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06-13-2005
Opened late last month, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline has a capacity of 1 million barrels of oil per day and is the greatest achievement in the Caspian energy area. The pipeline will take oil from Azerbaijan and eventually Kazakhstan to the global markets—free of Russian and Iranian domination. After years of inaccessibility for the West, vast oil reserves under the Caspian Sea—comparable to those in Kuwait—are now within hand’s reach of the world’s commodity markets.
The Heritage Foundation was an early supporter of this important project—quickly dubbed “the New Silk Road”—and was active in educating U.S. policymakers about its importance and helping them understand and work through difficulties in the region. In 1996, for example, Ariel Cohen drew U.S. policymakers’ attention to the developing “Great Game” of oil politics in the Caucasus and Central Asia in “The New ‘Great Game’: Oil Politics in the Caucasus and Central Asia,” “U.S. Policy in the Caucasus and Central Asia: Building A New “Silk Road,’” “U.S. Policy in the Caucasus and Central Asia: Building A New ‘Silk Road’ to Economic Prosperity,” and “Ethnic Interests Threaten U.S. Interests in the Caucus;” and later to Iran’s claim of Azerbaijan’s share of Caspian resources as a threat to energy security.
Completion of BTC would have been unattainable without U.S. support and championing of for democratic transition, sovereignty, and security cooperation in Georgia and Azerbaijan. The Heritage Foundation has forwarded these policies throughout. For example: “Securing the Democratic Transition in Azerbaijan,” “Aliev Dynasty or Azerbaijiani Democracy? Securing A Democratic Transition,” “U.S. Should Support Georgian Democracy and Independence,” and “Our Challenge in Georgia.” Dr. Cohen also co-authored and edited Eurasia in Balance, a book on U.S. strategy in the Caucasus and Central Asia, available this month from the British publisher Ashgate and on Amazon.com.
Halted several times by ethnic fighting in South Ossetia and Adzharia, the BTC will flourish if there is a peaceful resolution of the conflicts in the region. Promoting peace in this area has long been in the U.S. interest and is now perhaps even more so.
The BTC is the first link between the Caspian and the Mediterranean, to be followed by a natural gas pipeline between Azerbaijan and Turkey, and will be a key component of U.S. energy security for years to come. In addition, it is the largest foreign investment project in the region since the fall of the Soviet Union. Partially financed by its shareholders, such as British Petroleum and Azeri State Oil Company SOCAR, the project also received assistance from international financial institutions, such as the International Finance Corporation, the European Bank for Reconstruction and Development, and the U.S. Export-Import Bank, all of whom hail BTC as a model of development. It promises to be a gateway for revenue that could well bolster economic and democratic development in the Caucasus and Central Asia. This is a virtuous cycle; these gains will serve to improve the West’s access to diversified oil supplies and reduce its dependence on the Middle East.
Heritage is proud to have supported the Baku-Tbilisi-Ceyhan pipeline.
04-20-2005
The Bush administration’s desire to promote the globalization of democratic values is fueling tension in the United States’ relationship with Russia, a country that has experienced a dramatic erosion of its geopolitical influence over the past 18 months.
Following a meeting in Moscow on April 20, US Secretary of State Condoleezza Rice and Russian President Vladimir Putin both expressed satisfaction about the current state of bilateral relations. Despite their positive assessments, strains in the US-Russian relationship are readily evident.
Prior to meeting Putin, Rice voiced criticism of Russia’s democratization record, specifically citing the fact that the Russian government maintains a stranglehold on television outlets in the country. “There should be more independent media so that people can debate and make decisions about the future of Russia, democratic Russia, together,” Rice said during an interview broadcast by Ekho Moskvy radio. The secretary of state also suggested that Russia’s executive branch under Putin had accumulated excessive power at the expense of Russia’s other branches of government.
While critical of the Russian government, Rice emphasized that Washington and Moscow remained strategic partners, adding that the United States sought to build a “constructive, friendly relationship” with Moscow. The apparent US desire not to fully alienate Russia is rooted in geopolitical pragmatism. An antagonistic Moscow could greatly complicate a number of important international issues, including the global threat posed by radical Islam and nuclear non-proliferation.
Rice insisted insist during the Ekho Moskvy interview that the United States does not seek to replace Russia as the key power in the Caucasus and Central Asia – two areas that have traditionally sat well within Russia’s sphere of influence. However, recent actions indicate that Russian officials are extremely wary of American intentions.
One indicator of Russia’s concern is reflected in Moscow’s changing stance toward the Organization for Security and Cooperation in Europe. OSCE election monitors were highly visible in recent elections in Georgia, Ukraine and Kyrgyzstan, [For background see the Eurasia Insight archive] and the group’s reports on election flaws played a background role in fueling revolutions in all three states. [For background see the Eurasia Insight archive]. Russia now wants the OSCE to focus more on security, and it has adopted a cantankerous stance on several budgetary issues.
While US and Russian officials strive to preserve the veneer of a cooperative spirit, experts on both sides are far blunter in their criticisms, and more willing to use confrontational rhetoric. Debates during conferences on regional issues are now sometimes flavored with a touch of Cold-War era hostility. Such debates occurred in February in the Georgian capital Tbilisi during a conference called The South Caucasus in the 21st Century: Challenges and Opportunities.
During the three-day meeting, sponsored by the Georgian Foundation for Strategic and International Studies, Stephen Sestanovich, a former top US diplomat during the Clinton administration who is currently a senior fellow at the Council on Foreign Relations, courted controversy when he suggested that the concept of the Caucasus lying within the “post-Soviet space” was outdated. Instead, he advocated that the Caucasus ought to be identified simply as part of Europe, a change that could help to subtly weaken Russia’s traditional high-profile role in the region.
S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute at the Johns Hopkins School of Advanced International Studies, appeared to criticize Russia’s stance on the region’s so-called “frozen conflicts,” involving Georgia’s separatist territories of Abkhazia and South Ossetia, along with Nagorno-Karabakh. [For background see the Eurasia Insight archive]. “Conflict resolution failed not only due to intransigence of the sides and insincere policies of regional powers, but also because the efforts of good and tenacious people in international organizations to settle the conflicts have failed,” Starr said. He went on to suggest that if Russia does not respect territorial integrity of South Caucasus states – Georgia, in particular -- then the West should “open up” issues relating to the Northern Caucasus for discussion, including self-determination for Chechens.
Vyacheslav Nikonov, a pro-Putin political scientist and the president of the Politika Foundation in Moscow, staunchly defended the Russian record in the Caucasus, adding that Russia intended to remain an influential player in the Caucasus. Russia “is on the rise and its power will increase, whether you like it or not,” he said. The fact that millions of ethnic Armenians, Azeris and Georgians live in Russia grants Moscow a right to take an active interest in South Caucasus affairs, Nikonov maintained.
Yevgeny Kozhokin, the director of the Russian Institute of Strategic Studies, suggested that the United States and Russia should pursue “big issues,” such as the growing geopolitical influence of China and international terrorism, and Washington could leave “small fry” regional issues, such as the future political status of South Ossetia, for Moscow and Tbilisi to resolve exclusively.
Vladimir Socor, a senior fellow at the Washington, DC,-based Jamestown Foundation, said relying on Russia to work out its differences with Georgia on South Ossetia and Abkhazia would be a mistake. Socor assailed Russia for its failure to fulfill security commitments made during the OSCE’s Istanbul summit in 1999. He said political settlements to the two conflicts would remain elusive unless new peace-keeping and negotiating frameworks were established. “Existing frameworks for negotiations are relics of another era before the expansion of the EU and NATO,” Socor said “The UN mission in Abkhazia helps put an undeserved international gloss on the Russian framework designed to perpetuate secession and the occupation of Abkhazia.”
04-08-2005
A wave of democratic change is spreading around the world, from Afghanistan to Iraq to Ukraine, from Lebanon to Kyrgyzstan. These historic events demonstrate that we live in a truly interconnected world. President George W. Bush’s words, spoken in his second inaugural address and State of the Union speech, are resonating around the world and moving crowds.
The promotion of democracy remains an important goal of U.S. foreign policy. The ADVANCE Democracy Act (S. 516 and H.R. 1133), currently being considered by the Senate Committee on Foreign Relations and House Committee on International Relations, is intended to further this goal but could actually hinder it. The U.S. should continue its tradition of aiding burgeoning democracies around the world, but it should do so in a way that also takes into account U.S. vital interests, especially national security.
Equally important, the U.S. should promote democracy without limiting the executive branch’s ability to conduct foreign policy. Formulating and conducting diplomacy is an exercise in balancing U.S. interests abroad, including America’s relations with its allies in the war on terrorism and other military and business priorities. Diplomacy should be conducted with a dose of healthy realism. It cannot ultimately serve U.S. interests if it blindly pursues ideology.
A good example to follow is Ronald Reagan’s focus on the "evil empire" of the Soviet Union and his Administration’s championing of democracy promotion as a foreign policy priority in the USSR, Eastern Europe, and Latin America. Reagan eventually succeeded and tossed communism into the dustbin of history. Similarly, the soaring rhetoric of President Bush’s second inaugural address will require practical and realistic implementation. Learning from Reagan’s example, this means making strategic decisions about which regions of the world to prioritize as the focus of American resources and involvement. It also means that democracy promotion is only one tool in the foreign policy toolbox, which also includes free trade promotion, economic development, multilateral cooperation, and, in some rare cases, the use of force.
More Work Needed. The ADVANCE Democracy Act serves the American public by emphasizing the role of democracy in U.S. foreign policy in general and at the State Department in particular. The bill reaffirms U.S. political support for democracy and allocates funds to support the Community of Democracies, an international forum of democratic nations.
However, Congress should avoid the temptation to micromanage U.S. foreign policy. Democracy overseas, in particular, does not lend itself to management by foreign officials, especially diplomats, who are trained to interact with host governments and report back home.
The bill sets out to spread "universal democracy" worldwide, but its expansive legislative language sacrifices foreign policy flexibility and agility. Simply put, it is written too broadly. In particular, the ADVANCE Democracy Act dilutes the executive branch’s constitutional role in conducting foreign policy by over-prescribing analytical frameworks and tools. It assumes that all non-democratic states are de facto hostile to U.S. security. This is simply not the case.
The bill’s language requires mechanically classifying every state as "democratic," "partially democratic," or "non-democratic," ignoring any nuances or differences. In fact, the State Department may wind up fighting not to place states in "negative" categories in order to preserve good relations with host governments in pursuing other U.S. interests, such as trade and security.
Terrorist Threat Ignored. The bill ignores the war on terrorism as the main imperative of U.S. foreign policy. Instead, it should explicitly target countries that allow terrorist organizations to function within their territories or otherwise support terrorism. It should also focus on repressive regimes that ban political opposition, thus breeding terrorism.
The proposed legislation also ignores the organic nature of democracy by not acknowledging the importance of culture and history to the development of democracy in a country. It de facto imposes Western concepts of democracy instead of allowing it to grow locally. The bill ignores the fact that democracy is a process, not an event, and substitutes elections for democracy.
The act also disregards the possibility of electoral outcomes inimical to U.S. foreign policy goals, such as Islamists seizing power through elections in the Middle East, as could happen with the Muslim Brotherhood in Syria and Egypt or Jamaat Islamiya in Pakistan. Elections are not a cure-all for dictatorship. If democracy does not take root, it can open the door to totalitarianism, as Weimar Germany demonstrated in 1933.
Finally, this bill could alienate regimes that remain supportive of U.S. policies and are gradually evolving into democracies, such as Jordan and Morocco.
What Congress Should Do. To advance democracy, Congress should:
Keep the language reaffirming U.S. political support for democratic governance.
Add a clause specifying that support for democratic governance should be pursued after a full assessment of this policy and its value to U.S. vital national interests, including security priorities in the war on terrorism, through an interagency process led by the National Security Council.
Recommend a comprehensive review of financial assistance for the promotion of democracy to ensure efficiency and effectiveness.
Target funds for implementation of democracy programs to the National Endowment for Democracy and non-governmental organizations (NGOs) rather than expand the State Department bureaucracy.
Specify the intelligence community’s role in engaging in political warfare and promoting democracy in countries where U.S. diplomats and NGOs cannot operate.
Focus U.S. promotion of democracy on the Muslim world without harming America’s vital interests in the war on terrorism.
Conclusion. Democracy varies from country to country. It is not "one-size-fits-all." In helping freedom to blossom and take root, the U.S. should do what is possible and necessary, taking into account U.S. national interests while avoiding what is unrealistic.
03-29-2005
Kyrgyzstan’s revolution is widely welcomed in Washington, and has some American policy planners contemplating the possibility of regime change in other Central Asian nations, especially Turkmenistan and Uzbekistan.
The tendency among Bush administration supporters is to see Kyrgyzstan, where Bishkek protesters pushed President Askar Akayev from power on March 24, as part of the trend toward genuine democracy in the former Soviet Union, closely linked to Georgia’s Rose Revolution in 2003, and Ukraine’s Orange Revolution in 2004. [For additional information see the Eurasia Insight archive]. In the Bush administration view, all three revolutions are, at their core, reactions against the “managed democracy” model of government, in which the trappings of a democratic system is grafted on to an authoritarian-minded leadership structure. [For additional information see the Eurasia Insight archive].
Events in Kyrgyzstan help justify Washington’s pursuit of the “Bush Doctrine,” or the globalization of American democratic values, Bush administration supporters contend. Many of those associated with the Republican Party establishment believe the Bush Doctrine served as a major source of inspiration for Kyrgyzstan’s popular protest movement, which began amid allegations of vote-manipulation during the country’s recent parliamentary election. [For background see the Eurasia Insight archive].
Just a few years ago, Washington embraced Akayev as an ally, portraying him as the leader of Central Asia’s most progressive government. Indeed, Kyrgyzstan was at one point hailed as an “island of democracy.” But the very event that brought the United States and Kyrgyzstan closer together, the September 11 terrorist tragedy, also prompted Akayev to embrace an increasingly authoritarian governing style. Faced with a rising threat presented by Islamic radicalism in Central Asia, Akayev sought to stifle political opposition. At the same time, his administration tolerated widespread corruption, while members of family accumulated vast fortunes by using political influence to establish extensive business networks.
In recent years, Akayev, aiming to prop up his authority, played a double-game involving the United States and Russia. Following the September 11 tragedy, the Kyrgyz government granted the US military basing rights at the Manas air field outside Bishkek. [For background see the Eurasia Insight archive]. In late 2003, Akayev welcomed the opening of a Russian base in Kant, also outside Bishkek. In hosting the two bases, Akayev apparently hoped to secure increased support for his administration by playing the two regional powers off each other.
Having soured on Akayev’s conduct, Washington policy planners were not especially sorry to see his administration toppled. Akayev has not yet formally resigned and is now living in exile outside of Moscow. The leaders of Kyrgyzstan’s provisional government – including interim Prime Minister Kurmanbek Bakiyev, interim Interior Minister Feliks Kulov and interim Foreign Minister Roza Otunbayeva – are all familiar faces in Washington, and Bush administration officials appear to believe that a close US-Kyrgyz political relationship can now be reestablished.
The revolutionary turn of events in Kyrgyzstan has prompted some Bush administration officials to wonder whether more “democratic dominos” could fall in Central Asia in the near future. Frustration in Washington is running high with President Islam Karimov in Uzbekistan. Like Akayev, Karimov forged a close strategic relationship with the United States during the early stages of the global anti-terrorist campaign. [For background see the Eurasia Insight archive]. However, Washington’s has grown increasingly annoyed with Karimov’s hard-line domestic political policies, as well as his intransigent resistance to implementing long-promised economic reforms. [For background see the Eurasia Insight archive]. Many policy makers also see the erratic behavior of Turkmenistan’s leader, Saparmurat Niyazov, as a regional security liability.
A high-level US National Security Council official suggests that Karimov, Niyazov and other authoritarian leaders may be digging their own political graves with their absolute refusal to ease up on repression and to encourage reforms in their respective nations. A major source of concern in Washington is that hard-line governmental practices in Central Asia are helping to swell the ranks of Islamic extremist groups, including Hizb-ut-Tahrir. [For background see the Eurasia Insight archive].
Washington policy makers are relieved that the revolution in Kyrgyzstan proved to be relatively bloodless, with only a handful of deaths occurring during the March 24 protests and subsequent looting spree. Most are well aware that if the regimes in Uzbekistan and Turkmenistan end up confronting mass protests movements, security forces could be issued orders by embattled political leaders to shoot.
At this stage, US officials are engaging members of the Kyrgyz provisional government, discussing ways to promote economic stability and a return to constitutional order. On March 28, the American envoy to Kyrgyzstan, Ambassador Steve Young, met with Bakiyev, and separately with representatives of the Organization for Security and Cooperation in Europe, to explore ways to ensure to conduct of free and fair elections in the coming months. A tentative date for a new presidential election has been set for June 26.
While eager to assist the provisional government in fostering democratic changes, US diplomats have sought to avoid, or downplay questions concerning the legitimacy of the change in Kyrgyzstan’s political order. [For additional information see the Eurasia Insight archive]. Kyrgyzstani authorities -- including Omurbek Tekebayev, speaker of the country’s unicameral parliament – have admitted that recent developments, including the manner in which the provisional government was formed, have not always followed the Kyrgyz constitution. At the same time, Tekebayev and others have defended the provisional government’s formation and its actions so far as politically necessary, given the collapse of Akayev’s administration and Akayev’s departure for Russia.
At State Department briefings both on March 25 and March 28, spokesman Adam Ereli dodged the tangled issue of the provisional government’s legitimacy, specifically whether its leaders followed the rule of law in coming to power. “We’re dealing with reality on the ground [in Kyrgyzstan] with the understanding that what happens should happen consistent with the rule of law, consistent with the will of the Kyrgyz people and supported by the international community.”
02-28-2005
The Russian oil and gas sector’s new paradigm can be summarized in two words: "state domination." The free-market paradigm has been abandoned. In December 2004, the tax authorities bankrupted YUKOS, a major oil company, for alleged tax arrears and sold its main production unit, Yuganskneftegaz, to the state-owned oil company Rosneft, using a straw company as an intermediary. Chinese state banks apparently financed the purchase with $6 billion in loans. To top it off, Rosneft is merging with state-owned Gazprom, the largest natural gas company in the world.
The Bush Administration and U.S. oil companies need to recognize that the Russian energy sector is now operating on a new model of state domination and control. Successful U.S.-Russian energy cooperation depends on the U.S. and Russia arriving at a framework agreement during President George W. Bush’s visit to Russia in May to celebrate the 60th anniversary of the Allies’ victory in Europe. Washington should condition U.S. agreement to Russia’s entry into the World Trade Organization (WTO) on the creation of transparent rules and investment protection for U.S. companies that invest in Russia. President Bush should specifically request that U.S. companies participate in construction of the Murmansk pipeline and the Shtokman natural gas projects in the Barents Sea.
The Kremlin, not the private sector, has become the key decision maker in licensing oil fields, determining the location of pipelines, and approving consortia for production and transportation. The biggest problems in the post-YUKOS Russian oil sector are the intrusive role of the state, overregulation, the violation of property rights, opaque transactions, and xenophobia toward foreign investors. Exxon and Total, a French firm, recently announced that they would scale down involvement in Russia’s oil markets, and capital flight from Russia has increased from $2.9 billion in 2003 to $9 billion-$12 billion in 2004.
Vladimir Putin’s economic adviser Andrey Illarionov called the sale of Yuganskneftegaz the "swindle of the year" and warned that Russia is on its way to joining the Third World economically. While Illarionov was demoted for his candor, he was not fired. Clearly, the Russian elite is deeply divided over energy policy.
Global Ambitions. The Kremlin wants to play a major role in Russia’s domestic and global energy markets while keeping foreign investors at bay. The government-owned Gazpromneft (the combined Gazprom and Rosneft) will be a major global company, bigger than Petroleas de Venezuela (PVDSA) and comparable to Saudi Arabia’s Aramco (both state monopolies), and will become an instrument of Russian foreign policy throughout the region and around the world.
With anti-Americanism on the rise in Moscow, Russia wants to use its energy muscle to develop a more robust presence in the Commonwealth of Independent States, Europe, and Asia. It is buying up strategic infrastructure companies, such as pipelines, refineries, electric grids, and ports in Georgia, Hungary, and Ukraine. Russian officials have implied that 20 percent of Yuganskneftegaz would be sold to China. Moscow is enticing Japan to pay for the Nakhodka pipeline--cooperation that could create competition between China and Japan in the Far East. There are hopes in some quarters that Russia’s energy, supplemented by Iran and Venezuela, can power a global coalition with China and the Muslim world to offset U.S. hegemony.
After September 11, 2001, it was hoped that Russia and Eurasia could provide a welcome addition, if not an alternative, to Middle East oil, but this hope seems to have been premature. Russia’s real challenges, beyond government renationalization, are the antiquated pipeline network, which is a government monopoly, and high production and transportation costs. In December 2004, the Russian government committed to building the Taishet-Nakhodka pipeline, a gargantuan 4,300 kilometer project that will cost $12 billion and is designed to provide 80 million tons of oil per year to the Asian Pacific market, including up to 30 million tons to China. The Russian government seems to have lost interest in the pipeline from Western Siberia to Murmansk--the easiest way to export oil to the United States.
The U.S. Response. The Bush Administration and U.S. companies need to push energy cooperation issues at the highest level, beginning at the Bush-Putin Summits in Moscow in May and following up at the G-8 Summit in Scotland in July. Specifically, the Administration should:
Recognize that the Russian energy sector is operating on a new model predicated on total state domination and control. All future dealings in Russia must receive full Kremlin blessings. If the U.S. wishes to maintain an interest in Russian oil, the U.S. government must become a participant in assuring the viability of future deals.
Arrive at a framework agreement on U.S.-Russian energy cooperation. The U.S. should insist that such a framework include a key role for the private sector in developing Russian energy resources and infrastructure. Investment stability and recognition of Western investors’ property rights need to be acknowledged at the highest level.
Condition U.S. agreement to Russia’s entry into the WTO on the creation of transparent rules and investment protection for U.S. companies that invest in Russia.
Request that U.S. companies participate in construction of the Murmansk pipeline and the Shtokman natural gas projects in the Barents Sea.
Conclusion. U.S. and Russia are still "energy compatible." One is an importer and the other, an exporter. But recent events, by diminishing the attractiveness of Russia’s energy investment opportunities, will adversely affect the country’s economic development in the medium and long terms. In addition, Russia’s decision-making elite is split between those who view the takedown of YUKOS as a heavy-handed operation that caused unacceptable collateral damage and those who believe that the end justified the means. Statism and opacity conceal corruption; and nationalist rhetoric covers up protectionism, backwardness, greed, and graft. As a WTO candidate and G-8 member, Russia cannot afford any of these.
02-23-2005
MOSCOW -- Meetings with key Russian officials in this town last week reveal that the Putin Administration is facing a crisis of confidence. Russian Prime Minister Mikhail Fradkov’s Cabinet survived a Duma vote of no confidence on February 9th, but the real target of the abuse heaped on the Prime Minister by the nationalist and leftist opposition parties, which are artifacts of power elites, was never in doubt: Mr. Putin himself.
President Bush’s summit with Mr. Putin in Bratislava Thursday February 24th will be the most difficult meeting two men ever had. One year after Putin handily won a second presidential term, his domestic and foreign challenges are snowballing, and his aura of an almost-superhuman invincibility is quickly dissipating. This is not to say, however, that Putin should be looked down upon or counted out: he is still in control.
Moscow politicians are uneasy with the country’s perceived lack of domestic and foreign policy direction. Consequently, a 2008 transition to a successor hand-picked by Putin is no longer a sure thing. Neither is passage of constitutional-legislative changes that would guarantee Putin’s continued rule as Prime Minister after two presidential terms -- with enhanced powers, such as control of defense, the security services, and the legal system.
Russia’s political malaise has set in despite high oil prices and a robust GDP growth rate of around 7 percent. Still, a 20 percent drop in Putin’s popular support leaves one to speculate how quickly the situation could deteriorate if oil prices tumbled. The climate of stagnation and uncertainty manifests itself in numerous areas, including failure to attain economic growth to realize Putin’s proclaimed goal of doubling the GDP by 2010. The elites perceive this as a failure to achieve an important national target. Deteriorating investor confidence quadrupled capital flight in 2004.
The state power is monopolized by a small group of Putin loyalists, primarily from the St. Petersburg security services and mayor’s office. This group has overtaken state-owned companies, the justice system and courts, and even private businesses. If Putin is perceived by his group as too weak, it may attempt to remove him. However, this total control raises stakes for an anti-Putin coalition in the future, and increases the incentive to dilute or terminate the power of the St. Petersburg group -- through the ballot box or by other means if necessary.
There is a widespread perception in Moscow that the current Prime Minister Fradkov and his cabinet failed. Most recently, the Cabinet bungled social welfare reform that was supposed to replace in-kind benefits for the elderly with monetary payments. Inadequate planning and poor execution led to the largest campaign of street demonstrations since Putin’s coming to power in 1999. The forthcoming reform of subsidized housing and utilities could further damage the regime’s prestige. Putin’s attempts to appease the protesters by paying off officers, military retirees, and students, while simultaneously boosting the FSB and military budgets, have created an impression of weakness and indecision.
