natural gas OPEC itself?

Thanks to a long series of aggressive and innovative deals, agreements, and memorandums of understanding, the state-owned company has extended its grip everywhere from Central Asia to North Africa, Gulf of Guinea, and even the Americas in just the past few years. It is difficult to identify a natural gas supplier to Europe outside of Norway that the Russians haven't made a move on. Efforts to make headway with a common European policy appear completely stalled, as have the unfocused efforts from Washington to preserve energy competition (it's amazing in and of itself that the Americans seem more aware of the security implications than the Europeans). The cumulative effect of Moscow's energy strategy has pushed prices higher, cornered many companies and governments into poison pill commitments, and dramatically extended the political influence of an authoritarian government.

Just two weeks ago, when asked about the establishment of a gas OPEC, Russian Deputy Energy Minister Anatoly Yanovsky told delegates of the World Petroleum Conference: "We don't want to speak about a cartel organisation that would set prices with gas quotas. Absolutely not." (Vladimir Putin has said the exact opposite not long ago.) For once it seems apparent that the Russians are telling the truth this time about the cartel after years of flip flopping: they say they aren't interesting in forming a gas OPEC because they are the gas OPEC.

Garry's got a new op/ed in the Financial Times, which, among other arguments, suggests that recent platitudes offered by Terry Davis and Henry Kissinger show an inverse correlation between democracy and the price of gasoline. Robert Mugabe would have far fewer international problems with his autocracy if he had oil and gas supplies, Kasparov quips. Garry has publicly confronted Kissinger in the past.

Western flattery ignores the dark reality of Russia

By Garry Kasparov

Recently we have witnessed a flurry of high-profile and contradictory statements on the Russian state. In a role reversal, Russia’s leaders have been abnormally candid while several prominent western politicians and pundits have lavished undeserved praise.

For the BBC, it's a breaking news story; for author Steve LeVine, it's the subject of his polemic new book; but for Anthony Lane, the rather apolitical film critic of the New Yorker, Vladimir Putin's reputation for state-sponsored murder (deserved or not) is cause for some easy jokes.

In his review of the Angelina Jolie-headlined summer action blockbuster "Wanted" (a film about a secret society of assassins directed by the famous Russian Timur Bekmambetov), Lane finds a way to drop Putin into some pop culture humor:

"Mind you, we never discover who orders the kills: it could be governments, businessmen, or bishops. Is the whole film no more than totalitarian housecleaning posing as democratic do-gooding, and, if so, who will screen it for Vladimir Putin?"

Ouch - is this perhaps what Bekmambetov is saying with the movie? Best to just stay in Hollywood if that's the case. This of course isn't the first time we have seen this kind of dark humor over Putinist Russia surface in the mainstream.

The calm before the … what?

Grigory Pasko, journalist

Если Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда.

Usually, there is a calm before a storm. In the glass that is Russia’s turbid and muddy life, which the leadership of the country calls “the development of democratic processes and the further strengthening of the economy”, there can’t be a storm in principle any more: all the institutions of democracy have been suppressed, rallies and marches have effectively been banned, the opposition is splintered and atomized, the media are controlled… Against this background, with the arrival of the new president there all of a sudden arose expectations that perhaps something new might take place with the «YUKOS affair». Where could these expectations have come from?

The investigative isolator facility (SIZO) in Chita where Khodorkovsky and Lebedev are presently being held. (Photo by Grigory Pasko)

Ah, the delicate politics of official confirmation or denial - in a country where so many wantonly outrageous stories are leaked to the press, hearing the official comment during the morning briefing is often what separates news from libel lawsuits.

Following BBC Newsnight's blockbuster report quoting high ranking security officials (allegedly from MI5; video can be seen here) that they strongly believe the Russian government was involved in the assassination of Alexander Litvinenko, relations between the two countries have been rankled, and Gordon Brown's first meeting with Medvedev spoiled.

OK, that is certainly an accusation we have heard from many outside of the investigation, but where, the Russian ambassador to the United Kingdom is frantically demanding, is Downing Street's denial of this report? So far, mysteriously absent, and Yuri Fedotov is not happy about it (photographed here, talking with his favorite state-owned media).

The Financial Times reports:

Yuri Fedotov, Russia’s ambassador, said he had no doubt the BBC was correctly reporting its sources but insisted the allegation by security officials was without foundation.

“Since references were made to interviews with high level officials in MI5 ... it would be natural to have clarifications from Downing Street as to whether or not such comments were made,” he said. “If this is what they [the security services] are saying, then in Russia we would have to draw the necessary conclusions.”

You may not have known it, but Russia has a unique ability to "drive the Anglo-American world mad." Hmmm ... not sure if that is how I would put it, but this is the point of departure in a recent talk given by David Speedie of the Carnegie Council in the July 1 event. Get ready to brush up on your Morgenthau.

Blogger Matt Stone at the Global Buzz speculates that Condoleezza Rice's commentary on the Iranian missile (the photos of which appear to have been partially faked) during her visit to Georgia has drawn Tbilisi into the spat, with a double entendre warning to both Tehran and Moscow:

Iran fires off some missiles, US Secretary of State Condoleeza Rice responds with the statement "We take very, very strongly our obligations to defend our allies and no one should be confused of that," in Tbilisi, Georgia, with Georgian president Mikhail Saakashvili at her side. Rice was visiting Georgia during a time of escalating tensions between the United States and Russia over the Georgian separatist regions of Abkhazia and South Ossetia. Does anyone else get the sense that Secretary Rice's words were meant for the Russians as much as the Iranians?

