October 2008 Archives

Derek Brower, an energy journalist and former contributor to this blog, has a piece in the new edition of Petroleum Economist providing a "report card" on the recently disappointing performance of the once unsinkable Gazprom. Excerpts below:

GAZPROM has become notorious for corporate bombast, but in Deauville, France, last June, it exceeded itself with a series of statements that now look comical. The Russian gas monopoly would become the world's first trillion-dollar company by market capitalisation within the next seven to 10 years, the company's boss, Alexei Miller, told a press briefing. Oil prices would double to $250 a barrel in 2008, he added gleefully. European gas prices, which are indexed against crude prices, could rise to as high as $1,500/'000 cubic metres (cm) by the end of the year, the firm suggested. Gazprom was sitting pretty.

Yesterday Russia's foreign exchange reserves fell below $500 billion for the first time in eight months, dropping to $484.7 billion, not just because of the $50 billion rescue package but also due to the dragging efforts from the Central Bank to shore up the value of the ruble. We thought that by now we would have seen a ruble depreciation, but this guy from Goldman Sachs has some other thoughts: "A stunning one-week drop, more than twice the fall in the previous weeks," said Anna Zadornova from Goldman Sachs. (...) "We expect the Central Bank to continue to support the currency in the near term by defending the ruble in an effort to calm the population's fears ... and because it perceives itself to be under speculative attack from the markets. (...) We believe the currency is mainly under attack by the Russian population." (Source: Moscow Times)

These are tough times for the Russian economy - and those days when the political leadership was bragging about its easy liquidity and its status as a shelter during the storm seem quite distant indeed. Credit is tightening up, so major international banks and financial institutions are all calling for early repayment of their loans to big businesses, and Russia's many over-leveraged multi-billionaires are finding themselves hard pressed to come up with cash to keep the various companies and assets they have pledged as collateral.

One need not worry about the fates of the country's numerous billionaire elite businessmen. Today trading surged on the Russian markets for the first time in weeks after the state bank VEB deployed the first measures of its rescue plan for Mikhail Fridman and Oleg Deripaska, and no doubt many others will follow.

But what about ordinary Russian citizens, struggling to pay off debts with rising prices, unemployment (Severstal cut its workforce by 25%), and upcoming inflation? Toss them in the gulag. Echo Moskvy reports on a new law going through the Duma which will make citizens criminally liable for prison sentences if they fail to repay loans. Sure, that ought to encourage small business innovation. Translation below.

Defense Secretary Robert Gates made some pretty interesting comments a couple days ago during a speech at the Carnegie Endowment for International Peace. With regard to the proposed anti-ballistic missile shield in Poland and the Czech Republic, Secretary Gates commented that Russia's military appeared to understand and accept that the system would not be aimed at deterring from Russia, but politically, the leadership decided to make issue of it. He also said the argument that 10 interceptors could put the Russian arsenal in jeopardy "is laughable on its face."

Coincidentally, today Russia denied that it has been slowing cutting down oil exports to the Czech Republic as punishment for hosting the missile system.

Doug Sanders at the Globe and Mail talks to Masha Lipman about how the "fragile bond" between the Kremlin and the business sector is coming under strain because of the economic crisis and the oligarch rescue plan. Sounds like the name of an ironic, obscure rock band, no?

"The Russian public accepted a non-participation pact in which the government delivers [prosperity] and the people do not meddle in politics," said Masha Lipman of the Carnegie Moscow Centre, a political think tank.

"And until now the government was delivering in a very generous way: People's incomes were growing faster than the economy; people's salaries were growing faster than the productivity of labour did. But now that the Kremlin will no longer be able to rely on ample resources, the question is to what extent will people be disaffected and how might they act."

In other words, they might become more interested in voting - real voting this time.

A boost in the price of crude oil helped Russia’s stocks to surge 20% yesterday, but the fluctuations in price are forcing some US oil majors to stall projects. Despite a record profit this quarter, Exxon Mobil is struggling to keep up with oil-producing nations who are keeping more oil for themselves in the face of falling prices. Moscow’s peacemakers working on the Nagorno-Karabakh conflict ‘are probably more concerned with increasing their political and economic influence in the crucial energy corridor’ of the Caspian.

The financial crisis: Russia hasn’t seen anything like the worst of it yet, says this article. The country's gold and foreign exchange reserves have fallen below $500 billion for the first time in eight months, with this week’s fall being the most dramatic yet. Russia’s bailout plan is seeing most of its money going to ‘well-connected Kremlin insiders’, with oligarch assets possibly being exchanged with the state as collateral - ‘a Kremlin trap’. AvtoVAZ’s warehouses ‘have been glutted,’ forcing the carmaker to halt production this winter, and Russian miners are anticipating a cut in production next year. A new railway being built between Russia and China could offer ‘a potential supply route for iron ore produced by Anglo-Russian miner Aricom’. The LSE has postponed its plan to open a Russian office.

TODAY: Deripaska denied US visa due to ‘criminal associations’; Lavrov blames Georgia; Russian interests in Latin America provide an arms-export showcase; ‘half’ of Russians satisfied with government; Ingushetian president dismissed.

US immigration reportedly denied a visa to oligarch Oleg Deripaska due to suspicions that he was involved in ‘criminal associations and relationships’. Foreign Minister Sergei Lavrov says that Russia is not to blame for the death of a Dutch TV cameraman during the Georgian war. ‘He is one of the victims of the war that the Georgian leadership started,’ Lavrov said.

It is widely thought that Russia’s renewed interest in Latin America and, in particular, its military links with Venezuela, ‘are a showcase for arms exports, not an attempt to nurture Latin American allies for a new Cold War with Washington’. Of course Russia wants to recover its sphere of influence, says this columnist, but it can probably only achieve this through force. ‘Russia needs to scale down its geopolitical ambition’ and ‘develop its human capital’. Prime Minister Vladimir Putin says that Russia views Kazakhstan as one of its closest allies.

[ATTN Lawyers and human rights activists: before you next use Skype, be sure to read this important report]

Here is a question: should we be relieved or even more worried by the announcement this week that the top three internet giants have adopted a common set of principals known as the Global Network Initiative (GNI), which promises greater protection of human rights and free speech with respect to each company's business operations under repressive regimes?

On the one hand, this is a bold step forward in corporate foreign policy, as Google, Yahoo, and Microsoft have taken the unprecedented action of all committing to the same voluntary code of conduct, one that was crafted by reputable organizations such as Human Rights Watch and the Committee to Protect Journalists. There is a fair argument that coordinated compliance could have a multiplier effect. Robert Boorstin of Google explains to the WSJ that "Common action by these diverse groups is more likely to bring about change in government policy than the efforts of any one company or group acting alone."

On the other hand, we would be hopelessly naive to think that the creation of the GNI were a gesture of corporate altruism, rather than a last ditch effort to repair their tarnished reputations after several high profile cases of privacy violations and complicity in human rights abuses. Although the code of conduct will have implications for all countries, including Russia, this CSR push comes in response specifically to China, which in 2005 jailed the dissident journalist Shi Tao after Yahoo surrendered his identity, and on Oct. 1, when a Canadian research report indicated that Skype allows the Chinese government to monitor calls.

As a lawyer who represents clients in extremely politically sensitive cases from Latin America to Russia to Asia, and one who has seen their defense negatively impacted by the conduct of certain foreign businesses and individuals, I cannot overemphasize to my friends and colleagues the importance of how tech companies choose to engage with authoritarian governments. This is something to watch very closely.

From Robert Skidelsky in the Financial Times:

Despite the professionalism of the rescue mounted by the finance ministry and central bank – and the budgetary cushion provided by the stabilisation fund, brainchild of Andrei Illarionov, Mr Putin’s discarded economic adviser – Russia carries a heavy burden of political risk. This is the real economic legacy of the Putin years. Mr Putin does not understand the need for a degree of consistency between economic and foreign policy: or rather the reconciliation he has sought has been based on Russia’s energy windfall. If this has now ended, as seems likely, the key assumption of his politics – that Russia can use its energy power to boost its world power without paying much attention to the sensitivities of anyone but the Russian electorate – has been destroyed.

Russia needs to scale down its geopolitical ambition to its real weight – that of an emerging economy with only 3 per cent of the world’s gross domestic product and a quarter of America’s living standard. Also, it desperately needs to develop its human capital. The Putin era is over but Medvedev’s has not begun. This is the real Russian crisis.

First Fridman, then Deripaska. Now a report in Reuters points out the obvious fact that the acceptance of corporate welfare in Russia is a Faustian bargain:

The billionaires have transferred stakes in some of their most prized firms from Western banks to the Russian state as collateral, handing the Kremlin the means to grab the assets should the oligarchs fail to repay loans or fall out of favor.

"The turmoil provides an opportune moment for the state to get a little closer to the equity that was sold in the 1990s," said Michael Kavanagh, metals analyst at UralSib. (...)

VEB has said no company would get more than $2.5 billion, but Deripaska's aluminum major, United Company RUSAL, received $4.5 billion to pay back debt to foreign banks, which it amassed to buy 25 percent in mining giant Norilsk Nickel.

"It is possible that neither Alfa nor UC RUSAL will find fresh cash to repay the VEB loans, and the state could eventually get the stakes in both Norilsk Nickel and Vimpelcom," analysts from UniCredit Aton said in a note.

The RUXX Research Department has produced a new report related to foreign investors' increasing concerns over the Russian business environment, with a focus on the dispute between minority shareholders of power generator TGK-4 and billionaire Mikhail Prokhorov (photo), who reneged on an agreement for a share buyout following the economic crisis, thanks to a special monopoly designation from the government. Minority shareholders believe that Prokhorov's group, Onexim, may have influenced the government to put TGK-4 on this list given the timing, and now they are lobbying the president to intervene.

Isn't it funny and sadly self-perpetuating when the victims of arbitrary and illegal state interventions seek to produce yet another arbitrary exercise of power to fix the problem instead of seeking legal remedy? It's tough to use a broken system to solve the very problems that it causes.

From RUXX:

The enraged minority shareholders, a group that includes 15 foreign and domestic portfolio investors and managing companies and thousands of individual representatives of four Western companies (among them a Bostonbased hedge fund Spinnaker Capital) have turned to Russia’s highest authority for help. In an open letter to President Dmitry Medvedev printed in Vedomosti, the country’s major business daily, the minorities called Prokhorov's strategy “a plot” and requested state intervention:

(AFP/Getty Images)

The Financial Times is reporting that an independent audit of Turkmenistan's much lauded South Iolatan field has been completed, confirming it as one of the five largest deposits of natural gas in the world, boasting reserves more than twice the size of Russia's (in)famous Shtokman Field in the Barents Sea.

Jonathan Stern of Oxford tells the FT that the field could take a long time to develop, and that "for now, the race for Turkmenistan’s gas is between Russia and China." Europe, as usual, is an unfortunate non-entity here.

Just a few years ago, initial public offerings from Russia were all the rage on the London Stock Exchange, as well as its junior index, the AIM, accounting for the City's chief competitive advantage of listing over Wall Street. Until the new rules were implemented in 2006, any given Russian company could launch an IPO without even having to maintain a website, without an English-language prospectus, and with very lax corporate governance and tax requirements. Christopher Cox once called it a glorified "casino," and indeed these relaxed system of regulatory arbitrage made it possible for Rosneft to do a listing based on stolen Yukos assets.

But as the deal flow from Russia to the LSE has ground to a sudden halt during this economic crisis, the market owners becoming less enthusiastic about their favorite emerging market. Today the Wall Street Journal reports that the LSE has scratched its plans to open an office in Moscow, citing reports that capital-raising activity in the CIS had slumped to its lowest level since 2004.

This one comes from Prof. Craig Pirrong on the Streetwise Professor:

In Darkness at Dawn, David Satter claimed that Yeltsin’s young liberal economists were actually prisoners of their Soviet educations. They believed Marxist dogma about primitive capitalist accumulation, and that any transition to capitalism would inevitably entail the enrichment of those with the least scruples. But, in their view, the creation of a market state would eventually tame and discipline these unworthy acquirers. Regardless of the original disposition of property and property rights, efficiency would ensure that resources would soon flow to high value uses, and that the managers and owners best able to create value would end up owning and controlling them. (Thus, I guess, they simultaneously believed in Marxist dogma, and the Coase Theorem as a reasonable approximation of reality.) To them, anything was better than state ownership and control, and primitive capitalist accumulation was merely an unsavory but necessary transitional step to a modern economy.

It didn’t work out that way. Institutions matter, and Russian institutions did not–and do not–fully encourage and support wealth enhancing Coasian bargains. Instead, rent seeking, the lack of a rule of law, and weak property rights have prevented the realization of the liberals’ vision.

So, it is likely that the pendulum will swing back towards state dominance, which is perhaps better described as state oligarchism, rather than private oligarchism. This trend has been evident for almost exactly 5 years–Khodorkovsky was arrested 5 years and a couple of days ago–but the financial crisis is accelerating the process dramatically.

Thanks to everyone who signed the petition to free Svetlana Bakhmina yesterday - it appears that the number of signatures is rapidly approaching 80,000. It would be great to 100,000, so please forward this one around.

Today the columnist Alexander Arkhangelsky at RIA Novosti (!) argues that the release of Bakhmina would be the state's first step in reconciling with Russian society:

A state that takes hostages is like a guerilla group of mujahideen—it stops being a regular power meant to enforce some general rules. Becoming irregular for the sake of expanding its domain, it becomes outwardly stronger, but weakens on the inside, like an occupying army weakens as it spreads out over the territory it controls and becomes demoralized in drinking bouts, chicken hunts and tomcatting escapades. The command displays increased self-importance, puts on parades and sends out orders, all the while trembling in fear from not knowing how to handle this damned victory.

Russia’s oil majors are putting pressure on the case for tax cuts in the oil sector, warning of a possible drop in output next year. Sibir Energy’s London High Court ownership dispute with Roman Abramovich has come out in the billionaire’s favor. Peter Mandelson has called to attention the ‘ultimate perversity’ of wasting energy in Russia, and suggested that the country could cut consumption by 45%. ONGC's bid to buy Imperial Energy is still under review by the Federal Anti-Monopoly Service, who believe it may limit competition. The vice president of Lukoil says that Russia should join OPEC. TNK-BP’s Robert Dudley says that Russia’s oil production has reached its peak.

The financial crisis is making itself felt in job losses. The Kremlin is trying to limit the amount of foreign debt taken on by its oligarchs in an attempt to prevent Russian companies from ending up in foreign hands. United Company RusAl will receive a massive $4.5 billion bailout fund - almost half of the total loans allocated - from state-run Vneshekonombank, to help it refinance a Western loan. The UK’s Business Secretary, Peter Mandelson, spoke highly of Russia’s financial prospects as he reached the end of his visit to Moscow, saying that the crisis had boosted diplomatic relations between the two countries. A share buyback for Norilsk Nickel was so oversubscribed that shareholders will only be able to sell 7% of the shares tendered - provided the court injunction to freeze them is lifted. The UK’s Vodafone will sign a strategic partnership with Mobile TeleSystems today. Bakasoftware - Russia’s internet ‘scareware’ scam. Russia and Iceland are to resume talks over a possible loan. Finnish builders are feeling Russia’s construction slump.

TODAY: Duma votes to station troops in Georgia’s breakaway regions; WWF report pessimistic on Russia’s environmental footprint; Khodorkovsky appeal rejected; judges abusing rights to close trials.

Russia's State Duma has unanimously voted to ratify treaties with Georgia’s breakaway regions of South Ossetia and Abkhazia, allowing Moscow to station 7,600 troops there ‘to protect them from Georgian attacks’. The presidents of Armenia and Azerbaijan will meet in Moscow to discuss the Nagorno-Karabakh conflict. Libya’s Muammar Gaddafi will visit Russia this week to discuss energy and military partnership. Ukraine’s Ukrspetsexport says Russia wants to push it out of the arms market.

Did Deputy Finance Minister Sergei Storchak’s release have anything to do with Finance Minister Alexei Kudrin’s support of him, wonders Yulia Latynina in a column on Russia’s debt and potential company seizures by the state. Why has Russia’s financial crisis not drawn more public protests? Perhaps because ‘people think such activists are crazy’? A liberal Russian political alliance blasts the government for the crisis.

The economic crisis and drop in oil prices has really brought forward some interesting and contrasting views on Russia - from those who think this regime and their ways of doing things are toast, to those who believe the Kremlin will come out on the either side stronger than ever.

Judging by the wide range of loans, energy/pipeline deals, and political cooperation agreements recently signed between Moscow and Beijing, it would appear that China has situated itself in the latter camp - giving a vote of confidence in the survival of Russia's petrostate authoritarianism, despite recent divisions.