Protectionism and economic nationalism are rampant. Recently, the Minister of Natural Resources announced that "non-Russian resident companies" will be denied access to Russian natural resources, such as oil, gold and other minerals. This approach will allow Russian companies with dubious connections to the Ministry or the Kremlin to successfully bid for lucrative licenses while excluding foreigners. Already, the YUKOS affair has cost Russia tens of billions of dollars of opportunity cost in lost investment. Putin’s chief economic advisor, Andrey Illarionov, openly termed the sale of the YUKOS main production unit, Yuganskneftegaz, the "swindle of the year", while Putin’s Minister of Economic Development German Gref has publicly called for its return Yugansk to YUKOS.
Russia’s policy fiascos are multi-dimensional. Private, corporate, or bureaucratic interests trump raison d’etat in a manner the regime of Nicholas II did in the early 20th century. Policy makers allow themselves to fall back on Soviet clich?s, or even on their czarist era great power precursors. Thus, Russia opposes the US policy on Iranian nuclear disarmament, "not because of Iran, but because it pushes us into a corner," as one senior Russian lawmaker put it. He added that US unilateral policies based on military superiority are unacceptable not only to Russia, but also to China, France and Germany.
The era of quick US fixes in Russia is over, and Washington’s advice is no longer welcome -- if it ever was. Give-and-take, however, may still be the best diplomatic tool, as senior Russian officials say that many issues on the bilateral agenda are negotiable.
US interests in Russia include cooperation on terminating Iran’s nuclear arms program; non-proliferation; the global war on terrorism; Russian membership in WTO; and bilateral energy and economic cooperation. President Bush should maintain a solid working relationship with Putin, while supporting the forces of democracy, tolerance, open markets and civil society in the long term. This balancing act is not an easy task.
The US should request Moscow’s cooperation in neutralizing the Iranian nuclear weapons program as it will threaten Russia. Washington should foster Russian cooperation in the former Soviet areas, including troop withdrawals and bringing to closure "frozen conflicts" in Moldova, Georgia, including Abkhazia, and Nagorno-Karabakh. The US should condition progress of Russia’ WTO accession talks upon dismantling state monopolies and reversing opaque and protectionist economic practices. Finally, Washington should express support for democratization of mass media and encourage Russia to promote private and public non-state TV channels. Finally, Bush should clarify that the US is not seeking its dismemberment and fully recognizes its territorial integrity from Kaliningrad in the West to Dagestan in the South.
In Bratislava, President Bush needs to emphasize security, such as disarming of Iran and non-proliferation. Lecturing about democracy may not be effective; carrots-and-sticks may work better. Russia is facing a period of political instability as the power elites jockey for positions in the 2007-2008 electoral cycle. The US should not pick favorites, but rather champion transparency, democracy and business cooperation, while protecting its own security and economic interests in Russia and Eurasia.
02-21-2005
MOSCOW — President Bush’s summit with Vladimir Putin in Bratislava Thursday Feb. 24 will be the most difficult meeting two men ever had. A year after Mr. Putin handily won a second presidential term, his domestic and foreign challenges are snowballing, and his aura of an almost-superhuman invincibility is quickly dissipating. This is not to say Mr. Putin should be looked down upon or counted out: He is still in control.
Meetings with key Russian officials in Moscow reveal that the Putin administration faces a crisis of confidence. Russian Prime Minister Mikhail Fradkov’s Cabinet survived a Duma no-confidence vote Feb. 9. But the real target of the abuse heaped on the prime minister by the nationalist and leftist opposition parties, which are artifacts of power elites, was never in doubt: Mr. Putin himself.
Moscow politicians are uneasy with the country’s perceived lack of domestic and foreign policy direction. Consequently, a 2008 transition to a successor hand-picked by Mr. Putin is no longer a given. Neither is passage of constitutional-legislative changes to guarantee Mr. Putin’s continued rule as prime minister after two presidential terms — with enhanced powers, such as control of defense, the security service and the legal system.
Russia’s political malaise has set in despite high oil prices and a robust growth of around 7 percent in the gross domestic product. Still, a 20 percent drop in Mr. Putin’s popular support leaves one to speculate how quickly the situation could deteriorate if oil prices tumbled.
The stagnation and uncertainty manifest themselves in many areas, including failure to attain economic growth to realize Mr. Putin’s goal of doubling the GDP by 2010. Elites perceive this as failure to achieve an important national target. Deteriorating investor confidence quadrupled capital flight last year.
The state power is monopolized by a small group of Putin loyalists, primarily from the St. Petersburg security services and mayor’s office. This group has overtaken state-owned companies, the justice system and courts, and even private businesses. If Mr. Putin’s group perceives him as too weak, it may try to remove him. However, this total control raises stakes for an anti-Putin coalition in the future, and increases the incentive to dilute or terminate St. Petersburg group’s power — by the ballot box, or other means if necessary.
There is a widespread perception in Moscow that the current Prime Minister Fradkov and his Cabinet failed. Most recently, the Cabinet bungled social welfare reform that was supposed to replace in-kind benefits for the elderly with monetary payments.
Inadequate planning and poor execution led to the largest street demonstrations since Mr. Putin came to power in 1999.
The forthcoming reform of subsidized housing and utilities could further damage the regime’s prestige. Mr. Putin’s attempts to appease the protesters by paying off officers, military retirees and students, while boosting FSB and military budgets, have created an image of weakness and indecision.
Protectionism and economic nationalism are rampant. Recently, the minister of natural resources announced that "non-Russian resident companies" will be denied access to Russian natural resources, such as oil, gold and other minerals. This approach will allow Russian companies with dubious connections to the Ministry or the Kremlin to successfully bid for lucrative licenses while foreigners are excluded.
Already, the YUKOS affair has cost Russia tens of billions of dollars in lost investment. Mr. Putin’s chief economic adviser, Andrey Illarionov, openly termed the sale of the YUKOS main production unit, Yuganskneftegaz, the "swindle of the year," while Mr. Putin’s Minister of Economic Development German Gref has publicly called for return of Yugansk to YUKOS.
Russia’s policy fiascos are multidimensional. Private, corporate or bureaucratic interests trump raison d’etat as in the regime of the early 20th century’s Czar Nicholas II. Policymakers fall back on Soviet cliches, or even on their czarist-era great-power precursors. Thus, Russia opposes U.S. policy on Iranian nuclear disarmament, "not because of Iran, but because it pushes us into a corner," as a senior Russian lawmaker put it. He said U.S. unilateral policies based on military superiority are unacceptable not only to Russia, but to China, France and Germany.
The era of quick U.S. fixes in Russia is over, and Washington’s advice is no longer welcome — if it ever was. Give-and-take, however, may still be the best diplomatic tool, as senior Russian officials say many issues on the bilateral agenda are negotiable.
U.S. interests in Russia include cooperation on terminating Iran’s nuclear arms program; nonproliferation; the global war on terrorism; Russian World Trade Organization membership; and bilateral energy and economic cooperation.
President Bush should maintain a solid working relationship with Mr. Putin, while supporting the forces of democracy, tolerance, open markets and civil society in the long term. This is not an easy balance to achieve.
The U.S. should request Moscow’s cooperation in neutralizing the Iranian nuclear weapons program, since it will threaten Russia. Washington should foster Russian cooperation in the former Soviet areas, including troop withdrawals and closure of "frozen conflicts" in Moldova, Georgia, including Abkhazia, and Nagorno-Karabakh. The U.S. should condition progress of Russia’s WTO accession talks on dismantling state monopolies and reversing opaque and protectionist economic practices.
Finally, Washington should express support for democratization of mass media and encourage Russia to promote private and public nonstate TV channels. Finally, Mr. Bush should clarify the United States is not seeking Russia’s dismemberment and fully recognizes its territorial integrity from Kaliningrad in the west to Dagestan in the south.
In Bratislava, President Bush needs to emphasize security, such as nonproliferation and disarming Iran. Lectures on democracy may not be effective; carrots-and-sticks may work better.
Russia faces political instability as the power elites jockey for positions in the 2007-2008 electoral cycle. The U.S. should not pick favorites, but rather champion transparency, democracy and business cooperation, while protecting its own security and economic interests in Russia and Eurasia.
10-15-2004
President Alexandr Lukashenka of Belarus has added a referendum to the October 17 parliamentary elections, asking Belarusians to allow him to participate in the next presidential election (prohibited by his own tailor-made constitution) and to remove the presidential term limits from the constitution.
Lukashenka, an authoritarian, anti-Western populist and former collective farm boss, took office illegally after the 1996 constitutional coup. If the October 17 referendum passes, he will have taken a giant step toward becoming a "president for life"--an unseemly sight in democratic Europe. Not only could he run for a third term in 2006, but for an indeterminate number of terms thereafter. This would allow him to remain in office indefinitely--particularly given his policy of preventing political parties from competing in parliamentary elections, having equal access to the media, or placing their own observers on local and regional electoral commissions as provided by law.
The authoritarian Belarus has become a near-pariah state in Europe, especially after Lukashenka caused several opposition leaders to "disappear" in the late 1990s. Sources in Minsk confirmed that the dictator’s henchmen murdered them. The U.S. and the EU countries responded by jointly agreeing to deny travel visas to a list of Belarusian officials from Lukashenka’s inner circle. This may be a step in the right direction, but it is insufficient. Lukashenka can simply retaliate by banning U.S. and EU officials from visiting Belarus.
Moscow Apprehensive. Some in the Putin Administration are also apprehensive about Lukashenka and resent the basket-case Belarusian economy that is an albatross around their country’s neck. Moreover, the Putin Administration is aware that Lukashenka nurses an ambition to engineer a unification between Russia and Belarus in such a way that he could run for president of Russia. In fact, Lukashenka has expressed his admiration for Hitler and Stalin.
Russians should know that, if they absorb Belarus or even tolerate the abuses of power, the influence of Lukashenka’s authoritarianism may exacerbate their own country’s uneasy relationship with democracy. Furthermore, the world’s indifference to Lukashenka’s power grab may encourage President Vladimir Putin’s entourage to advise Putin to remain in power after 2008, when his term ends.
Cooperation with Europe. The U.S. and Europe have numerous interests at stake in Belarus, including how its failed democracy may influence its neighbors, particularly Russia and Ukraine, which will elect its next president on October 31. Belarus is also suspected of selling weapons to rogue regimes, such as Iran and Saddam’s Iraq. Anti-Western arms dealers in Minsk may also be selling weapons to terrorist groups around the world, including those fighting in Iraq.
However, the West has some powerful tools for fighting the Belarusian dictator and his henchmen. In the past, the U.S. has worked with allies such as Italy and the U.K. to stop overseas shipments of Ukrainian arms to the Balkans in violation of international sanctions. Furthermore, the U.S. has never recognized an absolute sovereign immunity defense, which means heads of state can be prosecuted under U.S. law. The U.S. also has investigated leaders from the post-Soviet states, including Ukrainian President Leonid Kuchma (and most of his senior team) and the late Azerbaijani President Heydar Aliev. Former Ukrainian Prime Minister Pavlo Lazarenko and former Panamanian President Manuel Noriega have been convicted in U.S. courts. There are many opportunities for Washington, London, Paris, Berlin, and Brussels to cooperate on Belarus.
On October 6, Congress passed the Belarus Democracy Act of 2004 (H.R. 854), sponsored by Representative Chris Smith (R-NJ) and others, to fund a broad range of measures to support democracy in Belarus. Although this is a beginning, the executive branch and Congress need to do more. Specifically, they should:
Denounce publicly Lukashenka’s violations of the constitution and electoral procedures, and the State Department should amplify its criticism of Belarus’s flawed political system.
Declare , with the EU, that the referendum and parliamentary elections are illegitimate if observers from the Organization for Security and Co-operation in Europe find election falsification or other violations.
Use domestic and international law enforcement agencies, such as Interpol, in cooperation with EU members, to coordinate criminal investigations into homicides, money laundering, and illegal arms trading linked to the Lukashenka regime.
Investigate the disappearances of Lukashenka’s political opponents, provided there is a jurisdictional nexus to the U.S. and/or Europe. Both the U.S. Justice Department and its European counterparts can do so. Moreover, Europe and the U.S. could initiate criminal proceedings against those in the president’s circle who ordered and participated in the murder of opposition politicians and journalists.
Seize assets of Lukashenka and his inner circle through criminal proceedings against illegal arms sales and money laundering operations if Belarus violated U.S. or international sanctions. The U.S. and EU would be entitled to enforce such sanctions even if the violations did not occur in America or Europe.
Fund , together with the EU, an international broadcasting operation by opposition radio and television stations from countries around Belarus, and expand people-to-people and educational exchanges.
Consult with Russia regarding possible political changes that would make Belarus more democratic and predictable. Such a coordinated effort would benefit Russia by making the transit route for Russian gas to Europe less prone to Lukashenka’s interference and would eliminate the need for Russia to support the Belarusian economy with subsidized natural gas at a cost of over $2 billion per year.
Conclusion. Lukashenka thinks he is the permanent ruler of Belarus, but the people of Belarus deserve better. From day one, the next Congress and Administration should provide leadership to help make Belarus free.
08-18-2004
After open-collar, red-shirt-clad Hugo Chavez claimed a victory in a referendum, the global oil outlook is gloomier than before. Geopolitically, Venezuela has become a flashing red light.
During his six years in power, Mr. Chavez has increasingly politicized oil, nationalized and mismanaged the national oil company PDVSA, and used its finances as a political kitty (up to $3.7 billion this year alone) to buy off the poor. Beyond Venezuela, he sees himself replacing Fidel Castro as the leader of Latin America’s radical left, opposing democracy, free markets, and American influence.
Mr. Chavez uses oil as a political tool to advance his hemispheric and global ambitions. He played a key role in the 1999 and 2003 decisions of the Organization of Petroleum Exporting Countries to cut production and coordinate policy aimed at driving oil prices higher. In 2000, Mr. Chavez visited Iran, Iraq, Libya and Saudi Arabia, further agitating for production cuts and quota enforcement. The year, he promised Fidel Castro 53,000 barrels of subsidized oil a day in exchange for the services of Cuban teachers — and intelligence experts.
Until the Chavez presidency, oil-rich Venezuela had been at peace with its neighbors and a firm American ally.
The situation changed in 1998. As a presidential candidate, Mr. Chavez campaigned against the "savage capitalism" of the United States. He allegedly aided Afghanistan’s Taliban government following the September 11, 2001, attack on the United States. Mr. Chavez also proclaimed Cuba and Venezuela were "called upon to be a spearhead and summon other nations and governments" to fight free market capitalism.
After a June 24, 2004, U.S. Senate hearing on the Venezuela situation, Mr. Chavez called U.S. congressmen "dogs of war, those that intend to dominate the world, those imperialists."
In Venezuela’s immediate area, Mr. Chavez has aided the narco-terrorist Revolutionary Armed Forces of Colombia (FARC). In Bolivia, Mr. Chavez supported indigenous activists who led an uprising that forced elected President Gonzalo Sanchez de Lozada from office in October 2003. And in El Salvador, Venezuelan troops on a post-earthquake mission urged villagers to support the leftist Farabundo Marti National Liberation Front.
Mr. Chavez’s Fifth Republic Movement (MVR) party is allied with the Brazil-based Foro de Sao Paulo — an organization of some 39 rabidly leftist parties and guerrilla organizations from 16 countries in the hemisphere. It opposes U.S. counternarcotics collaboration with Latin America and the Free Trade Area of the Americas, which it characterizes as a U.S. "annexation."
In November 2003, Mr. Chavez inaugurated the first Peoples Bolivarian Congress, whose cells now spy on neighbors in Venezuela. It brought together 400 representatives from 20 Latin American countries expressly to condemn the policies of the United States, the U.S. Southern Command, the International Monetary Fund and the World Bank.
But it is his handling of oil, which reveals an agenda of destructive populism. During its 20-year history PDVSA built a reputation for smooth operation and competence. Even though it nationalized its oil industry in 1975, exploration and production were reopened to foreign participation in 1996.
The 2002-2003 national strike devastated the oil giant. Some 35,000-40,000 skilled workers, including fire fighters, walked out while spillage and fires ensued. Daily production dropped from 3 million barrels (mbd) to 600,000 barrels. Mr. Chavez fired 18,000 skilled managers and workers, further undermining PDVSA’s precarious situation.
Mr. Chavez arrested oil sector reforms and began expropriating foreign assets. His 1999 constitution prohibited future PDVSA privatization; his 2001 Hydrocarbon Law doubled royalties on foreign operators from 16.67 percent to 30 percent and required a majority government stake in future joint ventures. During the 2002 strike, the Venezuelan military seized an information technology company jointly owned by PDVSA and Virginia-based Science Applications International Corporation (SAIC). Such expropriations jeopardize the investments of international major oil companies — such as Mobil, ChevronTexaco and ConocoPhillips — in oilfield development projects like those in Venezuela’s Orinoco basin.
However, while PDVSA projects $37 billion in new investment, including $10 billion from international companies, Mr. Chavez’s action threaten its 2004-2009 development plan.
Today PDVSA depends on U.S. refineries, which partially supply its CITGO gas station chain. PDVSA owns refining facilities in Louisiana, Illinois, Texas, New Jersey and Georgia, as well as several installations in Europe. Irresponsible tampering with U.S. and international company activities by the Chavez government could prompt legal proceedings against Venezuelan holdings in the West.
Despite recent high oil prices that have provided a fresh infusion of cash, PDVSA remains in disarray. This year’s internal investment fell from $5 billion to $4.3 billion while salaries went up 60 percent despite no apparent increase in productivity or number of employees. Without reinvestment in equipment and maintenance, PDVSA will not be able to maintain current production levels.
Besides supplying the United States with 1.5 million barrels of oil a day (mbd), Venezuela provides most of the petroleum for U.S. allies in the Caribbean and Central America.
Mr. Chavez has the luxury of cutting deliveries to those who opposed him. Caribbean leaders know opposing Mr. Chavez could result in high prices or delivery cuts. In September 2003, Mr. Chavez punished the Dominican Republic for harboring former President Carlos Andres Perez — who "might" conspire against his government. He stopped oil deliveries, prompting a temporary energy crisis.
Beyond the hemisphere, he is preparing to shift exports to an increasingly oil-thirsty China, making Venezuela less dependent on U.S. petroleum sales. A deal signed on July 14, 2004, to build oil and gas pipelines between the Maracaibo Basin in Venezuela and the Caribbean and Pacific coasts in Colombia would enable Venezuela to ship petroleum to China without using the Panama Canal. This would make it more critical than ever for Mr. Chavez to secure a pliant government in Colombia to keep this facility operating in Venezuela’s interest.
By destabilizing and replacing democratic governments in hydrocarbon-rich Bolivia, Colombia and Ecuador, he also could achieve a regional energy monopoly that could support rogue regimes and frustrate U.S. interests in the hemisphere. Mr. Chavez brought Cuban intelligence advisers to facilitate what may become a Castro-style dictatorship plus petrodollars.
For years, Republicans have tried to shove Latin America to the foreign policy back burner, while Democrats have feigned interest with insignificant and ineffective foreign aid programs. It’s time for U.S. leaders to stop pretending nothing is wrong. Mr. Chavez wants to harm the U.S. where it hurts the most — in the wallet and the oil tank.
President Bush had better watch out.
08-12-2004
Venezuelan President Hugo Ch?vez is systematically leading his country into dictatorship by provoking internal conflict and characterizing his internal opponents as traitors. Beyond Venezuela, he sees himself replacing Fidel Castro as the leader of Latin America’s radical left--uniting the region against U.S.-style democracy, free markets, and American influence.
Ch?vez derives popular support from fellow ideologues and a small but committed segment of Venezuela’s largely poor population, and he is beginning to use the hemisphere’s dependence on Venezuelan oil to encourage leftist movements elsewhere and to pressure other countries into acquiescing to his activities. By politicizing and mismanaging the state petroleum industry, Ch?vez is jeopardizing vital U.S. interests in the Western Hemisphere.
The good news is that the majority of Venezuelans do not support Ch?vez’s evolving dictatorship. Opponents have succeeded in petitioning for a referendum to recall him from office on August 15. Democratic governance and free markets are making slow strides in Latin American countries formerly ruled by dictators. While oil resources give him power, countries can buy oil from other vendors.
The bad news is that Ch?vez has consolidated his hold over Venezuela’s public institutions and is manipulating the electoral system in his favor. Increasing global demand for petroleum has given him an international power base, and his anti-American political agenda--fueled by petrodollars--could threaten nearby fledgling democracies and flourishing markets.
To strengthen Venezuela’s thread-like hold on democracy, cut the potential for regional destabilization, and deter manipulation of energy markets, the United States should help to keep Venezuela in the hemisphere’s democratic fold; promote private property rights and the rule of law, including in the natural resources sector; develop alternate sources of petroleum; and engage Latin America more effectively to help allies strengthen democratic institutions and market economies.
Reform, Then Reversal
Venezuelan leaders have never permitted either true representative democracy or really free markets. Until 1958, Venezuela was ruled by generals who first taxed coffee exports and then--after its discovery in 1917--petroleum. They created a welfare state and led citizens to believe that all could benefit from this underground treasure. In 1958, the country rejected military dictatorship in favor of civilian-elected rule. The first president, Romulo Betancourt, tried to institute free-market policies, but an economy and political system run by insiders and ratified by elections proved resistant to change.
During the 1970s, Venezuela nationalized its oil industry and gradually incurred increasing debt through runaway government spending on social programs designed to placate the middle class and the poor. The roller coaster of rising and falling market prices failed to sustain subsidies and programs to provide menial jobs to otherwise unemployed citizens. As a result, the average Venezuelan actually became poorer.
In 1992, a band of army officers led by Lt. Col. Hugo Ch?vez Fr?as attempted to overthrow President Carlos Andr?s P?rez. Although court-martialed and jailed, Ch?vez emerged a hero. In 1998, he was elected president on promises to clean out corruption and reduce poverty. Once in office, Ch?vez promoted a new consitution to consolidate his powers and began to constrain the business community, civil society, and rival politicians.
By 2001, Venezuelans had begun to protest his attempts to nationalize the Venezuelan Workers Union and turn schools into political indoctrination centers with Cuban curricula and teachers. Massive demonstrations followed in 2002. When 150,000 protesters marched on the presidential palace on April 11, Ch?vez reportedly ordered snipers to fire on them. Top generals convinced him to resign and replaced him with a hastily assembled junta headed by protest organizer and Chamber of Commerce and Industry President Pedro Carmona. The Rio Group of 19 Latin American presidents1 denounced the event as a coup, while the United States guardedly urged Venezuelans to restore democratic order.
Accounts of what happened next vary, but the junta attempted to dissolve the National Assembly and dismiss other elected officials. The military withdrew its support for the insurrection and brought Ch?vez back two days after his departure. The president later denied his resignation, and no investigation occurred to reveal what transpired.2 Later, opponents tried to force another resignation by staging a massive national strike (December 2002-January 2003) that spread to the state oil company, causing a temporary shutdown in January 2003. When that failed, more democratically minded detractors prevailed to seek a referendum on his presidency.
From Friend to Foe
Until the Ch?vez presidency, oil-rich Venezuela had been at peace with its neighbors and a firm American ally. Shortly after coming to power in Cuba in 1959, Fidel Castro visited President Betancourt in Caracas and asked him to join an alliance against the United States. Betancourt refused, and an angry Castro began sending insurgents to overthrow Venezuela’s democracy in 1961. In the 1970s, President Carlos Andr?s P?rez discouraged further external aggression by improving relations with Cuba, as well as the Soviet Union and China, while remaining a friend to the United States.3
But the situation changed in 1998. As a presidential candidate, Hugo Ch?vez campaigned against the "savage capitalism" of the United States. On August 10, 2000, he became the first foreign leader to visit Saddam Hussein since the Gulf War, and he allegedly aided Afghanistan’s Taliban government following the September 11, 2001, attack on the United States.4 At the same time, Ch?vez said that Cuba and Venezuela were "called upon to be a spearhead and summon other nations and governments" to fight free market capitalism.5
He cut back U.S.-Venezuelan military cooperation on counternarcotics by refusing overflights of U.S. aircraft tracking drug smugglers. In May 2004, Defense Minister Jorge Garc?a ordered the U.S. military mission to leave the Fuerte Tiuna offices that it had occupied for the past 50 years.6
Since his brief departure from power in April 2002, Ch?vez has charged the United States with complicity in what he now calls an attempted coup against him. After a June 24, 2004, U.S. Senate hearing on the situation in Venezuela, Ch?vez characterized U.S. Congressmen as "dogs of war, those that intend to dominate the world, those imperialists."7
Within Venezuela’s immediate neighborhood, reports suggest that Ch?vez has aided the narcoterrorist Revolutionary Armed Forces of Colombia (FARC). Videos and documents revealed by dissident Venezuelan military officers portray official promises of supplies and refuge as well as the existence of several FARC fronts on the Venezuelan side of the Colombia-Venezuela border.8 In Bolivia, Ch?vez reportedly has close ties to indigenous activists Felipe Quispe and Evo Morales, who helped lead an uprising that forced elected President Gonzalo S?nchez de Lozada from office in October 2003. And in El Salvador, Venezuelan troops sent to help victims rebuild after a devastating earthquake in 2001 were nearly declared persona non grata for allegedly urging villagers to support the leftist Farabundo Mart? National Liberation Front. 9
President Ch?vez’s Fifth Republic Movement (MVR) party is allied with the Brazil-based Foro de S?o Paulo--an organization of some 39 leftist parties and guerrilla organizations from 16 countries in the hemisphere. It shares Ch?vez’s anti-American agenda, opposing U.S. counternarcotics collaboration with Latin America and the Free Trade Area of the Americas, which it characterizes as an annexation of the region to the United States.10
Opening a rival front, Ch?vez inaugurated the first Peoples Bolivarian Congress on November 25, 2003, in Caracas. It reportedly brought together 400 representatives from 20 Latin American countries expressly to condemn the policies of the United States, U.S. Southern Command, the International Monetary Fund, and the World Bank. 11
Oil Politics and Mismanagement
When the United States became a net oil importer in the 1970s, friendly Venezuela was a founding member of the Organization of Petroleum Exporting Countries (OPEC) and a top supplier to the American market. Even though it nationalized its oil industry in 1975, creating the state oil company Petr?leos de Venezuela, S.A. (PDVSA), reform-minded politicians proposed giving back shares to every Venezuelan family while exploration and production was reopened to foreign participation in 1996.
