In this issue:

Putin Inaugurated, Meets With Patriarch

Russians Usher Abashidze Out, Defusing Georgia's Ajaria Crisis

Siberian Hydroelectric Plant Seized From UES

Russia Invites French and Italian Firms into Russian-Ukrainian Pipeline Consortium

Russia To Repay IMF Early

Russia Tests Mobile Version of Topol ICBM

From Volume 3, Issue Number 19 of Electronic Intelligence Weekly, Published May 11, 2004
Russia and the CIS News Digest

Putin Inaugurated, Meets With Patriarch

Vladimir Putin was inaugurated on May 7 as President of the Russian Federation for a second term, to which he was reelected March 14. He accepted the resignation of the government, as mandated by law, and immediately reappointed Mikhail Fradkov as Prime Minister. Putin also visited Alexei II, Russian Orthodox Patriarch of Moscow and All Russia, to receive his blessing.

Russians Usher Abashidze Out, Defusing Georgia's Ajaria Crisis

Russian representatives were decisive in defusing a potential explosion of violence between Georgia and its autonomous province, Ajaria. On Sunday, May 2, Ajarian President Aslan Abashidze had ordered the bridges between Ajaria and Georgia blown up, to prevent Tbilisi from sending in its military to disarm the Ajarian militias. On the evening of May 5, after a visit from Russian Security Council head, Igor Ivanov (formerly Russian Foreign Minister), Abashidze accepted a Russian offer of safe passage to exile in Russia, resigned, and left. His family's dynasty in the Ajaria region goes back well over a thousand years, to the 7th century.

After the destruction of the bridges, opposition forces from the Our Ajaria movement, allied with Georgian President Michael Saakashvili's group Kmara! (Enough!), conducted round-the-clock demonstrations against Abashidze at Batumi University and other locations. There were also unconfirmed reports that Aslan Smirba, former Mayor of Batumi, and Alexander Davitidze, an Ajarian underworld figure, had shifted to the Georgian side. The U.S. State Department issued a statement in support of Saakashvili's attempts to bring Abashidze to heel. Then, on May 5, Saakashvili imposed "direct Presidential rule" in Ajaria.

Saakashvili's media had repeatedly accused retired Russian Gen. Yuri Netkachov (commander of the Transdniester contingent of Russian troops in Moldova until 1992) of assisting Abashidze. But on May 5, after Saakashvili's "direct rule" announcement, it was Ivanov (rather than a strongly pro-Abashidze figure such as Moscow Mayor Yuri Luzhkov, who had travelled to Batumi the last time a conflict flared between Abashidze and Saakashvili) who flew from Moscow to Ajaria. His mediation was approved personally by Russian President Vladimir Putin, after the latter's phone consultation with Saakashvili. And Saakashvili publicly offered to drop a pending criminal case against Abashidze and guarantee his personal safety, in exchange for his resignation.

Siberian Hydroelectric Plant Seized From UES

The biggest hydroelectric power plant in Russia (and, at 6,400 MW, the fourth largest in the world), the Sayano-Shushensk facility on the Yenisei River, was ordered seized by the Russian government on April 23. The 1993 privatization of the dam and power plant as part of the national utility company, Unified Energy Systems (UES—currently run by former top privatizer Anatoli Chubais), was overturned by a regional court following a complaint from Gov. Alexei Lebed of Kharkassia, where Sayano-Shushensk is located, that UES had imposed unjustified price hikes. Three-quarters of the power it generates is used in the aluminum industry. Reuters news agency quoted an unnamed UES official, who called Deputy Prime Minister Alexander Zhukov's order to implement the court decision, "the beginning of de-privatization."

UES stock fell 9% in one day after Zhukov's announcement. The Moscow market was already in turmoil because of a rumored interrogation of Norilsk Nickel owner Vladimir Potanin.

Russia Invites French and Italian Firms into Russian-Ukrainian Pipeline Consortium

"Being tired of attempts to implement the original project for a Russian-Ukrainian gas transport consortium, Moscow has decided to invite Gas de France and ENI into the deal," reported the Russian newspaper Kommersant April 26. The paper recalled that Germany's Ruhrgas expressed a commitment to join the consortium as far back as June 2002. The gas transport consortium was officially founded in 2002 by Gazprom and Naftogaz-Ukraine. Since that time, Moscow has pushed for privatization of Ukraine's gas pipelines. As Kiev was reluctant to agree, Moscow proposed to lease the Ukrainian pipelines to the consortium for 50 years, on terms of parity (50:50), but Kiev wanted 51% control.

During his April talks with Ukraine's President Leonid Kuchma in the Crimea, Russian President Putin proposed to invite the major French and Italian gas companies to join the project. According to Ukrainian MP Alexander Hudyma, the proposal will be supported by the Supreme Rada only if the 51% stake is granted to Ukraine. A Ruhrgas spokesman declined comment, pending the conclusion of negotiations.

Kommersant quoted an anonymous Kremlin source as saying that during Putin's late-April talks with EU Commissioner Romano Prodi, he hinted that "if the Europeans are interested in reliable delivery of gas, they should convince Ukraine's government not to sabotage the consortium." Thus, in the framework of this trade agreement, the Kremlin is granting a share of its political influence in Ukraine to the EU.

Russia To Repay IMF Early

Addressing the spring session of the IMF and World Bank on April 26, Russian Finance Minister Alexei Kudrin "promised to return Russia's debt to the IMF ahead of schedule, and praised the U.S. dollar," according to what the Russian business daily Kommersant highlighted from Kudrin's speech. Russia has borrowed a total of $22 billion from the International Monetary Fund since joining it in 1992, but nothing in recent years. The IMF portion of Russia's foreign debt stood at $6.5 billion in early 2003, and $3 billion more will have been paid off in 2003-04.

Such payments have been made possible by Russia's high oil-export earnings—and fiscal austerity. If the spectre of the systemic world financial crisis was haunting the Washington meetings, Kudrin did not seem to notice. Kommersant reported that Kudrin appeared convinced by U.S. Treasury Secretary John Snow and Federal Reserve chairman Alan Greenspan, that the U.S. economy is growing vigorously, even if Europe is not. Snow also told him, the report said, that poor countries should turn to the IMF "only in cases of extreme necessity," while those that officially have a positive growth rate, like Russia, are expected to pay ahead of schedule.

Russia Tests Mobile Version of Topol ICBM

On April 26, Russia successfully tested a mobile version of its Topol intercontinental ballistic missile, the Topol-M (called SS-25 by NATO). The Topol-M hit a target at its maximum range of 11,500 km, Russian Minister of Defense Sergei Ivanov reported to President Putin. The Topol-M can be equipped with the new Russian hypersonic warhead, which can change course, shifting from ballistic to atmospheric flight—an anti-missile defense-evading technology that was first tested in February. The Topol-M launcher can traverse rough terrain, off-road, up to several hundred kilometers.

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