But is this a sound judgment and a reliable prediction for future relations between the two countries, or just a hasty moment of mutually colliding interests?

It would be a lot easier to agree with some of John Bolton's views on the U.S.-Russia relationship for the next president had he not said such foolish things in the past. Nevertheless, he makes a good point:

A truly rational Russia policy has to escape both the persistent romanticism of Moscow in recent U.S. Administrations, and the desire of some Europeans to pull the covers over their heads and hope that things will work out by doing nothing. Too many Europeans believe they have passed beyond history, and beyond external threats unless they themselves are "provocative." Last spring in Bucharest, that mentality led Germany and others to reject U.S. suggestions to put Georgia and Ukraine formally on the path to NATO membership. Moscow clearly read that rejection as a sign of weakness.

In truth, what most risks "provoking" Moscow is not Western resolve, but precisely Western weakness. This is where the real weight of history lies. Accordingly, attitude adjustment in Moscow first requires attitude adjustment in NATO capitals, and quickly, before Moscow's swaggering leaders draw the wrong lessons from their recent successes.

Yulia Latynina at the Moscow Times points out that the Kremlin's preferred apparatus for stealing private property is changing:

The market economy is remarkable, but not because it prevents people from making mistakes. People do make mistakes -- and very big ones.

What will happen next? The collective debt of all Russian banks and companies exceeds $510 billion, which is roughly equal to the combined total of the country's stabilization fund and foreign currency reserves. It would be impossible to refinance such a debt in the midst of a Russian financial meltdown. Only the state can partially refinance it using its reserves and stabilization fund.

That means that the government's reserves and stabilization fund have replaced the prosecutor general and the Federal Security Service as the state's most effective tool for seizing coveted companies. As a result, experts adept at orchestrating takeovers of debt-burdened companies through government bailout and buyout schemes have become more important than those who rely on trumped-up criminal charges to accomplish the same goal.

The Wall Street Journal is reporting that the Kremlin's oligarch rescue plan is being fully deployed with the first major bailout of an individual, as $2 billion was tossed to Mikhail Fridman to pay back a loan from Deutsche Bank AG, allowing him to retain his 44% stake in Vimpelcom (VIP), one of the country's largest and most successful mobile phone operators. On Monday, a Russian court froze Fridman's stake in VIP, which actually protected the Alfa Bank founder from having the collateral seized by his creditors.

The Journal reports that for the $50 billion rescue package, they have already received more than $100 billion in requests, and that Fridman appears to be the first official beneficiary: The selection criteria for the bailout loans are supposed to be objective, but VEB's board is dominated by government officials and headed by Mr. Putin.

But we doubt that Fridman is very happy about all this...

Please visit the Svetlana Bakhmina site to sign this petition, which will be sent to President Dmitry Medvedev. You can read more about Svetlana's case here and here. Below is the text of the letter:

Dear Mr. President,

Please attend to the case of Svetlana Bakhmina, a Russian citizen sentenced to a 6.5 years' imprisonment term. In May 2008, she served half of her term. According to Russian laws, she may be released on parole.

Svetlana has two sons, aged seven and eleven. Moreover, now she is expecting her third child, which is due in December. Now Svetlana is in prison hospital. Nonetheless, the court has twice refused to release her on parole.

Mister President, we know that under the Constitution of Russian Federation, you may pardon Svetlana Bakhmina.

We, the undersigned, urge you to pardon her.

We believe that by doing so you will demonstrate to the people of Russian Federation and to the whole world that mercy and respect of human rights are the corner stones of a strong civilized state.

Although he used to wear the number 68 to commemorate Prague Spring, former NHL star slash advocate for Russia's new ice hockey league, Jaromir Jagr, has changed his tune. This comes from the New York Times via AOL Fanhouse:

"Here, it's not like in the U.S.," Jagr says at a different point. "You got such freedom, it's hard to believe. In the U.S. you have so many rules, everything's regulated and structured. When you make a mistake you pay for it - a lot." It is a theme that Jagr returns to often, the freedom of this strange place. It is not so much that his departure from New York has left a disquieting wake, but that he has discovered the unlikely and unexpected promise of Siberia. "Look at A-Rod," he says. "No matter how well you do - they always want more. Expectations only climb higher. In Russia you don't have to worry if you make a mistake. And that's what I love about living here. There's always another way to make up for it. Nothing's too serious. Nothing is a problem, and at the same time, everything's a problem. But somehow no matter how bad things are, you can always work it out."

Jagr's enthusiasm to bash the United States and praise Russia is a good example of the kind of sports nationalism we talk about so often on this blog, and, in many ways, is parallel to the investment dialectic we see coming from Barclays, Eni, E.On, and so many others.

Of course there's nothing wrong with preferring to live in Russia, and Jagr probably has a point about the unreasonable demands placed on high profile U.S. athletes. But it seems rather dismissive to both his fans and former teammates to just shrug off the country where he spent 18 seasons earning many millions of dollars, as well as an insult to his family's legacy (his grandfather died in a Soviet prison during Prague Spring). However, when Jagr refers to "mistakes," he could just be referring to his outstanding gambling debts and failure to pay taxes.

Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao have signed a ‘much-delayed’ agreement under which Transneft will supply China with oil via a new section of its ESPO pipeline. A new report from the International Energy Agency shows that global oil output is falling at a faster rate than originally thought, with a 9.1% annual rate of decline predicted if current conditions continue. Reasons for consumer concern over prices: BP’s profits are up 148% this quarter. Russia’s electricity providers are struggling with cash flow problems as customers postpone payments. Russia's Natural Resources ministry insists that there is no reason why Imperial Energy should not be sold. US Defense Secretary Robert Gates wants Russia and the US to update nuclear agreements and further reduce nuclear warheads as part of broader intentions to communicate a stronger message of deterrence. Back tax claims on Russneft have been have been cut by millions following an appeal by the company.

As part of a number of significant new financial agreements, China could lend Russian companies $20-30 billion. Silver miner Polymetal is having trouble keeping up with the demands of the financial crisis, although Russian imports are apparently not suffering. One analyst suggests that now is a good time for companies to reinvent themselves - and restart their public images - by rebranding. It’s not all doom and gloom, insists this article: ‘During a crisis, the economy rids itself of its most ineffective and outdated components.’ S7 wants the Austrian government’s stake in Austrian Airlines. Goodbye to the Volga saloon. Russia is in the process of swapping around $675 million creditor claims dating back to the Soviet Union for Eurobonds. Norway’s Telenor intends to fight a Russian court’s decision to freeze the shares it owns in Vimpelcom.

TODAY: EU to resume Russia discussions; Britain ready to open relations with Russia once again; Russian passports in Ukraine?; Medvedev responds to US sanctions.

The result of an EU delegation meeting with Russian foreign ministers is that the EU will discuss options for resuming partnership talks with Moscow when it meets for a summit in Nice next month. It is ‘inevitable’ that negotiations will resume, says French foreign minister Bernard Kouchner. Kouchner has also been quoted this week as saying, ‘We all know that they are handing out Russian passports’ in Ukraine’s Crimea region. The UK is ready to ‘re-engage’ with Russia, according to Business Secretary Peter Mandelson, who is in Russia resurrecting the Russian-British Steering Committee on Trade and Investment, which hasn't met since 2002.

President Dmitry Medvedev’s reaction to US sanctions for Rosboronexport is either sharply critical or blasé, depending on who you read. Medvedev has still not made his first state-of-the-nation address.

RIA Novosti and TASS are both reporting that a jury at the Moscow City Court has reached a guilty verdict for the former businessman and banker Alexei Frenkel, who stands accused of organizing the murder of central banker and money laundering crusader Andrei Kozlov.

Kozlov was gunned down on Sept. 13, 2006 on his way home from a soccer match. He had earlier initiated money laundering investigations into Frenkel's group, VIP Bank, and eventually suspended their operating license. Prosecutors are arguing that Frenkel organized the hit for $300,000 as "revenge" for Kozlov having put him out of business.

Despite my complete lack of faith in the Russian judicial system and the investigative abilities of the politically controlled procuracy, Frenkel may very well be guilty of the murder for all we know (broken clocks are right twice a day, after all...). Nevertheless, there are still some considerable unanswered questions.

La Russophobe has posted a translation of a very, very good column by Yuliya Latynina in Novaya Gazeta about the fifth anniversary of Mikhail Khodorkovsky's arrest. Latynina poignantly argues "The people surrounding president Putin were not taught how to manage businesses. The people around president Putin were not taught how to run a country. They were, however, taught how to annihilate enemies. And in the absence of enemies, they get invented. Especially if the people protecting the president from enemies can take over those enemies’ property in the process of annihilating them."

Recommended reading.

October 24th marked the sixth anniversary of the Nord Ost theater hostage.

We often pointed out the amusing foibles of those who attempt to inject Russia issues into the U.S. partisan debate. Sometimes it seems that liberals find themselves cowed into a defensive posture, praising the public benefits of Putinist authoritarianism, while other times it's the far right which can barely hide its envy and admiration for the efficacy of sovereign democracy. These ideological convictions and disagreements have become especially pointed since the invasion of Georgia.

Case in point, there is a small "war of the pundits" going down right now over at Reason.com, concerning who is making excuses for who with regard to the Putin regime. It all started when the libertarian Cathy Young (representing the "right wing" - I know, confusing...) published an attack piece against Salon.com's Glenn Greenwald, who had earlier written a column criticizing some (alleged) McCain statements about the war in Georgia being "unprovoked."

Young points out that McCain never described the war as "unprovoked" during the debates, and then remarks that Greenwald and others appear to be confusing their past sympathy for the social ideals of the Soviet Union with today's Russia: "The Putin/Medvedev Russia is the opposite of everything today's left supports: It's a land where billionaires flaunt their $20,000 watches and $350 million yachts, social services are slashed to a minimum, religion is entangled with the state, ethnic bigotry flourishes, labor unions are trampled, and homophobia is rampant and officially condoned."

Greenwald then published a response, and a rousing game of pundit ping pong took off from there. He writes:

The following is a translation of an opinion column by Grigory Pasko published in the German newspaper Tagesspiegel.

Joyful Books, Sad Truths

By Grigory Pasko

There is a funny book in Russia, the Russian Federation’s penal code. It is funny because it is so far removed from reality that it is impossible to read without laughing, if only reality weren’t so cruel and grim. There are innumerable sad examples in the Russian justice system. This is particularly clear in the continuing harassment of the so-called “justice” relating to the actors in the “Yukos case.” Article 6 is called the “Principle of Justice.” It states that the punishment must fit the character and degree of social danger of the crime. Mikhail Khodorkovsky, Russia’s most prominent prisoner, probably does not find this article particularly hilarious. On Saturday he completes his fifth year in prison, where he sits because of supposed tax evasion. He is denied release on probation because he apparently refused a training course in prison to learn to sew. To give an interview he is locked up.

Today the Wall Street Journal is reporting that the British bank Barclays is looking to raise some $10 billion in capital from Kremlin-controlled banks Sberbank and VTB. The bank has studiously avoided any government bailout plan in the UK, which could result in restrictions on dividend payments and state influence over board seats. However it seems unclear how Barclays feels about Russian government influence over their operations. So what has led this fine British financial institution to the doors of the Kremlin?

Barclays CEO John Varley has been strenuous about his opposition to state intervention in the banks, commenting that "Those who have government shareholdings will be more constrained in their strategic and operational flexibility than those who are independent. (...) There will be some people in the employment market in the United Kingdom who will make the judgement that they don’t want to work for an organization that is controlled by government."

Varley, it should be noted, does not comment about what it would be like to work for a foreign government, or how it would impact the performance of a bank.

The attentive reader may recall that Sergei Lavrov got a little bit prickly in response to U.S. sanctions on the state arms exporter Rosoboronexport. During yesterday's press debriefing at the State Department, one journalist got a brief response out of Sean McCormack, which shows that the U.S. is getting bit annoyed with Russia's insistence that its helping out on Iran is seen as "a favor" rather than a mutual interest. He's got a point.

QUESTION: Sean, kind of old business from Friday. Sergey Lavrov expressed some irritation about the sanctions that the United States imposed against that Russian export firm Rosoboronexport or whatever.

MR. MCCORMACK: Yeah.

QUESTION: And he said that it was a case of unilateralism vis-à-vis Iran and that this will cause Russia to sort of approach the P5+1 process with diminished zeal. And I was wondering, have they communicated that to you?

MR. MCCORMACK: I don’t know, Dave. I don’t know if they’ve communicated directly. I know that we – with the Russian Government, we have been in contact specifically with respect to this designation. Yeah, and as for the Russians’ devotion of energy to the P5+1 process, look, this isn’t – as I’ve said before, this isn’t a favor to us. You know, Iran having a nuclear weapon isn’t in Russia’s interest. It’s in nobody’s interest. So working diplomatically to see that they don’t have the abilities and the know-how and the technology and the hardware to solve some of the toughest problems that could lead to a nuclear weapon is in Russia’s interest.

Prime Minister Vladimir Putin and Wen Jiabao, his Chinese counterpart, will meet today to discuss the details of a potential oil export deal, which could see China offering Russia a $25 billion loan. Vietnam, meanwhile, has signed an oil exploration deal with Gazprom. The UK’s BG Group has agreed to buy Australia's Queensland Gas Company for $3.4 billion. ‘We do have to see what happens with the world oil price before jumping to conclusions about impending economic collapse in Russia.’ Russia’s duty on crude oil exports is to drop at the end of the year by roughly $70 per ton. Chevron Corp has displaced BP as the world’s third-largest, non-state oil company.

‘Russia and metal stocks are toxic.’ Will the Russian film industry, amid rising production costs, survive the credit crunch? Major airline Krasnoyarsk Airlines has all but ceased operations due to debt issues. The Kremlin will bail out Russia’s construction companies by buying over $5 billion worth of new apartments, and says it is keeping careful tabs on the ruble, although it has just hit an 18-month low against the dollar, and analysts say that a devaluation is just a matter of time. Several restaurants and some sellers of consumer goods have reportedly stopped accepting credit cards in Moscow. Vladimir Putin has warned against taking ‘aggressive protectionist’ measures to deal with the crisis, and President Dmitry Medvedev signed into law a new set of measures to protect the banking sector last night. Barclays, the UK’s third-largest bank, is in talks with VTB and Sberbank over a potential fundraising opportunity. The number of Moscow mortgages dropped by 30% in just three months this year.

TODAY: French police conclude Moskalenko poisoning was ‘an accident’; Russia criticizes US over Syrian attack, offers Cuba support; Saakashvili dismisses PM; British MP admits it was a ‘mistake’ to meet Deripaska; youth groups, internet firewalls.

French investigators have reportedly concluded that mercury found in the car of Karinna Moskalenko, former lawyer to Anna Politkovskaya and Mikhail Khodorkovsky, was the result of an accidental spillage.

Russia is up in arms over the allegation that US helicopters attacked a Syrian farm near the Iraqi border. Will the IMF’s newly agreed loan to Ukraine protect the latter from ‘cash-rich’ Russia, wonders The Economist. Georgian President Mikheil Saakashvili, dismissing his prime minister, said that he needed a new team to help him face the Russian threat. The Russian military is to offer defense expertise to Cuba this week.

Talk of a writer with a lieutenant-colonel

Grigory Pasko, journalist

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In the writer Zakhar Prilepin’s essay "Поедем на авто, несогласный?" ["Shall we take a drive, dissident?"] (the book "Я пришел из России" ["I came from Russia"], Limbus Press, the year 2008) is described the dialogue of the author with an employee of the FSB (the feesbeshnik [FSB-nik—Trans.] speaks first):

“Look here, you’re a famous person – but you’re not afraid that they’ll use you?”

“Who can use me, if I myself don’t want this? The CIA? The Pentagon? A masonic lodge?”

“Well, something could be offered to you too…”

“Nothing can be offered to me, I have everything. Things can only be taken away from me.”
Further on, the author comes to the conclusion that he and his interlocutor are really not all that different. “The difference, really, is in one thing: if it will be necessary to ‘seat’ me [lock me up—Trans.] – he will ‘seat’ me. But I wouldn’t ‘seat’ him…”, - the author of the essay concludes his musings.

Doug Bandow, a former Reagan hand, is one of those unique right-wing guys who pushes the realist soft policy approach with Russia (more Kissinger than McCain, that is). Today he argues that "the incoming U.S. administration should use the present economic uncertainty as an opportunity to refashion relations with Russia."

This guy used to publish favorable columns for payola from Jack Abramoff, so perhaps this should also be taken with a grain of salt.

