From Volume 7, Issue 43 of EIR Online, Published Oct. 21, 2008
Russia and the CIS News Digest

Lavrov Calls Again for Cooperation with U.S.A.

Oct. 16 (EIRNS)—Russian Foreign Minister Sergei Lavrov emphasized Russia's "willingness to continue a full-format cooperation with the United States on the bilateral and international agenda," in his Oct. 14 meeting with Rep. Howard Berman (D-Calif.), chairman of the House Foreign Relations Committee, the Russian Foreign Ministry reported in its statement on the meeting. The two discussed current U.S.-Russian relations, and prospects for the future.

Lavrov had called for the United States and Russia to recognize that they share "a common destiny," and cooperate closely on transforming the international system, in an article, "Face to Face with America: Between Non-Confrontation and Convergence," published in the magazine Profile on Oct. 13, which U.S. statesman Lyndon LaRouche heartily welcomed. (See InDepth.)

During his three-day visit to Moscow this week, Berman also met with his counterpart, Konstantin Kosachov, chairman of the State Duma International Affairs Committee, former Prime Minister Yevgeni Primakov, and other authorities, as well as officials of Rosatom, the Russian nuclear energy state corporation. Discussions ranged from the August events in Georgia, to the Iranian nuclear program.

"Our two countries have to address some difficult issues, especially in the wake of the Georgia conflict. But we also face many common threats that should push us to develop a stronger partnership," Berman said in a joint press conference with Kosachov, after their meeting. "We have not spent enough time thinking about U.S.-Russian relations. We need to engage in better and more frequent dialogue. We have fundamental concerns in common, and must work together to build a partnership that will enable us to address these challenges more effectively."

"We're not only developing a political relationship between Foreign Affairs Committee chairmen, but also the start of a friendship," Berman added. Kosachov pointed out that Berman is the highest-level U.S. government official to visit Russia since the conflict with Georgia. He had been invited by Kosachov as part of an ongoing parliamentary exchange between Russia and the United States.

Berman told Kosachov that the United States has no plans to provide the nation of Georgia with military assistance, but only humanitarian aid, in 2009, according to Russian wire services. "We regard as crucial the confirmation on the part of Mr. Berman that the United States is not interested in maintaining the conflict and is ready to help resolve it," Kosachov said.

Kokoshin Warns of Dollar Collapse

Oct. 16 (EIRNS)—Andrei Kokoshin, deputy head of the majority United Russia group in the State Duma, warned of the international inflationary effect of the U.S. Fed's decision to provide unlimited dollar loans to the central banks of the European Union, Japan, the U.K., and Switzerland. Kokoshin said, in a statement today to RBC, that this massive dollar-pumping has raised serious concerns among both Russian and foreign experts, because it could greatly increase inflation globally. He emphasized that nobody was interested in the collapse of the dollar, or in greater dollarization of the global economy.

Kokoshin said that Russia and several other countries, must develop and put forward an alternative to the increasing dollarization of the global economy as soon as possible. This must be done within both the Eurasian Economic Community (EurAsEC)– the nations of the former Soviet Union—and the Shanghai Cooperation Organization (SCO),– which includes China, and as observers, India, Pakistan, Mongolia, and Iran.

Kokoshin is a leading Russian expert on the United States, and especially on Franklin Roosevelt.

Putin/Medvedev Economic Moves Alarm Financier Circles

Oct. 17 (EIRNS)—Of the package of crisis measures, about which Russian leaders have been in constant meetings all month, one aspect has greatly upset Russian and international financiers: Prime Minister Vladimir Putin announced strict conditions for desperate Russian banks and companies to convert their foreign debt into loans from the state-owned Vnesheconombank (VEB). Those terms, as spelled out by Putin in an Oct. 13 session with the VEB Board (which he chairs), are the following:

* the borrower must have most of its operations within Russia and in the real sector of the economy (tangible goods production and infrastructure);

* operations finance must be of either regional economic importance, or be important to strategic sectors;

* only foreign loans that were initially taken out for purposes of investment projects or asset acquisition inside Russia are eligible for the program.

The VEB refinancing program has been assigned state funding of $50 billion. As of Oct. 14, reported, there were already applications from 35 corporations and 20 banks, totalling more than that amount. The loans being refinanced are part of about $450 billion of private foreign borrowings by Russian companies in recent years, when interest rates were lower in London and other foreign markets, than inside Russia. Now, with the borrowers unable to refinance in frozen credit markets abroad, the Russian government is acting to bring these credit operations home, and to direct them into priority areas.

A Bloomberg wire today wailed that VEB's refinancing will "extend control over business leaders" and "give authorities veto power over companies' financing decisions." Among those that have applied are Basic Element, the holding company of aluminum magnate Oleg Deripaska; Mikhail Fridman's Alfa Group; and the telecommunications/IT giant AFK Sistema.

Putin started pushing for active measures to defend real industry, at his Sept. 26 meeting with Andrei Kostin of VTB, another one of Russia's big four banks. "What's up with your relations with the real sector?" Putin demanded, "That's the first question." Kostin laid out the need to "save Russian assets," since the large private-sector foreign debt could suck the companies dry rather quickly.

The VEB refinancing plan was announced by Putin at a Sept. 29 conference, alongside liquidity of 950 billion rubles ($36 billion) being pumped into the Russian banking system and stock market. The relevant laws were signed by President Dmitri Medvedev on Oct. 13. That day, Putin held his session with the VEB board (including the closely linked Development Bank), as well as a Government Presidium session. He told the Presidium that the directed measures were urgent, because merely pumping in liquidity would not save the industries. People from construction, machine-building and agriculture were reporting to him that "financial famine" threatened their operations, the prime minister said. Putin prioritized construction, leasing operations (used in transport and agriculture), machine-building, and the defense industry sector, noting that the latter "has special credit needs" outside of the stock markets.

All of these measures were reviewed again yesterday, along with reports from deputy premiers on consultations with Russian construction and auto industry executives, at an economic policy conference chaired by Medvedev. He instructed the government to pay particular attention to ensuring that the defense industry, regionally oriented infrastructure and transport projects, and small business all receive financing.

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