From Volume 5, Issue Number 4 of EIR Online, Published Jan. 24, 2006
Russia and the CIS News Digest

Cold Wave Tests Russian Infrastructure

The Russian government had its first post-holiday full cabinet session Jan. 19 with only one thing on the agenda: coping with the coldest weather Moscow has experienced in nearly 30, or perhaps 65 years. Nighttime temperatures in and around the Russian capital hit -35 to -37° C. (-31 to -35° F.), matching the winter of 1978-79, and threatened to dip to -40° C. (-40° F.), last reached in 1940. The extreme cold is nationwide, with nighttime temperatures below -50° C. (-58° F.) in several cities of north central and Siberian Russia, and is expected to last a week or more.

There have been evacuations and emergency relief actions in the Moscow Region, Komi Republic, Omsk, Tomsk, Chita, and on Sakhalin Island, where heat to residential areas was knocked out, in most cases by failing water pipes. In several cities, gas explosions caused casualties. Prime Minister Mikhail Fradkov took reports from Industry and Energy Minister Victor Khristenko and Emergency Situations Minister Sergei Shoigu. He ordered a mobilization to respond to situations where heating for schools or hospitals were to fail.

The stability of the electricity supply in Moscow itself is a major concern, as high consumption levels are reached due to the use of auxiliary space heaters. In May of last year, the capital experienced a huge blackout after a substation fire. Two months ago, Anatoli Chubais, head of United Energy Systems, the national electric power utility, warned that temperatures below -25° C. for three days or more would necessitate brownouts affecting industrial electricity users. Latest weather forecasts are for extreme cold to persist for the next 10-12 days. Chubais said in November, that a significant part of UES equipment is too worn out to be in service, while Moscow's power consumption had risen at quadruple the expected rate in 2000-2005. (Chubais continues to advocate a "Western deregulation"-based, outside-investor-friendly model for the reform of UES.)

Gazprom Cuts Flow to Europe

On Jan. 18, Hungarian and Italian energy executives reported that Gazprom, the Russian natural gas monopoly, had cut supplies to those two countries by 20% and 5.4%, respectively. Gazprom spokesman Sergei Kupriyanov said only that all contracts were being honored. According to a source in Italy's energy sector, "there are reasons other than the weather, for Gazprom's cuts." See European Digest for the details.

Gazprom's Capitalization Skyrockets

The official capitalization of the Russian natural gas monopoly, Gazprom, jumped by $40 billion to over $200 billion in the first few trading days after Russia's Jan. 1-10 holiday period. What's new is the lifting of a prohibition on the purchase of Gazprom shares by foreigners on the major Russian exchanges. Gazprom CEO Alexei Miller called the event "an historic frontier" for Gazprom and for Russia, boasting that company is about to surpass BP and Royal Dutch Shell, to become the second-biggest energy company in the world, behind only Exxon/Mobil. Gazprom's listing on the Russian Trading System (RTS) began on Jan. 13, with the Moscow Interbank Currency Exchange (MICEX) set to follow by the end of January. The company is controlled by the Russian state, its single biggest shareholder.

Another huge Russian government financial maneuver in the speculation-driven international financial markets is awaited later this year, when the state-owned oil company Rosneft plans an IPO on the London Stock Exchange. According to recent reports of Rosneft's prospectus, the company intends to raise $20 billion by selling around 30% of its shares.

German Chancellor Merkel Visits Russia

German Chancellor Angela Merkel and Russian President Vladimir Putin, speaking to the press before and after three-hour talks in Moscow Jan. 16, said that German-Russian cooperation would intensify in foreign policy, science and technology, culture, history, and "civil society" (democracy, rule of law, etc.). In addition to bilateral economic relations—which underwent a "breathtaking increase" (as Merkel put it) during 2005, with 30% more trade than in 2004, and an almost 20% rise in German direct investment—Merkel and Putin discussed G-8 matters and Russian-EU relations, including long-term energy security. On Jan. 21, Gazprom deputy director Alexander Medvedev arrived in Berlin for talks on specific pipeline and other projects.

Deputy Foreign Minister Gernot Erler commented that under Merkel, Germany will put more emphasis on human rights and democracy issues in relations with Russia, but will avoid using a "megaphone" approach, favoring talks between the governments and institutions, rather than exchanges via the media. Erler welcomed Putin's role in settling the recent Russian-Ukrainian gas conflict.

Merkel and Putin agreed to meet again, for the bilateral industrial summit in Tomsk, in April; they will also both attend Dresden's 800th-anniversary celebrations this autumn.

USA and Russia Renew Science & Technology Agreement

After a lapse of more than two years—because the White House had allowed the agreement to expire—on Jan. 13 a ten-year science and technology agreement was signed at the Russian embassy in Washington. The agreement outlines areas for continued and potential future cooperation that include vaccine and drug research, the "ecology" of infectious diseases, fusion research, and a combination of very general areas, such as science education, and some very specific ones, such as Arctic research. According to a senior counselor at the embassy, no one from Russia attended the ceremony, and the agreement was signed by the ambassador. There is still no agreement for cooperation on advanced nuclear power technology, he reported, even though two years ago, the White House finally dropped the accusation that Russia was helping Iran's weapons program.

Russia Wants To Build 40 New Atomic Power Plants by 2030

Sergei Kiriyenko, the new head of the Russian Atomic Energy Agency (Rosatom), announced after meeting President Vladimir Putin on Jan. 20, that Russia intends to build 40 nuclear power plants over the next 25 years. The program would increase the share of nuclear power in Russia's electricity supply from the present level of 9%, up to 25%. Three new plants are under construction now. Kiriyenko added that Russia expects to get contracts to build another 40, or maybe even 60 plants in other countries; five such facilities are now under construction, including in Iran.

The next day, Kiriyenko arrived in Kiev for talks on bilateral nuclear power cooperation, as mandated by Presidents Putin and Yushchenko at their recent meeting in Kazakstan. Ukraine's four nuclear power plants supply over half of its electric power. Still dependent on Soviet-era fuel reprocessing facilities located in Russia, Ukraine wants to develop one of its own, so as to have sovereignty over the full fuel cycle, President Viktor Yushchenko said, after a mid-January meeting of the national energy security council.

Russia-Ukraine Tensions Flare in Crimea

A series of incidents in the Crimean Peninsula, described by Russian military officers as attempts to "seize Russian Black Sea Fleet lighthouses," has increased tensions between Moscow and Kiev. Crimea is Ukrainian territory, but is also historically the base of the Black Sea Fleet, for which Russia rents various facilities. The incidents followed threats by Ukraine to raise the rent, during the year-end natural gas dispute between the two countries.

An incident on Jan. 13 involved a sudden visit to the Yalta lighthouse by the Ukrainian Hydrographical Service, while other incidents appeared to be based on picketing, and possibly, paramilitary activities. On Jan. 21, Russian Navy Commander-in-Chief Admiral Vladimir Masorin warned that the "attempts to seize" the lighthouses could trash all Russian-Ukrainian agreements concerning the Black Sea.

As the Russian Black Sea Fleet moved to bolster security around the lighthouses, a Ukrainian Foreign Ministry spokesman warned Jan. 19 against "unauthorized relocations of [Russian] troops and military equipment in Crimea." Also indicative of the tension was a Jan. 18 Interfax-Ukraine report about leaflets being distributed in the port city of Henichesk near the Sea of Azov Sea, predicting that Russia would invade "to establish control over gas pipelines considered vital to Russia."

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