Russia and Eurasia

Ariel Cohen

On Aug. 8, Russia decided to rewrite the rules of post-World War II European security. It repudiated the Helsinki Pact of 1975, which recognized the sanctity of borders in Europe, and violated the sovereignty and territorial integrity of NATO aspirant Georgia, whose troops had attacked South Ossetia the day before. In the process, Russia also tore up its own peacekeeping mandate in South Ossetia and Abkhazia.

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By Ariel Cohen

While all the facts of last week’s Russian-Georgian war are not clear, enough information--including eyewitness accounts--has been reported in the media to draw initial conclusions about the performance of Russian military forces and the implications of these operations for U.S. defense policies. Unquestionably, the war is a reminder that "conventional" military operations as an instrument of modern combat are far from obsolete.

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By Ariel Cohen

Moscow remains deaf to pleas from Washington and European capitals to cease aggression against its neighbor, Georgia. Last week, as the Olympic Games opened, the tragic and ominous conflict between Georgia and Russia erupted. On Thursday, August 7, South Ossetian separatists, supported by Moscow, escalated their machine gun and mortar fire attacks against neighboring Georgian villages.

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By Ariel Cohen

Alexander Solzhenitsyn (1918–2008) was a titan of 20th century Russian literature and politics. He survived the Stalinist purges, World War II, eight years in the Gulag, Communist denunciation, and even a battle with cancer. After spending 18 years exiled in America, he made a triumphant return to his homeland.

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By Ariel Cohen

July 2008 will mark a momentous month in the history of Russian business. This is when Sergey Chemezov, a close associate of Prime Minister Vladimir Putin, consolidated control over 426 additional enterprises that are now a part of the Russian Technologies (Rostechnologii) empire. A global, state-owned Russian weapons-and-metals holding has been born.

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By Ariel Cohen

In the last few days, Moscow has beefed up its "peacekeeping force" in the breakaway Abkhazia on the Black Sea, claiming it is protecting Russian citizens, who are the majority population of Abkhazia. Furthermore, Russian troops are amassing on the de-facto Abkhazia-Georgia border. The Caucasus may be on the brink of a war. At the same time, Russia has accused Georgia of planning to invade Abkhazia, accusations that sound distinctly hollow under the circumstances.

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By Ariel Cohen‍

Russian President Vladimir Putin began a two-day visit to Libya on April 16, the first by a Russian president to the formerly shunned country. The event was hailed by Libya’s veteran leader Moammar Gadhafi as "historic, strategic and very important." Gadhafi further stated "…given that we are both producers of gas and oil, we will work together to defend our interests."

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By Ariel Cohen

This coming weekend, Presidents George W. Bush and Vladimir Putin will meet for their final summit, to be held in the Russian resort of Sochi on the Black Sea at Putin’s invitation. This will mark the end of an era in a complicated relationship. The question is: Will the two leaders leave the scene while U.S.-Russian relations are at their lowest point since the Cold War, or will they attempt to rescue them?

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By Ariel Cohen

Central Asia is a major area of concern for US intelligence agencies, according to an annual threat assessment presented recently by Director of National Intelligence Michael McConnell.

McConnell discussed the Annual Threat Assessment -- a document representing the consensus view of 16 US intelligence agencies that covers all global security threats facing Washington -- with US senators on February 5. While Iraq remains an enduring source of concern, the reviving Islamic radical/terrorist threat in Afghanistan and in the tribal areas of Pakistan topped the list of security worries.

"We have seen an influx of new Western recruits into the tribal areas since mid-2006," McConnell told members of the Senate Intelligence Committee. "We assess that al Qaeda’s homeland plotting is likely to continue to focus on prominent political, economic and infrastructure targets designed to produce mass casualties, visually dramatic destruction, significant economic aftershocks, and/or fear among the population."

The Assessment warns that Islamic activism may grow in Central Asia as a result of mounting social and economic discontent. In Uzbekistan, a weaker economy and rising prices for commodities are a potential source of trouble for President Islam Karimov’s authoritarian-minded administration. While Kyrgyzstan and Tajikistan remain stable, Turkmenistan is beginning to open up after years of self-imposed isolation, and it has made improvements in human rights. Yet, unfortunately the Assessment disregards both regime fragility and growing external meddling in the region.

On Russia, the Threat Assessment drops plentiful hints that US-Russian relations stand to become more confrontational in the coming year. It mentions the Kremlin’s aims to dominate the main oil and gas land distribution networks to Europe and East Asia. Energy has become an instrument of Russian power in terms of its foreign policy and international economic relations, the threat assessment states.

The Report mentions the gradual resurgence of Russia’s military forces in terms of better training, more units with higher rates of readiness, military exercises conducted more frequently, and a higher number of strategic bomber patrols over the Arctic, Atlantic, and Pacific Oceans.

The Assessment does not dwell at length on Russia’s aspirations to alter the global economic architecture, and to do away with the Western-dominated post-Bretton Woods system. Russian leader Vladimir Putin called for just that in the 2007 St. Petersburg economic summit. Russia, Iran, Venezuela and other energy producers are moving away from the US dollar as the principal currency of settling energy accounts.

Meanwhile, the Threat Assessment views Iran with caution, in particular the country’s nuclear program. In a report released February 22, the International Atomic Energy Agency expressed concern about Iran’s ability to build nuclear weapons. The Threat Assessment states that Iran is developing and deploying longer range ballistic missiles with the capability to carry a nuclear warhead. The report does not mention, however, the close links between Iran and Russia regarding the development of the Iranian ballistic missile program. According to the London Daily Telegraph, Russia since 2003 has been supplying ballistic missile technology, including missile production capabilities, and technical assistance by Russian engineers.

Iran is also continuing efforts to enhance its ability to enrich uranium, ostensibly for civilian purposes but with the potential for making nuclear weapons. McConnell has reported that Iran may achieve the technical capability to produce enough highly enriched uranium (HEU) for a nuclear weapon within a few years.

While the intelligence community is certain that Iran stopped in 2003 its secret work to design a nuclear weapon and to enrich uranium for military purposes, it can’t be certain if Iran has restarted these activities. But there is no doubt that Iran has the scientific know-how, the technical capacity, and the industrial capability to develop nuclear weapons at some future point, McConnell said. A lot of this know-how came from Russia.

Moscow, for example, is building for Iran a $1-billion nuclear reactor in Bushehr. The US State Department has accused Iran of using the Bushehr project as a cover for a weapons program. There are also media reports that Iran is either negotiating the purchase of, or has already acquired S-300 long-range surface-to-air (SAM) missile systems. These SAM systems would be deployed to defend the Bushehr nuclear power plant and other key sites like the Natanz nuclear enrichment facility, analysts believe.

Iran also has a chemical weapons program, and it is engaged in research on biological weapons. Teheran’s development of a ballistic missile arsenal and its acquisition of anti-ship cruise missiles are intended to serve as a strategic deterrent in the Persian Gulf, especially at the Strait of Hormuz. Iran would be capable of closing the Strait, and thereby cause considerable disruption to oil exports, in the event of a conflict. In addition, US bases and naval forces in the region would face a serious tactical threat. Iran’s arsenal could also be used to intimidate its neighbors into "withholding support for US policy."

Tehran’s development of longer-range ballistic missiles with the capacity to reach Europe might also to deter NATO countries from permitting US military forces to use bases on their territory during a potential US-Iranian clash. A significant reason why Russia might be assisting Iran’s ballistic missile and nuclear programs could be to support Tehran’s deterrence capability, thereby intimidating NATO countries that host US bases.

Russia and Iran also have similar views on using energy as a geopolitical tool, with both expressing interest in establishing a natural gas cartel, along the lines of OPEC. Such an entity would aim to challenge the established international economic system, dominated by Western industrialized countries.

While the Threat Assessment is sober-minded on many points, it avoids one obvious conclusion involving Russia’s strategic intentions; by re-emphasizing military and economic power, and challenging the West, Moscow, aided and abetted by Teheran, is seeking to change the post-Communist balance of power in Europe, the Middle East, and in the world at large, and is challenging American post-Cold War hegemony. Whether it will succeed or not is a different question. It’s also up in the air whether American policy makers sufficiently comprehend the Kremlin’s capabilities and intentions, and, if they do, whether they can muster the political will that can help frustrate Russian plans.

Lajos Szaszdi, Ph.D., has contributed to the production of this article.

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By Ariel Cohen

Last December Russian President Vladimir Putin chose Dmitry Medvedev, a first deputy prime minister, to succeed him in the country’s presidency. March 2 presidential elections are anti-climactic, as they are going to ratify this choice, and as Mr. Medvedev is the only candidate likely to win.

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By Ariel Cohen

As Yogi Berra once said, “This is déjà vu all over again.” On May 9, heavy military equipment will once again roll down Moscow’s Red Square for the Victory Day military parade. Tanks, missiles, and 6,000 troops will be joined overhead by Su-27 and MiG-29 fighter aircraft and military helicopters. The last time Moscow saw such a display of military hardware on Red Square was November 1990, before the collapse of the Soviet Union.

The world should take notice of Russia’s increasing militarism. The parade is designed to generate nostalgia among the Russian people and to signal U.S., NATO, and Russia’s neighbors that Russia’s power is back. Most importantly, it illustrates President Vladimir Putin’s emphasis on the military and security services at the expense of modern, democratic institutions.

Putin has justified Russia’s rebuilding of its military muscle in the recent speech to the State Council. Putin claimed that the new arms race has been triggered “by the world’s most developed countries” – a clear reference to the U.S. and the West. Russia’s forthcoming rearmament is not caused by Russia but brought upon it by its adversaries, Putin said. In response to this alleged challenge to Russia’s security, the Kremlin plans to produce and deploy in the next years new weapons claimed to be as good as or even better than its Western equivalents. Research and development in revolutionary biological, nano-, and information technologies with military applications will continue. Putin also wants a new defense strategy for the Russian Armed Forces, and the formation of an “innovative army” based on more professional and better trained servicemen.

What the Parade Means

President Vladimir Putin’s government is reaffirming the central role that the military and the security services play as pillars of the Russian state. This is yet another indication from the Kremlin that the so-called “power” ministries and agencies are the bedrocks of the Russian Federation—as opposed to democracy, an open society, a multiparty system, free media, fair elections, constitutional liberties, and the separation of powers.

The parade is a signal to the world and to the Russian people that the armed forces matter again, after a decade or so of decay following the collapse of the Soviet state. Strategically, the display of newly-built weapon systems—like the road-mobile Topol-M intercontinental ballistic missiles (ICBMs), S-300 mobile long-range surface-to-air missiles (SAMs), bombers, and fighters—are intended to show that the Russian military is resurging with modern, or modernized, arms. This is a hallmark of Putin’s new Russia and a revival of the Soviet and czarist tradition of showing off the country’s military prowess.

To the Russian people, the parade will convey a sense of national pride and security in the face of external threats. First, it will mark the USSR’s heroic moment: victory in “The Great Patriotic War” (1941-1945), in which more than 25 million Soviet citizens were sacrificed—millions of them brutally murdered by the Nazis. Second, the Kremlin wants to resurrect the popular belief that Russia is a great power, which lost credence after the demise of the Soviet Union.

In essence, the parade is another sign that the Russian government is going “back to the future.” It wants to return the military—as well as other instruments of state power, from oil and gas exports to secret police and a subservient judiciary—to the forefront in 21st century Russian policy. While doing so, it is disregarding modern means of governance: popular participation, democratic politics, free press, and the rule of law by independent judiciary.

Putin’s Nostalgia

Almost three years ago, Putin said, “We should acknowledge that the collapse of the Soviet Union was a major geopolitical disaster of the century.” Clearly, the USSR was Putin’s country. During his career as a KGB officer, he cultivated a sense of duty and loyalty to the state (and to the “guild” of espionage officers) that made the USSR’s collapse, in his words, “the greatest geo-political catastrophe of the 20th century.”.

Since becoming president, his nostalgia for the Soviet past has manifested in the re-adoption of symbols from the Communist period. When that period ended, President Boris Yeltsin resurrected national symbols from the czarist pre-revolutionary period, including the tricolor Russian national flag, the imperial double-headed eagle on the state coat of arms and the hats of military officers, the 19th century-style gala uniforms of the Kremlin guard, and the adoption by the armed forces and security services of patron saints.

Under President Putin, these symbols have been complemented by the communist Red Star, which appears on military hardware such as tanks and aircraft; the re-adoption of Stalin’s Soviet anthem tune  as the music for the Russia’s national anthem in 2000; the use of “comrade” as a form of address within the military and security services; and the placement of a bronze bust of Felix Dzerzhinsky in the courtyard of the Internal Affairs Ministry in Moscow in 2005. Dzerzhinsky was the founder of Lenin’s dreaded secret police, the Cheka, and was responsible for arresting, exiling, torturing, and executing countless victims. Moreover, Putin appears to be particularly fond of commemorating every December 20 as Security Services Workers’ Day, or Chekist Day, recalling the day in 1917 when “Iron Felix” founded the Cheka, the predecessor of Stalin’s NKVD, the KGB, and today’s FSB.

