From Volume 7, Issue 28 of EIR Online, Published July 8, 2008
Russia and the CIS News Digest

Medvedev on Week-Long Asia Tour

July 3 (EIRNS)—Russian President Dmitri Medvedev today began a diplomatic trip to four Eurasian countries, including to Japan for the Group of Eight summit. Kremlin spokesman Sergei Prikhodko said Medvedev would hold talks with Azerbaijani President Ilkham Aliyev in Baku, moving on to Turkmenistan July 4 and Kazakstan the next day. In Kazakstan, which Medvedev will visit for the second time as President, he was to meet with President Nursultan Nazarbayev and also, on the sidelines of a celebration of Astana's 10th anniversary as Kazakstan's capital, with King Abdullah II of Jordan, Turkish President Abdullah Gul, and possibly President Michael Saakashvili of Georgia.

During the July 7-9 G-8 summit, the Kremlin announced that Medvedev will have bilateral meetings with U.S. President George W. Bush, British Prime Minister Gordon Brown, French President Nicholas Sarkozy, German Chancellor Angela Merkel, Japanese Prime Minister Yasuo Fukuda, and South Korean President Lee Myung-bak. He may also meet with the Italian prime minister and the Presidents of India and Brazil.

Medvedev in Pre-G-8 Interview: Set Up Ruble-Denominated Oil Trade

July 3 (EIRNS)—In an interview with media representatives from Group of Eight member countries, recorded July 1, Russian President Dmitri Medvedev reported on Russia's establishment of "an exchange for oil and other energy resources, where trade is conducted in rubles." Lyndon LaRouche said he found the proposal interesting, in that it would tend to undercut the power of the London oil spot market, and might even contribute to strengthening the U.S. dollar, by undercutting the Anglo-Dutch ability to drive up oil prices through their control of the oil futures market. LaRouche explained that, since the breakup of the Bretton Woods system by George Shultz and other British agents in the Nixon Administration, and the launching of the London spot market during the oil hoax of the mid-1970s, the dollar has been a captive of the Anglo-Dutch speculative system, and has not been a sovereign currency. The dollar must be liberated from the spot market control, LaRouche concluded, and if the Russians are prepared to take actions that undercut the power of London, it could be useful.

A ruble-denominated oil exchange, said Medvedev, "is a step towards turning the ruble into one of the possible regional reserve currencies, all the more so as the ruble is now fully convertible.... The main thing now is for the ruble to be seen as a reliable currency, in which savings can be placed and which can be used to carry out transactions."

Medvedev's interview began with the grave international financial crisis. Medvedev has focussed on the systemic nature of the crisis, and the Russian government's idea of the ruble as a reserve currency, in several recent interviews and speeches, as well as at a June 25 meeting with Russian VTB bank head Andrei Kostin about specific measures, including the oil exchange.

Paulson Spends Two Days In Moscow

July 1 (EIRNS)—U.S. Treasury Secretary Henry Paulson spent June 29-30 in Moscow, meeting with President Dmitri Medvedev, Prime Minister Vladimir Putin, and Finance Minister Alexei Kudrin. The talks were part of the run-up to the July 7-9 Group of Eight summit in Japan, where Medvedev has indicated he intends to present proposals for new international financial arrangements. As Lyndon LaRouche observed in his just-released article on "The Economic Debates About Russia," the Russian financial policy-makers have not broken free from the axioms of monetarism.

The meetings were featured on Russian national TV and widely covered under headlines like, "Russia Will Not Abandon the U.S.A. to the Financial Crisis." Little was revealed about their talks; Kudrin only said they discussed "real prospects for getting out of the financial crisis." Paulson, at a press conference and in a radio interview, effusively praised the benefits of Russian investment in the United States, particularly the investment of parts of its Reserve Fund and National Welfare Fund (the recently divided former Stabilization Fund, made up of oil export earnings that are kept out of Russia's own economy) in U.S. government securities. Kudrin has packaged the NWF investments to include up to 15% U.S. and European securities, including Fannie Mae and Freddie Mac bonds.

Paulson promised that the Bush Administration would push to get the Cold War-era Jackson-Vanik Amendment, which restricts trade with Russia, lifted in the context of Russia's continuing attempt to join the World Trade Organization. He portrayed himself as the friend of Russia's financial interests, as against expected opposition from Congress. Last month, Senate Foreign Relations Committee chairman Joe Biden (D-Del.) held hearings on the danger to the United States, allegedly represented by growing Russian investment here, not only in securities, but also the acquisition of American companies by Russian ones.