The missile defense system in Europe that the Czech Republic endorsed a few days ago irks the Kremlin to no end, but it's designed to protect European allies from a handful of Iranian ballistic missiles. Because Russia's nuclear arsenal is so large, the interceptor system in Europe would do little to undermine Russia's nuclear deterrent. Nevertheless, the interceptor system is one bargaining chip in the US-Russia relationship (which includes disagreements over the territorial integrity of US ally Georgia). The nexus of the Iranian threat and US-Russian relations is one to watch. Rice's comments towards the Iranians (and possibly the Russians) in Tbilisi only deepened the intersection of important global developments in Europe/the Caucasus and Iran.

Lawyer Peter Belk and Alexandros Petersen of CSIS have a new article in the IHT discussing Russia's credibility problem as a member of the G8, and what can be done to solve it (actually, I believe the authors quote the Spider-Man movie: "with great power comes great responsibility").

Is Russia ready to become a global superhero then? Commanding the respect and prestige of a global power? Moscow's recent calls for curbs on Zimbabwean President Robert Mugabe definitely looks like a step in the right direction as a responsible and conscious global citizen, and a break from the trend of sheltering authoritarian states. Belk and Petersen argue that Russia has a right to complain against unfair Western criticism, yet these protests overlook the enduring, fundamental credibility problem in terms of rule of law - the country's current inability to conform to rules and standards of international banking and law, "the core strengths of the modern economic system."

Their advice to just let Russia alone handle this problem, which we think is poorly argued: "That said, Russia needs no direct interference from the outside. Medvedev has made clear that he understands the problem. It will take Russian action - and Russian action alone - to begin much-needed reform and restructuring. The United States and Europe would be best served by continuing to encourage these trends through a nuanced carrot-and-stick approach. Targeted foreign direct investment - which Medvedev acknowledges is a priority for Moscow - can be married, for example, with principled cooperation toward achieving Russia's accession to the World Trade Organization."

Viktor Vekselberg, chairman of Russian investment company Renova Group and TNK-BP shareholders, wants a "peaceful solution" to the joint venture dispute over management and strategy, and has drawn up a “four-point peace proposal”. Deputy prime minister Igor Sechin, meanwhile, said that the state supported BP's presence in the country. Gazprom is upping its bid for continued gas sovereignty, reportedly offering to buy all oil and gas available for export from Libya. Gazprom’s controversial Nord Stream pipeline, to ship Russian gas directly to Europe, is awaiting environmental approval from neighboring countries after the European Parliament “scandalously” demanded an additional study into the potential negative effects of the project. Gazprom and Poland’s PGNiG will discuss extending the Yamal gas pipeline. Centrica, owner of British Gas, has bought Norwegian natural gas assets from Marathon Oil for $375m.

Prime Minister Vladimir Putin has approved a list of members for a government commission overseeing foreign investment in strategic sectors. “New limits on foreign investment in Russian companies will restrict non-Russians to no more than 5% of mineral exploration companies.” But with foreign direct investment already lessening, what effect will this have on the Russian economy? Metalloinvest, the miner half-owned by Alisher Usmanov, signed several new contracts to supply iron ore to leading iron and steel mills in Russia and Ukraine. Coca-Cola’s attempts to break into Russia’s kvas market are failing. Bank Rossiya, “otherwise known as the bank of Putin's friends,” is renovating its image and performance.

TODAY: Russia "upset" over US missile shield; is Medvedev changing his mind on Zimbabwe?; Rice in Georgia, rattling Russia; Moscow awaiting explanation from Britain on Litvinenko claims.

Russia is “extremely upset” about the signing of an accord between Prague and the United States over the latter’s missile defense shield, and will “not be hysterical”, but intends to take “retaliatory steps”, said Dmitry Medvedev. The Czech deputy prime minister responded to Russia’s early threats of retaliation, saying “The policy of threats has no place in the Europe of today. Russia should calm down.” Medvedev appears not to be signaling the “softer Kremlin line” that many had hoped for ahead of the G8. His success at the summit “was decidedly mixed”, says one report. Despite an apparent agreement on Zimbabwe by G8 leaders, Dmitry Medvedev is showing signs of changing his mind, postponing a vote on sanctions until tomorrow. One Russian reporter writes, “the mystical aura around Putin has vanished, and Medvedev has not been able to fill his shoes.”

There are quite a few reasons for people to be worried about the Russian government's international internet activity. The most prominent example was of course the famously crippling "cyberwar" waged upon Estonia in the wake of the Bronze Soldier scandal, which made the term "denial of service attack" an expression of common parlance in Eastern Europe. We've seen hackers from Russia successfully shut down the websites of Radio Free Europe in an unusual case of innovative censorship. There has also been a strong uptick in cross-border internet espionage, usually with the Chinese stealing the headlines - but MI5's recent threat assessments would also mean that Russia is probably also an area of concern. We have even seen an alleged attempt by an organized group of Russian internet users to remove a video we posted on YouTube detailing human rights abuses at a Yekatrinburg prison (it was only reinstated after a prolonged fight and media coverage - and has currently gathered more than 97,000 views).

And if we were to measure this by the way the Kremlin treats its own citizens online, than we wouldn't be encouraged by recent reorganizations to oversight agencies or the jailing of bloggers.

Even with all this considered, I really don't think I like the sound of Sweden's new "snoop" law, which will provide the authorities with the legal right to monitor and scan the details of 80% of Russia's internet and telecom traffic through the country. This seems to rank right up there with the recent Viacom-YouTube scandal which might require them fork over users' data - more and more tools of repression available to governments.

I need not remark about the kind of potential violation of privacy such a law poses - how could the authorities ever separate Kremlin-related activities to scan from normal use by citizens? It appears the Swedes did not take kindly to the sharp words from Moscow following their refusal to extradite to their courts...

National Mirages

Grigory Pasko, journalist

When former president of Russia Vladimir Putin was singing the praises of the realization of the National Project for health care, only someone dense and lazy wouldn’t have had the thought this whole big PR bacchanalia was needed for the creation of at least some kind of positive image for the then little-known Dmitry Medvedev. It was none other than Medvedev who was responsible for these same National Projects, which, in the words of Putin himself and Medvedev himself, were “extraordinarily successful”.

