From Volume 7, Issue 47 of EIR Online, Published Nov. 18, 2008
Russia and the CIS News Digest

Medvedev, Sarkozy Want European Security Meeting

Nov. 14 (EIRNS)—After today's Russia-EU summit in Nice, France, the leaders of Russia and France spoke positively about the prospects of a Euro-Atlantic security summit, to be held in 2009. President Nicholas Sarkozy of France, according to RIA Novosti's report and a transcript published by the Kremlin, said he hoped that Russia's deployment of Iskander surface-to-air missiles in Kaliningrad (between Poland and Lithuania) could be delayed until that meeting, and that the U.S. anti-missile emplacements in Poland, to which the Russian deployment is a response, could also wait.

Sarkozy posed the meeting as a summit of the Organization on Security and Cooperation in Europe (OSCE), which would be its first one since 1999 (the year NATO bombed Yugoslavia). The OSCE dates from the Soviet-initiated CSCE process, culminating in the Helsinki Agreement of 1975. The United States and Canada are among the 56 parties to the OSCE. President Dmitri Medvedev of Russia welcomed Sarkozy's view of an OSCE conference, linking it to his own proposal for a Euro-Atlantic security summit, put forward during a visit to Germany earlier this year, before the South Ossetia war.

Russia's flagship wire service, Novosti, treated Sarkozy's call for a conference as evidence that Medvedev's announcement of the Iskander deployment, as a response to the U.S. anti-missile plan, had "made the Europeans think more seriously about security on the continent."

Russian Defense Industry Hit by Crisis

Nov. 12 (EIRNS)—"The world financial crisis is hitting certain defense-sector producers quite hard," Russian Deputy Prime Minister Sergei Ivanov told a meeting of the government commission to support strategic defense companies yesterday. He warned that the financial liquidity crisis has made it impossible for defense plants to produce and ship their products. Ivanov also criticized Russia's banks for what amounts to mafia-style loan-sharking: "The banking sector not only wants to maintain its stability, but also to make money off the defense industry, which is just outrageous."

Ivanov said that many banks are revising the terms of already-signed loans, raising interest rates from 9-12% to 16-18%, and dawdling over new loans. The intragovernmental commission was set up last month, and Sberbank, VTB and Vnesheconombank have been urged to lend to defense companies in trouble, Ivanov said, specifying providing loans to companies under contract to the Defense Ministry to ensure cash flow, including for paying wages to staff, extending previously agreed credit lines, and subsidizing interest rates.

Reports from other sectors of Russian industry also reflect the impact of the financial crisis on production. According to today's Rossiyskaya Gazeta, which is the government newspaper, the Chelyabinsk Steel Plant in the Urals slashed output by 15% in October. Steel giant Severstal has announced a reduction of output by 25% in Russia and 33% in its plants elsewhere. MMK, the famous Magnitogorsk steel plant, cut steel production by 15%, and the Novolipetsk plant NLMK by 6.6% in the third quarter. Russian Railways shipped 12.9% less steel-related freight than planned during October, and 37.2% less non-ferrous metals.

Medvedev, Primakov Confer on Relief for Industry

Nov. 12 (EIRNS)—The Russian Central Bank will appoint "commissars" to ensure that government funds reach industry, Russian President Dmitri Medvedev told a meeting of the Russian Chamber of Commerce and Industry yesterday. They will monitor banks' profit margins from lending emergency government funds to other banks and companies. Billions in emergency funding is being channeled via state-owned banks like Sberbank and VTB. Former Prime Minister Yevgeni Primakov, head of the Chamber, said that private banks "ceased to be solely commercial" when they accepted state money. "We need to demand that they do what the government and the society require—demand is the word."

"Our biggest concern is that the thrombosis of credit lines and the rise in banks' rates is leading to falling production," Primakov said. The funds must go to the real economy, and this "can only be done through a tough state dictatorship over the banks."

