Eurasia Daily Monitor — The Jamestown Foundation
Monday, March 13, 2006 — Volume 3, Issue 49
IN THIS ISSUE:
*Kremlin defends its place among the G-8
*Putin makes “historic” visit to Algeria
*Aliyev tours Japan, seeking investors
MOSCOW COUNTS THE PROS AND CONS OF “SELECTIVE COOPERATION”
Until very recently the Kremlin dismissed the possibility that
Washington might seriously reevaluate the format and style of its
relations with Russia. At his extended press conference on January 31,
Russian President Vladimir Putin ridiculed the “adversaries” who
expressed doubt about Russia’s place in the G-8 because, “They are stuck
in the previous century.” His confidence was based on a unique insight:
“I know the mood of the G-8 leaders.” Foreign Minister Sergei Lavrov,
returning from an official visit to Washington last week, has to break
some very unpleasant news to his boss: The prospects now look rather
different from the picture so aptly described by Putin as: “The dog
barks, the caravan rolls on.”
During Lavrov’s visit, the Council on Foreign Relations Task Force
chaired by John Edwards and Jack Kemp released its report, “Russia’s
Wrong Direction: What the U.S. Can and Should Do.” The report received
extensive comment in the Russian media (Kommersant, March 9; Ekho
Moskvy, March 12). Some newspapers added critical opinions of other
experts (Izvestiya, March 9) and some noted that the Council on Foreign
Relations was not exactly the think tank closest to the White House and
that Ambassador Stephen Sestanovich, who directed the work, was a key
figure in the Clinton administration (Vremya novostei, March 7), but
some reports emphasized the clear link between the conclusions about
Moscow advancing in the wrong direction and the criticism of Russia in
the U.S. State Department’s report on human rights (Nezavisimaya gazeta,
March 10; Gazeta.ru, March 9). Meaningful parallels were drawn
with Winston Churchill’s famous Fulton speech that marked the onset of
the Cold War exactly 60 years ago (Ezhednevny zhurnal, March 9).
It might appear ironic, but the main thesis of the Task Force report —
that the progressive curtailing of democracy in Russia leaves space only
for limited and selective cooperation with the United States — is
entirely compatible with the recent course of Russian foreign policy.
Indeed, if Moscow wholeheartedly embraces Uzbekistan as a strategic ally
after the Karimov regime brutally suppressed a popular uprising in
Andijan and expelled the U.S. Karshi-Khanabad airbase, it follows that
the Russia-U.S. “strategic partnership” is somewhat limited. The
divergence between the Kremlin and the White House is now most apparent
in the Middle East. Lavrov managed to provide U.S. Secretary of State
Condoleezza Rice with sufficient explanations about the motives for
inviting the Palestinian Hamas delegation to Moscow and the content of
the rather unproductive talks, but then he rushed to join
Putin in Algeria where a .5 billion deal on selling Russian arms was
finalized (Kommersant, March 11). The Edwards-Kemp Report singled out
Iran as the most promising area for in-depth cooperation, but the start
of discussions in the UN Security Council on its nuclear program has
shown that Russia is resolutely against any sanctions, so this promise
quite probably will also prove a disappointment (Newsru.com, March 10).
Emphasizing the readiness to challenge the opinions of Western partners,
the Russian Foreign Ministry resolutely rejected the “double standards”
in the latest State Department report on human rights (Lenta.ru, March
10). Lavrov even sought to pre-empt the attack from Washington with an
article that outlined the fundamental differences in foreign policy
philosophy, focusing on projects for advancing democracy and freedom in
the world that were unacceptable for Moscow (Moskovskie novosti, March
3). These differences became even sharper in the programmatic speech of
Vladislav Surkov, deputy head of the presidential administration and the
chief “ideologist” in the Kremlin, who stressed the crucial importance
of Russia’s “sovereignty,” understood as its ability to manage its own
affairs and thus “politically synonymous with competitiveness”
(Vedomosti, March 6).