Photo: The St. Josef clinic in Regensburg (Grigory Pasko)

A news clip of the signed agreement between the United States and the Czech Republic to install anti-ballistic missile shield sites to defend against a potential attack from Iran. Russia has boldly promised a military response - can anyone guess what that might be?

It is a frequent threat from Gazprom executives that if Europe doesn't start unilaterally opening up to allow the Russian state to purchase distribution and direct sales assets, that they will decide all of a sudden to send the gas to the East to slake China's growing industrial thirst for energy. We saw this one as another bluff.

An excerpt from an Energy Tribune article backs this position up:

There was something unusual about Alexander Medvedev’s visit to Beijing in May: the newly elected Russian president didn’t take his energy minister along. This might easily be explained by claiming that Medvedev just wanted to chat with his Chinese counterparts, but that doesn’t make much sense. Russia and China have been trying to conclude a number of oil and gas pipeline deals, some of which have been pending for years.

Some high quality economic analysis of Russia's consumer-driven inflation problem by blogger Edward Hugh:

In this post we will look at the general macro economic situation of the Russian economy, and we will see that, with output in the resource sector effectively at or near its peak, the main drivers of Russian growth are now construction and domestic consumption. Since long term labour supply issues mean that Russia is unable to comfortably grow at its current rate of expansion the end product is rising inflation and structural distortions in the development of the manufacturing sector. Policy limitations at the level of fiscal demand management and exchange rate adjustment mean that this whole process is only being accelerated rather than contained and as a result the living standards improving boom could easily, under unfavourable circumstances, be converted into precisely its opposite: an impoverishing bust.

This one is from the Globe and Mail:

Nothing better illustrates the limits of the G8's power than yesterday's call for petroleum suppliers to boost production and refinery capacity. In a world in which the demand for oil increasingly exceeds the supply, that exhortation is only a bromide, unlikely to persuade oil-producing nations such as Nigeria or Venezuela to raise their output and drive down their prices. The eight developed countries, including resource-rich Canada and Russia, which are already increasing capacity, may express “strong concern” about high commodity prices. But yesterday's summit statement resorted to a clichéd call for more energy efficiency and alternative sources of energy. (...)

The lesson from this G8 summit is that the developed nations should concentrate on what they can do together to protect their economies in these difficult times. But if they cannot agree on why energy prices are high, they can only issue platitudes.

Their bland and unimaginative energy statement is a lost opportunity.

Madeline Albright and William Perry argue in the Los Angeles Times that Sen. John McCain's call to boot Russia from the G8 is problematic:

This week's Group of 8 meeting in Japan raises some important questions about Sen. John McCain's approach to the art of diplomacy. McCain has suggested that Russia be kicked out of the G-8 because of its government's retreat from democracy in recent years. This is the kind of proposal one might expect from a party candidate seeking to differentiate himself from the policies of an unpopular predecessor. It is not, however, a good idea.

The problem is not in McCain's analysis but in his proposed remedy.

On his recent trip to the Caspian, Medvedev did not sign any new energy agreements, but leaders of Russian energy companies “portrayed his visit as a success for Russia's strategic interests” all the same. TNK-BP is facing new demands for information from the Russian authorities regarding a group of foreign employees. Members of AAR are understood to have met with BP investors in the UK to combat negative media portraits. Gazprom will buy its gas from Central Asia at double today's rates from next year. Jack Gerard’s new role as the chief spokesperson for the oil and gas industry in the States will make him "the most hated man in Washington." The price of oil has dropped more than $8 in two days.

On “raiders”, the standard Russian term used for people or groups who use their links to corrupt officials to seize businesses illegally. Russia’s credit card habits. Canadian miner Kinross Gold Corp launched a new gold processing plant in Russia’s Chukotka region. Vimpel Communications will invest $267 million in the Vietnamese mobile telephone joint venture GTEL-Mobile. Russia has cut the limit on the percent of a company's share capital which can be floated abroad, down 5% to 30%.

TODAY: Russia unhappy over missile base in Czech Republic; British security forces ramp up work against Russian spies, are accused of undermining Russian government’s efforts to improve relations; Medvedev adds name to G8 statement on Zimbabwe; Albright criticizes McCain’s Russia stance.

Russia has not taken kindly to the signing of an agreement between the US and Prague under which a US radar base will be set up in the Czech Republic, threatening to retaliate “not diplomatically, but with military-technical means”. The Pentagon said the comments were "designed to make Europeans nervous about participating" in the plans and criticized its “bellicose rhetoric”, but promising to continue dialogue. And in a move likely to further irritate Russia, US Secretary of State Condoleezza Rice is due to arrive in Tbilisi, just after Russia's foreign ministry called Georgia a threat to stability in the South Caucasus.

Who is out to get Gordon Brown? Or perhaps more aptly, who isn't? The beleaguered British Prime Minister probably couldn't have had a more frustratingly empty first meeting with new Russian President Dmitry Medvedev on the sidelines of the G8 in Japan, and many are pointing to the ill-timed media leaks which have succeeded in aggravating the Russians.

Despite promising "very frank" talks with Medvedev on a number of critical issues ranging from TNK-BP to the British Council to the Lugovoi extradition, Brown seemed to go into the meeting lacking any kind of carrots or soft power, encountered by an uncharacteristically disinterested Medvedev.

Over on the Guardian's Comment is Free, William Harrison argues that releasing Khodorkovsky and providing citizenship for New Times journalist Natalia Morar (whom we've featured quite extensively on the blog) are the two tests for Dmitry Medvedev to show he means what he says about ending legal nihilism.