Allegedly, the coexistence of czarist and Soviet symbols is a way to connect Russia’s present and past. According to a spokesman for the Moscow Patriarchate, the use of both symbols means that “the continuity of all Russian history is restored and demonstrated.” Of course, the actions of Putin’s government show that this continuity is not limited to symbols. Putin also demonstrates his intent to restore the state’s historically central role in managing the politics, media, and economy in Russia.

Russia’s Military Resurgence

The public display of Russia’s military might reaffirms the power of that centuries-old Eurasian Leviathan, the Russian state. Russia’s resurgence is not limited to military parades, but includes military deployments and maneuvers, as well as the procurement of weapon systems. Last year, Putin ordered a resumption of regular patrols of strategic bombers deep into the Atlantic and Pacific airspace, from which they can launch cruise missiles against the United States. The already frequent ballistic missile test launches are set to double in the years ahead. The Strategic Missile Forces are deploying silo-based, mobile, and ship-based Topol-M, Bulava, and RSM-54 Sineva ICBMs. The Russian Navy is scheduled to commission the first of a new class of ballistic missile submarines this year. Moreover, on January 21–23, for the first time in 15 years, the Russian Navy staged a large-scale exercise in the Bay of Biscay, which included its sole aircraft carrier, the Admiral Kuznetsov, a guided missile cruiser, and strategic bombers, together with air-refueling tankers and airborne early-warning aircraft.

Conclusion

The announced rearmament, the parade, global maneuvers, and new weapon systems are designed to make others respect Russia as well as deter NATO and the U.S., which is viewed by Putin as a hegemonic superpower seeking to harm Russia. Russia wants to send the signal that it again has the military means to counter both perceived strategic threats, such as the U.S. missile defense system, and conventional military challenges such as NATO expansion and the West’s superior air power. The fanfare communicates Russian intentions to change the global “correlation of forces” in Moscow’s favor and signals Russia’s neighbors to do its bidding and not to challenge its security or its interests.

Russia is back on the world stage with all the attributes of power, including wealth and military might, for all to see. The next Administration will have its hands full dealing with resurgent Moscow.

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By Ariel Cohen

Russia lags behind the United States in aerospace research and development. It has yet to produce decent competitors to America’s two new, fifth-generation fighter jets, the Lockheed Martin (NYSE:LMT) F-35 Lightning Joint Strike Fighter and the Lockheed Martin/Boeing F-22 Raptor.

The main Russian rivals to the Lockheed Martin F-35 Lightnings are the Mikoyan-Gurevich MiG-35 (NATO designation Fulcrum F) and the Sukhoi Su-35 (NATO designation Flanker). The Mikoyan-Gurevich MiG-35 is an upgrade of the MiG-29M/M2 and the MiG-29OVT. Both are fourth-generation jets.

The Russian government has been eagerly selling the Sukhoi fighter jets to its friends, so these aircraft are likely to be found in areas where the potential for conflict is greatest, while financing development of the fifth-generation fighter from these export revenues.

Russian analysts like to note that the Lockheed Martin F-35 Lightning JSF, with a maximum speed of only 1,200 mph, is slower than both the Sukhoi Su-35 Flanker -- maximum speed 1,680 mph -- and the MiG-35 Fulcrum -- maximum speed 1,587 mph. The Lockheed Martin F-35 Lightning’s range of 1,320 miles is below the Sukhoi Su-35 Flanker’s range of 2,260 miles as well.

While these measures make the Lockheed Martin F-35 Lightning Joint Strike Fighter seem inferior, they are actually fully consistent with its projected mission: F-35s are designed to operate in tandem with Lockheed Martin/Boeing F-22 Raptors, which would clear the way for F-35s in real combat.

Moreover, the Lockheed Martin F-35 Lightning JSF’s reported service ceiling of around 57,000 feet is superior to the Mikoyan-Gurevich MiG-35 Fulcrum’s 56,000 feet and the Sukhoi Su-35 Flanker’s 55,000 feet. The Lockheed Martin F-35 Lightning JSF also claims a significant advantage in maneuverability because of its smaller size, advanced materials and lightweight construction.

On the record, Russian defense officials insist their Sukhoi and Mikoyan-Gurevich MiG fighters can stand up to their American rivals. But a Russian Defense Ministry expert, who spoke on condition of anonymity, told Pravda.ru that Russia "patches" its fourth-generation modifications to extend their lifespan, while most of its fifth-generation fighter program has largely remained on paper.

In fact, statistics are only the broadest indicators of an aircraft’s performance. Combat performance analysis includes maneuverability, stealth, tactics, training, avionics, situation awareness, weapons, countermeasures, interoperability and supportability as major factors.

Stealth is a major discriminator between a 5G fighter like the Lockheed Martin F-35 Lightning Joint Strike Fighter and "Gen 4 plus plus" competitors like the Mikoyan-Gurevich MiG-35 Fulcrum and the Sukhoi Su-35 Flanker that are essentially modernizations of their respective progenitors, the Mikoyan-Gurevich MiG-29 and the Sukhoi Su-27. No operational Soviet or Russian stealth aircraft has ever been reported to have entered service.

A U.S. analyst who requested anonymity said that while the Russians have some good specific system technologies, their ability to effectively integrate them often lags behind that of the West, and the Lockheed Martin F-35 Lightning Joint Strike Fighter takes integration of off-board intelligence to a step well beyond proven Russian capabilities.

"From the time of the collapse of the Soviet Union until crude oil prices recently rose to $100 per barrel, the ability of Russian aircraft designers to transition their advanced scientific knowledge through RDT&E (research, development, test and evaluation) into production-ready systems has been restricted, with funding available almost solely from sales of its legacy 4th Gen MiG-29 and Su-27 fighters to other countries," the analyst said.

With oil prices collapsing, the challenges of serial production of advanced aerospace weapons systems remains, while the Russian highly skilled military space and aviation industry labor force is pushing 60 -- beyond the life expectancy of an average Russian male.

Sukhoi Su-30 fighters bought by China and India were more advanced than those in Russian air force service, which were procured only in small quantities. Progress in completing the production development of the PAK-FA T-50, Russia’s first 5G fighter design, remains dependent on Indian funding.

While notable improvements have been made in the reliability and supportability of Russian aircraft systems, they still fall far short of Western standards. This is particularly true of aircraft engines.

Russia has a long way to go to catch up with the United States in the prestigious new generation fighter competition. Only domestic politics, such as in Europe; declining economic fortunes of potential partners; and high production costs of the Lockheed Martin F-35 Lightning Joint Strike Fighter may slow down its triumphant march.

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by Ariel Cohen

Dmitry Medvedev’s  endorsement as a presidential candidate by four pro-Putin political parties and by Vladimir Putin himself ends months of rumors in Moscow. Medvedev’s appeal to Putin, asking him to serve as a prime minister after the March presidential elections, confirms not only that Putin will play a pivotal role in Russian politics after he steps down but that he will remain the number one politician of Russia for years to come.

Putin is most likely to be a "super prime minister," with responsibilities over foreign, security, and defense policy. It is possible that after the March elections, Medvedev will transfer control of all or some of these branches to Prime Minister Putin.

Medvedev, a Putin protégé, is perceived as a weak bureaucratic player and will require Prime Minister Putin’s support as he consolidates power in the brutal world of Russia’s politics and oligarchic struggles. In contrast to Putin and other KGB veterans, Medvedev is soft-spoken and bookish. Having been focused on domestic politics and policy, Medvedev lacks experience in foreign policy and national security and may depend on Putin’s advice and support in these areas.

Who Is Medvedev?

Dmitry Medvedev, 42, first deputy prime minister and Putin’s former chief of staff, is the son of a Leningrad (St. Petersburg) professor. He has been a corporate lawyer and a law professor. In 1989, he joined the team of the late St. Petersburg pro-democracy mayor (and law professor) Anatoly Sobchak, at the height of Mikhail Gorbachev’s glasnost and perestroika reforms. Sobchak was Putin’s mentor. When elected, Medvedev will be the youngest Soviet or Russian leader since the 28-year-old Nicholas II’s accession to the throne in 1896.

Putin has deliberately chosen as a successor a person he can rely on and trust, while he remains the number one Russian politician. He has worked with Medvedev for the last 17 years, starting in the St. Petersburg city hall, where Putin was the deputy mayor in charge of foreign relations and Medvedev a legal advisor. The two struck a fast friendship and partnership, and Medvedev served as Putin’s campaign manager in his Kremlin-orchestrated presidential bid in 2000.

Medvedev became the chairman of Russian energy giant Gazprom and presidential administration chief in 2003--but many insiders say that Putin was still calling the shots in Gazprom. In 2005, Medvedev moved from the Kremlin into Putin’s cabinet, where he supervised "national projects," including health, education, housing, food production, and demography.

The projects are funded from Russia’s energy windfall profits.

Medvedev is known for his classical liberal rhetoric in an era of increasingly harsh nationalist, anti-Western, and anti-democratic pronouncements. For example, he has openly admitted that Russia is facing the problems of excessive dependence on natural resource exports, corruption, and a declining population.

Despite being the chairman of the second-largest state-owned corporation in the world, he appears to criticize the Kremlin’s preferred economic model of state-held companies, preferring private ownership. He said in a recent interview that the state should get involved in economy "only where it was needed." He recently said that "Gazprom will not be able to ’digest’ all of Russia’s energy resources...and thank God for that. Otherwise Gazprom would become the ministry of energy, and we have been trying to pedal away from this...."

Medvedev also said that laws limiting foreigners’ access to Russia’s "strategic" economic sectors, such as energy and natural resources, should be "clear, [and] balanced, and answer practical issues." So far, however, draft legislation on strategic sectors has been murky, and the Duma has delayed the vote.

Medvedev has expressed rhetorical support for a multi-party system based on large, stable parties, while decrying the chaos of the 1990s in Russia. He rejected the usual Russian adjectives when speaking of democracy, such as "controlled" or "sovereign." Yet, he is a part of the administration that cracked down on Yukos Oil Company, kicked Royal Dutch Shell from a lucrative Sakhalin energy project, bought up and shut up almost all opposition media, and conducted the most unfair and unfree elections in Russia since 1991. Mr. Medvedev will have a hard time proving his democratic credentials by opposing the siloviki, divesting the state from media control, and allowing unhindered political activities--an almost impossible task.

Guarantees of Succession

Just as Putin secured the late President Boris Yeltsin’s retirement by granting him a pardon from prosecution and guaranteeing his and his family’s safety and security, Medvedev is doing the same to win Putin’s endorsement. But there is more: He also guarantees Putin’s future political role for years to come by giving him the prime ministership. After the March presidential elections, Putin will stay on the scene as prime minister and the hailed "National Leader," a new and undefined position. This means that Russia is moving further away from constitutional democracy and the rule of law.

The Medvedev appointment also means that Putin and Medvedev have cut a deal with the powerful siloviki ("men of power"), which includes the secret police generals who supervise the security services and the armed forces. These men wanted Putin to stay as president in order to keep their powerful posts at the top of the national bureaucracy and lucrative positions as the heads of state-owned energy and arms-trading companies. They also are the main power behind Russia’s anti-American and anti-Western policy. Their influence is not likely to vanish, as Putin remains prime minister and shares many of their anti-American positions and Medvedev will depend on their support.

Energy Geopolitics

Medvedev is the chairman of Gazprom, the state-owned energy giant with market capitalization of $345 billion, which supplies over 30 percent of Europe’s gas needs. Russia has announced that its strategic goal is to reach capitalization of $1 trillion in seven to ten years, making Gazprom the largest company on Earth. Russia will not be able to accomplish this by permanently alienating its energy customers in Europe and elsewhere, so Russia’s confrontational foreign policy will be somewhat limited by the nature of its energy exports. Yet Medvedev announced that Russia will not sell subsidized gas to its neighbors and presided over the cut-offs of gas supply to Ukraine, Georgia, and Belarus.

The New Broom

The rule of thumb is that each regime in Russia is very different from its predecessor. There are discontinuities in each. Thus, Gorbachev’s reign was different than Brezhnev’s, Yeltsin’s was different than Gorbachev’s, and Putin’s rule is different than Yeltsin’s. Gorbachev, Yeltsin, and Putin all "campaigned" as the antitheses of their predecessors. Medvedev, on the other hand, is Putin’s "official" heir and will find it impossible to shed his boss’s control and vision even if he wants to.

First, there are personal promises to keep, especially as far as Putin’s prime ministership and other personnel issues are concerned and especially in the first presidential term. Second, Medvedev, lacking a KGB, military, or other security service background, may have a hard time establishing his control over the levers of power and, therefore, need Putin’s continued support.

But even if Medvedev ever, for some reason, stands on his own two feet, he must remember that public opinion in Russia and the USSR has always been unenthusiastic--to say the least--toward weak leaders: Nicholas II, Georgii Malenkov, Nikita Khrushchev, Mikhail Gorbachev, and Boris Yeltsin all are viewed with disdain by the majority of Russians, while "strong leaders" such as Peter the Great, Catherine the Great, Alexander II and III, Putin, and even the monstrous Joseph Stalin and bumbling Brezhnev are viewed by many in a positive light. To succeed, Medvedev will need to show his mettle.

U.S.-Russian Agenda Cannot Be Delayed

The Medvedev-Putin transition should not slow down the work on the complex U.S.-Russian agenda. It requires that the two countries return to business after the dust of transition settles in the two countries in early 2009 or even before.