Two things spoil the prospects for “selective cooperation” for Moscow.
The first one is the fact that the privilege to chair the G-8 in 2006
was granted to Russia as a confirmation of its role of “strategic
partner,” so the devaluation of this role logically leads to shrinking
of this privilege. Moscow attaches enormous importance to organizing a
perfect summit in St. Petersburg so even jokes by some British
columnists about European guests demonstratively leaving the banquet
table before the dessert is served can hit a raw nerve (Financial Times,
March 10). The CFR Task Force, however, proposes something more serious:
The revival of the G-7 format, which might be complemented by a wider
group where Brazil, China, and India together with Russia could be full
members (Gazeta.ru, March 9). Such a prospect would signify a
devastating blow to Putin’s ambitions, particularly if U.S. President
George W. Bush would indeed find a good reason to stay home in July, as
an increasing number of experts advise.
The second problem with stepping back from partnership to cooperation is
that the Russian political elite that appears so tightly united around
Putin is in fact pursuing a variety of strategies of personal
integration with the West (Kommersant, February 17). Surkov argued that
the “off-shore aristocracy” could be transformed into a real nationally
oriented elite, but his audience had plenty of reasons to worry for the
safety of their private connections with Europe, as Russia retreats into
a progressively more “selective” cooperation that increasingly resembles
self-isolation (Nezavisimaya gazeta, March 7).
One soothing message for the “patriotic” but intimately Westernized
bureaucrats was Anatol Lieven’s article entitled “Do not condemn Putin
out of hand” (Financial Times, February 28) reprinted in the pro-Kremlin
tabloid Komsomolskaya pravda (March 2). His insistence on giving the
benefit of the doubt to Putin’s courtiers who “will move freely between
the state and market sectors, and in the process will be handsomely
rewarded” earned scornful condemnation from liberal Russian commentators
(Grani.ru, March 6). What makes this kind of argument more convincing is
that it is always so much easier not to take demanding steps that would
require consistent follow-up, presuming that the ability of the West to
influence Moscow is quite limited. It is in fact far greater than even
the authors of the Task Force report admit, and Russia’s dependency upon
the EU energy market provides more
instruments for a pro-active policy. It is not too late for President
Bush to take a new look in Putin’s eyes and re-evaluate the Russian
leader’s intentions.
–Pavel K. Baev
RUSSIA POISED FOR BOLD INROADS INTO WEST’S ENERGY SUPPLY SYSTEMS
On March 10-11, Russian President Vladimir Putin paid what he
characterized as an “historic” visit to Algeria. The trip was the first
by a Kremlin leader since the Soviet heads of state and government,
Nikolai Podgorny and Alexei Kosygin, visited in 1969 and 1971,
respectively, during the heyday of the Moscow-Algiers strategic
partnership. Putin portrayed his visit as a resumption of that
partnership.
This time around, the Kremlin puts energy at the center of the
partnership as it seeks to undercut Western interests in that country.
Algeria is one of the main non-Russian suppliers of oil and gas to
Western Europe, and — thanks to liquified gas — a potential supplier
to North America as well. West European policymakers often cite Algeria
as one of several supply sources that could to some extent offset
Western dependence on Russia.
Putin, accompanied by Gazprom chairman Alexei Miller and other top
energy sector executives, offered Russian participation in oil and gas
projects in Algeria and on Algeria’s export markets. Russian and
Algerian officials discussed a draft framework agreement whereby Russian
companies would participate in international tenders for field
exploration and development, modernization of Algeria’s oil and gas
transport systems, and construction of additional transport capacities.
Further under these proposals, Algerian and Russian companies would
coordinate their positions on international gas markets, including
possible joint marketing. Algeria’s main export markets for gas and oil
are France, Spain, Italy, and Turkey.
Russia’s Gazprom and Rosneft state companies, Lukoil, and Stroytransgaz
(a state company for gas pipeline construction) are the main entities
slated to participate in such projects from the Russian side. Algeria’s
state company Sonatrak plans to sign a framework agreement in April in
Moscow on cooperation with Russian companies.
