In this issue:

Putin in Europe

Stand-Alone Meeting of 'Strategic Triangle' Nations Planned

Russian Chief of Staff in China

Russia 'Closely Watching' Responses to Maskhadov's Death

Russian Reserves Zoom; Debate Surges Around Petrodollars

Russia Limits Foreign Takeover of Raw Materials

Chubais Survives Assassination Attempt

Ukrainian Foreign Minister Visits Washington

Westerners Challenge Kyrgyzstan Elections

Putin in Europe

Russian President Vladimir Putin arrived in Paris March 18 for bilateral talks with French President Jacques Chirac, and their quadrilateral summit with German Chancellor Gerhard Schroeder and Spanish Prime Minister Jose Luis Rodriguez Zapatero. Expected Franco-Russian agenda items include the promotion of aerospace projects, especially the launch of Russian rockets from France's Kourou launch site, and the participation of French business in the Russian energy sector. Paris seeks to promote two projects: development of a regional passenger plane and production of Renault cars in Russia. Moscow seeks France's support in receiving EU approval for a new generation of Russian passenger planes, which will open European skies to Russia.

Stand-Alone Meeting of 'Strategic Triangle' Nations Planned

The Foreign Ministers of China, India, and Russia will meet in Vladivostok in June, Indian Foreign Secretary Shyam Saran said March 11 during a visit to Moscow. Next month, the three nations will hold a "business" meeting in New Delhi. "This would be for the first time a stand-alone trilateral meeting and this adds certain significance to it. Earlier, three such meetings were held on the sidelines of UN General Assembly and CICA in Almaty," Saran said. He did not rule out, that part of the economic and commercial cooperation of India, China, and Russia could include joint work in the development of Central Asian energy resources. Saran met with Russian Foreign Minister Sergei Lavrov and First Deputy Foreign Minister Valeri Loshchinin.

Russian Chief of Staff in China

General Yuri Baluyevsky, chief of the General Staff of the Russian Armed Forces, began a six-day trip to China and South Korea on March 16. It was his first trip abroad since assuming his post last year. The Russian Defense Ministry announced that Baluyevsky would discuss military and military-technical cooperation and international security with both nations. In Beijing, preparations for the first-ever Russian-Chinese military exercise were also on the agenda. The maneuvers will most likely be held in Fall 2005, on Shandong Peninsula in China, and in the bordering Yellow Sea, and will involve airborne troops, long-range and front-line aircraft, and Russia's Pacific Fleet, practicing "a joint peacekeeping operation," as well as anti-terrorist actions.

In Seoul, beginning March 20, Baluyevsky was to meet South Korean Defense Minister Yuun Kwang Woong and joint chiefs of staffs chairman Kim Jong Hwan.

Russia 'Closely Watching' Responses to Maskhadov's Death

In a Mar. 11 statement, the Russian Foreign Ministry Information and Press Department said that Moscow is "closely watching" international commentaries on the death of Chechen separatist leader Aslan Maskhadov. The statement attacked commentaries calling Maskhadov a "moderate separatist leader," or a now lost "potential negotiating partner" for Moscow. The Foreign Ministry accused Maskhadov of complicity in the Nord-Ost theater and Beslan school terrorist attacks, mentioned video evidence of his planning new such actions, and noted that it was under his Presidency that Shamil Basayev in 1999 launched a drive to create "a caliphate from the Black Sea to the Caspian," by invading Dagestan. "Basayev and Maskhadov are persons of the same order," the statement said. Now, it continued, Chechen separatists living abroad are threatening Russia with new acts of terrorism, while "the politicians of the countries that gave them asylum, pretend not to notice or understand those threats," though they give lip service to "combatting international terrorism"—a reference to Britain and the USA.

Russian Reserves Zoom; Debate Surges Around Petrodollars

Gold and currency reserves held by the Russian Central Bank stood on March 4 at $134.4 billion—75% higher than their Jan. 1, 2004 level of $76.9 billion. Above a certain level, surpluses collected by the Central Bank, mostly derived from taxation of crude oil export earnings, are channelled into a Stabilization Fund, administered by the Ministry of Finance. From Jan. 1 to March 1 of this year, the Stabilization Fund grew by 35%, to a level of 707.5 billion rubles ($25.8 billion).

