Robert Amsterdam

Energy Blast - Nov 20, 2008

2008-11-20T12:05:20Z

The liberalization of power prices - 'a key element of the electricity sector reforms that enticed investors to take on mandatory multibillion-dollar expansion programs' - is likely to be delayed by the government, after a number of oil companies complained that the measures were too much to deal with on top of the economic crisis. A difficult week for BP - pipeline maker Transneft is threatening to take it to court over a dispute about extending a link for the Chevron-led Caspian Pipeline, and a minor fire has disrupted output at a TNK-BP deposit. Spanish bank La Caixa has been in talks with Russia's Lukoil about the possible sale of its 14% stake in oil major Repsol. The deadline for countries to extend their territories into the resource-rich Arctic seabed is set for May of next year, writes The Economist.

Today in Russian Business - Nov 20, 2008

2008-11-20T11:47:46Z

Over $146 million is currently owed in overdue wages to Russian employees, as the financial crisis makes its way into the real economy. Inflation for 2008 has hit 12%. Yesterday's surprise halting of the MICEX 'scared investors'. A new deal with Cyprus could see the MICEX listing Cypriot companies. As of last year, Cypriot FDI in Russia was at $49.6 billion. A Russian unit of US-based Alcoa could be fined as much as 2% of its revenue by the Federal Anti-Monopoly Service for setting 'monopoly-high' aluminum prices. A $4.6 billion bailout fund from the IMF means that Iceland is now attempting to secure just $500 million from Russia - $3.5 billion less than it had originally hoped for. Norilsk Nickel wants the government to purchase a 25% blocking stake owned by Rusal, over fears that Russia could lose control of the company. Two new Russian banks have been added to the nine that have lost their licenses since August.

RA's Daily Russia News Blast - Nov 20, 2008

2008-11-20T11:40:27Z

TODAY: United Russia congress; Georgia-Russia talks progress, Russia wants UN to monitor weapons trade; Poland seeking to allay tensions over missile defense; Bakhmina, Politkovskaya.

The United Russia party is holding its congress today, giving party leader Vladimir Putin a chance 'to re-assert his status as Russia's most popular politician'. Putin has already been quoted as having pledged to spend an extra $1.8 billion on defense over the next two years, and to transfer $1 billion to the IMF to fund crisis rescue packages.

]]> territorial disputes have temporarily been put aside. Kazakhstan, in anticipation of taking the OSCE chair in 2010, says it wants to help resolve the situation. Russia wants the UN to review the international system of arms exports, and blames Ukraine and the US of supplying Georgia with arms in the lead-up to the war. Poland intends to reassure Russia with 'written proposals for confidence-building measures related to missile defense, on the basis of transparency and reciprocity,' although the final decision on the defense shield lies with US president-elect Barack Obama. Poland says it will not lobby on the issue. Russia wants NATO to get involved in EU security talks next year.

Masha Lipman writing in today's Washington Post says that Svetlana Bakhmina is 'simply suffering collateral damage from the harsh campaign against Khodorkovsky', and holds Dmitry Medvedev 'personally responsible for her suffering'. Garry Kasparov writes in today's Wall Street Journal, calling on Obama to 'label the Putin dictatorship correctly from the start'.

Human rights groups, journalists and family members respond to the news that Anna Politkovskaya's trial - already somewhat frustrated due to the fact that her killer remains at large - will now not be conducted publicly due to fears for the safety of the jury. 'This is a politically motivated decision by the government,' said Dmitry Muratov, the editor of the newspaper where Politkovskaya worked.

PHOTO: Russian Prime Minister and chairman of United Russia ruling party Vladimir Putin and Russian President Dmitry Medvedev enter the tenth United Russia Party Congress in Moscow, Thursday, Nov. 20, 2008. (AP Photo/Misha Japaridze)

The Disappearing Oil Market

2008-11-19T21:17:50Z

As the price of oil has just fallen again for the fourth day in a row, dipping below $54 a barrel for NYMEX crude, serious concerns are surfacing in the energy sector over financing for key production and transit projects, which could present a major strain on future supplies. With the credit tap still turned off and panic over rapidly changing projected cost structures, both technically complicated and politically risky projects are getting delayed - such as the massive oil sands project in Canada, the "Sarah Palin pipeline," the Petrobras deepwater megafield, and slowing investment to Angola and Nigeria.

