From Volume 7, Issue 6 of EIR Online, Published Feb. 5, 2008
Russia and the CIS News Digest

Liquidity Crisis Threatens Would-Be 'Safe Haven' Russia

Feb. 1 (EIRNS)—Kommersant daily today publishes leaks from a closed meeting of Russian bankers, where Central Bank deputy chairman Alexei Ulyukayev admitted the existence of a severe liquidity crisis in the Russian banking system. According to the report, he told the gathering at the Bor resort near Moscow that the Central Bank was shifting priorities, from inflation control toward stabilizing the banking system, saying that the problem stems from the "U.S. mortgage crisis."

Kommersant quoted several Russian financial analysts who pointed out that such action by the central banks would be in harmony with European central banks and the U.S. Fed, which have launched themselves onto a hyperinflationary curve—although it would run counter to the Russian government's recent anti-inflation measures. Last month, Prime Minister Victor Zubkov put Finance Minister Alexei Kudrin in charge of a task force to curb consumer price inflation. The day after Ulyukayev's reported remarks, the Central Bank announced a hike of its benchmark refinancing rate.

Kommersant noted that Ulyukayev's "radical" statement was the first such acknowledgement of how bad the situation is, and called it an effort to reassure smaller banks of support from the central bank. However, the central bank will be unable to raise liquidity through currency purchases as Russia's trade balance turns negative.

The anxiety expressed by Ulyukayev undercut Kudrin's claim, made in Davos, Switzerland the week before, that Russia represents an "island of stability" in the current global crisis. Ulyukayev, central bank head Sergei Ignatyev, and Kudrin himself are all part of a group of 1990s-era, pro-free-trade, liberal reformers, who managed to keep their key positions in Russia's banking and finance institutions, even as President Vladimir Putin's team has shifted to more state intervention to promote industry. Until now, these liberals have preached the doctrine of fighting inflation at almost any price; hence, billions of dollars of Russia's oil export tax revenues have been sequestered in a Stabilization Fund that is kept in foreign government bonds, rather than being invested in the domestic economy. At the same time, this grouping prides itself on following the monetarist policy models of Anglo-Dutch "independent central banking"—into whose current orgy of hyperinflation they admit Russia is now being dragged.

Russian Rail Chief Secures Deals with Armenia, Saudi Arabia

Jan. 27 (EIRNS)—Vladimir Yakunin, CEO of the state-owned company Russian Railways, was among the officials welcoming the Beijing-to-Hamburg demonstration container train when it arrived in Germany Jan. 24. "Railroads have always been a catalyst for economic growth," Yakunin said in his speech at the event, echoing the promoters of the Trans-Siberian Railroad, Dmitri Mendeleyev and Count Sergei Witte, from over a century ago. "The steady development of the Russian economy, China's rapid growth, and the expansion of economic ties and trade between Europe and Asia require the intensive development of our countries' transportation systems. These conditions also define a good basis for multilateral projects, like the Beijing-to-Hamburg container train."

PrimaMedia reported that Yakunin outlined the technical side of his company's participation in the 15-day, 9,780-kilometer train trip, including new container-handling capabilities on the Trans-Siberian, and innovations in document-processing to speed up customs.

Russian Railways announced two important international deals this month. On Jan. 16, Yakunin and Armenian Minister of Transport and Communications Andranik Manukian reached agreement for Russian Railways to operate the Armenian national rail network for the next 30 years. The Russian company is paying Armenia the equivalent of $5.5 million up front, while pledging to invest at least $570 million into improvements in Armenian rail, according to Armenian wire reports.

On Jan. 21, according to, it was announced that Russian railways had won an $800 million tender to build a 520-km rail line from Riyadh Airport to an important junction on Saudi Arabia's North-South railroad project. The latter is designed to support natural resource development. Yakunin is a close ally of President Putin, as well as co-founder of the international public forum "Dialogue of Civilizations."

Ukraine Pushes NATO Membership, to Russia's Ire

Jan. 27 (EIRNS)—Shortly after the reinstatement of Orange Revolution demagogue Yulia Tymoshenko as prime minister of Ukraine, she, President Victor Yushchenko, and chairman of the Supreme Rada (Parliament) Arseni Yartsenyuk sent an appeal to NATO Secretary General Jaap de Hoop Scheffer for the April 2008 NATO summit in Bucharest, to consider inclusion of Ukraine in NATO's Membership Action Plan. One of Tymoshenko's first acts as prime minister was to phone U.S. Vice President Dick Cheney, who had openly lobbied for her political comeback during 2007, as a counterweight to Russia in Central Europe. Kiev's bid for accelerated action on its membership status forms part of the setting for recent Russian denunciations of the eastward expansion of NATO.

