From Volume 8, Issue 21 of EIR Online, Published May 26, 2009
Russia and the CIS News Digest

Medvedev's 'Ruble as Reserve Currency' Obsession

May 18 (EIRNS)—Italian Prime Minister Silvio Berlusconi visited Moscow over the weekend of May 16-17. Since Italy currently chairs the Group of 8, the agenda for its July summit figured centrally in their talks. At a May 16 press conference, Medvedev continued to emphasize the London-promoted agenda of transparency/good governance/improved accounting standards, as well as a notion of multiple reserve currencies and, thereafter, a supranational currency—the latter being a scheme promoted by George Soros, in particular.

Medvedev once again demonstrated the failure of people in Russia to grasp the change in axioms, identified by Lyndon LaRouche as critical for addressing the current global systemic crisis. In particular, Medvedev blundered by asserting that modernized principles of "corporate supervision, transparency, accounting and reporting on the basis of principles that are not just to the benefit of one group of countries" are the top priority, "because the current principles are based on the Anglo-Saxon approach, and this is not to everyone'’s liking in Europe, for example."

More profound even than the oddity of this demand, given that the "supervision/transparency/accounting" agenda comes from Anglo-Saxon London, is Medvedev's utter disregard of the historical fact that there exist two, absolutely opposed schools of economic thought in the English-speaking world: the British imperial monetarist system, and the American System of political economy (which just happens to have been embraced by Russia's greatest economic thinkers and statesmen, Dmitri Mendeleyev and Count Sergei Witte).

Asked about Russia's proposals for a new financial architecture, Medvedev said he wanted to pursue "global ideas," which were not fully discussed at the London G20 summit in April. "One of these ideas was that of establishing a supranational currency. We have been looking at reorganizing the World Bank and International Monetary Fund'’s work, and examining the possibility of using the Special Drawing Rights used within these organizations as a potential supranational currency. Why not go further? These are all matters for the future, but in my view, this future is not far off at all." In the meantime, Medvedev called for steps toward using multiple reserve currencies, including the ruble.

Russian Industry Shrinking by the Month

May 19 (EIRNS)—Industrial output in Russia is collapsing at an ever faster rate. The Federal State Statistics Service, Rosstat, yesterday published figures demonstrating a 16.9% fall in industrial output in April from a year ago, after contractions of over 13% in February and March. Measured month-to-month, industrial output fell by more than 8% in April, Nezavisimaya Gazeta reported. This was the sixth straight month of industrial contraction in Russia, and the April figure is the worst in 15 years, when Russia was in the depths of the Shock Therapy catastrophe. Industrial output includes mining as well as manufacturing in Russian figures, and these figures reflect the ongoing destruction of manufacturing, which has dropped by over 25% from a year ago.

Hardest hit are the core sectors of steel, cement, and auto: Output of steel, cement, and construction materials has fallen by over 30% from a year ago, and auto production is down over 55%. The whole construction sector has shrunk by some 20%.

AvtoVAZ, Russia's largest automaker and employer of 100,000 people, will be cutting production drastically as of June, as car sales have imploded by over 50% this year. There is no credit available for car loans in Russia. AvtoVAZ plants will maintain only one daily eight-hour shift, cutting weekly production hours to just 40 from the current 48, the management announced in a statement today, which said that "harsh cost-cutting measures are necessary."

Ukraine had to publish similar figures, with production down almost 32% in the first quarter of 2009.

Ivanov: Afghan Drug-Running a Global Threat

May 19 (EIRNS)—Victor Ivanov, head of the Russian Federal Drug Control Service, told a meeting of Shanghai Cooperation Organization anti-drug officials in Moscow today, that the global community underestimates the threat of drug trafficking from Afghanistan, which must be recognized as a threat as great as sea piracy, Voice of Russia reported.

The SCO officials discussed steps to fight Afghan drug traffic on their territories, Ivanov's office said after the meeting. Ivanov also said that the Islamic Movement of Uzbekistan is trying to expand from merely providing drug couriers, to functioning as distributors for Afghan drugs in Central Asia and Russia. The group controls mountain passes on the Uzbek-Tajik-Kyrgyz borders in the Fergana Valley region, as well as money-laundering and arms-supply operations. The Islamic Movement members operate as "traders and preachers" in Russia, he said, according to Interfax, and this "missionary activity" is being used to build a drug network in the Caucasus, Ural, Siberia, and Volga regions.

Another reason for urgency in acting against the drug mafias in Central Asia is the Presidential election in Kyrgyzstan on July 23. One of the 18 recognized candidates is Jenishbek Nazaraliyev, who runs a very expensive private clinic for drug addicts in Bishkek. Criminal elements from Russia reportedly make up a large part of the clientele. On May 14, Nazaraliyev told Reuters that he wants Kyrgyzstan to legalize opium cultivation, "to solve its economic problems" by selling the drug to international pharmaceutical companies. Nazaraliyev claims to have played a key role in the March 2005 "Tulip Revolution," which ousted former President Askar Akayev from office. Akayev told the press afterwards, that a large group of the protesters who took over government buildings in Bishkek, were addicts from Nazaraliyev's clinic. Nazaraliyev's chances in the elections are reportedly very small.

U.S.-Russian Panel: No Threat from Iran at Present

May 23 (EIRNS)—The EastWest Institute, with offices in New York, Brussels, and Moscow, released on May 19 the report of a panel of six U.S. and six Russian scientific and military experts that evaluated Iran's nuclear and ballistic missile threat. Its major point is that until Iran has both a missile that can deliver a nuclear payload that threatens Europe (much less, the United States) and a nuclear weapon that can fit on a ballistic missile, there is no Iranian threat. Its conclusion is that it will be two to three years before Iran could have a nuclear device ready, and an additional five years before Iran could produce a warhead that could be delivered by an existing or any future Iranian ballistic missile.

The second major conclusion is that the proposed elements of the European BMD deployment "cannot provide a dependable defense for Europe or the U.S.;" that it does threaten Russian strategic capabilities; and that it destabilizes the nuclear deterrent, which is still the basis of strategic stability.

These conclusions are backed up with considerable technical detail.

The panel's recommendation is that the Obama Administration should conduct a "serious technical review of the capabilities claimed for the proposed European missile defense system," and that there be an upgraded, coordinated U.S./Russian approach to diplomacy with Iran.

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