by Roman Kupchinsky
Russia’s Gazprom and Turkmenistan’s state-owned gas company, Turkmengaz, were reported to have begun negotiations today on changing the terms of the gas purchase contract signed last December. Russia is proposing that the contract be a “take or pay” contract, linked to the price of oil and not the annual fixed price as was agreed upon in December.
Gas sales from Turkmenistan to Russia were suspended in April when a conflict broke out between the two countries over a pipeline blast caused by a change of pressure in the pipe. Turkmenistan blamed Gazprom Export for not notifying Turkmen authorities that it had stopped receiving gas. The Russian side rejected the charges and gas stopped flowing to Russia.
The conflict grew when the Turkmen side decided not to automatically award Gazprom a contract for the construction of the East-West pipeline and clinched a deal with China to develop the on-shore part of the giant Yolotan gas field.
At the heart of the dispute is the pricing mechanism agreed upon in the December 31, 2008 contract. Gazprom, according to Russian Prime Minister Vladimir Putin, agreed to pay Turkmenistan a fixed rate of $340 (which includes transit fees) for 1,000 cubic meters throughout 2009.
However, a few days later Putin and Gazprom insisted that Ukraine pay Gazprom on the basis of a take or pay contract linked to the price of oil. Why Turkmenistan was given a fixed price is difficult to say. Furthermore the terms of the December 2008 contract with Turkmenistan were never made public.
In the first quarter of 2009 Gazprom paid Ashgabat $300 per 1,000 cubic meters of gas. If a take or pay pricing method is agreed upon, Gazprom will pay Turkmengaz $220 in the third quarter and $160 in the fourth quarter of 2009.
A number of factors might have played a role in bringing Gazprom and Turkmenistan back to the negotiating table. When Turkmen gas ceased going to Russia in April, Turkmenistan, which has no other significant customers for its gas or export routes, was forced to cap some bore holes or flare off the gas, losing millions of dollars.
Russia, on the other hand, is faced with lower demand in Europe and Ukraine; however, the different opaque gas middlemen schemes Gazprom Export has created in Europe, like Gazprom Germania, rely on Central Asian gas supplies to sell to their customers. These schemes cannot continue siphoning off Russian gas without that gas being replaced by gas from Central Asia.
The Gazprom Germania website states: “The main focus of our business activities is on marketing natural gas of Russian and Central Asian origin in Western and Central Europe.”
The other question which needs to be resolved during the new negotiations is the volume of gas that Russia will buy from Turkmenistan in 2009. The earlier number of some 40 billion cubic meters, is now unrealistic and Gazprom will most likely insist on a far lower amount.
Tuesday, June 23, 2009
Sunday, June 21, 2009
Russia, the Archangel Michael and the Iranian Election
by Roman Kupchinsky
While many Western leaders have condemned the Iranian regime for rigging the vote in the June 2009 presidential elections in favor of incumbent President Mahmoud Ahmadinejad and for using brutal force to suppress pro-democracy protesters, Russia and China, as could have been predicted, congratulated the Iranian leader on his “victory” and lambasted the United States and its allies for having doubts about the final results of the vote.
“The issue of elections in Iran is an internal affair of the Iranian people,” Russian Deputy Foreign Minister Sergei Ryabkov told reporters in Yekaterinburg where Russia hosted a summit of the Shanghai Cooperation Organization (SCO), which was attended by Iranian President Mahmoud Ahmadinejad…“We welcome the holding of elections in Iran, and we welcome the newly re-elected president of Iran on Russian soil… it is highly significant that the first foreign visit after Ahmadinejad’s re-election is to Russia." It was indeed significant given that the two countries share so many things in common.
This message was further elaborated upon by Alexander Dugin, the head of the Russian right-wing International EurAsian Movement, among whose members are many influential Russian businessman. Dugin stated. "The SCO is evolving into a kind of organization for countries that feel themselves excluded from the global system, who feel victimized by the US-dominated unipolar order…"Now this unipolar world is being shaken to its foundations by economic crisis and imperial retreat, and it's time to define a new project of a multi-polar world."
The International EurAsia Movment board is listed on the organizations website and includes numerous members of the Russian defense and security services.
In a programmatic speech by Dugin at the 2004 conference of the organization, he presented a broad outline of the group’s goals in a rambling manifesto.
“Almost all religions and traditions claim – globalization, “new world order” , “unipolar world”, “world cabinet” – are symbols of Lucifer , strategic constructions of “God enemies” – Archangel Michael`s direct enemies. Christians identify this “new world order” as “antichrist”, muslims as “dadjallah”, judes – “great melting” (“erev rav”), hinduists – as forces of Kali Juga, Buddhists – Mara, demon of illusion. On the other side of all differences between doctrines, rituals and dogmata exists special tradition – tradition of Archangel Michael, “michaelic” veiled light. It is affiliation of human to “hierohistory”, right (and obligation) to be a soldier of one of the two opposing armies.”