Ch?vez put further reforms on hold and set a precedent by expropriating foreign assets. His 1999 constitution prohibited future PDVSA privatization, while his 2001 Hydrocarbon Law doubled royalties on foreign operators from 16.67 percent to 30 percent and required a majority government stake in future joint ventures.12 During the December 2002 national strike, the Venezuelan military seized an information technology company jointly owned by PDVSA and the U.S.-based Science Applications International Corporation (SAIC).13 Such expropriations could jeopardize the investments of international major oil companies--such as Mobil, ChevronTexaco, and ConocoPhillips--in oilfield development projects like those in Venezuela’s Orinoco basin. According to its 2004-2009 development plan, PDVSA projects $37 billion in new investment, including $10 billion from international companies.14
For the moment, PDVSA is dependent on U.S. refineries, which partially supply its CITGO gas station chain. PDVSA owns refining facilities located in Louisiana, Illinois, Texas, New Jersey, and Georgia as well as several installations in Europe.15 Irresponsible tampering with U.S. and international company activities by the Ch?vez government could prompt legal proceedings against Venezuelan holdings in the West.
Using Oil as a Political Tool
Ch?vez uses oil as a political tool to advance his hemispheric and global ambitions. He played a key role in the 1999 and 2003 OPEC decisions to cut production and coordinate policy aimed at driving oil prices higher. In 2000, Ch?vez visited Iran, Iraq, Libya, and Saudi Arabia, further agitating for production cuts and quota enforcement. The same year, he promised Fidel Castro 53,000 barrels of oil a day on concessionary terms in exchange for the services of Cuban doctors, teachers, and intelligence experts.
Besides supplying the United States with 1.5 million barrels of oil a day (mbd), Venezuela provides most of the petroleum consumed by U.S. allies in the Caribbean and Central America. Their leaders know that opposing Ch?vez in any significant fashion could result in less favorable sales terms or cuts in deliveries. In September 2003, President Ch?vez accused the Dominican Republic of harboring Venezuelans--like former President Carlos Andr?s P?rez--who allegedly might conspire against his government. He then stopped oil deliveries, prompting a temporary energy crisis while Dominican officials scrambled for new suppliers.
Beyond the hemisphere, Ch?vez is preparing to shift PDVSA’s customer base toward Asia and an increasingly oil-thirsty China, making Venezuela less dependent on petroleum sales to immediate neighbors. A deal signed on July 14, 2004, to build oil and gas pipelines between the Maracaibo Basin in Venezuela and the Caribbean and Pacific coasts in Colombia may seem innocuous, but it would enable Venezuela to ship petroleum to China without using the Panama Canal. This would make it more critical than ever for Ch?vez to secure a pliant government in Colombia to keep this facility operating in Venezuela’s interest.16 Ch?vez would thus have the luxury of cutting deliveries to those who opposed him, forcing them to seek other sources at greater cost. By destabilizing and replacing democratic governments in hydrocarbon-rich Bolivia, Colombia, and Ecuador, he also could achieve a regional energy monopoly that could support rogue regimes and frustrate U.S. interests in the hemisphere.
Mismanagement Threatens the Future
During its 20-year history before Ch?vez, PDVSA built a reputation for smooth operation and competence, but the 2002-2003 national strike devastated the oil giant. Some 35,000-40,000 skilled workers, including fire fighters, walked out while spillage and fires ensued. Production capacity dropped from three mbd to 600,000 barrels. Ch?vez fired 18,000 skilled managers and workers, further undermining PDVSA’s precarious situation.17 To regain and maintain pumping capacity at an estimated 2.5 mbd, PDVSA engineers reportedly "goose" wells by pumping air and water into them to coax Venezuela’s viscous petroleum to the surface, endangering the long-term viability of existing fields.
Despite recent high oil prices that have provided a fresh infusion of cash, PDVSA remains in disarray. Venezuelan economist Gustavo Garc?a calculates that this year’s internal investment fell from $5 billion to $4.3 billion while salaries went up 60 percent despite no apparent increase in productivity or number of employees.18 Without reinvestment in equipment and maintenance, PDVSA will not be able to maintain current production levels. Moreover, Ch?vez has reportedly channeled between $1.6 billion and $3.7 billion from PDVSA into a special account that he is using to finance social programs to influence voters in the upcoming referendum on his presidency.19
Recall and Prospects
President Ch?vez’s Bolivarian Constitution contemplates a referendum process for recalling public officials. Fortunately, opponents of various political stripes--including some former Ch?vez allies--have agreed to settle differences with the president at the ballot box. The bad news is that Ch?vez has tried to intimidate and divide opponents or otherwise block a vote.
Two months after President Ch?vez’s brief departure from office in 2002, the government invited former U.S. President Jimmy Carter and later the Organization of American States (OAS) to broker talks between the administration and the opposition, leading to a binding referendum as an alternative to civil conflict. Shortly thereafter, the National Electoral Council (CNE) was packed with Ch?vez allies who blocked several efforts for a recall.
Finally, the CNE allowed an official period for gathering signatures--known as the firmazo--in late 2003. Once organizers collected names on government forms, it changed the rules on how the forms should have been filled out and then dragged out a review process to "repair" or rehabilitate some of the disqualified signatures.
In May 2004, under pressure from the OAS and the Carter Center, Ch?vez grudgingly allowed a re-examination, known as the reafirmazo, of nearly a million signatures thrown out by the partisan CNE. It turned out that petition organizers had 2.56 million names--130,000 more than were needed to trigger a recall. As a result, the CNE scheduled a referendum for August 15, 2004.
For its part, Venezuela’s opposition umbrella group--the Democratic Coordinator--has united to support a 10-point platform to create jobs, attract investment, fight poverty, strengthen local government, institute checks and balances, rebuild public institutions, and open the government to citizen participation. Moreover, if Ch?vez loses the referendum, opponents promise to hold a primary to select their candidate. Ch?vez has declared that he will run again for his Fifth Republic Movement party even though the constitution is unclear on whether he can do so.
Despite the opposition’s willingness to play by the rules, many signs point to possible fraud by the government, even though some polls show the president with a 50-50 chance of winning the referendum. Specifically:
The CNE will use new touch-screen voting machines from a company of which it is part owner. Technical glitches and power outages could disenfranchise thousands, thus producing fewer votes than needed to recall the president.20 Rigged software could alter vote totals. Similar touch-screen systems without paper trails are under fire in the United States.21
Government teams in military trucks have circulated in pro-Ch?vez neighborhoods, credentialing new voters. No such efforts have been made in opposition barrios. The regime also has been naturalizing foreign residents at a frantic pace--some 236,000 from May through June in a program called "Misi?n Identidad."22
Ch?vez continues to intimidate opponents. On numerous occasions, he has accused them of trying to assassinate him. National police claim they found fake ID cards, computers, and printers in raids on offices of an opposition party in June 2004, but witnesses say they saw agents carry in suspicious bundles. The government even charged the directors of Sumate, a non-governmental organization (NGO) that helped organize the referendum, with conspiracy to commit treason for accepting a $53,000 grant for electoral observation from the U.S.-funded National Endowment for Democracy even though the Ch?vez administration has accepted thousands of doctors, teachers, and intelligence agents from Cuban dictator Fidel Castro.
Ch?vez has earmarked from $1.6 billion to $3.7 billion worth of state oil income to spend on poor voters during the campaign. He commands radio and TV stations to broadcast his speeches without equal time for opponents. In June, he revealed plans to enlist millions of "patriotic" electoral patrols to surveil neighborhoods under the authority of a campaign committee of high government officials known as the Comando Maisanta.
Curbing Mischief
Hugo Ch?vez is no democrat. At home, he has concentrated the powers of the state in his presidency, expropriating budgets from municipal governments, strengthening the national police, and packing the Supreme Court with cronies.23 Abroad, he appears to be in the initial stages of creating a confederation of nations opposed to the United States that is sustained by oil and united by an improvised nationalist ideology. History suggests a future of conflict and poverty, both for those under his rule and for all those who are allied with him.
Other countries in Latin America share some of Venezuela’s economic characteristics--abundant resources and high rates of poverty that make them easy prey for populist demagogues. A bloc of states united in leftist authoritarianism and oil extortion could ignite the flames of armed confrontation again in the Western Hemisphere. To avoid needless conflict as well as a possible energy crisis, the United States should help direct Venezuela back toward democracy, develop alternate sources of petroleum, and engage Latin America more effectively to help allies strengthen democratic institutions and market economies.
Specifically, the United States must:
Encourage a free and fair electoral process in Venezuela’s August 15 referendum. The Organization of American States, the Carter Center, and observers from other countries and international organizations sympathetic to Ch?vez have been invited to witness the vote. It is in America’s interest to support the OAS observer mission and to urge all impartial monitors to uphold electoral standards that protect Venezuela’s citizens from partisan intimidation, ensure equal party representation at the polls, guarantee fair opportunity to vote, permit equal access to broadcast and print media by all sides, allow observers freedom to monitor and report on all aspects of the vote, and ensure an independent audit and paper trail for any voting machines used.
The United States should urge allies to condemn fraud by any party, but if fraud is committed by the government and the outcome is altered as a result, OAS members should be ready to invoke the OAS Democratic Charter to pursue a rectification or suspension of Venezuela’s membership. The World Bank should be poised to suspend loans to Venezuela as well. However, if a fair vote results, all parties and observers should respect the outcome.
Constrain mischief if Ch?vez remains in office. Whether or not he wins the referendum, wins a follow-on election, or manipulates the process to remain in office, the United States, the OAS, and democratic neighbors must not relent in applying pressure on Venezuela to abide by norms contained in the Democratic Charter. U.S. Members of Congress should increase visits with counterparts in the National Assembly to advocate legislative oversight to curb executive branch excesses. The U.S. National Endowment for Democracy should continue funding election observers and local NGOs committed to strengthening democratic institutions. The United States and democratic allies should insist that Ch?vez dismantle and disband armed partisan groups such as the Bolivarian Circles, which clearly violate democratic principles. The same community should resist any attempt by Ch?vez to subvert democracy in neighboring countries.
Encourage timely political and economic reforms . If Ch?vez’s opponents win the referendum and subsequent presidential elections, the United States should support the OAS in continuing to monitor human rights and civil liberties to prevent reprisals by violent loyalists. Washington and allies such as the Group of Friends (Brazil, Chile, Mexico, Portugal, and Spain)24 should be willing to support reforms to roll back Chavez’s police state and jump start a new market economy. The task will be daunting: to reverse decrees allowing expropriation of private property, repeal unduly restrictive business laws, restore local authority over municipal budgets and services, retire partisan generals, strengthen separation of powers, and rewrite Venezuela’s convoluted socialist constitution.
Through diplomacy, the United States should encourage Venezuelans to safeguard PDVSA from presidential pilfering and put it in the hands of Venezuelan citizens through stock offerings. The creation of a transparent national oil fund fed by royalties would provide a social cushion without state mismanagement of the industry. A majority stake ownership by the private sector would be more likely to attract the capital needed to meet PDVSA’s 2009 production target of 5 mbd and develop super-heavy oil fields and offshore natural gas fields.
Develop alternate sources of petroleum and gas to avoid energy extortion. Besides increasing domestic exploration, America should be prepared to shift oil purchases to Brazil, Canada, Ecuador, and Mexico to compensate for potential cuts in Venezuelan production. Moreover, the U.S. Department of Energy (DOE) should help dependent Latin American and Caribbean nations diversify their energy sources.
Promote property rights. The DOE should also encourage consultations between energy coporations, Latin American governments, and NGOs with expertise in property rights, such as Peru’s Institute for Liberty and Democracy, to establish, guarantee, and enforce private and corporate property rights, including rights to subsurface minerals and hydrocarbons. Enhancing such rights could even help the rural poor, some of whom may own land with petroleum deposits, and could also diminish exploitation of energy industries by self-serving politicians.
Increase support for democratic institutions and market economies throughout Latin America. The United States must increase support for the countries neighboring Venezuela, many of which--like Bolivia and Ecuador--have fragile democracies and weak economies. It must strive to improve peoples’ representation in political parties, enhance separation of powers, and promote equal treatment of all citizens before the law in order to increase confidence in democratic institutions as opposed to demagogues. Congress should ratify recently concluded trade pacts with Central and South American countries, and the White House should support regional economic reforms to enable entrepreneurs to start new businesses and the poor to accumulate wealth. Better integrated societies with accountable governments and abundant economic opportunities are more able to resist the spell of charismatic dictators.
Conclusion
On August 15, 2004, Venezuela’s citizens will go to the polls to decide whether to retain or recall President Hugo Ch?vez. During the five years he has been in office, he has divided the nation through demagoguery, destroyed an already anemic private sector through bad economic policy and conflict, caused 12 percent of the population to slip into extreme poverty,25 and created a climate of fear by dispatching partisan political gangs advised by Cuban intelligence officers. Logic would suggest that he be recalled, but fraud or fear that personal security depends on loyalty to Ch?vez could well keep him in office.
In view of its political and economic instability, as well as its evolving anti-American policies, Venezuela should no longer be considered a reliable supplier of oil. Moreover, mismanagement, diversion of funds, and shifting alliances to match the political goals of President Ch?vez could keep PDVSA from raising enough capital to stay competitive and maintain production levels. Both the United States and neighbors that depend on Venezuela’s oil should diversify their sources of energy imports. They should also guard against any efforts by Ch?vez to use oil revenues to support revolution beyond his country’s borders.
Above all, the United States must not abandon Venezuelans who seek a democratic and free-market renewal. All their leaders, including Ch?vez, should be actively discouraged from populist rule and guided toward institutions of public service by a combination of policy incentives and sanctions. To a lesser degree, similar problems exist elsewhere in Latin America. There too, the United States should redouble efforts to ensure that pluralism and free choice defeat authoritarianism and misery.
Stephen Johnson is Senior Policy Analyst for Latin America and Ariel Cohen, Ph.D., is Research Fellow in International Energy Security and Russian and Eurasian Studies in The Kathryn and Shelby Cullom Davis Center for International Studies at The Heritage Foundation. The authors wish to thank Intern Santiago Pinz?n for his assistance with this research.
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1. An informal consultative body formed in 1986.
2. The junta made uncharacteristically rapid and peculiar decisions, suggesting it was under pressure from the officers. The military also summoned Venezuelan civic leaders to the palace to sign a pledge supporting the junta. This may have been a ruse to draw out Ch?vez’s adversaries in order to discredit them. One of the participants in the insurrection, General Lucas Rinc?n, escaped punishment and is now the Minister of Interior and Justice. In a similar strange incident in May 2004, Ch?vez claimed that on a farm outside Caracas, his police had captured Colombian paramilitaries who were plotting to assassinate him. Eventually, 102 were charged and shown to reporters in Venezuelan army fatigues. A National Assembly deputy called it a publicity stunt to distract attention from the referendum drive to recall Ch?vez from office. See James Menendez, "Chavez Foils `Assassination Plot,’" BBC News, May 9, 2004, at news.bbc.co.uk/1/hi/world/americas/3699245.stm (August 2, 2004). See also Carlos Chirinos, "Venezuela: `Bluff Paramilitar,’" BBC Mundo News, June 29, 2004, at news.bbc.co.uk/hi/spanish/latin_america/newsid_3852000/3852047.stm (June 30, 2004).
3. Cuban insurgents initially tried to recruit Venezuelan collaborators, but pro-Soviet Venezuelan communists resented the Cuban intrusion, while other supporters left to develop a concept that embraced indigenous pride and sought an alliance between radicals and soldiers eager to re-establish military rule. It was called la Revoluci?n Bolivariana after Sim?n Bol?var, a hero of South American independence. As a junior officer, Hugo Ch?vez was undoubtedly influenced by this ideology. See Alberto Garrido, "El Eje Revolucionario Ch?vez-Castro," El Universal, June 22, 2004.
4. According to former Ch?vez personal pilot Major Juan D?az. See Casto Ocando, "Organismo demanda a Ch?vez en Miami," El Nuevo Herald, January 30, 2003, at www.miami.com/mld/elnuevo/news/world/americas/5060974.htm (January 31, 2003).
5. "Chavez Says Ties Make Venezuela, Cuba `One Team,’" Reuters, September 6, 2001.
6. "Venezuela Asks U.S. Military to Leave Base Offices," Reuters, May 12, 2004.
7. "Ch?vez califica de `perros de la guerra’ a congresistas de EE.UU.," Associated Press, June 27, 2004.
8. "Colombia evaluar? supuestos nexos entre Farc y militares venezolanos," El Tiempo, January 31, 2002, at www.terra.com.co/actualidad/internacional/31-01-2002/nota47739.html (March 27, 2002), and Javier Ignacio Mayorca, "740 de las FARC en Venezuela," Venezuela Anal?tica, March 11, 2002, at www.analitica.com/va/vpi5521076.asp (April 1, 2002).
9. Giaconda Soto, "El Salvador se retracta y permite permanencia de militares venezolanos," El Nacional, May 3, 2001, at www.el-nacional.com/eln03052001/pa2s1.htm (May 3, 2001).
10. "Resolu??o a favor da revolu?ao bolivariana da Venezuela," Foro de S?o Paulo, 10th Encounter, Havana, Cuba, December 7, 2001, at pt.uol.com.br/site/teste/textos/10venezuelap.asp (March 27, 2002).
11. "Primer Congreso Bolivariano de los Pueblos," Final Declaration, Web site Rebeli?n-Resistencia Global, November 30, 2003, at www.rebelion.org/sociales/031130congreso.htm (June 30, 2004).
12. Energy Information Agency, An Energy Overview of Venezuela, Privatization Status, p. 2, at www.fe.doe.gov/international/venzover.html (July 27, 2004).
13. Established in 1996, Inform?tica, Negocios y Tecnolog?a, S.A. (Intesa) provided computer services to the state oil giant, SAIC exercising a 60 percent share. In May 2002, the Venezuelan government notified SAIC that it wanted to terminate the partnership and made a buyout offer. Before the parties could come to an agreement, PDVSA president Ali Rodr?guez ordered a lockout and the army seized Intesa’s assets. The U.S. Overseas Private Investment Corporation granted SAIC $6 million in compensation, while its spokesman declared it would not support future investments in Venezuela. See Bruce V. Bigelow, "SAIC to Recoup Some Losses in Venezuela Deal," The San Diego Union-Tribune, July 20, 2004, at www.signonsandiego.com/uniontrib/20040720/news_1b20saic.html (July 30, 2004).
14. "Venezuela Says OPIC Ruling Won’t Hurt Investment," Reuters, July 21, 2004.
15. Ibid.
16. Ch?vez might then shift tactics from aiding Colombia’s FARC guerrillas to backing revolutionaries in Colombian elections.
17. Frances Robles, "Oil Accidents Mount in Venezuela," Miami Herald.com, January 21, 2002 (July 27, 2004).
18. Victor Salmeron, "PDVSA aument? partida de salarios en 60%," El Universal, July 30, 2004, at http://www.eluniversal.com/2004/07/30/eco_art_30158C.shtml (July 30, 2004).
19. Matthew Robinson, "PDVSA Spending May Hit Venezuela Oil--Analysts," Reuters, July 12, 2004 (July 27, 2004). Lower estimate is from Economist Intelligence Unit, 2004 Country Report.
20. Some 3.8 million are required to exceed the number that re-elected Ch?vez president in the 2000 contest following the adoption of his new constitution.
21. See Jon E. Dougherty, "`Reformers’ Now Attack Costly Election `Reform’ of E-Voting," NewsMax.com, July 30, 2004, at www.newsmax.com/archives/articles/2004/7/29/115913.shtml (August 2, 2004).
22. "Nacionalizados 236 mil extranjeros en dos meses," El Nuevo Siglo, July 6, 2004, at www.elnuevosiglo.com.co/noticia.php (July 6, 2004).
23. On May 18, a slim majority of pro-Ch?vez deputies in the National Assembly passed a law expanding the Supreme Justice Tribunal from 20 to 32 justices and made it possible to approve and remove appointees by a simple majority vote. See "Venezuela: Judicial Independence Under Siege," Human Rights Watch, June 17, 2004, at www.hrw.org/english/docs/2004/06/17/venezu8855.htm.
24. Organized by Brazil and the United States in January 2003 to hold President Ch?vez accountable for promises to abide by electoral procedures outlined in his own constitution.
25. Jackson Diehl, "A Missile from the South," The Washington Post, August 2, 2004, p. A17.
03-18-2004
When a U.S. presidential candidate contends the struggle against terrorism is only a matter for "justice and intelligence," the events in Madrid demonstrate this is not the case. Today’s justice, law enforcement and secret services — even in Europe — do not seem up to snuff.
The brutal March 11 attacks in Madrid might not have occurred if Spanish justice were quicker to do its job. The Spanish authorities failed to apprehend 30-year-old Jamal Zougam, an unindicted co-conspirator and an al Qaeda operative now blamed for the Madrid massacre.
According to a Spanish Judge Baltazar Garzon’s 700-page report, which indicts Osama bin Laden and others for the September 11, 2001 attacks, Zougam was a part of the Spanish al Qaeda cell that facilitated the attacks against the United States.
According to Spanish Interior Minister Angel Acebes, three Moroccans — Zougam, Mohamed Bekkali, 31, and Mohamed Chaoui, 34 — were known to the authorities because of their past criminal records in Spain. A Moroccan government source said Zougam had been under surveillance since terrorist bombings in the coastal city of Casablanca last May. The al Qaeda network in Spain included Al Jazeera journalist Tayseer Allouni, arrested in September 2003.
This is not the first time blind justice and cautious law enforcement has threatened the war on terrorism. In Great Britain, five al Qaeda terrorists from Guantanamo, released by the Bush administration after repeated appeals by Tony Blair, have become an inspiration to radical Islamist youth.
Touted as heroes by the British human-rights community, Ruhal Ahmed, Asif Iqbal and Shafiq Rasul want to sell their Gitmo stories to the tabloid press for as high as $450,000. The media refer to them as exemplary students, computer enthusiasts and devoted Muslims.
The newspapers accept at face value their explanations that just after September 11 they "left Britain to study Islamic culture" in Pakistan, or "strayed into Afghanistan while on a trip to Turkey"(despite lack of a common border between the two).
The Birmingham Central Mosque’s leader, Mohmmed Naseem, compared the U.S. administration with Nazi Germany and Stalin’s U.S.S.R., and the Gitmo detainees with concentration camp victims. The families — and their lawyers — now threaten to sue the U.S. and British governments for "moral damages."
The Bush administration has expressed disappointment that the Blair government failed to communicate to the British public the true nature of the British detainees in Gitmo.
Germany also is allowing September 11 co-conspirators to walk. Earlier this month, a five-judge panel of the German Federal Court of Justice set the case of a 30-year-old Moroccan national, Mounir el Motassadeq, for a retrial. Earlier, a Hamburg court released another Moroccan, Abdelghani Mzoudi, from detention. Both were part of the Hamburg cell that prepared and launched the deadly attacks against the United States.
The terror suspects demanded testimony from al Qaeda members in U.S. custody, such as Ramzi bin al-Shibh. They didn’t get them, and they were allowed to walk. The U.S.-held suspect Zacharias Moussaoui is pursuing a similar tactic.
The presiding German Judge Klaus Tolksdorf claimed "under the German law, all available evidence must be made available ... the justice system could not bend to accommodate security concerns stemming from international efforts to fight terrorism." Speaking of the United States, he added "the fight against terrorism cannot be a wild, unjust war."