But if we are really to trust Medvedev's words on freedom of the media and "legal nihilism", we need to see some concrete action. Two cases that have hit the news recently in Russia can be seen as a test as to whether he really is committed, as his words suggest, to moving towards a more liberal style of rule in Russia – and, just as important, whether he is capable of achieving it.

This news clip from NBC explores the Stalin-era nuclear bunkers built 18 stories under the streets of Moscow, which since passing into private ownership in an auction are used for tourism (where visitors can simulate the ordering of missile attacks) and exclusive nightlife events. The symbolism of communism embracing capitalism with the reinvention of this Cold War military installation is not lost on anyone.

Joshua Keating often does some great blogging about Russia over at FP Passport. His column today summarizing a number of simmering tensions (the Georgia-Abkhazia escalations to the Czech missile shield deal) underscoring Russia's meetings on the sidelines of the G8 points out an interesting trend - the Kremlin's muscle flexing doesn't always produce the desired results.

In fact, it's clear Czech leaders are excited to be under the U.S. military's protective wing, and the same goes for Georgia's efforts to join NATO. Poland, which the U.S. hopes will also host part of the missile defense system, is still holding out, but that seems to be mostly about the Poles negotiating a better deal.

These countries, even if purely for cynical reasons, see cooperating with the U.S. as a strategic advantage. Russia, on the other hand, only seems to influence other nations by undermining their governments or shutting off their energy supplies. This can work in bordering countries like Georgia or Ukraine, but places like the Czech Republic and Poland no longer have to fear Russian tanks rolling down the street.

There's a lesson here: For all the talk of the Putin/Medvedev tandem's international assertiveness, they seem to lose a lot more battles than they win. And despite everything that has gone wrong in the last eight years, the United States still seems to be much better at making and keeping friends than the Russians.

The biggest Russia news of the day comes not from the G8 meeting in Japan but rather from the BBC, which is reporting to have interviewed "a senior security official" from Whitehall about the murder by poisoning of Alexander Litvinenko, who has a dropped a bomb by disclosing that there are "very strong indications it was a state action."

Our source said: "We very strongly believe the Litvinenko case to have had some state involvement."

Newsnight has also learned that officers at MI5 believe they thwarted an attempt last summer to kill another Russian dissident, Boris Berezovsky.

The BBC's source said the Berezovsky incident showed "continued FSB willingness to consider operations against people in the West".

A must-watch video news clip of this piece can be viewed here. Coincidentally, BusinessWeek has recently published extended excerpts of Steve LeVine's new book precisely on this subject.

Last week we published a translation of a front page article from French newspaper Le Monde regarding the recycling of charges against Mikhail Khodorkovsky. Below is an editorial note which followed the next day, which makes a flattering mention of this blog. The original article can be read here.

Russian Justice System Relentlessly Against Mikhail Khodorkovsky

Le Monde editorial, July 3, 2008

And here we go again: the new charges have been brought against Mikhail Khodorkovsky and Platon Lebedev. Their lawyer Yuri Schmidt has just announced that the new accusations have been formulated against his clients, former owners of the Oil Company Yukos. The General Prosecutor claims that Khodorkovsky and Lebedev, embezzled nearly 350 millions tons of oil and laundered the acquired funds. The news was announced on the blog of Robert Amsterdam, one of Khodorkovsky’s international lawyers.

We're all quite familiar with Igor Sechin, chairman of Rosneft, Deputy Prime Minister, and silovik extraordinaire, but few would describe him as a maven of open competition in Russia's energy sector.

Yet that is exactly what he appears to be doing, as Kommersant reported this past weekend that he has soared in above the law "ordered" the Federal Anti-Monopoly Service and Gazprom to allow indiscriminate third-party access to their monopoly on pipeline exports - namely, access for his own company. To call such a move "a conflict of interest" or "abuse of office" wouldn't really come close to capturing the incestuous nature of Russia's political environment and energy sector, as Sechin could personally stand to see his bank account swell with billions should Rosneft begin exporting natural gas to Europe.

But what will happen to the Kremlin's political monopoly on the pipelines? Affording them the ability to cut the taps to Western-leaning governments in the near abroad, and freeze out foreign investment projects they wish acquire?

TNK-BP’s Russian shareholders, AAR, failed to have the firm's CEO, Robert Dudley, dismissed, but signaled that they will continue to try to oust him. BP rejected claims that it had treated its Russian partners as "subjects, not equals". According to the head of OGK-1, Russian power producers expect coal prices to follow the cost of gas sharply upward in the coming years, and are switching away from coal as much as possible. Spanish oil company Repsol is in “advanced negotiations” to buy a “significant” stake in Russia's Sakhalin Island oil and gas reserves. The Russian government is reportedly in talks with UBS and other Swiss banks on management of its two oil wealth funds, worth a combined $163 billion. Russia's hydropower levels have fallen to their lowest in 16 years, exacerbated by a “chronic rail wagon shortage”. The prime minister of Latvia says that Russian plans to stop shipping coal and oil products via the Baltic states conflicts with its aim to join the World Trade Organization.

At the G8 summit, Dmitry Medvedev said that the global financial system is outdated. United Airlines has postponed opening a route to Russia from the United States by six months due to high jet fuel prices. Norilsk Nickel's recently elected nine-member board of directors has chosen Vladimir Potanin as chairman.

TODAY: UK security officers say Litvinenko murder was backed by Russian state; blogger given suspended sentence; Medvedev’s meeting with UK’s Gordon Brown leaves relations “in the deep freeze”, and “no particular progress” with the US; Russia and EU to scrap visas.

