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Tuesday, April 28, 2009

Two-Part Czar

04.27.2009  – The National Interest onLine by Peter Reddaway
THE WORLD’S economic crisis may have profound political effects in many countries over the next year or two, but it certainly won’t cause President Obama to leave office early. The same cannot be said with any certainty about President Medvedev or Prime Minister Putin of Russia. Indeed, the system of dual-executive leadership that they operate is the subject of continuous debate and increasing anxiety on the part of Russian elite groups. Some observers fear that the tandem system is becoming unstable, is undermining the cohesion of the state and—in particular—may not be able to handle the deepening recession. They are apprehensive that the two men could, before too long, lose the public trust that they now enjoy, which is a crucial linchpin holding a fragile state and society together. This in turn could cause dangerous convulsions over who should lead the country.
These observers, from academe to think tanks to business circles, see the tandem system as unnatural, first because the executive branch has only rarely in Russian history been divided. On those occasions, as in 1917 after the fall of the monarchy and in the early 1990s when Gorbachev and Yeltsin competed, the division was short-lived. Second, the history of the present arrangement, launched in December 2007, has been bizarre. Toward the end of his presidency, Vladimir Putin rejected calls to change the constitution and run for office again. Instead, he anointed a protege, the politically weak Dmitri Medvedev, to succeed him as president. Then he had Medvedev appoint him to what was, formally, the politically inferior position of prime minister.
Subsequently, however, with some exceptions, Putin went on acting as though he, not Medvedev, was “the real czar.” Meanwhile, Medvedev took occasional initiatives and made periodic speeches about the need for change, but remained, at crucial moments, essentially subservient to his longtime boss.
WHAT HAS imposed new strains on the awkward tandem rule is the deepening recession. Responding to this requires a well-devised strategy and agile tactics. To date, these have been lacking, partly because Putin and Medvedev have somewhat different interests and instincts, partly because the mafia-like clans of Russia’s power elite are seriously divided, and partly because the deeply ingrained vices of “the Putin system” have made personal and clan interests, not Russia’s interests, the ruling class’s priority. None of the clans wants to upset the covert and intricate arrangements of the status quo with an honest debate about the national interest. They are rich, sometimes superrich, with too many secrets to hide about how they acquired their wealth. Usually their business interests conflict with the national interest, to the detriment of the latter. Members of Putin’s main clan—his comrades from the security services in St. Petersburg—are especially determined to hang on to their power and wealth, and may, in the short term at least, have more ways both of influencing Putin and of undercutting Medvedev than do others.
The clans are trying to adapt to the disorienting political system in which there are suddenly two masters and not one. Even though Putin is clearly more powerful than Medvedev, they see that this might change if, say, Putin decides to retire. So maybe it is best to get close to Medvedev in advance, or at least to hedge their bets. On the other hand, maybe Putin will push Medvedev out and resume the presidency, in which case he’d take revenge on them for having sucked up to Medvedev. After a year of this, the uncertainties facing Russia’s rich are as enervating as ever. And with a drop of 70–75 percent in the value of the stock market, the well-off are losing a lot of money and their moods have become sourer still. Thus the risk grows that the bolder clans could start to seek change in the leadership, a potentially disruptive outcome.
If, as seems plausible, the recession and the clumsy tandem structure should make the Putin-Medvedev leadership increasingly erratic, the implications would be many—a deteriorating economic policy, business and bureaucratic groups ever-more aggressive in their demands, regional governors asserting more autonomy, the spread of popular discontent, weakened media censorship and a less predictable Russian foreign policy, to name a few. The future of the leadership would be subject to even-more discussion, maneuvering and plotting than it is already. And the critical public support for the present leaders would start to fragment. This would throw their futures into doubt and could lead to an unstable transfer of power.
THE RECESSION is also having painful effects on the Russian populace. What scares many ordinary people is the rising level of unemployment and the fear that, with production falling, the job situation will continue to get worse. One well-known economist with ties to Medvedev’s entourage, Yevgeny Gontmakher, believes that real unemployment will likely go up by year’s end to about 13–14 percent (from the current 8 percent). At the same time, annual inflation has officially risen to 14 percent, fueling fears that it may go higher still if the government sticks to its present course of undiminished social spending.
Also, for the first time in a decade, the 2009 budget projects a deficit—a hefty 7.4 percent of GDP. This will be wholly financed, Putin said on March 19, by tapping what amounts to more than half of the government’s Reserve Fund, a stockpile built up from taxes on oil and gas sales. Acknowledging that deficits would probably continue for a few years, he said that these would be funded, if necessary, by borrowing from domestic, not foreign sources.
Critics, such as former–Prime Minister Mikhail Kasyanov, argued that the budget was unrealistic, notably in its overoptimistic projections for inflation and GDP. A World Bank report predicted that GDP would fall by 4.5 percent, not the 2.2 percent estimated in the budget.
A more specific threat to working people is the $500 billion debt to Western lenders accumulated by Russian companies. Some $130 billion of this is due to be repaid this year alone. However, most of the companies cannot pay, and the prospects for debt restructuring are unclear. At the Davos World Economic Forum in January, Putin discreetly sounded out Western banks on this score, but reportedly met with a cold reception.
Already, in a way that Americans will recognize, companies are downsizing or closing, and experts predict the trend will likely go much further. Russian firms cannot turn to domestic banks, because even though these have received the largest share of the government’s bailout money to date, they are still not lending.
Among ordinary people, the threatening economic trends have stimulated an emerging readiness in some Russian cities for citizens to publicly express their discontent. While demonstrations usually attract only a few-hundred protesters, their demands have turned more radical. Attacks on the government have become more specific, including placards saying “Putin Out!” and “Enough lies, enough blood, enough Putin.” Other subjects of demonstrators’ discontent have been the lack of housing for military personnel, the disbandment of a military-intelligence unit and the imposition of a tax designed to curtail the import of used cars from Japan. The authorities have shown their concern and uncertainty about these demonstrations both in the inconsistency of their responses—unpredictably peaceful or brutal—and also in the priority given to the training and funding of riot police. The last point is one of several recent omens that elements of the power elite may be preparing to answer a deepening of the recession and popular unrest with a shift to outright authoritarianism. Such a shift would be risky, in my view, and could easily backfire.
