In this issue:

Putin Urges Continuing Russia, China, and India Meetings

Menshikov: People in Washington Misestimate Russian Policy

South Korea, Russia Discuss Northeast Asia Energy Community

Moscow Mayor Backs Siberian River Projects

Chinese Firm May Bid for Russia's Slavneft Oil Company

Germany Hosts Event on European-Russian Economic Cooperation

Russian Academy: Economic Growth Stalled

Russian Official: Iraq Inspections Going Well

Putin in Kyrgyzstan; Russian Military Base Inaugurated

Assassination Attempt Against Turkmenistan's President

From Volume 1, Issue Number 40 of Electronic Intelligence Weekly, Published Dec. 9, 2002
Russia and Central Asia News Digest

Putin Urges Continuing Russia, China, and India Meetings

Before departing New Delhi for Bishkek, Kyrgyzstan on Dec. 5, Russian President Vladimir Putin, in direct talks with India's Prime Minister Vajpayee, stressed the importance of continuing meetings between Russia, China and India. Putin said such meetings should be part of their trilateral cooperation initiative, The Hindu reported from New Delhi sources Dec. 6. Vajpayee did not respond directly, the sources said.

In addition to the three bilateral relationships among them, Putin said that the Foreign Ministers of the three countries should keep meeting together, as they did on the sidelines of the September UN General Assembly. (See INDEPTH, for full coverage of Putin's back-to-back visits to Beijing and New Delhi.)

Menshikov: People in Washington Misestimate Russian Policy

In his Nov. 29 Moscow Tribune column, the experienced Russian observer of the U.S. scene, Prof. Stanislav Menshikov, threw cold water on the notion that Russian support for an attack on Iraq could be bought with pledges of protecting Russian economic interests there, including its Iraqi contracts. "Russia's interest in a non-military solution in Iraq is primarily geopolitical, not economic or financial," he cautioned, "Iraq has for decades been a friendly state on the southern perimeter of Russia and so has Iran. Moscow wants it to remain that way. For various reasons it is supported by France, but also China and India, the two largest nations in Eurasia. Moscow would hardly want to forego that natural common interest for an uncertain financial kickback from the United States."

It is a mistake for President Bush to take Putin "for a weak partner who has to agree to anything the U.S. President demands," wrote Menshikov. He gave, as an example of such miscalculation, Bush's telling Putin during their recent St. Petersburg meeting, that expanding NATO is good for Russia. It is, wrote Menshikov, "another example of how much he underestimates his Kremlin vis-à-vis. Putin's reply was too polite to many Russians' taste. But it is simply a sign that the NATO expansion into the Baltics has been discounted at least some time ago. More important is what happens next. Putin's meeting with Lukashenka of Belarus shows that he is not prepared to dispose of that ally right now. Putin has also given Kuchma of Ukraine moral support in his current confrontation with the United States. Chances are that he will use other means to keep these countries out of NATO."

The article carried a subhead "Eurasian Strategic Triangle," and pointed to the importance of Putin's then-imminent Dec. 1-5 trip to Beijing and New Delhi. "The idea of building up a Strategic Triangle, once promoted by Yevgeny Primakov, might start becoming a reality under Putin. If that happens, it would be a very sensitive response to NATO expansion. Eventually, it could also help turn the scales in Eurasian and global geopolitics."

South Korea, Russia Discuss Northeast Asia Energy Community

South Korea and Russia agreed to expand economic cooperation across the board, said Seoul's Minister of Finance and Economy Jeon Yun-churl in a press conference Nov. 29, at the fourth Korea-Russia Joint Committee on Economic, Scientific and Technological Cooperation in Moscow. The committee reached a broad understanding on further bilateral ties, during talks, the Ministry said. The Export-Import Bank of Korea (EXIM) said Nov. 28 that it has reopened its office in Moscow four years after the closing of the office in November 1998.

Detailed negotiations on developing gas (and possibly oil) pipelines from Irkutsk to South Korea were also a key agenda item at the South Korea and Russia Fifth Resources Cooperation Committee Meeting Dec. 4-5 in Moscow, according to Seoul's Ministry of Commerce, Industry and Energy. "We are discussing establishment of a Northeast Asia Energy Community to use the oil and gas in Russia's Far East as a foundation for lasting peace and economic interdependence in the region," said a Korean official. "Energy consumption in Northeast Asia is growing at an enormous rate. China, Japan, and South Korea will be the largest energy-consuming region in the world by 2020. Energy demand in these three countries will account for two-thirds of the worldwide growth in energy. Demand must be met not only from the Mideast and Indonesia, but from within the Northeast Asian region."