Even the implacable Norwegians at the tightly managed StatoilHydro are gloomy, as Chief Executive Helge Lund has commented "I now see more downside risk for our industry than in a long time. (...) The industry's attention is clearly very quickly shifting from production and growth to cash flow and flexibility...Oil and gas companies all over the world are revisiting plans and investments, and projects are put on hold."

]]> repeated threats by Vladimir Putin and Alexander Medvedev to call off the controversial Nord Stream project in favor of even more expensive LNG terminals. Although the attempted bluster to hardball and pressure the easily frightened Europeans should be taken with just a grain of salt, there are other indications that the oil price crash could open up some new cooperation and opportunities (even the Chinese may soon hold some serious collateral on Rosneft shares).

But the truth is that it might be too late to see any parity come back, at least not without a significant cognitive shift in how we think about the energy trade. For all our talk about investment plans, production targets, competition, corporate governance, and competition, we may be inadvertantly granting the oil trade a "market" status when it long ago ceased to function like one.

Although the origins of the current market conditions had their roots well before 11-S, the U.S. invasion of Iraq, and the drastic spike in oil prices which followed, one can really sense that the politicization of the energy trade has become significantly more entrenched since 2003. This has been largely driven by domestic political developments in producer countries such as Russia, Venezuela, Iran, and Libya, among others, where nationalizations and bureaucratic involvement over the management of the resource sector has grown prolifically. Just consider for a moment the high number of officials Vladimir Putin's government, now presided by Dmitry Medvedev, who hold dual posts in the administration as well as at the head of a state owned company. The same goes for Hugo Chavez's Venezuela.

But it would be a mistake to assume that the overlapping of foreign policy and resource ownership in these countries were the only factors contributing to the deepening politicization. The same period has also heralded the quick rise of the so-called NOCs (National Oil Companies), such as CNOOC and CNPC of China, India's ONGC, Russia's Gazprom and Rosneft, and many other smaller players in emerging markets. The NOCs used to be just another player in a vibrantly competitive landscape, and an important client to Western energy companies who could provide project capital, technology and experience for difficult projects, and highly specific services. Soon, however, these companies began to develop oil services subsidiaries of their own, and the capital gap closed very quickly.

A frequent complaint of mine is that the IOCs (International Oil Companies) appear to fail to understand why the Chinese, Indian, and Russian companies are able to land so many more production licenses and contracts than they are in the developing world - areas of the largest proven reserves. The answer is that because they approach the deal as both a company and government, they bring incentives to the deal and tied-selling opportunities that no private sector corporation could possibly match - everything from debt forgiveness, infrastructure investment, arms (that's a Russian specialty), and civilian nuclear development assistance.

There are not a lot of options remaining to consumer nations and private sector players. The time has come for coordinated action: international legal frameworks and agreements to de-politicize the energy trade, supply diversification, and the formation of a cartel of buyers. First, though, let's stop pretending like this is working like a market. Second, don't be fooled by the illusion that the current low oil prices will bring about serious structural changes anytime soon to undo the damage incurred since 2003.

The Ruble and the Reserves

2008-11-19T16:08:53Z

There appear to be some discrepancies over views on possible ruble devaluation and the rate of depletion of Russia's foreign exchange reserves.

From AP:

Russia's finance minister sought Wednesday to reassure investors and citizens that the economy will survive the global financial turmoil, saying Russia's rainy day fund will last for at least 7 years under the worst-case scenario.

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Despite a plunge in stock markets, oil revenues and the ruble, Alexei Kudrin said Russia's vast reserves - which have been accumulated in the 8-year-long oil boom - "have laid a solid foundation for a stable macroeconomy and the rate of the national currency."(...)

Russia's presidential aide Arkady Dvorkovich on Wednesday said again that the government would not let the national currency tumble.

"The Central Bank is in full control of the situation," Dvorkovich said in televised remarks. He admitted that lower oil prices may affect the ruble, but pledged that "there will be no devaluation".

From Bloomberg:

Russia's international reserves, the third-biggest after China's and Japan's, have fallen $122.7 billion, or 21 percent, since Aug. 8 as the central bank tried to shore up the ruble. At the same time, President Dmitry Medvedev, 43, has pledged more than $200 billion of tax cuts, loans and other measures to maintain economic growth, threatened by plummeting oil prices and investor flight.

The reserves' decline increases the chance the central bank, which signaled last week it is willing to gradually weaken the ruble, will stop supporting the currency. (...)