From the Asia Times Online:

Without question, the landscape of diplomatic battles has been impacted deeply by the rise of petro-states in the context of ballooning oil prices. The question now arises whether this is just another bubble that will be pricked by the sharp recent fall in petroleum prices. Already, Western media outlets are gloating that the heydays of Russia, Iran and Venezuela are over as oil prices have plummet in response to decreased world demand. There are doomsday predictions that the healthy foreign exchange reserves built up by the petro-states are dwindling and that the next logical step would be a reversal of their policies of confrontation with the US. (...)

However, announcing the "fall" of Russia, Iran and Venezuela as a result of the about-turn in oil prices would be naive. A state's power in world politics is not absolute, but relative to the power of other states. If petro-states are on the back foot on account of the plunging value of their chief export, then the oil-importing nations of the West are stuck in an even deeper hole. The relative political power of the US and other Western states has taken a massive dip as a result of unregulated financial fiction, and petro-states cannot fall when their rivals are getting battered.

Silovik-in-Chief Igor Sechin appears to be expanding his passport stamp collection with another series of foreign state visits - this time to China - to announce agreements to deepen energy cooperation and establish frameworks to increase supplies to the East. His last trips to Cuba and Venezuela were shortly followed by the deployment of nuclear warships and fighter jets along with all the business deals.

It must be so nice to be the chairman of an oil company and have the opportunity to travel on the government's dime to go make more money for yourself. The man has at least four different job titles, which is something that would not be tolerated in most countries.

We only partially agree with this Financial Times piece, which explains why Russia's formation of an OPEC-like natural gas cartel with Iran and Qatar has some serious weaknesses which will in some ways prevent its ability to coordinate production. However the focus should be not only the price manipulation, but also the carve-up of markets and the steady reduction of competition. These suppliers may also be sharing development and investment plans to cause further distortions in the market. True, the biggest punch of the gas cartel at the moment is simply a PR stunt to panic speculators, but neither is this a development to just ignore.

That is where the similarities end. Unlike petroleum, natural gas is still for the most part split into regional markets served by pipelines. It is supplemented by a growing market for liquefied natural gas that, like crude, can be shipped to the continent where it fetches the highest price. Notwithstanding Gazprom’s sway over the European Union and success in bullying former vassal states, the economics of the two markets are different enough that a successful gas cartel is a pipe dream for now.

Had there not been a massive financial crisis crippling the U.S. economy over the past two months and seemingly dominating the public's short attention span for news, this very well could have been the foreign policy election of the post-Cold War era. Even Vladimir Putin has incredibly suggested that the war in Georgia was masterminded by the U.S. government with the aim of giving John McCain a vehicle to the presidency - though while a preposterous argument, one could still sense a note of disappointment that his "we are all Georgians" speech couldn't hold the headlines for more than a day.

Nowadays in their stump speeches, if either candidate talks about a financial aid package to Georgia, most voters will likely be thinking of bailouts for Delta Airlines and Aflac to shore up jobs in the Atlanta area.

The importance of the Kremlin-controlled piggy bank Vnesheconombank (VEB) is rising during this financial crisis, as the group becomes the government's critical instrument in its efforts to re-nationalize a large slice of the economy from the country's beleaguered elite business class. Eric Reguly at the Globe and Mail takes a quick look:

The financial crisis seems to have given the Kremlin the opportunity to reassert at least some control over the industries that were so haphazardly discarded during the Yeltsin era. The agent of influence is a government development agency called Vnesheconombank (VEB). The chairman of its supervisory board is - guess who - Mr. Putin. Some of Russia's most powerful government officials, including the finance and transportation ministers, prop up the rest of the board.

OPEC has received international criticism for cutting output in an attempt to prevent the oil price from crashing. Meanwhile the possibility of a ‘Gopec’ consisting of Russia, Iran and Qatar, has some observers worried. Russia and China are planning to sign a memorandum of cooperation in the oil sector, which includes a plan to direct part of the ESPO pipeline to China, and Rosneft and CNPC are preparing to sign a long-term supply deal. Gazprom says it will not need any loans to finance its investments this year. ‘We are not worried about our financial position.’

Oleg Deripaska’s Strikeforce Mining and Resources must postpone its IPO due to poor market conditions, and Deripaska’s Aughinish Alumina refinery is facing legal action ‘that puts his empire in jeopardy’. Will the oligarchs survive the financial crisis? Dmitry Medvedev is to present a series of measures to help the global financial crisis at the G20 summit next month. But Russia’s ambitious economic proposals will founder due to its demographic crisis, says this article. Germany apparently isn’t worried, with German companies planning to increase long-term investments there. Russia and China might protect themselves from the effects of the crisis if they pooled their resources, says one analyst. Severstal will pay over $300 million less for PBS Coals than originally agreed due to a coal price collapse.

TODAY: Lavrov unhappy with US sanctions on arms; EU to restructure Russian relations; Kremlin keeping tags on bloggers?; Lukhkov accused of influencing foreign policy under Vladimir Putin; UK’s Peter Mandelson under scrutiny for ties with Oleg Deripaska.

Foreign Minister Sergei Lavrov has condemned sanctions imposed on Rosoboronexport by the US State Department for selling arms to Iran as having ‘no international legal foundation whatsoever’. A new EU policy document suggests that Europe should restructure its discussions with Russia to solve ‘numerous difficulties’ affecting relations. Nguyen Minh Triet, the president of Vietnam, has arrived in Russia for talks on cooperation, closely following a visit by the Belarusian president Alexander Lukashenko aimed at strengthening financial ties. Over 50% of Lithuanians see Russia as a threat to the security of Balkan countries, says a public opinion poll.

The New York Times investigates Moscow’s Mayor Yuri Luzhkov’s influence on former President Vladimir Putin’s ‘aggressive’ Russian foreign policy, and receives a divided response from its Russian readers. One Russian television station is so worried about boring its viewers with ‘tame’ financial news that it has introduced a roundup of ‘crazy news’ to attract viewers. Is the Kremlin using ‘soft power’ to keep tabs on Russian bloggers without drawing attention to itself? The shooting of the owner of the opposition web site Ingushetiya.ru has been ruled an accident. Five members of the Young Russia movement were detained at an opposition rally held in Moscow over the weekend.

Here's an excerpt from the latest Richard Lourie column in the Moscow Times:

It is now in Russia's interest to release former Yukos CEO Mikhail Khodorkovsky from prison.

That wasn't always the case. Early on, the benefits outweighed the costs. Khodorkovsky was punished for his hubris. He dared to meddle in politics even though he was explicitly warned by then-President Vladimir Putin himself not to do this. This set a firm example for the other oligarchs, and they have taken it to heart. And Khodorkovsky's major oil company passed into Kremlin-friendly hands.

But things have changed in the five years since Khodorkovsky was arrested on Oct. 25, 2003. At the time, few were moved -- billionaires don't get much sympathy. People assumed that French novelist Honore de Balzac's dictum applied: "Behind every fortune there's a crime." But while Khodorkovsky behaved manfully in prison and elicited respect, his fortune dwindled.

Russia also changed in the interim, becoming the odd hybrid it is today. Though social freedoms have remained fairly robust, the holy trinity of democracy -- free media, opposition parties and independent judiciary -- was reduced to the bare minimum. Though Soviet leader Mikhail Gorbachev has recently founded a new political party, chances are it will remain marginal. Nor is any significant shift in media freedom likely. Russians will have to get by with the Internet, Ekho Moskvy radio and a few small-circulation newspapers. The judicial system is the only point where any change of substance can occur.

Though there are other worthy candidates for release, it is Khodorkovsky who has become the symbol of Russia's compromised judiciary. Politically and economically, that symbol has become too expensive to maintain.

Five-year plan in prison

On 25 October of the year 2003 Mikhail Khodorkovsky was arrested

Grigory Pasko, journalist

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On 27 October of the year 2005 the press-center of the lawyers of Mikhail Khodorkovsky issued a statement from Mikhail Khodorkovsky (in Russian and English). In it, in part, was said: "Our country is facing great challenges. It is necessary to move the program for Russian development into the 21st century. It is necessary to build the army and law-enforcement system anew. To create from the ground up another bureaucracy that is interested in the fate of both state and society, rather than in unrestrained personal enrichment. It is necessary to abandon the fatal path of Russia’s transformation into an official source of raw material and make a decisive turn towards the new “knowledge economy.” It is necessary to keep as part of Russia the Far East and Siberia, which may fall under China’s control within a few years. It is necessary to rebuild Russia’s place and image in the world, which have been lost as a result of the lack of professionalism and sometimes of direct betrayal."

I have been receiving questions from several friends, colleagues, and a few reporters regarding the situation of Karinna Moskalenko.

As many of you recall, Karinna discovered what looked like mercury pellets in her car on Sunday, Oct. 12. That week she and her children fell ill. Karinna was worried they may have been poisoned. She went to the French police and asked them to investigate. By Tuesday, Oct. 14, international media had picked up on the story following comments made by Karinna to Echo Moskvy regarding the likely mercury discovery.

On Wednesday, Oct. 22, the French newspaper Le Figaro quoted unnamed police sources saying that the former owner of Karinna's car had been found, and that he said the mercury may have come from a barometer he accidentally broke in the vehicle a few months ago. By Friday, Oct. 24, reports emerged stating that the French authorities believed the most likely scenario explaining the presence of the mercury was that of an accident. The investigation, however, has not yet concluded, no official announcements have been made, and neither Karinna nor her children have yet fully recovered from their exposure to the substance.

From the Wall Street Journal editorial page:

Putin's Prisoner

Khodorkovsky dared entertain political ambition.

Five years to the day after his arrest and incarceration in a Siberian prison camp, former Yukos CEO Mikhail Khodorkovsky might have a rueful reason to smile. The ruble is at a two-year low, the Russian stock market is down 70% from its highs, and the price of energy is plunging. The bill for the Kremlin's economic cronyism and disdain for the rule of law is coming due.

Robert Amsterdam has a letter published in today's Telegraph on the Singapore case.

Democracy in Singapore

Sir – This week, the Singaporean opposition party leader Dr Chee Soon Juan and 17 others are standing trial on unlawful assembly charges, which are likely to result in punitive prison sentences.

These charges are unconstitutional, given the right to freedom of assembly outlined in Singapore’s constitution.

RA is quoted by the AmLaw Daily blog with regard to the break up of the TNK-BP and Gazprom deal to acquire a share in the Kovykta field.

"It's apparent that BP made a vast miscalculation in dealing with the Kremlin," says Robert Amsterdam of Amsterdam & Peroff, a frequent Kremlin critic and follower of Russian politics. (Amsterdam also represents imprisoned Russian oligarch Mikhail Khodorkovsky, on which he has an opinion column in today's Wall Street Journal.) "You know things aren't going well for Gazprom's cash flow when they can't even close a theft."

Read the rest here.

As noted, the Singaporean opposition leader Dr. Chee Soon Juan is appearing before court this week to fight preposterously trumped up charges of having participated in a protest without a permit - only the latest in a series of ruinous lawsuits and legal actions aimed at depriving him and his political party of their constitutionally guaranteed rights to free speech. I am assisting Dr. Chee with his international legal defense, along with many others. Below is his dramatic, landmark speech presented in court today before District Judge Chia Wee Kiat.

Your Honour,

This Constitution was written and promulgated when we wrestled our country back from the British colonial government. It wasn't just a flight of fancy on the part of the framers of the constitution when it was written. Every word was scrutinised and considered before its inclusion in the document.

The headlines are awash today with the dramatic quotes from the former Federal Reserve Bank Chairman Alan Greenspan, who in simple and unequivocal language directly assumed some responsibility for the current financial crisis: "I made a mistake."

It takes a big man to admit he is wrong, and I think it is commendable to see Greenspan not shy away from accountability.

It strikes me as very poignant to think of the deep impossibility of ever seeing Vladimir Putin or any other high ranking Russian official take a similar action, be it for Yukos, the Kursk, Beslan, Nord Ost, the crisis, or any other major problem of contemporary Russia. It would just simply never happen with this administration, and that, in and of itself, is worrying.

Last night I attended the Human Rights First 30th annual award dinner in New York City, where I had the opportunity to meet with the admirable Russian civil society leader Oleg Kozlovsky - a brave young man who is well known to my regular readers. As previously reported here, Kozlovsky was in town to receive an award from this organization along with the Egyptian blogger Nora Younis, presented by the well known actor Sigourney Weaver. Other notable attendees included Ted Kennedy, Mary Robinson, and Lyudmila Alexeyeva. Oleg blogs about his experience at the awards ceremony here, and an interview from the day before was also published here.

My editor James caught up with Oleg in New York today for a quick Q&A, which you'll find posted below. It's always a pleasure and honor to meet with one of Russia's brave young democratic activists, and I wish him the best of luck and success in his important work. - Robert Amsterdam

Q: Tell me about the ceremony last night ... what was it like to be thrust into the limelight alongside so many notable figures to receive this award?

Oleg Kozlovsky: Well, I certainly don’t feel like a celebrity, or that this is what the event was really about. I don't believe that this organization was necessarily recognizing my humble work, but rather the award is in recognition of the work of many other people - the real, true democratic heroes of Russia. In this case I'm seen as their representative, and I accepted the award on behalf on all of them.

It would be immeasurably beneficial to Russia's future, painful though it may be, if they could ever get around to doing something like this.

It was another rough day for Russian markets, as the RTS slumped 14 percent to 549.43 and the Micex down to to 513.62, which is the tenth consecutive weekly decline. Our devaluation prediction from Sunday did not pan out, but it certainly feels close.

Anders Aslund explains why in the St. Petersburg Times:

Putin is correct when he claims “that our economy is rather well prepared for lengthy external shocks.” But that is not enough. Thanks to Finance Minister Alexei Kudrin’s extraordinary steadfastness, Russia has maintained a large budget surplus and held huge reserves at the outset of this crisis. But $70 billion of the reserves have already fled the country and more will follow.

A crucial shortfall is that the government exploited the 1998 financial crisis to establish a dominance over the banking system by strengthening the position of five state banks, which still hold 45 percent of Russia’s banking assets. The problem with state banks is that they are inefficient. Therefore, the country suffers from very poor financial intermediation.

Putin seems set to aggravate this problem.

It's a scary situation when after oil and gas, a country's top export is arms. Somehow I just don't see that really helping the world.

Although India and China are traditionally the largest buyers, Russia has been ambitiously expanding its weapons customer portfolio and enjoying an estimated 23% growth in sales from last year. It's not even so much that scary dictators like Qaddafi and Chavez count themselves among the most enthusiastic and loyal customers, but rather what has Washington (and Israel) worried is the big bump up in arms sales to Iran, Syria, and North Korea.

Today the United States decided to impose sanctions against Rosoboronexport (along with a dozen of other firms from China, Sudan, Venezuela) which prompted quick and angry responses from Foreign Minister Sergei Lavrov and other officials, which outlined much of the exact same arguments that critics have against Gazprom. It's the return of the doppelgänger effect...

Tomorrow will mark the fifth anniversary of the arrest of Mikhail Khodorkovsky. Today Robert Amsterdam has an opinion article published in the Wall Street Journal in commemoration. Also see an article published earlier this week about the case by the New York Times.

Russia's Jailed Bellwether

A CEO's fate shows Moscow's true colors

By Robert R. Amsterdam

Five years after his arrest on Oct. 25, 2003, Mikhail Khodorkovsky is in a Siberian prison, his eligibility for parole denied by Russian courts.

The former Yukos CEO's Kafkaesque trial, conviction and banishment to the gulag have been accompanied by the rise of a corrupt cadre of state officials who have reshaped the country's politics and quietly generated enormous personal wealth. Since Mr. Khodorkovsky's arrest, Russia has been moving away from free-market principles, away from public-sector reforms, and away from the rule of law.

Even for those who may have believed the Khodorkovsky case had some basis in law, illusions were dispelled by the inability of the state to engineer a credible trial. Matters were not helped by the state's fencing of Yukos assets, or by the unconscionable treatment of the accused.

Russia's Energy Minister, Sergei Shmatko, lays out a long term plan for plying more influence in the global oil market. "But our approach differs from OPEC," Shmatko said. "We have different technologies. We are working on technology to create an oil reserve so we can quickly raise and cut production." One small step: calculating oil export duties bi-weekly as opposed to monthly. Or, you can get proactive in Latin America. And two weeks before EU foreign ministers will be debriefed on the consequences on EU-Russia relations from the war in Georgia, a report by EU diplomats concludes that Europe-Russia relations boil down to energy.

With oil prices dropping, Russia's talks with a weakened OPEC produce a pledge of greater cooperation, while admitting that "Russia is not a member of OPEC." Google, meanwhile, was thwarted in its effort to purchase the Moscow-based advertising agency, Begun. "The government urged support for Russian Internet resources and said strategic assets shouldn't be sold cheaply into foreign hands," said Olesya Vlasova, an analyst at UralSib Financial in Moscow. In moments of crisis, the contrarians can make for fun reading, while the realists can be a bit depressing. Nothing a strong beer can't, er, handle, or better yet, chocolate.