This comes from the same justice system that recently convicted a confessed cannibal to eight years in prison, which means the man-eater walks after 41/2 years — if he does not eat anyone else in jail.
There is nothing at all "unjust" in recognizing that procedural requirements appropriate to civilian criminal courts are not appropriate for war criminals . Applying that standard would have prevented the Nuremberg trials.
In Indonesia, the Supreme Court has announced the May 2004 release of Jama’ at Islamiya leader Abu Bakar Bashir, the inspiration behind the attacks in Bali and Jakarta that killed more than 200 people. Tom Ridge, U.S. secretary for homeland security, Singapore’s foreign minister and Australian officials have all expressed disappointment over the hastened release after only 18 months in custody. Bashir snarled: "It is clear that [the U.S.] government is dishonest because it has killed innocent people in Iraq, Afghanistan and Palestine." Attacking Australia, he added, "They have the mentality of colonialists. All white people are like that."
In the past, neither courts nor cops have managed to stop totalitarian movements alone. The Bolsheviks and the Nazis repeatedly said they would use democracy to defeat democracy. Russian juries in the 19th century acquitted terrorists who murdered government officials and innocent bystanders. The German courts let Nazis walk.
Similarly, Islamo-totalitarians are using every procedural trick in the book to gain freedom and public support. Unfortunately, some in the legal profession often care more about the rules of evidence than about security and survival. As Thomas Powers has written: "In a liberal republic, liberty presupposes security; the point of security is liberty."
In the war on terrorism, courts and legislatures have to take a different tack. The last chapter of Justice William Rehnquist’s book, presciently published in 1998 and titled "All the Laws But One: Civil Liberties in Wartime," is called "Inter Arma Silent Leges" — "in times of war, the laws are silent."
Justice Renhquist believes in wartime the government’s power to limit civil liberty is greater than in peacetime, and presidents are justified in pushing their legal authority to the limit — or beyond. Legal authorities elsewhere should apply this notion, including modification of procedural rules, such as the right to call and cross-examine witnesses from across the ocean, to account for the unique circumstances of terrorism.
Democratic governments may opt to set up tribunals, which would consist of military and intelligence officers, to deal with mass murderers, so long as many judges are unfamiliar with terrorist practice and ideology.
It is ironic the Europeans and others who draw their legal tradition from the Continent seem to have forgotten the Roman wisdom. Unfortunately, thousands of people in Madrid, New York, Washington, Jerusalem and elsewhere, have paid the price for the errors of blind justice.
Recent Changes in Russia and Their Impact on U.S.-Russian Relations
03-09-2004
As President Vladimir Putin awaits re-election for a second term with no significant challenges, U.S.-Russian relations are in limbo. The revival of statism and nationalism has seriously diminished Russia’s chances of being regarded as a close and reliable partner that is clearly committed to democratic values. Nevertheless, there are ways by which the United States and Russia can restore their cooperation on the basis of pragmatism and the pursuit of compatible national interests, including enhancing each other’s security, economic ties, democracy, and human rights.
In 2003, the U.S.-Russian relationship was fraught with multiple complications. Russia resisted the U.S. military action in Iraq, continued its military cooperation with Iran, developed multifaceted ties with China, attempted to play the anti-American card in its relations with Western Europe, and stepped up political pressure on the independent nations of the post-Soviet space.
Moreover, a joint war on terrorism and large-scale exploration of natural resources, especially in the energy sector, are yet to become a focal point of the bilateral relationship. At the same time, backtracking on democratic politics could change the nature of the Russian state and challenge America’s national interests unless both sides can find a common ground and reconcile their mutual concerns.
In a fundamental difference between Russia and Central Europe, the Russian political establishment underwent little reform after the collapse of communism and has yet to complete the transition from the centuries-old Soviet and czarist worldview. The legacy of Russia’s imperial and totalitarian past deeply affects Moscow’s foreign policy rhetoric and performance. Anti-Americanism, exaggeration of differences between the United States and Western Europe, heavy-handedness toward smaller Central and Eastern European nations, attempts to recreate a sphere of influence in the former Soviet republics, and continuing relations with Iran, North Korea, and Cuba all continue to frustrate bilateral ties.
The Moscow elite finds America’s global leadership overbearing and continues to view its own country as a great power, at times capable of competing with the United States for regional, if not global, dominance. Russian leaders, while recognizing their country’s weakness, strive to maximize their freedom of maneuver. They believe in a "multi-polar world" model in which Russia forms part of the great concert of powers, including the U.S., China, and eventually India and a united Europe. Russia also is anxious to maintain good relations with the Islamic world, as both the September 2003 visit of Saudi Crown Prince Abdullah and Putin’s speech at the Organization of the Islamic Conference have demonstrated.1
Back to the "Old Think"?
The "old think" among Russia’s foreign and security policy elites has caused the country to return to a strategic posture that is both prickly and at times anti-U.S. In military policy, despite low-intensity radical Islamist threats from the South, arms sales to countries that threaten international stability, including Iran and Syria, have been on the rise.
In February, Moscow conducted its largest military exercise in the past 25 years, which culminated in intercontinental ballistic missile firings. Though many missile strikes toward an "unspecified" enemy failed, the exercises were a throwback to the Cold War.2 So was the surrounding propaganda: Putin announced that the maneuvers were successful, and government TV channels reported only successful launches. By contrast, NTV, which is owned by the Russian gas monopoly Gazprom, also mentioned failures.3
The New Authoritarianism
Russia’s domestic policy has been marked by the consolidation of President Putin’s authoritarian rule, including the control of all TV channels and manipulation of the news media. In addition, there is reason to suspect that the new government appointee at the largest Russian public opinion research organization, known as VTsIOM, will open doors for the manipulation of polling results. The Kremlin has intensified its manipulation of mass media, political parties, and vital financial flows in the economy.
The fairness of the State Duma elections last December, in which pro-Putin parties secured an absolute majority in the Duma, is suspect as the Kremlin exercised its powerful "administrative resources" through which it sways mass media outlets, regional governments, the military, the police, and control over the Central Elections Commission. The outcome of the elections led some in Washington to call for reassessment of the whole paradigm of the U.S.-Russian strategic partnership.4
Subsequently, the Bush Administration made an effort to smooth over relations while speaking frankly to Moscow. U.S. Secretary of State Colin Powell’s visit to Moscow on January 26 is evidence of those efforts.
Secretary Powell sent clear messages to the Kremlin on issues such as withdrawal of Russian troops from Georgia, securing the independence and territorial integrity of Moldova and Ukraine, and U.S. concerns about backtracking on democratic development in an op-ed published on the front page of Izvestia’s January 26 issue, writing that "Russia’s democratic system, it seems to us, has yet to find the necessary balance between the executive, legislative and judicial branches of power."5 Powell also hailed the strength of the bilateral relationship, adding that the two countries should continue developing relations while taking into account their national interests. Powell’s op-ed was the shot across the bow, expressing the Bush Administration’s concerns with the direction Russia has chosen for Putin’s second term.
A Russian Sphere of Influence in the CIS?
The U.S. has expressed concerns about the emerging Russian sphere of influence in the former Soviet Union area. Russia’s attempts to entrench its military presence from Moldova to Georgia to Kyrgyzstan, and its efforts to impose a regional free trade zone, all cause insecurity in the capitals of the Commonwealth of Independent States (CIS).6
A significant U.S. concern is the future of Georgia and, more broadly, the Caucasus and CIS at large. Continuous Russian pressure on Ukraine, Moldova, and other countries could undermine bilateral U.S.-Russian ties. At the same time, as the U.S. focuses on the war on terrorism, primarily in the Middle East and South Asia, confrontation with Russia is counterproductive. Without clarification of strategies on both sides, and without policies constructed to pursue cooperation and avoid confrontation, Moscow and Washington this year could find themselves--unnecessarily--on a collision course from the Black Sea to the Pamir Mountains.
The tension escalates particularly in relations with Ukraine and Belarus, both of which are ethnically, religiously, and linguistically close to Russia and home to millions of Russian-speakers. Russia hampers their rapprochement with the West. To this end, it has given backing to Alexander Lukashenko’s authoritarian regime in Belarus.7 In Ukraine, Moscow employs political and economic pressure to solidify the pro-Russia forces and weaken the pro-Western, democratic, and nationalist opposition ahead of elections this October.8
Tensions are also rampant in Russian-Georgian ties. Georgian President Mikheil Saakashvili made sincere attempts to improve relations with Russia during his February 2004 trip to Moscow, including a suggestion of a trans-Georgian oil pipeline to Russia. These steps were positively received in Moscow.9
Washington hopes that Russia will not launch a massive campaign to destabilize Georgia, as Russia should have no interest in turmoil along its southern border, in addition to which it has no alternative candidate to lead the country.
While the U.S. plans to continue to support the Saakashvili administration and to back completion of the Baku-Tbilisi-Ceyhan pipeline, it is likely that internal policy disagreements over Georgia within the Russian establishment will continue until the summer, when a new Putin government is firmly in place. Ideally, Washington would like to see quick progress for reunification of Georgia, but without Moscow’s support, such a development is unlikely.
There is a risk that Russia, which during 2003 has retreated from many global commitments, after this year’s presidential elections may focus on its immediate neighborhood, scaling up its involvement in the CIS. This may include further acquisitions of energy, transportation, and other industrial assets; pressures to expand a free trade area; and more military and security cooperation under the umbrella of the CIS Mutual Defense Treaty.
U.S. Interests in Eurasia
As elsewhere, the U.S. has to pursue its national interests in its relationship with Russia and Eurasia. These interests can be divided into two categories: "vital" and "important."10
Vital Interest #1: The war on international terrorism.
As the U.S. projects power on a global scale to fight the war on terrorism, the attitude of regional powers, elites, and public opinion toward cooperation in combating terrorism becomes important.
Objectively, the United States and Russia are allies in fighting international terrorism. Forces linked to al-Qaeda are financing acts of terrorism in Russia. The Chechen conflict, which began as resistance to the Russian imperial occupation at the end of the 18th century, has evolved into a separatist movement for national self-determination. Stalin subjected the Chechens to a genocidal deportation in 1944, and they were allowed to return to their homeland only in 1956.
Radical Wahhabi Islam, a recent import into this war, has hijacked the nationalist movement and spread to Daghestan and other regions of the Northern Caucasus. The radical forces aim to build an Islamic state on the doorstep of Europe between the Black Sea and the Caspian, expanding into Tatarstan and Bashkortostan and eventually Islamizing Russia. While Russia could have split the Chechens by conducting talks with non-radical separatists, so far it has chosen not to do so.
Theoretically, Russia and the U.S. should coordinate anti-terrorist policy and work closely to derail the economic foundation of international terrorist networks. The intelligence communities of both countries should interact, exchange information, and in certain cases stage joint operations designed to eliminate terrorists. These actions would engender a renewed partnership in combating terrorism and strengthen confidence in bilateral relations between the two nations. Instead, cooperation between Moscow and Washington was at its peak during the initial phases of the war in Afghanistan and has diminished ever since. While NATO reconnaissance flights along Russian borders irritated the Kremlin, Moscow’s anti-American posture over the Iraq war in the U.N. similarly annoyed the White House.
The shifting geopolitical priorities in the global war on terrorism are dictating change. For example, the U.S. is planning to deploy more troops in Romania and Bulgaria to provide power projection capabilities into the Middle East and Central Asia. Small-scale forward bases in the Caucasus and Central Asia are under discussion among Pentagon planners. In the absence of a confidence-building dialogue between the U.S. and Russia, these moves may cause an adverse reaction in Moscow.
On February 10, Putin’s Chief of Staff Dmitry Medvedev had talks in Washington with National Security Adviser Condoleezza Rice, Secretary of State Colin Powell, and other officials. The CIS was featured in the talks, along with Iraq and other global issues. In a message to President Bush published February 11, however, Putin tried to smooth over any disagreements:
I am convinced that it is in our common interest to cherish the positive things that have been accumulated, and I think by practical actions we shall be able convincingly to show everyone that the partner foundations of our relations remain immutable and that any speculations about a "cooling-off" between Russia and the United States are far removed from reality. Russia will remain a stable, reliable and predictable partner.11
Yet there are other stresses, despite Putin’s words. Ongoing Russian-Iranian nuclear cooperation is a highly sensitive issue, especially after supporters of theocratic totalitarianism rigged parliamentary elections in February. Efforts by the International Atomic Energy Agency to prevent Iran from acquiring nuclear weapons may not be sufficient. Iran’s acquisition of nuclear weapons can become a major security threat to the U.S. and its allies, and threaten stability in the Persian Gulf. All these developments in the area of terrorism and terrorist-sponsoring states should lead Washington to recognize that partnership in this sphere might have clear-cut limits.
Vital Interest #2: Development of energy resources.
Since the U.S. relies heavily on imports of foreign oil, the development of energy resources in the Caspian Sea basin and joint exploitation of Russian oil and gas deposits have become an important aspect of U.S.-Russian relations. However, the two countries’ interests over these resources may not always coincide. If Moscow pursues an aggressive policy in the South Caucasus and Central Asia, it could derail U.S. plans to establish a reliable pipeline system in these regions. However, a policy of cooperation would benefit both parties.
Western companies are invited to participate in development in Russia only where difficult geological and geographic conditions, such as deep water, permafrost, or extreme climates, necessitate technologies that the Russian companies lack. As long as oil prices remain high, the Russian companies are likely to have access to credit and not to need Western financing, even of larger projects.
The prospects for U.S.-Russian energy cooperation have been endangered by the recent withdrawal of the license previously granted to ExxonMobil and ChevronTexaco to explore and develop the oil and gas fields of the Sakhalin-3 block, as well as by extortionate demands from the energy ministry for a $1 billion fee to pursue the project.12 The Sakhalin-3 experience could put the future of the total $6 billion-$10 billion U.S. investment in Russian oil at risk. U.S. Ambassador to Russia Alexander Verschbow said that this decision by the Russian government could impede a U.S.-Russian energy dialogue.13 It is likely that, in the future, the U.S. will react more strongly to hostile Russian actions against American companies. As Russian oil, steel, and software companies increasingly enter the U.S. market, they may become subject to similar hardball tactics.
The situation in the natural-gas industry is even more difficult, principally because the state-controlled Gazprom remains a monopoly. Until that changes, U.S. access to gas fields will remain limited.
The Bush Administration has sent Moscow a clear message that America’s energy security priorities, including lowering energy dependence on the Middle East, are among its vital interests. Russia’s respect for its American investors’ access to markets, and protection of the companies’ property rights, will go a long way to improve relations.
Vital Interest #3: Averting a strategic threat to Europe, East Asia, and the Persian Gulf.
At present, Russia does not pose a genuine military threat to American interests in Europe and Asia. However, it seeks at times to complicate U.S.-European relations. Russia backed the French and German opposition to the U.S. military action in Iraq. For a few years, it waged a harsh but ineffective campaign against NATO enlargement that was designed to weaken the Atlantic alliance--one of the pillars of U.S. security.
Russia opposes the relocation of U.S. military bases eastward. At the international security conference in Munich, Germany, in February 2004, Defense Minister Sergei Ivanov stated that Russia may scrap the CFE Treaty limiting conventional weapons and troop deployments in Europe unless it is changed to include Baltic militaries and rule out NATO forces in the Baltic States.14
At the same time, Russia refuses to pull its military out of Georgia and Moldova, even though it vowed to do so in an agreement signed at the 1999 Istanbul summit of the Organization for Security and Cooperation in Europe.
Moscow’s efforts to improve relations with the European Union (EU) were rebuffed, and enlargement of the EU is proceeding to Moscow’s detriment. Russia’s accession to the World Trade Organization (WTO) has been virtually stalled due to EU members’ opposition to Russian cheap domestic energy prices, which constitute a hidden subsidy to the Russian economy.
The Schengen visa regime, which governs travel into the EU from non-EU nations, is making travel tougher for Russians seeking to go to the EU. This causes the Kremlin’s disenchantment with Russia’s prospects in Europe and ratchets up the elite’s anti-Western attitudes. Instead of backing Russia’s wish to join the WTO, the United States could encourage Russia to move toward membership in the Global Free Trade Association (GFTA).15 GFTA is a proposed global free trade area for which any country would qualify provided it reached a sufficiently high level of economic freedom.
Vital Interest #4: Protecting America, its borders, and its airspace.
Intercontinental ballistic missiles armed with nuclear warheads are a major threat to the United States. Russia and China are the only states potentially capable of a massive nuclear attack against the United States. Russia’s state-of-the-art intercontinental ballistic missile, Topol-M, is entering service.
Since the end of the Cold War, Russia has pursued a buildup of strategic missile forces, including research and development of new systems allegedly capable of defeating U.S.-built ballistic missile defenses. Putin stated that the new program would not be a threat to the U.S.16 Yet Russian military doctrine has become increasingly offensive, clearly aimed at repelling the kind of "air-space attack" that only the U.S. and its allies are capable of staging. Russia’s doctrine is also allowing pre-emptive use of force, including nuclear weapons, and the development of mini-nukes.17
In addition, the Russian military still has vintage ICBMs in service that are armed with multiple, independent re-entry vehicles (MIRVs). These are known as RS-20 "Satan" missiles18 As both Russia and the U.S. are likely to abide by the START-III arms control ceilings, the U.S. has called for the destruction of these weapons. Recently, however, Sergei Ivanov unexpectedly made an announcement that the Satan would remain in service until 2016.19 This definitely boosts the strength of Russia’s strategic nuclear forces.
This challenge demands that the United States and its allies deploy a reliable missile defense system in the near future. The emerging missile defense system, however, would be incapable of defending America from a massive Russian attack.
Important Interest #1: Stability in the post-Soviet space.
The political pressure that Russia applies to its neighbors to the west and south could impede their development along a democratic and market-oriented model, step up social tensions, endanger territorial disintegration, and instigate armed conflicts. The "big brother" syndrome is ingrained in Russia’s dealings with the former Soviet Republics, and the Russian elite continues to look upon the countries of the former Soviet space as its sphere of influence. This leaves open an imperial option or, at least, a scenario of border revisions in the future. Realizing that these nations are truly independent and sovereign is difficult for Moscow.
That is, in part, why Russia concentrates on its military presence in the former Soviet space, including through CIS "peacekeeping missions." Russian military bases and units in the Trans-Dniester (Moldova), Georgia (Abkhazia and Adjara), Kyrgyzstan, and Tajikistan are tools of Russia’s political pressure on the governments of these states.
The Russian state is relying too much on its military presence as a political tool in the post-Soviet space. It is also overreacting to U.S. military deployments in the adjacent regions for the purpose of combating international terrorism. Many in the Russian elite are concerned that the Americans have established a permanent presence in the region. "They [the United States] will never go away, we are witnessing a long-term American presence in Central Asia, and possibly, in the Caucasus," says a senior Russia expert who requested anonymity.20
Such speculations are broadly used by Russian nationalists to revive the "enemy image" of the U.S. Some experts maintain, though, that "Russia is as yet undecided: should it perceive the United States presence on the broad sweep of the former `Soviet Motherland’ as an ally, partner, rival, or enemy."21
The results of the December 2003 parliamentary elections demonstrate that nationalists such as Vladimir Zhirinovsky’s Liberal-Democratic Party, Dmitry Rogozin’s Motherland Party, Communists, and others have consolidated their position in Russia’s political life. They are engendering increased xenophobia. Under the pretext of fighting terrorism, Russian nationalist policymakers call for the deportation of non-Slavic people, primarily Caucasus-born, from Moscow and other large cities.
Russian nationalists are also lobbying for "protecting Russian speakers" and the Russophone population in the post-Soviet space. The selectivity of their complaints exposes a deeper, more sinister agenda, however: While they protest the "violations of Russian speakers’ rights" in the Baltic nations, they choose to disregard the infringement of these rights by the Central Asian authoritarian regimes whose anti-democratic worldview they share.
Important Interest #2: Progress of democracy abroad.
The increasing authoritarian trends in Russia challenge the fundamental U.S. mission to consolidate freedom. In 2003, democracy and the rule of law were declining in Russia. Since 2000, all independent television channels have been shut down under powerful administrative pressure or taken over by the government’s allies. Radio stations and print media are also being gradually brought under control. Self-censorship is used across the board: The authorities "guide" journalists on what to report and what to withhold, and are quick to clamp down on dissenters.
Moscow has stepped up its control over regional administrations through the extra-constitutional institution of unelected presidential envoys (four out of seven of whom are former military or security-services generals) and through its power to recall elected governors. This is at odds with the basic principles of federalism and abuses the rights of legitimately elected governors and regional legislatures.
The conduct of last December’s State Duma elections provoked discontent among many Russians. Federal, regional, and local administrations have spent vast resources to secure the victory for pro-government parties, primarily United Russia. To back "the party of power," government-run television channels aired elaborate programs on the candidates while denying equal access to the opposition. David Atkinson, head of the Council of Europe Parliamentary Assembly delegation to Russia, described Russia’s recent parliamentary elections as "free but unfair."22
Only a high level of respect for individual freedom and property rights would guarantee Russia’s political stability, economic growth, and integration into a democratic international community. Russia’s authoritarian regime is likely to engineer "foreign threats" for domestic consumption, including pursuit of anti-Americanism, to justify its own existence. Authoritarianism and anti-Americanism in Russian public opinion and policies threaten further progress toward the rule of law, civil society, and a market economy. Neutralizing Russian anti-Americanism should also be on the U.S. public diplomacy priority list.
What Should Be Done
The United States and Russia should restore their cooperation on the basis of pragmatism and pursuit of their compatible national interests, including enhancing each other’s security, economic ties, democracy, and human rights. Specifically, the Bush Administration should:
Offer to cooperate with Russia to end the global terrorist finance networks’ bankrolling of Chechen militants and to assist Russia in monitoring and countering the increased threat from radical Islamist terrorism in the North Caucasus. Expand cooperation between intelligence services, customs, police, immigration services, and banking regulators of the two countries in the war on terrorism.
Enhance the development of nuclear, chemical, and biological controls to prevent development of weapons of mass destruction (WMD). The U.S. should insist that Russia end all nuclear fuel and equipment deliveries to Tehran and cooperate with other countries to bar such deliveries. Continue the Nunn-Lugar Program, set up to dismantle and monitor ex-Soviet WMD and the technology and personnel used to manufacture WMD, with a special emphasis on monitoring technology transfers to states supporting terrorism, such as Iran, Syria, and North Korea, and to non-state actors.
Develop a joint Russian-American, market-oriented energy policy in which Russia both protects the integrity of deals already struck with U.S. energy firms and provides American oil and infrastructure companies access to hydrocarbon reserves in Eurasia. Call on Russia to minimize government regulation and ensure U.S. market access to Russian companies. Focus on specific projects, such as the Murmansk pipeline, Sakhalin-3, and Bosphorus European bypass, to facilitate direct shipping of Russian oil to the U.S.
Support Russian membership in the WTO by offering mediation between European states and Russia on internal energy price issues, and begin discussions between the U.S. Trade Representative and the Russian Ministry of Economy and Trade on Russian accession to a Global Free Trade Association, if and when a GFTA is established.
Defend the independence, sovereignty, territorial integrity, and democratic development of the newly independent states, especially Georgia, Moldova, and Ukraine. Send Moscow a clear message that the U.S. will regard intervention in the domestic affairs of sovereign countries in a most negative light. Expand dialogue with Russia on issues related to the political development of Eastern Europe, South Caucasus, and Central Asia.
Broaden public diplomacy efforts in Russia, including outreach to Moscow-based and regional elites, independent media, and academia, both through the public diplomacy apparatus at the U.S. Embassy in Moscow and through the nonprofit and academic sectors. Expand education exchanges to facilitate bringing 10,000 degree-seeking Russian students to U.S. universities. To compare, 80,000 Chinese students are currently studying in the U.S.
Raise democracy and human rights issues in contacts with Moscow and in non-governmental organization (NGO) forums. The U.S. Administration should be unwavering in raising questions about violations of press and political freedoms in Russia. Establish close working relationships with political and public-policy organizations that struggle against the threat of authoritarianism in Russia. Expand material assistance to democratic and free-market NGOs and continue political training of democracy-oriented parties through the National Endowment for Democracy (NED), International Republican Institute (IRI), and National Democratic Institute for International Affairs (NDI).
Conclusion
Russia and the United States are facing a choice: They can build a constructive relationship based on joint repelling of mutual threats and recognition of each other’s relative power, capabilities, and limitations or they can revert to Cold War-style confrontation. Put another way, they must choose between respecting each other’s national interests and engaging in petty fights over status; developing lucrative economic partnerships or playing power games that benefit third parties; fostering 21st century norms of democracy, human rights, and the rule of law or retreating to heavy-handed authoritarianism and risk international opprobrium.
The U.S. has chosen a path of productive partnership with Russia and should encourage Moscow to choose well. People of both countries want freedom, security, stability, and prosperity. It is up to their leaders to deliver the goods.