Russian President Dmitry Medvedev and Chinese President Hu Jintao both met Ahmadinejad, although the meeting with Medvedev was brief because Ahmadinejad had arrived in Yekaterinburg a day late because of the crisis in Tehran. Ahmadinejad and Medvedev joked and smiled for television cameras, but as Kremlin spokeswoman Natalya Timakova said “their meeting had been very short: "They did not even sit down."
A brief report from China's official Xinhua news agency said Hu and Ahmadinejad "exchanged views on bilateral relations and issues of common concern" on the sidelines of the summit.
By embracing, however low-key, the official Iranian election results, the Russian and the Chinese leaderships have gambled that the current regime will be able to suppress the opposition and remain in power. If they are proven wrong they are likely to be seen by the Iranian opposition as allies of the hated regime and the Archangel Michael and his contemporary supporters might be in for a shock.
While many Western leaders have condemned the Iranian regime for rigging the vote in the June 2009 presidential elections in favor of incumbent President Mahmoud Ahmadinejad and for using brutal force to suppress pro-democracy protesters, Russia and China, as could have been predicted, congratulated the Iranian leader on his “victory” and lambasted the United States and its allies for having doubts about the final results of the vote.
“The issue of elections in Iran is an internal affair of the Iranian people,” Russian Deputy Foreign Minister Sergei Ryabkov told reporters in Yekaterinburg where Russia hosted a summit of the Shanghai Cooperation Organization (SCO), which was attended by Iranian President Mahmoud Ahmadinejad…“We welcome the holding of elections in Iran, and we welcome the newly re-elected president of Iran on Russian soil… it is highly significant that the first foreign visit after Ahmadinejad’s re-election is to Russia." It was indeed significant given that the two countries share so many things in common.
This message was further elaborated upon by Alexander Dugin, the head of the Russian right-wing International EurAsian Movement, among whose members are many influential Russian businessman. Dugin stated. "The SCO is evolving into a kind of organization for countries that feel themselves excluded from the global system, who feel victimized by the US-dominated unipolar order…"Now this unipolar world is being shaken to its foundations by economic crisis and imperial retreat, and it's time to define a new project of a multi-polar world."
The International EurAsia Movment board is listed on the organizations website and includes numerous members of the Russian defense and security services.
In a programmatic speech by Dugin at the 2004 conference of the organization, he presented a broad outline of the group’s goals in a rambling manifesto.
“Almost all religions and traditions claim – globalization, “new world order” , “unipolar world”, “world cabinet” – are symbols of Lucifer , strategic constructions of “God enemies” – Archangel Michael`s direct enemies. Christians identify this “new world order” as “antichrist”, muslims as “dadjallah”, judes – “great melting” (“erev rav”), hinduists – as forces of Kali Juga, Buddhists – Mara, demon of illusion. On the other side of all differences between doctrines, rituals and dogmata exists special tradition – tradition of Archangel Michael, “michaelic” veiled light. It is affiliation of human to “hierohistory”, right (and obligation) to be a soldier of one of the two opposing armies.”
Russian President Dmitry Medvedev and Chinese President Hu Jintao both met Ahmadinejad, although the meeting with Medvedev was brief because Ahmadinejad had arrived in Yekaterinburg a day late because of the crisis in Tehran. Ahmadinejad and Medvedev joked and smiled for television cameras, but as Kremlin spokeswoman Natalya Timakova said “their meeting had been very short: "They did not even sit down."
A brief report from China's official Xinhua news agency said Hu and Ahmadinejad "exchanged views on bilateral relations and issues of common concern" on the sidelines of the summit.
By embracing, however low-key, the official Iranian election results, the Russian and the Chinese leaderships have gambled that the current regime will be able to suppress the opposition and remain in power. If they are proven wrong they are likely to be seen by the Iranian opposition as allies of the hated regime and the Archangel Michael and his contemporary supporters might be in for a shock.
Friday, June 19, 2009
BPS-2 -A New Russian Oil Pipeline Which Might Not be Needed
by Roman Kupchinsky
On June 10, 2009 the construction of the Baltic Pipeline System (BPS-2) got underway. The 1,170 km long pipeline will run from Unecha in the Bryansk Region to the Ust-Luga oil terminal south of St. Petersburg. The first stage with an annual capacity of 30 million tons is scheduled to be completed in September 2012. The second stage will increase capacity to 50 million tons and is due to be ready by the end of 2013.
In February 2007, Semyon Vainshtok, the-then head of Transneft, the operator of the BPS-2 pipeline, issued a statement saying that it was necessary to “protect the country” from the risks involved in transporting oil through the territories of neighboring countries. Earlier that year, a dispute occurred between Russia and Belarus over tariffs for oil transported via the Druzhba pipeline. “We discussed with colleagues that if we had had no risks with neighboring countries, we did not have to spend so much money,” Vainshtok said.