The Russian daily Novyye Izvestiya reported Jan. 17 that Ukraine's relationship with NATO was on the agenda when U.S. Sen. Richard Lugar, senior Republican on the Senate Foreign Relations Committee, met with Yushchenko in early January. Lugar told the Russian paper, "The Membership Action Plan does not mean actual membership, but a positive answer from Brussels will launch a nationwide discussion."

A spokesman for the Party of Regions, which is in the opposition, although it was the highest vote-getter in last October's elections, said that moving into the Membership Action Plan "will split and destabilize Ukraine." He promised a fight over it in the Supreme Rada. Victor Chernomyrdin, the former prime minister, who is Moscow's current ambassador to Ukraine, told Novyye Izvestiya that the move would force "revision" of Russian-Ukrainian relations. Although even Tymoshenko says the process of joining NATO will be "gradual," Ukraine's foreign ministry issued a statement in late January, reiterating the Kiev leadership's commitment to that goal.

U.S.-Russia Nuclear Accord Held Hostage to Iran Policy

Jan. 30 (EIRNS)—Although Presidents Bush and Putin initialed an agreement in July during their Kennebunkport summit in Maine, for U.S.-Russia cooperation in civilian nuclear energy, that agreement has not yet been signed. According to a Russian source involved with the negotiations, Washington has decided to hold the "123" cooperation agreement, as it was called, hostage to Russian policy on Iran—to pressure Russia to support further UN sanctions, and other punitive measures.

Former Vice President Al Gore tried for years, unsuccessfully, to get Russia to cancel its contract to complete the Bushehr nuclear power plant in Iran.

When Bush and Putin initialed their approval of their agreement last July, the Bush Administration said Bushehr would not stand in the way of cooperation.

And the Congress, which will have 90 days from the signing to "dispose" on the agreement, has passed into law the Iran Counter-Proliferation Act, which bars any U.S. nuclear cooperation with Russia, as long as Russia has any nuclear agreement with Iran.

'Why Are So Many Russian Criminals Living in London?'

Feb. 1 (EIRNS)—Russian commentators have been pointing a finger at Britain's role in undermining Russia. For example, a September 2007 interview with Lyndon LaRouche is posted on websites throughout Russia under the title, "The Danger Comes from London," and a U.S. intelligence source asked EIR, "Why is it that so many Russian criminals are living in London?"

The latest development is that the Kremlin is demanding the extradition from Great Britain of Russian oligarch Yuri Nikitin, who is accused of a $492 million fraud against Russia's shipping fleet. British authorities confirmed that an arrest request has been sent to the Home Secretary in London, but—like many other Russian government warrants—has not so far been acted on.

Speaking from his new home in Berkshire, England, for which he paid $18 million in cash, Nikitin said: "I want British government protection."

Russian authorities hired a British security firm run by a former Special Air Services (SAS) officer to investigate Nikitin's offshore assets, reported the Guardian of London today. His British property is registered to a front company run for him by London city solicitor Lawrence Graham. He is accused of looting the state-controlled shipping company Sovcomflot by bribing its former executives to give him "sweetheart" tanker deals. Sovcomflot, now run by former Transport Minister Sergei Frank, operates one of the world's largest merchant fleets, and provides liquefied natural gas tankers for the energy giant Gazprom.

Nikitin has at least another $197 million frozen in Russian bank accounts.

The Guardian lists ten Russian oligarchs wanted by Moscow, most of whom are sitting quite safely in Britain, including:

Akhmed Zakayev, Chechen politician, wanted for terrorism; Britain refused to extradite him in 2003.

Mikhail Gutseriyev, former head of oil giant Russneft. Britain refused to extradite him on fraud and tax charges.

Boris Berezovsky, accused of embezzlement and given asylum in Britain since 2002.

Yuli Dubov, a Berezovsky ally, whom Britain refused to extradite in 2003 on fraud charges.

Britain also refused extradition of leading officials of the bankrupted Russian oil giant, Yukos: Alexander Temerko, the former vice president of Yukos; and Natalya Chernysheva and Dmitri Maruyev, both former Yukos managers.

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