Yevgeny Volk, Ph.D., is The Heritage Foundation’s Moscow Office Coordinator.23
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1. "Saudi Prince’s Visit Draws Moscow, Riyadh Closer," People’s Daily (English), September 5, 2003, at http://english.peopledaily.com.cn/200309/05/eng20030905_123765.shtml (February 26, 2004); "Putin’s Asia Pacific Trip," RFE/RL Analytical Report, Vol. 4, No. 42 (October 22, 2003), at http://www.rferl.org/reports/securitywatch/2003/10/42-221003.asp.
2. Anna Dolgov, "Russian Exercises Flex Military Muscle," The Boston Globe, February 21, 2004, at www.boston.com/news/world/europe/articles/2004/02/21/.
3. Vladimir Isachenkov, "Russia’s Putin Oversees Military Maneuvers," Atlanta Journal-Constitution, February 17, 2004, at http://www.ajc.com/news/content/news/ap/ap_story.html/Intl/AP.V3501.AP-Russia-Military.html (February 26, 2004).
4. "US Senator McCain Slams Russia Violations Under Putin," Agence France-Presse, February 7, 2004, at http://coranet.radicalparty.org/pressreview/print_right.php?func=detail&par=8219 (February 26, 2004).
5. Colin Powell, "The Relations of Partnership: Work Is Underway," Izvestia, January 26, 2004, p. 3.
6. Ariel Cohen, "U.S. Should Promote WTO as Substitute to Eurasian Common Economic Space," Heritage Foundation WebMemo No. 349, October 16, 2003.
7. Ariel Cohen, Ph.D., "The Last European Dictator," February 23, 2004, at http://www.techcentralstation.com/022304C.html.
8. Olena Horodetska, "Ukraine-Russia Tensions Grow in Dam Dispute," Reuters, October 23, 2003, at http://www.enn.com/news/2003-10-23/s_9697.asp (February 26, 2004).
9. Jean-Christophe Peuch, "Georgia: Saakashvili in Moscow, Looking to Start Ties with a Clean Slate, RadioLiberty-Radio Free Europe, February 10, 2004, at http://www.rferl.org/featuresarticle/2004/02/d56922de-8b78-490f-bb52-590117ab4426.html. See also "Moscow Finds a Partner in Georgia’s Saakashvili," Gateway to Russia, February 12, 2004, at http://www.gateway2russia.com/st/art_210305.php (February 26, 2004).
10. Kim R. Holmes and Thomas G. Moore, eds., Restoring American Leadership: A U.S. Foreign and Defense Policy Blueprint (Washington, D.C.: The Heritage Foundation, 1996).
11. Russian Ministry of Foreign Affairs, February 12, 2004, at http://www.ln.mid.ru/bl.nsf/0/88d3b53efe61e44fc3256e3800439d8a?OpenDocument (February 26, 2004).
12. Valeria Korchagina, "Energy Minister Says State Is Seeking $1Bln for Exxon Sakhalin-3 License," St. Petersburg Times, February 6, 2004, at http://www.sptimes.ru/archive/times/941/news/b_11600.htm.
13. Ibid.
14. Greg Walters, "Ivanov Says Russia May Pull Out of Arms Treaty," The Moscow Times, February 10, 2004, p. 4.
15. John C. Hulsman, Ph.D., and Aaron Schavey, "The Global Free Trade Association: A New Trade Agenda," Heritage Foundation Backgrounder No. 1441, May 16, 2001.
16. Ibid.
17. Nikolai Sokov, "Russian Ministry of Defense’s New Policy Paper: The Nuclear Angle," CNS Reports, Monterrey Institute of International Studies, at http://cns.miis.edu/pubs/reports/sok1003.htm (February 26, 2004). See also Colonel (Ret.) Mikhail Pogorely, " Russia’s New Military Doctrine," Global Beat Syndicate, October 28, 2003, at http://www.nyu.edu/globalbeat/syndicate/pogorely102803.html (February 26, 2004).
18. SS-18 in NATO classification.
19. Alexander Babakin, "Strategic Rocket Forces Tap into `Dry’ Emergency Rations," Nezavisimoye Voyennoye Obozreniye (Independent Military Review), January 23, 2004, p. 5.
20. Svetlana Babayeva, Yekaterina Grigoryeva, and Nikolai Khorunzhiy, "They Have Come to Stay," Izvestia, January 26, 2004, p. 1.
21. Ibid.
22. Alexander Bratersky and Mikhail Vinogradov, "The Lords from PACE Disliked United Russia," Izvestia, December 9, 2003, p. 2.
23. The authors wish to thank Irene Gorelik for her valuable help with the research for and production of this paper.
Models and Policies for Oil Production, Revenue Collection, and Public Expenditure: Lessons in Iraq
03-04-2004
Countries in both the developed and the developing worlds rely on a stable and secure supply of oil. However, abuses and misallocations of oil revenues often lead to social and political instability and, at times, armed conflict. The broader the political cooperation and public consensus, and the greater the transparency in the management of oil revenues, the greater the chance that the supplier will remain stable.
The challenge of devising optimal models and policies for oil production in developing or transitional economies is formidable. Resource-rich countries tend to fall behind non-oil economies in economic development, rate of growth in gross domestic product (GDP), GDP per capita, and human development.1 Oil often derails democratic development and causes civil strife and civil war. Other problems such as graft and "rent-seeking behavior" regularly accompany oil exploration and exploitation.
Many have noted that lagging institutional development, democratic deficiencies, and rampant corruption are the downside of the windfall profits from large-scale oil production. Political control of those natural resources makes political power paramount. Thus, politics becomes a competition for a near total control of wealth, resulting in a zero-sum game with devastating results for democratization and civil society.2
Simply put, unstable countries make poor oil suppliers. The examples abound, from Iraq to Iran to Venezuela.
Moreover, experience and research demonstrate that private ownership of any industry increases production and reduces costs anywhere in the world.3 Thus, consumers of energy should advocate privatization of the oil and gas sector worldwide. However, because of the industrial economies’ thirst for oil, it is likely that Western governments and international institutions will remain quiet on privatization while denouncing the excesses of producers and abuses of natural resource property rights and revenue.
This paper analyzes current models of ownership and revenue management in the hydrocarbon sector, as well as their political implications, and suggests policies on property rights, tax collection, and public expenditure. The achievements in making the rule of law and transparency a paramount public policy and business value in the oil and gas industry have been limited at best.
Finally, this paper addresses some challenges that the Coalition Provisional Authority (CPA) and the Iraqi Governing Council (IGC) face in restoring and managing Iraqi oil production. It also offers recommendations for the Iraqi oil industry and public sector.
Production Mode: Privatization Versus State Management
The Iraqi oil industry is a case in point. Saddam’s predatory dictatorship succeeded in bankrupting the country with the world’s second largest oil reserves (after Saudi Arabia). The oil sector formerly provided more than 60 percent of Iraq’s GDP and 95 percent of its hard currency earnings. Yet Iraq’s GDP for 2001 was estimated at only about one-third its 1989 level. Iraq is also hobbled by $200 billion in foreign debt and reparation claims. This fiscal devastation is the result of a number of factors, including nationalization of the country’s oil sector in the 1970s, extensive central planning of industry and trade, the 1982-1988 war with Iran, the 1990 invasion of Kuwait and subsequent Gulf War, and the U.S.-led war in 2003.
According to senior Iraqi Oil Ministry officials, Saddam ran the oil industry as his private kitty--with devastating results for the infrastructure and the treasury.4 Moreover, Saddam’s disastrous policies led to Iraq’s OPEC quota being taken over by other producers, primarily Saudi Arabia and Venezuela.
Importance of Privatization
Critics point out that centralized, state-owned industrial capacity in the oil sector is less successful than wholly owned private industry or public-private partnerships in attracting investment, integrating new technology, introducing international accounting standards and practices, boosting productivity, and observing environmental standards.5
Moreover, as many of the OPEC members exceed their production quotas, leading to a greater supply of oil and lower prices, it is not clear whether the countries that follow the centralized planning model are indeed maximizing their oil revenue.
Political Factors
Political underpinnings are crucial in forging a workable political model for oil exploration and exploitation. In the Iraqi case, the future model will probably need both to be popularly accepted and to be incorporated into the new constitution. Otherwise, civil strife may develop.
Oil disputes played a large part in the Biafra war in Nigeria in the 1960s, in which 1 million-3 million civilians were starved to death or bombed.6 Recently, tribal unrest in Nigeria resulted in Western and local oil workers being taken hostage.7 Secession movements in Indonesia parallel the distribution of oil, as the country’s smaller and potentially oil-rich islands attempt to secede from overpopulated Java.8 Such conflicts should be avoided in Iraq, which is a relatively new political entity created by the British Empire after the defeat of the Ottoman Empire in World War I.
Since the creation of Iraq, relationships between the Kurds, the Sunni Arabs, and the Shi’a Arabs have been uneasy at best and murderous at worst. The Sunni Arabs have dominated Iraq since the Ottoman and British eras.
Beyond ethno-religious strife, clans and families are the smallest political units, and their interests may need to be taken into account in devising a stable political solution that allows equitable and sustainable sharing of oil revenues. Thus far, the process involved in drafting an Iraqi constitution has been a painful one, and there is no date certain by which agreement will be reached and the document will be ready.9 As Iraq develops its own constitution, principles of protection of private property must be extended to the oil industry and oil reserves.
Property Rights in Iraq
The launch of the Iraqi oil industry in 1925 was undertaken by a private consortium, the Iraq Petroleum Corporation, owned in equal shares (23.75 percent) by British Petroleum and Shell, Companie Francaise de Petroles, and two constituent parts of Exxon Mobil. Nubar Gulbenkian, the famous "Mr. Five Percent," owned the remaining 5 percent. The consortium was expropriated in 1964 and fully nationalized in 1972.10
Theoretically, if the property rights of the original consortium were restored, new companies would participate in bids for new field projects and the rehabilitation of existing oil infrastructure. In addition, the future government of Iraq might recognize some of the contracts concluded by the Saddam Hussein regime, such as the Russian Lukoil West Qurna concession, as valid. The Iraqi government could also examine other production-sharing agreements that Saddam’s regime signed with China, France, and other countries.
Economic Efficiency
Partial privatization, which the CPA and the Provisional Council are pursuing, and low taxation are the right policies to follow. However, more needs to be done to achieve eventual privatization of reserves and extraction. As Iraqi needs for reconstruction are high, one way to increase the cash flow up-front is to sell off the reserves and tax the future oil revenues. This would better address the immediate needs of the Iraqi people without giving up natural resource royalties and rents.
The United States--through its senior representatives of the Departments of State and Defense in the CPA and its advisers on the ground, with the assistance of the International Monetary Fund (IMF), World Bank, and other international and non-governmental organizations (NGOs)--should begin advising the leaders of Iraq’s three primary ethnic groups to establish policies that would lead to a thriving modern economy. These policies should be based on "best practices" developed around the world during the largest government privatizations in history, during the 1980s and 1990s.
Institutional Development and Controls
One of the greatest challenges in privatizing Iraqi oil and attracting foreign investment (in addition to building political consensus and building the institutions to implement it) will be ensuring equity, transparency, and the rule of law. To accomplish these goals, Iraqi political and government institutions, donor representatives, and international agencies should coordinate their activities while each plays its distinct role.
Courts, parliamentary committees, commissions, government accounting offices, ombudsmen, and chief prosecutors’ offices may have competing jurisdictions on privatization. (Regrettably, this was often not the case in the great 1990s privatization in post-communist countries.) Legal and administrative challenges may increase public control while simultaneously miring the process in numerous court hearings and investigations. While such involvement, especially of Iraqi institutions, may increase transparency and public "buy-in," it may also slow down the process and open it to frivolous challenges. Indigenous NGOs and media also have a role. However, it is all too easy for politicians and unprofessional journalists to denounce and undermine privatization through demagoguery.
The Eastern European experience demonstrates that a strong executive branch with political commitment and a public mandate for privatization, combined with meticulous insistence on open and competitive bidding, can carry the day. In that respect, the process could be facilitated by inviting private foreign companies and officials with experience in the German Privatization Agency (Treuhandanstaldt), Estonian Privatization Agency, and similar organizations to serve as advisers to the Iraqi government.
Revenue Collection and Distribution Mode
Best management practices and financial controls in the taxation and expenditure stages of oil revenue accrual and disbursement are essential. The history of oil-rich states, from Saudi Arabia to Nigeria, provides ample evidence of a cycle of high revenue/high expectations/high expenditure followed by an oil market slump, a decline in revenue, and social unrest caused by fiscal and budgetary adjustments.11
These states, however, failed to use centrally managed oil revenues to jump-start development and prevent precipitous declines in their GDP per capita. Saudi GDP per capita peaked in 1981, when both the U.S. and Saudi Arabia had a per capita GDP of about $28,600. In 2001, U.S. GDP per capita was $36,000, while Saudi Arabia’s was less than $7,500. According to the U.S. Embassy, "Per capita income [in Saudi Arabia] will continue to decline unless economic growth increases significantly and/or the birth rate drops."12
Political Factors
Iraqi policymakers should be aware of a "dual hazard" in politics of revenue taxation and expenditure. On the one hand, Iraq has a large, growing, and impoverished population whose basic needs are still unmet. Their representatives are likely to press for higher tax rates and deficit budgets and to lobby for borrowing against future oil receipts. Even with projected increases in oil production and revenue growth, Iraq will still be in the poor category or in the low end of the medium-income developing countries. However, if the Iraqi poor, especially the Shi’a, are excluded from budgetary decisions, such factions as Islamist Shi’a radicals (often connected to Iran), Sunni Islamists connected to al-Qaeda, and Ba’athists can be expected to use this exclusion as a pretext for agitation against the Iraqi Government Council and its pro-American successor.13
Iraq’s challenge is to educate the political and technocrat classes, and the elites in general, on the dangers of high taxation and unbridled expenditure. Macroeconomic instability and a negative investment climate can be as damaging in the long term to a national economy as corruption.
Institutional Development and Controls
As Terry Lynn Karl wrote:
When states do not have to depend on domestic taxation to finance development, governments are not forced to formulate their goals and objectives and the scrutiny of citizens who pay the bills.... Excessive centralization, remoteness from local conditions, and lack of accountability stem from this financial independence.14
Under Saddam, Iraq was a good case in point. The dictator and the Ba’ath elites in Baghdad made all the economic decisions, such as nationalizing oil assets and using revenues to pay for the military, including programs to build weapons of mass destruction.
In post-Saddam Iraq, institutional controls on the revenue stream are vital. These should include creation of competent and independent central fiscal and budgetary bodies; a strong police force, including organized and white-collar crime divisions to prevent oil smuggling; and a tax collection agency sophisticated enough to prevent and investigate tax evasion. Such services need to be strong enough to stand up to the Iraqi national oil company and the international oil companies, which will handle an increasing number of exploration and extraction projects.
Since the Iraqi state most likely will remain weak and fractious after the U.S. transfers sovereignty on July 1, 2004, it should divest itself from providing most nonessential services, which can be delivered by the privatized non-government sector. Market demand, not government programs, is more likely to reflect the needs of the Iraqi people. Since government revenues can be generated up-front from privatization, keeping tax rates low (around the current 15 percent) is advisable.
The government can shift provision of services to the private sector while building a constitutional barrier to keep budget deficit spending below a certain level, such as 3 percent of GDP. Such a safeguard would keep the budget within reasonable limits, make the Iraqi dinar more stable, and instill both fiscal and budgetary discipline among the elite. Without such discipline, the state will attempt to use expenditures to buy its legitimacy.
Given the fragility of the Iraqi state--the combined result of Saddam’s regime, the current conflict, and deep ethno-religious fissures--state dependence on oil revenues should be avoided. As in many other countries that have experienced cyclical oil wealth, windfall oil revenues can be stored in non-dinar, off-shore accounts--an Iraqi oil fund.
What Should Be Done
The Coalition Provisional Authority and the Iraqi Governing Council should:
Initiate a broad public debate about development of the rule of law and property rights, including mineral rights. This debate should include Western economists, Iraqi officials, and the public and should cover the future of oil production, taxation, and the distribution of income. As part of the debate, the CPA and IGC should conduct a comprehensive public campaign aimed at privatization of oil and gas industry assets and reserves, as well as broad institutional reform. Many Iraqi officials and other members of police and media elites are not aware of the macroeconomic factors that support privatization, keeping the oil revenue out of government’s hands, and instituting publicly accountable and transparent decision-making processes on oil production.
Bolster property rights and the rule of law, including enabling legislation and regulations on oil and gas production that allow private ownership of all productive assets and minerals. This includes fostering an independent judiciary, training judges to handle complicated civil litigation such as energy law, and allowing international arbitration, including enforcement of arbitral awards.
Conduct a comprehensive audit of state-of-the art techniques of oil privatization, revenue generation, and management. This information should then be disseminated to the Iraqi political leadership, management of the oil and financial sectors, and broader elites. U.S. institutions (e.g., the CPA and U.S. Agency for International Development), major oil companies, nonprofit organizations, the IMF, and the World Bank should all be involved in this undertaking.
Ensure that the privatization process is transparent and perceived as being conducted in the interests of the Iraqi people.
Develop safeguards to prevent smuggling and diversion of oil and refined products from "well to wheel" and create a law enforcement climate in which the diversion for private use and theft of crude oil, refined products, or revenue is reported, prosecuted, and punished.
Improve revenue collection, such as taxation of oil sales, by establishing independent audit procedures, supporting public supervision by bona fide NGOs, and developing an independent media.
Assist in creation of a national, private, professionally and independently managed oil fund. A modified version of the Alaska arrangement, allowing for direct deposits of revenues into the private bank accounts of the Iraqi people, would go a long way toward legitimizing the future Iraqi government and privatization of oil assets.
Develop political legitimacy and transparency of oil revenue expenditure through open budgetary and legislative processes. As part of the open budgetary process, budgetary drafts prepared by legislative and governmental budgetary offices should be publicly available and discussed openly in the legislature before the final vote. Budget-watching indigenous NGOs should be allowed to participate in such discussions, thus enhancing the development of civil society in Iraq. Once the security situation improves, both the government and non-government sectors should be provided international technical assistance on budgetary issues.
Oil Revenue Management and International Energy Security
A private and transparently managed oil and gas sector is vital to global energy security and thus in the national interest of the United States. Returning Iraq to the international oil markets is important for the Iraqi people, the United States and other Western countries, and the global economy. This would provide locally generated revenue to finance post-war reconstruction, provide an additional 2 million-4 million barrels per day to the oil market, and relieve the U.S. of the financial burden of Iraqi reconstruction.
Iraq’s output prior to the Gulf War was 3.5 million barrels per day, while the oil discovery rates (50 percent to 75 percent) on new projects in the 1990s were among the highest in the world. Given Iraq’s own output projections, it may be capable of pumping as much as 6 million barrels (by 2010) to 7 million barrels (by 2020) per day--more than double current production levels. In view of demand projections, especially increased demand from the large Asian economies such as India and China, the global market can easily absorb such an increase. The U.S. Energy Information Administration forecasts that oil consumption in Asia will grow by 55 percent from 2003 to 2025 and that natural gas consumption will increase by 100 percent.15
Generating, accounting for, managing, and expending this revenue for the Iraqi people is a huge responsibility that is complicated by the state-owned and state-managed infrastructure, poorly defined property rights, absence of a functioning legal system, a shattered public service, lack of consensus on how to own and exploit the oil reserves, and the large number of Iraqi poor with pressing needs.
Privatization should be undertaken only after a public education campaign and a good-faith effort to build a consensus among the Iraqis that private ownership of industrial assets, including commodities, is economically more efficient than a government-owned system.
Oil revenue from Iraqi oil should be transparently managed, adequately taxed, and protected from government abuse and corruption. To facilitate this process, creating a professionally managed oil fund should be seriously considered. Such a fund would protect oil revenues from the long hands of the Iraqi politicians. As in the Alaska model, part of the revenue should be distributed directly to the bank accounts of every Iraqi.
These are only some of the answers and challenges facing state oil revenue management. Those tasked with solving these problems owe the people of Iraq their best efforts not to repeat the abuses of the past.
NOTES:
1. Svetlana Tsalik, "The Hazards of Petroleum Wealth," in Caspian Oil Windfalls: Who Will Benefit? (New York: Open Society Institute, 2003), p. 1.
2. Benn Eifert, Alan Gelb, and Nils Borje Tallroth, "Managing Oil Wealth," Finance and Development, Vol. 40, No. 1 (March 2003), at www.imf.org/external/pubs/ft/fandd/2003/03/eife.htm (November 11, 2003). According to the authors, "Work on the theory of rent-seeking behavior illustrates how rent reorients economic incentives toward competition for access to oil revenues and away from productive activities, especially in nontransparent environments characterized by political discretion and unclear property rights."
3. World Bank, "Privatization: Eight Lessons of Experience," Policy Views from the Country Economics Department, July 1992.
4. Interviews with Mutasam Akram Hasan and Dr. Mussab H. Al-Dujayli, Istanbul, Turkey, January 29, 2004. Thus, for example, forcing high production levels without investment in modern technology and maintenance has resulted in massive penetration of water into the Kirkuk oil fields.
5. Ariel Cohen and Gerald P. O’Driscoll, Jr., "The Road to Economic Prosperity for Post-Saddam Iraq," Heritage Foundation Backgrounder No. 1633, March 5, 2003, at www.heritage.org/Research/MiddleEast/bg1633.cfm.
6. Federation of American Scientists, "The Biafra War," at www.fas.org/man/dod-101/ops/war/biafra.htm (November 11, 2003).
7. Oronto Douglas, Von Kemedi, Ike Okonta, and Michael Watts, "Alienation and Militancy in the Niger Delta: A Response to CSIS on Petroleum, Politics, and Democracy in Nigeria," FPIF Special Report, July 2003, at www.fpif.org/papers/nigeria2003.html (November 16, 2003). See also "Hostages from 4 Countries Head Home from Nigerian Oil Rigs," CNN.com, August 5, 2000, at www.cnn.com/2000/WORLD/africa/08/05/nigeria.hostages.reut (November 11, 2003), and "Nigeria: Forces Head for Oil Rigs," Africa Online, May 1, 2003, at www.africaonline.com/site/Articles/1%2C3%2C52870.jsp (November 11, 2003).
8. "Aceh’s Rebel Chief Demands Full Independence from Indonesia," CNN.com, November 10, 1999, at 216.239.41.104/search?q=cache:G-37xS6574wJ:www.cnn.com/ASIANOW/southeast/9911/09/indonesia.aceh.03/
+aceh+independence+oil&hl=en&ie=UTF-8 (November 11, 2003). See also Embassy of Indonesia (Ottawa), "Rebels Urge Mobil Oil to Leave Aceh Province for Safety Reasons," January 4, 2001, at www.indonesia-ottawa.org/news/Issue/Aceh/010401_IO_01.htm.
9. "Iraqi Constitution Delayed," BBC World, October 1, 2003, at newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/middle_east/
3153732.stm (November 12, 2003).
10. Martin Hutchinson, "What to Do with the Oil," United Press International, March 24, 2003.
11. Tsalik, "The Hazards of Petroleum Wealth," p. 7.
12. Embassy of the United States (Riyadh), "Saudi Arabia 2002 Economic Trends," May 2002, at riyadh.usembassy.gov/wwwhet02.html (November 16, 2003).
13. Herbert Docena, " No Money, No Play: US on the Brink in Iraq," Asia Times, October 10, 2003, at www.atimes.com/atimes/Middle_East/EJ10Ak01.html (November 16, 2003).
14. Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of California Press, 1997), p. 190, quoted in Tsalik, "The Hazards of Petroleum Wealth," p. 7.
15. Indo-Asian News Service, "India, China Will Drive Global Energy Use Increase," Asian Tribune, May 2, 2003, at www.asiantribune.com/show_news.php?id=4059 (November 16, 2003).
02-24-2004
Georgian President Mikheil Saakashvili is in Washington for talks with top-level Bush administration officials on expanding strategic and economic cooperation. The Georgian leader’s US visit is coming at a time of geopolitical uncertainty in the Caucasus, with Moscow and Washington potentially on a collision course.
Georgia is shaping up as a key venue in the building US-Russian competition for regional influence, a fact that is forcing Saakashvili into a delicate balancing act in the foreign policy sphere, while at the same time trying to restore order on the domestic front. [For additional information see the Eurasia Insight archive]. Georgian-Russian relations have long been marked by tension, but during an early February visit to Moscow, Saakashvili appeared to stabilize Tbilisi’s relationship with the Kremlin. [For background see the Eurasia Insight archive].
Saakashvili arrived in Washington on February 22 and is expected to seek stronger US security cooperation, along with an expansion of economic assistance. In addition to meeting with Bush administration officials, Saakashvili is scheduled to meet with representatives of the World Bank and International Monetary Fund, as well as US business executives.
Since Saakashvili led the protest movement last November that succeeded in forcing former president Eduard Shevardnadze’s resignation, the United States has strongly backed his stated desire to place Georgia on a fast track towards integration with Western security and economic structures. [For background see Eurasia Insight archive].
At the same time, Russian leaders are loathe to lose any influence in what they consider to be their strategic backyard. Despite Saakashvili’s widely praised performance in Moscow, many in Russia’s policy-making community remain suspicious of his intentions. Specifically, there is still strong doubt about Saakashvili’s pledge that he would not permit the United States to establish a military base in Georgia after Russian forces pull out from the country. [For additional information see the Eurasia Insight archive].