Russia lags behind Algeria and France with regard to liquid gas.
Consequently, Moscow is keen to cooperate in this field with a view to
entering international LNG (liquified natural gas) markets. According to
Russian officials during this visit, Gazprom’s first-ever delivery of
LNG to the United States in September 2005 was based on a swap deal with
Gaz de France and Sonatrak. Algeria is ranked fourth worldwide for gas
exports and seventh worldwide for gas reserves (although this ranking
should not be taken literally as long as gas reserves in Turkmenistan,
other Central Asian countries, and around the Persian Gulf are only
incompletely estimated).
In a parallel set of proposals, Putin’s delegation proposed that Russia
participate in the modernization of Algeria’s armed forces. The Russian
side offered air defense systems, combat planes, infantry weapons and
field ordnance, and naval craft to Algeria. These proposals are
reminiscent of the Soviet arms offers to Arab countries including
Algeria (as referenced by Putin) in that they seek to create
multidimensional dependency by the recipient country on Russia, with the
difference this time around that any arms deal with Algeria would likely
be on a commercial basis (Interfax, March 10-11)
On March 10, Germany’s E.ON Ruhrgas announced that it is holding talks
with Gazprom on identifying assets of the Germany company that would be
turned over to Gazprom in accordance with agreements signed last year.
E.ON Ruhrgas and BASF’s subsidiary Wintershall are the two German major
gas import and distribution companies that signed agreements in April
and September 2005 with Gazprom on German participation in gas field
development in Siberia, construction of the Baltic seabed pipeline from
Russia to Germany, and takeover of assets in Germany’s internal gas
distribution networks by Gazprom. Such takeovers by Gazprom are slated
to extend deeper into European Union territory, as those German
companies own stakes in the gas transport and distribution companies of
several other EU countries.
At present, Gazprom holds a 50% stake plus one share, and Wintershall
50% minus one share in Siberia’s Yuzhno-Russkoye gas field, the source
of the pipeline planned to run toward the Baltic Sea and further on the
seabed to Germany. For its part, Wintershall has ceded some of its
internal German gas distribution systems to Gazprom via the joint
company Wingas, consisting of 50% plus one share for Wintershall and 50%
minus one share for Gazprom. The Russian monopoly has given E.ON Ruhrgas
the option to acquire half of Wintershall’s stake in Yuzhno-Russkoye, in
which case the two German companies would each provide 25% of the total
capital investment. For its part, E.ON Ruhrgas must turn over to Gazprom
some internal German gas distribution systems via a parity joint company
along the same lines as the Wintershall-Gazprom company (Interfax, March
10).
–Vladimir Socor
AZERBAIJAN SIGNALS EASTWARD TILT WITH PRESIDENTIAL VISIT TO JAPAN
President Ilham Aliyev’s official visit to Japan on March 8 marks
another milestone in Azerbaijan’s slow re-orientation toward Asia.
During the visit, he met with Japanese Emperor Akihito, Prime Minister
Junichiro Koizumi, Foreign Minister Taro Aso, and the head of the
Japanese International Development Agency (ANS TV, March 8). Aliyev and
Koizumi signed several agreements to expand bilateral cooperation.
Aliyev delivered a keynote speech at the Japanese Institute for
International Relations and attended a business forum that hosted more
than 150 businessmen from both countries (Echo, March 8). Hosting
business forums in conjunction with President Aliyev’s visits abroad has
become a regular event, which shows his strong commitment to developing
economic ties with foreign countries and attracting new investment to
Azerbaijan.
The business agenda for Aliyev’s visit is particularly noteworthy. It
included presidential meetings with the heads of several large Japanese
companies, including Itochu and Inpex, as well as with members of the
Japanese-Azerbaijani Parliamentary Friendship Society.
