In this issue:

Putin Vows To Fight Poverty, Upgrade Infrastructure

U.S. Energy Secretary Chases Oil in Moscow

Egyptian President in Russia for Discussion with Putin

EU Supports Russia on International Iraq Conference

New Russia-Azerbaijan-Iran Rail Consortium To Form

Two Sino-Russian Summits Are Coming Up

Putin Hits NGOs That Serve 'Dubious Interests'

From Volume 3, Issue Number 22 of Electronic Intelligence Weekly, Published June 1, 2004
Russia and the CIS News Digest

Putin Vows To Fight Poverty, Upgrade Infrastructure

The annual Message to the Federal Assembly, delivered May 26 by Russian President Vladimir Putin, expressed his desire to find remedies for the poverty and low standard of living that still grip much of the Russian population, but was less clear about what those cures would be. Putin returned to the theme of his first such Message, delivered in 2000, when he had called Russia's demographic crisis its gravest national security problem. In 2004, Putin said, "We must bring down the mortality rate, increase people's life expectancy and overcome the population decline." Describing the 1990s as a time of destruction and clean-up, Putin pointed out that Russia lost nearly half its economy in that period and has "still not caught up to where we were in 1989."

Putin went into detail about housing and two areas of "soft" infrastructure—education and health care. He pushed the development of a mortgage system, which would allow one-third of the population to be able to buy decent housing by the year 2010, as against one-tenth of the population today. (Recent studies, though, have shown that the rate of physical breakdown of the national housing stock is outstripping even the most optimistic projections for housing construction.)

For both health care and education, Putin gave a nod to "voluntary medical insurance" and also certain types of paid education, while insisting that the state must continue to guarantee free health care for those who need it. Again, he linked the need to improve health care, to Russia's "high mortality rate among working-age people," which makes life expectancy in the country 12 years lower than in the USA and five years less than in China.

Putin spent relatively little time on the technicalities of budget and tax reform, which have been the main means discussed in his new government, for trying to achieve the goal of "doubling GDP" and fighting poverty. He also said only a little about another hot topic, namely natural resources exploitation, although he confirmed the importance of ensuring "transparent, non-corrupt conditions of access" to them and of reforming the system of payments for resources.

The other area of economic policy Putin highlighted was physical infrastructure development—especially roads (but he didn't talk about rail) and pipelines. He said the underdevelopment of these networks is a constraint on the whole Russian economy, but "a modern, well-developed transport infrastructure is capable of turning Russia's geographical features into a real advantage for the country." Here, Putin was the most emphatic about the need for the state to take a guiding role: "The state must control the development of infrastructure for a long time to come. I am convinced of this. Private investment will also make an important contribution to creating a ramified transport infrastructure of high quality and reliability. For private capital, however, it is very important for the state to have definite plans. From this standpoint, the government must announce its plans and projects...." Putin then listed oil pipelines, including expansion of the Baltic area system, opening the West Siberia-Barents Sea pipelines, deciding on routes from the East Siberian fields (i.e., to the Pacific Coast near Japan, to China, or both); natural gas pipelines, in Europe and especially northern Europe; and road modernization, especially integration of Russia's road network into the North-South transportation corridor, and the Trans-Siberian road link between Europe and the Far East.

He also touched on the requirements of the Armed Forces.

U.S. Energy Secretary Chases Oil in Moscow

The May 27 London Financial Times reported that the agenda of U.S. Secretary of Energy Spencer Abraham's current visit to Moscow is "world oil supplies." Under the headline, "U.S. to lobby Russia to increase oil output," the FT said that Abraham would ... try to salvage the position of ExxonMobil and ChevronTexaco as developers of the Sakhalin 3 oilfield. Earlier this year, Russia cancelled the exploration rights those multis won in a tender 10 years ago. Abraham told the FT he would tell the Russians that such treatment of ExxonMobil "will influence how other people think about investing in Russia in the future." At the same time, writes the FT, "Abraham is also likely to discuss the issue of increasing oil output by Russia."

Besides government officials, Abraham met leaders of the top Russian oil producer, Lukoil, as well as of Transneft, the state-owned pipeline company, and the natural gas monopoly, Gazprom. He stated on May 28, that he had indications that OPEC members Kuwait, United Arab Emirates, Saudi Arabia, Mexico, and Nigeria were willing to boost oil supplies to the USA to "help ease oil prices." Abraham welcomed President Putin's commitment, in his Message to the Federal Assembly, to step up construction of oil export pipelines.

The Times of London, May 27, focussed its coverage of Putin's Message, on Russia's oil-export dependency. "The fabulous boasts about Russia's glittering economic future will no doubt go down well with many Russians who still feel poor and left behind," sneered the Times' Bronwen Maddox, but Putin "avoided acknowledging the main economic threats facing Russia." Citing World Bank estimates that Russia's economy is 25% oil-export dependent and that its 7.2% growth in the first six months of last year, for example, would have been only 4.2% if oil prices hadn't been rising, Maddox continued, "The threat is clear: if the oil price slides, the rate of growth tumbles. And to keep growth at current rates, oil prices would have to keep rising steeply, not simply stay stable. But that would begin to choke off growth in Europe, one of Russia's main export markets. Alternatively, Russia could pump more oil." But there are constraints: "The high prices have done nothing to encourage the oil giants to invest in new fields. They have preferred just to pump more from the old ones. The pipelines are also at full capacity. Many analysts now doubt Russia's ability to rise to Putin's challenge."