TODAY: Medvedev says Russia can emerge stronger from crisis; Duma approves bank bailout; the S&P casts a wary eye; Interior Ministry disputes journalist's death in Georgia; Georgia decries Russian troop build up in Ossetia; and Kangaroos cower from Russian schoolchildren.

Russian markets may be down 70 percent since May, but on a video posted on his website, President Medvedev assures the world Russia can "avoid banking, forex or debt crisis and go through today's difficulties without losing the potential we have created." Whatever you want to call the current economic situation, it's clear the VEB has been thrust into the role of savior. The Duma, meanwhile, approved a plan to allow the Russian government to spend more than $18 billion bailing out Russian banks. But despite the overtures to project confidence, Standard & Poor's downgraded Russia's sovereign credit rating to negative, and cautioned that "the ongoing concentration of the financial system in state hands" had become a political risk. Perhaps it's not a financial crisis or "Kremlinomics" that's to blame, but rather, corruption in the West.

As my week in New York City draws to close I'm relieved to be headed back home, both to see my family and to get away from the non-stop election coverage that I masochistically subject myself to.

Here's a thought that I am sure is shared by many other Americans: I am sick and tired of "Joe the Plumber" and other complete fictions of imaginary middle America cooked up by campaign managers. Politics from any ideological standpoint can become extremely tedious, but watching the McCain-Palin ticket wage a campaign of fear and whining during this last road trip through Florida, it strikes me that the Republicans are driving the political discourse through the floor, as thought median voting age in this country were 9. This is doubly offensive given the extreme economic problems the country is going through.

No wonder so many people are jumping ship. Whatever position or party one supports, the tactics of fear and the incredibly low level of political messaging coming from the incumbent camp drives home the point that the American public seems ready for change.

This one comes from from Silicon Alley Insider:

The Russian government blocked Google from acquiring contextual advertising firm Begun.

Google would have paid Russian portal Rambler $140 million for its subsidiary, but Russian authorities say Google failed to provide "documented information about individuals that may influence the business group Google."

A Rambler shareholder told Russian newspaper Vedomosti that Prime Minister Vladimir Putin actually blocked the deal because he did not want to see US company Google take over the Russian market as it has elsewhere.

Why do we find that so easy to believe?

No, not the c-bomb that John McCain dropped, but rather he said the forbidden word regarding the current economy...

This is from Michael McFaul's recent testimony before the House Committee on Foreign Affairs on Sept. 9, 2008.

Two responses currently being debated among America’s foreign policy elite – business as usual and isolation – must be avoided.

This first school of unqualified engagement contends that we need Russia on so many crucial issues, and therefore we cannot risk alienating the current Russian government over minor disputes such as Georgian territorial integrity. For instance, we need Russia to help us on dealing with Iran -- so the argument goes -- so we should not make a big deal about Russian actions in Georgia. This way of thinking misunderstands both the current Russian government and American national interests. On Iran or any other issue in U.S-Russian relations today, Russia’s current leaders are going to act based on their calculations about Russia’s national interests and not as a favor to the United States. Trying to trade soft statements on Georgia for Russian votes on Iran at the United Nations Security Council will never work. Moreover, the engagement-at-all-costs school overestimates our dependence on Russia for pursuing our security needs while at the same time underplays a core U.S. national interest – peace and stability in Europe. After twenty years of working diligently to make Europe whole and free, we cannot abandon this mission now. Signaling indifference to this objective also will encourage more Russian belligerent behavior.

Good piece in the New York Times today about Azerbaijan.

“Azerbaijan is doing a dance between the West and Russia,” said Isa Gambar, an Azeri opposition figure. “Until now, there was an unspoken consensus. Georgia was with the West, Armenia was an outpost of Russia, and Azerbaijan was in the middle.”

But with the war in Georgia, Russia burst back into the region, humiliating Tbilisi and its sponsor, the United States, which issued angry statements but was powerless to stop Russia’s advance. It was a sobering sight for former Soviet states, and one that is likely to cause countries like Azerbaijan to recalibrate their policies.

“The chess board has been tilted, and the pieces are shifting into different places,” said Paul Goble, an American expert on the region, who teaches at the Azerbaijan Diplomatic Academy in Baku, the capital. “What looked balanced before does not look balanced now.”

As many regular readers of my blog already know, I am involved in the international legal support of the Singapore dissident Chee Soon Juan. Today he went on trial, and the following press release has been distributed to media. I urge everyone to support his important cause.

Human Rights Goes on Trial in Singapore with Chee Soon Juan Case
---
NEW YORK, Oct. 23, 2008 – Today Singaporean opposition party leader Dr. Chee Soon Juan and others will stand trial for unlawful assembly charges which lawyers believe may result in punitive prison sentences.

“This latest trial of Chee Soon Juan represents yet another showcase of fundamental human rights violations and constitutional manipulation that has become Singapore’s darkest secret,” said lawyer Robert Amsterdam, of Amsterdam & Peroff, who provides international legal assistance to Soon Juan. “After suffering so many arbitrary arrests and charges, it’s time for the world to stand up and staunchly defend this courageous man, who has made heroic personal sacrifices in the name of freedom and democracy.”

Who says propaganda's dead? RIA Novosti reports: Lukashenko says crisis prompts U.S. to look to Belarus model.

Oh yes, that's a great idea. What we really need are political prisoners, no free speech, flagrant corruption, zero transparency, and a Kremlin-owned dictator to stay in power for at least 14 years. That's what we should be aiming for.

Edward Lozansky is very critical of Sen. Barack Obama's Russia team of advisers, claiming that the Kremlin would prefer to deal with the Bush administration. Then again, the guy loses a lot of credibility when he asks his audience to believe that Joe Biden doesn't know any more about Russia than Sarah Palin. Right.

If Obama wins the election, his presidency will be most welcome in Europe and the rest of the world and will definitely help improve relations with U.S. allies and Washington's image in general. But when it comes to U.S.–Russian relations, one should not expect any drastic changes for the better unless Obama overhauls his foreign policy team. The current lineup comprising official and self-proclaimed advisers on Russia is as bad as McCain's and in some cases even worse, starting with former U.S. National Security Adviser Zbigniew Brzezinski and former U.S. Ambassador to the United Nations Richard Holbrooke.

Obama's running mate, Senator Joseph Biden, is not much better on Russia than Palin. Besides lobbying in the middle of a huge financial crisis for $1 billion for his good friend President Mikheil Saakashvili of Georgia, Biden is known for blocking the lifting of the Jackson-Vanik amendment unless Moscow guarantees large purchases of U.S. chicken. This outdated obstacle to trade engenders resentment in Russia, blocks its admission to the World Trade Organization, and harms U.S.-Russian economic and diplomatic ties.

It seems this Oleg Deripaska-Lord Mandelson problem just won't seem to go away:

The only one of Mr Deripaska's non-attributable disclaimers I find hard to get to grips with is his supposed failure to understand why the Conservatives put it about that the idea of a donation came from him. Really? On reflection, though, this could be true; a characteristic of Russian oligarchs is their collective lack of party-political nous.

There is a reason for this, of course. If you get too interested in politics in your home country, you might acquire a taste for actually doing it and end up on the wrong side of some rather flexible Russian laws. This is, after all, what took the oil billionaire, Mikhail Khodorkovsky, from his private plane, via a Moscow courtroom, to a prison camp in Siberia.

Which is not to say that oligarchs are not political animals. It is the finer points of Western party politics that tend to elude them. But they also have an acute sense of which way the political wind is blowing, in so far as it will affect them and their business. This is how they made their fortunes in the chaotic prelude and aftermath of the Soviet Union's collapse. Mostly outsiders, many of Jewish origin, and highly educated, they saw opportunities, where others saw only fatal risk.

Despite a record-breaking quarter in European sales, Gazprom's cash crunch continues, and CEO Alexei Miller says "deteriorating market conditions" mean the company might have difficulty getting new loans or refinancing existing debt. Several mining and metals companies aren't paying their electric bills, but due to a legal loophole it may be regular Russians who feel the pinch. TNK-BP will lower prices at the pump. And Russia needs foreign investors to build a new nuclear power plant in Kaliningrad, while Norilsk Nickel wants to build a cobalt refinery on the Kola peninsula.

Russia's Central Bank continues to prop up the ruble, and announced a plan for devaluation, causing Finance Minister Alexey Kudrin to say that “Currency speculators will be very disappointed.” It also bailed out Renaissance Group with a $250 million collateral-free loan, allowing it not to sell its consumer lending arm. And the equally active VEB wants to exchange bail out loans for stakes in Russian companies, prompting fears that the Russian state could end up owning a massive part of the private sector. Meanwhile, billionaire tycoon billionaire Alexander Lebedev's National Reserve Bank announced it will buy out troubled Russian Capital bank. As the troubled waters churn, Putin says the government's $6.4 trillion plan to upgrade Russia's transportation infrastructure is in good shape. And Aeroflot says it wants to buy S7.

TODAY: a strategic Russian oil reserve is considered; skeptics debate the efficacy of a natural gas alliance; Russia tests old missiles; France balks at Georgia joining NATO; the US military assures Baltic NATO nations they are safe; and Armenia claims Georgian war losses.

Eying improved ties to OPEC, Russia says it is considering reviving a decades-old idea and establishing an oil production reserve big enough "to reach efficient pricing parameters." Meanwhile, some skeptics say the mechanics of an OPEC-like gas group are complicated and expensive and that the talks were likely "empty declarations."

Russia test-fired Soviet era intercontinental Stilet missile in Kazakhstan on Wednesday, saying that while the financial crisis won't inhibit military spending, "Prolonging the exploitation time for Stilets allows to free up considerable funds for other important state needs." Russia still has plenty of submarines and bombers to defend against broadening threats in Asia. Lest such tests of aggression be misconceived, Russia voiced muted support for the extension of a UN resolution authorizing the presence of foreign military in Iraq.

As is being reported on the Human Rights in Russia website, coordinator of the Oborona movement, Oleg Kozlovsky, has received the Human Rights Award, conferred annually by the human rights organization Human Rights First. As they reported in the press-service of the organization, the 30th jubilee award ceremony will take place in New York on 23 October.

Among the previous laureates of this award are the Russian human rights advocate Ludmilla Alexeeva, UN High Commissioner for Human Rights Mary Robinson, philanthropist George Soros, dissident Natan Sharansky, senator Edward Kennedy, and other people who have made a significant contribution to the defense of human rights in the world and in their countries – reports Human Rights First.

It was one of those rare moments that one of Vladimir Putin's people humiliated him in public. It was on May 23, 2007, when Putin "suggested studying the possibility of investing funds received from sales of Russian energy in Russian blue chip stocks, in light of the stock market's stagnation during the first quarter of 2007."

At the time, Finance Minister Alexei Kudrin could barely hide his shock, and immediately expressed his strong disagreement with Putin's suggestion, arguing that such investments would hike inflation and trigger stock market speculation. Kudrin has come under fire several times now over the management of the stabilization fund, and it is interesting to see the following announcement in light of the recent release of his #2 man Sergei Storchak.

And low and behold, today Forbes reports...

Russia's National Wealth Fund will invest $6.9 billion, or nearly a seventh of its total reserves, in buying domestic stocks, Pyotr Kazakevich, the head of the Finance Ministry's debt department, said Monday. From Tuesday onwards the fund will be able to deposit up to 625 billion rubles ($24.0 billion) in state-owned Vneshekonombank, better known as VEB, which would be the government's agent. The fund has previously invested in currency deposits and top-rated sovereign bonds outside Russia, such as U.S. government Treasuries.

"The first part of this money has been transferred to VEB. From this day, they have the right to invest," a spokesman for the Finance Ministry told Forbes.com. "I think that this investment will be made in five years or more."

Russian citizens prefer one candidate, while their leaders prefer another.

Europe is being cryptic yet vaguely threatening in response to Russia's announcement to take steps toward the formation of a gas cartel with Qatar and Iran to control 60% of the world's natural gas:

EU spokesman Ferran Tarradellas Espuny said the European Union preferred to see gas traded on a free and transparent market.

He said the EU executive was not opposed to energy suppliers cooperating more closely on research but was opposed to price-fixing cartels in principle.

"If such a cartel was created, the Commission may review its energy policy," he said, refusing to give details of what that would mean in real terms.

It's not hard to imagine what Tarradellas Espuny is talking about - it would mean a resurrection of the recently defeated Gazprom clause of the unbundling proposal that would block Gazprom from owning mid- and downstream assets in Europe. One has to wonder whether or not we would even have to be dealing with the threat of a gas cartel if E.ON and Eni hadn't been so aggressive and successful in its lobbying for Russian energy interests to the detriment of European consumers.

Apparently I missed quite the stinging attack against Henry Kissinger made by Foreign Minister Sergei Lavrov during his visit to CFR about a month ago. This is interesting to me because for the past six months or so Kissinger has been seen as the leading proponent in the U.S. foreign policy community for rapprochement with Russia, pushing a softer policy line.

In a by-lined WaPo article along with George Shulz, Kissinger argued that "We believe that the fundamental interests of the United States, Europe and Russia are more aligned today -- or can be made so -- even in the wake of the Georgian crisis, than at any point in recent history. We must not waste that opportunity."

Just a couple weeks earlier, Lavrov had this to say about Kissinger's understanding of events in the Caucasus:

How could I resist? ...don't worry, I'm not trying to compete with English Russia.

Didi Senft, a 56-year-old cycling fan better known as 'El Diablo', poses with a chess bike for the media at the 'Bundeskunsthalle' in Bonn, October 21, 2008. The World Chess Championship between World Chess Champion Viswanathan Anand from India and Vladimir Kramnik from Russia takes place in Bonn from October 14 to November 2, 2008. (Reuters)

Some amusing commentary from Al Kamen on the McCain-Palin campaign's accidental solicitation for donations from the Russian Mission to the United Nations.

The Russians released a copy of a Sept. 29 solicitation addressed to Vitaly I. Churkin, urging him to contribute as much as $5,000 to "stop the Obama Democrats from seizing control of the entire federal government."

"Please know this -- we will not concede any region to the Democrats," the letter stated. That might have resonated with Churkin, who doubtless started thinking about South Ossetia, Chechnya and such.

But when McCain then criticized Obama for recklessly supporting an "unconditional timeline" for the withdrawal of U.S. troops from Iraq, a position that Churkin supports, you could see the checkbook going back into his pocket. And McCain's warnings about Obama's "big-government solution to health care" or increasing the size of the federal government or big tax increases probably left the Russian only scratching his head.

But Churkin, like everyone else, might have been sympathetic to McCain's complaint about the "vicious attacks" from "the Democrats and their liberal special interest allies." Clearly something that would not be permitted in Russia.

Russia probably should devalue the ruble, but can't afford to inspire a massive round of withdrawal and conversion panic. From the Financial Times:

Managing the rouble poses a similar challenge. The currency’s recovery has symbolised Russia’s Putin-era regeneration. Spending billions of dollars at a time, the central bank has in recent weeks kept it within its target range against a dollar/euro basket. But Russia has burned through $70bn of reserves since August, and cannot go on at a similar rate; crude prices are now below the $70-a-barrel balancing point for the 2009 budget. There is a case for Russia to allow the rouble to weaken to make manufacturers more competitive. For now, however, fears of a uncontrolled run on the rouble have made officials prefer to stress they have no plans for devaluation.

At least that's what Alexander Lebedev tells the Wall Street Journal about the release of Sergei Storchak:

Alexander Lebedev, a billionaire banker and friend of Mr. Storchak who has been one of his strongest public defenders since his arrest, said it is "too early to judge" if Mr. Storchak's release signals a loosening of Kremlin control.

"If tomorrow there is an announcement that they have revised their control of (state) TV, registered some parties, and done a few more things, then I would see it as a trend," he said.

I'm just amazed by the dizzying news cycle of all these broadcast outlets during my brief visit to New York City this week. It's actually quite hypnotic and surreal ... I think that a few more days of this and I won't even remember what was happening amongst the elections gossip of just yesterday.

So a comment before I lose the shelf life on this one: I am completely blown away by the stupidity of something said by the Democratic vice president candidate Sen. Joe Biden about Sen. Barack Obama, that the prospective nominee would be "tested" by a variety of foreign leaders if elected.

I think it was an incredibly stupid comment because it is almost unbearably true, and really provided the Republican ticket with something to talk about for three straight days ... which has become tedious for everybody by this point.

Granted they took it a bit out of context.