Surveys are already underway to lay two 4,100-km (2,500-mile) pipelines, one for gas from the Kovykta field in Irkutsk on Lake Baikal to Ulaanbaatar, across Mongolia and northern China to Beijing, and on to South Korea, and Japan. A second oil pipeline is being discussed between Russia and China along the same route, at least as far as Beijing. Kovykta is the largest gas reserve in Russia, with at least 1.4 trillion cubic meters, enough to meet U.S. gas demand for more than two years. Construction of the pipeline, planned to start in 2005, will cost from $15-20 billion.

"We are hopeful this plan will be joined by North Korea," the Korean official said. The Irkutsk gas pipeline could reach South Korea from China, either by a subsea route or via North Korea, and on to Japan. "North Korea would receive substantial benefits," he continued. "It would collect fees from transmission of gas to South Korea and Japan, and have the right to tap the pipeline for power and fertilizer. The project would generate enough money for North Korea to finance the construction of a gas-fired power plant, and finance the rebuilding of its power grid for industry and households."

Moscow Mayor Backs Siberian River Projects

Moscow Mayor Yuri Luzhkov is sending a proposal to President Putin, on reviving the scheme to divert water from the great rivers of Siberia, southward into Central Asia. Luzhkov proposed creating an International Eurasian Consortium for this purpose, according to a Dec. 4 RIA Novosti report.

The project, which was worked up during the Soviet period but scrapped in the 1980s, would divert some water from the Ob and Irtysh Rivers to Central Asia, where the over-exploited Amu Darya and Syr Darya Rivers no longer serve even to feed the Aral Sea, causing an ecological catastrophe in the area. Luzhkov proposes that Russia sell the water to the Central Asian countries. Uzbekistan, in particular, has also called for reviving this project.

Luzhkov pointed to the situation in Afghanistan, where any serious revival of agriculture would urgently require expanded water supplies.

Chinese Firm May Bid for Russia's Slavneft Oil Company

The Russian government is deciding one of its biggest ever privatization tenders on Dec. 18, auctioning off the state's 74.95% share in the oil company Slavneft. The minimum bid is $1.7 billion, with bids accepted through Dec. 15. During President Putin's trip to China, the Russian paper Vedomosti reported that the Chinese state oil company, CPNC, would likely take part in the Slavneft tender and had already hired consulting companies for this purpose. The report was not confirmed, and there was some speculation that it was floated in order to drive up other bids; Vedomosti quoted a source at one of the Russian contenders, who said that CPNC's participation in the auction could push the price towards $3 billion.

Slavneft owns oilfields, with 400 million tons of confirmed reserves, in the East Siberia region from which an oil pipeline is being built to China.

Russian press have identified other likely bidders as Yukos (the second largest Russian oil company) which is also involved in the Chinese pipeline, Lukoil (the largest) with a foreign partner, Surgutneftegaz (third largest) with its close partners at Vladimir Potanin's Interros, and Roman Abramovich's Sibneft in alliance with the Alfa financial group. The financial paper Kommersant asserts that the initiative to sell the whole Slavneft stake at once came from Prime Minister Mikhail Kasyanov.

Germany Hosts Event on European-Russian Economic Cooperation

In the keynote address to a Dec. 3 event commemorating the 50th anniversary of the German Ostausschuss der Deutschen Wirtschaft (the "Eastern Committee of German Business," which promoted East-West trade even in the midst of the Cold War), German Chancellor Gerhard Schroeder said that the expansion of the European Union into 10 states of Eastern Europe should benefit Russia, as well as other European countries. The EU expansion eastward poses a financial burden for Germany during the first phase of integration, but the benefits will soon outweigh the problems, Schroeder said, because "a giant economic potential is developing for Germany, in the East."

German trade with Eastern Europe, with 10% of total German exports, today exceeds trade with the U.S., said Schroeder, although German direct investments in the States are still bigger, in terms of total volume.

Jean Lemierre (France), President of the European Bank for Reconstruction and Development, said in his speech that the EU's partnership with Russia and other nations in Eastern Europe is essential to Europe's own development, as the EU bloc faces a host of own problems, which can be overcome only by looking to the East.