U.S.-Russian relations today are at an all-time low. The bilateral agenda includes the fight against proliferation of weapons of mass destruction, U.S. anti-ballistic missile deployment in Europe, restraining Iran’s nuclear program, energy security, building democratic institutions in Russia, and many other issues.

The Bush Administration should give the Putin-Medvedev administration at least a 100-day grace period after Medvedev’s inauguration--until September 2008--to sort out the transition. In the meantime, the U.S. should lay the groundwork for engaging Russia on important issues, for the benefit of the next U.S. President. Specifically, the U.S. should press forward with the next round of sanctions on Iran in the U.N. Security Council, where the Russian vote is crucial, and continue discussions over the Kosovo independence and negotiations on deployment of the missile defense interceptors in Europe.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation

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Russia"s foreign policy assertiveness, funded by revenues from natural resources, makes many believe that a new energy empire is on the rise. The country today is ruled by post-Soviet security and military elites that have internalized the jingoistic values of the Russian Empire and the Soviet Union. These elites view the outside world almost exclusively through the lens of economic and military might. They also use foreign policy as a tool to buttress domestic sup­port and to foster a perception that Russia is sur­rounded by enemies at a time when its democratic legitimacy is deteriorating.

Despite its projected might, the Kremlin is not capable of dealing with some of Russia"s critical demo­graphic, social, economic, and political vulnerabili­ties. These flaws may well challenge the current sense of stability in Russia, especially after the 2007-2008 election cycle or if the economy deteriorates.

As the proverb states, "Russia is never as strong as she appears, and never as weak as she appears."[1] Rus­sian President Vladimir Putin modified this proverb in a May 2002 speech: "Russia was never as strong as it wanted to be and never as weak as it was thought to be."[2] Russia"s strengths made the authorities and the public believe that their country is still a great power, yet Russia"s many weaknesses limit its ability to act as one. Continuing state weakness combined with an increasingly bold foreign policy is a recipe for imperial overreach and systemic breakdown.[3]

For over a decade, the Russian authorities have failed to provide a coherent and modern nation-building ideology or to overcome Russia"s nostal­gia for its lost empire. Most telling was Putin"s statement in April 2005 that the collapse of the Soviet Union was "the greatest geopolitical catas­trophe of the twentieth century."[4] Rhetorical out­breaks reflect the Kremlin"s failure to confine itself to solving pragmatic tasks and its attempts to fill the post-Soviet ideological vacuum with a mix of the Soviet anthem, the imperial coat of arms, and the tsarist flag.[5]

Because domestic factors are increasingly driving Russia"s foreign policy, Russia"s internal weaknesses cannot be easily dismissed. To play the global role it claims for itself, Russia needs to put together a complex system of economic, technological, and social resources, but not all of these are easily within its grasp.

Both Congress and the Administration need to understand that Russia is resurging as an assertive autonomous international actor. However, as long as Iraq, Iran, and the war on terrorism continue to top Washington"s agenda, it is not in America"s stra­tegic interest to challenge Russia openly. Rather, the U.S. should staunchly defend its national interests and involve Russia in resolving international crises when possible.

Specifically, the U.S. should:

Continue to negotiate and cooperate with Russia on matters of mutual concern in security and non-proliferation;

Promote Russia"s integration into the global economy, particularly the rule-based World Trade Organization (WTO) regime;

Provide technical assistance on pressing health care issues, such as the HIV/AIDS and tuberculo­sis epidemics, cardiovascular diseases, cancer, and health care management;

Increase support for civil society groups work­ing to advance media independence, rule of law, political liberalization, and tolerance in Russia;

Reach out to the Russian people through a com­prehensive public diplomacy strategy to debunk the myth of inherent American hostility toward Russia; and

Establish a comprehensive multidisciplinary project to monitor the stability, security, and health of Russia"s society and economy and how they influence Russian foreign policy.

Demographic Catastrophe

The great-power ambitions of Moscow"s current elites cannot be realized without ample, developed, and highly skilled human resources. Since the 1980s, however, Russia has experienced dramatic declines in population, fertility, and life expectancy combined with increases in mortality and disease rates, including a rise in the rates of HIV/AIDS and tuberculosis infection.

From 1995 to mid-2007, Russia"s total popula­tion dropped by 6.5 million people, down to 142 million--a decline of almost 4.4 percent.[6] Such a drop typically is the result of war or mass emigra­tion, but it is occurring in a largely peaceful Russia that has a growing economy and positive immigra­tion rate. Russia"s population is the world"s ninth-largest but is projected to drop to 128.5 million by 2025 and 109.4 million by 2050.[7]

Because of the low birthrate and the high mortal­ity rate, Russia is losing an average of 700,000 peo­ple per year. In 2006, the mortality rate was 15.2 deaths per 1,000 people, and the birthrate was just 10.4 births per 1,000 people. While the birthrate is low compared to other industrial states, the death rate, particularly among working-age males, is astonishing. Life expectancy for Russian males is only 59 years, five years below what it was 40 years ago and 13 years lower than the life expectancy of Russian women--one of the largest gaps in the world.[8] The current solution of stimulating births by paying over $4,000 per baby may create a hered­itary welfare problem where there now is none and encourage growth among both Russia"s Muslim population and its urban and rural poor.

The incidence of cardiovascular disease and can­cer in the Russian population is among the highest in the world and accounts for the surge in Russian mortality rates. External (preventable) causes, such as accidents, account for 15 percent of deaths.[9] Even with fewer cars per capita than other indus­trial states, the number of deaths in traffic-related accidents per 100,000 people is higher in Russia than in other industrialized countries. Homicide deaths reached 30,000 in 2006, equaling the num­ber of deaths from accidental alcohol poisoning, but even more died from suicide.[10] Heavy alcoholism also helps to explain the high rates of heart disease. Many Russian men seem to choose lifestyles with dire health consequences.

Deadly Epidemics. Russia is suffering from epi­demics of HIV/AIDS, assorted other sexually trans­mitted diseases, and tuberculosis. The HIV infection rate is growing faster in Russia than in any other country outside of Sub-Saharan Africa.[11] An esti­mated 1.3 million (1.1 percent) Russian adults are already infected.[12] AIDS-related deaths are hard to measure, partly because of Russia"s tuberculosis epi­demic. According to the World Heath Organization, almost 150 people per 100,000 in Russia are infected with tuberculosis.[13]

The vast majority of HIV infections in Russia are associated with intravenous drug use, which is widespread among young people.[14] According to some estimates, nearly 2 million Russians (1.96 per­cent) inject drugs.[15] A Russian drug control official has predicted that the total number of drug users will grow from over 4 million to over 35 million by 2014.[16]This dramatic rise is fueled by cheap opiate narcotics from Afghanistan and Central Asia[17]and by domestically produced synthetic drugs.

Ethnic Changes. Central Asia is also a source of Muslim migrants. While the numbers and health of Russia"s ethnic Slavs and Orthodox Christians con­tinue to decline, Russia"s Muslim population is growing, rapidly transforming the ethnic makeup of Russian society.

Fertility and birthrates are much higher among Muslim ethnic groups than among ethnic Slavs. In 2006, predominantly Muslim regions had the highest population growth rates: 1.79 percent in Chechnya, 1.16 percent in Ingushetia, and 0.65 percent in Dagestan. The national average was -0.37 percent.[18]

Since 1989, Russia"s Muslim population has increased by 40 percent, rising to 20 million-25 million. Moscow"s Muslim population of about 2.5 million is the largest of all European cities. Muslims could make up a majority of Russia"s conscript army by 2015 and one-fifth of the population by 2020.[19]

This has drastic political, cultural, and ideological implications for Russia. Ethnic Russians feel uneasy as the prevailing ethnically based notion of the Rus­sian national identity is being challenged. The changing ethnic makeup of Russian society and the growing radicalization of Islam fuel ethnic tensions among Russian citizens.

Implications of the Demographic Decline. These demographic shifts are already affecting Rus­sia"s ability to project power. The Russian military is failing to meet its recruitment targets because of a declining pool of fit conscripts and their semi-legal efforts to avoid the draft.[20] Some demographers predict that in just nine years--by 2016--the pool of conscripts will be half Muslim.[21] It is also not clear that a majority Muslim, non-ethnic Russian army will willingly take on missions to carry the Russian flag forward either in the "near abroad" (the 14 other former Soviet republics) or elsewhere.

In addition, the workforce will further shrink in size and quality. (See Chart 1.) The population is diseased, aging, and dying. In many countries, immigration has helped to mitigate the economic effects of population decline. In Russia, most immi­grants are from Central Asian former Soviet repub­lics and increasingly from China and Afghanistan. Yet, as growing xenophobia and racism in Russia suggest, ethnic Russians mostly disapprove of non-Slavic immigration.

The Russian government is unable to address the lingering health and demographic crisis. In 2004, health care spending reached a low of 6 percent of gross domestic product (GDP).[22]In 2007, Russia intends to spend $10.2 billion[23] on President Putin"s "national priority projects," but so far, this funding has failed to improve Russia"s collapsed public health sector. (See Table 1.)

Ideologies and Tensions Within Russian Society

Russian society is unhealthy not only physically, but also ideologically. Russia"s history and legacy provide context for its current trends.

From its beginnings in the 14th and 15th centu­ries, Russian imperial development was driven by muscular external aggrandizement and a lack of domestic accountability. In the mid-16th century, Ivan IV (Ivan the Terrible) annexed new territories with significant Muslim Tatar populations, and Russia emerged as a multiethnic, multi-faith state, although dominated by Russian Orthodoxy. Its ideologists viewed Muscovy, nicknamed "The Third Rome," as the heir to the Byzantine Empire, which was destroyed by the Ottomans in 1453. On the domestic side, the lasting model of the omnip­otent state ruled by the czar produced generations of people who crave authority and value stability above freedom.

Since the 17th century, any moves to open Rus­sia to the West have been followed by internal reactions and aggressive expansionism. By the 19th century, Westernizers who favored European ways were opposed by Slavophiles who courted foreign Slavs, appealed to the Russian Orthodox heritage, hailed political autarky, and denounced the West as an enemy.[24] Slavophile principles were simplified and adapted by Russian ethnic nationalists. Eurasianists called for the creation of a new Russian super-ethnos from the Baltic Sea to the Pacific Ocean, including Central Asia, by amalgamating Slavs and Turks. Throughout 75 years of Soviet rule, these ideological divisions among Westernizers, imperialist Eurasianists, and ethnocentric and Christian Orthodox Russophiles has persisted in Russian foreign policy.

Ideological Vacuum. After the collapse of the Soviet Union, Westernizers appeared to be ascen­dant, but only for a short time. The creation of the independent Russian Federation in 1991 was the first attempt to construct a modern Russian nation-state. Under President Boris Yeltsin, the Kremlin tried to organize a multiethnic society into a non-imperial nation-state, but without a coherent ideol­ogy or state-building strategy. By the end of Yeltsin"s term, the barely reformed post-Soviet elites were beginning to reject Western liberal models because of Russia"s domestic economic meltdown and diminished international influence.

For over a decade, Moscow has failed to articu­late Russia"s new ideology clearly. Many among the Russian political elite believe that ideas mean noth­ing in world politics and that only pure national interests matter.[25]

Putin"s United Russia party is sending a mix of "distinctly non-ideological"[26] messages for the "har­monious coexistence" of a market economy and a strong state while trying to blur the difference between Russian ethnicity and Russophone cultural orientation. The key liberal parties, Yabloko and the Union of Right Forces, have failed to gain sufficient support and are victims of political infighting. The Liberal Democratic Party of Russia and Rodina (motherland) have stuck to xenophobic slogans. Today, the major political parties are ready to use xenophobic sentiments to some degree as a means to garner popularity among voters and to justify Russia"s cantankerous foreign policy.[27]

The Kremlin"s current ideology has its roots in statism, authoritarianism, and great-power jingoism but with strong elements of capitalism. It is eerily reminiscent of the late Romanov empire but with­out its strong liberal opposition streak. As was the case after the 1905 revolution, the extremes of the ideological spectrum--ultranationalists, jingoists, and national-Bolsheviks--are heard loud and clear in public debate, while liberal voices are being hushed. The rule of law is severely lacking. The Russian experience suggests that after centuries of authoritarianism, there are no simple answers in the process of moving away from statist government involvement in politics and economic policy dic­tated by a "strong hand."

Official Patriotism. The Kremlin is trying to imbue Russia"s youth with statist, patriotic, and religious ideas through the official national patri­otic education program in schools. The Kremlin-backed parties have created youth units somewhat reminiscent of Komsomol (Communist Union of Youth), the youth wing of the Communist Party of the Soviet Union. In 2005, the Kremlin endorsed the creation of the Nashi (Ours) youth move­ment to prepare a loyal mob to act against possible public protesters.

Under Putin"s guidance, high school history text­books have been rewritten. The new texts view Josef Stalin"s cruelty through the lens of strong leadership in a long line of autocrats going back to the czars. Russian history, it is said, at times demands tyranny to build a great nation.[28] The textbooks also link U.S. global "hegemony" to that of the Third Reich and compare the mass murder of Soviet citizens by their government to the U.S. using the atomic bomb against Japan during World War II.[29]

Critics warn that such an ideological historiogra­phy encourages "collective amnesia" and promotes nationalism. A recent poll showed that a substantial part of Russian youth hold positive or ambivalent views of Stalin and his legacy. The majority of respondents considered the Soviet collapse a trag­edy, as Putin expressed in 2005, and two-thirds saw the U.S. as a rival and an enemy.[30] Such distorted perception of history is inherently anti-democratic.

