Russia and Central Asia News Digest
Putin Floats Idea of Pricing Russian Oil In Euros
At a joint news conference on Oct. 9, with German Chancellor Gerhard Schroeder, in the Ural city of Yekaterinburg, Russian President Vladimir Putin commented on rumors that Russia will soon start to denominate its oil exports in euros, rather than dollars. "We do not rule out that it is possible," he said. "That would be interesting for our European partners." He then noted that the decision wouldn't depend solely on the government, because the main Russian oil companies are privately run. A German government source stated on the same day in Yekaterinburg, "The question is taking on increasing significance."
The Moscow Times noted that back in 1999, just after Putin became Prime Minister, he laid out a proposal to move Russia's trade out of dollars and into euros. The paper adds, "A switch into euros by Russia, the second-biggest oil exporter behind Saudi Arabia, and holder of the world's largest natural gas reserves, would represent a major shift in the balance of currencies behind the world's most traded commodity."
Currently, Russian oil exports create a daily demand for dollars in the volume of about $170 million. Michael Lewis, head of Deutsche Bank's commodity research, commented, "If Russia makes this move, it will be a reorientation of its economy towards Europe."
Three-Year Industrial Cooperation Agreement Between France and Russia
The Moscow visit of French Prime Minister Jean-Pierre Raffarin achieved a commitment, between France and Russia, to visibly increase bilateral trade over the coming three years, beyond the 6 billion euros expected for 2003. According to announcements made Oct. 7 at the conclusion of the three-day visit, French cooperation projects will focus on three main areas: energy, aerospace, agriculture.
Aerospace/aircraft: Here, France will contribute 50% of the EU's 340-million-euro share in the construction of a new launching site at Kourou; France will contribute to the Russian development of a new generation of fighter aircraft; France will purchase Russian BE-200 firefighting aircraft.
Energy: Gaz de France may join the German-Russian project of building a new gas pipeline, either via Ukraine or along the southern Baltic coast; EDF and Russia's Interros signed an agreement on petrochemical cooperation; a letter of intent is signed by BNP on cooperation with Russian banks.
According to Russian news wires, nuclear technology cooperation also featured prominently in the Franco-Russian talks. The AREVA firm signed a letter of intent with the Russian nuclear industry, for cooperation in the development of improved nuclear technologies. AREVA is the main promoter of the EPR, a new generation of nuclear-power plants that has been developed through Franco-German cooperation (Framatome and Siemens).
Furthermore, the two energy ministries reached agreement to cooperate closely in the development of thermonuclear-fusion technologies, for example, in the context of ITER, the planned International Thermonuclear Experimental Reactor project, which is scheduled to be commissioned at the end of this year. Both France and Russia are offering sites for the construction of ITER.
German-Russian Talks Center on Energy and Rail
In the economic sphere, five agreements classified as "strategic" and eight other agreements were on the agenda as German Chancellor Gerhard Schroeder visited the Ural city of Yekaterinburg for two days of talks with Russian President Vladimir Putin, beginning Oct. 8. In all, 14 agreements, totalling 1.5 billion euros, were signed. Included were the construction of a big, natural gas-fueled power plant near St. Petersburg, with investments of 500 million euros; construction of a big fertilizer plant (location not made known); a pilot project for development of smaller-sized units for heating systems in densely-populated urban areasstarting in the Russian city of Samara; and an agreement to ship 6 million tons in containerized freight from Asia to Germany via the Transsiberian Railway, beginning in 2004.
Another agreement concerns transfer of equipment and other supplies from Germany to the German ISAF troop contingent in Afghanistan, via Russian airspace and (mainly) railway grid, plus transfer via Uzbekistan. A Russian official is quoted, saying that the agreement is open also for transfer of civilian freight, for the economic reconstruction in Afghanistan, later on.
There will also be preferential visa regulations for Russians in science, research, economics, and culture, to promote intensified exchange with Germany. There are, furthermore, statements from Russia that it hopes to modernize its industrial machinery stocks with the help of Germany, in coming years. Russian media emphasized, on the eve of the Yekaterinburg Summit, that at 11 billion euros, Germany accounts for 22% of total foreign investment in Russia, being Russia's number one investment partner.
The planned signing of a letter of intent concerning the construction of a new gas pipeline from Russia to Germany, has been frozen, because of an acute conflict between the Russian natural gas giant Gazprom and the EU Commission in Brussels. Brussels' demand that Russia open its domestic gas-pricing market to international standards, for reasons of "unhindered competition in line with WTO rules," is overshadowing all of Gazprom's planned projects with Germany and other EU countries like France and Italy. Putin denounced the EU Commission request as "implying ruinous consequences for the Russian economy and society." The planned pipeline project between Russia, Germany, and France would involve investments of 6 billion euros, alone. In case that pipeline ran along the bottom of the Baltic Sea, it would connect Vyborg with Greifswald, over a distance of 1,200 km.
Joint Opposition to War Opened Door to Economic Cooperation
Germany's and Russia's joint opposition to the American war drive in Iraq, has created a favorable environment for economic cooperation, the German daily Frankfurter Allgemeine wrote in an Oct. 10 backgrounder to the Yekaterinburg Summit. As close aides to the German Chancellor told the daily on the sidelines of the summit, it was not at all a guaranteed perspective, months ago, that the anti-war threeChirac, Schroeder, Putinwould hold firm: "There was always fear that at this stage of confrontation with America, one of them would retreat."