UK Prime Minister Gordon Brown has held his first face-to-face meeting and “extremely frank” discussion with Russian President Dmitry Medvedev at the G8 summit in Tokyo, but it is being reported that Brown received “little sign that Moscow was prepared to give ground” on issues of TNK-BP visas, the closing of the British Council, or the extradition of Andrei Lugovoi, and that relations remain “in the deep freeze”. Supposedly, Brown received “scraps of comfort” regarding investment and in the implication that Russia “would continue to be helpful on trying to nudge Iran down from its nuclear ambitions,” but other reports allege that Vladimir Putin spoke with Iranian President Ahmadinejad yesterday, pledging to speed up the construction of Iran’s first nuclear-energy plant. Perhaps the UK “should be asking whether there is not something about Britain in particular that rubs the Kremlin up the wrong way”. The Russian press sees the meeting as “completely positive”.

On his meeting with President George Bush, Medvedev commented, “There is no particular progress”, and the US has called on Russia to reverse its “recent provocative steps” in Abkhazia.

Upon reading Mikhail Fridman's plaintive comment piece in the Financial Times today, I have to say that I find myself in support of his position - not necessarily the handling of the affair nor the use the state's bureaucratic institutions instruments of pressure, but rather because the leadership of BP prevented TNK-BP from becoming all that it could be. That, in and of itself, is a great pity, as the dispute is not only bad for corporate governance and bad for Russia's business environment, it is also having a negative impact on the country's oil production during a time of great consumer need.

If I could make just one broad, sweeping statement about the TNK-BP dispute, is to point out how it illustrates that Russia's lack of rule of law and non-functioning courts system doesn't just hurt political victims of the Kremlin such as Khodorkovsky, but everyone from consumers to the titans of industry in the AAR consortium and even Oleg Deripaska's Rusal.

BP has been treating Russians as subjects

By Mikhail Fridman

Today an extraordinary meeting of the board of TNK-BP, the oil joint venture, has been called in Moscow to remove Robert Dudley from his role as chief executive. Viktor Vekselberg, a 12.5 per cent share-holder in TNK-BP and chair of the board compensation committee, has also made a formal request to BP to nominate an independent candidate to the post. This is the latest development in our attempts to reverse years of underperformance at TNK-BP.

We have been left with no choice. Sadly, BP has refused to engage meaningfully with any of the proposals we have made in recent years. Rather than talk to us, it has chosen to misrepresent our objectives and the nature of the dispute between us.

VOA has an interesting book review of "Of Spies and Spokesmen: My Life As a Cold War Correspondent" by Nicholas Daniloff, a journalist who at one point was imprisoned by the KGB.

Nicholas Daniloff says that, although both sides know more about each other today, there are still many misperceptions. He says, while America tends to view Russia as a democracy and "probably a friend," for Russians, the "love-hate relationship seems to live on." He says Russians are quick to blame the United States for things that go wrong. According to Mr. Daniloff, it has become almost a "national pastime" for the U.S. press to criticize those in power, whereas in Russia those in power are suspicious of media criticism. In the post-Soviet period, he says, the regimes in the successor states, especially those in Central Asia, see little benefit in "looking problems straight in the eye" and tend to suppress dissident views. In the 1960's, Nicholas Daniloff explains, censorship was quite strict with hundreds of forbidden topics, and it was difficult for foreign journalists to have "any kind of relationship" with Soviet citizens.

Read the rest here.

"Oil and food prices are going through the roof, and the world isn't getting any cooler, so it's appropriate that these topics dominate the talk among the leaders of the world's main economies meeting in Japan right now. But British Prime Minister Gordon Brown has another issue on his mind, and that's murder," Steve LeVine writes at Oil and Glory, arguing that Brown will likely bring up the Litvinenko murder, the Lugovoi extradition, and the rest of of the unsolved high-profile murders in his first bilateral meeting with Dmitry Medvedev on the sidelines of the G8. LeVine wonders whether Medvedev will inherit his predecessor's "strange willingness to be seen as a killer, or a harborer of them," and goes on to detail how so many high profile investigations, from Klebnikov to Politkovskaya, are making zero progress.

Robert Amsterdam also reviewed LeVine's new book for the New York Post a little while back.

The Soviet Union may be dissolved, and the establishment of sovereign statehood firmly in place for several energy exporting Central Asian territories, but the pipeline architecture continues to represent the regional imperialism of Cold War Russia. Countries such as Turkmenistan and Kazakhstan have for years been flirting with new Trans-Caspian pipeline projects to Azerbaijan to circumvent the Russian control over exports to Western Europe (often resulting in higher prices being paid by Gazprom to lock down supply).

Robert M. Cutler of Carleton University has a good column on the Caspian pipeline challenge in Asia Times today (extracted below), which argues that Gazprom's attempts to build a monopoly in Central Asia are in some respects backfiring, as even the Azeris are refusing offers from Russia to purchase their gas reserves at market rates.

At present, about four-fifths of Kazakhstan's oil has nowhere to go but through Russia's pipeline system. Half of the rest is exported through the Georgian Black Sea port of Batumi, the seaside capital of the formerly rebellious Georgian province of Ajaria. The other half of the rest goes to China, which wishes to quadruple its oil imports from Kazakhstan from 100,000 to 400,000 barrels per day (bpd) by the end of the decade, although Kazakhstan, perhaps because of its experience with Russia, is hesitating at the prospect.

Remember back when George W. Bush "looked into Putin's eyes" and found a democratic soul for the world to trust? It appears that empty compliments and a lack of progress in relations with Russia will be the bookends of the Bush era.

AP: "In their first sit down as heads of state, Bush called Medvedev a "smart" guy who is well versed in foreign policy. Medvedev casually referred to Bush as "George." Yet they inched no closer on the missile defense issue during their more than hour-long discussion on the sidelines of a summit here."

From the LA Times: "You know, I'm not going to sit here and psychoanalyze the man, but I will tell you that he's very comfortable, he's confident, and that I believe that when he tells me something, he means it," Bush added.

The New York Times also tees off here.

From Richard Lourie in the Moscow Times:

Some countries have better reputations than they deserve. The Netherlands, for example, emerged from World War II with a nobler image than they warranted. In Poland, however, just the opposite held true. Russia today also seems to be a place whose image is worse than the reality.