Putin Warns Ukraine Over Plans To Join NATO

July 1 (EIRNS)—In televised remarks on June 28, following a visit from Ukrainian Prime Minister Yulia Tymoshenko in Moscow, Russian Prime Vladimir Putin painted a grim picture of the consequences for Ukraine, should that country follow through on its desire to join NATO. The money it would cost to retool Ukraine's weapons production to NATO standards, Putin said, would be better spent on investments in high-tech cooperation with Russia—for example, in energy and aerospace. Putin and Tymoshenko were meeting as ex officio chairs of the Russia-Ukraine intergovernmental cooperation group.

On the tense issue of the Black Sea Fleet's basing at Sevastopol in Crimea, Tymoshenko reiterated Ukraine's commitment to fulfill the terms of the 1997 agreement that allows the basing, as well as the intention not to extend the agreement past its expiration in 2017. Putin, again playing up the benefits of Russian-Ukrainian cooperation, noted that the fleet protects both countries.

Upon her return to Kiev, Tymoshenko said that Ukraine will not be hit with another gas price shock in the near future, despite Russian Gazprom CEO Alexei Miller's recent remark that the gas price for Ukraine should rise from the current $179 per thousand cubic meters, to $400. Her comments touched off a flurry of rumors about secret deals reached between the Ukrainian and Russian prime ministers.

Tymoshenko is treading carefully, since her government's one-vote parliamentary majority could evaporate at any time. In Moscow, she said that a decision on Ukraine's entry into NATO would only be made after a nationwide referendum, insofar as Ukraine is committed to neutrality under its post-Soviet Constitution. Also, Tymoshenko is positioning herself to run for the Presidency. Andrei Okara, a Russia-based specialist on Ukraine, noted in an AMI-Novosti-Ukraine commentary that Tymoshenko by no means has a fixed anti-Russian position, and appears to be carving out yet another niche for herself, as the Ukrainian politician who can talk to Moscow.

Cheney Pursues Missile Defense Deals, Pushes NATO Expansion

July 3 (EIRNS)—U.S. Vice President Dick Cheney is currently very active in diplomacy with Poland and Lithuania, regarding the plan to emplace anti-missile systems in the immediate vicinity of Russia, a plan that Russian officials have said crosses a "red line" of hostility. On July 3, Cheney spent 40 minutes on the phone with Polish Prime Minister Donald Tusk, following conflicting statements by officials about how firm an agreement was, reached earlier in the week, for emplacement of anti-missile batteries in Poland.

On July 1-2, visiting Prime Minister Gediminas Kirkilas of Lithuania met with Secretary of Defense Robert Gates and Secretary of State Condoleezza Rice, including about Lithuania's serving as a back-up location for the ABM systems. Gates called Lithuania—formerly part of the Soviet Union and located right on Russia's border—a "good alternative" for the emplacement, if Poland falls through.

Meeting Kirkilas July 3, Cheney advocated plans for Ukraine and Georgia—also former Soviet republics—to join NATO, and discussed U.S.-Lithuanian collaboration to make that happen. Lithuanian President Valdas Adamkus was a former U.S. Army military intelligence specialist and U.S. Environmental Protection Agency official, before renouncing his U.S. citizenship to enter politics in his native country.

Putin Purges Soros-Linked, British NGOs from Tax-Free List

July 5 (EIRNS)—Russian Prime Minister Vladimir Putin signed a decree July 3 purging leading British and George Soros-linked international organizations from the list of those enjoying automatic access to tax-free status in Russia, Kommersant reported. The new decree, signed without forewarning to the NGOs, will mean that the NGOs will have to prove in the next three months that they qualify for this status—and this will be very difficult, according to NGO officials interviewed by Kommersant. The new decree, to take effect on Jan. 1, 2009, slashes the number of international organizations which do not have to pay heavy 24% taxes on profits, from 101 to just 12 UN and other intergovernmental commissions and associations. All the big private foundations, including the World Wide Fund for Nature, the Soros-sponsored Global Fund To Fight AIDS, the British Royal Society, the Ford and MacArthur Foundations, the U.S. Eurasian foundation, and the Red Cross and Red Crescent societies, were excluded.

Coincident with the decree, former chief of Russia's Federal Security Service Nikolai Patrushev testified to the Duma's National Anti-Terrorist Committee that "certain NGOs" working in Russia were providing information helpful to terrorists’ emissaries, while Federation Council Deputy Speaker Alexander Torshin said that 59 international NGOs "support Chechen terrorists and separatists."

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