From Volume 6, Issue Number 3 of EIR Online, Published Jan. 16, 2007
Russia and the CIS News Digest

Russian Duma Greets U.S. Congress; Media Covers Disputes on Iraq

By a vote of 368 to 0, with 1 abstention, Russia's State Duma on Jan. 10 adopted a message to the U.S. Congress, calling for an upgrade in interparliamentary contacts, as well as for specific legislative action. The Duma demanded repeal of the Jackson-Vanik amendment (linking U.S.-Russian trade to Jewish emigration), as a Cold War relic. It also wants ratification of a range of global treaties and agreements, including the Kyoto Protocol, Comprehensive Test Ban, Conventional Forces in Europe, and others. The Duma wants to preserve "the spirit of anti-terrorist solidarity, which brought our countries closer together after the Sept. 11, 2001 attacks and the horrific terrorism in Moscow and Beslan." The motion was introduced by Duma Speaker Boris Gryzlov of the Unified Russia party, an ally of President Putin. One deputy from Rodina attacked the statement as "subservient," while Vice Speaker Vladimir Zhirinovsky grandstanded, shouting, "We are sending this message to the last empire in human history! America will perish!"

Pessimistic Russian commentaries like that of Political Studies Institute head Sergei Markov, who said in a radio interview, "The Democrats will use Russia, to attack Bush," are on the same wavelength as the Financial Times of London, which beat the drums for Russian-American tension, headlining a Jan. 10 article, "Congress on collision course with Moscow." But continuing Russian coverage of the Congressional challenge to Bush's intended Iraq actions is more attuned to reality. "Iraq is George Bush's Vietnam, declares Democratic Senator," RIA Novosti titled a report on Sen. Edward Kennedy's Jan. 9 press conference. The major radio station Ekho Moskvy's story of the same date said, "The failure of American policy in Iraq is being called the reason for the Republican Party's recent defeat in the Congressional elections, and this same matter is going to lead very soon to serious conflict between the Congress and President George Bush." The radio report cited the letter from Sen. Harry Reid and Speaker of the House Nancy Pelosi to Bush, about not funding a "surge." The coverage is particularly noteworthy, coming from Russia, where foreign policy expectations towards the Democratic Congressional leaders have been largely negative.

Russian Economist Sees Dollar Crash

The Moscow daily Komsomolskaya Pravda on Jan. 4 rounded up various experts' forecasts for 2007, most of them focussed on the run-up to the Russian Presidential election of March 2, 2008. But economist Mikhail Leontyev, host of the Odnako (However) program on First Channel TV, said the top priority for Russia would be to strengthen the ruble as "a full-fledged sovereign currency," in anticipation of the crash of the dollar system. At present, said Leontyev, "Our Stabilization Fund and reserves are mostly invested in U.S. assets. We have one year to establish a sovereign system that's disaster-proof to some extent, or at least shielded from the cataclysms that may befall the dollar-based economy.... We need to stop holding our currency reserves in dollars. We need to invest the Stabilization Fund in Russia. If this happens, we shall become one of the leading powers in the multipolar world of the future; if not, we'll cease to exist as a sovereign state."

Russia and Belarus Reach Oil Agreement

Prime Ministers Mikhail Fradkov and Sergei Sidorsky, of Russia and Belarus, reached agreement Jan. 12 to settle a dispute over duties on Russian oil deliveries to and through Belarus. The talks began two days earlier, when a phone call between Presidents Vladimir Putin and Alexander Lukashenka ended a standoff that had cut the oil flow into the Druzhba pipeline, just days after a dispute over steep natural gas price hikes by Russia's Gazprom had gone to the brink of a gas shutoff on New Year's eve. Belarus lifted a tax on transit oil (piped to customers elsewhere in Europe), as demanded by the Russians as a precondition for the talks. Under the agreement, Russia reduced the duties it had imposed on oil to Belarus as of Jan. 1, from $180 per metric ton, to $53; the Belarusian transit tax had come in retaliation against those new fees.