Some of the latest movements in public opinion certainly give cause for official concern. Whereas last summer 75 percent of the population supported the course set by the leadership, a poll by Moscow’s Levada Center, a private opinion-research organization, showed that in February, Russians were evenly divided on how they rated the Kremlin’s competence. While slightly over 40 percent thought their leaders would handle the crisis, another 40 percent did not believe they would succeed—or doubted they would.
CLEAR-SIGHTED members of the wider elite can see that Russia’s state capacity—the efficiency and cohesion of its system—is declining. The cause of any particular problem may be the recession, the dysfunctional leadership, the accumulated systemic vices of the Yeltsin and Putin eras, or some combination of all three.
At the national level, this push and pull is seen when Medvedev and the finance minister, Aleksei Kudrin, state that the recession will go on getting worse before it gets better, only to be contradicted by a deputy prime minister, Igor Shuvalov. Shuvalov holds that Russia has reached or almost reached the bottom, and recovery will probably begin by the end of the year. The conflict is also seen when Medvedev’s economic adviser, Arkady Dvorkovich, backs the view of many economists that the government should abolish the sprawling and inefficient state-owned corporations, but the government pays no attention. Instead, it gives special favors to the largest of them, Russian Technologies, a weapons and manufacturing firm that happens to be headed by a Putin crony, Sergei Chemezov. Putin’s highly placed allies, whom he promoted from the police and intelligence services, then try once more to undermine a key enemy, Kudrin, by renewing their efforts to get his deputy imprisoned for alleged past corruption. They use such accusations because this is their favorite modus operandi against their opponents, even though they have little public support for their goal. Meanwhile, the plans of Medvedev and others to fight endemic corruption receive much fanfare and get onto the legislative agenda. However, no one believes that anything much will change. This is because Russia’s rulers have taken similar initiatives every year or two since the early 1990s to no avail.
At the regional level of government, which becomes more important as the national government weakens, the administrations of Russia’s eighty-three regions have been under severe pressure from the recession. They have also, like the Moscow elites, been suffering from the confusion caused by the tandem leadership. Like most recipients of Kremlin funds, the administrations have recently found that Moscow officials are not reducing the kickbacks they demand just because they are giving the regions less cash than before to run their jurisdictions.1 Last summer, the regions’ governors were perplexed as local elections approached. They received from Putin’s and Medvedev’s offices, simultaneously, lists of candidates “recommended” to them for election. But the names were different: the leaders had not coordinated them. In Tatarstan, the Caucasian republics of Dagestan and Ingushetia, and elsewhere, the local authorities have recently taken advantage of Moscow’s weakness. With the Putin-Medvedev duo distracted by the recession and their complex relations with each other, these regions have increased their autonomy with impunity. For example, Dagestan simply refused to accept a tax official appointed by Moscow, while Tatarstan practiced regional protectionism by favoring local companies over outsiders.
Finally, in December, in the Pacific city of Vladivostok, the local government sympathized with the above-mentioned demonstrators against the new tax on used-car imports from Japan. So it declined to disperse the crowd by force. The Kremlin then sent riot police across eleven time zones from Moscow. They proceeded to do the job with considerable violence, thus angering additional people and recruiting them for subsequent demonstrations. Putin wanted to fire the local police chief, but Medvedev persuaded him to desist.
WHO IS to blame for the recession and government weakness? Putin is more obviously vulnerable than Medvedev. As prime minister, he has been directly responsible for handling the financial and economic crisis. Most independent observers consider that, overall, he has performed this job without distinction and with undue favoritism to the companies of his cronies. Moreover, they see the severity and likely persistence of the crisis as stemming, in considerable part, from his failure to take on the deep structural problems of Russia’s economy and society over the last decade, especially in the “good years” of the oil bonanza.
Russia’s neglected infrastructure of roads, ports, railways and public buildings, its lack of economic diversification, the corruption of the bureaucracy and the business world, the subservience of the judiciary, the underfunded educational system, the largely unreformed military, the neglected public-health facilities and the acute demographic crisis—these are the sort of major problems that, in most cases, as Clifford Gaddy and Barry Ickes have said in these pages, “remain worse now than they were at the beginning of Putin’s tenure.”
Some critics, such as former–Deputy Prime Minister Boris Nemtsov, former–Deputy Energy Minister Vladimir Milov and newspaper editor Konstantin Remchukov, have made a damning case for Putin’s departure—though without directly calling for his ouster. They point out that since 2000 the ultimate responsibility for policymaking has rested with him. They also note that his boasts about the strong economic and political system he built have proved hollow, as have his repeated claims of last fall that this system would insulate Russia from the global recession.
Motivated to protect their wealth, elite groups are beginning to blame Russia’s rulers, Putin in particular, and they are doing so either in private or through their media outlets. They ask what economic and political strategy could extricate Russia from its wide-ranging crisis. And some wonder which leader would be best qualified to replace their most frequent target, the prime minister, and implement a new course. Deputy Prime Minister Shuvalov has been mentioned more than others in the media.
Nonetheless, Putin’s political defenses have so far taken relatively few blows. His popularity accrued over the last several years as he presided over the punctual paying of government wages and pensions and the steady, oil-fueled rise in Russians’ personal incomes. He controls most of the key institutions, and strict censorship of the main TV channels limits Russians’ understanding of the economic crisis. As a result, his sky-high popular-approval ratings have begun to come down only recently and—despite the growing intellectual and popular protests—only a little.