By ending Moscow’s dependence on Belarus as a transit country for Russian oil as well as relying on Ukraine’s oil terminal in Pivdenny on the Black Sea, Russia will deprive the badly starved Belarus treasury of some $1 billion annually in transit fees. At the same time, the Ukrainian Pivdenny oil terminal will most likely stand empty and the Odessa-Brody pipeline, originally built to ship oil from the Caspian to the Plock refinery in Poland will rust in the picturesque Ukrainian countryside if it cannot find a supply of oil.
Other factors also contributed heavily to the hurried pace of preparations of BPS-2, not least of which is the self-interest of some members of the Russian political and commercial elite who lobbied extensively for the project. Gunvor, a company which has often been linked in the media to Russian Prime Minister Vladimir Putin who is reputed to have a close relationship with Gennadiy Timchenko, a co-owner of Gunvor, obtained a majority interest in the oil terminal being built in Ust-Luga in March 2009.
Ust-Luga will become the biggest outlet for refined products in the region, with a spur line connecting the port and crude pipeline to the Kirishi refinery, owned by Surgutneftegaz. Kirishi is more than 100 kilometers to the east of Ust-Luga.
A report released by Moscow investment bank Troika Dialog in December 2008 criticized the Gunvor scheme for Ust-Luga as “politically-driven…It is unclear where Transneft intends to find oil for the new pipeline, given declining oil production and exports and already ample spare capacity in the pipeline system. Moreover, some 450,000 bpd of West Siberian crude will be re-routed to fill the first phase of the Eastern Siberia – Pacific Ocean (ESPO) pipeline. Transneft therefore faces the prospect of paying up to $5 billion for a project that would bring no additional revenues.”
In April 2008 Russia's Ministry of Industry and Energy submitted to the government its negative conclusions regarding the pipeline; however their reservations took second place to the geopolitical motives and the personal interests of the Russian elite.
On June 10, 2009 the construction of the Baltic Pipeline System (BPS-2) got underway. The 1,170 km long pipeline will run from Unecha in the Bryansk Region to the Ust-Luga oil terminal south of St. Petersburg. The first stage with an annual capacity of 30 million tons is scheduled to be completed in September 2012. The second stage will increase capacity to 50 million tons and is due to be ready by the end of 2013.
In February 2007, Semyon Vainshtok, the-then head of Transneft, the operator of the BPS-2 pipeline, issued a statement saying that it was necessary to “protect the country” from the risks involved in transporting oil through the territories of neighboring countries. Earlier that year, a dispute occurred between Russia and Belarus over tariffs for oil transported via the Druzhba pipeline. “We discussed with colleagues that if we had had no risks with neighboring countries, we did not have to spend so much money,” Vainshtok said.
By ending Moscow’s dependence on Belarus as a transit country for Russian oil as well as relying on Ukraine’s oil terminal in Pivdenny on the Black Sea, Russia will deprive the badly starved Belarus treasury of some $1 billion annually in transit fees. At the same time, the Ukrainian Pivdenny oil terminal will most likely stand empty and the Odessa-Brody pipeline, originally built to ship oil from the Caspian to the Plock refinery in Poland will rust in the picturesque Ukrainian countryside if it cannot find a supply of oil.
Other factors also contributed heavily to the hurried pace of preparations of BPS-2, not least of which is the self-interest of some members of the Russian political and commercial elite who lobbied extensively for the project. Gunvor, a company which has often been linked in the media to Russian Prime Minister Vladimir Putin who is reputed to have a close relationship with Gennadiy Timchenko, a co-owner of Gunvor, obtained a majority interest in the oil terminal being built in Ust-Luga in March 2009.
Ust-Luga will become the biggest outlet for refined products in the region, with a spur line connecting the port and crude pipeline to the Kirishi refinery, owned by Surgutneftegaz. Kirishi is more than 100 kilometers to the east of Ust-Luga.
A report released by Moscow investment bank Troika Dialog in December 2008 criticized the Gunvor scheme for Ust-Luga as “politically-driven…It is unclear where Transneft intends to find oil for the new pipeline, given declining oil production and exports and already ample spare capacity in the pipeline system. Moreover, some 450,000 bpd of West Siberian crude will be re-routed to fill the first phase of the Eastern Siberia – Pacific Ocean (ESPO) pipeline. Transneft therefore faces the prospect of paying up to $5 billion for a project that would bring no additional revenues.”
In April 2008 Russia's Ministry of Industry and Energy submitted to the government its negative conclusions regarding the pipeline; however their reservations took second place to the geopolitical motives and the personal interests of the Russian elite.
Thursday, June 18, 2009
Russian Energy Briefs
By Roman Kupchinsky
Chaos and uncertainly seem to have gained the upper hand in the Russian gas business. On Tuesday, June 16, 2009, Gazprom, the Russian state owned gas concern, announced that it would postpone investments into the giant Bovanenkovo gas field in the Yamal Peninsula until the third quarter of 2012, Gazprom’s deputy chief Alexander Ananenkov said Tuesday.