The Russian government has reopened discussion about spending these funds, seen as a dead weight on the Russian economy, unless invested. Finance Minister Alexei Kudrin has advocated spending the Stabilization Fund exclusively for foreign debt reduction; recently, for example, Russia paid its entire IMF debt ahead of schedule. Izvestia of March 11 reported that Minister of Economic Development and Trade German Gref has prepared a compromise between Kudrin's position and the desire of Prime Minister Mikhail Fradkov to invest part of the Stabilization Fund inside Russia. Gref's ministry reportedly wants to cap the Stabilization Fund at its current level, then Gref himself would head a new Investment Fund, with power over new surpluses that accrue. Izvestia said that the Ministry of Transportation has a list of priority projects for such investment: high-speed rail and road links between Moscow and St. Petersburg; airport renovation in Moscow and Novosibirsk; and a bridge across the Volga River at Volgograd. The Ministry of Information and Communications reportedly has an alternative list of projects.

The timeliness of infrastructure investment was underscored at a recent conference on Russia's roads, held near Moscow. RBC news agency reported from that event, that funding for road construction fell by two-thirds over the past four years, especially after the 2003 abolition of regional road-repair funds that collected earmarked taxes. Now 80% of Russia's 600,000-kilometer national road network fails to meet basic standards and that portion will reach 95% by 2010, without investment.

Also suffering from lack of investment is the Russian oil industry itself, where privatized oil companies have neglected new exploration and development. A new estimate by the International Energy Agency (IEA) suggests that Russian oil output will rise by only 3.8% this year, as against 9% in 2004 and 11% in 2003.

Russia Limits Foreign Takeover of Raw Materials

Russian Deputy Ministry of Natural Resources Anatoli Temkin confirmed Mar. 16 that the government's new draft law on mineral resources "rules out the involvement of foreign citizens and entities in possible minerals development," RIA Novosti reported. Instead of the previous leasing and licensing system, he said, raw materials exploitation will be done on a contract basis, with the Federal government retaining ownership. Bidders for contacts must be residents of the Russian Federation, Temkin said, although "we don't care where the users of minerals get the money." The Russian cabinet reviewed the draft law March 17.

Chubais Survives Assassination Attempt

One of the highest-level assassination attempts on Russia's tumultuous political and business scene took place March 17, when a remote-controlled car bomb exploded, followed by automatic weapons fire from two assailants, in an ambush of Anatoli Chubais on the Minsk Highway as he drove towards Moscow. Chubais's vehicle was heavily armored, and members of his security detail were able to return fire. The attackers escaped, while Chubais proceeded to Moscow and gave a press conference. Chubais stated that he knew who was after him, without giving details. Later, a retired military man was detained for questioning, though commentators noted that this may have been a false lead.

Chubais is one of the most hated men in Russia, for his role as a "young reformer" in privatizing Russian industry and suppressing the standard of living in the 1990s. For the last several years, Chubais has been active in the Union of Right Forces (SPS) political party, while working as CEO of United Energy Systems (UES), the Russian national electric power utility.

SPS colleagues of Chubais, among them Boris Nemtsov, were quick to charge that the assassination attempt was politically motivated. But there is just as much reason to suspect that it had to do with current, intense battles for control of Russia's energy sector. It was recently rumored on the website kompromat.ru, that Chubais was slated to be eclipsed at UES by people in the service of one faction of the Kremlin staff. Apart from that unconfirmed report, there is also ample evidence that Chubais has incurred the enmity of regional and corporate officials, by his ruthless fee-collection techniques, and that he has clashed with powerful criminal clans, in the course of his drive to expand UES control of electric power facilities in CIS countries.

Ukrainian Foreign Minister Visits Washington

Foreign Minister Borys Tarasyuk of Ukraine came to Washington March 11 to prepare an April visit by President Victor Yushchenko. He conferred with Secretary of State Condoleezza Rice, National Security Advisor Stephen Hadley, and Vice President Dick Cheney. While being praised for Ukraine's turn to the West, and its bid to join NATO and the WTO, Ukraine nonetheless began its announced pullout from Iraq on March 12, intending to have all 1,650 Ukrainian troops out by October. Tarasyuk also told the Washington Times that the turn to the West would not come at the expense of relations with Russia.

Westerners Challenge Kyrgyzstan Elections

After Parliamentary elections held Feb. 27 and March 13 in Kyrgyzstan awarded a majority to candidates linked with President Askar Akayev, U.S. Ambassador Stephen Young denounced the vote as having been marred by harassment of the independent media, government interference in the campaign process, and media bias towards pro-government candidates. He also charged that there had been vote-buying on both sides. "These negative tendencies have damaged Kyrgysztan's reputation for promoting democracy," the ambassador said. Young cited protest demonstrations in various parts of Kyrgyzstan as "a sign that many Kyrgysztan citizens felt disappointed by the government failure to run a truly free and fair and transparent process." Commenting on these events on March 16, the Neue Zuercher Zeitung noted that the protest movement lacks solid backing from the population.