National Identity Crises. A drummed-upforeign threat is being used to foster national solidarity, which is otherwise threatened by ethnic diversity.In a multi­ethnic state, the discrepancy between an individual"s ethnic and political-civil identity is dangerous. Rus­sian leaders have only recently started to employ the terms "rossiyskaya natsiya" (Russian nation) or "rossiyskiy narod" (Russian people) to denote the country"s diverse population.[31]

The difficulties of defining Russia"s national identity are exemplified in the use of the termsrusskie (ethnic Russians, who are descendants of eastern Slavs) and rossiyane (Russian citizens, regardless of ethnicity). Russia"s ultranationalist movements focus on the former, while most of Rus­sia"s ethnic minorities identify themselves with the latter. Now, however, Russian-speaking persons outside of Russia"s borders can be declared russkie and protected, whether they ask for it or not. Such an identity crisis hinders the formation of a multi­ethnic, multi-faith nation as a foundation for a nation-state.[32]

While the Putin administration and Putin"s United Russia party tolerate and integrate representatives of numerous ethnic groups, staunch nationalists claim that ethnic Russians, the dominant ethnicity, should be the legitimate masters of the state. In an increas­ingly multiethnic Russia, however, ethnic Russian nationalism cannot play a unifying role, as it usually takes the form of the exclusionary ideology of ethnic Russian, Slavic, or Russian Orthodox superiority. The question remains whether the Russian elites are inter­nationalist enough to rebuild a great power empire void of ethnocentric ideologies.

Xenophobia and Ethnic Nationalism. The ex­tremist movements and ideologies present an addi­tional set of challenges for the Kremlin and Russian society. Previously somewhat suppressed by Soviet authorities, ethnic nationalism and extremism have reemerged in modern Russia.

Racism and xenophobia are on the rise. Freedom House has reported on government and social dis­crimination and harassment of ethnic minorities, particularly against people from the Caucasus and Central Asia, as well as people from the rest of Asia and Africa, and an increase in racially motivated attacks by extremist groups.[33] In August 2007, 55 percent of the population sympathized with the slo­gan "Russia for [ethnic] Russians," while 57 percent believed the authorities should limit the inflow of immigrants.[34] According to the Sova Center, which tracks ultranationalist activity in Russia, there were 520 racist attacks, including 54 murders, in 2006.[35] (See Table 2.)

The main extremist movements are worth noting. Eurasianism, represented by the notorious neo-fascist Alexander Dugin, emphasizes Russia"s unique fate and inherent hostility toward the West. Dugin flirts with Christian Orthodoxy and promotes Rus­sian imperialism and extreme anti-Americanism. He opposes democracy and supports Vladimir Putin, "an irreplaceable leader," whose obligation to leave office in 2008 is "the greatest political problem for today"s Russia."[36] Dugin is a frequent guest on state television, which raises concerns about the main­streaming of fascism in Russia.[37]

Other ultranationalist movements, some favor­ing the Russian Orthodox Church and some anti-Christian, peddle racial hate and violence.

The Nationalist-Patriotic Front "Pamyat" (memory) was set up in 1987 to "lead Russian people to the spiritual and national revival" with slogans blending fascism with autocratic monarchy. Many analysts allege that Pamyat was a KGB front. Its activists have since spread to other extremist groups, and the movement has lost its prominence.

Russian National Unity (RNE) originated from Pamyat and promotes ethnic nationalism and outright Nazism mixed with aggressive anti-lib­eralism and anti-Semitism. It functioned as a political party in the early 1990s but has since stagnated and splintered into other groups.

The Nationalist-Bolshevik Party (NBP), led by the notorious Eduard Limonov, is culturally pro-Soviet and nationalistic and seeks the "protection of the Russian population in the former Soviet territory," often through overt hooliganism. Par­adoxically, it is now part of world chess cham­pion Garry Kasparov"s Other Russia movement, which draws support from democratic and lib­eral circles.

The Movement Against Illegal Immigration (DPNI) is a violent, ultranationalist, anti-immi­grant group led by Alexander Belov, a former Pamyat spokesman, that emerged in 2002 in response to the clashes between "native residents and raging immigrants."[38] In June 2007, the DPNI announced the formation of People"s Self-Defense groups to "unite native citizens for orga­nized resistance to any aggressive actions of criminal migrants."[39] The DPNI and People"s Union were at the core of the march on National Unity Day, a newly proclaimed national holiday on November 4 that commemorates the expul­sion of the Catholic Polish invaders in 1612 and replaces celebration of the Communist October Revolution of 1917.

Russian March is a neo-Nazi affair, which this year featured screaming skinheads, a white-clad young ladies" drummer band, and a keynote appearance by Preston Wiginton, a Texas white supremacist.[40]

This looks like the beginning of a new tradition: On November 4, 2005, National Unity Day, ex­tremist groups marched under the slogan "Russia for Russians" and Nazi symbols. In 2006, Russian March was banned in major Russian cities, but smaller protests occurred illegally.[41]

Racist aggression erupted in August 2006 when a deadly bomb was thrown at a Moscow produce market frequented by Azeri traders and again dur­ing the September 2006 riots in Kondopoga, a town in northern Russia. Putin has denounced the "semi-gangs, some of them ethnic," that control produce markets in Russian cities and has called for regula­tions to protect "the native population." The mar­kets are a source of tension because they are staffed mainly by non-Slavic migrants. In 2007, immigra­tion policy was changed to ease labor immigration rules in all sectors except the markets, where foreign labor was banned in April 2007. All Kondopoga attackers received suspended court sentences. Today, an estimated 8 million to 12 million migrants are working in Russia illegally.[42]

Fortunately, anti-migrant organizations in Russia are not yet electable parties. The fragmentation and internal struggle among nationalist-patriot factions compromise the very idea of Russian ethnic unity and push away potential allies. However, Slavs do not pose the only threats to Russia"s internal cohesion.

Radicalization of Russia"s Muslims. The Krem­lin faces a growing challenge in dealing with Mus­lim communities. While most Muslims in Russia are indigenous peoples of multiethnic Russia, the distinction between immigrants and citizens is often blurred in xenophobic discourse. Many Russians associate Islam with extremists, and their anti-Islamic prejudice is growing. At the same time, many recognize the more moderate nature of Tatar and Bashkir Islam. As Russia"s Muslim population grows and interest in the religion surges, its members become vulnerable to extremist ideas, even in currently moderate areas.

Proponents of radical Islam have their own expansionist and often violent agendas. Radicalism spreads in many regions because of local griev­ances--including Stalinist persecution and ethnic cleansing, poverty, and corruption--and radicaliz­ing foreign Islamic influences. Since 1991, Russia"s Muslims have been exposed to the ideas of Islamic fundamentalism, reinforced by intensive foreign penetration through education, propaganda, and financing.[43] The total number of mosques in Russia has increased from 300 in 1991 to 4,000 in 2001 to over 8,000 in 2007.[44] Private foundations in Saudi Arabia and other Persian Gulf states have financed the construction of many mosques and have sent clerics to run them. Often, foreign clerics rejected traditional local Hanafi and Shaf"i schools of Islam and preached Salafi Islam and Wahhabisim, previ­ously unknown in Russia. Although the new prac­tices appear stricter and more radical, they continue to gain in popularity.

No accurate estimates of the strength of radical Islamists in Russia are available. As Alexey Malash­enko of the Carnegie Moscow Center has written:

An entire mythology has developed around it, created by forces within the state, jour­nalists, and the Islamists themselves. All of them, albeit for different reasons, tend to exaggerate the power of the Islamists.[45]

The authorities inflate the power of the adver­sary, while the Islamists elevate their own self-image to gain influence and attract funds. Lacking a basic understanding of Islam and its practices, the Krem­lin fails both to realize the dangers of radical Islam and to provide a coherent policy response.

The political influence of Russia"s Muslims will, however, remain limited by their cultural, ethnic, and religious divisions. The diversity of Russia"s Muslims presents both a challenge and an opportu­nity for the Kremlin.[46] It needs to work carefully to limit the spread of potentially violent radicalism without alienating the rest of the Muslim commu­nity. This is a significant challenge in a country in which national identity is still malleable.

The Role of the State. The nexus of the Krem­lin"s rhetoric, its efforts to revive national pride based on tsarist and Soviet symbols, and the hate on Russia"s streets constitute a potential source of insta­bility. Government rhetoric often hovers in the grey area between sometimes exaggerated national pride and paranoid nationalism.[47] Experts believe the Kremlin is deliberately tolerating extremism to cul­tivate an "enemy within," positioning the Kremlin as Russia"s only defense against it. Radical activists, in turn, interpret the government"s appeals for "strong Russia" as a virtual license to attack.[48]

From the pogroms of the 19th century to the intermittent Soviet racism of the 20th century, Rus­sian rulers have tried to manipulate nationalism to serve their own ends.[49] Unlike the earlier "external threats," such as imperialism or Zionism, the cur­rent "enemy" is homegrown.

The presentation of xenophobia in the Kremlin-controlled media also remains ambiguous. While primitive xenophobia and outright racism are con­demned, anti-Western, anti-Turkic, anti-Muslim, and even anti-Georgian or anti-Ukrainian stereotypes dominate the mainstream media. Increasingly crude and intense rhetoric depicts the U.S. as a "wrongdoer" and an adversary of Russian civilization.[50]

Russia"s anti-extremism laws are applied selec­tively, and critics fear that they may be used to per­secute the political opposition and undesirable civil society groups.[51] In the penal code, extremism is vaguely defined[52] and even includes slandering a government official in the performance of his duties.[53] The 2006 amendment to the election law aimed at keeping extremists out of elected offices could also be used to disqualify rivals of the Krem­lin unfairly.[54]

At the same time, the justice and law enforce­ment systems have been slow to recognize actual racist crimes and often classify them as mere "hoo­liganism." Many policemen are involved in harass­ing ethnic groups. In 2006, Amnesty International reported that the Russian "government is shirking its responsibilities" and failing to respond to the shocking regularity of racist attacks.[55]

Followers of both radical ethnic nationalism and Islamism in Russia inspire those who oppose the current state and are willing to shatter it in order to remake it in their own images. Inability to address these domestic tensions and imperial nostalgia among the pro-Kremlin elite are shaping Russia"s sometimes aggressive international behavior. The question remains: Are the state and its institutions capable of opposing extremism?

Governance: Managed Democracy

Russia looks strong, but its political institutions are weak and fragile. The Kremlin, while retaining the trappings of democratic procedures and cere­monies, essentially curtails the development of a democratic regime. The Russian government has a hyperactive presidential system and pliant state institutions, including the legislature and the judi­ciary. The executive branch manipulates political expression by strictly controlling the mass media, the political opposition, and civil society. Political freedom has mostly been replaced by the competi­tion of bureaucratic and oligarchic clans.[56] Weak­ened institutions have no independent legitimacy[57] and fail to provide institutional stability.

In the Economist Intelligence Unit"s Democracy Index, Russia ranks 102nd among 167 states sur­veyed.[58] Given its trend of curtailing civil liberties, Russia could be further downgraded after what is likely to be a flawed 2007-2008 election cycle in which election observers from the Organisation for Security and Co-operation in Europe were denied entry visas. With President Putin leading the United Russia Party in December 2007, the real power may stay with him regardless of his job description.

Ensuring Desired Electoral Outcomes. It is said that in a democracy, electoral rules are clear while the outcome is uncertain. In Russia, the out­come is certain while the rules are unclear. The Kremlin tailors the electoral system to ensure the desired outcome.

This consolidation of power through electoral change is best exemplified by the 2005 abolition of the direct election of regional governors. Under this "reform," the Russian president appoints the regional governors, who are then confirmed by their respective regional legislatures. As a result, gover­nors are no longer accountable to their constituents. Similarly, majority parliamentary districts have been replaced with proportional representation from party lists, with parties required to receive at least 7 percent of the vote to win any seats.

This severed the link between the voters and their representatives and concentrated the "man­ageable" political elite in Moscow. The reforms, in other words, have again turned Russia into a cen­tralized state.

The option to reject all candidates on the ballot and the minimum voter turnout threshold have been eliminated from the election law. A minimum turnout of 25 percent was required in the 2003 Duma election for an election to be valid. Critics say that this effort to neutralize voter apathy as a poten­tial factor in the elections is just the latest step by the Kremlin to control the political process before the key 2007 and 2008 elections.[59] Many Russians had resorted to "passive protest" by not voting--turn­outs of 30 percent were common[60]--or by voting against all candidates in the elections that did not offer real alternatives.

In 2007, for the first time, all members of the Russian State Duma will be elected by proportional representation. Banned from forming electoral blocs, smaller opposition parties have little chance of overcoming the 7 percent threshold.[61] Thus, the 2007 legislature is expected to have a large Kremlin-loyal majority in both Houses, comprised of the United Russia Parties led by President Putin and possibly Vladimir Zhirinovsky"s Liberal Democratic Party. The pro-Putin social democratic Just Russia party and the Communists may be the designated opposition if they manage to clear the 7 percent bar­rier. Just as after the 2003 Duma elections, when United Russia gained over a two-thirds majority, the parliament will serve mostly as a rubber stamp for executive branch decisions.