Mikhail Kasyanov, Prime Minister of Russia, called for economic relations between Germany, the EU and Russia, to go to a next phase, to the exchange of developed products, which would allow Russia to move from a supplier mostly of raw materials, to an exporter of industrial goods. He called for high-tech and especially, aerospace cooperation, to play a bigger role in the future.

Russian Academy: Economic Growth Stalled

Recent data on Russia's economic development indicate that the growth of the national economy is stalled, according to research by a group of scientists from the Institute of Economy of the Russian Academy of Sciences (RAS), reported in the Russian press Nov. 29. "The current level of public demand for domestic production has decreased to a minimum level for this year," announced the Institute's Natalya Raiskaya, Yakov Sergiyenko, and Alexander Frenkel. "On this background, in most of the branches of industry, enterprises are reducing their purchases of machinery and equipment. 64% of Russian industrial companies explain their current problems as due to a lack of demand, and 44% as due to a shortage of working capital.

"Non-ferrous metallurgy remains the most successful branch. However, in January-November (2002,) it grew by 8.4% against the same period last year, while in January-October (2002,) this rate was at 8.9%. A similar reduction of growth is registered in the food industry—6.6% as compared with 7.2% for January-October; in production of construction materials—3.8% against 4.2%; in machine-building—2.9% against 3.1%. The most depressed sectors are light industry (zero growth for the year) and electric energy (a 0.4% decline)," report the authors.

Russian Official: Iraq Inspections Going Well

Russian Deputy Foreign Minister Yuri Fedotov told Itar-Tass Dec. 3 that "the absence of difficulties in the work of the [United Nations] inspectors [in Iraq] gives grounds for optimism, as does cooperation with the UN people from the Iraq side." He also praised the inspectors for working "professionally and without bias."

Putin in Kyrgyzstan; Russian Military Base Inaugurated

En route to Moscow from his diplomacy in China and India, Russian President Vladimir Putin stopped Dec. 5 in Kyrgyzstan for meetings with President Askar Akayev and discussion of military cooperation in the framework of the CIS Collective Security Treaty (CST). The Presidents signed a detailed document, titled the Bishkek Declaration, and a bilateral security agreement, regulating military-technological cooperation. Defense Minister Sergei Ivanov had arrived in Bishkek the day before, with a 70-strong military delegation, to observe flights by Su-27 fighters at Kant, site of a future Russian military base. The decision to deploy an Air Force base near Bishkek was made at the Nov. 20 meeting of the CST defense ministers, Izvestia reported. The first five Su-27s have been delivered, with nine more to follow next year, according to Kommersant.

President Akayev expressed his commitment to military cooperation with Russia, including the permanent Russian air force base in Kant. At the same time, he emphasized that the deployment of NATO's military base in his country is restricted to the period of the NATO operation in Afghanistan. In turn, Putin promised to restructure Kyrgyzstan's energy debt to Russia.

Coverage of the Russian air base in Kant, in The Hindu of Dec. 4, termed its establishment "sudden," and bound to be a shock to the United States, since the general impression floating around Washington is that Russian influence across Central Asia has waned. The paper cited military officials from Russia and Kyrgyzstan, who said the base will enable Russian jets to provide close-air support for ground units of CST member states—Kyrgyzstan, Kazakhstan, Tajikistan, Russia, Armenia and Belarus—against potential security threats.

Assassination Attempt Against Turkmenistan's President

An assassination attempt against President Saparmurat Niyazov of Turkmenistan was reported on Nov. 25, when his motorcade came under machinegun fire. At least 16, possibly as many as 100 persons were arrested the next day, including relatives of four political figures accused by President Niyazov himself of being behind the attack: former Foreign Minister Boris Shikhmuradov, former Ambassador Nurmukhamet Khanamov, former Central Bank head Khudayberdy Orazov, and former Deputy Agriculture Minister Imanberdy Iklymov. All four have been in exile over the past year. Niyazov's aide Sardar Durdyev alluded to unnamed Russian politicians as patrons of the attack. On Dec. 1, Interfax quoted a spokesman for the Russian Prosecutor General's Office, denying that Turkmenistan had requested Russian help in locating the accused. Chairman of the Federation Council Sergei Mironov, among others, dismissed Durdyev's claim of Russian involvement in the attempt as "absurd."

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