More evidence of a financial crisis: Norilsk Nickel may sell its only American asset, a 55.4 percent in Stillwater Mining Company it bought for $257 million in 2003. "In a crisis situation, cash is king," said chief financial officer Oleg Lobanov. China, meanwhile, wants access to the Russian gas market. Litasco, the trading arm of LUKOIL, forecasts a grim 2009. And ExxonMobil Corp. announced today that it would increase gas supply to Russia's Far East in 2012, bowing to pressure from Gazprom. The advance of the Russia-led gas cartel, denied by various naysayers for years, is reported on here, here, and here.

Russia will lend Belarus $2 billion, in a goodwill gesture intended to improve economic and political ties with the country and keep open the option of incorporation into the Federation. "During this time we decided to draft a joint action plan to create a common currency," said Russian Finance Minister Alexei Kudrin. As Russian grocers and food sellers feel the pinch of the economic crisis, an aide to Medvedev announced that Russian banks will loan more money to grocery chains and pharmacies. Texas engineering and construction giant Fluor has secured a contract from Sibur Group, one of Russia's leading petrochemical companies, for a gas processing expansion project in the West Siberian oil fields.The European banking stocks of commodities tycoon Suleyman Kerimov, meanwhile, have taken a pretty big hit. "He sold out of Gazprom and Sberbank in the late spring, which was smart, but invested the proceeds in Deutsche Bank, Fortis and others, which was not," a source said. And S7 won't make a bid for Austrian Airlines Group.

TODAY: Russia moves toward the gas OPEC, military leaders meet in Helsinki, Duma plans to put FSB on Georgian borders, billions pledged for the space industry, a Russian couple is convicted of attempting to spy for China, and Svetlana Bakhmina asks for a pardon.

Russia, Venezuela, and Iran face petro-punishment in the economic crisis, possibly leading Russia closer to an OPEC-like natural gas allegiance with Iran and Qatar. "God willing, in the upcoming meeting of ministers of these countries, we will confirm the establishment of the organization," said Qatari oil minister Abdullah bin Hamad Attiyah. If such a cartel formed, it could pose a "serious economic threat" to Europe. Meanwhile, while in Moscow OPEC's security general said he wouldn't ask Russia to cut oil production. "OPEC will try to balance the market, but maybe OPEC alone will not be able to do it," said Abdullah al-Badri.

Below is a translation of a piece of news from Interfax reporting on a court's decision to release former Deputy Finance Minister Sergei Storchak, who was the right-hand man of Russia's last remaining financial liberal, Alexei Kudrin, who was taken down with a political case as part of the clan wars. It looks like someone in the Kremlin is very eager to create some good news that foreign investors might like to hear. What is particularly interesting about the court's reasoning is that the investigation against Storchak has concluded, therefore his pre-trial detention is no longer necessary as he wouldn't be able to tamper with evidence. Such a courtesy was never extended to Mikhail Khodorkovsky, proving once again the arbitrary and selective persecution against him - as though we were lacking in examples.

Storchak's "Freedom"

Deputy minister of finance Sergey Storchak is released from custody against a signed pledge not to leave town, because the investigation has been completed and the accused no longer can influence its course

Moscow. 21 October. INTERFAX.RU - The Investigative committee attached to the procuracy (ICP) of the RF has adopted a decision about changing the measure of restraint for deputy minister of finance of the RF Sergey Storchak and the other figurant in this criminal case Viktor Zakharov. "The decision about changing the measure of restraint for former deputy minister of finance Storchak and other figuarnts the investigator adopted in connection with the fact that the investigation of the case is completed and the accused, being found at liberty, are already in no way be able to influence the results of the investigation", - declared official representative of the ICP of the RF Vladimir Markin to "Interfax" on Tuesday. According to his words, from Storchak and Zakharov has been taken a signed pledge not to leave town and to behave appropriately. "Now the accuseds will be familiarizing themselves with the materials of the criminal case inside the walls of the Investigative committee attached to the procuracy of the RF", - noted Markin.

S. Adam Cardais of TOL writes that Russia is "basking" in its the international glamor of being able to bailout Iceland: "And Russia is positioned, as a revitalized once-superpower flush with cash, to rescue Iceland, a NATO member praised for its chart-topping living standard! To Putin and the Kremlin, could there be a sweeter arc to the last two decades of Russian history?"

Anne Applebaum at the Washington Post is taking another approach, arguing that the syndrome being experience in Iceland is spreading quickly and uncontrollably - making the Russian some intervention irrelevant. Applebaum's frightening but convincing prediction is that the economic crisis is opening up a series of opportunities for unscrupulous trans-national economic sabotage and subterfuge, which could involve everyone from unfriendly neighbors, former imperial powers, and any government with an axe to grind.

The case of Iceland, which in recent weeks has nationalized its three major banks, shut its stock exchange and halted trading in its currency, is by now well known. Less well known is the speed with which the Icelandic disease is spreading. Consider Hungary, once the destination of choice for investors who wanted an Eastern European head office with a 19th-century facade and a pastry shop next door: The currency is in free fall and so is the stock market, flummoxing those previously well-fed investors. (One of them told a Hungarian financial Web site: "I haven't got a clue as to when and how this would end, I'm just staring into empty space.") Or Ukraine, whose central bank governor declared his banking system "normal and reliable" on Monday of last week. By Tuesday of last week, Ukraine had desperately requested " systemic support" from the IMF.

The BBC reports that Russia's economy, especially the construction and real estate sector, is grinding to a halt...

But below Prime Minister Putin continues to insist that everything is peachy. RA has commented that the word "crisis" might be made illegal quite soon in the Russian media.

The New York Review of Books has published a review of the film Letter to Anna: The Story of Journalist Politkovskaya’s Death, written by Amy Knight. You can order a copy of the DVD of this documentary here. The trailer is here.

By the time of Chaika's announcement—over ten months after the murder—the investigation of the Politkovskaya killing was falling apart. The names of the suspects had already been leaked to the press, thus hampering efforts to successfully prosecute them. More importantly, Chaika himself was no longer in charge of the case; it had been handed over to a new "investigative committee," which was part of the prosecutor's office, but not under Chaika's jurisdiction. The committee had been formed as the result of a bitter feud between Putin's two main security chiefs, FSB director Nikolai Patrushev and Viktor Cherkesov, the head of the Drug Control Agency.

Today Diane Francis writes about Robert Amsterdam's work in Singapore defending Dr. Chee Soon Juan.

Fortunately, a team of lawyers, led by Canadian law firm Amsterdam & Peroff in Toronto, has been set up in order to help Dr. Chee defend himself in court and to embarrass Singapore before the world for its failure to uphold the rule of law. The team is headed by Bob Amsterdam (who defended Mikhail Khodorkovsky and other high-profile Russians against the oppressive Putin regime), U. K. defamation expert Anthony Julius (who represented Lady Di) and American law professor William Burke-White. "The Singaporean authorities are using the law to repress political rivals and as punishment," Amsterdam said in a phone interview from his headquarters in London. "It's a myth that Singapore is a democracy, a complete myth."

Russian stocks rose 4 percent Monday, partly in response to news that an upcoming conference of OPEC countries will focus on ways to stabilize the price of oil at $70 per barrel. The Algerian Energy Minister says Russia and other non-OPEC countries should also cut output, or else "the OPEC decision is going to be harder and more painful (to make), demanding greater sacrifices on the part of OPEC members." Speaking of OPEC, its Secretary General, Abdullah al-Badri, will visit Moscow this week to discuss expanding ties with Russia. For its part, Gazprom finalized a deal with Equatorial Guinea, while continuing to pursue suitors Iran and Qatar.

Former Kremlin economic aide Andrei Illarionov says Russia's sabre-rattling is scaring investors away, since "any investor thinking on a medium- to long-term perspective will decide to remove funds from states whose leadership isn't scared of war." A prominent American economist and author, meanwhile, advises against investing in Russia, which "needs to respect property rights, stop throwing business leaders into jail on trumped up tax charges, promote the rule of law, and treat foreign investors and business partners fairly. None of this is a sign of weakness, but of strength." Ever the voice of calm, Putin claims the 2009 Russian federal budget will be balanced even if oil prices fall below $70 per barrel. If the oil market dries up, there's always nuclear: Russia and India prepare to sign a nuclear energy deal. Libya, meanwhile, is pondering a $2 billion Russian arms purchase. And Russian investors are targeting the unreliable Nigerian Telecommunications. And the Arab-Russian Businessmen Conference will be held in Moscow this week.

TODAY: Putin tells international investors that Russia can withstand an economic crisis; Oligarchs ask the Kremlin for help; Dutch government investigates the death of journalist in Georgia; Russia bails out Iceland; the Communist Party passes the hat; and seven Russian athletes are banned for doping.

Putin tells foreign investors that Russia can withstand the global economic crisis, since "We have taken into account potential threats while building financial and economic policies...We can to a great extent fund economic growth from our internal resources." Infusing the economy with an extra $7.6 billion) from the Deposit Insurance Agency won't hurt, either. Meanwhile, an American magazine tabulates the losses of Russian billionaires, many of whom are now turning to the Kremlin for help. The crisis seems to have spared the average Russian, while encouraging elites of the need for greater state assistance.

One of the benefits of the global financial crisis, if we allow ourselves to look for such a token silver linings, is that a number of major flaws and vulnerabilities of the world's financial and political systems are being exposed for examination. Problems are being laid bare and difficult truths are being unearthed.

This thought struck me as I was reading several articles earlier today about the economic slowdown in China, and the potential of a coming crash in one of the world's most dynamic markets. With economists predicting a steep slide in growth for the third quarter, world markets are shuddering with anticipation of having to deal with declining Chinese demand in everything from steel to professional services. Even though 9% growth is still that most countries can only dream of, this would be the first time in more than five years for Beijing to record single digit growth rates.

Corruption is a very big part of the story.

I have been obsessed with this news about Vasily Alexanyan today, and the subsequent censorship and intervention by some propaganda department within the Kremlin.

As if the horrific fate of Alexanyan is not enough to bring back memories of the USSR, and leave open the possibility of Russian judicial officials ultimately being tried for crimes against humanity, we now have evidence of that old-style media manipulation that we know exists but rarely see displayed. Mikhail Gorbachev would not even have put up with such blatant tampering in the media - it runs completely opposite to perestroika.

It is interesting that Interfax actually completed the work of journalism and published it to its site before we were able to observe this farce. Then, by the time the censors had the opportunity to review the piece, it was apparently deemed as too sympathetic, and struck down. Thankfully, the original Russian version was posted on Khodorkovsky.ru. For about two hours while the censors dithered, this place-holding piece of news was put up in its place, and then later an edited article appeared with significant differences from the original (for example, the newly edited article fails to mention his critical health status or the fact they had to remove his spleen).

It's so rare that we get to see Russian censorship in action ... but that doesn't make it any less reprehensible.

This is starting to get scary. Like we said months ago, keep your eye on the Russian currency as the bellwether of her political environment.

From the Associated Press:

The ruble has declined steadily since the Aug. 7 start of the five-day war with Georgia, losing some 10 percent to 12 percent of its value against the dollar. Without intervention by the central bank, which began in early September, it might have fallen further, faster.

Anton Struchenevsky, an economist at Troika Dialog investment bank, said Monday the Central Bank was spending $600 million a day to buy rubles and support the currency's exchange rate, for a total of $20 billion in less than two months. Other experts put the cost of defending the ruble as high as $50 billion.

While Russia has more than half a trillion dollars in foreign exchange reserves, Struchenevsky said: "This cannot last forever."

While we were the first ones to say that the Kremlin's preferred candidate for the U.S. presidency was Sen. John McCain, this story is just ridiculous, prompting the Russian Mission to the UN to issue a statement reminding the world "that Russian officials, the Permanent Mission of the Russian Federation to the United Nations or the Russian Government do not finance political activity in foreign countries."

Hmmm. I wonder how Viktor Yanukovych could afford to pay Rick Davis $35,000 a month. It seems natural that the campaign would assume that there was more swag to be had from Russia, but this looks like an honest mistake.

I was both appalled and amazed this morning when a friend pointed me over to the Interfax news website, where I saw on the front homepage, along with prominent photo, the following headline: "Court Rules to Extend Detention for Former Yukos Vice President Alexanyan for Three More Months"

Seeing George W. Bush discuss U.S.-Russia relations, with his increasing frustration over the media's incomprehension, reminds us that there is probably no one who more eagerly awaits the end of his term than George himself. Listening to this unconvinced talk about needing Moscow's help on Iran, personal relationships with foreign leaders, and whether or not Medvedev is a puppet of Putin, one can just sense a yearning to be back on a Crawford ranch clearing brush.

Wouldn't it have been great if Bush could have just grabbed the microphone and said: "Look, my administration's policies on Russia have been a dismal failure. I messed everything up, I squandered opportunities, and committed to severe misjudgments - so much so that even McCain makes fun of me for 'looking into Putin's soul.' The truth is that my government had more in common with Putin's than any other on earth, but at least you can vote me out. I was the best thing that ever happened to the world's autocrats. Let's just hope the next guy can start fresh and get some things accomplished, because let's face it, from down here there is no where to go but up."

Yesterday Bob blogged about the strangely taboo topic of talking about the economic crisis in Russia's state-owned media, and the sense of surreal opacity and rumors it has generated. Today there's a nice piece over on Eurasia Daily Monitor about how the crisis may have an impact on the consensus of Russia's elite for the Putin-Medvedev tandemocracy of authoritarian capitalism.

Pavel K. Baev writes that "The abrupt end of a petro-prosperity that had been taken for granted has revealed and exacerbated divergences and clashes of interests among various groups of loyalists, who suspect that their “social contracts” have been revised without their consent. (...) Who will be rescued from bankruptcy and who is the designated loser is open to bargaining, so the oligarchs have been camping around the Kremlin and wailing about their “social responsibility.”"

It's certainly true that many oligarchs are losing their shirts.

Yesterday we blogged about the important Serge Schmemann piece in the New York Times and International Herald Tribune. Below, you can download a PDF of the print edition to see the impressive layout the article received.

Canada's Globe and Mail editorial page has come out in defense of Karinna Moskalenko. There is also interesting coverage in Time Magazine.

Silencing critics

Russia's leaders are almost certainly up to their old tricks. Last week Karinna Moskalenko, a human rights lawyer who represents the family of Anna Politkovskaya, the crusading journalist and Kremlin foe gunned down in 2006, was admitted to a French hospital with mercury poisoning after the toxic metal was found in her car. Her illness just happened to prevent Ms. Moskalenko from attending the start of pretrial hearings into Ms. Politkovskaya's death in Moscow.

Former Norilsk Nickel head Denis Morozov is a popular choice to take over the reigns at TNK-BP, after the departure of Robert Dudley. This comes amid news that the trading of Russian oil stocks has essentially been paralyzed by a the freefalling price of crude. "At such prices, we would rather turn off the wells and halt production than trade at a loss," said one trader at a Siberian company. Meanwhile, Russia's first liquefied natural gas plan, the Sakhalin-2 project, will finally begin next year, with shipments of the gas headed to Japan as that country tries to reduce its energy dependence on the Middle East. And President Dmitry Medvedev arrives planned in Armenia tomorrow for a two-day tour designed in part to "highlight broader energy cooperation."

A delegation of British business leaders will visit Russia this week. The trip, led by Business secretary Lord Mandelson, is being billed a sign of Britain's willingness to maintain robust trade relations, "a demonstration that there is a very clear intention on both sides to have good business-to-business relations despite the misunderstandings we have in other, political areas,” namely the ongoing spat over whether to extradite Andrei Lugovoi. Troubled Bank Globex will be bought out by Vneshekonombank, making it the fourth of Russia's 50 biggest banks to have been nationalized in recent weeks. A summarization of Russia's current economic woes: big banks lending big bucks to big spenders. One of these big spenders, aluminum baron Oleg Deripaska, has until the end of the month to repay nearly half of a $4.5 billion loan with western banks, or else forfeit a 25 percent stake in Norilsk Nickel.

TODAY: Russian soldiers get a raise and permission to fire; Georgian conflict shows its identity crisis; Russian officials balk over economic crisis; Venezuela buys more Russian tanks; Kremlin discusses missile defense for Syria; Russian and US leaders may extend nuclear arsenal treaty; and Russia's biggest mosque opens in Grozny.

Amid a report about a plan to raise the salaries of Russian army officers, there are varying accounts of the number of Russian troops killed in an ambush in the North Caucasus region over the weekend. Meanwhile, there is no confusion concerning the directive given to police in South Ossetia, who have been ordered to meet any potential assault by Georgian forces with force. "We will not allow our people and our officers to be killed," said Acting South Ossetian Interior Minister Mikhail Mindzayev. Abkhazia, for its part, remains ensconced in an alleged identity crisis, deeply dependent on Russia for economic stability yet overwhelmingly nationalistic. In sum, it remains to be seen how much Russia and Georgia will gain or lose politically from the imbroglio.