In the 2004 presidential election, Putin, the incumbent, won 71.4 percent of the vote in the first round. For the upcoming March 2008 presidential election, Putin is expected to name his successor. In September 2007, 40 percent of Russians were likely to vote for the anonymous candidate nominated by Putin, and 51 percent were likely to name him as the politician they trust.[62] Recently, Putin has talked of five possible presidential nominees[63]--including previously obscure Prime Minister Viktor Zubkov and two well-positioned First Vice-Premiers, Sergey Ivanov and Dmitriy Medvedev--thereby maintain­ing intrigue and his own influence over events.

The elections have put great assets at stake, exac­erbating internal frictions over power and property. A class of high-ranking officials has emerged. These new members of the elite manage, but do not for­mally own, Russia"s strategic industries on behalf of the state. They are extremely wealthy and influen­tial, but they also depend on their access to power. This means that the stakes for the 2008 elections are very high. Public offices, control over business, and even basic freedoms are at stake.

Taming the Media and Civil Society. Media outlets, owned or controlled by the state, are used as tools in shaping the desired public opinion. Sev­eral remaining radio stations, on-line sources, and the remaining printed media that are still critical of the Kremlin are under constant pressure from the authorities. Since 2000, 13 journalists have been killed, and none of these cases has resulted in a conviction.[64]

Since 2003, the government has taken control of all of the television networks, directly or through the state-owned entities. Notably, Ekho Moskvy radio station and Kommersantnewspaper, the two relatively independent outlets, are owned by state energy giant Gazprom and a Gazprom subsidiary, respectively. An estimated 27.8 million Russians (25 percent of the population) have Internet access,[65] making the Internet the main alternative information source and a medium for the opposi­tion"s mobilization.

Russia"s "managed democracy" constrains the civil space and limits public debate. Russian nongovern­mental organizations (NGOs), particularly those that receive foreign funding, have been under state pres­sure since a 2006 law imposed strict registration and reporting requirements. According to Russian human rights activists, Russia now has political prisoners convicted of criminal offenses in the absence of "polit­ical paragraphs" in the penal code.[66]

Rise of Bureaucracy and Red Tape. Critics say that many long-overdue administrative reforms have not been implemented under the Putin admin­istration and that the quality of governance has deteriorated. As one veteran critic puts it, "Russia remains one of the most criminalized, corrupt, and bureaucratic countries in the world."[67]

Russian official data testify that government bureaucracy has grown steadily. It has increased by 40 percent since 2001 and now totals 1.57 million fed­eral and local government employees[68]--roughly equal to the size of Soviet bureaucracy. Thus, Russia"s bureaucratic ratio to general population has more than doubled since 1991 because its population is less than half the size of the population of the Soviet Union in 1991. Independent experts estimate Russian bureaucracy, including municipal-level officials, at 3.5 million[69]--more than twice the official number.

Civil service salaries are dramatically higher than the average nationwide wages, and civil service pres­tige is also on the rise. Yet the quality of Russian bureaucracy remains low. A recent World Bank study of government effectiveness placed Russia in the lowest quartile of the 212 countries surveyed, based on its performance in such key areas as rule of law and control of corruption.[70] Graft, inertia, and negligence remain typical of Russia"s bureaucracy. State expansion into the private sector worries inves­tors, slows down the economy, and fuels corruption.

The remarkable intertwining of Russia"s bureau­cratic and business elites illustrates the ruling elite"s unsurpassed economic power. For example:

The Financial Times reported in 2006 that 11 members of the presidential administration chaired six state companies and held 12 state directorships and that 15 senior government officials held six chairmanships and 24 other board seats.[71]

The long list of senior officials serving on boards of major companies starts with the two First Deputy Prime Ministers: Dmitriy Medvedev, chairman of Gazprom, and Sergey Ivanov, who oversees the military-industrial complex and state holdings in aircraft, shipbuilding, and nuclear industries.

Igor Sechin, Putin"s Deputy Chief of Staff, chairs Rosneft, Russia"s largest state-run oil company.

Viktor Ivanov, Putin"s top aide, heads the board of directors of Almaz-Antei, the country"s key defense producer, and the board of directors of Aeroflot, the national airline.

Alexey Gromov, the President"s Press Secretary, sits on the board of Channel One, Russia"s main television channel.

The Economy: Commodity Dependence and State Intervention

Banking on its energy revenues, Russia has man­aged to avoid painful economic restructuring and diversification beyond the natural resource sectors. The growth of the Russian economy is due mainly to exports of raw materials (oil, natural gas, and metals). After seven years of economic growth, Rus­sia remains heavily dependent on energy exports and is vulnerable to fluctuations in global commod­ity prices. The International Monetary Fund and the World Bank estimate that:

[I]n 2005 the oil and gas sector represented around 20 percent of the country"s GDP, gen­erated more than 60 percent of its export revenues (64 percent in 2007), and accounted for 30 percent of all foreign direct investment (FDI) in the country.[72]

President Putin has offered an action plan for Russia to diversify away from reliance on energy and natural resources and to become one of the world"s leading economies. His vision of Russian economic development entails growing high-tech industries, a strong service sector, and a state boost for "national champions" in key industries--vertically integrated state-owned or state-controlled global companies capable of competing with foreign corporations. However, it is not clear that Russia is emerging as a diversified globally competitive economy, given Russian commodities" competitive advantage and the Kremlin"s preference for economic regulation.

The Kremlin has steadily increased the state-con­trolled share of the economy. The European Bank for Reconstruction and Development reported that the public sector"s share of the economy increased from 30 percent to 35 percent in 2005. The state"s share of major blue chip companies has quadrupled between 2004 and 2007. The state has also come to play a significant role in mergers and acquisitions. According to KPMG, two transactions--the increase in the state share of Gazprom from 38 percent to 51 percent and Gazprom"s purchase of Sibneft-- totaled $20.21 billion and accounted for half of the value of all Russian mergers and acquisitions in 2005.[73]

Although leading officials have explicitly rejected state capitalism as a model for Russia, the Kremlin is pushing to consolidate state assets in many domes­tic industries. The leaders in state intervention are the military-industrial complex and the civilian nuclear sector, which are under state command and control.

Moreover, these influential industries need inter­national instability to increase sales. The USSR and Russia at times have sold weapons to both sides in a conflict, such as to Iran and Iraq in 1980s. Russian experts are fond of saying that weapons exports cre­ate allies. "Civilian" nuclear reactors are often pre­cursors of a military nuclear program, as is the case with Iran, to which Russia sold the Bushehr reactor and is planning to sell up to five more units.

Putin envisages the state not as the great rena­tionalizer, but as the biggest shareholder in a newly privatized society.[74] The oil and gas sector has a built-in interest in keeping the Middle East unstable and oil prices high. The industry is notorious for evictions of foreign corporations and internal own­ership consolidation by state giant Gazprom. Con­solidation of strategic assets under state control is often presented to the public as restoration of national property illicitly acquired in the mid-1990s by corrupt oligarchs at deeply discounted prices. This was the stated justification for Rosneft"s 2004 acquisition of Yuganskneftegaz, the key production unit of forcibly bankrupted Yukos.

The Kremlin is also increasing its shares of the aerospace, weapons production, nuclear industry, shipbuilding, shipping, and automotive sectors. This often involves regrouping industry assets into "national champions" through acquisition of privately owned assets by major state holdings. Needless to say, the state is employing multiple administrative levers to avoid paying market prices for these acquisitions.

At the opening of the 2007 economic forum in St. Petersburg, First Deputy Prime Minister Sergey Ivanov cited state holdings as an example of innova­tive economic development. On paper, such public corporations are assigned ambitious projects such as developing nanotechnology, tripling national ship­building capacity, and promoting Russia"s civilian aircraft industry to serve 10 percent of the world market by 2020.[75] In practice, these sectors are inter­nationally uncompetitive and have demonstrated limited effectiveness even in import substitution.

Experts say that "Kremlin Inc.,"[76] a set of strate­gic industries under state control and managed by high-ranking officials, ensures the revival of the mil­itary-industrial complex once enjoyed by the Soviet Union. Such massive economic power in the state"s hands, multiplied by the oil-fueled budgetary sur­plus, could lead to a new round of massive Russian rearmament.

The Kremlin"s insistence on the legitimacy of mercantilism, which limits Western business to minority stakes in the natural resources sector, neg­atively affects the U.S.-Russian economic agenda. The pattern of government takeovers of businesses is increasing the political risk of doing business in Russia and driving away much-needed investment. Although foreign investment in Russia topped $150 billion in 2006[77] and has exceeded $70 billion in the first seven months of 2007, experts say these levels are relatively low for a country with a massive and obsolete infrastructure and an economy grow­ing at 6.7 percent annually.[78]

The investment ratio is just over half of what is needed to sustain high growth. Foreign investment will remain much lower than is needed until Russia improves its corporate governance and creates a more welcoming investment environment.[79]

What the U.S. Should Do

Congress and the Administration should under­stand that Russia is resurging as an assertive auton­omous international actor poised to challenge American leadership, particularly in Central Asia, the Caucasus, Eastern Europe, and the Middle East. It is also likely that Russia will conduct forays into the Western Hemisphere, particularly via Venezuela and its satellites, such as Bolivia and Ecuador, as well as Cuba.

However, as long as Iraq, Iran, and the war on terrorism remain high on the U.S. agenda, it is not in America"s strategic interest to pick a major fight with Russia, exacerbate differences unnecessarily, or respond tit-for-tat to each provocation. Rather, the U.S. should staunchly defend its national interests and, when possible, involve Russia in resolving international crises.

In view of pressing demands elsewhere, it is understandable that U.S. assistance to Russian democracy and civil society has been limited. In fis­cal year (FY) 2006, of $949.3 million budgeted by all U.S. government agencies for assistance pro­grams in Russia, democracy programs accounted for only $45.2 million, $23.6 million was spent on social reform, and security and law enforcement aid accounted for $860 million.[80]

The Department of State and the National Endowment for Democracy (NED) may need to explore more creative ways to reach their objectives. The total NED budget has grown from $59 million in FY 2005 to $74 million in FY 2006 but was cut in FY 2007 to $50 million despite the Bush Adminis­tration"s request for $80 million.[81]

The U.S. should establish strategic goals and objectives and pursue greater engagement with the remnants of Russian civil society. Specifically, the U.S. should:

Continue to negotiate and cooperate with Rus­sia on matters of mutual concern in the areas of security and nonproliferation. Moscow and Washington have common interests in prevent­ing a new arms race and renegotiating the Strate­gic Arms Reduction Treaty (START), which is up for renewal in 2009, and the Intermediate-Range Nuclear Forces (INF) Treaty, which is in force indefinitely. Moscow and Washington should seek common ground in opposing the spread of intermediate-range missiles and weapons of mass destruction, nuclear proliferation, and illicit drug and arms trafficking.

The U.S. and Russia should also expand cooper­ation in civilian nuclear energy, space explora­tion, and fighting the spread of radical Islam. The U.S. should clarify that Iran"s nuclear arsenal will be even more detrimental to Russia"s security than to U.S. security and should work to limit Russian arms sales to Iran, Syria, and Venezuela. The Defense Department should continue the Coop­erative Threat Reduction of Russia"s strategic arse­nals under Nunn-Lugar funding.

Promote Russia"s integration into the global economy, particularly the rule-based WTO regime. Russia"s increasing role in the global marketplace will further expose it to economic liberalism, freedom of travel, and the free exchange of ideas. The Bush Administration should ask Congress to take the long-overdue step of "graduating" Russia from the Jackson- Vanik Amendment, which bars Russia from enjoying Permanent Normal Trade Relations (NPTR) with the United States. This amendment was overtaken by events over a decade and a half ago when Russia fully liberalized Jewish emigra­tion from the country, as demanded by the Jack­son-Vanik Amendment.

At the same time, the U.S. and its European allies should insist that Russia open its natural resources sectors, including energy, to Western investors. The U.S. Trade Representative and U.S. Department of Commerce should cooper­ate with their European counterparts to ensure a level playing field for American and other West­ern companies operating in Russia. If Russia fails to cooperate, the U.S., Japan, and European countries should review the flow of technology and investment to the Russian energy sector. The U.S. should also strive to create an Energy Consumers" Club with China, India, Japan, and Europe to balance the power of OPEC and other energy superpowers, such as Russia.

Provide technical medical assistance. Russia could benefit significantly from assistance in combating the HIV/AIDS and tuberculosis epi­demics, improving prevention and treatment for cardiovascular diseases and cancer, improving health care management, and dealing with other pressing health issues. The U.S. State Depart­ment should encourage such activities, which would offer new business opportunities for the American health care sector. The U.S. needs to demonstrate to the Russian elites that it has much to offer in their areas of concern.