"The 1 percent devaluation feeds into capital flight,'' said Osakovsky. ``It helps fuel speculative attacks'' on the ruble. "There will be a few small devaluations and eventually they will be forced to accept a floating currency rate.''

That's not necessarily bad news. The dollar-denominated revenue from energy exports would rise in ruble terms, making it easier to balance the budget even with lower oil prices. At the current level of 27 rubles per dollar, the 2009 budget would, be balanced at an average Urals price of $55 a barrel, according to Struchenevsky's estimates.

"The only solution is to devalue the ruble, to stop supporting it,'' Renaissance Capital's Sharipova said.

Economic Crisis to Prompt Early Elections?

2008-11-19T15:35:36Z

That's what Yulia Latynina was suggesting in her column today. Garry Kasparov also has a big interview with Reuters in which he (no surprise) not only predicts the rapid toppling of the regime within the next two years, but also hypothesizes that the economic crisis is making Vladimir Putin feel very insecure being outside of the Kremlin, and may lead to early elections: "[He] is scared by the crisis and wants to go back to the Kremlin. (...) Now ... it's about saving your skin. That's why I believe they will soon move into a new election phase."

Interesting, no doubt, but these seem like mutually contradicting outcomes - Putin going back into the presidency is not something we would associate with a regime on the brink of collapse ... however there is also doubt over how much appetite there would be for the vulnerability presented by another transition.

Oleg Kozlovsky: Autopsy of an Opposition Party

2008-11-19T15:16:48Z

A Medical Report for SPS

By Oleg Kozlovsky

On 15 November, Union of Right Forces (SPS), one of the two remaining democratic parties in Russia, was liquidated by its own members at an extraordinary convention in Moscow suburbs. This was, as openly admitted, a deal between the party's leadership and the Kremlin. Some of the former SPS members will now join a new puppet party Right Deed (Pravoe Delo) while dissenters will participate in creation of Solidarity opposition movement.

SPS was a very contradictive organization from the day one. It appeared not long before the 1999 parliamentary elections as a coalition of liberal (in European sense) and conservative movements and parties. The liberals included the oldest democratic party in Russia, Democratic Choice of Russia (DVR), led by ex-PM Yegor Gaidar, and Boris Nemtsov's Young Russia (Rossiya Molodaya) movement. Ironically, the name of Nemtsov's organization was later taken by a Kremlin-sponsored group of provocateurs. The conservatives were represented by another ex-PM Sergey Kirienko (now a member of Government) with his New Force (Novaya Sila) movement and by the father of Russian privatization Anatoly Chubais among others.

]]> The strange structure of the party caused ambivalence in its position and activities. The liberals criticized Putin for establishing authoritarian regime and wanted to join the opposition while the conservatives supported Putin's economical policy and tried to cooperate with the Kremlin. The parliamentary campaign in 1999 was mainly influenced by the conservative wing with its slogan "Putin for president, Kirienko for the Duma!" Soon after this program was fully implemented, Sergey Kirienko left the Parliament and became Vladimir Putin's representative in Volga Federal District. Some of his former colleagues like Boris Nemtsov were at the same time trying to oppose Putin's crackdown on NTV, the most popular independent TV channel. But even this one of the earliest anti-democratic moves of the new president was done by the hands of Alfred Kokh, Chubais' colleague and close friend! As Boris Nemtsov participated in protest rallies against the takeover of NTV, his fellow party members celebrated the success of this "special operation" (I have witnessed it myself).

The party's schizophrenia was arguably the main reason for its loss of popular support. Putin's followers who voted for SPS in 1999 switched their support to United Russia while the opposition voters didn't believe SPS and simply stayed at home. As a result, SPS lost the 2003 elections and stayed out of the parliament. Many people hoped that this defeat would force the party to choose its side. However, it never happened. Since Kirienko left SPS, all of its public leaders were liberals, they maintained the critical to the Kremlin stance of the party and attracted new activists from the opposition. But the party's funding was mostly provided (especially after the arrest of Mikhail Khodorkovsky and the loss of elections) by Anatoly Chubais, many regional branches only existed de jure and consisted of UES (the state energy company headed by Chubais) employees. In addition, most of the party's officers were paid by and therefore loyal to Chubais and his conservative wing but had to follow orders from party's political leadership, mostly liberal. This made both wings of the party dependent on each other and predetermined its end.

