From Volume 37, Issue 11 of EIR Online, Published Mar. 19, 2010
Russia and the CIS News Digest

Russia and India Strengthen Strategic Ties

March 12 (EIRNS)—Russian Prime Minister Vladimir Putin made a short, but packed visit to India March 11-12, meeting Indian President Pratibha Patil, Prime Minister Manmohan Singh, and Congress Party President Sonia Gandhi, addressing scientists, engineers, and businessmen in three major cities by video conference, and signing wide-ranging trade deals. Of 19 agreements signed or witnessed by the two prime ministers, three are in the civil nuclear field; one for purchase of 29 MiG-29K fighters; another finalizes India's purchase of the Admiral Gorshkov aircraft carrier.

Under the civil nuclear agreements, Russia would build 12 nuclear plants: six in Kudankulam, Tamil Nadu, and six in Haripur in West Bengal. The pacts in the civil nuclear field are an agreement on cooperation in the use of atomic energy for peaceful purposes, and an agreement on a road map for the serial construction of Russian-designed nuclear power plants. In the hydrocarbon sector, an agreement on cooperation was signed between India's ONGC and Russia's Gazprom, whereby Russia has offered ONGC a stake in gas fields in the Arctic Peninsula of Yamal. An MoU was signed between ISRO and Russia's Federal Space Agency and JSC Navigation Information Systems, for a joint enterprise for production of equipment for the GLONASS satellite navigation system, and services for civilian users. Two pacts were also signed in the field of fertilizers.

Hailing Putin as "a great friend of India" and architect of the strategic partnership between India and Russia, Manmohan Singh said, "We owe a deep sense of gratitude to him for bringing our two countries so close to each other." Describing the outcome of Putin's visit as "rich and very substantive," Singh said he had told the visiting Prime Minister that relations with Russia are "a key pillar of our foreign policy, and we regard Russia as a trusted and reliable strategic partner." The Indian Prime Minister said there was much that India and Russia could do together to advance global peace and stability, and the process of global economic revival. He said the two countries had agreed to intensify their consultations on Afghanistan, and the challenges posed by terrorism and extremism in their region.

Analyzing Putin's visit to India, Yekaterina Koldunova of the Moscow State University of International Relations told Russia Today that the visit shows that Russia is broadening its economic interaction. She said that, economically, Asian countries did not suffer from the financial crunch as badly as the West. Referring to Russia, India, and China, Koldunova said: "That could make many think that soon they will be able to out-do Western countries in economic growth." However, "There are huge internal imbalances in the development of these countries.... The future for China, India, and Russia is to change the model of cooperation, and for China and India to move for a new level of economic development; to proceed from the export-oriented model, to a more technically-advanced one," concluded Koldunova. Commenting on the visit, the director of Centre of Indian Studies of the Science Academy, Tatiana Shaumyan, said: "Until recently India was looked as the 'client state,' but today there is the clear understanding that relations with India should be developed as a dialogue partner."

Anticipating the nuclear cooperation "road map," Indian officials said that cooperation involving joint R&D on fast neutron (breeder) reactors is a priority. India wants to expand civilian nuclear power cooperation with Russia, Srikumar Banerjee, secretary of India's Department of Atomic Energy, told RIA Novosti. "Now we are discussing the R&D sector, where one of the areas is the fast reactors," the Indian nuclear energy chief said. "Russia has an advantage: it has a reactor; others can only show papers."

Russian Officials Hit 'Londongrad' Money Laundry

March 14 (EIRNS)—On Feb. 27, Russia's Deputy Prosecutor General Alexander Zvyagintsev blasted the role of Britain in harboring Russian fugitives from justice, especially those wanted for financial crimes. "No wonder so many of them call the British capital 'Londongrad,' " Zvyagintsev told the government daily Rossiyskaya Gazeta, "These are not just small pickpockets, but figures with substantial funds." Zvyaginstev cited the U.K.'s loose asylum laws (which have also been a factor in another of London's nicknames: "Londonistan," haven for terrorists) and the City of London's status as the premiere world financial center, which provides ways for criminals to conceal their ill-gotten profits.

If shadow-economy profits were the only issue, a straight-forward law enforcement approach could make headway. What Zvyagintsev didn't go into, however, is a much bigger elephant in the room: the huge portion of the Russian economy which has been melded into the global hot- and fake-money flows of the London-centered Inter-Alpha Group and related financier interests. This occurred, thanks to the takeover of the Russian government in 1991 by a London-trained clique, including the late Yegor Gaidar, and Anatoli Chubais, today CEO of the state-owned tech firm Rosnano.