Part of the problem, as always in Russia, is the weight of the past. The country can't seem to shake off the legacy of its brutality and injustice in the 19th and 20th centuries, which can be summed up in two words -- pogrom and Gulag. And so it didn't help that Vladimir Putin's presidency was littered with corpses in Shakespearean profusion. Spin and hype can't do much for that.

But what can turn things around are dramatic acts of enlightened clemency. It is an ideal time to free former Yukos CEO Mikhail Khodorkovsky. Having served half his sentence, he has the right to appeal for early release. Releasing him would win great good will for the new presidency of Dmitry Medvedev without necessarily reflecting badly on his predecessor. On the other hand, piling more years onto Khodorkovsky's sentence will only make Medvedev look weak and malicious, at best.

AAR, the Russian partner in the TNK-BP oil venture, is being sued for $362 million by BP in the High Court of London. BP is suing over a back tax claim. AAR responded by accusing the firm of “bullying tactics”, and meanwhile is set to begin legal action against chief executive Robert Dudley today, which could see him removed from the company if successful. This article suggests that the protracted dispute is predominantly about control, following comments from Mikhail Fridman on the nature of the conflict.

Vyborg Shipyard has begun building the first of two drilling rigs for Gazprom's Shtokman project in the Barents Sea. Power Machines will build a 26.8-megawatt hydrostation in northern Iraq by July 2010. Deputy Prime Minister Igor Sechin has given Gazprom and the Federal Antimonopoly Service a month to ease access for independent natural gas producers and oil companies to Gazprom-controlled pipelines. Sechin is chairman of Rosneft. Ukraine’s Naftogaz is in negotiations with Gazprom on joint production on the shelf of the Black Sea. Dmitry Medvedev has completed his energy tour of Kazakhstan, Turkmenistan and Azerbaijan. China Oilfield Services will buy Norway’s Awilco Offshore for around $2.5 billion. French oil major Total plans to spend $1.9 billion in 2009 developing of new wells and upgrading older wells in Indonesia.

Mobile phone operator Vimpelcom paid $561.8 million to boost its stake in Kazakhstan's carrier Kar-Tel to 75%. Metalloinvest, the iron ore and steel company controlled by Alisher Usmanov, has picked Merrill Lynch, Credit Suisse and Deutsche as organizers for an initial public offering. A group of State Duma deputies proposed a major overhaul of the Customs Code "aimed at simplifying the process of importing goods into the country and stamping out corruption." Oleg Deripaska is “offended” by the London High Court judge’s decision that he could be tried in Britain and his implications about the state of the Russian justice system. A new report from PricewaterhouseCoopers reveals that Russian bankers and their counterparts abroad view liquidity shortage as their biggest risk during the credit crunch.

TODAY: State Duma to quadruple funding for United Russia; Medvedev playing “good cop” at G8; UK says Russia spy activities are distracting from fighting terrorism; Medvedev warns Georgia over breakaway regions.

The State Duma has unanimously passed a bill quadrupling government funding for major political parties, entitling the ruling United Russia party to millions of dollars of additional government funding. The measure will leave liberal opposition parties with nothing, due to the stipulation that parties receive at least 3% of the popular vote in order to be eligible for funding.

British prime minister Gordon Brown will have his first meeting with Dmitry Medvedev today. The UK Foreign Secretary has reportedly promised the wife of ex KGB agent Alexander Litvinenko that Brown will press Medvedev on the matter of Litvinenko’s death. British officials are complaining that Russian spy activities are distracting intelligence sources away from uncovering terrorist plots. A “Russian dissident” associated with Litvinenko has been granted asylum by the UK, as has the leader of Russian youth opposition group ‘Pora!’.

Eduard Limonov, an opposition leader of the outlawed NatsBols party and most recently known for his involvement in the forced shutdown of the eXile, has declared Sept. 14 as "Prisoner Day," and is demanding that the authorities release all current political prisoners, including Mikhail Khodorkovsky.

Here's the report from Reuters:

Russia opposition figures calls for "prisoner day"

MOSCOW (Reuters) - A Russian dissident launched a campaign on Sunday in support of what he called political prisoners, demanding President Dmitry Medvedev free 25 people - including jailed oil boss Mikhail Khodorkovsky.

Eduard Limonov, the leader of the banned National Bolshevik party and a key organizer of the anti-Kremlin 'Other Russia' protests with chess grandmaster Garry Kasparov, called for a union of what he says are current or ex-political prisoners.

We're a pretty cynical bunch over here - always doubting in the motives of the powers that be. But I'm not sure what to make of this new Transitions Online article, which takes aim at Moscow's recent spate of profligate emergency aid packages and debt forgiveness. The argument goes that these much needed millions for poor countries are just a soft power experiment - a poison pill slipping in along with oil and gas deals to increase Russian influence, and "purchase" new friends. Is it such a negative development that there is competition now in the global game of generosity?

Still, until very recently, it’s been baby steps all the way, and most aid has come in the form of debt relief. Russia has cancelled, or promised to cancel, more than $11 billion in debt from African countries.

In 2005 Russia gave $97 million in development assistance, and in 2006, $100 million. Admittedly, that does not include contributions to worldwide health and education programs, but it’s about 3 percent of the aid given by Canada or Spain, countries with comparable GDPs. Alimov said Russia’s target for “the future” is to provide $500 million annually in development assistance, but that seems a long way off. (...)

So stay tuned. If Medvedev can negotiate the turf wars between the ministries who want control of the funding, if he can give foreign aid a prominent place in a foreign policy that has rested largely on energy deals, and if he can articulate an attractive set of ideals to go with it, then the world might yet see another – less glowering, more smiling – of Russia’s many faces.

You gotta love Antonio Brufau of Repsol - everything he says makes so much sense. Let's see if the Europeans can get their act together.

