From Volume 5, Issue Number 26 of EIR Online, Published June 27, 2006
Russia and the CIS News Digest

Medvedev Calls for 'More Secure' Financial System

Russian First Deputy Premier Dmitri Medvedev's speech on the need to change the international monetary system, to the 10th International Economic Forum in St. Petersburg June 13, was summarized in Rossiyskaya Gazeta, the Russian government newspaper, on June 14. "The First Deputy Premier does not agree that 'globalization' means 'poverty and backwardness,'" said the report. "Nonetheless, Russia evidently understands globalization in its own way.... 'The IMF practice of money in exchange for reforms is not very promising,' said the vice-premier—even as IMF top manager Ann Krueger was in the audience.... Medvedev chose to begin his presentation of the authorities' economic program, by indicating Russia's absolutely new position in the world market. First of all, the Vice Premier said, there is no reason for the dollar to be the only reserve currency in the world. Countries, including developing countries, don't see any sense in continuing to extend credit to the U.S. economy. But the traditional 'successor' of the dollar, the euro, has led to economic stagnation in the EU, due to the poor rates policy of the EU authorities. The First Vice Premier believes that the time has come to replace the reserve currency, and that there should be several of them. 'We need a more secure financial system, in which there is no dominant currency,' he said. 'Future generations will decide what it will look like." At this point, Medvedev asserted that the ruble could become a reserve currency.

Russia, Kazakstan Finalize Eurasian Development Bank

Following the Shanghai Cooperation Organization summit in Shanghai, Russian President Vladimir Putin and Kazakhstan's President Nursultan Nazarbayev finalized the establishment of a Eurasian Development Bank, during a meeting in Almaty. The two leaders had participated in the Conference on Interaction and Confidence Building Measures in Asia (CICA), where they signed a joint statement and an agreement between the Kazakhstan government and the Eurasian Development Bank (EDB) on the terms of the new bank. The bank has been established to boost investment across the former Soviet Union. Russia and Kazakhstan had signed an agreement to create the bank on Jan. 12, under which the bank will have authorized capital of $1.5 billion, 33% of which will belong to Kazakhstan and the remainder to Russia. The bank will be based in Almaty, with a branch in St. Petersburg.

Nazarbayev said that the Eurasian Economic Community—a regional body comprising Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Belarus—could now receive loans from the bank. Putin said, "Now it's necessary to start practical activity, and considerable funds allocated by Russia and Kazakhstan to the charter capital would allow attracting serious financial resources to resolve integration tasks."

Russians Note Economic Dimension of Putin-Ahmadinejad Talks

The June 15 meeting between Russian and Iranian Presidents Vladimir Putin and Mahmoud Ahmadinejad took up the current six-power proposal for the Iranian nuclear program. Russian press also reported about other areas of cooperation, including transport corridors and natural gas. In his speech to the Shanghai Cooperation Organization (SCO) summit, Ahmadinejad called for cooperation on key infrastructure projects, as well as the establishment of "zones of joint investment," according to Russian reports. Talking about Ahmadinejad's invitation to the economics ministers of SCO member countries, to meet in Teheran about cooperation on energy, Kommersant wrote June 15 that the proposals were unexpected, as was the peaceful tone in which they were presented. "The proposal to convene an economic conference in Tehran, as well as the invitation to take part in Iran's oil extraction projects, was definitely a thoroughly calculated move—which may disturb the U.S. establishment more than any of his earlier revolutionary statements," wrote the Kommersant author.

In addition to the already-reported comments by Putin on the nuclear issue, the Russian President informed the journalists about the talks on a "unification of efforts" in the oil and gas sphere between Russian and Iranian corporations, involving joint Russian-Iranian ventures in this sphere. "That means that the words about 'coordination of global gas prices' were quite serious," concluded Kommersant.

Speaking to the media, Russian Foreign Minister Sergei Lavrov acknowledged that the proposal for a Tehran-based conference of SCO economics ministers was a surprise for the Russian delegation. "Such a conference is quite possible, he said. However, it will take place, most probably, in a country that is a full member of the SCO." In a follow-up comment on June 20, Lavrov said denied the existence of Russian-Iranian plans to set up a "gas OPEC."