The announcement came despite a pickup in European sales that began in April following a decline in Gazprom's prices."Why would we invest money into something that won't have demand?" Ananenkov said. "It wouldn't make sense."
Sitting north of the Arctic Circle, the frozen Yamal Peninsula fields will be Gazprom's most valuable gas reserves for the next few decades, and Bovanenkovo is the largest of them. It is still scheduled to be the first in the area to come on line.
First Deputy Prime Minister Viktor Zubkov, a member of the Gazprom Board of Directors, described the beginning of the Bovanenkovo field as the start of a "megaproject to develop the gigantic hydrocarbon treasure troves of the Yamal Peninsula" and called the effort "the largest energy project" in Russia's post-Soviet history.
Soon after this announcement, Gazprom's market share in Europe and Turkey plunged from 30 percent last summer to 16 percent in the first quarter of 2009.
Will this decision to postpone investments save the Russian gas giant from further losses? Russia’s conflict in Central Asia over the price of gas agreed upon between Gazprom and Turkmenistan in December 2008 is sure to continue escalating. Will it end soon is anyone’s guess. The Turkmen government is already making deals with Chinese companies to build pipelines to China and the Kremlin is highly upset by this development.
Ukrainian Prime Minister Yulia Tymoshenko, in the meantime, is seeking a $4 billion loan from the EU to pay for Russian gas in order to meet the terms of the contract she signed in January 2009 with Gazprom. According to Mykhaylo Honchar, the former deputy head of the Ukrainian pipeline system, the situation is critical. “Naftohaz has cut off gas deliveries to Kyiv (City) due to non payments and is considering cutting off supplies to other Ukrainian industrial regions.” Does this mean that Naftohaz Ukraine is on the verge of bankruptcy as has been predicted for months?
The European Union is scheduled to discuss energy security at a summit meeting today in Brussels. Earlier, a high-level European Commission fact-finding team met with Naftohaz chief Oleh Dubyna and Gazprom Export director Alexander Medvedev in order to access the current state of affairs between the two companies and seek a solution to Naftohaz’s debt problems.
The Commission team suggested that private EU gas companies could possibly buy excess Russian gas and stockpile it in Ukrainian underground storage facilities. This would provide badly needed cash for Naftohaz and the companies could resell this gas on the spot market during the winter heating season.
Chaos and uncertainly seem to have gained the upper hand in the Russian gas business. On Tuesday, June 16, 2009, Gazprom, the Russian state owned gas concern, announced that it would postpone investments into the giant Bovanenkovo gas field in the Yamal Peninsula until the third quarter of 2012, Gazprom’s deputy chief Alexander Ananenkov said Tuesday.
The announcement came despite a pickup in European sales that began in April following a decline in Gazprom's prices."Why would we invest money into something that won't have demand?" Ananenkov said. "It wouldn't make sense."
Sitting north of the Arctic Circle, the frozen Yamal Peninsula fields will be Gazprom's most valuable gas reserves for the next few decades, and Bovanenkovo is the largest of them. It is still scheduled to be the first in the area to come on line.
First Deputy Prime Minister Viktor Zubkov, a member of the Gazprom Board of Directors, described the beginning of the Bovanenkovo field as the start of a "megaproject to develop the gigantic hydrocarbon treasure troves of the Yamal Peninsula" and called the effort "the largest energy project" in Russia's post-Soviet history.
Soon after this announcement, Gazprom's market share in Europe and Turkey plunged from 30 percent last summer to 16 percent in the first quarter of 2009.
Will this decision to postpone investments save the Russian gas giant from further losses? Russia’s conflict in Central Asia over the price of gas agreed upon between Gazprom and Turkmenistan in December 2008 is sure to continue escalating. Will it end soon is anyone’s guess. The Turkmen government is already making deals with Chinese companies to build pipelines to China and the Kremlin is highly upset by this development.
Ukrainian Prime Minister Yulia Tymoshenko, in the meantime, is seeking a $4 billion loan from the EU to pay for Russian gas in order to meet the terms of the contract she signed in January 2009 with Gazprom. According to Mykhaylo Honchar, the former deputy head of the Ukrainian pipeline system, the situation is critical. “Naftohaz has cut off gas deliveries to Kyiv (City) due to non payments and is considering cutting off supplies to other Ukrainian industrial regions.” Does this mean that Naftohaz Ukraine is on the verge of bankruptcy as has been predicted for months?
The European Union is scheduled to discuss energy security at a summit meeting today in Brussels. Earlier, a high-level European Commission fact-finding team met with Naftohaz chief Oleh Dubyna and Gazprom Export director Alexander Medvedev in order to access the current state of affairs between the two companies and seek a solution to Naftohaz’s debt problems.
The Commission team suggested that private EU gas companies could possibly buy excess Russian gas and stockpile it in Ukrainian underground storage facilities. This would provide badly needed cash for Naftohaz and the companies could resell this gas on the spot market during the winter heating season.