From the Financial Times:

Repsol chief calls for unified energy policy across EU

By Carola Hoyos and Mark Mulligan

The head of Spain's biggest energy company has lambasted European politicians' inability to formulate a unified energy policy. Antonio Brufau, executive chairman of Repsol, said yesterday Europe needed to consider energy as an integral part of its foreign policy.

He criticised Europe's lack of cohesion when dealing with powerful oil and gas producers such as Russia and Algeria. In an interview with the FT, he also said the European Union's biofuels targets were misguided, and questioned Europe's failure to develop a cross-border gas and electricity network.

"In terms of energy, Europe is not advancing in the right direction," he said. "We have to have one single voice, one single policy, one single market." The fact that Germany negotiated bilaterally with Russia for gas showed that "Europe was failing", he said.

Wired.com has broken the salacious story of the former U.S. Congressman Curt Weldon, who is currently under investigation by the FBI for attempting to broker several deals between Russia's state-owned arms exporter, Rosoboronexport, and the governments of Libya and Iraq. It appears that the Russians were eagerly seeking a middleman to move these weapons to states in ambiguous standing with the international community:

Weldon did not respond to e-mails and phone requests to be interviewed or comment for this article. But in a 2006 interview, before the FBI probe was public, Weldon spoke enthusiastically about setting up a "front company" to work with the Russian arms agency, Rosoboronexport. Weldon hoped this company could sell weapons to the Middle East, and other regions, particularly to countries where the U.S. has strained relations. He claimed the director of Rosoboronexport approached him to work with "an American company that would act as a front for weapons these nations want to buy."

Weldon called the proposal an "unbelievable offer."

Hot stuff. Yet another example of how the Americans simply cannot claim to be any kind of moral authority in discussions with Russia. Read the rest here. (Photo: Sergei Chemezov, CEO of Rosoboronexport, and quietly one of Russia's most powerful siloviki)

Every now and then, we post an exclusive translation from the RBK daily website, which puts up a pretense of being a legitimate business periodical but often tends to get carried away with its fawning sycophancy towards the power. We recently posted an excellent analysis by Neil Buckley entitled "The Three Unwritten Rules of Russian Television". The first of these rules was "give only the Russian side of the story". Well, it seems that this rule applies to other media as well, not just to television.

Below is an article from RBK Daily about the South Ossetian conflict. If you don't have any background knowledge, you would be forgiven if, as you read this article (especially the first paragraph), you came to the conclusion that it's about the legitimate government of some faraway sovereign country you've never heard of that is being mercilessly attacked by the Republic of Georgia, which has even tried to install its own puppet on a sliver of territory it has managed to wrest from the control of the legitimate government in the capital of Tskhinvali.

In the fall of 2007, Amsterdam traveled to Singapore for a speech at the International Bar Association, where he struck up a friendship with one of the country's leading democratic activists, the Dr. Chee Soon Juan. The two found a remarkable overlap in their respective issues of fighting for rights and rule of law within capitalist authoritarian systems. Since then, we've published numerous pieces by Soon Juan (this is significant, as Singapore is a country where blogging can land you in jail), and opened up an interesting dialogue of similar political trends in both the former Soviet Union and Southeast Asia. Soon Juan has forwarded us this column from the Guardian, which points out that every country should be wary of trading liberties for economic growth. We find the parallels to the Russia case to be numerous.

The new authoritarianism

More and more of us are willing to trade freedom for wealth or security

By John Kampfner

Why is it that a growing number of highly educated and well-travelled people are willing to hand over several of their freedoms in return for prosperity or security? This question has been exercising me for months as I work on a book about what I call the "pact".

The model for this is Singapore, where repression is highly selective. It is confined to those who take a conscious decision openly to challenge the authorities. If you do not, you enjoy freedom to travel, to live more or less as you wish, and – perhaps most important – to make money. Under Lee Kuan Yew, this city-state built on a swamp has flourished economically.

Unfortunately, not the right rankings. Today tucked away at the bottom of our Russia News Blast was a note that UK security services have declared the Russian Federation to be the #3 threat to the country's public security, trailing only behind al-Qaeda terrorism and nuclear proliferation from Iran. A little more info:

"The services are understood to fear that Russia’s three main intelligence agencies have flooded the country with agents, The Times understands.

There is reported to be deep irritation within the services that vital resources are having to be diverted to deal with industrial and military espionage by the Russians."

It's hard to know whether this is just antagonistic baiting ahead of the G8 meeting in Japan, expressing resentment over the BP issue, but this is not the first time we've heard this complaint of increased espionage from Russia in the United Kingdom.

The following joint statement from the Mikhail Khodorkovsky defense team was posted in Russian yesterday on Khodorkovsky.ru. Below is the translation - also see Robert Amsterdam's comment from last night.

Declaration of the defense of Mikhail Khodorkovsky

It is impossible to get rid of the feeling that with every step it takes, the investigation is trying to confirm the substantiation of the assessments of its actions as criminal.

Today, 3 July 2008 - The investigative committee once again demonstrated that it not only does not consider itself in any degree whatsoever bound by the demands of the law, but even openly juxtaposes its actions to the demands of the President of the RF about uprooting legal nihilism, ensuring the supremacy of the law, independent and fair justice.

Although it seems we hear more out of his sister Nina, Dr. Sergei Khrushchev, son of the former Soviet Premier Nikita Khrushchev, made a recent appearance at the Oregon World Affairs Council to discuss democracy in post-Putin Russia. Fast forward to 11:50 for the beginning of the speech.