Still, there were a few attempts to cure the party's split personality. One of SPS' leaders and ex-senator Ivan Starikov headed a riot against Anatoly Chubais and his conservative wing by going for the party chairmanship in 2005. He claimed that SPS must become a part of the opposition and shouldn't compromise ideals of democracy for Kremlin's favor. The conservative wing had no political figures to stand against Starikov and many expected that he would win. However, just before the national convention a compromise figure, Nikita Belykh, was introduced by Boris Nemtsov. Chubais' closest deputy, Leonid Gozman, was to become the vice chairman of the party to counterweigh liberal Belykh. So, schizophrenia in SPS was saved (and even institutionalized by introducing the new vice chairman position) by both of its parts. They truly felt that they couldn't do without each other!

Nikita Belykh tried to balance both wings of the party for several years but it was impossible. The more SPS hesitated to join the opposition, the more supporters it lost. Starikov and some of his followers were the first to leave the party in 2005. Eventually, Starikov joined Mikhail Kasyanov's People's Democratic Union and is now one of its leaders. I myself left SPS in April 2007 when Belykh supported an attempt of party's apparatchiks to destroy the Moscow branch, which has always been liberal and opposition. The party's support and influence was disappearing day by day.

The last attempt to bring SPS in opposition was made in late 2007 before the parliamentary elections. When Putin became #1 in United Russia's list of candidates, it made impossible even for SPS conservatives to support him. The second reason was that Chubais ceased to sponsor the party and its dependence on him diminished. Nikita Belykh and other party leaders criticized the president in the media, campaign printed materials were openly anti-Kremlin, it even officially participated in a Dissenters' March--something that had been severely punished just a year earlier. But the split hasn't gone anywhere: some regional leaders refused to oppose the administration, some even changed sides, others simply didn't know how to work under government's pressure. After losing the elections SPS largely returned to its older state with two wings struggling against each other. It appeared, however, that the liberals were to win.

There was one other actor that didn't like an idea of having a schizophrenic party in the country--the Kremlin. What they wanted to see is a controlled, predictable and loyal quasi democratic party, which might be used to convince the West that we've got pluralism. At first, they attempted to use spoiler parties like Democratic Party of Russia (DPR) but they couldn't fool many people: SPS was still there. And the worst of all, SPS had an official registration that allowed the party to go for the elections. Since more and more people in SPS realized that there was no other option rather than to join the opposition, the Kremlin's well-entrenched electoral system became endangered: it was based on not allowing any uncontrolled elements even to appear in the ballots. What would happen if Russian citizens had an opportunity vote for Kasparov or Kasyanov or even both? Nobody knows. And Kremlin surely doesn't want to know. So it decided to liquidate SPS.

Of course, this special operation could be done by simply "re-checking" the party and taking away its registration, as it was done to the Vladimir Ryzhkov's Republican Party of Russia before. But this would cause some political troubles for Putin, both domestic and international: SPS was a well-known and rather large organization. Therefore it was decided to destroy the party with its own hands. What still strikes me is how easily it was done! Gozman agreed to shut SPS down in exchange for a "pardon" from the Kremlin. Belykh left the party but didn't try to prevent its liquidation. Only a small number of devoted liberals kept struggling against Gozman till the last day. Some of them even organized a picket near the place of the party's convention and said, "If you have conscience, don't vote for [the liquidation]". According to the results of the voting, only 11 delegates had conscience out of 108.

At the end of the day, the liquidation of SPS may be a good thing. It's true that this party had many true democrats and liberals but these people haven't disappeared. On the contrary, now you can easily tell them from the others, who had nothing to do with liberalism but participated in the same party. The latter will join a new Kremlin's pseudo-democratic party Right Deed, the first will join the opposition Solidarity movement or other opposition organizations. It is sad, however, that the only way to cure schizophrenia was decapitation.

Photo: Ex-leader of Russian Union of Right Forces party Leonid Gozman (L), head of business association "Business Russia" and ex-leader of the party "Civic Force" Boris Titov speak during a constitutive congress of "The Right Thing" party in Moscow on November 16, 2008. (AFP/Getty Images)

Bakhmina as a "Seed for Civil Society"

2008-11-19T14:49:35Z

Below is an excerpt from an editorial published in the Boston Globe. The New York Times also ran a piece, the petition can be signed here, and other blog material read here, here, and here (Pasko wrote his piece back on Jan.24, 2007).