Tuesday, June 16, 2009
Viktor Chernomyrdin Removed as Russian Ambassador to Ukraine
by Roman Kupchinsky
Russia’s controversial envoy to Ukraine, the once head of Gazprom and former Russian Prime Minister, Viktor Chernomyrdin was, at long last, recalled to Moscow by Russian President Dmitry Medvedev and offered a position as a consultant to the president. His successor has not yet been named.
Chernomyrdin’s career spans a few decades working in the Russian gas industry. His was a highly controversial career. The 71-year old Chernomyrdin began working in the Orenburg gas fields as a driller in the rough and tumble Soviet gas industry. He worked his way up within the industry and in 1989 became the head of Gazprom. Earlier he had been appointed by Mikhail Gorbachev to be the U.S.S.R. Minister of Gas at which time it was renamed OAO Gazprom. In 2005 the Russian state became the owner of 51 % of the company. In 2001 newly elected Russian President Vladimir Putin appointed Chernomyrdin to become the Russian ambassador to Ukraine. This appointment revealed Putin’s strategy towards Ukraine – gas was the key in Russian-Ukrainian relations and the only person who could represent Russian policy had to be a senior official familiar with the intricacies of Russian gas politics.
Chernomyrdin, however, did not arrive in Ukraine with a clean slate. Earlier, as a member of the Gore-Chernomyrdin Commission, he was suspected of corruption by the U.S. C.I.A. In a report reputedly sent by the C.I.A. to then-U.S. Vice President Al Gore in 1995, the agency cautioned the Vice-President that Chernomyrdin was linked to a number of criminal schemes. Chernomyrdin's private assets accumulated in his official position, according to the alleged C.I.A. report, ran into the billions of dollars. When the secret report reached Vice President Gore, he refused to accept it. Instead, according to several C.I.A. sources, he sent it back to the agency with the word "bull***t" scrawled across it."
As Russia’s Ambassador to Ukraine, Chernomyrdin played a highly controversial role and there were a number of attempts by Ukrainian politicians to have him declared persona non grata for his comments on Ukrainian domestic affairs. Russian political scientist Stanislav Belkovsky told the Ukrainska Pravda website on June 12, that Chernomyrdin had initially been sent as envoy to influence then-Ukrainian President Leonid Kuchma. Once Kuchma left office and after the Kremlin’s unsuccessful attempt to support Viktor Yanukovych’s presidential bid in 2004, Chernomyrdin’s role changed. He became more involved in gas negotiations between Russia and Ukraine and on March 24, 2009, Chernomyrdin was awarded the highest Russian state decoration - the medal “For Services to the Fatherland” from Medvedev.
In February 2009 Chernomyrdin made a number of highly disparaging remarks about Ukrainian President Viktor Yushchenko in an interview for the media. He was summoned to the Ukrainian Foreign Ministry and warned that this type of behavior was incompatible with his status and if he persisted in doing so he would be expelled. According to various sources in Ukraine, the two most likely candidates to replace Chernomyrdin are Gregory Karasin, the Russian Deputy Minister for Foreign Affairs who is responsible for Russian relations with C.I.S. states and Dmitry Rogozin, the Russian representative to N.A.T.O. Whoever is appointed, the overall consensus is that the candidate will be someone with high level access to Medvedev and Putin and be willing to do whatever it takes to help bring Ukraine into the Russian orbit.
Russia’s controversial envoy to Ukraine, the once head of Gazprom and former Russian Prime Minister, Viktor Chernomyrdin was, at long last, recalled to Moscow by Russian President Dmitry Medvedev and offered a position as a consultant to the president. His successor has not yet been named.
Chernomyrdin’s career spans a few decades working in the Russian gas industry. His was a highly controversial career. The 71-year old Chernomyrdin began working in the Orenburg gas fields as a driller in the rough and tumble Soviet gas industry. He worked his way up within the industry and in 1989 became the head of Gazprom. Earlier he had been appointed by Mikhail Gorbachev to be the U.S.S.R. Minister of Gas at which time it was renamed OAO Gazprom. In 2005 the Russian state became the owner of 51 % of the company. In 2001 newly elected Russian President Vladimir Putin appointed Chernomyrdin to become the Russian ambassador to Ukraine. This appointment revealed Putin’s strategy towards Ukraine – gas was the key in Russian-Ukrainian relations and the only person who could represent Russian policy had to be a senior official familiar with the intricacies of Russian gas politics.
Chernomyrdin, however, did not arrive in Ukraine with a clean slate. Earlier, as a member of the Gore-Chernomyrdin Commission, he was suspected of corruption by the U.S. C.I.A. In a report reputedly sent by the C.I.A. to then-U.S. Vice President Al Gore in 1995, the agency cautioned the Vice-President that Chernomyrdin was linked to a number of criminal schemes. Chernomyrdin's private assets accumulated in his official position, according to the alleged C.I.A. report, ran into the billions of dollars. When the secret report reached Vice President Gore, he refused to accept it. Instead, according to several C.I.A. sources, he sent it back to the agency with the word "bull***t" scrawled across it."