Gazprom sees the price of Russian gas units reaching $500 in Europe by the end of the year. Dmitry Medvedev’s bid to win gas contracts in the Caspian could “tighten the Kremlin's stranglehold over Europe's energy supplies”. Gazprom has announced that Azerbaijan had agreed to discuss selling gas to Russia. Could ExxonMobil’s Sakhalin project run into the same difficulties that Shell and BP’s Russia projects have? The head of Repsol, Spain’s biggest energy company, has urged Europe to consider energy as an integral part of its foreign policy. Germany’s RWE faces new demands from Russian partner Sintez Group as the two companies seek to complete the purchase of Russian utility OAO TGK-2. Gas supplied to the Chinese border via Russia’s Altai pipeline will cost $10 to $15 more than the gas supplied to Europe. Energy machinery producer Power Machines will build a hydrostation in northern Iraq in a deal estimated to be worth $16-18 million. “In a bizarre event that exemplifies the chaotic nature of the dispute between TNK-BP's British and Russian shareholders, the Federal Migration Service invited a small group of reporters to witness the work-permit issuance.”

Michael Cherney, the former business partner of Oleg Deripaska, will sue for a 20% stake (worth $4bn) in Rusal in London, after a judge agreed that the case “could not be heard in Russia for fear [Cherney] could be assassinated or arrested on trumped-up charges.” Dmitry Medvedev wants to see fewer government officials and more independent directors on the boards of Russian state-controlled companies. Anatoly Chubais, former head of Unified Energy Systems, writes in today’s FT urging Europe to forge closer ties with Russia: “The beginning of EU-Russia talks presents a welcome opportunity to boost bilateral business relations”.

TODAY: Putin takes Sochi plans off track to comply with environmental organizations, tax cuts for NGOs raise concerns; UK press has reservations about Medvedev’s optimistic outlook on relations; Abramovich resigns as governor of Chukotka; a third of money for armed forces goes to corruption; poll reveals 50% of the Russian middle-classes do not believe in a Putin legacy of stability.

Vladimir Putin has ordered organizers of the 2014 Winter Olympics to relocate a number of planned facilities away from protected wilderness following complaints that some of the constructions would damage wildlife. "In determining our priorities - money or the environment - we chose the environment," he said. Putin’s decision to offer fewer tax breaks to Western NGOs has “raised fresh fears that the Kremlin had opened a new front in its war against free speech”.

Letters and a comment piece printed in The Guardian show reservations regarding Medvedev’s indication of wanting to improve relations with the UK. Medvedev is to make his “debut” at next week’s G8 summit. In terms of “asserting European values,” one source already see him as “following the course set by Vladimir Putin” in relations with the EU. Medvedev has fired Russia's envoy to the European Court of Human Rights.

It is very positive that there has been such a robust reaction from the international press with regard to the latest developments in Mikhail Khodorkovsky case - public awareness of Russia's political prisoners is tantamount to building a groundswell of support, allowing government leaders to overcome internal resistance and finally lift this stain of lawlessness on the country's reputation.

However it would not be honest if I didn't also express my disappointment and frustration with the inaccuracy of many of the articles, as these mistaken assumptions about the basic facts of these developments are being broadly replicated across the world.

Vladimir Socor at Eurasia Daily Monitor has an article on Russia's perspective on the upcoming partnership and cooperation agreement (PCA) that Moscow and the European Union are looking to negotiate beginning this summer. I believe that the PCA is a top foreign policy priority for Europe, and its successful negotiation could be the most important instrument in reducing impunity and legal abuses within the Russian Federation. This is something to follow closely.

Neil Buckley of the Financial Times has a great article on the state of Russia's state-dominated television news - where propaganda has become more subtle, glitzy, and effective:

Three unwritten rules seem to apply to the editors’ approach. The first is to give only the Russian side of the story. When, for instance, Moscow cut off natural gas supplies to neighbouring Ukraine in a payment dispute in 2006, Ukrainian voices were barely heard.

Second, keep the opposition off the air. Critics broadly tolerated by the Kremlin – the communists and ultra-nationalist Vladimir Zhirinovsky – get some airtime, but the pro-democracy opposition, including former chess champion Garry Kasparov and a former prime minister, Mikhail Kas-yanov, are almost entirely absent. Even Grigory Yavlinsky, twice a presidential candidate from the liberal Yabloko party, complains he rarely gets on national TV, or is “edited to make me look stupid”.

Rule three: don’t criticise the president. Putin-era TV news developed the habit of showing him daily jabbing his finger at unfortunate ministers, regional governors or the occasional oligarch. The government may be a bunch of incompetents, it implied, but good Tsar Putin is looking after you.

Photo: Vremya host Yekaterina Andreyeva handled Putin's nationally televised question and answer call-in show back in 2005 (Washington Post)

This comes from an interesting Moscow Times column by Andrei Piontkovsky:

But Moscow's self-destructive confrontation with the West can be halted, and its centuries-old debate between Westernizers and the Slavophiles can be put to rest once and for all. This, however, will depend on Ukraine's success on the path of European development it chose in the Orange Revolution of 2004 and 2005.

Ukraine does present a threat, but not to Russia's security, as Kremlin propagandists claim. The real threat is to the Putin model of a corporate, authoritarian state, unfriendly to the West. For the Kremlin it is a matter of life and death that countries that were once part of the Soviet Union but chose a different model of development -- Ukraine being the chief example -- should never become attractive to ordinary Russians.

Dmitry Medvedev is beginning to outline some specifics of his anti-corruption policies. Note the important mention of transferring powers back to the regions.

Mr. Medvedev said the plan includes tougher criminal punishment for corrupt officials and more rigid requirements for civil servants and judges. He said the new legislation must be in place by next year.

Combating graft should be a "matter of honor" for the government, he said. "Corruption in our country has become a way of life for a huge number of people," Mr. Medvedev said at a meeting with federal and regional lawmakers. "It has become a norm." (...)

"Those who take bribes...feel it involves no risks or consider such risks as negligible," Mr. Medvedev said. "It mustn't be so." Mr. Medvedev said the anticorruption plan must include transferring some federal powers to the r