But dissent is still brewing. Especially notable in some articles on the internet and in papers like Kommersant, Novaya Gazeta and Nezavisimaya Gazeta is the lack of respect for Putin, his government and the party he heads, United Russia. With power at least to some extent divided, censorship and self-censorship have waned or vanished in parts of the media even with all that government control. Here authors can say, at last, what they really think. The more daring papers now publish articles on the covert business affairs of top politicians and solicit the often-disrespectful views of public figures about the government, Putin and his future. The aforementioned editor of the upscale newspaper Nezavisimaya Gazeta, Konstantin Remchukov, for example, writes dismissively about him, arguing that he’s not up to handling the recession: “The structure of his government is ineffective, it is focused neither on reforms, nor on development.” Putin’s “concept of development ‘from above’ is based on the illusion that the successes of the 1950s, the era of industrialization and the state sector, can be repeated. Experience has long shown the ineffectiveness of the top-down model.” Finally, the author writes, Putin’s centralization of decision making is “a road to a dead-end,” and the present system has entered a state of “entropy.”2
Of course, Putin has his defenders in the media too. But most of them are, in one way or another, on his payroll (television host Mikhail Leontiev and the media analyst Vyacheslav Nikonov, to name just two). What is more striking are the increasingly strong and frequent critiques of him. However, unless and until the critical views they present spread into society and the population at large, they can be ignored and the Putin-Medvedev leadership may retain some stability. But this seems unlikely.
ALONG WITH the public perception of Putin, the relationship between the president and the prime minister is key to both men’s futures. When it comes to everyday relations, some things have been going quite well. Neither man has directly criticized the other in public. No apparent squabbling has developed over who should attend a particular conference or summit or meeting. And the first test of the tandem operating in conditions of military stress and heavy international criticism, during the five-day war with Georgia last August, was passed. The two men looked like a team, mainly perhaps because Medvedev went along with the tough line Putin took when dealing with both Georgia and the West.
What about tensions within the tandem? Between the two men personally, the relationship is quite close and superficially warm. Beneath the surface, however, frictions exist, caused in part by inevitable rivalries between their teams. More specifically, over time Medvedev has laid out fairly systematically his ideas for certain liberal reforms to be pursued in the future, providing considerable potential for tension. The same is true about some related actions that he has taken, it seems, when he thinks Putin won’t object too much or is distracted by the pressure of events. These ideas and actions have concerned such issues as: stepping up the fight against corruption, strengthening the judiciary’s independence from the executive, devolving some federal powers to the regions, curbing the state-owned corporations, and freeing business from unnecessary bureaucratic regulation and harassment by police agencies.
In general, Putin has not reacted in public to Medvedev’s presentation of at least the beginnings of a reform program. Thus, he has given the unverifiable impression that he may not be opposed to most of the proposals. In that case, Putin may want Medvedev to lay the basis for a reformist program before he, Putin, removes from Medvedev what might be called his training wheels.
However, on one occasion Putin appears to have lost his patience. It began with Medvedev speaking of the baneful effects of official corruption:
Decisions about who should be appointed to official positions are sometimes taken on the basis of personal ties, or on the principle of personal loyalty, or, and this is the most revolting of all, in return for money. In other words, positions are sold.
Seemingly, Putin took these words as an implied criticism of his own conduct of the presidency, because the next day he delivered an angry populist attack on the big-metals corporation Mechel. Evidently in order to give the impression that he was not cozy with big business, he accused Mechel of avoiding taxes and committing other criminal acts. A little later, Medvedev agreed publicly with Putin that Mechel was indeed negligent about paying taxes, but also referred to “the nightmares” faced by companies when government officials tried to shake them down, in league with one partner or another. Eventually Mechel escaped by paying a hefty fine.
That real tensions exist between the two men is also suggested by the report of a Russian official speaking anonymously in early February. According to the Washington Post, he said that they had
recently decided that a note-taker should keep minutes of their discussions because “misunderstandings” had arisen following past meetings. “It’s a very bad sign,” the official said, arguing that a rift in the leadership could destabilize the government.
More recently, Gleb Pavlovsky, a longtime Kremlin publicist, spoke about the Putin-Medvedev relationship with some revealing frankness leavening his usual spin. The editorial introduction to an interview with him starts:
Will the Russian political system survive the crisis? . . . Predictions vary from cautiously optimistic to extremely dark. The question is exceptionally important, because not only the personal fates of Putin and Medvedev depend on the outcome, but also, without exaggeration, the future of the country.4
Pavlovsky believes the crisis has already been politicized. He accuses what he polemically dubs the “pro-crisis party”—made up of people “from big business, the top levels of government, Moscow circles, and the governor corps”—of organizing a conspiracy. They are allegedly aiming to detach Medvedev from the tandem, get rid of Putin, declare Medvedev their hero and ride into power.
While this scenario seems considerably exaggerated, it may, as this article has indicated, contain some grains of truth.
In any case, Pavlovsky contends that a split in the tandem will not happen, because the two men have similar strategies for extricating Russia from the crisis:
Supposedly, Medvedev has a strategy of liberalization and Putin has an authoritarian strategy based on support from the security forces. This is not so. Putin is a clear-cut conservative national-liberal. Medvedev is a statist and an institutionalist, with expertise in the law. . . . If people get the impression that one of them wants to inflate himself at the expense of the other, or get rid of him . . . , then neither the president nor the premier would be forgiven for that.
If there’s a problem, Pavlovsky claims, it’s that “Putin and Medvedev are slightly fearful about their own joint potential.” But in fact, he urges, “Their alliance should be emphasized,” because it will only strengthen their leadership potential.
Pavlovsky does not believe the duo is blameless. They should, he says, improve outreach to societal groups if they hope to create policy cohesion and a strong joint message:
They’re avoiding this. . . . In a period of crisis they should appear together in public more often. Otherwise, if there’s trouble in some company town, the ruling tandem may not come up with a common response, and two different signals may be given.
The lack of outreach has incurred a certain cost for the duo, Pavlovsky says, “even highly trusted experts say that the system of decision making is unfathomable.” This must be especially frustrating to businessmen who need to know whose assistants to lobby and bribe.
In sum, then, even though Pavlovsky sees Russia’s system as having “extraordinarily large reserves of durability,” he nonetheless believes that Putin and Medvedev have some failings as a team, and fears that the opposition could exploit the economic crisis to incite popular discontent and change the leadership.
Going much further and portraying the duo’s relationship as dangerously underdeveloped, given the need for dynamic leadership in a major crisis, is Alexander Budberg, an established columnist for one of Russia’s best-known papers, Moskovsky Komsomolets. Not surprisingly, Budberg, whose marriage to Medvedev’s publicity chief enhances the significance of his articles, implicitly assigns responsibility for this situation to Putin.5 On the surface, he argues like this: The global crisis is an immediate threat and potential disaster for Russia, because it has exposed the hollowness and fakery of the country’s institutions and, therefore, the extreme vulnerability of its economy. However, Russia has one solid and invaluable asset that, if properly exploited, can avert catastrophe. This is the people’s enduring trust, demonstrated by opinion polls, in the leadership of Putin and Medvedev. Although “chaos is very close,” these leaders can bring Russia through the slough of despond. Yet danger comes from selfish forces intent on preserving their power, their wealth and the status quo as a whole. These forces are led by two unnamed officials easily identifiable as Igor Sechin, a deputy premier and hard-liner, and Vladislav Surkov, the top regime spinmeister. The blocking efforts of these people are, Budberg says, preventing Putin and Medvedev from unleashing their courage and drive, from pursuing the sort of innovative ideas demanded by the crisis and from cooperating fully with world leaders to bring it under control. Finally, he appeals to the two men to break free from their restraints and lead Russia to safety.
That is the superficial message of the articles. But it is not their true or full meaning. This becomes clear only if you know that Sechin is Putin’s longest and closest ally, that Surkov was a top aide to Putin until last year when Putin placed him in the position of deputy head of Medvedev’s presidential administration, and that both Sechin and Surkov are longtime enemies of Medvedev.
Then the message comes into focus. It is, in reality, a lightly disguised but impassioned appeal to Putin. Budberg is pleading with him to recognize the urgency of the economic crisis, to push aside Sechin and Surkov, to open himself up to new ideas and willing cooperation with world leaders, to make a genuine team with the primed-but-frustrated Medvedev and, in all these ways, to actually deserve the unwavering trust of the Russian people that both men enjoy.
Whether or not Budberg’s articles have made any impression on Putin remains to be seen. It seems unlikely. However, he and Pavlovsky, as insiders, tell us much about the nature of the tandem, Putin’s main clan and the political difficulties faced by Medvedev.
THIS BRINGS me to some brief conclusions about the near-term future of Russia’s leadership.
Clearly, one possibility is that the tandem will continue for the time being, with Putin calling most of the shots, while Medvedev, frustrated but loyal, tries to make a difference in places where he can insert himself. His ambition seems to be growing, along with his public exposure. But it’s not yet clear whether this is leading to a real increase in his political weight. Whatever the case on this point, in theory at least, the tandem might astonish observers and last through Medvedev’s four-year term.
What could perhaps force change in this conservative scenario would be the self-assertion of some of the more aggressive clans that have their roots in Moscow, rather than Putin’s St. Petersburg, and are unhappy with the political and economic status quo. Their chances would improve if the recession were to deepen and persist. They might be able to prevail privately on Putin to say that, since Medvedev was now firmly in the saddle, he himself could leave office for a high position outside the government. Medvedev might then appoint as prime minister a nominee from one of the clans.6 All this would probably conform to the constitution. However, it wouldn’t necessarily change the essence of the present system very much. Medvedev might try to liberalize the system, but be thwarted by powerful vested interests opposed to change.
Alternatively, at some stage Putin might, under certain circumstances, have Medvedev resign and get himself reelected as president. This much-discussed scenario seemed plausible late last year, when, in a series of swift authoritarian moves and without the urgency being convincingly explained, the constitution was changed to extend the president’s term in office from four years to six. Now, however, the scenario appears improbable. It’s hard to see Putin organizing an electoral diversion in the midst of an economic crisis. And it’s impossible to see him running again, if the crisis is long and deep. This would cause the pendulum of public opinion to swing against him (and probably against Medvedev too), as it did in earlier times against the once-popular leaders Gorbachev and Yeltsin, who both left office with their approval ratings close to zero.
Putin faces an unenviable dilemma. He cannot depart without looking like a cowardly deserter. But staying on would likely be politically fatal. Furthermore, he may not be a free agent. As is widely rumored in the media, key actors may have damaging information on his accumulation of personal wealth or other dark deeds from the past, which they can use to direct him along the path they prefer.
There is one last scenario. Some sort of non-constitutional and possibly violent change to the leadership might be attempted from the Far Right, and might or might not succeed. This would probably be fueled by the xenophobic and imperialist ideology that dominates most Far Right media, and by elements of the siloviki, i.e., the security services and the military. However, partly because the representatives of these groups who are currently in power have been politically weakened, this scenario looks unlikely, at least for now.
The Russian leadership is becoming unstable—for reasons mainly to do with the awkward tandem-leadership arrangement and the costs, economic, political and psychic, of the recession. None of the future scenarios is very promising—for Putin, Medvedev, the Russian economy, the clans, the wider elite, the newly unemployed or the country. The least disruptive development in the short term would be a transition to a situation in which Medvedev becomes a fully fledged president and appoints a competent prime minister to handle the recession. Then, in 2010–12, Medvedev or his successor might be able to mobilize enough elite and popular support to start tackling the urgent, deep-seated problems of Russia’s system of government.