Recently, the Bakhmina case took a new turn. In September, a former classmate of Bakhmina's posted an open letter to President Dmitry Medvedev asking him to pardon Bakhmina. Several days later, an Internet petition was launched. By late October, the petition had more than 60,000 signatures. On Oct. 30, in a rare media breakthrough, the case was discussed in the television debate show "K barieru!" ("Challenge to a Duel"), with writer Maria Arbatova facing off against veteran dissident Valeria Novodvorskaya.

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Some commentators suggested that Novodvorskaya, known for her anti-Putin tirades, was set up to discredit the "Free Bakhmina" movement as a cause of loony radicals. But her occasional extreme comments (such as comparing Bakhmina's treatment to Nazi killings of pregnant Jewish women) were overshadowed by the repulsiveness of Arbatova, whose quasi-feminist argument against special treatment for women quickly devolved into cruel jeers at Bakhmina and her defenders.

The call-in vote tilted in Arbatova's favor, by about 68,000 to 56,000 votes. Many Russian bloggers believe it was rigged, claiming that calls to the pro-Novodvorskaya line repeatedly got a busy signal but calls to the pro-Arbatova line went through at once. Even so, it was a fairly small margin for a pro-government position. Interestingly, in an October poll, only 16 percent of Russians approved of the denial of parole to Bakhmina while 37 percent disapproved and the rest had no opinion.

There are now more than 85,000 signatures on the Bakhmina petition - including professionals, managers, and college students as well as homemakers, workers, and police officers. The accompanying comments offer a fascinating slice of Russian life. Some people appeal to Medvedev's Christian mercy; others say that the request should be a demand. Some blast Medvedev and Putin as "vicious clowns" or "criminals," or refer pointedly to Medvedev's lack of true authority. Some angrily denounce the current regime and its injustices while others sound poignantly resigned: "How sad that we live in such a time," or simply, "God help us." (...)

Meanwhile, the movement for Bakhmina may become, in the words of writer Boris Akunin, "a seed of civil society." One petition signer, a Moscow mathematician, commented, "Svetlana, stay strong! With your help, Russians are opening their eyes!"

Sometimes, such unlikely heroes make history.

Russia's Leaking Economy

2008-11-19T14:25:34Z

From Yulia Latynina in the Moscow Times, a suggestion of a building scapegoat campaign:

In order to understand how the Russian economy was built, ask yourself one simple question: Is it possible to carry water in a colander? Yes -- if you are able to pour more water into the colander than the amount that leaks out of its holes.

For the past eight years, the Russian economy was like a huge colander. With oil prices above $100 per barrel, petrodollars flooded into the colander with amazing force. As long as oil prices remained high, it seemed as if the colander could actually hold water.

]]> Unfortunately, the sharp drop in oil prices cut off the flow coming into the colander, and we discovered that it doesn't hold water after all.

There were other major leaks as well. Dollars have fled Russia at the rate of $3 billion to $7 billion per week. It is useless to try to stop this outflow because the dollars are being sent abroad by the very people who were the most active in drilling the holes in the colander in the first place.

There's nothing the government can do about the problem either. If it gives money to the banks, they'll just send it overseas. If it doesn't give them money, there will be a catastrophic liquidity crisis and the interbank interest rates will reach astronomical levels.

To make matters worse, the government's reserves are streaming out of the colander, but the Kremlin is only worried about choosing which oligarchs should get a slice of the bailout pie.

How can the Kremlin solve the problem of its leaking colander? Find a scapegoat. Who would be the best scapegoat? Russia's new, young president.

Energy Blast - Nov 19, 2008

2008-11-19T12:07:43Z

Belarus hopes that broader economic integration with Russia as of 2010 will help it secure the discounted rates it currently pays for natural gas. The current massive debt problems faced by Russian electricity providers are reportedly due to to 'delinquent private and corporate customers' avoiding paying their bills. The doubling of output at Su Tu Vang will boost Vietnam's national crude output by 25%. An expansion of a major oilfield in Bahrain could see a doubling of the country's national output.

Today in Russian Business - Nov. 19, 2008

2008-11-19T12:03:08Z

The World Bank's 2009 outlook for Russia is 'grim', predicting further falls for the ruble and cutting the growth forecast in half, and Dmitry Medvedev has acknowledged that the crisis is starting to hit the real economy, as Finance Minister Alexei Kudrin tries to reassure investors on grounds that Russia's gold and currency reserves 'have laid a solid foundation for a stable macroeconomy'. Trading on the MICEX was suspended this morning. Russia cut its holdings in securities of US companies Fannie Mae and Freddie Mac by $45 billion this year, state spending on the ruble has hit $58 billion, and the state's banking buyout is currently around $14 billion, with foreign exchange reserves running 'dangerously' low.