I am very grateful for the support of IHT editor Serge Schmemann for the terrible and unjust plight of my client, Mikhail Khodorkovsky.

The case against and for Khodorkovsky By Serge Schmemann Sunday, October 19, 2008

This month marks five years since Mikhail Khodorkovsky was seized in his private plane at the Novosibirsk airport. He was subsequently convicted of fraud and tax evasion and sentenced to eight years in labor camp, and his oil company, Yukos, was dismantled and sold off to Kremlin loyalists.

Now 45, Khodorkovsky was denied parole in August on the grounds that he had not been attending sewing classes at his labor camp in the Russian Far East. Earlier this month, his lawyers said he was put in solitary confinement for 12 days for giving a written interview to the Russian edition of Esquire magazine.

I can't confirm all of these rumors as fact at this point, but well informed friends from Moscow have been calling me all morning with news that major announcements by Russia's financial authorities will be made early this week in attempt to staunch what has been up until now an under-reported level of capital flight moving out of Russia. These announcements, my sources tell me, may involve restrictions on money movements and possible ruble intervention.

The changes are said to mirror the fairly draconian measures which have already been implemented by Ukrainian financial authorities over the past week such as bans on withdrawals, controls over lending, and talk of bank nationalizations.

We have known for some time that the use of the word "crisis" has become completely taboo in the state media. Despite reports we have published from Grigory Pasko about difficulties withdrawing cash from ATMs in Moscow, as well as other anecdotal evidence from Russians I work in with on Moscow that cash is frequently scarce at various bank machines, the official line has been to deny, deny, and deny. On Sept. 15, President Dmitry Medvedev confidently declared "Despite all the global economic problems there are today, the situation in our economy is on the whole completely stable. We definitely have no crisis or pre-crisis situation."

This afternoon and evening I have put in a number of hours working on the case of Dr. Chee Soon Juan to prepare for the events of next week (read more here and here). I've been doing a lot of reading, and making many calls to various contacts, and I've discovered that many in Singapore believe that this man's tireless and heroic efforts somehow impairs the image of the country. There are some who express open distaste in what he is doing based on the "cultural relativism" argument, and others who are openly afraid to be involved in any way in his defense.

Both arguments I have encountered before in other contexts and in other countries. I can only say that respect for opposing views is not the property of any one single culture. Further, what the present global financial crisis shows us is that there is an overwhelming social interest in transparency at all levels of both governments and business. Our interest in this case, I would like to emphasize, is generated by Dr. Chee's proper and legitimate interest in bringing authority to account and building a stronger future for the country. In my series of discussions with this gentleman, I have heard him raise questions of leadership, but have never heard him utter a disrespectful word. I marvel at his restraint and the constructive attitude he has exhibited throughout personal bankruptcy and multiple wrongful incarcerations.

After the cut, I share an excerpt from a July 2008 report from the International Bar Association's Human Rights Institute entitled "Prosperity and Individual Rights? Human rights, democracy, and the rule of law in Singapore." The report, which confirms the institutional culture of fear which has prevented Dr. Chee from obtaining legal counsel, explains the background of his case, and states: "It certainly appears that Dr Chee has been made a target by the Singapore Government, and that their criticism of him has gone far beyond a reasonable standard."

From the Wall Street Journal:

There is of course a long line of goons happy to take military, energy or economic handouts from the Kremlin, though the dramatic drop in oil prices and Russian stocks will limit its ability to buy people off. Mr. Lukashenko could well be holding out his support for cheaper natural gas. But Russia's erratic and aggressive behavior in the Caucasus has apparently given even him pause about its possible intentions against Belarus.

In addition to Mr. Ortega, Russia did manage recognition by Hamas, Hezbollah and the Moldovan regions of Gaugazia and Trans-Dniester. But that is little solace for a Kremlin whose bigger goal in the war was to declare a Monroe-ski Doctrine for its "near abroad" and lead a new anti-American block. Fyodor Lukyanov, the editor of Russia in Global Affairs, summed up the strategy: "Our long effort to become part of the West is over. The aim now is to be an independent power in a multipolar world in which Russia is a major player."

It's hard to be a major player when all you have is very minor friends.

Andrew Kramer has a piece in today's New York Times which examines how so many of Russia's most wealthy people lost so much money in so little time during the current financial crisis. Not a lot of new information, but some interesting quotes:

If banks require businesses to sell shares to repay these loans, “the Russian stock market could come down like a house of cards,” Michael Kavanagh, a mining sector analyst at Uralsib bank, said.

“This could be a game changer for a lot of very, very large players,” Rory MacFarquhar, an economist at Goldman Sachs in Moscow, added. “The ground is shifting under them.”

As reported on yesterday's news blast, Mikhail Gorbachev has come out in support of Svetlana Bakhmina, one of the Yukos prisoners who along with Mikhail Khodorkovsky has spent years illegally imprisoned. Gorbachev has called upon the Russian leadership for her immediate release. Below is the full translation of the interview with izbrannoye.ru.

Mikhail Gorbachev – for pardon for Bakhmina

The president of the USSR in an interview with editor-in-chief of the internet-newspaper “Izbrannoye” Lyudmila Telen highly assessed the civic initiative of the internet-community, which is gathering signatures under an Appeal to Dmitry Medvedev with a request to pardon YUKOS ex-lawyer Svetlana Bakhmina.

Mikhail Gorbachev, in part, said:

“Svetlana Bakhmina has already completed the greater part of her term. She has, to the best of my knowledge, two little boys and she’s pregnant besides, the press writes, she’s to give birth in December. Why hold her behind bars? Methinks, president of Russia Dmitry Anatolievich Medvedev in this situation can make use of his right to a pardon. I would welcome this.”

Most readers of this blog are used to occasional coverage of freedom of press issues in Russia, and discussions of the impact on civil society and democracy when the state targets journalists with impunity. As I announced yesterday in a blog post, I recently starting working a pro-bono case representing Singapore's leading opposition party, and it is in this area of freedom of press that we can observe some of the strongest parallel trends in both countries.

According to a study by watchdog reporters without borders, Russia ranked a dismal 144 in the Freedom of Press Index - which is below scores awarded to Yemen and Afghanistan. Singapore ranked only slightly better at 141. Whereas government critical journalists in Russia, from Anna Politkovskaya to Ivan Safronov to Magomed Yevloyev, tend to find themselves killed in mysterious circumstances, in Singapore, these journalists and publications usually find themselves at the wrong end of devastating defamation lawsuits.

Africa needs Russia’s money more than Russians do?

Grigory Pasko, journalist

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The basic products of nutrition – bread, meat, butter, sugar, fish and vegetables – have increased in price in Russia since the beginning of the year by 4 times more than in the European Union. Such an unpleasant statistic of prices for foodstuffs has been published by Rosstat [the state statistics agency—Trans.] Experts explain the anomalous foodstuffs inflation by the absence of competition on the market, as well as the protectionist protection of domestic producers, whose prices often exceed the world level.

“Stab[ilization]fund. And the people.. nothing as usual” (source)

The FT is running a report about Oleg Deripaska's €48.5m investment in an aluminum smelting plant in Montenegro. Things are going so well over, and apparently the group is applying all the political pressure it can muster in order to secure lower utilities rates to make the plant turn a profit. Like several other Russian business initiatives in the Balkans, this one smells fishy:

Mr Deripaska, whose empire spans carmaking and aluminium, has cultivated close ties to the Kremlin and is known for aggressive business tactics.

The government claims that the Central European Aluminium Company (CEAC), a subsidiary of Mr Deripaska’s Basic Element, was exerting “political pressure” in a bid for extended electricity subsidies. Russian investments in the Balkans sometimes appear to lack business logic, with tycoons instead bending to fit Moscow’s strategic priorities.

The money-losing KAP acquisition stems from “the monstrous combination of awfully rich, but fearful, oligarchs, and a poor but powerful Russian government”, Mr Grahovac said.

From Reuters:

Putin interrupted a meeting of officials who were discussing the virtues of the Russia's new satellite global positioning system GLONASS to monitor cattle and wild animals.

"Can I use it for my dog?," he asked, according to the account of the meeting posted on the government website www.gov.ru

Deputy Prime Minister Sergei Ivanov, a close friend of Putin, said the collar, which weighs 170 grams (6 ounces) and is equipped with transmitters, had been ready for Koni some time ago and now was the time to test it.

It was immediately slipped on the dog.

"She looks sad," Ivanov said. "Her free life is over."

"She is wagging her tail. That means she likes it," Putin said.

From an editorial on the breakdown of peace talks between Georgia and Russia in Japan's Asahi Shimbun.

The fact that Georgia triggered the military clash by sending troops to retake South Ossetia doesn't justify Russia's decision to recognize the two pro-Moscow regions in Georgia as independent states. Russia, which had been issuing passports to residents in these regions, responded to Georgia's attack on South Ossetia by deploying military units under the pretext of protecting its own citizens. Such heavy-handed tactics should not be tolerated.

Rosneft, LUKoil, TNK-BP, Gazprom Neft and Surgutneftegaz are all under pressure from the Federal Anti-Monopoly Service to reduce domestic prices. TNK-BP is being hung out to dry by Gazprom, which has reneged on its agreement to buy 63% of the Kovykta gas field, which is a reflection of the enormous financial pressure on the company as they shift focus to short-term projects. Russia's Central Bank has decided to place a long-term $500m deposit in Gazenergoprombank, a bank affiliated with Gazprom. The company's surprise decision to send a high-ranking 12 person delegation to Alaska to discuss projects with ConocoPhillips is seen as an embarrassment for vice presidential candidate Sarah Palin.

First, Russia's energy companies successfully lobbied for a bailout, now it is the airline industry. Amid economic woes, Sibir Energy announced it was moving beyond oil into real estate and leisure. Dmitry Medvedev has told his cabinet that their most urgent task was to repair "trust between creditor and debtor," as the RTS dropped 9.52% and Micex slipped 9.11% due to continuing capital flight. Some lending is still happening: Avtovaz, one of the country's largest automotive companies, is concluding negotiations with Vneshekonombank for a credit of $1 billion. In mining, Metalloinvest has ended merger talks with Kazakhmys, which could have created a $40bn (£20bn) metals group before commodities prices drove down the stock price by 25%. Alexei Kudrin announced that capital flight reached $33 billion for August.

TODAY: EU decides to delay talks with Russia; Gorbachev supports Yukos prisoner; More military spending; UK continues fight for extradition.

With strenuous resistance from Poland, Sweden, and the Baltic States, the European Union leaders have delayed a decision on whether to restart talks over establishing a new Partnership and Cooperation Agreement with Russia. "The PCA will resume once the analysis, the evaluation that is being done by the Council (of EU ministers) and commission is finished," said EU foreign policy chief Javier Solana.

Amid funeral proceedings for Alexei Cherepanov, the New York Rangers first-round pick who died during a game outside of Moscow Monday, the Duma called for a probe of why medical officials weren't present at the game. Responding to outlandish claims of Russia expertise by Vice Presidential candidate Sarah Palin, her Democratic opponent, Joe Biden, recently quipped, "Well, I guess just like she can see Russia from Alaska, she can see Delaware from Alaska? She's got great eyesight." Meanwhile, in one of her first acts as Britain's new ambassador to Russia, Anne Pringle has reiterated her country's determination to extradite Andrei Lugovoi as part of the investigation into the murder of Alexander Litvinenko. "We have provided already significant evidence...sufficient for his extradition," said Pringle. And ironically, in a prominent murder investigation on Russian soil, Chief Procurator Alexander Bastrykin claims that the killer of Anna Politkovskaya is hiding abroad.

Many readers of this blog are already familiar with the Singaporean pro-democracy activist and opposition politician Dr. Chee Soon Juan, who has published a number of essays on this blog. His organization's tireless struggle to assert basic constitutional rights has direct parallels to the struggle for justice in Russia, and the similarities between these two illiberal authoritarian capitalist systems are clear and abundant.

Like many in Russia, Dr. Chee's efforts have brought about a severe and unjust crackdown from the state, who appear to be seeking to jail him once again following an upcoming trial on Oct. 22nd. I'm pleased to announce that my law firm has agreed to represent Chee Soon Juan and his party on a pro bono basis, to assist him in every way possible to continue his good work to bring democracy to Singapore.

I first had the privilege of meeting this impressive young man on the sidelines of the International Bar Association conference two years ago, where he was staging a one-man protest to draw attention to the country's democratic shortcomings. He made a very memorable first impression, and clearly took great personal risks to stand up for his beliefs by himself before dozens of jackboot secret service agents, security cameras, and the distinct intimidation of a government enjoying impunity.

His bravery in the face of this onslaught deserves international recognition, and I am pleased to be part of the effort to assist him. After the cut, there is more information on the current situation.

About the national pride of the Great Russians…

Grigory Pasko, journalist

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I have already written an article with such a name in our blog. The previous time I was talking about the ability of Russians, who have such a rich and in many ways heroic past, to easily and wordlessly agree to being governed by thieves, crooks, enviers, cowards, liars, etc.

This time, let’s talk about the attitude of Russians towards non-Russians – those entrants of whom in Russia there are – millions (in Moscow – hundreds of thousands). For the year 2009, Moscow has requested of the Federal Migrational Service to allow it to increase the quota of admission of foreign workers (in the main from the republics of Central Asia and Moldavia) from 300 to 500 thousand persons. Now, closer to the start of the new year, what is already being spoken of is to increase even this number, say, to 800 thousand.

A Central Asian migrant in Moscow (photo by Grigory Pasko)

[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.]

THEY HAVEN’T KILLED YOU YET….
To the memory of Anna Politkovskaya

Andrei Novikov
Independent Political Columnist

I proposed holding a rally in memory of Anna Politkovskaya in the city of Rybinsk. They shoved my proposal away. I proposed having at least a minute of silence in memory of Anna Politkovskaya. Then they told me: “We’re not interested in politics!”.

Then I told them literally the following: "When they kill you, you’ll get interested in politics instantly."

Then those who aren’t interested in politics looked at me and said: "And who is this Anna Politkovskaya anyway?"

Today the newspapers are filled with stories about the mercury poisoning of Karinna Moskalenko. This one from Tony Halpin at the Times of London has some good information:

“The machinery of the state is probably now so angry with my activities, but I still don’t know whether we have grounds to link this to my work. I don’t know if it is a demonstrative act to threaten me,” she said from her home in Strasbourg.

“I am quite weak now and have been sick since Friday. I am really angry that I could not come to the Politkovskaya case, I was effectively prevented from coming.” The discovery has prompted speculation that she could have been the target of an attempt to silence her over the case. Exposure to high levels of mercury can damage the brain, heart, kidneys, lungs, immune and nervous systems.

Matthew Chance of CNN reports on Russia's sudden financial altruism.

Turkmenistan has just discovered what might be the fourth largest natural gas field on earth. I am sure that Gazprom doesn't like this development whatsoever.

From the Asia Times:

British consultancy firm Gaffney, Cline & Associates (GCA), making the announcement in Ashgabat regarding the first results of its audit of Turkmen gas reserves, said its low estimate under the established international and classification system is that the fields may have a minimum 4 trillion cubic meters of gas and as much as a staggering 14 trillion cubic meters.

This catapults Yoloten-Osman, in the southeast of the country, to the status of Turkmenistan's No 1 gas field, overtaking even the fabulous Dowalatabad, whose reserves it will exceed by at least five times. It should be kept in mind that many other of Turkmenistan's many gas fields have yet to be fully explored, and the GCA has just made its initial findings known.

A further group of Russian energy companies is planning to ask the government for ‘tens of billions of dollars of cheap loans’ to stave off the effects of the financial crisis. ‘Turkmen gas riches may exceed the West’s wildest dreams’ - if so, what lies ahead for EU energy relations? Foreign Minister Sergei Lavrov reiterated his view that sanctioning Iran for its nuclear work is ‘counterproductive’.

The falling price of oil contributed to further huge losses on the MICEX yesterday. Mid-size Bank Globex is under scrutiny for seeking to protect itself from severe losses by taking measures that, some argued, are against the law. Amid falling prices and an unusually big harvest, the agricultural sector needs more than $34 billion in order to survive the crisis. News of the crisis is still failing to hit Russia’s mainstream media, says this report. Aviation authorities have grounded a group of Russian airlines due to their debts. The financial crisis doesn’t seem to be having an effect on the art world. ‘Good art correctly priced will always make good prices,’ says the head of Sotheby’s in Russia. An Austrian property commissioner has reportedly blocked the sale of a luxury chalet to billionaire Yelena Baturina, on the grounds that the sale was not in the public interest.