As Russia’s Ambassador to Ukraine, Chernomyrdin played a highly controversial role and there were a number of attempts by Ukrainian politicians to have him declared persona non grata for his comments on Ukrainian domestic affairs. Russian political scientist Stanislav Belkovsky told the Ukrainska Pravda website on June 12, that Chernomyrdin had initially been sent as envoy to influence then-Ukrainian President Leonid Kuchma. Once Kuchma left office and after the Kremlin’s unsuccessful attempt to support Viktor Yanukovych’s presidential bid in 2004, Chernomyrdin’s role changed. He became more involved in gas negotiations between Russia and Ukraine and on March 24, 2009, Chernomyrdin was awarded the highest Russian state decoration - the medal “For Services to the Fatherland” from Medvedev.
In February 2009 Chernomyrdin made a number of highly disparaging remarks about Ukrainian President Viktor Yushchenko in an interview for the media. He was summoned to the Ukrainian Foreign Ministry and warned that this type of behavior was incompatible with his status and if he persisted in doing so he would be expelled. According to various sources in Ukraine, the two most likely candidates to replace Chernomyrdin are Gregory Karasin, the Russian Deputy Minister for Foreign Affairs who is responsible for Russian relations with C.I.S. states and Dmitry Rogozin, the Russian representative to N.A.T.O. Whoever is appointed, the overall consensus is that the candidate will be someone with high level access to Medvedev and Putin and be willing to do whatever it takes to help bring Ukraine into the Russian orbit.
Thursday, June 11, 2009
New Obstacles for the Nord Stream Pipeline
by Roman Kupchinsky
The German Ministry of Defense has once again voiced its opposition to the proposed route of Gazprom’s major gas pipeline project- the Nord Stream pipeline. The Bundeswehr reservations were recently presented to the German parliament’s committee on national defense, in which the Defense Ministry stated that the route was too close to the island of Rugen where large scale German naval maneuvers are held.
The news of this renewed opposition to Nord Stream came on the same day that German Foreign Minister Frank-Walter Steinmeyer arrived in Moscow for talks with Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.
In the past Steinmeyer had been a firm supporter of Nord Stream. According to Jamestown senior fellow Vlad Socor, “The Russo-German pipeline is not a European project in any sense. Interested parties ranging from the Kremlin and Gazprom to German business groups and elements in the German government portray this project as a European one. German Minister of Foreign Affairs Frank-Walter Steinmeyer used this argument when visiting Estonia.”
However this month, Steinmeyer is challenging German Chancellor Angela Merkel in the upcoming election and is reluctant to whitewash Nord Stream which has become a controversial issue for many German voters. As the candidate from the SPD, once headed by former chancellor Gerhard Schroeder, a key executive in the Nord Stream consortium, Steinmeyer is now caught in a vicious political battle. The Bundeswehr report tempered his support of Nord Stream to the great displeasure of the Russian leadership. Steinmeyer’s position is also weakened by the fact that the head of the Nord Stream Consortium office in Switzerland is Mathias Warnig, a former intelligence officer for the East German security service, the hated Stasi.
Responding to the German military report, the deputy CEO of Gazprom, Alexander Medvedev stated: “Europe must decide how to resolve this situation. If Europe does not want our gas, we will find the means to sell it elsewhere.”
Medvedev, in what might be seen as a threat to the EU, once again raised the specter of Gazprom diverting gas from European markets and selling it as LNG to the U.S. and Canadian markets. Bloomberg quoted the Gazprom official on June 10, 2009: “Gazprom is seeking as much as 10 percent of the U.S. gas market by 2020, after two Arctic liquefied natural gas projects start producing, deputy CEO Alexander Medvedev told reporters Tuesday.”
"The volume which we have right now is just 0.5 percent of natural gas consumption of the United States, but with gas out of Shtokman and maybe Yamal LNG our share in the U.S. and Canadian markets would go up between 5 and 10 percent," Medvedev said.
Many U.S. energy analysts view this as an empty threat. LNG is still a tiny source of gas supplies to the U.S. and will remain such for years to come. Besides, Russian LNG will face fierce competition from Qatar and Nigeria, not to mention Trinidad and Tabago, the main supplier of LNG to the U.S.
Is the Nord Stream pipeline doomed? Much will depend on the upcoming German elections and on the continuing opposition to Nord Stream from Poland and the Baltic states. But the end game will take place in the near future and a showdown between Gazprom and Germany is in the works.
The German Ministry of Defense has once again voiced its opposition to the proposed route of Gazprom’s major gas pipeline project- the Nord Stream pipeline. The Bundeswehr reservations were recently presented to the German parliament’s committee on national defense, in which the Defense Ministry stated that the route was too close to the island of Rugen where large scale German naval maneuvers are held.
The news of this renewed opposition to Nord Stream came on the same day that German Foreign Minister Frank-Walter Steinmeyer arrived in Moscow for talks with Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.