By all appearances Russia is preparing to wage a vigorous struggle to keep Georgia within its sphere of influence. An indication that Russian President Vladimir Putin is planning to get tough on CIS states came February 24, when, in a televised address, he announced that he was firing his cabinet. Putin stressed that his decision was not driven by dissatisfaction with the government’s performance. "It is dictated by a wish once again to set down a position on how policy will develop in the country after [Russia’s presidential election] on March 14," Putin said. Putin’s re-election is considered a virtual certainty.
Putin provided some insight into his thinking during a February 12 televised speech, in which he characterized the 1991 collapse of the Soviet Union as a "national tragedy on an enormous scale" in which "only the elites and nationalists of the republics gained." The underlying assertion of Putin’s comments was that the Kremlin needed to do more to defend Russia’s national interests, and, accordingly, would be justified in adopting tougher policies towards other CIS states.
Dmitry Sidorov, Kommersant bureau chief in Washington, said that Putin really believes what he says. "His popularity allows him not to make any statements and win handily in March," he said.
Putin’s statements sent ripples around CIS capitals and beyond. "What does this mean – that Russia is going to correct the ‘mistakes of the past?" a senior Central Asian leader visiting Washington asked rhetorically.
Already, Russian rhetoric is toughening. At an early February security conference in Munich, Germany, Defense Minister Sergei Ivanov announced that Russia might opt out of the Conventional Forces in Europe Treaty, alleging that the pact is an outdated "legacy of the Cold War." Such an argument is mimics the US contention that the ABM treaty is outdated, and thus should no longer be binding.
Russia’s potential withdrawal from the CFE pact could have significant ramifications for Tbilisi. Moscow’s obligations under the CFE treaty are perhaps the most significant source of pressure on Russia to pull out from its two remaining bases in Georgia.
In his speech at the Munich conference, Ivanov complained that Western leaders were ignoring Russian security needs. "NATO should -- in deed, not only in words -- take into account Russian concerns," Ivanov said.
The Russian threat to withdraw from CFE comes at a time when the United States is planning a wide-ranging re-deployment of its forces in Europe, much of it related to the ongoing war on terrorism. For example, the United States is planning to deploy more troops in Romania and Bulgaria to enhance its ability to project power in the Middle East and Central Asia. Small-scale forward bases in the Caucasus and Central Asia are also under consideration by Pentagon planners, although US diplomats have stressed that Washington has no firm plans to establish bases in the region.
Ivanov attacked Georgia twice in his Munich policy speech. Georgia allows terrorists from the Middle East to enter Chechnya from its territory, Ivanov claimed. He also stated that Georgia has been lax in controlling terrorists along its borders with Russia. Georgi Baramidze, the Georgian Interior Minister, has rejected Russian claims. "The Interior Ministry has written to the Acting Interior Minister of Russia and suggested a number of concrete cooperation projects, and so far received no response," he told EurasiaNet.
US Senator John McCain, speaking at the same panel as Ivanov, provided a ringing rebuttal. The Arizona Republican said, that "undemocratic behavior and threats to the sovereignty and liberty of her neighbors will not profit Russia -- but will exclude her from the company of Western democracies."
In a message to President Bush published February 11, Putin tried to smooth over tension. "I think by practical actions we shall be able convincingly to show everyone that the partner foundations of our relations remain immutable and that any speculations about a ’cooling-off’ between Russia and the United States are far removed from reality," Putin said. "Russia will remain a stable, reliable and predictable partner."
A majority in Washington policy-making circles believe that Russia will ratchet up its involvement in the Caucasus and Central Asia after presidential elections. This may include further acquisitions of energy, transportation, and other industrial assets. It may also take the form of pressure on CIS states for more favorable trade conditions, and more military and security cooperation under the umbrella of the war on terrorism.
Regardless of any Russian policy shift, Washington will remain intent on supporting Georgian democratization efforts and pushing for the completion of the Baku-Tbilisi-Ceyhan pipeline. [For additional information see the Eurasia Insight archive].
US officials privately doubt that Russia would formally pull out of the CFE Treaty. Both Russia and the NATO members are well below CFE ceilings along the Western and Southern flanks, and Baltic states are unlikely to deploy significant NATO or own forces. Many in Washington also do not expect a massive Russian campaign to destabilize Georgia, as Russia has no alternative candidate who could assume control of the country’s government. One American official characterized the prognosis for the Caucasus as a "status quo plus".
While Georgia is firmly in the US and Western camp, Azerbaijan is a more difficult case. According to a senior CIS official who spoke on condition of anonymity, President Ilham Aliyev has been stung by criticism in Washington of his human rights record, and may be gravitating towards the Russia. [For additional information see the Eurasia Insight archive]. Nevertheless, US officials are not concerned about "losing" Azerbaijan, citing the fact that Baku will always require a diplomatic partner to balance its relations with Russia and Iran.
Whether Putin will remain a reliable partner for Bush, who is proving increasingly vulnerable in an election year, remains to be seen, Washington insiders say. As the Bush Administration is facing escalating violence in Iraq, a power hand-over in Baghdad on June 30, and a hotly contested presidential elections campaign, it can only hope for no additional foreign policy surprises.
01-23-2004
On January 25, US Secretary of State Colin Powell will attend Mikhail Saakashvili’s inauguration as president of Georgia. The transition of power there has some Washington strategists imagining ways to export Georgia’s "revolution" to other post-Soviet states. It has also led to consternation in Moscow which could further erode the spirit of partnership that the Kremlin forged with US President George W. Bush in late 2001.
From Tbilisi, Powell will go to Moscow for meetings with Russian president Vladimir Putin and other key officials. Insiders expect that Powell will not mince words in expression of support for Saakashvili, whom the Kremlin considers (according to a Moscow political scientist) "too pro-American and too unknown." This is delicate geopolitical territory. Russia commands four military bases in Georgia.
During a December 2003 visit to Georgia, US Defense Secretary Donald Rumsfeld called for Moscow to withdraw its troops from Georgia in line with agreements signed at the 1999 Organization for Security and Cooperation in Europe Istanbul summit. [For background see the Eurasia Insight archive]. This call prompted concern in Russia’s Foreign and Defense Ministries that the Bush administration seeks to use Saakashvili’s ascent to extend its own military presence in Georgia. [See the Eurasia Insight archive].
Saakashvili marked his campaign with promises to tackle Georgia’s internal corruption and its endemic poverty. He has tried to placate Russia in speeches but has been firm about his insistence on keeping breakaway provinces from seceding to Russia. Powell’s spokesman has said that the secretary will deliver an unstinting message to Putin on this issue. Powell also seems likely to demand that Russia expedite its troop withdrawal.
Why would Powell be so firm? In the past he has negotiated more gently with Uzbekistan’s Islam Karimov and Kazakhstan’s Nursultan Nazarbayev, both of whom have invoked antiterrorist rhetoric to blanket their misdeeds. [For background see the EurasiaNet Insight archive]. The answer may have to do with the fact that Saakashvili represents something new in post-Soviet politics: the leader of a massive, well-organized effort to peacefully render a sitting president illegitimate.
The Bush administration cannot afford to let Russia undermine Saakashvili’s story. A confident Georgia can deliver many benefits. It could stabilize the South Caucasus, shielding American access to the Baku-Tbilisi-Ceyhan oil pipeline and other valves on the Caspian Sea. It could weaken separatist rhetoric in Abkhazia and South Ossetia, which might discourage Russian intervention. And it could become a more effective partner in tracking, stopping and punishing terrorists. [For background on these issues, see EurasiaNet’s package on the Pankisi Gorge].
Indeed, some in the Bush administration doubt that Saakashvili’s "rose revolution," so dubbed because celebrants clutched roses after Shevardnadze stepped aside, will necessarily foster stability. Proponents of the Realpolitik school, primarily at the State Department, point out that a rush to overhaul Georgia could weaken Russia’s membership in Bush’s antiterrorist coalition and jeopardize American access to Caspian energy sources.
Analysts at the National Security Council and the United States Agency for International Development (US AID) understand that Georgia’s entrenched corruption is just one of the symptoms keeping the country poor. It also lacks competitive industries and sound models for capitalist ethics. Moreover, Russian interests control critical chunks of Georgia’s economy.
During 2003, state-controlled Russian companies RAO UES and Gazprom acquired the vital electric and natural gas grids in Georgia. [For background, see the Eurasia Insight archive]. Migrants sending money home from Russia contribute meaningfully to Georgia’s annual output. In this context, if Russia encourages the breakaway provinces of Abkhazia, South Ossetia and Ajaria to fully secede, it could sap Georgia’s already anemic economy.
Washington understands how many challenges the untested Georgian leadership faces. These include conducting legitimate parliamentary elections in the spring, battling organized crime, and rebuilding public institutions that became sinecures under Shevardnadze. Temur Yakobashvili of the Georgian Foundation for Strategic and International Studies www.gfsis.com suggests that Saakashvili will have to scale down unrealistic expectations, generated in November’s rush of events, in order to thrive. The president’s inaugural address may try to cool the popular mood.
According to Yakobashvili, the new regime will struggle to attract honest, competent and educated people to the government, deliver pensions, salaries and other social safety payments on time and restarting economic growth and foreign investment amid deep economic crisis. Finally, Mr. Saakashvili will face a difficult relationship with Russia while attempting territorial reintegration in the face of Moscow-supported separatist opposition. Because conditions in Georgia are so fragile, Russia could swiftly claim that the country needs Russian troops.
Powell and his colleagues will have to advance Washington’s goals while staying friendly to a Kremlin that balks at the idea of Georgian initiative. Especially after nationalists made strong gains in Russia’s parliament in December, the idea that Georgia can act against the Kremlin’s wishes is growing especially sensitive. While the Bush administration and European Union figure to encourage institutional development through privatization in Georgia, they will also have to manage Russia’s concerns about security and hegemony.
In this context, Powell might be wise to press Saakashvili to make conciliatory gestures to Moscow. The State Department should foster Tbilisi’s official contacts with the leaderships of Abkhazia and South Ossetia to develop a jointly workable political model. This could federalize Georgia or otherwise protect minority rights. At the same time, since Ajaria’s Abashidze is likely to play provocateur, Powell should manage a dialogue between Tbilisi and Moscow on the withdrawal of Russian troops and the end of Russian support to South Ossetian and Abakhzian separatists. In addition to the regular diplomatic channels, such dialogue should include the two countries’ National Security Councils and departments of defense.
Saakashvili’s country is as fragile as his victory was emphatic. If Georgia grows violent, or poorer, or darker, it could deteriorate to bloody anarchy. That prospect should keep Powell somber at the inauguration and careful in Moscow.
01-09-2004
US official are warily monitoring a policy debate in Russia over how Moscow should deal with its former Soviet neighbors. Many in Washington believe that the strong showing by nationalists in the recent Russian parliamentary election could prompt the Kremlin to toughen its stance towards states in the Caucasus and Central Asia.
Developments in Georgia – where a pro-Western administration has come to power -- has prompted policy makers in Moscow to reexamine Russian foreign policy towards its neighbors. The fact that nationalists will exert considerable influence in the Russian legislature appears to sharply reduce the chances of a softening of Russian policy.
In all, four political parties gained sufficient electoral support to win seats in the Russian parliament, led by United Russia, which serves as President Vladimir Putin’s powerbase. The other three – the Communist Party, Vladimir Zhirinovsky’s Liberal Democrats and Rodina, (Motherland) – all embrace nationalist-oriented foreign policy views.
There are two competing policy viewpoints in Moscow today. The first, articulated by the Chairman of the Federation Council’s Foreign Affairs Committee, Mikhail Margelov, maintains that Russia does not stand to benefit from the geopolitical competition with the United States in the Caucasus and Central Asia. This faction wants Russia to be more accommodating towards its neighbors.
In Georgia’s specific case, Russia’s confrontational stance risks causing renewed conflict between Tbilisi and Georgia’s separatist-minded regions of Abkhazia, Ajaria and South Ossetia. Such tumult could create "another Chechnya," some believe. It would thus be better for Moscow’s own security aims to use its influence to promote rapprochement among the Georgia government and the three autonomous regions.
The other approach, as described by a senior policy expert with close ties to the Kremlin, holds that Georgian President-elect Mikhail Saakashvili is an implacable opponent of Russia. Accordingly, Moscow should do nothing that helps to stabilize his administration.
"Saakashvili is an unknown quantum in Moscow, and he’s not made efforts to build relations here. There is no way Abkhazia and South Ossetia will return to Tbilisi’s fold," the expert said.
While on a visit to Armenia on January 8, Saakashvili repeated his call for improved Russian-Georgian ties. At the same time, he said a new approach was needed in Moscow. Bilateral relations "should not be based on previous relations when Russia itself instigated conflicts, tried to resolve them and never succeeded," the Arminfo news agency quoted Saakashvili as saying.
For the United States, the implications of a rise in instability in Georgia are clear. Tumult could easily spill over Georgia’s border into neighboring states, and threaten to delay, or even prevent completion of the Baku-Tbilisi-Ceyhan Pipeline.
A senior U.S. diplomat in Moscow believes that the "reservoir of imperial nostalgia" will lead to a "more muscular approach" in Russian policy towards Central Asia and the Caucasus.
If Russian policy makes a right turn, a key political figure will be Dmitri Rogozin, one of the leaders of the Rodina party. Rogozin’s nationalist rhetoric has repeatedly sparked controversy. Most recently, he called for the creation of a Russian land corridor across Lithuanian territory linking Russia proper to the exclave of Kaliningrad, which Rogozin represents in parliament. Rogozin has also called for the expansion of Russia’s borders to include areas – such as northern Kazakhstan – that have heavy concentrations of ethnic Russians.
US analysts do not expect Russia to make any significant moves in the Caucasus or Central Asia until after the Russian presidential election, which is scheduled for May.
At the same time, the rhetoric of some Russian MPs indicates that an influential policy-making segment is disinclined to adopt a more cooperative tone with Russia’s neighbors, in particular Georgia.
Georgia’s "over-reliance on Western countries in the solution of these issues [the separatist struggles of the country’s autonomous regions] was the previous Georgian leadership’s [i.e. former president Eduard Shevardnadze’s] great mistake," Andrei Kokoshin, current chairman of the Russian Duma Committee on CIS Affairs, told the NTV television channel on January 8.
In a separate interview with Ekho Moskvy news agency, Kokoshin insisted Russia needed to maintain military bases in neighboring states. Georgia and Russia have long haggled over a timetable for the withdrawal of Russian forces still housed at two bases in Georgia.
"To win its place under the sun, Russia must not only speed up its economic development, but also show military muscle," Ekho Moskvy quoted Kokoshin as saying. "In a number of post-Soviet areas, we need either permanent bases, or agreements enabling us to deploy our military contingents rapidly."
12-23-2003
Russia and Israel have formally agreed to ship oil from the Russian oil terminals in the Black Sea via the Israeli Eilat-Ashkelon pipeline, to Asian markets. This pipeline has the potential to greatly decrease the transit time for oil exports from the Mediterranean to the Far East. This development signals a new level of cooperation between Russia and Israel in the energy field, and emergence of the Jewish state as a player in Russian and Eurasian pipeline politics.
BACKGROUND: During November 3-5 summit in Russia, Israeli Prime Minister Ariel Sharon and Russian president Vladimir Putin have signed a historic agreement making Israel the first Middle Eastern transit country for Russian oil. The 158-mile (254 km) pipeline from the Red Sea port of Eilat on the Gulf of Aqaba to Ashkelon was constructed in the 1960s, to ship Iranian oil to European and U.S. markets. Thus, the direction of the pipeline was South-North. After the collapse of the Shah regime in 1979, the pipeline was used to ship small amounts of Egyptian oil from Abu Rudeis field to Israel. According to the Director General of the Ashkelon pipeline company Emmanuel Sakal, Israel has accomplished improvements to reverse the flow of the pipeline over the last two years, to accommodate shipping of the Russian and Eurasian oil to Asian markets.
Meanwhile, Russia has been experiencing an important infrastructure bottleneck while shipping its oil to the fast-growing and highly lucrative Asian markets. Russian energy officials have realized that the plans for pipelines from Siberia to China and the pacific port of Nakhodka may be years and billions of dollars away. After YUKOS oil company ran afoul of the Kremlin in Spring and summer of 2003, the Russian government has decided not to pursue a pipeline to the Northern Chinese city of Daiking – the YUKOS-preferred route. Instead, Moscow has opted for a much more expensive project – the pipeline to the Russian Pacific port of Nakhodka, from which Russian companies can ship oil not just to China, but also to Japan, Korea and the West Coast of the U.S.
IMPLICATIONS: As Russian oil exports to Europe have stagnated due to slow rates of economic growth there, Russian companies have decided that an alternative root to ship oil to China and India must be found. The oil major LUKoil, and the government-controlled Rosneft are prime candidates to ship oil via Israel as they control pipelines and terminals along the Black Sea Coast. From the ports of Novorossiisk and Tuapse, Russian tankers will pass via the Bosphorus-Straits and unload at the slip dock at the port of Ashkelon, from which it will be pumped across the Negev desert to Eilat. Mosst importantly, this significantly shortens the shipping time and decreases costs: a Very Large Tanker (VLT) with 300,000 tonnage travels for 35-30 days from the Mediterranean to China, and only around 10-14 days from Eilat to Shanghai.
The Israeli ports can accommodate tankers larger than those capable of passing through the Suez Canal. And while the tariffs in the Israeli pipeline amount to $.40 a barrel, Egyptians are charging higher rates for transit through the canal, which is a major target of terrorism.
The Israelis, as well, may worry about threats to pipeline security from radical Islamist organizations, such as Al Qaeda, Hamas, and Islamic Jihad. Today, oil routes are no longer safe. The attack on the French supertanker the Limbourg in October 2003, and the Al Qaeda attempts to penetrate the information technology department of Saudi Aramco, the national oil company, demonstrate that terrorists are targeting high ‘emotional value’ economic targets. Moreover, while Hamas and Jihad go after human-rich targets, such as buses and restaurants, they so far targeted Israeli infrastructure only occasionally and unsuccessfully. Al Qaeda does not seem to care about Israel enough to endanger its somewhat depleted force. Moreover, oil burns, but does not explode, and pipelines can be patched up relatively easily.
In this sense, the Israeli North-South pipeline from the Mediterranean to the Red Sea with a capacity of 1.1 million barrel a day offers a significant shortcut for Russian and Eurasian oil, which targets fast-growing Asian markets. It will be an ideal outlet also for the Kazakh and Azerbaijani fields, which are coming online. The pipeline’s capability may be boosted to 1.6 mbd by installing additional pumping stations. As it is aiming to provide Very Sweet Light Crude (VSLC) from the Caspian, additional supply may come from the Baku-Supsa and from Baku-Tbilisi-Ceyhan pipelines when the latter is completed around 2005-2006.
Israel has excellent relations with Azerbaijan and the administration of President Ilham Aliyev, as well as with the Government of Georgia, so that political pressure from Arab countries is unlikely to undermine Israel’s oil transit role. While the immediate economic impact is modest (about $140 million a year), an increase in volume of shipping, more demand for Israel’s own needs, and provision of stock for Israel’s petrochemical industry are additional benefits. As a result, the project is likely to be sustainable and profitable.
CONCLUSIONS: Israel is likely to increase its profile in the Caspian area, and the energy politics of Russia and the Caucasus. It is likely, as it did in the past, to play a mediator’s role in conflicts between Moscow and Washington. Ariel Sharon in particular, together with the leader of Russian-speaking Israel Our Home Party Avigdor Lieberman are keen to see the project implemented. Sharon has taken time to cultivate Putin and try to balance the Russian foreign policy and security elite’s traditional tilt towards the Arab world. Moreover, Sharon has championed in the past a spur to Israel of the Russian Gazprom natural gas pipeline Blue Stream to Turkey. That project was derailed in favor of an Egyptian gas pipeline which never happened. At this point, however, the Eilat-Ashkelon pipeline shows that Israel is becoming an actor in the regional energy field as well.
11-26-2003
Eduard Shevardnadze has done his country of Georgia one last, important service—resigning as president. While the resignation avoided the bloodshed of the use of force against demonstrators in the streets, it leaves the country in a volatile situation, which the United States can help to stabilize.
Brewing Unrest
Besieged by his handpicked successors-turned-opposition leaders, abandoned by his soldiers and policemen, Shevardnadze resigned the Georgian presidency rather than giving an order to shoot his own people.
Shevardnadze rose in the ranks of the Soviet Communist Party since joining in 1948 at the height of Stalin’s rule and then played a key role in the dissolution of the Soviet Union. The question now is, what’s next?
Georgia conducted badly flawed parliamentary elections on November 2, 2003. International observers reported massive fraud, and the U.S. State Department issued a stern rebuke of the vote counting procedures. The 1999 parliamentary elections had been equally faulty. The team that eased Shevardnadze out of power used the populace’s frustration with that election fraud and the accumulated dissatisfaction with the old regime as a fulcrum to topple Shevardnadze.
The first post-post-Soviet transition team in Georgia is decidedly pro-Western:
The most popular politician in Georgia is Columbia-educated former Justice Minister Mikhail Saakashvili (35);
The current President pro-tem (until the elections, which will take place in early January 2004) is the former Speaker of the Parliament Nino Burdjanadze (39);
Former Parliamentary Speaker Zurab Zhvania (40).
All of these leaders are well-known faces in Washington: they are bright, English speaking, and pro-American. However, the economic and security challenges before the new leadership are more difficult to surmount than the 18,000 feet mountain snow-capped peaks of the Caucasus.
Crucial Challenges
Shevardnadze leaves behind a number of tough problems that will be difficult for his young successors to solve. The economic and security situation is depressing, and the population is falling. Three autonomous republics—coastal Abkhazia and Adjara and the mountainous South Ossetia—are in various stages of secession from the central government in Tbilisi. The separatists are supported by the Russian government and military, who still have not evacuated four Georgian military bases, despite a 1999 decision by Organization for Security and Cooperation in Europe (OSCE) summit that they do so.
Georgia’s economic performance remains anemic, with GDP growth around 2 percent per year from 1997-2002, official unemployment over 17 percent, and underemployment even higher. Hundreds of thousands have left the country for neighboring Russia or greener pastures in the West. Corruption is rampant, and Shevardnadze’s relatives and cronies control the choicest morsels of the economy. Saakashvili’s earlier efforts to fight corruption and to reform the judiciary and the State Prosecutor’s office were stalled.
Armed militias, who in the past contributed to the country’s chaos and fought Shevardnadze, as well as the autocratic and pro-Russian leader of Adjara, Aslan Abashidze (a former nemesis of Shevardnadze), have already voiced opposition to the new leadership. And while the Russian Foreign Minister Igor Ivanov mediated between Shevardnadze and the opposition, Russia is cautious about the emerging government, which many in Moscow view as pro-American. The geopolitics of Georgia’s future will be tough for Washington to manage.
Geopolitical Importance
Georgia, with its Christian, largely pro-Western population, was an independent kingdom in the Middle Ages and has dreamt of freedom ever since losing it to a succession of imperial masters, including the Ottomans, Persians and Russians. The country wants to be part of the Euro-Atlantic zone and is located between Russia and Turkey and in proximity to Armenia, Azerbaijan, and Iran. Georgia controls land access to the oil riches of the Caspian, and is a transit country for the Main Export Baku-Ceyhan Pipeline from Azerbaijan to Turkey, which will be completed by 2005.
What the United States Should Do
U.S. support of Georgian independence is bipartisan. Since 1992, the Clinton and Bush Administrations expended as much as $1 billion in assistance. Georgia also received IMF and World Bank credits, loans, and technical assistance. To keep Georgia free and democratic, and to ensure the stability of the Southern Caucasus, the United States should:
Ensure that Eduard Shevardnadze and his family are treated with dignity and that he is allowed an honorable retirement. He should be guaranteed immunity from criminal prosecution.
Enhance democratic development and the rule of law, including the provision of technical assistance for anti-corruption measures and the development of institutions of the law and law enforcement.
Support new parliamentary and presidential elections, including sending U.S. observers for OSCE missions.
Boost thetrain-and-equip program, administered by the Pentagon, to institutionalize Georgian anti-terrorist capabilities.
Help restore the territorial integrity of Georgia by maintaining dialogue with all local parties and Moscow and promote the reintegration of Abkhazia and South Ossetia, by assisting in the development of cultural autonomy models for them, as well as the return of Adjara back under Tbilisi’s full control.
The United States should acknowledge the historic role Eduard Shevardnadze played in the dissolution of the Soviet Union, while supporting the new Georgian democratic leadership. Beyond that, it should renew efforts to ensure Georgia that it can open a new page in its history by strengthening democracy, sovereignty, territorial integrity, rule of law, and economic reforms.