Gazprom’s positions in Europe shattered

28 April 2009 - Sofia FOCUS News Agency - Gazprom has sustained three strong blows on its European positions these days, Nezavisimaya Gazeta reads. The first blow came from the European Parliament (EP) and its package of measures for energy market liberalization, which in fact ditched Gazprom’s aspirations for direct access to European consumers. Then was Turkmenistan’s support for Nabucco. And on 25 April at the Energy Forum in Sofia, the South Stream pipeline project failed to find its place on the EU priority list. Gazprom’s defeat on the European arena could mean a collapse in the Russian gas giant’s doctrine for expansion abroad.

Medvedev's Macro-European Ambitions Ring Hollow

April 27, 2009 - Eurasia Daily Monitor by Pavel K. Baev - President Dmitry Medvedev paid a state visit to Finland last week anticipating a warm welcome on "safe ground," since it was with Russia's help that Finland started building its own statehood exactly 200 years ago (Rossiiskaya Gazeta, Vremya novostei, April 22). He paid due respect to the memory of Carl Mannerheim, who led then newly-independent Finland in the "Winter War" with the USSR in 1940, but showed little interest in minor matters of bilateral relations -disappointing his traditionally pragmatic hosts (www.gazeta.ru, April 22). Instead, Medvedev tried to refresh his initiative on launching an all-European political process leading to a new collective security treaty. He first announced this idea last June in Berlin and has referred to it many times since without elaborating on the content (Ezhednevny Zhurnal, April 23). The Finns remained indifferent to Medvedev's vision despite the catchy name "Helsinki plus" and despite the undeniable fact that Russia's dissatisfaction with the existing security system makes it seriously unstable. The examples that Medvedev brought to illustrate this fact -from the conventional arms control breakdown to the August war in the Caucasus- proved primarily Russia's readiness to violate the post-Cold War norms of behavior, and there are few reasons to believe that new norms that would suit Moscow's ambitions could satisfy its neighbors. Medvedev explained that he expected long and complicated talks, but the start of this as yet hypothetical process will inevitably signify that the Organization for Security and Cooperation in Europe (OSCE) is compromised, while undermining NATO's role as the central security-providing institution. Russia's "principled" course against ceding any political territory to the Alliance was enriched with a new quarrel last week as the Foreign Ministry vigorously condemned NATO's "destabilizing" exercises in Georgia scheduled for May (RIA-Novosti, April 23). Medvedev's counterparts will eventually abandon their "we-will-think-about-it" approach and tell him bluntly that a new Kellogg-Briand pact is a non-starter. Meanwhile, Medvedev tries to supplement his grand initiative with a no less ambitious proposal for replacing the Energy Charter with a new framework agreement. The inconclusive Russian-Ukrainian "gas war" has proven that the current arrangement does not work, but the draft unveiled by Medvedev in Helsinki and uploaded to the presidential website is first and foremost self-serving (Vedomosti, Kommersant, April 21). Its three main goals are to secure expanded demand for Russian gas while returning to "fair" prices, to abolish the EU plans for liberalizing the gas market, and to discipline the states responsible for providing transit -first of all Ukraine. Moscow hardly expects that such a "conceptual approach" will secure support within Europe but it might help in making the Energy Charter null and void -and that would be a perfect hit as far as Russia is concerned. Putting more emphasis on spin in this grand energy bargain, Moscow maintains high levels of activity on all European gas fronts. Medvedev sought to get from the Finns the final approval for the delayed Nord Stream pipeline project across the Baltic Sea. Prime Minister Vladimir Putin sent a different signal by canceling his participation in an energy summit in Sofia, Bulgaria, sending instead Minister of Energy Sergei Shmatko, who insisted that the EU should grant priority to the Russian pipeline project South Stream across the Black Sea (Kommersant, April 22). Deputy Prime Minister Igor Sechin went to an international conference on energy transit in Ashgabat seeking to calm down President Gurbanguly Berdimuhamedov, who had blamed Gazprom for the explosion on a pipeline in Turkmenistan (Nezavisimaya Gazeta, April 21). In neither case, however, was significant progress registered, and Moscow now often finds itself in the uncomfortable position of suppliant instead of negotiating from a position of gas strength. Berdimuhamedov apparently presumes that Gazprom is not what it used to be, while probably not reflecting much on the predicament of his own gas-centric mono-state. Gazprom is indeed so tightly integrated into Russia's structures of governance that it is affected by the general economic downturn -even if the world energy prices have stabilized. Forecasts for the Russian economy are revised almost weekly -and invariably for the worse. The GDP decline in the first quarter has been corrected from 7.2 percent to 9.5 percent, so the Ministry for Economic Development now predicts a 6 percent contraction for the year (Kommersant, April 24). These macro-figures imply a 30 to 40 percent reduction in the state budget income, and if in the current year the government aims at minimal cuts in spending, covering the deficit from the accumulated reserves, by 2010 this policy will be unsustainable. Evgeni Gontmaher, an economist from the Institute of Contemporary Development that enjoys Medvedev's patronage, argues that that the presidential address in May with the key guidelines for the 2010 budget -which must be presented by the government to the parliament by August 25- could be crucially important for Russia's recovery from the devastating recession (Vedomosti, April 22). Large-scale sequestration and cuts for every program will mean that the government has failed to identify its priorities and set Russia on a course of stagnation at the "bottom" of the crisis (www.gazeta.ru, April 22). That might suit the interests of some parts of the ruling bureaucracy, but will leave the populist demands unaddressed and the main pressure groups, from the siloviki to Gazprom, entirely dissatisfied. The ruling "tandem" is quite possibly incapable of making hard choices, as Medvedev's vague ideas about modernization contradict Putin's commitment to preserve key elements of his power system. This system of corrupt patronage and triumphant consumerism was perhaps organic to Russia in the period of petro-prosperity (Rossiiskaya gazeta, April 21). It is, however, simply not viable in the years of scarcity and survival-of-the-fittest -so the Russians are remembering Boris Yeltsin, who died two years ago, with a new respect for a leader that steered the country across a sea of troubles.