The fact that this did not occur, and that neither Putin nor Schroeder give in to the massive pressure from the U.S. side, has "improved the personal relationship of trust between these two politicians even more."
Nominally, the economic deals signed in Yekaterinburg have a volume of 1.5 billion euros, but seen as developing over the next years, they imply a volume of 7 billion euros, the article noted.
While the economic deals have received more coverage in the German and Russian media, the non-economic agreements are no less important, because they signal the level of trust, as well: German specialists are allowed to enter the otherwise sealed-off naval base at Murmansk, to help Russia decommission 120 nuclear submarines, at a level of 300 million euros of funding from Germany; the two heads of the German and Russian foreign intelligence agencies met in Yekaterinburg as well, talking about intensified cooperation in Afghanistan and Central Asia; also the transit agreement that allows Germany to supply its troops in Afghanistan via Russian rail grids and airspace, is the first ever of this kind signed between Russia and a NATO member country.
Putin Confirms Exxon/Mobil in Negotiations for Yukos Oil
Rumors are swirling in Moscow about a possible acquisition of Mikhail Khodorkovsky's Yukos Oil company by Exxon/Mobil. Yukos has just merged with Sibneft, making it Russia's largest oil company. The popular view in Russia has been that the sale of a controlling stake in Yukos would not be allowed before next year's Russian Presidential election, but Izvestia of Oct. 8 reported that government officials have been pressuring Yukos to sell its stock, "in exchange for [U.S.] guarantees respecting other matters." Izvestia wrote, "Recently, a government source said the government 'did not see any obstacles' to such a deal. The source admitted that the US partner may be Exxon/Mobil. Last Friday, Leroy Raymond, Exxon's head of board, personally informed Prime Minister Mikhail Kasyanov that his company is in negotiations with Yukos. The fact of the negotiations was earlier confirmed by President Vladimir Putin.... Pushing the company to merge with a U.S. partner, the government may be trying to use it to secure guarantees of its interests in other regionsin particular, in Iraq."
In the meantime, Izvestia analyst Maria Ignatova observed that the investigation of Yukos by law enforcement officials is making the company easier to acquire. "The more frequently the company's offices are searched, the lower its stock price goes."
President Putin was asked about "Exxon buying 40 percent of Yukos," in his New York Times interview, published Oct. 6. Putin replied, "To the best of my knowledge, this deal has not yet been concluded. It is under discussion. You know what was our attitude to the purchase by British Petroleum of 50 percent of another major company of ours, TNK. We favor foreign capital involvement in Russia's economy. ExxonMobil is operating in the Far East, in Sakhalin, it is involved in investing a lot of money there, and we will support their further activities there. As regards purchasing part of the Yukos company, again this is a corporate matter, but once again we are talking about a possible major deal here, and I think it would be the right thing to do to have preliminary consultations with the Russian government on this matter."
Chubais Campaigns For 'Liberal Empire'
Anatoli Chubais, who oversaw the fire-sale privatization of ex-Soviet industry that created today's "oligarchs" in Russia, has presented his view of Russia's mission for the 21st Century: Become a "liberal empire." Currently head of UES, the national electric power utility, Chubais is campaigning for the State Duma as the third candidate on the Union of Right Forces slate.
Chubais spelled out his scheme in a Sept. 25 speech in St. Petersburg, a nationally televised interview on TV Channel 1 on Sept. 28, and an Oct. 1 article in Nezavisimaya Gazeta. "Liberal imperialism must become Russia's ideology, and the creation of a liberal empire must become Russia's mission," he wrote. This would mean Russia's having economic controlfor Chubais' type of liberal economics policiesin the area of the former Soviet Union. "It's high time to call things by their names," said Chubais, "Russia is the sole and unique leader in the CIS, regarding the size of its economy.... Russia is not just the leader; it can and must increase and strengthen its leading positions in this part of the planet within the next 50 years." Such an "empire" would not "challenge the principle of territorial integrity of neighboring states," but in the realm of economy and business, "The Russian state can and must contribute to the expansion of Russian business to neighboring countries."
Thus, "empire" should not be a curse-word, according to Chubais. There should be "a strategic ring of great democracies in the northern hemisphere during the 21st Century: the United States, united Europe, Japan and the Russian liberal empire."
Call for New Investigation of Bloody October 1993
On Oct. 6, Russian State Duma deputies Sergei Glazyev and Dmitri Rogozin introduced a bill calling for a new investigation into the October 1993 confrontation between then-President Boris Yeltsin and the elected Parliament of that time, the Russian Supreme Soviet. It would mandate identification of who was responsible and assess the legality of actions taken.
On Sept. 21, 1993, Yeltsin abolished the Constitution and the Supreme Soviet, which had been refusing to rubber-stamp radical economic liberalization measures. When members of parliament would not disband, and were joined by Vice President Alexander Rutskoy, Yeltsin ultimately ordered the Russian Armed Forces to take the Supreme Soviet building by force, and it was shelled by tanks. At that time, Rogozin was a consultant at the Supreme Soviet. Glazyev resigned from Yeltsin's Cabinet immediately after the Sept. 21 decree.
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