11-14-2003
Al Qaeda’s massive November 8 attack in Riyadh, Saudi Arabia, killed 17 and wounded over 120. This attack targeted the Saudi royal family as well as foreign presence in this kingdom, which is vital to the oil economy. It also gave a boost to the ultimate goals of Osama bin Laden: driving the “infidels” from the Land of Two Mosques and toppling the monarchy. As the result, Western oil supply is at risk.
Three devastating scenarios may endanger the flow of oil:
In any such event, oil prices are likely to skyrocket.
Terror Economics
Bin Laden and his henchmen understand well political economy of terror. They aim for maximum ripple effect: banking and insurance losses for the 9/11 attacks have exceeded $55-60 billion. Bin Laden has proclaimed that if he takes over his native land, the oil price will hit $125 a barrel, while his deputy, Ayman Al Zawahiri stated that U.S. economic targets are high on the Al Qaeda’s hit list.
In October 2002, the Limbourg, a French super-tanker, was hit by a suicide Zodiac boat in the Persian Gulf – just like USS Cole was in 2000. Four incidents of “pirates” taking over large tankers and piloting them for four hours have been reported in South East Asia. Tim Spicer, the British terrorism expert has called this a maritime equivalent of a pre-9/11 flight school. Blown up tankers can paralyze vital waterways, such as the Panama and Suez canal, or the Bosphorus Straits. A tanker full of Liquified Natural Gas (LNG) blown up at port can devastate an oil terminal in the Gulf.
Bin Laden’s engineering and managerial skills and his familiarity with his country’s infrastructure will serve him well in staging a mega -attack on the Kingdom’s oil fields. For example, a radiological weapon (dirty nuke) could paralyze vital nodes of the Gulf oil infrastructure. Such an attack may neutralize the Saudi two million barrel a day surplus oil producing capacity vital for price stability. If this occurs, gas price may hit $6 a gallon for several months, and a deep economic recession will be then triggered by expensive energy, which may be worse than the 1973 and 1979 oil embargoes. This may have devastating results to President Bush’s economic recovery strategy.
Boosting Anti-Terror Cooperation
Since May 2003, Saudi government has improved its anti-terrorism efforts. However, according to Secretary of State Colin Powell, it must do more to fight terrorism and halt funding to Al Qaeda and other terrorists. Many in Washington remain critical of the 1996 investigation of the Khobar Towers attack on U.S. soldiers, which was stalled by the Saudi Interior Ministry. In May 2003, Saudis ignored pleas for additional security before the first attack from Deputy National Security Advisor Stephnen J. Hadley and U.S. Ambassador’s Robert W. Jordan.
Oil is a highly emotional and political issue in the Middle East. In many monarchies, transparency and accountability are lacking. Opulent lifestyles of rulers are becoming unsustainable as the population explodes. Today, the Jihadi chickens are coming home to roost. It was Saudi-sponsored foundation, supervised by members of the Saudi royal family, which funded terrorism from Miami to Manila. The oil bonanza funded the largest expansion of the radical Wahhabi Islam, which bred Al Qaeda, the Taliban, Hamas and Yasir Arafat’s Al Aqsa Martyrs Brigades, which have blown up the Oslo process and the Roadmap.
Israel, however, is just a target of opportunity, a substitute for the Great Satan, which is the U.S. The “root cause” of violence against America is not the Arab-Israeli confrontation, but the ideology of Jihad, which allows the blood of the “infidels.” For the Islamists, born and bred in Arabia, however, it is also permitted to murder “apostate” rulers, such as the Saudi royal family.
What the Bush Administration Should Do
It is only the matter of time when the blow against the oil fields’ Saudi royal guardians – or the fields themselves -- may come. As the oil is endangered, the U.S. needs to prepare comprehensive energy and security responses. Specifically, it should:
The threat today is not just to America and the West, but to the very survival of the Saudi regime and its blood supply -- oil. The United States should be ready to counter it.
11-07-2003
The Kremlin’s attack on YUKOS, the major Russian oil company--including the arrest of Chairman and Chief Executive Officer Mikhail Khodorkovsky, seizure of his shares of YUKOS, and his subsequent resignation--is a watershed event in post-communist Russia. This development has negative implications on several levels, and its ripple effects are far from over. Obviously, President Vladimir Putin has been listening to those who do not care about Russian integration into the global economy and who are undermining his stated goal of doubling Russian gross domestic product by 2008.
The Kremlin’s attempt to dismantle YUKOS will have several long-range consequences:
Drying up domestic and foreign investment,
Undermining the rule of law,
Increasing the power of unelected bureaucrats from secret police and law enforcement,
Withering sources of funding to democratic parties and charities, and
Weakening civil society.
Seizing Complete Control
Through an orchestrated campaign of leaks and accusations, the Kremlin has accused Khodorkovsky of preparing for a constitutional coup by inundating the Duma with his loyalists, financially supporting opposition political parties, and harboring presidential aspirations for 2008. The Kremlin was miffed that YUKOS supported several political parties but did not support the pro-Putin United Russia party. Furthermore, Khodorkovsky was considered a part of the Yeltsin-era "crony capitalism"--a freewheeling combination of politically active billionaire "oligarchs" and Boris Yeltsin’s family members, who are now being purged. Alexander Voloshin, Yeltsin’s chief of staff, whom Putin retained until his resignation on October 30, 2003, was a political leader of the Yeltsin "family."
The St. Petersburg KGB men with whom Putin is siding ("chekists" or siloviki--men of force) and their associates from the business world differ with the Yeltsin "family" in their view of politics. While wrapping themselves in the flag and patriotic rhetoric, they do not hesitate to misuse law enforcement and the courts to achieve their goals. Their main goal is to translate power into wealth. To that end, some in the St. Petersburg faction want to chop up YUKOS.
YUKOS has become Russia’s most successful oil company. Just a month ago, it merged with Sibneft to form the world’s fourth largest oil company. It introduced Western accounting standards and management, pioneered shipping Russian oil to the U.S. market, and launched a private consortium to build a pipeline from western Siberia to the arctic port of Murmansk. It has also bought hundreds of millions of dollars worth of U.S. oil equipment. Over the years, YUKOS paid billions of dollars in taxes and gave hundreds of millions to charity. It was also the company most independent from the government, and the attack on YUKOS suggests that other companies may soon be on the chopping block.
Abuse of the Legal System
Politically well-connected businessmen, associated with government-dominated oil companies and banks, have conspired to dismantle YUKOS by bringing apparently trumped-up charges of past irregularities against YUKOS’s principal shareholders. In the 1990s, the Russian economy was plagued with lawlessness, and any consistent retroactive application of today’s law would threaten a majority of Russia’s current politicians, bureaucrats, and businesspeople with long jail terms. Such abuse of the law, however, causes irreparable damage to the Russian economy, its court system, and Western and Russian investors.
The attack on YUKOS has already done multibillion-dollar damage to the Russian stock market, causing the Moscow RTS index to plunge by over 20 percent and triggering a massive capital flight. YUKOS shares plunged 10 percent on the news of Khodorkovsky’s arrest alone. Moreover, by jailing Khodorkovsky and his partner Platon Lebedev, Putin is sending a clear signal that the Russian state can be hijacked and its legal system subverted by unscrupulous bureaucrats, businessmen, prosecutors, and law enforcement officers. The positive investment climate that Russia had enjoyed since 1998 has evaporated overnight.
What the U.S. Should Do
The Bush Administration is facing a dilemma: It wants to keep Russia as a strategic partner in the war on terrorism and an alternative source of oil. However, as Russia is moving toward the destruction of independent centers of power and increasing authoritarianism, and as the future of economic reform is at stake, decisive measures may be necessary. Specifically, the Bush Administration should:
Re-evaluate its energy dialogue with Russia until Khodorkovsky is released and an impartial investigation examines the charges. U.S. companies should not endanger their stockholders by investing in an unstable Russia.
Temporarily suspend U.S. Export-Import Bank and Overseas Private Investment Corporation financing of Russian oil and gas projects with state-owned entities, such as the oil monopoly Gazprom. This will send a signal that the state cannot abuse its power when dealing with private-sector competitors.
Issue a joint statement by the U.S. Secretaries of Commerce, Energy, and State expressing concern over the crackdown on the private sector and abuse of the legal system.
Provide U.S. government funding for democracy, free media, and rule of law projects through National Endowment for Democracy and U.S. Agency for International Development contractors--activities supported by YUKOS charities until now--and encourage private charitable giving to these programs. Support of democracy and an open society in Russia should not be allowed to die.
Conclusion
With the attack on YUKOS, the ex-KGB faction in the Kremlin has reverted to state-led repression against private capital and independent power centers. A crackdown on the independent media has been going on for three years. The U.S. should send a strong signal to President Putin that such policies may cost Moscow America’s good will and cause damage in tens of billions of dollars.
Restarting the Flow: Restoring Iraqi Oil Production
10-01-2003
The Iraqi people desperately need to have their oil flowing again to the global market. Restarting the flow of Iraqi oil would be a win-win proposition, as not only the Iraqis, but also consumers around the world would benefit from bringing the Iraqi oil supply back on line.
The main impediment to increasing Iraqi oil production at this point is lack of security--terrorist sabotage and looting. The recent attacks on pipelines and power stations are disrupting the flow of Iraqi oil and are clearly aimed at further impoverishing the Iraqis and even further disrupting their lives.
Since the end of major hostilities, saboteurs have bombed Iraqi pipelines more than eight times, causing $7 million per day in lost revenue.1 The culprits, including the remnants of Saddam Hussein’s Ba’ath party and Islamic radicals, are following the old Leninist adage, "the worse, the better." They are betting on an upsurge in resistance to the U.S. presence in Iraq if they can severely disrupt the country’s gasoline, electricity, and cooking gas supply. Saddam loyalists, local Islamist militants, and foreign jihadis who come to Iraq to fight the "infidels" believe that by escalating Iraq’s suffering they can drive the Americans back across the ocean.
It is also true that the lack of security, the scarcity of gasoline and other fuels, and the intermittent supply of electricity are impeding the post-war reconstruction. Today, Iraq is producing less than half as much oil as it pumped before the war.
Saving Iraqi Oil Production
The attacks on the oil infrastructure are part of a premeditated campaign by the remnants of Saddam’s regime and radical Islamist mujahideen organizations to stop the flow of Iraqi oil, harm the people of Iraq, and disrupt global oil markets. A secret memo dated January 23, 2003, reportedly issued by Saddam’s security services, found in Iraq after the war, and published in the London-based Saudi daily Al-Hayat, directs pro-regime elements to destroy power generating stations and the water supply.2 It is likely that Saddam supporters and other terrorists are applying the same tactics to the oil industry.
Iraq is pumping 900,000 barrels per day--considerably less than the pre-war production level of 2.2 million-2.4 million barrels per day. The target of achieving pre-war production by the end of 2003 is in jeopardy, with further increases also in question. While Halliburton subsidiary Kellog, Brown and Root (KBR) and the U.S. Army Corps of Engineers are rehabilitating the Iraqi oil infrastructure, their mandate does not include providing pipeline security.3
The Iraqi oil ministry has begun paying tribal leaders in the south to keep saboteurs and thieves away from the pipelines.4 However, in at least one case, Sheikh Hatem Al Obeidi, an influential tribal leader who was on the government payroll to prevent attacks, instead abetted sabotage and was arrested by U.S. troops.5 Without security, neither the U.S. nor the Iraqis can repair the damage caused to Iraq’s oil industry by the war or rehabilitate Iraq’s infrastructure, which had fallen into a state of grave disrepair under Saddam.6
Meanwhile, the continued attacks are hurting both the Iraqi and Western economies. The West is still suffering from relatively high oil prices, as the economic recovery remains tenuous, and the Organization of Petroleum Exporting Countries has cut production by 900,000 barrels a day.7 As a result of the drop in Iraqi oil production and the Iraqi fiscal shortfall, U.S. taxpayers will need to subsidize 50 percent of the $6 billion Iraqi budget for fiscal year (FY) 2004.
On September 7, President Bush announced that he would request $87 billion for assistance to Iraq and Afghanistan for FY 2004, with the lion’s share going to Iraq.8 A boost in oil production would remedy the Iraqi economic crisis, give the Iraqi people hope, and decrease levels of needed U.S. assistance funding.
Sabotage and Looting
The key impediments to reconstructing the Iraqi oil industry and raising its oil revenues are attacks on the 4,350-mile-long pipeline system and the 11,184-mile-long electric grid.9 The northern pipeline, which runs from Kirkuk to the Turkish port of Ceyhan, was attacked twice in June,10 twice in August, and twice again in September. After an attack on August 16, the pipeline burned for more than 48 hours. The pipeline from the giant Rumeila field in the south has also been bombed twice.
Security analysts divide these attacks into two distinct categories. The first is looting and plunder of the oil infrastructure, including fields, pumping stations, pipelines, and refineries. Organized crime is also raising its head, as demonstrated by the recent interception of a barge with 1,000 tons of stolen Iraqi oil.11 Smugglers usually ship oil to Iran, which reflags and re-exports it.
A much more serious threat, however, comes from groups opposing the U.S. and coalition presence, U.N. involvement, and the elements of Iraqi society participating in the Governing Council.
Thus far, senior U.S. officials, the Coalition Provisional Authority (CPA), and the the U.S. military have not publicly identified the main culprits in the pipeline attacks, which suggests that intelligence is insufficient.12 The ferocious terrorist bombings against personnel and the infrastructure continue.
The main threat comes from three types of groups:
Networks of the old regime operating underground, such as Ba’ath party officials, Iraqi intelligence officers, and Fedayeen Saddam militia.
Radical Sunni groups, such as the predominantly Kurdish Ansar al-Islam; Vanguard of Muhammad’s Army; and others whom President Bush has characterized as "Al-Qaeda type fighters" and who are part of the international jihad movement.13 In his September 7 address to the nation, President Bush called Iraq "the central front of the war against terrorism."14 Anti-Western fighters are crossing into Iraq from Syria and the adjacent Gulf states, including Saudi Arabia.15 Funding for their movements comes from rich individuals and foundations in these same Gulf states and from the global radical Islamic community.
Extremist Shi’a groups, affiliated with Mullah Muqtada Sadr, suspected of attacks on leading Shi’a clerics.16 As the result of the assassinations, a militia called the Badr Brigade--the armed wing of the Supreme Council for the Islamic Revolution in Iraq--was allowed to operate after attempts to ban it by the coalition. Elements of the Lebanon-based Hizballah, an organization on the U.S. terrorism list, and other radical pro-Iranian groups and agents are also present in Iraq.
Key Iraqi pipelines have been paralyzed repeatedly by terrorism. On August 13, the day Iraq started pumping oil to the Turkish port of Ceyhan, terrorists attacked the Northern Kirkuk-Ceyhan pipeline. The same pipeline was attacked again on August 30.17 The pipeline, with a throughput capacity of 1 million barrels of crude per day, was attacked four times between May and September.18 Attacks occurred near the towns of Haditha and Hawja, which are close to the largest Iraqi oil refinery at Bayji.
Iraqi oil production is also suffering from years of centralized, state-run management of the oil sector, long-term lack of investment, and inadequate technical maintenance of the oil fields under Saddam. The absence of hard currency reserves to repair and restart the oil industry is slowing production. However, no investment and expansion are possible unless the physical security of the vast Iraqi oil infrastructure can be assured.
Pipeline Security: Planning and Execution
The military component of seizing Iraq’s oil infrastructure during the war was brilliantly planned and executed. Unlike during the Gulf War, when Saddam succeeded in setting hundreds of Kuwaiti oil wells on fire, fewer than 10 wells were ignited in Iraq. U.S. and British troops seized and secured the oil fields, refineries, and pipeline infrastructure with minimal casualties and material damage. The final draft of an internal post-war report for the Joint Chiefs of Staff gave high marks for pre-war gaming and combined operations during the time of combat.
However, the post-war planning received the lowest grade, with "capabilities that fell short of expectations or needs, and need to be readdressed through new initiatives."19 CPA Administrator Paul Bremer has admitted that the U.S. forces are "stretched thin."20 Securing the oil infrastructure was an important part of post-war objectives, but the plans for post-war occupation of Iraq were not ready when the war started, and the Pentagon was forced to alter its original plan as the post-war violence escalated.21 Thus, it is not surprising that 80 percent of the damage to Iraq’s oil infrastructure occurred after the war ended.22
Five months after the war, the U.S.-led coalition force in Iraq consists of 140,000 American troops and 20,000 international troops, including one British division and one Polish-led division. They are aided by over 54,000 Iraqi security personnel, including 37,000 police, 12,000 facility guards, and 5,000 border police and civil defense corps.
On September 4, in Baghdad, Secretary of Defense Donald Rumsfeld called for putting up to 75,000-100,000 former Iraqi officers and soldiers back in uniform to protect their country and fight its enemies. He also criticized Saudi Arabia and Syria for not doing enough to seal Iraq’s borders.23
Faced with attacks on oil pipelines, the CPA is working to expand the Iraqi force charged with infrastructure protection. During this past summer, it discussed the provision of training to this security force with Kroll Associates and other private U.S. companies.24 With more international troops coming to Iraq, they can also assume responsibility for guarding the pipelines and infrastructure and training the Iraqi security forces, which will be tasked with protecting the pipelines in the future. As long as security is not restored, however, the American taxpayer will pay for this security force.
Criticism on the Hill and Beyond
Senators and Representatives, including prominent Republicans, as well as retired senior military officers have criticized the planning, numbers, and troop deployments in Iraq. Senator Richard Lugar (R-IN), chairman of the Senate Foreign Relations Committee, stressed his criticism of the planning done for post-war deployment but called on his colleagues to "rejoice" that the plan has been corrected. Representative Curt Weldon (R-PA), vice chairman of the House Armed Services Committee, expressed reservations about the planning for the war last winter.25
Senator Kay Bailey Hutchison (R-TX), Senator John McCain (R-AZ), columnist George Will, and Weekly Standard editor William Kristol--all outspoken proponents of Saddam’s removal--have criticized the Administration for post-war mishaps.26 It is less surprising that Democrats, including Senators Joseph Biden (D-DE), ranking Democrat on the Senate Foreign Relations Committee, and Jack Reed (D-RI), a West Point graduate who served with the 82nd Airborne, are also criticizing the Administration for mistakes in post-war planning and deployment.
Among senior generals critical of the post-war performance in Iraq is General Anthony Zinni, the former head of the U.S. Central Command who has extensive experience in the Middle East and serves as a consultant to the U.S. State Department.27 The most prominent proponent of a bigger Army and a greater deployment in Iraq is General Eric Shinseki, the recently retired Army Chief of Staff, who called for "several hundreds of thousands of soldiers on the ground" and warned against a "twelve division strategy for the ten division army."28
Even if the actual size of the U.S. Iraqi deployment is not increased, it has to be refocused on intelligence and training of the Iraqi forces, while the number of coalition troops from other countries must go up, according to General John Abizaid, the current head of Central Command.29 This is also the opinion of the pre-eminent British military historian, John Keegan.30 Increased intelligence collection, anti-terrorist operations, and training should become the focus of the U.S.-led force in Iraq.
Protecting Iraqi Oil Revenue
The Bush Administration has issued an executive order barring claims in U.S. courts against Iraqi oil or proceeds from it.31 It has also coordinated with other permanent U.S. Security Council members--the United Kingdom, France, China, and Russia--on the imposition of a moratorium on Iraq’s national debt.
The U.S. should further coordinate its actions with companies and sovereign claimants (states) to delay reparations for Gulf War damages and other claims. Iraq needs breathing space in order to restart its cash flow and get its oil industry up and running again.
Providing Security for the
Iraqi Oil Infrastructure
Iraq’s oil reserves are the third largest in the world after Russia and Saudi Arabia. However, only 15 of its 73 discovered giant and large fields have been developed.32 Vast parts of the country remain unexplored.
According to current estimates, the investment needed to bring Iraqi production to about 3 million barrels a day will exceed $3 billion over the next two to three years. Over the next 10 years, $35 billion-$40 billion will be needed to boost production from the current 1.2 million-1.4 million barrels per day (MBD) to the pre-1979 production level of 5-6 MBD.
Before serious reconstruction work can begin, however, the physical security of the infrastructure needs to be achieved. To this end, the Bush Administration, including the CPA, and the Iraqi Cabinet should:
Conduct an assessment of security needs to provide for infrastructure protection in conjunction with the Iraqi oil ministry. Before serious reconstruction of the oil industry can begin, the coalition and the Iraqi cabinet must be able to assure physical security of Iraqi energy infrastructure.
Increase the number of Iraqi guards as needed to provide security. However, the rank-and-file and all officers must be adequately screened to root out Saddam’s hard-core supporters and Islamic radicals.
Utilize coalition forces, especially the British, to train Iraqi security forces, including pipeline security units. British instructors have earned high marks the world over providing security and military training.
Hire an international security company to administer pipeline security and train the Iraqi security forces tasked with protecting the pipelines to complement military training.
Train the guards for the task at hand; deployment without training is self-defeating. The CPA has cut the training time for Iraqi police from 12 weeks to eight, and the quality of this force leaves much to be desired.33 Similar shortcuts in training for pipeline protection forces could lead to undesirable results.
Develop and conduct a public information campaign explaining to the Iraqis the importance of pipeline security and the resultant oil revenue. Such a campaign should emphasize the direct link between oil revenue and the provision of basic services and the growth in living standards.
Design a technological package to enhance infrastructure security, using satellite imaging, unmanned aerial vehicles/drones, video cameras, and sensors. This package would be integrated with the security provider (state or private).
Provide additional funding to repair the oil infrastructure. The rundown state of the oil infrastructure will require significant investment: up to $3 billion per year to get it up and running again. These funds can be provided on credit to the Iraqi Governing Council or the oil ministry, to be repaid from future oil revenues.
Work with the Iraqi oil ministry leadership appointed by the Coalition Provisional Authority and the Council to intensify the purge of former Ba’ath officials from the oil ministry and the oil industry.
Conclusion
Without adequate security, Iraqi oil will not reach global markets. Rebuilding the Iraqi oil sector through Western investment will not work as long as terrorists and looters are able to target technical personnel, pipelines, power lines, and other assets necessary for restarting oil production.
By liberating Iraq, the U.S. undertook an immense responsibility. Without Iraqi oil, the U.S. taxpayer will have to foot the bill for the occupation and reconstruction of Iraq. U.S. consumers will pay higher prices at the pump, and the U.S. and global economies will endure an indirect tax by paying higher energy prices. The alternative to restoring Iraqi oil production--misery for the Iraqi people and victory for the terrorists--is not an option.34
1. Radio Free Europe/Radio Liberty, "Iraq: Pipeline Fire Costing $7 Million a Day," August 18, 2003, at www.rferl.org/nca/features/2003/08/18082003075830.asp. See also Walter Rodgers, Nic Robertson, and Jason Bellini, "3 U.S. soldiers killed in ambush near Tikrit," CNN.com, September 18, 2003, at www.cnn.com/2003/WORLD/meast/09/18/sprj.irq.main. The most recent explosions occurred on September 8 and 18.
2. This document was translated by the Middle East Media Research Institute in its Special Dispatch Series No. 538, July 17, 2003. Available at http://memri.org/bin/articles.cgi?Page=archives&Area=sd&ID=SP53803
3. Energy Intelligence Group, "Oil Flows at Kirkuk as KBR Begins Damage Assessment," Eye on Iraq, May 1, 2003, at www.energyintel.com/EyeOnIraq.asp (subscription required).
4. Bassem Mroue, "Oil Ministry and U.S. Troops Take Measures to Protect Iraq’s Main Pipeline from Thieves and Saboteurs," Associated Press, July 4, 2003, at www.enn.com/news/2003-07-04/s_6207.asp.
5. "Iraq Tribal Sheikh Arrested Over Oil Blasts," Agence France-Presse, August 31, 2003, at www.ptd.net/webnews/wed/cs/Qiraq-oil-blast-sheikh.RMbd_DaU.html.
6. Energy Intelligence Group, "Oil Flows at Kirkuk as KBR Begins Damage Assessment." War damage included the bombing of the K3 pumping station at Haditha and a number of pipelines that crossed the Tigris around Tikrit.
7. John W. Schoen, "OPEC Cuts May Crimp Economy," MSNBC, September 24, 2003, at www.msnbc.com/news/
971120.asp?0sl=-23.
8. George W. Bush, "President Addresses the Nation," September 7, 2003, at www.whitehouse.gov/news/releases/2003/09/
20030907-1.html.
9. Pamela Hess, "CPA Speeding Police Training in Iraq," The Washington Times, September 2, 2003, at www.washtimes.com/
upi-breaking/20030902-012831-9370r.htm.
10. Lamia Radi, "Fires Blaze on Iraq Oil Pipeline After Twin Bomb Attacks: Residents," Agence France-Presse, June 13, 2003, at iafrica.com/news/worldnews/244870.htm.
11. Pacific Disaster Management Information Network, "Iraq Humanitarian Assistance Report," August 11, 2003, p. 3, at www.who.int/disasters/repo/10470.pdf.
12. Douglas Jehl and Dexter Filkins, "Rumsfeld Eager for More Iraqis to Keep Peace," The New York Times, September 5, 2003, at www.nytimes.com/2003/09/05/international/middleeast/05RUMS.html.