Russia Deploys Bank Credits To Save Rail Plans

Nov. 11 (EIRNS)—One day after Prime Minister Vladimir Putin chaired a Cabinet meeting on the dire situation of the investment program of the state-owned Russian Railways (RZhD), CEO Vladimir Yakunin and the heads of key Russian banks today signed a package of "initiatives to support the real economy sectors of the Russian Federation." The program is aimed at channeling "additional liquidity into financial support for significant infrastructure projects," according to the RZhD-Partner information service. At a press conference, Yakunin said that the RZhD agreement with the banks, including VTB, Sberbank, Gazprombank, and others, will save jobs and social guarantees; it is an attempt to uphold what the railways mean for other sectors of Russian industry—not only for shipping freight, but as a customer of the steel, machine-building, fuels, and electronics industries. RZhD experienced drops in freight shipped during October, ranging between 10% and 37%, for different categories of freight.

Finance Minister Kudrin Wants 'International Maastricht'

Nov. 10 (EIRNS)—Speaking after the Nov. 9 meeting of G-20 finance ministers in São Paulo, Brazil, Russian Finance Minister Alexei Kudrin presented his country's proposals for the Nov. 15 G-20 Washington summit as featuring an "international Maastricht," among other elements. American economist Lyndon LaRouche observed that if what Kudrin is quoted as saying really does represent the advice he is giving President Dmitri Medvedev, "then it is very bad advice, which shows a grave lack of understanding of the menacing situation in the world today."

"Cooperation between the U.S.A. and Russia, with China and India as leading partners, is key to a solution that will work," said LaRouche. "These four powers must act together, in a process of cooperation among culturally dissimilar nations." And they must put the currently collapsing, post-1971 monetary system through bankruptcy, writing off the huge, speculative and parasitical derivatives obligations to clear the way for rapid implementation of what will be, not a monetary system, but a credit system, to enable and promote national and cooperative international development of the real economy, such as President Franklin Roosevelt envisioned, at Bretton Woods in 1944.

The European Union's Maastricht agreements, cited by Kudrin, are designed to block any such challenge to the Anglo-Dutch Liberal monetarist model. Maastricht operates as a bankers' dictatorship, whereby supranational agencies can prevent sovereign nations from issuing credit for development.

According to the RT report, Kudrin identified three components of the Russian proposals. These included "new rules," and a ban on "egoistic aspirations," for countries whose currencies are used as reserve currencies, as the U.S. dollar is today. Also, Kudrin mentioned "restructuring and reorganization" of the International Monetary Fund, with an expanded presence in it for Russia and China. First and foremost, however, he drew his parallel with Maastricht, saying that countries around the world need to be subjected to the same sort of conditionalities as Maastricht imposes on EU members.

Given the role that the U.S.A., Russia, and China need to play, LaRouche noted, what Kudrin did was to "hit a real foul ball," compared with what would be in Russia's own interests. Reflecting on the Russian finance minister's many years of closely following City of London-style monetarist prescriptions in his work, LaRouche said of Kudrin, "You have to understand that he has never been competent in economics. He found a niche in the Russian government, despite those shortcomings. But, he's not to be treated as a serious thinker."

For example, Kudrin was brought into the Russian finance ministry in 1997 by then-Deputy Prime Minister Anatoli Chubais, one of the architects of Russia's disastrous neo-liberal reforms in the 1990s. He remained there through the 1998 Russian government bond default and the subsequent recovery, overseeing the pay-down of Russia's Soviet-era debt to international lenders, and the establishment of the multi-hundred-billions Stabilization Fund, through which Russian oil earnings were invested in foreign securities (rather than in the Russian economy). The decision to keep Kudrin as finance minister and deputy prime minister, during the formation of Prime Minister Vladimir Putin's Cabinet last Spring, prompted Russian economist Prof. Stanislav Menshikov to warn, "The make-up of the Cabinet does not cohere with the announced goal" of an industrial recovery. As the global breakdown crisis accelerated in Summer 2008, Kudrin persisted for many weeks in claiming that Russia would be a "safe haven" for international investors.

All rights reserved © 2008 EIRNS