Increase support for civil society groups working to advance media independence, rule of law, political liberalization, and tolerance in Russia.Russia is a signatory to the Helsinki 1975 Final Act and to the 1991 Moscow Docu­ment. Thus, Russian domestic behavior is sub­ject to these obligations. In particular, the National Endowment for Democracy and other U.S.-funded NGOs should provide greater sup­port to Russian NGOs fighting ethnic hatred and working to memorialize Stalin"s victims and the mass crimes committed under his regime. Inter­net-based projects should be emphasized as they facilitate public access to alternative sources of information that the Russian state has had diffi­culty controlling or shutting down.

Constantly and steadily reach out to the Rus­sian people through a comprehensive public diplomacy strategy to debunk the myth of inherent American hostility toward Russia. The U.S. should expand its public diplomacy efforts via the Internet, international broadcasting under the Broadcasting Board of Governors, and professional and academic exchange programs. These programs should emphasize improving business relations and the investment environ­ment, as well as cultivating ethnic and religious tolerance in Russian society, thus helping to pre­vent further radicalization and alienation of mar­ginalized groups. For FY 2008, Congress should also fund the long-delayed reorganization of U.S. Russian-language international broadcasting.

Establish a multidisciplinary monitoring project, through the U.S. government or a con­sortium of preeminent think tanks with the par­ticipation of top U.S. and international scholars, to scrutinize the dynamics of domestic stability, the security and health of Russia"s society and economy, and how they influence Russian domestic and foreign policy.

Conclusion

Russia"s foreign policy is still driven by former Soviet military and security elites who view Russia as the direct heir to the autocratic Russian Empire and the Soviet Union and who cherish Russia"s self-appointed role as America"s principal counterbal­ance on the world stage.[82] The lack of institutional checks and balances on the executive branch pre­vents the public airing of differences on foreign and security policy and makes it difficult for sober heads to voice their opposition to truculent foreign policy.

The Russian state is being progressively weak­ened by negative demographic trends, including alcoholism, HIV/AIDS, tuberculosis, and the result­ing decline in life expectancy. The alienation of Muslims and other ethnic groups is leading to an increase in xenophobia and violence and to further Islamic radicalization and deepening divisions in Russian society.

While Russia has become more assertive interna­tionally, its domestic policies have become more authoritarian, and state intervention in the econ­omy has become excessive. U.S.-Russian bilateral relations are at their lowest since the end of the Cold War, and many trends in Russian foreign policy are justifiably disturbing.

U.S. officials should develop a comprehensive strategy to serve America"s objectives, keeping in mind the significant internal vulnerabilities of the Russian state. The U.S. cannot afford to "lose" Rus­sia while Russia is involved in protracted conflicts in the Caucasus and is influencing the situation in Central Asia, in the Middle East, and throughout the Muslim world. Meanwhile, Russia"s cooperation is essential to restraining and reversing Iran"s quest for nuclear weapons. Although Russian elites may not always recognize it, Russia can ill afford to "lose" the West, especially in view of Moscow"s lack of stra­tegic allies and the looming power of China.

The U.S. government should address Russia"s adverse domestic trends through a sustained Amer­ican effort both to reach out to the Russian public, business sector, and intellectual community and to support the empowerment of the remnants of free media and civil society. To be a partner, Moscow needs to behave responsibly along its periphery and in the Middle East, Venezuela, and other key regions and countries. At the same time, some important areas of bilateral relations should remain open to cooperation, and the U.S. government should do its best to encourage and sustain dialogue with its Russian counterparts.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. The author wishes to thank Yevgeny Volk, Ph.D., Coordinator of The Heritage Foun­dation"s Moscow Office, for providing valuable comments on this paper. Heritage intern Olena Krychevska also contributed to the production of this paper.

[1]Encyclopaedia Britannica Online, s.v., "Russia," at www.britannica.com/eb/article-9109504/Russia (November 5, 2007).

[2]Mark N. Katz, "Is Russia Strong or Weak," SpaceWar, July 10, 2006, atwww.spacewar.com/reports/Is_Russia_Strong_Or_Weak_999.html (August 23, 2007).

[3]Alexander Motyl, "Ukraine and Russia: Divergent Political Paths," openDemocracy, August 17, 2006, at http://opendemocracy.net/democracy-ukraine/russia_ukraine_3830.jsp (August 25, 2007).

[4]Robert Fulford, "Putin"s ‘Managed Democracy,"" The Financial Post (Canada), July 15, 2006.

[5]BBC News, "European Press Review: Russia in Shock," June 11, 2002, athttp://news.bbc.co.uk/2/low/europe/2037530.stm (July 30, 2007).

[6]Ekaterina Scherbakova, "Demograficheskie itogi 2006 goda" [Demographic results of 2006], Demoscope Weekly, March 5- 18, 2007, athttp://demoscope.ru/weekly/2007/0279/barom01.php (July 20, 2007); Russian Federal State Statistics Service, "Chislennost naseleniya" [Total acts of violence], atwww.gks.ru/free_doc/2007/b07_11/05-01.htm (July 20, 2007); and Population Reference Bureau, "2007 World Population Data Sheet," August 2007, atwww.prb.org/pdf07/07WPDS_Eng.pdf (September 14, 2007).

[7]Ibid.

[8]"Russian Health and Demography: A Sickness of the Soul," The Economist, September 7, 2006, at www.economist.com/world/europe/PrinterFriendly.cfm?story_id=7891259 (July 20, 2007).

[9]Russian Federal Statistics Service, "Key Mortality Indicators," atwww.gks.ru/free_doc/2007/b07_11/05-07.htm (July 20, 2007).

[10]Russian Federal Statistics Service, "Koeffitsienty smertnosti po osnovnym klassam prichin smerti" [Mortality rates for main causes of death], atwww.gks.ru/free_doc/2007/b07_11/05-07.htm (July 20, 2007), and Organisation for Economic Co-operation and Development, OECD Economic Surveys: Russian Federation, 2006, athttp://puck.sourceoecd.org/upload/1006171e.pdf (August 20, 2007).

[11]UNAIDS, "2006 Report on the Global AIDS Epidemic," May 2006, atwww.unaids.org/en/HIV_data/2006GlobalReport/default.asp (September 13, 2007).

[12]Guy Faulconbridge, "Russia Warns of AIDS Epidemic, 1.3 mln with HIV," Reuters, May 15, 2007, at www.reuters.com/article/healthNews/idUSL1546187520070515 (July 27, 2007).

[13]World Health Organization, WHO Statistical Information System, "Core Health Indicators," 2007, atwww.who.int/whosis/database/core/core_select_process.cfm (September 10, 2007).

[14]Yale University, Center for Interdisciplinary Research on AIDS, "Epidemiology of HIV/AIDS in Russia," 2007, athttp://cira.med.yale.edu/international/russiaepid.html (September 12, 2007).

[15]James Magee, "HIV Prevention, Harm Reduction, and Injecting Drug Use," AVERT, updated August 31, 2007, at www.avert.org/injecting.htm (September 12, 2007).

[16]"In Sad Tally, Russia Counts More Than 4 Million Addicts," Pravda, February 20, 2004, at http://newsfromrussia.com/main/2004/02/20/52421.html (September 12, 2007).

[17]Human Rights Watch, "Lessons Not Learned: Human Rights Abuses and HIV/AIDS in the Russian Federation," Vol. 16, No. 5(D) (April 2004), p. 16, athttp://hrw.org/reports/2004/russia0404/russia0404.pdf (October 31, 2007).

[18]Scherbakova, "Demograficheskie itogi 2006 goda."

[19]Michael Mainville, "Russia Has a Muslim Dilemma: Ethnic Russians Hostile to Muslims," San Francisco Chronicle, November 19, 2006, at http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/11/19/MNGJGMFUVG1.DTL (July 25, 2007).

[20]Judyth Twigg, "National Security Implications of Russia"s Health and Demographic Crisis," Center for Strategic and International Studies PONARS Policy Memo No. 360, February 4, 2005, at www.csis.org/media/csis/pubs/pm_0360.pdf (August 15, 2007).

[21]Judyth Twigg, "Differential Demographics: Russia"s Muslim and Slavic Populations," Center for Strategic and International Studies PONARS Policy Memo No. 388, December 5, 2005, at www.csis.org/media/csis/pubs/pm_0388.pdf (August 15, 2007).

[22]World Health Organization, "Core Health Indicators."

[23]RIA Novosti, "Russia to Raise National Project Spending 12% to $10 bln in 2007," August 23, 2007, at http://en.rian.ru/russia/20070823/73753727.html (September 14, 2007).

[24]Encyclopædia Britannica Online, s.v., "Slavophile," 2007, atwww.britannica.com/eb/article-9068172 (August 23, 2007).

[25]Konstantin Eggert, "Amerika v poiskakh Rossii, Rossiya v poiskakh sebya" [America is in search of Russia, Russia is in search of herself], BBC News, July 4, 2007, athttp://news.bbc.co.uk/go/pr/fr/-/hi/russian/russia/newsid_6271000/6271308.stm (August 24, 2007).

[26]Peter Lavelle, "Russia: Unified Russia"s ‘Ideology-Lite,"" Radio Free Europe/Radio Liberty, December 2, 2005, at www.rferl.org/featuresarticle/2005/12/9e265611-7d9e-4fce-81d8-240d54115271.html (August 24, 2007).

[27]Galina Kozhevnikova and Alexander Verkhovsky, "Posevnaya na polyane russkogo natsionalizma" [Sowing the field of Russian nationalism], Sova Center, July 27, 2007, athttp://xeno.sova-center.ru/29481C8/96A2F47 (August 15, 2007).

[28]Andrew E. Kramer, "New Russian History: Yes, People Died, But...," International Herald Tribune, August 15, 2007, atwww.iht.com/articles/2007/08/15/news/letter.php (August 20, 2007).

[29]Mark H. Teeter, "The Matter with History," The Moscow Times, July 16, 2007, atwww.themoscowtimes.com/stories/2007/07/16/007.html (August 20, 2007).

[30]Reuters, "Russian Youth: Stalin Good, Migrants Must Go: Poll," July 25, 2007, atwww.reuters.com/article/worldNews/idUSL2559010520070725?feedType=RSS&rpc=22&sp=true (July 30, 2007).

[31]Valery Tishkov, "Self-Determination of the Russian Nation," International Trends, Vol. 3, Issue 2(8) (May-August 2005), at www.intertrends.ru/seven_e.htm (September 13, 2007).

[32]Ramazan Abdulatipov, "Sozdanie rossiiskoi natsii: proekt dlya XXI veka" [Creation of the Russian nation: Project for the XXI century], Rossiiskaya Gazeta, August 28, 2003, atwww.rg.ru/2003/08/28/Sozdanierossijskojnatsii.html (August 23, 2007).

[33]Freedom House, Freedom in the World: Country Reports, s.v. "Russia," 2007 ed., atwww.freedomhouse.org/template.cfm?page=22&country=7258&year=2007 (August 25, 2007).

[34]Levada Center, "Natzionalizm i ksenofobiya" [Nationalism and xenophobia], August 29, 2007, at www.levada.ru/press/2007082901.html (September 15, 2007).

[35]Galina Kozhevnikova, "Radikalnii natsionalizm v Rossii i protivodeistvie emu v 2006 godu" [Radical nationalism in Russia and counteraction to it in 2006], Sova Center, January 4, 2007, at http://xeno.sova-center.ru/29481C8/8F76150 (July 30, 2007).

[36]Boris Reitschuster, "After Putin Is the Same As Before Putin," InoPressa, September 14, 2007, at www.inopressa.ru/focus/2007/09/17/12:04:33/putin (September 16, 2007).

[37]Andreas Umland, "‘Neoevraziistvo", vopros o russkom fashizme i rossiiskii politicheskii diskurs" [‘Neoeurasianism," the issue of Russian fascism and Russian political discourse],Zerkalo Nedeli,No. 48(627), December 16-22, 2006, at www.zn.ua/1000/1600/55389 (July 25, 2007).

[38]Dvizhenie Protiv Nelegalnoi Immigratsii, "O dvizhenii" [About the movement], atwww.dpni.org/about/o_dvizheni (September 17, 2007).

[39]Dvizhenie Protiv Nelegalnoi Immigratsii, Sluzhba Informatsii, "Vstupai v narodnuyu camooboronu DPNI!" [Join DPNI"s people"s self defense!], June 26, 2007, athttp://dpni.org/articles/novosti_dp/2802 (October 31, 2007).

[40]Natalya Krainova, Kevin O"Flynn, and Nabi Abdullaev, "Racist Chants Undercut Day of Unity," The Moscow Times, November 6, 2007, p. 1, atwww.themoscowtimes.com/stories/2007/11/06/002.html (November 7, 2007).

[41]Claire Bigg, "Russia: Counterrally to Defy Ultranationalist March," Radio Free Europe/Radio Liberty, November 3, 2006, at www.rferl.org/featuresarticle/2006/11/b08c1e9c-99ff-4203-897b-bf38073f079f.html (July 30, 2007).

[42]"Immigrants in Russia: Market Forces," The Economist, January 18, 2007, atwww.economist.com/world/europe/displaystory.cfm?story_id=8562029 (August 23, 2007).

[43]Alexey Malashenko, "The Situation Inside Russia," Bitterlemons-international, Vol. 4, Edition 13 (April 6, 2006), at www.bitterlemons-international.org/inside.php?id=516 (October 31, 2007).