In the past Steinmeyer had been a firm supporter of Nord Stream. According to Jamestown senior fellow Vlad Socor, “The Russo-German pipeline is not a European project in any sense. Interested parties ranging from the Kremlin and Gazprom to German business groups and elements in the German government portray this project as a European one. German Minister of Foreign Affairs Frank-Walter Steinmeyer used this argument when visiting Estonia.”
However this month, Steinmeyer is challenging German Chancellor Angela Merkel in the upcoming election and is reluctant to whitewash Nord Stream which has become a controversial issue for many German voters. As the candidate from the SPD, once headed by former chancellor Gerhard Schroeder, a key executive in the Nord Stream consortium, Steinmeyer is now caught in a vicious political battle. The Bundeswehr report tempered his support of Nord Stream to the great displeasure of the Russian leadership. Steinmeyer’s position is also weakened by the fact that the head of the Nord Stream Consortium office in Switzerland is Mathias Warnig, a former intelligence officer for the East German security service, the hated Stasi.
Responding to the German military report, the deputy CEO of Gazprom, Alexander Medvedev stated: “Europe must decide how to resolve this situation. If Europe does not want our gas, we will find the means to sell it elsewhere.”
Medvedev, in what might be seen as a threat to the EU, once again raised the specter of Gazprom diverting gas from European markets and selling it as LNG to the U.S. and Canadian markets. Bloomberg quoted the Gazprom official on June 10, 2009: “Gazprom is seeking as much as 10 percent of the U.S. gas market by 2020, after two Arctic liquefied natural gas projects start producing, deputy CEO Alexander Medvedev told reporters Tuesday.”
"The volume which we have right now is just 0.5 percent of natural gas consumption of the United States, but with gas out of Shtokman and maybe Yamal LNG our share in the U.S. and Canadian markets would go up between 5 and 10 percent," Medvedev said.
Many U.S. energy analysts view this as an empty threat. LNG is still a tiny source of gas supplies to the U.S. and will remain such for years to come. Besides, Russian LNG will face fierce competition from Qatar and Nigeria, not to mention Trinidad and Tabago, the main supplier of LNG to the U.S.
Is the Nord Stream pipeline doomed? Much will depend on the upcoming German elections and on the continuing opposition to Nord Stream from Poland and the Baltic states. But the end game will take place in the near future and a showdown between Gazprom and Germany is in the works.
Wednesday, June 10, 2009
Russia's Economic Pressure on Belarus Escalates to Trade War
by Alexander Melikishvili
On Friday, June 5, in a three-hour interview given to the chief editors of the mainstream Russian news publications - the newspapers Izvestia and Zavtra and journals Rossiiskaya Federatsiya Segodnya (Russian Federation Today) and Soyuznoe Gosudarstvo (Union State) - the President of Belarus Alexander Lukashenko presented the list of grievances and focused on the sources of tensions in the bilateral relations with Russia. In a bold move, President Lukashenko spoke openly about the fact that Russia linked the postponement of the $500 million loan to Belarus with Minsk's continued refusal to recognize the independence of Georgia's breakaway regions of South Ossetia and Abkhazia. In particular, when asked when Belarus plans to recognize the independence of Georgia's separatist territories and whether this was a painful topic in the relationship between Belarus and Russia, President Lukashenko responded:
Moscow's bullying appears to have produced a rare moment of opportunity for Minsk's rapprochement with the West. At the meeting on Monday with the Deputy Chairman of the House of Representatives of the Belarusian National Assembly, Valery Ivanow, the special rapporteur on Belarus for the Parliamentary Assembly of the Council of Europe (P.A.C.E.), Andrea Rigoni stated that Belarus was invited to participate in the P.A.C.E. session on June 23, which will include the discussion of the question of restoring special guest status for Belarus. In addition, the International Monetary Fund (I.M.F.) announced today that the loan to Belarus has been increased by $1 billion to $3.5 billion, which must still be approved by the executive board of the I.M.F. It remains to be seen whether increased Western attention and efforts to engage Minsk will indeed result in the multi-vector foreign policy by President Lukashenko. It is clear though that the ultimate litmus test of whether Minsk will bow to Moscow's pressure will be the issue of the recognition of Georgia's breakaway provinces.