TODAY: International Court of Justice gives Georgia green light on ethnic cleansing case; Georgia-Russia talks suspended amid accusations on both sides; EU makes friendly moves towards former Soviet republics; Karina Moskalenko story hits global press; Russia makes ties with Argentina; Mitvol to head Yabloko?

The International Court of Justice has given Georgia permission to go ahead with its case accusing Russia of ethnic cleansing, and has ordered both sides to ensure the security of all ethnic groups in the breakaway regions. Attempts by Russia and Georgia to hold talks about how to proceed were almost immediately suspended, with both sides blaming each other for a failure to engage. The talks began ‘on a tense note’, as the Russian negotiator reportedly arrived late. Russia has withdrawn troops from some Georgian areas, says this article, but many remain: ‘the Kremlin is, in effect, unilaterally redrawing Georgia's map.’ The EU’s suspension on a travel ban on the Belarusian president is ‘part of an initiative to promote closer ties with former Soviet republics after Russia's invasion of Georgia’. On the ‘heavy costs of drawing fragile post-Communist nations’ like Bulgaria away from Russian influence.

I must confess that I feel entirely too close to Karinna Moskalenko personally and too involved professionally in the defense of our client, Mikhail Khodorkovsky, to objectively comment on what appears to be a horrific mercury poisoning attempt in her car in Strasbourg, France. My subjective opinions on these events, colored as they may be by emotion, nevertheless lead me to believe that we are witnessing the latest chapter in a long established pattern of threats, harassment, intimidation, and now violence against lawyers in Russia. It is this pernicious pattern, and the institutionalized impunity that supports it, which must be unequivocally denounced, confronted, and challenged by every government, NGO, private sector company, and individual who still claims to uphold even the most minimal standard of ethics, morals and decency.

Russian lawyer – a dangerous profession?

By Grigory Pasko

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The procuracy of Strasbourg has opened a criminal case based on the fact of an attempt to poison the famous Russian lawyer and human rights advocate Karinna Moskalenko and her family. As various mass information media have reported, in Moskalenko’s automobile was found a large quantity of a substance that looks like mercury. The French police are now conducting an investigation and the necessary expert studies.

Yesterday, Moskalenko had appeared in the European Court of Human Rights. She had reported that during the course of the past week the state of her health had deteriorated several times. At the present time, the condition of Karinna Moskalenko and of the members of her family is satisfactory.

We agree with the concerns raised in this new Financial Times op/ed that the Russian government's bailout plan is unlikely to be distributed evenly and fairly, and will likely reward certain political expediencies. However this argument that "the market’s fragile grip on the economy could be undermined" by the increasing role of the state is silly - market forces haven't been a real factor in Russia since the Yukos affair.

In fact, Russia’s $180bn-plus intervention in liquidity and capital injections is proportionately even bigger than the $700bn US package, as the US economy is seven times larger than Russia’s.

But more money means more risk. The immediate danger is that the funds, which are largely being channelled through big banks, will not reach far into the economy so smaller companies will be left stranded. Next, the rules under which the funds are distributed are unclear, creating a yawning gap for favouritism.

The following is a translation of an article which appeared last week in Spain's leading newspaper, El País, coinciding with the anniversary of the death of journalist Anna Politkovskaya. The original article can be read here.

Russia’s Growing Impunity to Kill and Intimidate Journalists

Pressures, boycotts, threats, torture and including death: this is what critical journalists in Russia expect. NGOs and experts criticize the silence of the West before this violation of human rights

Juan Carlos Galindo, Madrid, Oct. 4, 2008

Magomed Yevloyev died in Ingushetia on August 31st after receiving a shot to the head while he was in police custody. Telman Alishayev, a broadcast reporter for Islamic TV in Dagestan, died one day later not very far from there, after being shot while in his car. On this same day, MIlosav Bitokov, editor of a weekly in the south of Russia, was beaten close to his home and checked into a hospital with various broken bones and grave wounds. Also at the end of August, Zurab Tsechoyev, editor of the human rights web site Mashr, was kidnapped and tortured for hours by the Russian security forces. A few weeks before, Roza Malsagova flew all the way to Paris with her three children to seek asylum after she suffered harassment and threats. The list could go on for many more paragraphs.

All of them were journalists and all have suffered this violence before the indifference of silence of the European Union and Western governments. They have all paid, some with their lives, for their criticism of the Russian government and the zero respect for liberties and human rights shown by Vladimir Putin and his successor Dmitry Medvedev.

Well, that sure was fast. Today for the first time since war broke out between the two countries, delegations from Russia and Georgia met at the United Nations in Geneva for peace talks aimed at resolving tensions. However, no sooner than the Russians and Georgians decided to meet for talks, they decided not to talk, and suspended the meetings.

Perhaps neither side has all that much to gain politically at the current juncture while the United States crawls toward the November elections (indeed, they have been postponed until Nov. 18). Some people believe that the peace talks are just one of many stunts from Georgia in order to keep the international media spotlight pointed in their direction, but this doesn't reconcile with reports that it was the Russian delegation which stormed out of the Geneva summit.

That makes sense. Just earlier today President Mikheil Saakashvili told the FT that "The financial crisis could work both ways. It could make the Russians more realistic, down to earth and pragmatic. (...) But there is a fair chance that, with their kind of mindset, it could make them more aggressive, in order to make public opinion less critical of economic developments."

Let's hope that his latter thesis is proven incorrect.

Photo: Russia's Deputy Foreign Minister Grigory Karasin, speaks during a press conference after a closed meeting of the Caucasus talks to try to settle the Russia-Georgia conflict, in Geneva, Switzerland, Wednesday, Oct. 15, 2008. (Source: AP Photo/Keystone, Laurent Gillieron)

Yesterday we blogged about the death of hockey star Alexei Cherepanov. Today an ESPN columnist makes a call for greater transparency in Russia's top league, the KHL:

Many hockey people who have been to Russia in recent years -- whether they're players, GMs, scouts or agents -- describe a certain Wild West element to the country's society, and its hockey business in particular.

The KHL, with its deep pockets and sometimes suspect way of doing business, has done little to disabuse observers of that notion. League officials acknowledged that Radulov was under contract to the Predators before he returned to Russia to play in the KHL this season, but they did nothing to stop him. Avangard Omsk offered Stanley Cup-winning coach Bob Hartley a contract to become its bench boss, then turned around and offered the job to former Canadian Olympic assistant Wayne Fleming.

Now, with many troubling questions surrounding Cherepanov's death, the KHL must choose what kind of league it is going to be.

Today the New York Times has published a "Last Call" for a number of people to pose op/ed questions before the candidates as the debate approaches tonight. It's interesting that the Democrat Bill Bradley has chosen to throw out the Russia-Georgia bone. He appears to fallen into that classic left-leaning trap we have described on this blog in the past (a trap that Obama has so far resisted), by which Democrats may accidentally find themselves cornered into the pro-Putin corner, finding themselves in the business of manufacturing excuses for unilateral war and producing legitimacy for Russia's claim to a sphere of influence and the irrelevance of national sovereignty - at least for former Soviet nations. Logically, anyone opposed to the unilateral U.S. invasion of Iraq should also be opposed to the invasion of Georgia ... in practice, we see that the opposite tends to be true.

It's easy to see why people are tempted to question support for Georgian sovereignty...

I was emailed the other day by La Russophobe, whose disagreements with this blog are robust, asking to bring attention to the case of the Russian literature professor Boris Sokolov, who appears to have lost both his position at the university as well as his columnist arrangement with Gazeta for having written a column about Georgian president Mikhail Saakashvili. Sokolov had also previously been criticized for questioning a 9/11 conspiracy film being heavily shown on Russian state television.

Sokolov's firing appears to me to be a frightening barometer of the current level of intolerance in Russia for outsider opinions on the Georgia situation.

The press and blogosphere are of course having a field day with the news that executives from Gazprom are enjoying a road show in Alaska this week to woo local representatives and meet with ConocoPhillips, possibly discussing participation in natural gas pipeline down to the lower 48 states. Given that Gov. Sarah Palin, the eminent "Kremlinologist," has placed so much emphasis on her foreign policy expertise with Russia, the Gazprom invasion is embarrassing to say the least. Some think that the timing of the Alaska visit carries a message:

"The timing is as interesting as the visit itself," said Chris Weafer, chief strategist at UralSib Financial in Moscow. "Gazprom's entire senior management goes into Sarah Palin's backyard during a contentious election. There's a message there."

He might be right. The New York Times reports that the Alaskans were expecting a two-person delegation, then were surprised to receive about a dozen, including CEO Alexei Miller and silovik-in-chief Alexandr Golubyev.

However let's not lose the plot completely. Gazprom has had a business presence in the United States for years now, with a sales and marketing office in Houston, delegations send to conferences such as the CERA, and various agreements with American firms. They even once spent a month touring the USA with a Gazprom-sponsored ice hockey team to promote the brand ... I don't recall anybody assailing Mitt Romney of rolling over to the Russian invasion when the Boston Bruins re-enacted the miracle on ice with the Gazprom team.

The government is to lend its four major energy companies up to $9 billion to help them survive the financial crisis. Gazprom has announced that it has offered to help Alaska develop its natural resources, and has accordingly sent a group of senior executives to anchorage. ‘The timing is as interesting as the visit itself,’ noted one analyst. Stroitransgaz, which is part-owned by Gazprom, plans to extend a gas link from Syria to Turkey with a view to supplying a European project. Syria and Russia signed a €52 million gas deal earlier in the week. New research indicates that the Gulf could deliver an extra 10 million barrels of crude oil per day by 2015. TNK-BP has started commercial oil production at its Verkhnechonsk field.

It is expected that a slowdown in growth across the board in all sectors, and particularly for finance specialists, will lead to severe job losses. This report indicates that emerging market stocks, including Russia’s, have fallen harder in the last few weeks then US and Western European stocks, but the Moscow Times is focusing on good news in the short term. An Icelandic delegation, in Moscow to begin negotiations on a loan, has received ‘an excellent reception’. Rusal has reportedly ‘lashed out’ at Vladimir Potanin for selling $600 million in assets to a unit of mining giant Norilsk Nickel.

TODAY: Russian armed forces to be halved; Russia-Georgia talks begin amid pessimism; China and Russia solve border dispute; nepotism case sees sixteen notaries fired; Russia supplying arms to Darfur, says human rights group. Politkovskaya hearings begin.

Prospects for a breakthrough at today’s UN-EU-Russia-Georgia talks are ‘negligible,’ says one journalist, ‘as western leaders continue to avoid confronting awkward issues.’ Russia itself is pessimistic on its outlook for the talks, saying that progress is impossible without input from officials from South Ossetia and Abkhazia. In the aftermath of the talks, the International Court of Justice will rule on whether to order Russia to take immediate steps to prevent further ‘ethnic cleansing’. This journalist sees Russia’s withdrawal from Georgia as ‘make-believe’. China believes that its successful resolution of a border dispute with Russia, unveiled yesterday, ‘sets an example for the international community.’

Defense Minister Anatoly Serdyukov has announced that he is to cut the number of generals and officers ‘in a drive to streamline the bloated armed forces’, and re-establish its position as a global power. The total number of staff is to be more than halved by 2012. A Moscow court will begin preliminary hearings of Anna Polikovskaya's murder case, a day after reports emerged that Karinna Moskalenko, the former lawyer of the journalist, found deadly mercury in her car.

The Financial Times is running a story tonight about an $87 billion bailout plan by the Russian government to ease the fall of some of the country's most wealthy and overleveraged men - allowing the government enormous power to determine the winners and losers of the financial crisis.

It occurs to me that there is only one (former) oligarch who needs rescuing - and he is the only one whose rescue is proven to boost the stock markets. Liquidity may be short in Russia this month, but irony is not. More details from the report after the cut.

Firstly I need to apologize to all my readers for having been away from the blog all day. I had a long flight from Europe to North America today, but not before I was in contact with many people asking about Karinna Moskalenko, one of Mikhail Khodorkovsky's lawyers whose persecution has been carefully documented on this blog. Karinna is a dear friend and trusted colleague of mine, so obviously I am extremely concerned about the news from Strasbourg. I do want to reassure everyone that I have spoken with her several times today, and that she and her children do not appear to be in mortal danger.

Very soon I expect we can hear Karinna speak for herself on these events, and we plan to be among the first to report the news to you. For now, below I post excerpts from the Reuters report:

A Russian human rights lawyer whose clients have included leading Kremlin opponents said Tuesday that she had found poisonous mercury in her car in France and believed it may have been a warning to her.

Karinna Moskalenko told Ekho Moskvy, a radio station in Moscow, that the incident had prevented her from travelling to Moscow to take part in the trial of three suspected accomplices in the 2006 murder of the journalist and Kremlin critic Anna Politkovskaya.

"People do not put mercury in your car to improve your health," Moskalenko, who spends much of her time in the French city of Strasbourg, told the radio station. "I am very concerned because there were children in that car."

The fervent brand of nationalism that has flourished in Vladimir Putin's Russia has taken on many forms, from Nashi youth rallies to nostalgic trends of consumerism to violence against immigrants. But perhaps the most vibrant arena for these patriotic exercises in national pride and supremacy (almost exclusively defined by comparison to the United States) is within sports nationalism.

Many have already commented on Russia's bid, beginning last year, to build a competing elite ice hockey platform known as the Kontinental Hockey League (Континентальная Хоккейная Лига, or KHL), which would eventually overcome the popular National Hockey League in the United States, and lure away all the premiere talent with higher salaries. Look no further than how the state-run media has covered the rise of the KHL to see the enthusiasm of injecting nationalism into this sporting competition.

All of this raises some interesting questions following the unexpected and tragic death of the 19-year-old hockey phenom (and leading prospect for the New York Rangers) Alexei Cherepanov, who suffered a fatal heart attack during a KHL game last night.

For a while now I have been checking out some entries at the Across the Pond blog managed by Deutsche Welle, sometimes finding interesting opinions and other times, well, not so much. Today's entry is a reaction to the Vali Nasr op/ed on Iran and Russia that we commented on the other day.

Let's assume Nasr's ultra-realist strategy, which sounds like a new version of the old saying "the enemy of my enemy is my friend," works out and helps contain Russia. That still doesn't answer the question about how to deal with Iran's nuclear program. What's more, Nasr's dichotomy "Freeing Europe from the clutches of Russia" versus "Punishing Iran for its nuclear program" in itself is debatable. First, so far the common goal of the U.S. and the EU wasn't to punish Iran for its nuclear program, but to prevent Iran from acquiring nuclear weapons, which is an important distinction. Second, whether Europe is really in the clutches of Russia is still a point of discussion. And third, whether containing a resurgent Russia has a higher priority than preventing Iran from acquiring nuclear weapons is equally questionable. So what do you think? Is it a sound strategy for the next president to play off Iran versus Russia?

Grigory Pasko has just contacted us with a breaking news report: today in Moscow, none of the Visa or MC Electron labeled ATMs were giving out any cash, possibly signifying a freeze on accounts. Pasko could not ascertain the functioning of other ATM systems.

More on this to come...

See Pasko's first dispatch from Iceland here.

Descendants of the Vikings
or Political Correctness in Iceland

Grigory Pasko, journalist

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On 5 October of this year in Reykjavik one Icelandic newspaper took from me an interview. On that same day telejournalists also took an interview, having promised to put it on the air the next day. On the next day, the 6th, the interview came out in the paper, but was not shown on television. On that same day, the 6th of October, two more newspapers took interviews. And promised to publish them on the 7th. And on that same day, but later in time than when the interviews had taken place, it became known that Russia would supposedly allocate 4 billion euros to Iceland in the capacity of financial aid for overcoming a crisis.

Neither on the 7th, or the 8th, or the 9th of October were the interviews published. Nor did television show air the interview with me.

Representatives of the Icelandic branch of Amnesty International, the organization that had invited me to Iceland, were unable to ascertain the reasons for such censorship.

It looks like Russia's Renaissance Bank is experiencing its own small version of the Société Générale rogue trader scandal, as a young man placed several unauthorized trades on the market right before the crash, losing the group about $10 million. From the NYT Dealbook Blog:

A Russian business newspaper, Vedomosti, reported that the institutional client had encouraged a trader on the equities desk, identified as Anton Stenin, 28, to place the bets in early September in violation of risk rules, at a time when many thought the stock market was poised to rebound after a dip during Russia’s conflict with Georgia the month before. Instead, it declined further as the global financial crisis set in. The client was unable to make margin calls. Mr. Stenin left the company before the brokerage firm learned of the unauthorized trading. The institutional client was not identified.

An official with knowledge of the transactions told The Times that Mr. Stenin was trading in Russian blue-chip stocks.