The growing Japanese demand for energy makes Tokyo a reliable and eager
partner of Azerbaijan, which is increasing its oil production
year-by-year. At the same time, the development of infrastructure in
Azerbaijan requires technical assistance from abroad. During the visit,
Azerbaijan and Japan signed an agreement on the provision of technical
assistance to Azerbaijan by the Japanese government (Trend, March 7).
One of the key goals of President Aliyev’s visit was to draw more
Japanese investments into the Azerbaijani economy, particularly sectors
other than oil. Speaking at the Business Forum in Tokyo, Aliyev said,
“We have a very good investment climate. Azerbaijan highly values direct
foreign investments. We have received a great deal of assistance from
Japan in the past. But now, the time for real, active cooperation has
come” (Xalq Qazeti, March 12). During his meeting with President Aliyev,
Prime Minister Koizumi also noted the friendly nature of bilateral
relations and stressed that Japan was looking for reliable a partner in
the region (Sherg, March 11).
Japanese businesses have already invested more than 4 million in
Azerbaijan, primarily in the oil sector. Mitsui and Mitsubishi provided
Azerbaijan with loans up to 4 million for construction of the
“Severnaya” power generation plant in the vicinity of Azerbaijan’s
capital, Baku. The plant came online in early 2003. Altogether, Japan’s
overall assistance to Azerbaijan through various organizations has
reached 4 million, including million in grants (Turan, March 6).
Japan has been particularly keen on funding the construction and repair
of new public schools in Azerbaijan and providing educational
opportunities for the country’s youth. For his efforts to promote
education in Azerbaijan, former Japanese ambassador to Azerbaijan
Toshiyuki Fujiwara was awarded with the highest state prize ever given
to a foreign ambassador, the Order of Honor, and ANS Media Group named
him “Man of the Year.” Azerbaijan has opened a department of Japanese
language at Baku State University, where more than 40 students currently
study. Aliyev also hopes to draw the Japanese government’s attention to
the plight of internally displaced persons in Azerbaijan, a population
that receives less and less humanitarian assistance each year. Japan is
traditionally one of the largest humanitarian donors around the world.
With Western countries and organizations pressing Aliyev regarding
democratization, the Azerbaijani president feels much more comfortable
with the less-demanding Eastern partners. Thus, the development of
relations with the Middle Eastern countries as well as with China,
Japan, and Pakistan are seen as priorities. Although Azerbaijani foreign
policy officials continue to claim that the country is pursuing a
balanced foreign policy, a strong bias toward Asia is evident.
Azerbaijan also hopes that Japan will support its case regarding the
ongoing Karabakh conflict with Armenia. Baku is prepared to support
Japan’s nomination to the UN Security Council in exchange for help with
Karabakh. Lider TV reported on March 8 that President Aliyev had devoted
much of his speech at the Japanese Institute for International Relations
to the Karabakh conflict. Koizumi confirmed Japan’s recognition of
Azerbaijan’s territorial integrity during his private talks with Aliyev
(Sherg, March 11).
Ties between Japan and Azerbaijan are increasing markedly. First
established in 1992, bilateral relations skyrocketed following former
president Heydar Aliyev’s visit to Japan in 1998. Baku subsequently
negotiated with Japanese companies to secure their involvement in the
Ateshgeh, Mugandeniz, and Yanan Tava Caspian oil fields (Zerkalo, March
8). Azerbaijan recently opened a new embassy in Tokyo.
At the moment, Azerbaijani-Japanese trade is nearly .6 million, yet much
of it (.3 million) comes from imports of Japanese products into
Azerbaijan, such as steel pipes, electric appliances, transmissions,
spare parts, and telecommunication materials. Azerbaijan exports
alcohol, carpets, plastic, and textiles.
The visit should open new opportunities for bilateral cooperation.
Novruz Mammadov, head of the International Relations Department within
Aliyev’s office, told Trend News Agency on March 7, “The visit carries a
very important nature, both from the side of inter-governmental and also
inter-parliamentary relations. The purpose of the visit is to deepen
these relations in all spheres.”
–Fariz Ismailzade
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