A Russian cabinet meeting on Jan. 9, chaired by Putin, had reviewed the dispute in detail, also taking up contingency plans for the eventuality that Belarus would not resume talks, and that the 2 million barrels per day of crude that go into the Druzhba Pipeline would remain cut off. Some of these contingency plans involved major production cuts and reorientation of Russia's exports. There was serious consideration of cutting oil output by 1 million bpd (over 20% of Russia's exports). Russian reports said that Russia's own refineries could accommodate up to 500,000 bpd more, while Minister of Industry and Energy Victor Khristenko suggested that, though "there is no magic wand to switch transit routes over just two days' time," a medium-term approach could include "speeding up the already record pace of laying the pipeline from East Siberia to the Pacific Coast, and expanding oil terminals on the Black Sea."

Within the previous Soviet economy, a large portion of industrial activity and employment in Belarus was associated with two big oil refineries, and related industries. The crude oil for this fuels complex came from elsewhere in the Soviet Union: Russia. In the post-Soviet period, Belarus has enjoyed duty-free importation of this crude oil. In return, out of the export duties Minsk charges when it sells the refined products abroad, 85% is supposed to go to Russia, with Belarus keeping 15%. Russian Economics Minister German Gref said Jan. 9, that Belarus had not handed over the 85%, during the past four years. The Soviet-era Druzhba (Friendship) Pipeline from Western Siberia carries approximately 40% of Russian oil exports (the rest move by ship and rail), a total of 2 million bpd, of which 500,000 bpd is for Belarus; 360,000 bpd to Poland, 500,000 bpd to Germany (20% of its oil needs); and a southern spur takes the rest to the Czech Republic, Slovakia, and Hungary.

British Conundrum: How Can We Punish Both Russia and Belarus?

The Jan. 10 editorial in the Financial Times of London laid out a conundrum for the relevant British and related circles. On one side, it said, the European Union "rightly wants Europe to be rid of Mr. Lukashenka." But, at the same time, "it must not allow Russia to seize political control of Belarus, let alone annex it." It concluded that Russia must be pressured to continue guaranteeing energy for Europe, while Belarus must remain independent.

More Energy Fallout: Azerbaijan Cuts Its Oil Exports

In another energy export disruption, related to Russia's raising of natural gas prices, the Azerbaijani state oil company SOCAR announced Jan. 9 that it has suspended oil exports through the Baku-Novorossiysk pipeline for January-March. The amount is 2.4 million tons, or approximately 200,000 bpd. The oil will be used to fuel Azerbaijan's electric power plants, instead of running them on natural gas imported from Russia. Gazprom hiked prices for Azerbaijan to $235 per 1,000 cubic meters of gas on Jan. 1, more than doubling the 2006 price of $110. President Ilham Aliyev called this "commercial blackmail," and terminated the imports from Russia as of the new year. The Azerbaijan International Operating Company (AIOC), an international consortium, will continue to ship through the Baku-Novorossiysk pipeline.

Russia and Kazakstan Sign Nuclear Partnership

Inaugurating a modern uranium-mining facility in Zarechnoye, the head of Russian Federal Nuclear Power Agency (Rosatom), Sergei Kiriyenko, and Kazak Prime Minister Danial Akhmetov have signed a nuclear partnership, under which Russia can use Kazakstan's vast uranium deposits, in exchange for access to Russian high technologies. Energy Daily quoted Kiriyenko: "We are not simply cooperating with Kazakstan in certain industries, but, by pooling our potentialities, we want to lead in the world nuclear market, and there is every prerequisite for this." The Zarechnoye project is Russia's first uranium-mining joint venture on foreign territory. Kyrgyzstan has a tiny share of 0.67%, whereas Kazakstan has agreed to the joint venture only on conditions of parity—uranium for technology. The project, located in south Kazakstan (on the historic road, where Genghis Khan's cavalry rode eight centuries ago), was completed in 14 months, and Russia will start receiving "yellow cake" from this 20,000-ton uranium deposit beginning now, in January 2007.

Russia Writes Off North Korean Debt

An agreement between Russia and North Korea on the cancellation of 80% of the latter's debt to Russia was signed in early January at the Deputy Finance Minister level, Chosun Ilbo reported Jan. 5. A Russian diplomat explained, "Russia earlier said it won't continue economic cooperation unless the North pays its debt. But it changed its mind as it wants to relieve the financial burden on Pyongyang so it can persuade the North to take part in trilateral economic cooperation with South Korea and Russia, and any six-party talks on North Korea's nuclear program in the future."

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