RA's Daily Russia News Blast - Nov. 19, 2008

2008-11-19T11:51:51Z

TODAY: Politkovskaya trial closed to public; tariff increases could harm WTO bid; presidential term bill has successful second reading in Duma; Medvedev against parliamentary elections; prosecutors to eye press coverage of financial crisis; Georgia-Russia talks could take years; Putin to do television Q&A session as usual.

The EU aims to draw up a plan of action for Russia's WTO membership, although the Trade Chief warned the country against pursuing tariff increases proposed by Vladimir Putin which would be 'contrary to the spirit of the G20'. President Dmitry Medvedev has promised that Russia will not resort to protectionist measures to fight the economic crisis.

]]> refused to enter the court room in the presence of reporters. A new campaign has been launched to keep tabs on press coverage - 'information attacks' - on Russian banks during the financial crisis. 'It isn't censorship. We are checking the accuracy of the information,' says the Prosecutor General's office. The case of Svetlana Bakhmina has appeared in the New York Times.

Vladimir Putin will continue the 'tradition' of his yearly live television question and answer sessions this January. Spokesman Dmitry Peskov says Putin's aim is 'to continue the practice of direct communication with the people of this country by the head of the government.' 'He will act more in the role of party leader than prime minister,' said a United Russia official. As the State Duma bill to extend the presidential term moves forward, the Moscow Times points out that Russia's longest-serving leaders behaved in a pattern of 'losing their motivation, energy, innovation and the ability and willingness to consider the opinions of others within an average of five to six years after coming to power.' Medvedev has responded to a call for gubernatorial elections by saying that anyone who supported such a measure could step down from their posts, and said that a parliamentary republic would be 'the death of' Russia.

Medvedev's first tour of Latin America begins this Saturday, and will finalize a range of agreements, particularly in Venezuela, on nuclear energy (Moscow has agreed to build Venezuela's first ever nuclear reactor), air transport and a $4 million joint development bank.

Russia wants an independent inquiry into who started the Georgia-Russian war. Defense Minister Anatoly Serdyukov says allegations that Georgia is trying to build up its military are 'causing concern' that the region could see a conflict worse than the last. The deputy foreign minister of Abkhazia predicts that Georgia-Russia talks, which have commenced this week, could take years to resolve.

PHOTO: Deputies of Russia's lower house of parliament, the State Duma, vote on a proposal to extend the presidential term in Moscow November 19, 2008. (Sergei Karpukhin/Reuters)

Arms for Oil in Africa

2008-11-18T23:08:43Z

Apparently the government of the Sudan is prepared to offer Russian energy companies special benefits and terms to make sure that this country is the "gateway" for Russia's entrance to continent:

Mudawi further said that Sudan does not see Russia's economic partner only and, but an ally to security. He pointed out that there are some areas on the African continent in which Russian soldiers take part in peacekeeping operations, including Darfur.
The Russian official, Margelov, stressed that Russia sees that all the problems in Sudan and African countries that suffering from internal conflicts should be solved with the help of the international community but without direct intervention.

Last month Sergei Lavrov visited New York for a speech at the Council on Foreign Relations, where explained the military intervention in South Ossetia as a humanitarian prevention of genocide under the UNSC principle of "responsibility to protect."

But the Janjaweed need to buy their arms from somewhere... One hopes that any Russian oil workers will have better luck than the Chinese.

Russia's New Friends in the Middle East

2008-11-18T20:39:09Z

Today's news that Somali pirates have hijacked a Saudi Arabian oil tanker, carrying one quarter of the OPEC nation's daily production (valued at $100 million), may result in increased cooperation on security of oil shipments between the Saudi and Russian government. The Kremlin recently pledged to increase its military presence in the Gulf of Aden following the high-profile hijacking of a Ukrainian arms shipment and inference with other Russian freighters, and, just this weekend, the Russian Navy was successful in scaring off an attempted hijacking by pirates of another Saudi vessel. Surely the royal family will be grateful.

But seeing Russia develop closer and closer relations with Saudi Arabia as the savior of the high seas shouldn't be too alarming - this is a relationship (and wider regional policy) that the Kremlin has been quietly and successfully developing for several years now, extending into many areas beyond just the energy and political spheres.