Kremlin aide Sergei Prikhodko said that Putin and Ahmadinejad also discussed Caspian Sea resources and partnership in transnational transportation corridors.

Gazprom in Deals with Italy, Hungary

During Italian Premier Romano Prodi's visit to Moscow on June 20, agreement was reached for cooperation, to be fleshed out by Gazprom and Italy's ENI, on joint development of gas fields in the Barents Sea, and Russian participation in the Italian consumer market. Answering a question about how the agreement relates to the ongoing European Union demand for Russia to ratify its Energy Charter (turning Gazprom's export pipelines over for general use), Russian President Vladimir Putin said that the agreement was analogous to a recent one with Germany's BASF-Wingas. ENI will get a share in exploration and future production at the Shtokman gas field in the Barents Sea, in exchange for Gazprom's gaining access to ENI's gas distribution network in Europe (and, possibly, also ENI's business network in Northern Africa). "Essentially," said Putin, "this is nothing other than the practical implementation of a supplementary protocol to the Energy Charter; it is the implementation of those agreements, without the formal, juridical ratification of that document by the Parliament of the Russian Federation. In other words, we are prepared to do this, but not for all and sundry; only with those partners, who come halfway to meet us, and with whom we can reach agreement on cooperation on an equal basis."

In a June 21 briefing for foreign press, Kremlin official Igor Shuvalov, who is Putin's point man for the July G-8 summit, said that the Russian State Duma will not ratify the EU Energy Charter. Izvestia (now owned by Gazprom) wrote that Shuvalov was trying to prevent the EU from putting the question on the G-8 agenda. Other Russian officials have called the Energy Charter "anti-Russian."

Gazprom also published, on June 22, a strategic cooperation deal with MOL, Hungary's energy monopoly, on a gas and oil pipeline, storage, and investment projects in the Balkans and the eastern Mediterranean. The announcement coincided with U.S. President George W. Bush's arrival in Hungary.

In a related energy cooperation development, the Turkish government announced that it would stick to its plan to have a pipeline built from the Black Sea coast to the Mediterranean, for transporting Russian gas from the Blue Stream pipeline to Europe and the Mideast, replacing transfer through the Bosphorus Straits. This pipeline project involves Italy's ENI, as well.

EU-USA Declaration Challenges Russia

A declaration was issued after the June 21 talks in Vienna, between U.S. President George Bush and Austrian Chancellor Wolfgang Schuessel, in his capacity as head of the European Union. Stating that the EU and the United States "attach great importance to our relationship with Russia," the declaration devolves into a laundry list of bad behavior, attributed to Moscow: "We are concerned about some recent developments in Russia and the region and will work with Russia to promote energy security, the application of the rule of law, an independent judiciary, and full respect for human rights, including free and independent media and a vibrant civil society, and a resolution of frozen conflicts in the region." The USA and EU evidently intend to push all of these boilerplate issues onto the agenda of the St. Petersburg Group of 8 summit next month. In addition, the declaration reportedly criticizes Russia's policies vis à vis sanctions against Iran, relations with the Hamas movement, and relations with President Alexander Lukashenka of Belarus.

Ukrainian Orange Rerun Attempted, After All

After having declared on June 12 that talks to reconstitute the Orange Revolution coalition in Ukraine were at a standstill, President Victor Yushchenko's Our Ukraine movement held talks with the top vote-getter in the March elections, Victor Yanukovych's Party of the Regions (POR), and then went back to the table with the "orange" Bloc of Yuliya Tymoshenko (BYuT) and the Socialist Party. The result was the proclamation, June 22, of an according between Our Ukraine, the BYuT, and the Socialists, to form a government, with Tymoshenko, as she had demanded all along, becoming Prime Minister again.

Tymoshenko stated, among other things, that now all agreements on gas prices and transshipments, with suppliers in Russia and Central Asia, will be subject to review. Thus, the prospect arises of renewed conflict with Russia over gas.

A Member of Parliament from the POR was televised, saying that the POR would now go into "tough opposition," and that they did not expect the new government to last long. Communist Party leader Symonenko said in the Supreme Rada, that the development was "a seizure of power by corrupt officials," and that it increased the danger of a break-up of Ukraine.

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