Thursday, April 23, 2009

Russia's economy shrank 9.5% in first quarter - ministry

MOSCOW, April 23, 2009 (RIA Novosti) - Russia's gross domestic product (GDP) declined by an annualized 9.5% in January-March 2009, an Economic Development Ministry official said on Thursday. Andrei Klepach, a deputy economics minister, said that the GDP decline in March also equaled 9.5%. Klepach said the substantial decline in the first quarter was attributable to the slump in construction (a decline of about 20%) and lower tax revenues. The GDP also shrank due to reduced investment and retail trade volumes, Klepach said. The economics ministry expects the country's GDP to decline 8.7-10% in April-June 2009 as compared with the same period of last year, Klepach said, adding, however, that the Russian economy "was beginning to rebound." According to the ministry's estimates, Russia's economy will grow by 1.3% to 2.8% in the second quarter of 2009 as compared with January-March 2009. Klepach said that the economics ministry would revise downwards its forecast of the country's GDP decline from the current 2.2%, adding that the figure given by the IMF was quite realistic. The IMF issued a report earlier this week, saying that Russia's economy would shrink 6% in 2009 and grow 0.5% in 2010.

Wednesday, April 22, 2009

Khodorkovsky pleads not guilty

04-21-2009 - Upstream OnLine - Mikhail Khodorkovsky, the founder of now-defunct Russian oil giant Yukos, pleaded not guilty today to four charges of embezzlement and money laundering in a fresh trial. In response to four separate charges that were read out, Khodorkovsky responded each time: "I plead not guilty." His co-defendant and former business partner, Platon Lebedev, condemned the conduct of the case, an AFP report said. "This is not an accusation but a schizophrenic fraud.... I have never stolen anything nor raided anything in my life, either individually or in a group. To confess to a crime that has not taken place is ridiculous," AFP quoted Lebedev as saying. Khodorkovsky was already convicted and sentenced to eight years imprisonment afetr being found guilty of fraud and tax evasion charges but is undergoing a new trial for embezzlement. His supporters have condemned the trial as politically motivated, aimed at keeping the 45-year-old critic of Prime Minister Vladimir Putin out of the political scene indefinitely. Current President Dmitry Medvedev has so far declined to intervene, while insisting on the independence of the courts and promising to improve legal standards in Russia. Prosecutors claim Khodorkovsky and Lebedev embezzled a massive quantity of oil worth 892.4 billion rubles ($25 billion) from three Yukos subsidiaries between 1998 and 2004. They are also accused of then laundering part of the proceeds, amounting to 487.4 billion rubles in Russian currency and $7.5 billion in hard currency. Defence lawyers say that in a worst-case scenario Khodorkovsky could face a further 22 years in jail.

