Sunday, January 11, 2009

The gas deal with Russia: In extremity: forget blame.

The agreement between Russia and Ukraine on gas prices reveals how powerful Russia's position is over Europe: The Europeans dependent on this gas supply were, in this severe winter, "unnerved as lights blinked out and homes went cold in some of the new member states of the union in Eastern Europe." As this article reports, “the situation has gone so far that they stopped being interested in who is to blame,” ... “Now we’re talking about preserving trust in a large supplier and a large transit country.” Russia, despite its own problems of population decline, enjoys a strategic position: supplier of vital resources (oil, gas) for Europe. And soon it will be a vital source of fossil fuel resources for the populations of the Far East, for China's growth rate is still one of the highest in the world. Pipelines west, pipelines east: Russia at the center, along with client states in Central Asia like Kazakhstan and Turkmenistan, whose natural resources are similarly vital to their neighbors.
Here are two articles from the New York Times today that reveal how powerful are the conditions of exigency: people in distress make deals, sometimes very costly ones. So what are the prospects over the long haul?
NYTimes January 11, 2009
Ukraine and Russia Sign Deal Over Gas

MOSCOW — Russia and Ukraine took a major step toward resolving a dispute over natural gas that has left large parts of Europe without heat or fuel for days, signing an agreement with the European Union to establish independent monitors of pipelines, officials said early Sunday.

The agreement was a precondition set by Russian energy officials to turn on the gas flow again. Russia shut off the valves on Thursday after an extended dispute with Ukraine over pricing and accusations of stealing gas from the export pipelines.

It may be days before relief comes to European countries down the line from Ukraine, especially Poland and Bulgaria, which have suffered greatly without heating fuel in the bitter winter weather. Even if Russia immediately turns on the flow, it would take about three days to repressurize the European natural gas pipeline system and restore full service, experts said. And the underlying price dispute has still not been resolved.

Still, the agreement was the first major progress in days of tough negotiations.

The breakthrough started on Saturday, when the Czech prime minister, Mirek Topolanek, whose country holds the rotating presidency of the European Union, met for hours of talks with Prime Minister Vladimir V. Putin of Russia outside Moscow and secured Russia’s agreement. Mr. Topolanek then flew to Kiev, Ukraine, late that night to meet with Ukrainian leaders.

Early Sunday, Prime Minister Yulia V. Tymoshenko of Ukraine emerged from talks with Mr. Topolanek to say her country had signed the protocol. On the Russian side, Ilya Y. Kochevrin, executive director of the export arm of Russia’s natural gas company, Gazprom, confirmed in a telephone interview that an agreement had been reached.

Mr. Topolanek was quoted by Agence France-Presse as saying that now, “Nothing prevents the deployment of monitoring teams and renewal of gas transit.”

Mr. Topolanek and other European officials, clearly unnerved as lights blinked out and homes went cold in some of the new member states of the union in Eastern Europe, had been pressing hard for a settlement in recent days.

In his opening remarks to Mr. Putin, Mr. Topolanek said his colleagues in Europe were interested in restoring gas flow rather than placing blame for the shut-off. The matter is deeply entangled in former Soviet politics and Russia’s assertions of a new and dominant role in the region.

“Indeed, the situation has gone so far that they stopped being interested in who is to blame,” Mr. Topolanek said, according to a Russian government transcript of the meeting. “Now we’re talking about preserving trust in a large supplier and a large transit country.”

Russian authorities maintain that Ukraine began siphoning from pipelines some of the Russian natural gas intended for export to Europe and has been using it to meet internal demand since Russia halted supplies to Ukraine on Jan. 1 because of a dispute over pricing.

Angered that Ukraine was circumventing its fuel embargo and and accusing its leaders of interrupting exports to paying customers farther west, Moscow halted all shipments to Europe via Ukrainian territory. That was unfortunate for European consumers, as about one-fifth of all the natural gas burned in Europe passes through the pipelines. Ukraine denied that it had withdrawn gas from the lines.

Ukraine rejected an earlier version of the monitoring protocol, saying the structure was too cumbersome and would delay the deployment of monitors. It was unclear early Sunday what specific changes had been made, if any, to meet those concerns.

Under the agreement finalized Sunday, Ukraine and Russia would accept observers on their territory, said Mr. Kochevrin, the export director for Gazprom.

Copyright 2009 The New York Times Company

NYTimes January 11, 2009
A Crossroad for Russia and America

MOSCOW — In August of last year, a new Russia presented itself to the world. From the battlefield of Georgia, the message said: We are no longer seeking the good opinion of the West. The new taste for confrontation was seen by many as a byproduct of oil and gas wealth, which had given Russia’s leaders the confidence to risk international isolation. In the title of a book he published in April, the scholar Marshall Goldman offered a one-word explanation: “Petrostate.”

That thesis may have a short shelf life. Russian leaders, no longer hoping to make the ruble an international reserve currency, now face a confluence of disasters: The price of a barrel of oil has slid below $40, shares of Gazprom fell 76 percent in a year and more than a quarter of Russia’s cash reserves have been spent shoring up the ruble.

But does that mean we can expect a thaw between Russia and America?

The question arises at a moment of high tension. The deadlock between Russia and Ukraine on gas prices has drawn in all of Europe; violence in Georgia could flare up again. Barack Obama’s Russia policymakers are taking office under the pressure of unfolding events.