On Friday, June 5, in a three-hour interview given to the chief editors of the mainstream Russian news publications - the newspapers Izvestia and Zavtra and journals Rossiiskaya Federatsiya Segodnya (Russian Federation Today) and Soyuznoe Gosudarstvo (Union State) - the President of Belarus Alexander Lukashenko presented the list of grievances and focused on the sources of tensions in the bilateral relations with Russia. In a bold move, President Lukashenko spoke openly about the fact that Russia linked the postponement of the $500 million loan to Belarus with Minsk's continued refusal to recognize the independence of Georgia's breakaway regions of South Ossetia and Abkhazia. In particular, when asked when Belarus plans to recognize the independence of Georgia's separatist territories and whether this was a painful topic in the relationship between Belarus and Russia, President Lukashenko responded:
"You say that this is a painful topic and question. But to me all Russian leaders tell me: 'This does not really matter. Well, if you recognize - that's good, but if you don't - that's fine too.' First of all, of course, for Russia this is not even an issue. Whether we recognize them or not, say, now, tomorrow or the day after tomorrow. Compared to what is happening around Belarus - that's not that important. But, yes, we do understand that this recognition would not be redundant for Russia. However, I often say that we have our own history of relationships with those republics, and in particular with Abkhazia. With Ossetia, of course, we almost had no such relations, even though we met with people and so on. This is my position...By the way, when we met within the framework of the C.I.S. [Commonwealth of Independent States] everyone told Medvedev: 'No, we have our own problems.' And I was the last one to speak and I said: 'If you do not want to recognize, do not look for motivation under the table. You simply do not want to do it, you are afraid and so forth. And why should not we express support? This is our only ally, we want a lot from it and so forth.' Ask Medvedev, ask him this question about my position. And I told the Russian leadership how we intend to resolve this problem. They had no more questions. But nonetheless...We reached the point that they arrive and say: if [you deliver on] Ossetia and Abkhazia - this means that there will be $500 million. You know, we do not want to 'sell' any issues and positions. We never had that in our history and we never will. We will resolve this issue by ourselves. More so because we met with the leader of Abkhazia Bagapsh, and after that we met with Kokoity. They do not have any questions for us. They understand our position."At times equally cryptic and combative, President Lukashenko spoke with palpable frustration and provided a number of responses that will surely fuel speculations about the continuing rift in relations between Minsk and Moscow. On the possibility of Belarus becoming another subject of the Russian Federation Lukashenko's remarks actually contained a warning and a veiled threat:
"We, as leaders, must calculate the consequences of such a move. Even I, let's imagine that I make such a decision, and what about tomorrow? Do we have shortage of conflicts in the Caucasus? Today Russia is being 'bombed' for the fact that it 'imperially,' with armed force squashed and subdued...And what about here? From this point of view the President of Russia says: 'Yes, you are absolutely right...This will be absolutely harmful for Russia.' On the other hand - we have our own 'morons,' there are a few of them, even if they constitute two, or, say, three percent, but they are the most active, the most ambitious, the most 'moronic' in any society. They are ready to unleash 'national-liberation war.' They need a pretext. At present everyone makes fun of this. And you think that they will not have anything to fight with? Tomorrow they can receive from Ukraine, the Baltics, mainly from there, from Poland, where they maintain channels. The weapons will surface instantly, explosions, the situation will be destabilized and many in the society will think: listen, they fight for independence, for what is sacred. Here, in Belarus, our people are not dumb, they think exactly the same as the Russians: 'our land, we will never give up, they will tear their shirts and go.' They are similar to Russians in that. Do you want to create one more Chechnya here? I don't."Meanwhile the ever inventive head of the Russian Federal Consumer Protection Service, Gennadiy Onishchenko (one of the chief architects of the economic embargo imposed on Georgia) announced a comprehensive ban on imports of Belarusian milk products to Russia, which will surely hit Minsk hard economically considering that Belarus exports 40 percent of the milk it produces and 95 percent of it (worth $1 billion) goes to Russia annually. Even though the Russian government went to a considerable extent to deny any political pretext and the Foreign Minister Sergei Lavrov rejected the notion of tacit economic sanctions against Belarus and insisted that the ban stemmed from the concern for the health of Russian consumers, the closer examination of imposed measures clearly indicates otherwise. According to The Moscow Times, the ban on Belarusian milk products is formally predicated on the technicality - the failure by the Belarusian manufacturers to comply with the new regulations for the dairy industry products that went into effect in December, which include requirements to provide additional information on packages. However, the dairy industries of other neighboring countries, including Lithuania, Latvia and Ukraine, also, by and large, do not meet the new regulations and yet their products have not been affected by the ban thus far.
Moscow's bullying appears to have produced a rare moment of opportunity for Minsk's rapprochement with the West. At the meeting on Monday with the Deputy Chairman of the House of Representatives of the Belarusian National Assembly, Valery Ivanow, the special rapporteur on Belarus for the Parliamentary Assembly of the Council of Europe (P.A.C.E.), Andrea Rigoni stated that Belarus was invited to participate in the P.A.C.E. session on June 23, which will include the discussion of the question of restoring special guest status for Belarus. In addition, the International Monetary Fund (I.M.F.) announced today that the loan to Belarus has been increased by $1 billion to $3.5 billion, which must still be approved by the executive board of the I.M.F. It remains to be seen whether increased Western attention and efforts to engage Minsk will indeed result in the multi-vector foreign policy by President Lukashenko. It is clear though that the ultimate litmus test of whether Minsk will bow to Moscow's pressure will be the issue of the recognition of Georgia's breakaway provinces.
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