Monday, April 20, 2009

Medvedev calls for new energy pact

04-20-2009 - Upstream OnLine - Russian President Dmitry Medvedev said today he wanted to clinch a new energy pact with the European Union to ensure security of supplies and replace the European Energy Charter, which Moscow rejects. "As I promised, I will distribute today among G8 partners, G20 partners, [Commonwealth of Independent States] partners and closest neighbours such as Finland a basic document which will outline issues of international cooperation in the energy sphere, including proposals on transit agreements," Reuters quoted Medvedev as saying. Russia has refused to ratify the European Energy charter, saying it does not ensure a balance of the interests of energy producers, buyers and transit states. "The energy charter has failed to solve this imbalance. We have not ratified it and do not view ourselves bound by it," Medvedev told a joint news conference with Finnish President Tarja Halonen. "Our task is to ensure the balance of producers, transit states and energy buyers... We would like to start talks with the European Union and our other partners about these documents and hope our ideas will be taken positively," he said. Medvedev's economic adviser Arkady Dvorkovich told reporters afterwards the new document will cover coal and nuclear fuel along with oil and gas. "We are really interested in the nuclear materials' angle. We should spread the principles in this sphere as well," he said. The European Union relies on Russia for a quarter of its gas needs and EU politicians have called on the bloc to cut reliance on Russia after two severe disruptions to Russian gas supplies in recent years due of disputes with transit states Ukraine and Belarus. Russia expressed anger when Ukraine, which is responsible for the bulk of Russian gas transit to Europe, signed a deal last month with the European Union for the overhaul of its pipeline system without consulting Moscow. Moscow has also repeatedly warned the European Union it could reconsider building new pipelines to Europe, such as Nord Stream and South Stream, and choose to build gas liquefaction plants instead, if Europe fails to support its projects. Halonen told the same news conference the Nord Stream pipeline remained mainly an environmental issue for Finland. "If the pipeline can be built ecologically, then it is a good solution in our opinion," she said. She noted environmental impact studies were still under review by the Baltic Sea states and said when the prime ministers of Russia and Finland meet in June, more would likely be known about the timetable for the pipeline project.

Friday, April 17, 2009

Speakers’ Corner, Moscow Style?

MedvedevApril 17th, 2009 - Reuters by Ralph Boulton - So President Medevedev would like to create a “Speakers’ Corner” in Central Moscow for Russians to vent their political passions. “It looks cool,” Medvedev told a group of human rights activists. “I need to speak with the Russian authorities and build our very own Hyde Park.” Was this just a rhetorical flourish to impress his guests, a signal that he would loosen the reins that his predecessor, Vladimir Putin, has pulled so tight? Free speech, say the rights activists, is not something Russian authorities have prized, whether on the streets or in the media. Would it, could it, work in Moscow? Where ever would you put it in that crowded, bustling city? Who would go there? What would they do there? Singaporeans, not know for a culture of dissent and protest, have led the way, setting up their own speakers’ corner to protest over economic hardship. Hundreds meet there every Saturday to demand government help. No trouble reported yet. The London speakers’ corner is held up by some as a symbol of British democracy, a place where anyone can stand on a box and say (more or less) whatever he wants without fear. Yes, in their day, Vladimir Lenin and Karl Marx haunted the place, touting ideas that would have had them dragged away by police in their own countries. Lenin’s wife, Nadezhda Krupskaya, wrote in her memoirs that the Bolshevik leaader was most impressed watching speakers “harangue the passing crowds on diverse themes”. All jolly stuff and not something he himself encouraged when he set up the dictatorship of the proletariat back at home. These days though, for the most part, London’s speakers’ corner is a gathering place for quirky exhibitionists and comedians, political oddballs of left and right and religious eccentrics of all ilks warning sinful tourists of hell and damnation. The occasional thoughtful soul will read through Shakespeare’s sonnets or expound the virtues of a forgotten philosopher. Heckling seems to be a central part of the fun. A policeman may be at hand in case things turn nasty, but they rarely do. Possibly, the spot in the north-east corner of Hyde Park was chosen for its closeness to Tyburn gallows where once the condemned would make their last declarations. The Moscow equivalent to Tyburn, I suppose, would be Red Square, where villains were put to death by the axe – though, in the Russian tradition, without those last words. Perhaps, then, Moscow’s Speakers’ Corner might fit nicely nearby at Alexandrov Gardens, at the Kremlin Walls. Arguably, though, a bit too close to Medvedev’s seat of power. My proposal would be a few hundred metres up Tver Avenue, on Pushkin Square where the Soviet Union once maintained its own bizarre and macabre form of speakers’ corner. Perhaps I should call it the hat-takers-offers corner. Every Human Rights Day, a keen crowd of journalists and plain-clothes KGB officers would gather in the winter cold around the perimeter of the square named after the great liberal poet Alexander Pushkin. As the hour of eleven approached, a tense hush would descend. A single figure would eventually appear, walk to the centre of the square, stand for a moment, and then take his hat (usually a rabbit-skin ‘shapka’) off; a symbolic protest against the suppression of human rights in the communist state. In an instant, the KGB officers would swoop down upon him, drag him across the square, bundle him into a van and speed him off to the Lubyanka prison. A few minutes would pass and a second dissident would arrive, take off his hat and stand to attention before being likewise borne away by the forces of order. And so it went on. Pity though the ‘innocent’ citizen who strayed unwittingly onto the square on that December day, carrying perhaps a magazine or a string bag of potatoes, and found himself suddenly the focus of this hawkeyed gathering. He would break his step and look around, of course, in wonder at his sudden and unexplained celebrity. Me? That was more enough. Hat or no hat, he followed the rest, bundled into the van and away. It happened, sadly. Finally, I ask myself who would pitch up at Moscow’s speakers’ corner and in what frame of mind? Memories of the breakup of the Soviet Union, the coups, the civil wars, the anger and the hardship, are still fresh. Economic crisis raises fears of another plunge into uncertainty and the eternal search continues. Kto Vinovat? Who is to blame? What makes London’s Speakers’ Corner possible, amid all the mockery and sometimes quite pernicious views, is that most people just don’t take it seriously. They laugh, make fun. There may be anger but it knows its bounds. People throw up their hands and walk away, triumphant or humiliated before their peers. How would Speakers’ Corner take root in Russian soil? Would liberal literati feast on Pushkin and Gogol, while the preachers invoke the fires of hell? Would it become a platform for Muscovites nursing private grievances against uncaring state institutions, the police, big business, the President? Could a Chechen malcontent plant his flag alongside angry nationalists and red-banner waving Stalinists? Are Russians ready yet to laugh at profanity?