Henry Kissinger, who was in Moscow last month, is offering the hopeful view that the global financial crash could lead to “an age of compatible interests.” But others see the crisis pushing Russia in the opposite direction. So there are two paths:

SCENARIO 1: COOPERATION In the global financial collapse, as Alexander Rahr of Germany’s Council on Foreign Relations put it: “We have all become weaker. We have all become poorer.” So, pressed by domestic concerns, both sides pare back their foreign ambitions. Washington slows its timetable on NATO expansion and missile defense; Russia defers the dream of recapturing the Soviet “privileged sphere of influence.” Leaders in Moscow present this to the public as a victory.

The logic here is straightforward: A cash-strapped Russia would need Western money and technology to develop its energy fields. State monopolies would seek foreign partners, and bare-knuckled power grabs like Russia’s past moves against BP and Shell Oil would look counterproductive. The “battle of ideas” within the Kremlin, as Igor Y. Yurgens, an adviser to President Dmitri A. Medvedev, describes it, would turn away from “isolation, seclusion, imperial instincts” and toward long-term partnership with the West.

“If we take care of the crisis by isolating ourselves, if we don’t learn the lessons from what is already being done, then the fate of Russia can be the repetition of the fate of the U.S.S.R.,” Mr. Yurgens said. “I don’t think we are stupid enough.”

SCENARIO 2: RETRENCHMENT AND NATIONALISM “Less resources means more selfish behavior,” as Sergei A. Markov, director of the Institute of Political Studies in Moscow, has said. In this case, Russia finds itself facing internal dissent and the threat of regional separatism, and lacking large piles of oil money to disburse in hopes of keeping control. Forced to fight for their own survival, political leaders tailor their policies to domestic public opinion. They focus on an external enemy — the United States, which leaders have already blamed for Russia’s financial crisis, and with whom Russia is already deeply irritated over the prospect of American military influence reaching Ukraine.

By this logic, it would be absurd to cede ground to the West now, after the long-awaited taste of satisfaction that Russians got in Georgia. Many Russians see the August war as a restoration of Russia’s rightful place in world events — a product not of oil wealth, but of the Russian society’s recovery from the Soviet collapse.

“Russia has returned, period,” said Vyacheslav A. Nikonov, president of the Kremlin-aligned Polity Foundation. “That will not change. It will not get back under the table.”

WHICH scenario is more likely? To begin, it is clear that Russian authorities are preparing to defend their political power. After presenting himself to the world as a liberal modernizer, President Medvedev has prioritized one major reform — lengthening the presidential term to six years. Last week, he signed a law eliminating jury trials for “crimes against the state,” and pending legislation would expand the definition of treason.

The authorities are nervous, it seems. Mr. Medvedev, in his State of the Nation speech, sent a barbed warning to “those who seek to provoke tension in the political situation.” And last month, riot police were sent 6,000 miles from Moscow to Vladivostok, where hundreds of people were protesting automobile tariffs, The Associated Press reported. “I just think they don’t trust what they can’t control,” said Clifford Kupchan of the Eurasia Group, a global risk-consulting firm based in New York. “Their instinctive reflex is to clamp when faced with uncertainty.”

The first scenario, in which economic considerations dictate a more subdued foreign policy, requires conditions that may not exist. In the government, economic liberals might challenge hardliners. The constituencies who might back them up are ones that fell silent during the boom.

“People in epaulets who feel they are middle class, people in bureaucracy who feel they are middle class, they could be part of this coalition,” Mr. Yurgens said. “Whether this coalition will be strong enough, I have no way of knowing.”

These days, Stephen Sestanovich, a senior fellow at the Council on Foreign Relations, sees signs of “policy confusion” as Moscow’s leaders adjust to Russia’s sudden economic slide. Moscow has allowed the Georgia crisis to subside, but has escalated tensions over gas with Ukraine.

The choice the elites face, Mr. Sestanovich said, is whether to keep talking in ways that make them look like “angry risk-takers and disturbers.”

“Is that still their real view of themselves, and of the appropriate policy in a time of crisis?” he said. “It may be. But I’m not sure, and I don’t think they are.”

The United States has real interests in a cooperative Russia; it wants help in curbing Iran’s nuclear ambitions, and NATO needs more supply routes into Afghanistan. And with Mr. Obama’s arrival in the White House, there seems room for compromise on two big Russian concerns: possible NATO expansion to Ukraine and Georgia, and the plan to station missile-defense facilities in Poland and the Czech Republic.

But in the deep freeze of a Moscow January, the gains of August are still thrilling. When Mr. Putin went on television last week to cut gas shipments to Ukraine — retaliation, he said, for thefts from Russia’s pipeline — who could miss the glint of satisfaction at another tough-guy stance? Foreign policy emits an energy that goes far beyond mere economics, and the new year will call for all the resources Moscow can muster. To a Russia intent on reclaiming great-power status, there may be something elemental about resisting America.

“It’s just the way things are,” said Mr. Nikonov, whose grandfather, Vyacheslav Molotov, was Stalin’s foreign minister. Searching his memory for periods of warmth between the two countries, Mr. Nikonov came up with two: March and April of 1917, and August through December of 1991.

Copyright 2009 The New York Times Company

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