]]> experts, since about 2003, Moscow has been taking advantage of the rather obvious opportunity provided by many Middle Eastern governments' unease with U.S. policy in the region. These deepening ties reached a peak in 2007, when then President Vladimir Putin made a much publicized trip to Riyadh, where he received a red carpet welcome from King Abdullah just days after lambasting U.S. policy. The Crown Prince Abdul Aziz al-Saud made a return visit himself to Moscow that November, followed by some visits between the two governments in 2008 (the most recent is photographed).

This level of diplomatic contact isn't as high as, say, Russia's interest in Hugo Chavez, but it certainly is much more time they have spend with George W. Bush.

A recent paper I came across while preparing for a talk helps to explain what each side is getting out of this partnership. For the Saudis, frustrated with the cold shoulder and deaf ears in Washington with regard the Israeli-Palestinian issue, are happy to look for alternative diplomacy and peace iniative forums which may serve to "wake up" the Americans to their needs. Russia's increasing clout in the region, their close relations with difficult-to-handle Iran, and even their direct negotiations with Hamas make them an emerging player for the Saudis to entertain - even if politically the achievements are more rhetorical than actionable.

There is also certainly an interest from the state oil company Saudi Aramco in bringing Russia closer into the embrace of OPEC, if falling short of regular membership. Just this September during a visit to Moscow, the OPEC chairman extended a renewed offer to Russia to bring them in, and for fun, the Russians pretended to ponder the benefits of the cartel before denying any interest (the same they have said about lacking interest in the gas cartel).

An Oct. 23 article in the New York Times reported that the global economic crisis and crash in oil prices has pushed Russia into serious consideration of undertaking production quotas, which have long been anathema to the world's leading producer. While OPEC Secretary General Abdalla Salem el-Badri's was visiting Moscow, President Dmitry Medvedev made no concrete commitment, but said that the government is quite keen on "maintaining stable oil prices" - which seemed at the time a euphemism for market monopoly.

According to one analyst cited by the article, "The likely reason for the OPEC secretary general's visit to Moscow today was to deliver a message that Saudi Arabia will not take all the financial pain on its own. (...) The cartel is unlikely to make any deeper cuts in the future without the participation of major non-OPEC producers such as Russia."

Motivating the Russian side, we can see a major arms play involved as the subtext to the generalized narrative of "resurgent Russia". According to the South Asia Analysis paper, the secretive Russia-Saudi arms deal may total as much as $4 billion for 150 T-90 tanks, 100 helicopters, and a variety of other equipment. The Saudis plan to spend upward of $12 billion on arms in coming years, and this represents a major shift away from purchases from the United States and Europe, and even represents a choice of Russian arms selected over Chinese suppliers.

While it may be true that Russia remains much better positioned to affect geopolitical outcomes in the Middle East in this current environment, especially if U.S. policy toward Iran remains unchanged, there is no telling how stable this position of dominance might be in the long run. There is only so much that Moscow can say in terms of crowd pleasing the Middle East with the anti-imperialist tropes before the new friends will remember some traditional competing interests.

In terms of oil production, Saudi Arabia and Russia are both traditional competitors, not allies, and any Sovietologist can you tell you what happens whenever Washington convinces the Saudis to ramp up production, temporarily crashing the price - and that's just one of the many hang-ups which have defined Russo-Saudi antagonism over the majority of Cold War.

...but then again, we are so often reminded by everyone that there is no new Cold War, so really we should probably expect an artful and opportunistic response on behalf of both parties to the prevailing realpolitik over any promises of partnership.

Photo: Russian Prime Minister Vladimir Putin (R) shakes hands with Prince Bandar bin Sultan bin Abdul Aziz al-Saud, Saudi national security council secretary general and former Saudi ambassador to the United States in Astrakhan, south-western Russia, on September 4, 2008. (Photo: AFP/Getty Images)

Pasko: It's Clear Who Benefitted from Politkovskaya Murder

2008-11-18T19:55:14Z

Our Russia correspondent Grigory Pasko talks to the BBC about the opening of the trial of Anna Politkovskaya's killers:

They were things the militia commanders in Chechnya and their bosses in Moscow did not want the outside world to hear about.
"It's clear who benefited from this murder," said fellow journalist Grigory Pasko.
"The regime benefited from silencing her, from silencing a brave and prominent journalist. And they also scared other journalists; the few independent journalists there still are in Russia."