Washington appears to finally be paying the cost of ignoring Latin America for so many years as Russia swoops into the vacuum. This comes from Dan Erikson of the Inter-American Dialogue:

Moscow's outreach to the region is by no means confined to Hugo Chavez and his closest allies. In June 2004, Putin made the first-ever visit to Mexico by Russian premier for talks focusing on military sales, and later that year he attended the APEC summit in Chile and then visited Brazil to initiate cooperation in satellite technology and oil exploration. In 2007, the Russian leader visited Guatemala and then promised to cooperate with the country on electricity production, prompting then-President Oscar Berger to describe Putin as "one of the brightest leaders in today's world." Russian arms sales to the region amounted to only $300 million from 1998 to 2001, but they have since escalated dramatically. In 2006, Russia's military sales to Venezuela alone totaled $3 billion (including an eyebrow-raising shipment of 100,000 Kalishnikov assault rifles), and hundreds of millions more were sold to other major Latin American countries. If the pace of military trade continues, Russia's arms sales to Latin America will soon surpass the records set by the Soviet Union.

The strategic interests that are motivating Russia's drive into Latin America are clear. Russia seeks to reassert itself as a world power, which includes a renewed presence in Latin America, while much of the region wants to diversify its economic partners to reduce its dependence on the United States. None of this favors US influence in the hemisphere, which appears to be in free fall during the Bush Administration's final months in office.

This report from National Public Radio interviews average Russians about their perceptions of the economic crisis:

Russia is among the countries hardest hit by the world's financial turmoil. Only recently, Moscow was bragging that its oil-rich economy was an island of stability amid global uncertainty. But now many ordinary Russians are worried about losing their jobs and their savings.

The President of Russia’s Gas Union insists that the financial crisis will have no effect on the country’s major natural gas pipelines. Will OPEC respond to the drop in oil prices with a cut in production? Likely so, says The Economist. The President of South Korea has urged his population to reduce their energy consumption in order to protect the economy from the effects of the global crisis. Will Kazakhstan’s national oil fund save its economy? Ukraine's energy ministry has approved a tender from Russia’s Atomstroyexport to construct a nuclear power plant.

What’s the deal with the Kremlin’s opaque ‘secretive anti-crisis task force’, wonders the Moscow Times? An equities trader at Russia’s Renaissance Capital lost the company an estimated $10 million by placing unauthorized bets just as the stock market collapsed. Vladimir Putin’s comments yesterday about the failure of government measures to prevent the financial crisis from affecting Russia’s real sector have been picked up by opposition party The Other Russia, which also reports on the estimated 37 billion rubles that Russian consumers have withdrawn from their banks due to uncertainty about the security of their savings. Medvedev, meanwhile, has increased the value of bank deposits that the government will insure. Vladimir Potanin has sold $600 million worth of assets to Norilsk Nickel. Is it a blow to add to the collective woes of Russia’s oligarchs, or a shrewd business move? Norilsk's board member Mikhail Prokhorov, currently thought to be feuding with Potanin, warned that the company could go bankrupt if it proceeded with a planned share buyback. Alisher Usmanov has insisted he will not sell his stake in football club Arsenal because he is ‘in love’ with it. VTB shows it is feeling the effects of the crisis, applying for government money. In the period leading up to the crisis, MDM Bank reported a three-fold net profit rise.

TODAY: Elections shut parties out; EU divided over resuming talks with Russia in aftermath of Georgia war; Medvedev never mentioned a ‘sphere of influence’, argues one reporter; Russian to sue US government over Aeroflot crash. Roscosmos. Hockey player dies at Russian game.

Russia’s regional elections, which took place over the weekend, denied registration to all parties not represented in the Duma, ‘effectively locking in a four-party system’. Roman Abramovich won a seat in Chukotka with a reported 97% of the vote. Germany and Italy are leading the campaign for Europe to resume discussions with Russia on trade, energy and political ties, although Britain and France have protested. The US is to join tomorrow’s Russia-Georgia talks, which have been organised by the EU, UN and OSCE to work towards promoting stability in Georgian regions.

The Moscow Times tries to set a few things straight regarding Medvedev’s supposed ‘sphere of influence’ and the discussion of Russia, as part of coverage for the US presidential elections, as an ‘evil empire’.

This characteristically bombastic Washington Times editorial argues that Europe's response, and especially that of Germany, to Russia's invasion of Georgia has been seen as rewarding of bad behavior - confirming Russia's claim to its sphere of influence. I wonder if Germany has thought that this "sphere" may include East Berlin...

Mr. Putin and Mr. Medvedev have demonstrated that the West is powerless to protect Russia's neighbors. Mrs. Merkel stated that the plan to include Georgia and Ukraine in NATO provoked Russian aggression in August. Instead, the German leader should ponder whether the provocation emanated from her decision in April to kowtow to Russian demands - behavior which emboldened Moscow to act against Georgia. If Mrs. Merkel's logic is sound, then, in light of her rejection of the NATO bid, Russian troops should withdraw completely from South Ossetia and Abkhazia. Yet it is more likely that recent Western weakness will serve to only further whet Russia's appetite for dominating its neighbors.

In case you missed it, CBS provides us with a split screen monitor of how Senators Barack Obama and John McCain react to the rather pointed question on Vladimir Putin's Russia. See if you agree with me that McCain seems to visibly relax when talking about this favorite policy area of his. You can see video of their first debate on Russia here.

Let's see if we hear any more refinement on these questions during Wednesday's debate given Dmitry Medvedev's speech at Evian, the cooperation shown in Georgia, and the test firing of ballistic missiles over the weekend.

Watch CBS Videos Online

The following open letter is making the rounds of the Russian blogosphere these days. As October 13 is Svetlana Bakhmina's birthday, we thought we'd do our part and publish an exclusive translation of it here on our blog to help bring attention to the outrageous plight of this innocent person.

Sep. 25th, 2008 04:13 pm APOLOGIES FOR APPEALING TO YOU

...Dear friends, I have never asked, but now I'm asking: help me to disseminate [this letter] so as to increase the chances that it will get to the addressee. If, of course, this text does not enter into contradiction with your life position. I will not get into discussions. If you want to express dirt about Sveta or to tell me that a thief should be sitting in jail, go take a hike. Sorry.

ABOUT SVETLANA BAKHMINA
Esteemed President of the Russian Federation!
Esteemed user of the Internet Dmitry Anatolievich Medvedev!

Apologies for distracting you from the affairs of state.

I wanted to write an official letter, but it, naturally, will not get beyond a low-level employee of the Administration, while writing a letter in the name of this same employee is something I am fully capable of doing myself. All the arguments are completely understandable.

But hope for a miracle does not leave me, and therefore I write nevertheless.

Women’s colony – hell bedecked in flowers

By Grigory Pasko, journalist

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

From the editor: Former YUKOS lawyer Svetlana Bakhmina has been transferred to colony № 21, which is a prison hospital. About this reports the website "Избранное" citing a source in the administration of the Federal Service for the Execution of Punishments for the Republic of Mordovia. It is known that they had transferred her a week ago already. About the reasons for the hospitalization they did not report. However, the website reminds that Svetlana Bakhmina now is found in the seventh month of pregnancy. That is, it is entirely possible that Svetlana is going to have to give birth behind barbed wire, and then to raise the child in the same place.

Not that long ago, our correspondent Grigory Pasko spent time in the capacity of a journalist in the Mozhaisk women’s colony not far from Moscow. We asked him to tell us about what a women’s colony in today’s Russia is like and what is a “house of the child” in this colony.

A few years ago, RA had a series of blog posts arguing that in terms of geopolitical interests, energy, and simple geography, Washington and Tehran could find that they have much more in common than the fiery and hostile diplomacy (or lack thereof) might dictate. Russia's mild protection of Iran from sanctions in the UN represents not a true alliance or mutually rewarding friendship, but rather the maintenance of a "swing position" whereby Moscow can ensure that Iran and the United States continue to have poor relations, and especially prevent Iran's natural gas sector from developing into a competing supplier to Gazprom (enormous amounts of foreign capital are required). Indeed, many policy analysts have explicitly identified the urgency of including Iranian supply in order to make the Nabucco pipeline a possibility (not that Dick Cheney understands this...).

Photo: An Iranian police stands guard in front of a picture of Iran's late leader Ayatollah Ruhollah Khomeini (L) and Supreme Leader Ayatollah Ali Khamenei next to the municipality of Tehran October 7, 2008. (Source: Reuters)

Today the Lex column at the FT points toward the massive redistribution of assets happening in Russia as a result of the global financial crisis, and the routing being experienced by a number of the country's most wealthy oligarchs (Oleg Deripaska had to give up his stake in Hochtief).

However, unlike the 1998 Russian financial crisis, the government appears set to dramatically extend its influence over the economy.

Even so the Russian rout is triggering a redistribution of assets as some oligarchs are forced to sell assets to repay loans or meet margin calls. This time however – unlike Russia’s infamous 1995 loans-for-shares scheme and 1998 financial crisis – the state is set to increase its influence over the economy, continuing the Putin-era trend. First, the Russian government has channelled extra liquidity through state-owned banks Sberbank and VTB. Some $50bn has been earmarked for Vnesheconombank, a third state bank, to help companies refinance debt. That in effect gives the Kremlin the power to choose the winners and losers.

Second, Russia’s state-controlled or state-loyal energy companies could also benefit. Vagit Alekperov, president of Lukoil, says his company, as well as Gazprom, Rosneft, and TNK-BP, have all asked for slices of the Vnesheconombank credit – though none has crippling debt. The money, he says, will help the companies develop and “have money to buy assets”, which happen to be extraordinarily cheap right now. Don’t count out Russia’s oligarchs – state or otherwise – just yet.

This idea comes from a column by Aleh Tsyvinski in the Moscow Times:

Trying to erect an Iron Curtain around Russian funds and businesses will prove counterproductive. Indeed, a large-scale "invasion" of Russian business would be a positive development, because it would foster economic interdependence. This is true even if the economic expansion is led by state-owned companies and by Russian wealth funds. By investing in U.S. and European assets, Russia's government and business elites are buying a stake in the global economy. This should bring better mutual understanding and a more rational and accountable foreign policy.

Sure, sounds great, but what kind of companies are we talking about, and who would the prospective owners be? The private sector getting into debt markets, or some yet to be created Ministry of Foreign Holdings looking for energy and defense? Most importantly, exactly who is refusing investment from abroad right now - I think pretty much any U.S. financial institution would be absolutely delighted to take a few billion from Pol Pot if he were still around. Also, is rushing in to snap up assets a really smart move at the moment? Take a look at the Chinese, who have been very conservative throughout the recent financial crisis, after having been burned in three to four consecutive attempts to make big moves in the United States.

I often wonder to what extent the Russians are strategically thinking in the long-term vs. the short-term.

Competition authorities in the European Union face a very tough challenge in regulating foreign investment in energy infrastructure. For political reasons, it's clear that they desire a level of "reciprocity" in the home market of each foreign investor - namely, that if Gazprom wants to own mid- and down-stream assets in Europe, it's only fair that European companies be allowed direct shares in energy production projects. Such was the aim of the contentious but well intentioned "unbundling" proposal from the EC.

The measure, it goes without saying, came under aggressive criticism both from Gazprom as well as several German and French national champions, who didn't want to see their energy production companies severed from their supply and distribution entities.

On Friday, the commissioners finally folded under the pressure, reaching an agreement which will allow each individual EU member state to decide whether to allow foreign bidders entering their market, significantly weakening Europe's ability to protect itself from Russian market domination.

Smaller oil exploration companies across the UK’s energy sector will struggle to keep afloat due to debt refinancing issues caused by the financial crisis. Gazprom is looking likely to post some of its strongest profit margins this quarter due to the high price of natural gas. European overdependence on supplies from Russia is problematic due to potential shortfalls, not intentional volatility, suggests this article. The US has removed North Korea from its blacklist of terrorists after an inspection of its nuclear capabilities. The consumer price of gasoline in the US has recorded its largest drop of all time, falling 35 cents a gallon over the weekend.

Russia's Finance Minister Alexei Kudrin says that the government is planning to invest money from its pensions fund in the stock market, and has called for the IMF to take action to help developing economies ‘caught in the whirlwind of the global financial crisis’, and warned against suspending trading on Russia’s stock exchanges for too long. Kudrin also warned that growth for 2009 could be low. ‘The International Monetary Fund's forecast for 5.5% growth next year is the optimistic one,’ he said. CIS leaders have decided to create a working group of finance ministers to coordinate their responses to the crisis. It is thought that former coal-mine electrician and majority shareholder in Novolipetsk Steel , Vladimir Lisin, has lost the most money of all Russia’s oligarchs, with an estimated $22 billion drop. ‘The Kremlin thinks that now is the time to buy [foreign] assets cheaply.’ Norway’s government is reportedly seeking a loan from Russia. Is Vladimir Putin facing a threat to his legacy of bringing growth and stability to Russia?

TODAY: Medvedev oversees missile test; United Russia wins regions across the country; Russia prefers Obama; anti-Russia party wins Lithuanian elections; Deripaska links dog British politician; Einstein.

Attending a test firing of two strategic missiles, President Dmitry Medvedev said he would commission a new generation of weapons for Russia's armed forces. Sunday’s election for Russia’s regional assemblies saw United Russia receiving over 50% of the votes in all major regions. Read a special report detailing the events of the 1993 Communist demonstration in Moscow in which a reported 150 people were killed.

The US presidential candidates are now showing ‘a similar resolve’ on plans to deal with Russia, but a senior Russian lawmaker says that Barack Obama would be a better partner for Moscow. Former Soviet leader Mikhail Gorbachev wants the west to stop trying to ‘teach lessons’ to Russia.

The European Court of Human Rights has satisfied the application of former deputy director of the first department of Asia of the MFA of Russia Valentin Moiseyev, sentenced by the Moscow City Court in the year 2001 for state treason to 4.5 years of deprivation of liberty with confiscation of property.

Valentin Moiseyev was taken into custody in July of the year 1998. They had brought charges of espionage in favor of South Korea against him. The FSB accused Moiseyev of having supposedly worked for the special services of South Korea from the year 1994 through the year 1998, passing on to them information comprising a state secret. According to the data of the investigation, he had conducted around 60 meetings with a representative of South Korean intelligence and had «passed on to him copies of 23 documents» concerning cooperation between the RF and the DPRK [Democratic People’s Republic of Korea], including in the military sphere. And had gotten 14 thousand dollars for all this. According to the arithmetic of the FSB, that comes out to 608 dollars per document. Moiseyev himself declared that he had maintained amicable relations with representatives of the embassy of Korea, while the passed on materials had been earlier published in a series of newspapers and other open sources. And that in actuality this is not secret materials, but a scholarly lecture “The Policy of Russia on the Korean peninsula”.

From a book review in the Economist:

You could read Mr Vaughan’s book, substituting ex-Soviet countries such as Estonia for Czechoslovakia. With Kremlin talk of “privileged interests” in Russia’s neighbourhood, and a litany of real and imagined grievances there, it is easy to imagine a resurgent Russia whipping up its millions of compatriots, living in foreign countries thanks to the collapse of the Soviet empire, into a frenzy while the outside world stands aloof. These stranded Russians tune almost exclusively into the Kremlin-run electronic media, not local stations, which broadcast poorly in Russian, if at all (the same mistake that Czechoslovakia made with German). The lesson of the 1930s is that once you lose hearts and minds, and malefactors gain them, everything else usually goes too.

Someone from Renaissance believes that the more Washington decides to play around in Georgia and the Ukraine, the worse the Russian stock market will perform. To us, that seems to be a clear demonstration of a transparency problem.

Marina Akopian, a partner at London-based emerging markets boutique Hexam Capital (a joint venture with Resolution Asset Management) says: 'Prices bear little or no relation to results, with sellers getting rid indiscriminately of winners and losers.' She cites potash producer UralKali, whose share price is down some 70 per cent over three months despite first-half revenue growth of 114 per cent and net income up 261 per cent year on year.

'The plunge would not have been so steep had the government done some more explaining,' says Igor Yurgens, head of government relations at Renaissance Capital, Russia's largest privately owned investment bank. 'It needs to be more open about its medium and long-term strategy - if it has one.'

But this is Russia and the politics of defence are never far away. Yurgens's biggest fear is a US election result that will lead to more hardliners in Washington. 'If Nato offers quick accession to Ukraine in December there could be big trouble, making the current Georgia problem seem like a joke. We have this power, though we don't want to use it. But if there is no anti-Russian provocation, I expect the markets to start rising gently by Christmas.'

Judging by the media's unabated promotion of his cult of personality, I'd have to agree with John Follett of the Sunday Herald that no one should rule out a political