[44]Dmitry Gorenburg, "Russia"s Muslims: A Growing Challenge for Moscow," Center for Strategic and International Studies PONARS Policy Memo No. 421, December 8, 2006, atwww.csis.org/media/csis/pubs/pm_0388.pdf (August 15, 2007).

[45]Malashenko, "The Situation Inside Russia."

[46]Gorenburg, "Russia"s Muslims."

[47]"Russian Xenophobia," The Economist, February 17, 2005.

[48]Yuri Zarakhovich, "Inside Russia"s Racism Problem," Time, August 23, 2006, atwww.time.com/time/nation/article/0,8599,1304096,00.html (August 23, 2007).

[49]"Russian Nationalism," The Economist, May 11, 2006.

[50]Umland, "‘Neoevraziistvo", vopros o russkom fashizme i rossiiskii politicheskii diskurs."

[51]Press release, "OSCE Media Freedom Representative Asks Russian Authorities to Review Extremism Laws," Organization for Security and Cooperation in Europe, July 27, 2007, at www.osce.org/item/25791.html (July 30, 2007). For example, Putin critic Andrei Piontkovsky is on trial for "extremism" due to his anti-Kremlin books Unloved Country andFor the Motherland! For Abramovich! Fire! The Kremlin claims that the books incite violence against Russians, Americans, and Jews. Piontkovsky joked that this is the first time the Kremlin has looked out for Americans.

[52]Kozhevnikova and Verkhovsky, "Posivnaya no polyane russkogo natsionalizma."

[53]Freedom House, Freedom in the World.

[54]Press release, "OSCE Media Freedom Representative Asks Russian Authorities to Review Extremism Laws."

[55]Zarakhovich, "Inside Russia"s Racism Problem."

[56]Human Rights in Russia, "Managed Democracy Is a Straight Road to Dictatorship and Fascism," at www.hro.org/ngo/discuss/march.htm (September 17, 2007; unavailable November 5, 2007).

[57]Nikolai Petrov, "From Managed Democracy to Sovereign Democracy: Putin"s Regime Evolution in 2005," Center for Strategic and International Studies PONARS Policy Memo No. 396, December 14, 2005, at www.csis.org/media/csis/pubs/pm_0396.pdf (September 19, 2007).

[58]Laza Kekic, "The World in 2007: Democracy Index," Economist Intelligence Unit, 2007, at www.economist.com/media/pdf/DEMOCRACY_INDEX_2007_v3.pdf (August 10, 2007).

[59]Associated Press, "Russia Scraps Election Turnout Threshold," The Washington Post, December 7, 2006, at www.washingtonpost.com/wp-dyn/content/article/2006/12/07/AR2006120701106.html (September 15, 2007).

[60]Petrov, "From Managed Democracy to Sovereign Democracy."

[61]Russian Federation, "Federalnii zakon o byborakh deputatov gosudarstvennoi dumy federalnogo sobranniya rossiiskoi federatsii [Federal law on the election of deputies to the state duma of the federal assembly of the Russian Federation], May 18, 2005, No. 51-F3, atwww.cikrf.ru/cikrf/law/2/zakon_51.jsp (September 18, 2007).

[62]Levada Center, "Vybory 2008" [Elections 2008], at www.levada.ru/vybory2008.html(September 19, 2007); "Prezident: Odobrenie i doverie" [President: Approval and trust], atwww.levada.ru/prezident.html (September 19, 2007); and "Reitingi doveriya" [Trust ratings], September 2007, at www.levada.ru/polotiki0907.html (October 31, 2007).

[63]C. J. Chivers, "Putin Sees ‘Real Choice" in Election," International Herald Tribune, September 14, 2007, at www.iht.com/articles/2007/09/15/europe/15russia.php (September 15, 2007).

[64]Freedom House, Freedom in the World.

[65]Public Opinion Foundation, "The Internet in Russia/Russia on the Internet," Population Poll, 19th Release, Spring 2007, published June 23, 2007, athttp://bd.english.fom.ru/report/map/projects/ocherk/eint0702 (August 23, 2007).

[66]Moscow Helsinki Group, "Politzaklychennye putinskoi Rossii" [Political prisoners of Putin"s Russia], 2004, at www.mhg.ru/publications/4D61A27 (July 29, 2007).

[67]"Russia Under Putin: The Making of a Neo-KGB State," The Economist, August 23, 2007, at www.economist.com/world/displaystory.cfm?story_id=9682621 (September 18, 2007).

[68]Nikolaus von Twickel, "Red Tape Reaching Its Soviet Heights," The Moscow Times, August 7, 2007, at www.themoscowtimes.com/stories/2007/08/07/001.html (November 7, 2007).

[69]Ibid.

[70]The World Bank, "Country Data Report for Russia, 1996-2006," athttp://info.worldbank.org/governance/wgi2007/pdf/c187.pdf (September 15, 2007).

[71]Neil Buckley and Arkady Ostrovsky, "Back in Business--How Putin"s Allies Are Turning Russia into a Corporate State," Financial Times, June 19, 2006, atwww.ft.com/cms/s/0/d776a916-ff2f-11da-84f3-0000779e2340.html (September 20, 2007).

[72]U.S. Department of Energy, Energy Information Administration, "Country Analysis Briefs: Russia," April 2007, at www.eia.doe.gov/emeu/cabs/Russia/Background.html (September 20, 2007).

[73]Buckley and Ostrovsky, "Back in Business."

[74]Nick Paton Walsh, "Meet the Chief Exec of Kremlin Inc...," The Guardian, July 6, 2005, at www.guardian.co.uk/russia/article/0,2763,1522191,00.html (September 20, 2007).

[75]RIA Novosti, "Russia Among Top 5 in Terms of GDP by 2020--Ivanov," June 9, 2007, athttp://en.rian.ru/russia/20070609/66970013.html (September 20, 2007).

[76]Walsh, "Meet the Chief Exec of Kremlin Inc..."

[77]RIA Novosti, "Russia Among Top 5 in Terms of GDP by 2020."

[78]American Chamber of Commerce in Russia, "The Economy and Investment Climate in Russia," April 6, 2007, at www.amcham.ru/publications/investment_reports/ir2006 (July 17, 2007).

[79]Keith Bush, "Russian Economic Survey," U.S.-Russia Business Council, May 2007, atwww.usrbc.org/pics/File/EconSurvey/SurveyMay2007.pdf (July 17, 2007).

[80]U.S. Department of State, Bureau of European and Eurasian Affairs, "U.S. Assistance to Russia--Fiscal Year 2006," May 11, 2006, at www.state.gov/p/eur/rls/fs/66166.htm (August 20, 2007).

[81]U.S. Department of State, Bureau of Resource Management, "FY 2007 Budget in Brief: Related Appropriations," February 6, 2006, atwww.state.gov/s/d/rm/rls/bib/2007/html/60316.htm (August 20, 2007).

[82]Ariel Cohen, "How to Confront Russia"s Anti-American Foreign Policy," Heritage Foundation Backgrounder No. 2048, June 27, 2007, atwww.heritage.org/Research/RussiaandEurasia/bg2048.cfm.

‍

by Ariel Cohen

Russia is consolidating its grip on oil and gas—the economic lifeblood of Europe. Moscow is pursuing a comprehensive strategy that could increase Europe"s political and economic dependence on Russian energy. Such dependence could negatively affect trans­atlantic relations, common values, goals, strategic objectives, and security policies. Without a policy dialogue and coordination between Washington and European capitals, Europe"s strategic drift away from the United States will continue unabated.

In the meantime, European energy security policy is in disarray. Despite British Prime Minister Tony Blair"s call for a common European energy policy in an October 2005 speech to the European Parliament,[1]  European countries have rushed to secure their own energy interests in lieu of a more coordinated approach. In the spring and summer of 2007, Austria, Italy, and Hungary negotiated separate deals with the Russian energy giant Gazprom. These deals may undermine the EU"s Nabucco project, which aims to bring Caspian gas to the heart of Europe via Bulgaria, Romania, Hungary, and into Austria.

On paper, the European Union is invested in energy security. At the 2007 spring summit in Brus­sels, EU members outlined an action plan on energy security for 2007–2009. First, to ensure security of supply, the EU needs to "diversif[y]…energy sources and transport routes, and better systems for respond­ing to crises."[2]  Second, the EU should promote inter­national energy policy by "negotiating a new treaty framework for energy co-operation with Russia, and improving relations with energy-rich countries in Central Asia and North Africa." The EU also pro­claims that it wants to improve its ability to manage supply crises, to expand the energy grid connecting European countries, and to improve the functioning of the internal energy market.[3]

In practice, some European countries depend heavily on energy imports and are highly vulnerable to global energy shocks. The EU is the world"s larg­est importer of oil and gas. It imports 82 percent of its oil and 57 percent of its gas. Imports are pro­jected to rise to 93 percent of its oil and 84 percent of its gas over the next 25 years.[4]

With Russia consolidating its control of Euro­pean and Central Asian energy, and in view of Europe"s dependence on the Persian Gulf, Europe desperately needs to cooperate on energy security. Europe and the U.S. should work together to miti­gate the adverse effects of Europe"s strategic depen­dence on Russia. In particular, the U.S. should:

• Work with key European governments to address vulnerabilities that result from overreliance on a single oligopolistic energy supplier—Russia. They should encourage development of EU-wide nat­ural gas reserves, increase the consumption of liquefied natural gas, and expand the nuclear, coal, and renewable energy sectors.
• Support diversification of energy transportation routes in Eurasia, especially oil and gas pipelines that link Central Asian producers to European markets, bypassing Russia.
• Continue efforts to bring Russia into full compli­ance with the Energy Charter to increase predict­ability and transparency in energy markets.

Energy Dependence on Russia

Europe is hungry for energy. In 2006, the 25 EU members consumed 1,722.8 million tons of oil equivalent (mtoe). Nearly two-thirds came from hydrocarbons: 706.3 million tons of oil (14.9 million barrels per day) and 420.6 mtoe (476.4 billion cubic meters) of natural gas. The remain­ing 34.6 percent came from coal, nuclear, and renewable sources.[5]

EU energy security already depends heavily on Russia. The EU imports almost half of its natural gas and 30 percent of its oil from Russia.[6]  Eastern Europe consumes even higher percentages of Rus­sian gas. Table 1 shows the major European recipi­ents of Russian natural gas exports, ranked from most dependent to least dependent.

In 2006, oil imports from Russia and Central Asia reached 5.9 million barrels per day (290.8 mil­lion tons). Russia also supplied some 132 billion cubic meters (bcm) of natural gas.[7]  Rising demand indicates that Europe"s dependence on Russian energy will continue to grow.

Russia has the largest proven natural gas reserves (1,688 trillion cubic feet) and the seventh-largest proven oil reserves (60.0 billion to 74.4 bil­lion barrels) in the world,[8]  and large areas of east­ern Siberia and the Arctic are still unexplored. Total Russian net oil exports reached 7 million barrels per day in 2006.[9]  Chart 1 and Chart 2 show the current and projected increased levels of Russian oil and gas exports.

Russian Energy Strategy and Tactics

Russia"s energy strategy seeks to make Europe increasingly dependent on Russian oil and gas. The Kremlin has advanced this strategy through a series of policies. It creates dependency by locking in demand with energy importers, consolidating the supply of oil and gas by signing long-term contracts with Central Asian energy producers, and securing control of strategic energy infrastructure in Europe and Eurasia. This includes extending the Gazprom monopoly and attempting to create an OPEC-style gas cartel.[10]  At the August 2007 summit of the Shanghai Cooperation Organization, the presidents of Kazakhstan and Russia called for establishment of an "Asian energy club" to expand energy ties among the member states, including creation of a unified energy infrastructure to serve as the basis for a common energy market.[11]

Locking in Demand. Russia is attempting to lock in demand by signing long-term bilateral and multilateral contracts with European countries. Moscow prefers to deal with the EU member states separately rather than as a group so that Russia can price-discriminate among its customers, charg­ing each country as close to its full paying poten­tial as possible.

Gazprom has negotiated long-term supply con­tracts with most Western European countries, including France, Germany, Italy, and Austria. Rus­sia has contracted for portions of Central and East­ern European demand that are much greater than that of Western Europe. Newer EU members, such as Slovakia, Bulgaria, and the Czech Republic, are almost entirely dependent on Russian gas.

More recently, during President Vladimir Putin"s May 2007 visit to Austria, the Austrian government agreed to a major deal with Gazprom. OMV, a par­tially state-owned Austrian energy company, signed a long-term gas import deal with Gazprom.[12]  Under the agreement, Gazprom subsidiaries GWH and CentrexEurope Energy and Gas will begin to deliver gas directly to Austrian consumers in 2008. Current imports from Russia account for approxi­mately 70 percent of Austrian gas consumption.[13]  Gazprom is scheduled to deliver 6.8 bcm of gas in 2007 and 9 bcm in 2009.[14]  This agreement would practically integrate Austria"s gas transit and storage networks (existing and planned) into Gazprom"s expanding network of dependencies.

Moreover, Gazprom intends to use Austria as a transit corridor to capture other EU markets. It is planning to develop a Central European Gas Hub and Gas Transit Management Center, the largest in continental Europe, at Baumgarten near Vienna.[15]  In July 2007, OMV announced its intent to take over MOL, a private Hungarian energy company, which will further strengthen Russia"s grip on Euro­pean energy infrastructure.