At a meeting on attracting foreign investment to Russia, held earlier this year, President Dmitri Medvedev lamented that as much as half of "foreign" investment actually comes from Russian companies, which have their legal registration offshore. This is one of the reasons why Russia's top four foreign investor countries last year were Cyprus, the Netherlands, Luxembourg, and the U.K., in that order.

A March 3 article in the St. Petersburg newspaper Nevskoye Vremya reported that, "by conservative estimates, 90% of Russia's major [privatized] companies belong entirely or partially to offshores." The article cited a number of famous cases in point: the Alfa Group of Mikhail Fridman and Pyotr Aven is registered through companies in Gibraltar, Luxembourg, the British Virgin Islands, and the Netherlands; Oleg Deripaska's Basic Element, the holding company for Rusal (aluminum), the GAZ auto complex, and a major insurance company, is registered through a holding company in the British Crown dependency called the Bailiwick of Jersey, which holding company, in turn, belongs to a firm registered in the British Virgin Islands; Roman Abramovich's Yevraz steel empire is registered as a Cyprus company; the NLMK steel complex, property of Russia's richest man, Vladimir Lisin, is run through the offshore Fletcher Holding Ltd.; and Victor Vekselberg's Renova is registered in the Bahamas.

In his book The Anatomy of Russian Capitalism (English edition, EIR News Service, 2007), Prof. Stanislav Menshikov detailed how this pattern developed, with the ill-gotten fortunes of the 1980s Gorbachov "perestroika" era passing over into still more ill-gotten fortunes of the 1990s Gaidar-Chubais privatization. It was profitable for the newly minted "oligarchs" to keep their money offshore, avoiding various Russian taxes.

Nevskoye Vremya quotes the London-intimate Finance Minister Alexei Kudrin, a junior member of the Gaidar-Chubais clique, and one of its members still in power, covering for these practices: "Our budget loses from optimization (tax evasion—NV editors) through offshores, but it's not illegal." At the same time, the same Kudrin is cutting funding to Russian Railways and other national infrastructure projects, in pursuit of his avowed goal of outdoing the European Union's Maastricht conditionalities by a factor of three: Kudrin wants Russia's budget deficit to be no greater than 1% of GDP.

Russia Goes for Insane British Carry Trade

March 14 (EIRNS)—The grip of insane British monetarist practice on whole swathes of Russian economic activity was dramatized in the December 2009 newsletter of MICEX, one of Moscow's two main stock exchanges. One of the shorts in The MICEX Newsletter section, "Macroeconomic Review," asserted, "In 2010, the possibility of conducting carry trade transactions will contribute to the strengthening of the ruble. Even if the Bank of Russia continues to lower interest rates, the overnight repo rates will remain substantially higher than interest rates in the USA and the EU."

Saner heads, such as Chamber of Commerce and Industry head Academician Yevgeni Primakov, have pointed to the already more than $500 billion foreign holdings of Russian corporate debt as a strategic vulnerability of the nation. Yet, London-centered monetarists continue to hype the ability of the Moscow markets to attract speculative capital as a great plus for Russia.

In 2009, even as Russian goods production collapsed and unemployment surged, the Russian RTS stock market surged by 233%. On March 11, 2010, the British wire agency Reuters crowed that the Russian ruble had hit a 14-month high, on the basis of rising oil prices and the carry trade. The London Financial Times of March 12 headlines that "Russia's hot ruble keeps seducing foreign investors."

Even the Central Bank, which is run by veterans of the London-steered radical free marketeers' hegemony within Russia in the 1990s, is alarmed at how rapidly the ruble is surging, which tends to tighten financial resources available inside the country. The Central Bank is lowering interest rates, accordingly. The FT gloats that Russia is still "the weakest link" in the BRIC (Brazil, Russia, India, China) countries, "but that is not stopping the speculators showing a rational—or perhaps irrational—exuberance for the ruble."

China and Russia Strengthen Anti-Drug Cooperation

March 14 (EIRNS)—China and Russia agreed March 12 to strengthen cooperation in combatting drug trafficking in order to protect people in both countries and safeguard social stability. The agreement was reached during a meeting between Victor Ivanov, head of Russia's drug control agency, and Chinese Ambassador to Russia Li Hui. The agreement is within the framework of the Shanghai Cooperation Organization. Ivanov and Li also called for concerted efforts by the international community to crack down on drug production and trafficking in Afghanistan.

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