13. See also Genaro C. Armas, "Troops Called Not an Answer," Associated Press, August 25, 2003.
14. George W. Bush, "President Addresses the Nation."
15. Secretary Donald H. Rumsfeld and General John Abizaid, "DoD News Briefing," August 21, 2003, at www.defenselink.mil/
transcripts/2003, /tr20030821-secdef0604.html. See also Stephen Schwartz, "Reading Najaf," The Weekly Standard, September 3, 2003.
16. Aparisim Ghosh, "Terror at a Shrine," Time, September 8, 2003, p. 30. See also Tarek Al-Issawi, "Previously Banned Militia Patrols Iraqi Holy City, with Coalition’s Blessing," Canadian Press, September 6, 2003, at www.canada.com/news/world/story.asp?id=517B3E75-E27D-42A2-BD33-E47782C941A6. The Badr Brigade was previously disbanded by the coalition, but after the murder of Ayatollah Muhammad Bakr al-Hakim and an earlier attack on his uncle, it is now being allowed to function again.
17. "Iraqi Oil Pipeline Ablaze," News24, at www.news24.com/News24/World/Iraq/0,,2-10-1460_1409548,00.html, and "Iraq Council Makes Security Demands," MSNBC News, August 30, 2003, at www.msnbcnews.com/news/959639.asp?cp1=1.
18. "Iraqi Oil Pipeline Sabotaged," Agence France-Press, August 13, 2003; see also Joseph Logan, "Bomb, Tech Problems Hit Iraq Pipeline," Reuters, August 16, 2003, and Celcan Hacaoglu and Bruce Stanley, "Iraq Resumes Pumping Oil from Northern Oil Fields through Turkish Pipeline," Canadian Press, August 13, 2003, at www.canada.com.
19. Rowan Scarborough, "Joint Chiefs Report: U.S. Rushed Post-Saddam Planning," The Washington Times, September 3, 2003,
p. 1.
20. Armas, "Troops Called Not an Answer."
21. Ibid.
22. Bruce Stanley, "Security the Top Priority for Iraqi Oil Industry As Looting Continues," Oil and Gas Reporter, May 27, 2003, at www.oilandgasreporter.com/stories/052703/ind_20030527006.shtml.
23. Douglas Jehl and Dexter Filkins, "Rumsfeld Eager for More Iraqis to Keep Peace," The New York Times, September 5, 2003.
24. Douglas Jehl, "U.S. Considers Private Iraqi Force to Guard Sites," The New York Times, July 18, 2003, at query.nytimes.com/gst/abstract.html?res=F30C17FC3B580C7B8DDDAE0894DB404482.
25. Amy Fagan and Rowan Scarborough, "Post-Saddam Planning Failures `Unforgivable,’ Democrats Say," The Washington Times, September 4, 2003, at washingtontimes.com/national/20030903-115853-1572r.htm.
26. Sig Chrstenson, "Some Republicans Doubt Progress on Iraq," San Antonio Express-News, August 31, 2003, at
news.mysanantonio.com/story.cfm?xla=saen&xlb=180&xlc=1048090.
27. Thomas E. Ricks, "Ex-Envoy Criticizes Bush’s Postwar Policy," The Washington Post, September 4, 2003, at
www.washingtonpost.com/wp-dyn/articles/A27846-2003Sep4.html.
28. Mark Thompson and Michael Duffy, "Is the Army Stretched Too Thin?" Time, August 24, 2003, at www.time.com/time/magazine/printout/0,8816,477891,00.html.
29. Rumsfeld and Abizaid, "DoD News Briefing."
30. Jack Kelley, "Troop Strength Debate Ranging," Pittsburgh Post-Gazette, August 23, 2003, at www.post-gazette.com/pg/03235/214252.stm.
31. George W. Bush, "Executive Order Protecting the Development Fund for Iraq and Certain Other Property in Which Iraq Has an Interest," May 22, 2003, at www.whitehouse.gov/news/releases/2003/05/20030522-15.html.
32. Emma Clark, "Iraq `Needs Foreign Oil Companies,’" BBC News, July 24, 2003, at news.bbc.co.uk/2/hi/business/3075521.stm.
33. Pamela Hess, "CPA Speeding Police Training in Iraq," The Washington Times, September 3, 2003, at www.washtimes.com/
upi-breaking/20030902-012831-9370r.htm.
34. The author would like to thank William Schirano, Research Assistant in the Kathryn and Shelby Cullom Davis Institute for International Studies, and Anita Greco and Irene Gorelik, interns at The Heritage Foundation, for their assistance with researching this paper. The author also wishes to thank Heritage Foundation colleagues Peter Brookes, James Phillips, and Jack Spencer, as well as Ed Badolato, Executive Vice President of the Shaw Group, and Dr. Gal Luft, Director of the Institute for Analysis of Global Security, for discussing concepts contained herein and commenting on the paper.
09-26-2003
At the Camp David summit which started on September 25, Presidents George W. Bush and Vladimir Putin should put the recent U.S.-Russian differences over the Iraq war behind them and close ranks on rebuilding Iraq and defeating al Qaeda. The senior leadership of both countries recognize that global terrorism is a strategic threat to their countries and to the West in general, whether in New York, the Caucasus, Moscow, or Baghdad.
At his August 30 press conference in Sardinia, Italy, Putin signaled a willingness to put past differences aside and negotiate an acceptable formula for Moscow’s support of a U.N. Security Council resolution on sending U.N. peacekeepers to Iraq under U.S. command. Progress in such negotiations — and in the overall U.S.-Russian strategic relationship — will depend on the quid pro quo that the U.S. offers.
Restoring the U.S.-Russian antiterrorism alliance may also spur other major powers, such as Germany, India, and possibly Turkey, to support U.S.-led efforts to shore up security in Iraq and restore the Iraqi economy.
Improving the Balance of Interests. Two years after the September 11 attacks, disagreements over Iraq — combined with the perception of the Moscow elite that Russia has little to show for its unprecedented cooperation with Washington — have marred U.S.-Russian solidarity in the war on terrorism. This resulted in Russia’s siding with France and Germany in opposition to the U.S.-led war in Iraq. As early as the fall of 2001, high-level officials in Moscow had signaled that recognition of Russian economic interests in Iraq could secure Moscow’s support of the war, but the U.S. ignored their overtures.
Russian policymakers have also criticized the relationship as skewed against Moscow. Russia’s acquiescence in the U.S. withdrawal from the ABM Treaty, to NATO enlargement, and to the U.S. deployment of forces in the Southern Caucasus and Central Asia are often cited as examples of the United States taking advantage of Russia. There is also dissatisfaction in Moscow because Congress has not lifted the obsolete 1974 Jackson-Vanick Amendment, which continues on a symbolic level to restrict U.S. Permanent Normal Trade Relations with Russia — despite Bush administration pledges that the amendment would be repealed.
The Russian criticism that the U.S.-Russian relationship is a one-way street may have some validity. But to be fair, since September 11, the United States has taken steps toward Moscow by declaring some Chechen extremists international terrorists and by pursuing cooperation with Russian companies on ballistic-missile defense.
Some of Putin’s political allies, especially from the secret police, nuclear power, and defense circles, still harbor anti-American sentiments and insist on Russia’s "special path." This path includes building military presence and political influence in the former Soviet republics and coordinating Moscow’s policies with China and Iran, and selling arms to them.
Russian nuclear-technology transfer to Tehran is particularly dangerous and destabilizing. The new Russian overtures to Saudi Arabia are also a signal that Russia is keeping open the option of cutting a "separate deal" with the Islamic world, to attract massive investment and prevent the financing of terrorist operations on Russian soil.
While all politics are local, all foreign policy is domestic: Future Russian foreign policy will be influenced by the continuing political struggle in Moscow between the Westernizers and authoritarians.
What Should the Bush administration Do? Improving antiterrorism cooperation and pulling Russia closer to the U.S. side on Iraq may trigger competition between other powers to offer peacekeepers and support for the U.S. on Iraq, Iran, and the war on terrorism. At Camp David, President Bush should request Russian support for the U.S. draft of the U.N. resolution authorizing U.N. peacekeepers for Iraq under U.S. military command while rejecting the French demands for a hasty transfer of power to the Iraqis. Putin and Foreign Minister Igor Ivanov have signaled that Russia will support U.N. peacekeepers under U.S. command in Iraq.
Bush should also invite Russian participation in the U.N. peacekeeping force for Iraq. While Russian U.N. Ambassador Sergey Lavrov has ruled out Russian troops in Iraq, peacekeepers could provide training, emergency relief, and oil-pipeline security. Russia currently has up to 10,000 experienced peacekeepers, who adequately cooperated with American troops in Bosnia and Kosovo.
Bush should offer expansion of Russian participation in the reconstruction of Iraq. Russian companies have up to $1 billion in contracts to rebuild Iraq. The USSR constructed the Iraqi power grid, which is in need of major refurbishing. Russian oil companies have contracts to increase production in the depleted Iraqi oilfields. Doubling the value of contracts for Russian participation in the reconstruction of Iraq would provide Moscow with an incentive to cooperate.
Bush should request Russian cooperation in preventing further development of the Iranian uranium-enrichment and nuclear-weapons program. On August 26, the International Atomic Energy Agency (IAEA) announced that it had found traces of weapons-grade uranium in Iran. Russia has expressed support for intrusive inspections under the IAEA’s "additional protocol" and expects to conclude a spent-fuel repatriation agreement with Tehran. However, as Iran is threatening to follow North Korea and withdraw from the Nuclear Non-proliferation Treaty, President Bush should encourage Russia to coordinate its position with Washington and stress that a nuclear-armed Iran will pose a strategic threat to Russia.
Finally, Bush should explore further cooperation on missile defense. The president has signed a policy directive calling for missile defense cooperation with Russia, and he should use this summit to further this policy. Boeing and a major Russian military-electronics manufacturer have recently signed a contract to build a sophisticated radar for a joint missile-defense program.
The Camp David summit is a strategic opportunity to put U.S.-Russian relations back on track. If successful, Presidents Bush and Putin will contribute to achieving security and peace in Iraq and strengthening struggle against international terrorism.
09-18-2003
A US corruption case that has implicated top Azerbaijani officials is not expected to substantively alter Bush administration policy towards Baku, experts in Washington believe. At the same time, the case stands to deepen Washington’s conundrum over its short- and longer-term interests in resource-rich Azerbaijan.
An early September indictment unsealed in a New York federal court alleges that Swiss lawyer Hans Bodmer "paid bribes and authorized the payment of bribes" to four unnamed "senior officials" in Azerbaijan in a scheme to influence the privatization of the state oil company, SOCAR.
Western media, including the Financial Times, have reported that two of Azerbaijani officials involved in the scheme were President Heidar Aliyev, and his son, Ilham, who is a former deputy head of SOCAR and is currently the ruling New Azerbaijan Party’s candidate for president in the upcoming October 15 election. Azerbaijani government officials have vigorously denied that either Aliyev received illicit payments from Bodmer.
Opposition media outlets in Azerbaijan have seized on the indictment, hoping the bribery probe can boost the electoral chances of opposition presidential candidates. So far, though, the response to the case in Azerbaijan has been somewhat muted. State-run media has largely ignored news about the indictment. Meanwhile, the limited reach of opposition-controlled media hampers their ability to spread their message.
In Washington, the indictment hasn’t generated much concern over the near-term policy implications. Zeyno Baran, Director of International Security and Energy Programs at the Nixon Center and a Caucasus expert, indicated the corruption allegations cannot be considered a shocking development. "The United States knows that Azeri officials are corrupt." Indeed, the group Transparency International ranks Azerbaijan as among the most corrupt countries in the world in its 2002 Corruption Perceptions Index.
Realpolitik ensures that the Bush administration will largely maintain its current policy course. Azerbaijan has emerged as a key ally in the strategically important Caucasus region. More importantly, the country is the central player in US-backed efforts to export Caspian Basin energy via the Baku-Tbilisi-Ceyhan pipeline. Washington built a close working relationship with President Heidar Aliyev, and top Bush administration officials have sought to foster similar ties with Ilham, who is widely perceived as the likely presidential election winner.
The main consequence of the indictment could be that US-Azerbaijani relations, while remaining strong, will assume a lower profile. Some observers in Washington dub this phenomenon as "Nazarbayevization," a reference to Kazakhstani President Nursultan Nazarbayev, who is reputedly linked to an ongoing corruption probe involving New York merchant banker James Giffen. Under Nazarbayevization, US leaders effectively maintain a policy status quo while distancing themselves from a leader tainted by allegations of impropriety.
An indicator that US-Azerbaijani relations may be undergoing Nazarbayevization is that while Ilham Aliyev received a warm reception from Bush administration officials during a recent visit to Washington, both President George W. Bush and Vice President Dick Cheney refrained from meeting with the Azerbaijani heir apparent. According to a source familiar with the Bodmer investigation, the White House had advance knowledge of the pending indictment against the Swiss lawyer.
As is the case in the US corruption probe reportedly involving Nazarbayev, legal and political experts in Washington expressed doubt that prosecutors in New York would seek to reveal the identities of the bribe-taking Azerbaijani officials. David Rivkin, a former White House and Justice Department official during the former Reagan and first Bush administrations, said there was no legal basis to prosecute Azerbaijani officials for accepting illicit payments. "As they cannot be prosecuted, they should not be named," he said. "That’s why we have a category of un-indicted co-conspirators."
In general, US officials would prefer that the Bodmer case not receive wide publicity. The mere allegations of corruption have the potential to alienate Azerbaijani leaders, prompting them to downgrade US relations. Such a trend is noticeable in Kazakhstan, where Nazarbayev in recent months has taken steps to improve relations with Russia and China in what he has described as a "multi-vectored" policy.
Ultimately, the Bodmer indictment brings into sharper profile a conundrum that surrounds US policy towards Azerbaijan. Washington’s immediate interests appear to clash with its long-term preferences.
Over the near term, Bush administration officials are convinced that maintaining strong ties with the Aliyevs is in the best interests of the United States – both in strategic and economic terms. The Aliyevs are widely seen in Washington as offering the best option for the maintenance of stability in Azerbaijan in the coming months and years.
Over the longer haul, however, the Aliyevs association with corruption, which has been enhanced by the Bodmer indictment, can prove a liability for US goals. The United States remains interested to promoting the democratization of the countries of the former Soviet Union, and many American observers believe civil society, the development of which can be painstakingly slow, is the best guarantor of stability in any given country. Ongoing Bush administration support for the Aliyevs may be undermining Azerbaijan’s gradual democratization process, some policy analysts believe.
Opposition leaders in Baku have sharply criticized recent US behavior, saying that the overt Bush administration preference for Ilham Aliyev is tantamount to meddling in the election outcome. Some observers believe that such a perception could prompt the opposition to embrace confrontational methods if they feel the presidential election is rigged. Others suggest that Washington’s embrace of Ilham could encourage vote rigging by conveying the impression that the United States is not prepared to take punitive action in response to a falsified election tally.
While visiting Baku to monitor election preparations, Andreas Gross, the head of a Council of Europe Parliamentary Assembly (PACE) delegation, expressed concern about the possibility of fraud. At the same time, Gross expressed hope that authorities would take action to rectify current electoral shortcomings.
"Azerbaijan needs strong leaders and a strong president," Gross was quoted as saying by the Ekho newspaper on September 17. "However, the strength of the president lies not in his authoritarianism, but in his legitimacy. It is the legitimacy of power that makes the statesman strong."
09-17-2003
Geopolitical tectonic plates have shifted as the de-facto ruler of Saudi Arabia, Crown Prince Abdullah, completed his recent visit to Russia.
No longer sure of its prior close relationship with Washington, the Saudi monarchy is reaching out to the former empire it helped America to defeat in Afghanistan only 15 years ago.
In the aftermath of the Iraq war, Riyadh is looking to balance U.S. influence in the Persian Gulf. It also hopes to diversify its sources of weapons and signal to Washington that it keeps all geopolitical options open.
Russia is the third largest weapons exporter after U.S. and Great Britain. It leads the world in selling large weapons systems like tanks and aircraft. Its military sales topped $6 billion in 2002, according to the Stockholm-based International Peace Research Institute.
In the 1990s, Russia sold a $4 billion state-of-the-art, multi-layer air defense system to the United Arab Emirates, and would like to open the large and lucrative Saudi weapons market to its rusting but once-formidable arms industry.
The Saudis also recognize that Russia -- as the largest producer of oil outside of Organization of Petroleum Exporting Countries (OPEC) and the largest producer of natural gas -- packs a lot of punch in the global energy markets. While the U.S. is interested in diversifying its energy supply to include Russia, Saudi Arabia wants its own direct energy dialogue with Moscow.
Russian oil exports have grown 8-10 percent a year since 1998. Its increasing oil market share started to worry the Saudi kingdom. Riyadh traditionally considers itself the market-maker of energy and wants others to follow. It is also worried that the more efficient Russian private sector oil model may become contagious. The Saudi royal family would like to keep controls of the "spice."
The five-year oil-and-gas cooperation agreement signed in Moscow by the energy ministers will allow the two fuel giants to coordinate supply of oil to the global markets. Russia will not even need to join OPEC, although the U.S. State Department sources told TCS that Washington "will not be excited" if Moscow consider joining the cartel.
Moscow is driven towards a partnership with Saudi Arabia for a combination of geopolitical and geo-economic reasons. It is looking to compensate itself for the loss of influence in the Gulf with the demise of Saddam Hussein, the old Soviet client.
Russia’s traditionally warm relations with other secular Arab countries, Syria and Libya, have stagnated for years. While Damascus has no cash to pay for Russian weapons, Riyadh has plenty. And Russian energy companies, flush with cash, are looking for joint ventures in the Middle East, including in Saudi Arabia.
The desert kingdom is a perfect partner for giant natural gas development schemes under the umbrella of Prince Abdullah’s much-touted "gas initiative," which would include power generation, liquid natural gas (LNG) production for export, and gas-powered desalination.
Most importantly, though, Moscow believes that Saudis and other rich Gulf states hold the keys to the 9-year-old war in Chechnya. One of the most radical and audacious Islamist commanders in Chechnya, known by Nome-de-guerre Hattab, was a Saudi. The Russian special forces killed him after a long hunt. Another top commander, Shamil Basaev, on the U.S. Department of State terrorism list, is known to have military and financial support from the Gulf, as well as a flow of jihadi recruits.
In October of last year, the Russian security services alleged in the media that the Chechen suicide bombers who took 1,000 people hostage in a Moscow theater made phone calls to the Gulf. Their commander, they said, has negotiated to make a "snuff movie" featuring hostage executions for a rich Gulf sponsor -- for US $1 million.
The Kremlin was livid. In the last summit with President Bush in St. Petersburg in June, President Putin stressed that 15 out of 19 hijackers were Saudi. President Bush nodded in agreement. This was an intentional jab to signal to Saudi Arabia that Russia is willing to join forces with the United States in prosecuting the war against terrorism if the Saudis don’t reign the radical Chechens in.
Al Qaeda’s terrorist attacks in Riyadh, in which over 30 Saudis died, seemed to have changed the tone in the desert kingdom. Now Saudi leaders claim that they view Chechen separatism as an internal Russian affair, and that their assistance was always exclusively humanitarian. While nobody in Moscow believes that, the Putin Administration, which is facing parliamentary elections in December and presidential elections in March 2004, is hoping for drying up of financing to terrorism, and significant decrease in hostilities.
Russian-Saudi relations have known their share ups and downs. The Soviet Union was the first state to recognize the desert Kingdom of Hijaz in 1926, hoping to upset the British. In the great purge of 1937, however, Stalin recalled the Soviet Ambassador and had him shot.
Saudi Arabia paid billions of dollars and thousands of mujahideen to fight the Soviet Union in Afghanistan in the 1980s. It also crashed the oil prices down, denying Leonid Brezhnev, the Soviet General Secretary, his principal source of foreign cash. The conflict that brought Riyadh and Washington to the pinnacle of their friendship, allowed the Saudis to propagate the Wahhabi school of Islam worldwide, and hastened the demise of the Soviet Union. Saudi foundations and rich individuals have poured over $100 million to support Chechen separatism. According to George Engelhardt, a Moscow-based expert on radical Islam, the Saudis are spending up to $100 million a year to support Wahhabi indoctrination and anti-Western lobbying. This amount is likely to increase if more Saudi companies will become engaged in Russia.
Dr. Sergey Karaganov, the Chairman of the Russian Council on Foreign and Defense Policy and a consultant to the Russian government and to energy companies, was instrumental in bringing Prince Abdullah to Moscow. Karaganov says that the visit was "very productive." This means Saudi-Russian cooperation both on energy and on Chechnya.
As Moscow and Riyadh discover their newfound common agenda, and pursue cooperation, the bear-and-camel rapprochement demonstrates the old adage: countries do not have permanent friends. They only have permanent interests.
09-12-2003
The Bush Administration needs to monitor a new geopolitical shift that is taking place following the visit of de-facto ruler of Saudi Arabia, Crown Prince Abullah to Russia on September 1-2. Moscow and Riyadh, old rivals, now claim to have found a common agenda, which spans oil, terrorism, and arms sales.
Moscow wants to intercept money flowing to the Chechen rebels from the Persian Gulf, sell arms and attract Saudi investment. No longer sure of their close relationship with Washington, the Saudis are reaching out to the Russians. In the aftermath of the Iraq War, Riyadh is looking to balance U.S. influence in the Persian Gulf. The Saudis also hope to diversify their sources of imported weapons. They have signaled to Washington that they want to keep all geopolitical options open.
Weapons and Oil
Russia is the world’s third largest weapons exporter after the United States and Great Britain, with military sales topping $6 billion in 2002. In 1997, Russia sold $4 billion, SA-10 air defense system to the United Arab Emirates, and would like to open the lucrative Saudi weapons market to its formidable arms industry.
Saudis also recognize that Russia, as the largest producer of oil outside of Organization of Petroleum Exporting Countries (OPEC) and the largest producer of natural gas, packs a lot of punch in the global energy markets. Saudi Arabia, like the United States, wants its own “energy dialogue” with Moscow.
Russian oil exports grew 8-10 percent a year since 1998. The Saudis are concerned that the more efficient Russian private sector-driven oil industry development model may spread to the Middle East.
The five-year oil-and-gas cooperation agreement signed between Russian and Saudi Arabia will allow the two fuel giants to coordinate supply of oil to the global markets. Russia will not even need to join Organization of Petroleum Exporter Countries (OPEC) to do so, although the U.S. State Department sources believe that Washington “will not be exited” if Moscow considers joining the cartel.
The Kremlin Agenda
Moscow, for its part, is driven towards a partnership with Saudi Arabia for a combination of geopolitical and geo-economic reasons. It is looking to compensate itself for the loss of influence in the Gulf with the demise of Saddam Hussein, the old Soviet client.
Russia’s traditional influence and markets in secular Arab countries: Iraq, Syria and Libya, have been in decline.
Russian energy companies, flush with cash, are looking for joint ventures in the Middle East, including in Saudi Arabia, while Saudis may invest in the Russian natural resources sector, including energy, in real estate and aerospace. The desert kingdom is a perfect partner for giant natural gas development schemes under the umbrella of Prince Abdullah’s “gas initiative” that includes power generation, liquid natural gas (LNG) export facilities, and gas-powered desalination of seawater.
The Chechen Connection
Most importantly, though, Moscow believes that Saudis and other rich Gulf states keep the keys to the 9-year-old war in Chechnya. One audacious Islamist commander in Chechnya, now dead, Hattab, was a Saudi. Another top commander, Shamil Basaev, on the U.S. Department of State terrorism list, receives financial support and a flow of jihadi recruits from the Gulf. Saudi foundations and rich individuals have out poured over $100 million to support Chechen separatism between 1997-1999 alone, according to a State Department official who requested anonymity. Radical Chechen leaders, such as Movladi Udugov and Zelimkhan Yandarbiev, found asylum in Saudi Arabia.
However, Al Qaeda’s May 12 terrorist attacks in Riyadh, in which over 35 people died, seemed to change the tone. The Putin Administration is now hoping to stem the financing, and decrease hostilities in and around Chechnya.
Russian-Saudi relations knew its ups and downs. The kingdom paid billions of dollars and sent thousands of moujahedeen to fight the Soviet Union in Afghanistan in the 1980s. It also crashed the oil prices down, denying the USSR its principal source of foreign cash. That conflict has provided the Saudis with U.S. acquiescence to spreading the Salafi (Wahhabi) school of radical Islam worldwide.
What to do
The Bush Administration should be aware that Russian-Saudi rapprochement may affect U.S. energy security and may diminish Russia’s enthusiasm in support of U.S. war on terrorism. If successful, these ties may lessen U.S. clout in the Middle East and boost Moscow’s impact.
The National Security Council should instruct the U.S. Department of State and the intelligence community to monitor and analyze the possible new developments between Moscow and Riyadh, including:
As Moscow and Riyadh discover their newfound common agenda, and pursue cooperation, the Bush Administration should remember the old adage: countries do not have permanent friends. They only have permanent interests.