Russia's richest 100 lose $380 bln in 12 months

MOSCOW, April 17, 2009 (RIA Novosti) - The 100 richest Russians have lost $380 billion in the last 12 months as the global economic crisis has sent the values of their assets tumbling, Forbes magazine claimed on Friday. The total wealth of Russia's 100 richest people was put at $142 billion by the magazine, compared to $552 billion at this time last year. The total number of Russian billionaires also fell dramatically, from 110 to 32. Forbes said the largest tumble in wealth was experienced by Oleg Deripaska, the head of holding company Basic Element, who topped the list with $28.6 billion in 2008, and dropped to number 10 with a net wealth of $3.5 billion this year. The new Forbes list is topped by Oneksim Group owner, Mikhail Prokhorov, with $9.5 billion, followed by the Millhouse Company and Chelsea FC owner Roman Abramovich ($8.5 bln), and the president of LUKoil, Vagit Alekperov ($7.8 bln). Forbes also noted that no one in the top 100 had increased their wealth, just that some had lost more than others. Yelena Baturina, the wife of Moscow mayor Yury Luzhkov, was the only woman in the top 100 for the second year in a row, in 32nd place. Baturina, the president of the construction conglomerate Iteka, has lost some $4.2 billion, leaving her with a total wealth of $900 million, Forbes said. The average age of the Forbes' list is 47 years and six months.

Wednesday, April 08, 2009

Khodorkovsky hits out at Medvedev

04-07-2009 - Upstream OnLine - Jailed Russian tycoon Mikhail Khodorkovsky today challenged President Dmitry Medvedev from the dock of a Moscow court to stand by his commitment to keep the judiciary independent of the Kremlin. The former boss of oil group Yukos, on trial for new charges that could keep him in jail for a further 22 years, said his fate would send a signal to Russians on whether to trust the court system or to take their grievances onto the streets. "President Medvedev has several times noted the importance of having an authoritative and independent judiciary in the country. This is a key question," Khodorkovsky, 45, dressed in jeans and a brown jacket, said from a glass cage in court. "The Yukos case, whether anyone likes it or not, is symbolic," Reuters quoted him as saying. Medvedev has promised to end what he terms "legal nihilism" in Russia's court system, and made the establishment of an independent judiciary a key pledge of his presidency. Khodorkovsky and his co-accused Platon Lebedev are already serving eight-year terms for fraud and tax evasion after a highly politicised trial in 2005, widely viewed as part of former president Vladimir Putin's campaign to rein in Russia's powerful oligarchs. Both deny the charges. The pair were brought to Moscow this year from their Siberian prison to face new charges for embezzlement and money laundering in a joint trial being watched for any signs of a softer line from Putin's successor, Medvedev. "It is clear that President Medvedev, in promising society independent and honest courts, has taken on an extremely heavy but very important burden," said Khodorkovsky. He said the verdict in his trial would send an important political signal to Russians. "When a person feels his rights have been violated in a crisis situation... there are two ways out: to proceed calmly through the courts or loudly through civil protests," he said.

Monday, April 06, 2009

G20 London summit: a stopover to destination

04-01-2009 - MOSCOW. (RIA Novosti political commentator Andrei Fedyashin) - The most frequently asked question ahead of the G20 summit in London was: Will it live up to our expectations? The answer depends on what you want from it. In fact, it would be completely wrong to judge an event by expectations. If you really want to know what was expected from the London summit, read the communique issued by the finance ministers and central bank governors of the G20 countries at Horsham in southern England in mid-March. It showed progress on the main issues on the agenda for the April summit, with agreement on action to restore global growth and lending by the world's banks. As for the London summit, you cannot seriously believe that the G20 leaders will solve all the problems within 4 hours and 35 minutes, the official duration of the summit. The summit's final statement could stipulate many necessary moves, but their effectiveness will be judged only in five or six months' time. Everything depends on the participants' readiness to take them and to make them part of a systemic approach to the crisis. Nobody believes that the London summit is "the last stop," or that the G20 must find a solution or the world will go bust. Brazilian President Lula da Silva said before going to London that the summit would be a failure if the participants did nothing more than agree to meet again. This is his hot Latin American blood speaking. The London summit is only, and could not be anything other than, a stopover to a final destination. It is logical to agree on some measures, give each other time to see how they are implemented, and then meet again to affirm or correct them. The April 2 summit should be viewed as part of the process, not its culmination. The participants know that they will have to meet again, and they even know where and when - in Asia, possibly in Japan or China, in November. The world's developed and emerging economies should learn their lessons from this crisis. One of the lessons is that summits cannot be judged by their final statements. In fact, we should reconsider holding summits of such groups as G5 and G8 - and the G20 that has grown out of them - altogether. The London summit cannot even be described as a G20 meeting, because not 20 but 29 national leaders and representatives of international organizations have met in the British capital. There is a lack of logic in the creation of all these groups and their subsequent expansion. An exclusive club, if its operation is effective, does not need to expand, to admit more members. And a club is not an ad hoc structure set up for the duration of a crisis. Such forms of interaction are good only for dealing with the consequences of a crisis. But if we want to eradicate the reasons for it, we should create a permanent agency. If the world's leaders who have gathered in London accept this simple truth, the summit will be a success. In fact, it is rumored that the G20 may be changed into a permanent organization with a secretariat and administration.

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