Egyptian President in Russia for Discussion with Putin

President Hosni Mubarak of Egypt arrived in Moscow May 27 for talks with President Putin on the Palestinian-Israeli conflict and Iraq, as well as bilateral relations. In interviews to the Russian press, Mubarak stressed several points: Negotiations for a Palestinian state must start, according to the road map. Finding a way out of the Iraqi mess, he said, is extremely difficult, but he voiced hopes that a really sovereign Iraqi government would be able to rebuild the army. Mubarak emphasized the importance of Iraq's having its own army, police forces, and justice system, as any coalition armies would be rejected. He said the disbanding of the army, police, and ruling Ba'ath Party had accelerated the current collapse of the state structure in Iraq. However, he cautioned against an immediate withdrawal, as that could pave the way to chaos.

EU Supports Russia on International Iraq Conference

The May 21 European Union-Russia summit in Moscow devoted attention to global crisis spots, especially Iraq and Palestine-Israel. EU Commission President Romano Prodi met with Russian President Vladimir Putin, and EU Commissioner for Foreign Affairs Christopher Patten met with Russian Foreign Minister Sergei Lavrov and Defense Minister Sergei Ivanov. They all agreed on the need for an international peace and reconstruction conference on Iraq, similar to the earlier Berlin peace conference on Afghanistan. They also emphasized the importance of continuing the "Road Map" for peace in Palestine, organized by the Quartet (UN, U.S., EU, Russia)

Asia also came with the scope of the Russia-EU talks, as, a few days before the summit, the Russian Foreign Ministry briefed the Irish Ambassador, who represents the EU Presidency this semester—on Russia's recent diplomatic initiatives with China and the Shanghai Cooperation Organization.

On May 13, the EU and the Russian government held a transport seminar in Moscow, on the further development perspectives for the Grand East-West Corridor (Asia-Europe via Trans-Siberian Railway) and the North-South Corridor.

New Russia-Azerbaijan-Iran Rail Consortium To Form

An international consortium will be established to build railway links among Russia, Azerbaijan, and Iran, railway officials from the three countries announced on May 19. The railway line will link Qazvin, 100 km from Tehran, with the Azerbaijani city of Astara, on the Caspian Sea. Azerbaijan has ample railway links to Russia. Russian Railways company head Gennady Fedeyev, announced that final plans would be made at a future meeting in Baku. He said the links would "strengthen Russia's economic and geostrategic positions and its ties with [Persian] Gulf countries and the Indian Ocean"—the zone of the North-South Eurasian Transport Corridor from India to northwestern Russia.

Two Sino-Russian Summits Are Coming Up

Chinese President Hu Jintao will meet Russia President Vladimir Putin at the Shanghai Cooperation Organization summit in June in Tashkent, and again in October, when Putin makes an official visit to China. The two summits were discussed May 26 by Putin and the leader of the Chinese National Peoples Congress, Wu Bangguo, who is making a seven-day visit to Russia. Wu said that China regards Russia as its main strategic partner and their bilateral relations as a strategic priority of Chinese foreign policy.

Wu's visit is focussed on economic ties. He visited Khabarovsk and Irkutsk in eastern Russia, and will also go to St. Petersburg. Wu said China supports Russia's bid to enter the WTO. (At the Russia-EU summit, an endorsement of Russia's joining the WTO was signed, but it's an open question whether the WTO still exists, after the breakdown of talks at its last two summits.) Wu made five proposals for trade with Russia, including for enhanced government "macro-guidance and coordination," more cooperation on major projects between large firms and in high-tech fields, expanding local cooperation between China and Russia, and regional economic cooperation, particularly in the framework of the Shanghai Cooperation Organization.

Wu told the Forum on Border and Inter-Regional Cooperation between China and Russia that, while Chinese-Russian trade is growing, too much of it is in raw materials and labor-intensive, low-value-added products. Also, over 22% of trade was border trade—mostly consumer products. Wu called for more and better joint direct investments in energy and resources exploitation, infrastructure construction and hi-tech development. He said that Chinese companies should participate in projects in Russian Far East and Siberia, and Russian enterprises invest in northeast and western China.

Putin Hits NGOs That Serve 'Dubious Interests'

Near the end of his Message to the Federal Assembly, after a brief section on foreign policy, Vladimir Putin took up questions of the Russian political and social systems. Here, he blasted foreign-tied NGOs: "There are thousands of public associations and unions that work constructively. But not all of them are oriented towards standing up for people's real interests. For some of these organizations, the priority is to receive financing from influential foreign foundations. Others serve dubious group and commercial interests. And the most serious problems of the country and its citizens remain unnoticed."

This swipe against foreign-funded "open society" projects of the George Soros type grabbed headlines in the U.S. media, as showing Putin's turn away from "democratization."

All rights reserved © 2004 EIRNS