Locking in Supply. Russia"s second tactic is to lock in supply by consolidating its control of strate­gic energy infrastructure, most notably pipelines, throughout Europe and Eurasia. Rus­sia is using outright ownership and joint ventures to control supply, sale, and distribution of natural gas and is buying up major energy infrastruc­ture, such as pipelines, refineries, electric grids, and ports.

In 2002, Russian state-owned Transneft attempted to gain control of the Mazeikiu Nafta refinery in Lithua­nia and the Ventspils oil-export ter­minal in Latvia. When the two governments refused to sell their stakes to Transneft, Moscow sharply cut oil deliveries, forcing Ventspils to obtain oil by rail.[16]  Russian pursuit of the Lithuanian refinery was cut short when the Polish company PKN Orlen bought the refinery in 2006,[17]  but Moscow is still pursuing the Latvian terminal. As recently as May 2007, a top Ventspils executive said that "the company was prepared to take on a strategic Russian investor."[18]

As of 2004, Gazprom had in­vested $2.6 billion in 23 major joint ventures, including buying a 50 per­cent stake in Slovrusgaz in Slovakia, 48 percent of Europol Gaz in Poland, and 30.6 percent of Eesti Gaas in Es­tonia. [19]   Russia is also buying up stra­tegic infrastructure companies in Georgia, Hungary, and Ukraine.[20]  In 1998, Gazprom took over shares of Topenergy, a Bulgarian company dealing with commercial distribu­tion of gas.[21]

Russia is also aggressively consoli­dating its control of European pipe­lines. The Kremlin has actively opposed Western-controlled pipeline projects directly linking Eurasian energy-producing countries to Euro­pean markets, such as the Baku– Tbilisi–Ceyhan oil pipeline and the Baku–Erzurum gas pipeline.

Earlier in 2003, German Chancel­lor Gerhard Schroeder and President Putin agreed to build a Nord Stream pipeline to supply Germany with Russian gas. The pipeline will cross the Baltic Sea and bypass Ukraine, Belarus, and Poland. (See Map 1.) It will have an annual capacity of 27.5 bcm of gas and is expected to become operational by 2010. Gazprom owns 51 percent of the North Euro­pean Gas Pipeline Company, which was created to build the pipeline"s underwater section.[22]  This pipeline will further tie European energy security to the Kremlin.

In February 2007, Ukrainian Prime Minister Viktor Yanukovych abandoned a project to extend the Odessa–Brody pipeline into Poland to pump Caspian oil outside of Russian control. The new plan would pump Russian oil into the Druzhba pipeline"s Slovak section, Transpetrol, which will soon be under Russian control. Loss of Transpetrol will make Slovakia and Hungary fully dependent on Russian oil.[23]

The Burgas–Alexandroupolis oil pipeline will be the first Russian-controlled pipeline on EU terri­tory.[24]  In March 2007, Russia signed an agreement with Bulgaria and Greece to construct the oil pipe­line bypassing the Turkish-controlled Bosporus Strait. It will have a capacity of 35 million metric tons of oil per year. Russian companies Transneft, Gazpromneft, and Rosneft will control 51 per­cent of the pipeline. Bulgaria and Greece will con­trol the rest.[25]  This pipeline will allow Russia to bypass the Bosporus chokepoint while maintain­ing control of oil transit. Russia is planning to build the second Bosporus bypass from a Turkish port on the Black Sea (such as Samsun or Trabzon) to the Mediterranean.[26]

As of March 2007, Hungary preferred to cooper­ate with Gazprom to extend the existing Russian– Turkish Blue Stream gas pipeline into EU territory through Bulgaria, Romania, Hungary, and Aus­tria.[27]  However, a more recent Russian–Italian South Stream pipeline agreement would partly replace the proposed Blue Stream extension.

At a May 2007 summit in the Turkmen port city of Turkmenbashi, Russia, Turkmenistan, and Kaza­khstan agreed to build the Prikaspiiski gas pipeline to carry gas from Turkmenistan to Russia via Kaza­khstan.[28]  The deal thwarts U.S. and EU plans for a trans-Caspian pipeline that would have delivered Turkmen gas across the Caspian Sea via Turkey and would have enabled Central Asian exporters to cir­cumvent Russian-controlled routes.[29]

Derailing Competition. On June 23, 2007, Gaz­prom and Italy"s ENI signed a memorandum of understanding to build the South Stream gas pipe­line from Russia to Italy. This pipeline will have a capacity of 30 bcm per year and will run across the Black Sea from Russia to Bulgaria, bypassing both Ukraine and Turkey. From Bulgaria, the pipeline could run either southwest via Greece and the Adri­atic Sea to southern Italy or northwest via Romania, Hungary or Austria, and Slovenia to northern Italy. Through ENI, Gazprom has gained access to Italian distribution systems and consumers.[30]

The South Stream pipeline will increase EU dependence on Russian energy and compete directly with the Nabucco gas pipeline project backed by the EU and U.S. The Nabucco pipeline was expected to transport gas from the Caspian basin to Europe via Turkey, Bulgaria, Romania, Hungary, and Austria, benefiting all 27 EU member countries.[31]  However, its chances are shrinking as Gazprom is building up influence in Europe and reaching agreements on alternative routes. South Stream also rivals the proposed extension of the EU-backed Baku–Erzurum gas pipeline via Turkey, either connecting to the Nabucco pipeline or con­tinuing on to Greece and Italy.

In mid-July 2007, in response to South Stream"s bypass of Turkey, Ankara reached an agreement with Tehran to receive some 30 bcm per year of Ira­nian and Turkmen natural gas (via Iran) for domes­tic use or for transport further west to Europe. The deal envisages constructing two separate gas pipe­lines across Turkey, as well as developing three gas fields in Iran"s giant South Pars field, and a reported investment of $3.5 billion.[32]  On July 26, Italy, Greece, and Turkey signed a deal to import Caspian and Middle Eastern gas to Italy via Greece and Tur­key. The project will include an enlarged Turkish gas network; a Turkey–Greece link (the IGT pipeline with a capacity of 11.5 bcm per year, to become operational in 2007); and a Greece–Italy link (the IGI pipeline with a capacity of 8 bcm per year, to be completed by the end of 2012).[33]

The U.S. is concerned about increased energy links between Turkey and Iran at a time when Washington is seeking to isolate Iran internationally because of its nuclear program and efforts to desta­bilize Iraq. The U.S. Congress is considering an amendment (H.R. 957) to the Iran Sanctions Act of 1996 to expand and clarify the entities subject to sanctions.[34]  According to the bill, sanctions could be imposed on foreign companies that invest more than $20 million in Iran"s oil and gas sector. This amendment would pit U.S. foreign policy objectives against Europe"s energy needs and put Iran in com­petition with Russian energy exports to Europe. However, increased dependence on Iranian energy brings even greater economic and geopolitical vul­nerabilities and could be detrimental to Europe"s, including Turkey"s, transatlantic alliances.

External Consolidation. The Kremlin is also con­solidating its control of oil and gas supplies through­out Eurasia, particularly by signing long-term exploration and supply agreements with Turkmeni­stan, Uzbekistan, and Kazakhstan to preempt inde­pendent export arrangements with the West. These agreements defeat the EU"s major goals of avoiding strategic dependence and diversifying supply.

Turkmenistan is a good example of this policy. A 2003 agreement set the price for 2003–2006 gas deliveries from Turkmenistan to Russia at $44 per 1,000 cubic meters.[35]  An October 2006 agreement commits all current Turkmen gas production to Russia and raises the price to $100 per 1,000 cubic meters, ensuring Russian control over regional energy flow.[36]

Uzbekistan remains an important source of gas for Russia. In January 2007, a Gazprom subsidiary started exploring and developing several gas depos­its in northwestern Uzbekistan. Russia"s agreement with Uzbekistan gives the subsidiary a five-year exploration license and the exclusive right to export the gas.[37]  President Putin and Uzbek President Islam Karimov have signed an agreement awarding exploration and development rights to Gazprom for 35 years.[38]

Internal Consolidation. Moscow is acting to consolidate Russia"s oil and gas sector in the hands of government-controlled entities. The Kremlin is also pushing major international energy corpora­tions out of the Russian energy sector. Russian Min­ister of Natural Resources Yuri Trutnev announced in February 2005 that Moscow intends to keep Western firms from bidding on mining and drilling licenses for major natural resources.[39]

The Kremlin amalgamated the Yukos oil com­pany into its state-owned flagship after bankrupting the company with inflated tax bills in 2003. In 2005, Yukos chairman Mikhail Khodorkovsky was sentenced to nine years after a 19-month pretrial detention and conviction on six charges, including personal and corporate tax evasion and fraud.[40]

Royal Dutch Shell has been pushed out of a major Russian energy project. In 2006, under pres­sure from the Kremlin for alleged environmental breaches, Shell announced the sale of its majority stake in Sakhalin-2 oil and gas fields off Sakhalin Island to Gazprom.

The last major Russian independent oil com­pany, LUKoil, is gradually coming under the Krem­lin"s control. On March 6, 2007, LUKoil chairman Vagit Alekperov announced a joint venture between LUKoil and Gazpromneft, a Gazprom subsidiary, to develop future oil projects, with Gazpromneft own­ing 51 percent of the venture.[41]

Most recently, BP was evicted from the lucrative Kovytka gas field in eastern Siberia. TNK–BP joint venture was unable to meet the Kremlin"s production quotas because Gazprom refused to develop any export pipelines. After officials threatened to cancel the license and the courts refused to intervene, TNK–BP sold its 62.9 percent stake in Kovytka to Gazprom at a fraction of its market value.[42]

Domestic consolidation of Russia"s oil and gas industry under the Kremlin"s direct ownership or control increases Moscow"s ability to use energy as a foreign policy tool. These major takeovers and evic­tions further limit the opportunities for foreign investment in and technology transfer to the Rus­sian energy sector. They signal the return of statist economic policies and a major departure from mar­ket liberalization.

A Gas OPEC. Most important, Russia is stealth­ily and steadily developing a cartel to control the price and output of natural gas—a gas OPEC. This cartel will include the world"s major gas producers: Argentina, Bolivia, Venezuela, Iran, and Qatar.

During his February 2007 visit to Qatar, Presi­dent Putin called the gas OPEC "an interesting idea."[43]  In Doha, Russia initiated the creation of a high-level group to "research" gas pricing and develop methodologies using gas pricing models. An unnamed "high ranking member of the Russian delegation" told RIA Novosti that "as the gas market undergoes globalization, certainly such an organiza­tion [a gas cartel] will appear and is necessary."[44]

For Europe, dependence on such a cartel would be worse than dependence on OPEC, because Rus­sia has direct national interests with regard to Europe: preventing NATO expansion and deploy­ment of anti–ballistic missile defenses, fostering division between Europe and the United States, and regaining more comprehensive control of the post-Soviet space.

Trends in European Energy Security

In evaluating what this Russian energy strat­egy means for Europe, there are three important considerations.

First, European energy consumption and import dependency are rising. In 2030, the EU is expected to consume 15 percent more energy than it con­sumed in 2000, with consumption stabilizing after 2020.[45]  Europe will generally meet its increased energy needs with natural gas and renewables. Demand for natural gas is projected to grow con­siderably through 2030, increasing to 140 mtoe per year over 2000 levels. Oil will remain the most important fuel, but with minimal projected growth in consumption. After a slight decrease, solid fuels are projected to return almost to the current level by 2030 due to high oil and gas prices and the nuclear phaseout in some EU member states.[46]  (See Chart 3.)

European energy production is declining sharply, particularly in hydrocarbons, solid fuels, and nuclear energy. Between 2000 and 2030, the production of European oil, gas, and solid fuels is expected to decline by 73 percent, 59 percent, and 41 percent, respectively, but production of renewables should more than double. Altogether, Euro­pean production in 2030 will be 25 percent below 2000 levels.[47]

By 2030, because of growing energy demand and declining domestic production, Europe will rely on imports for two-thirds of its energy needs. Dependence on imported oil will remain extremely high, reaching 94 percent in 2030. Dependence on imported gas will rise from about 50 percent today to 84 percent in 2030, and imports of solid fuels are projected to reach 59 percent in 2030.[48]

Second, European energy supply routes remain concentrated. Before 1999, about 95 percent of Russian natural gas exports outside of the former Soviet republics transited Ukrainian territory.[49]  Since then, Russia has initiated a number of projects to diversify gas transmission routes. As of 2006, however, 80 percent of Russia"s gas exports to Europe still passed through Ukraine.[50]

Third, European leaders are partly responsible for growing gas demand. Europe, led by Germany and the United Kingdom, has made a conscious choice to rely on gas as its main new source of energy at a time when domestic supplies are declining. Europe has encouraged the construction of gas-fired plants, feeding the demand for more gas.[51]

Implications for European Energy Security

These developments have dire implications for European energy security.

First, Europe should expect higher prices in the coming decades, especially because its supply is becoming concentrated in Russian hands. Moscow has already demonstrated its willingness to raise oil and gas prices and to use energy as a foreign policy tool, as recent incidents in the Baltic States, Ukraine, Azerbaijan, Belarus, and Georgia have clearly shown.

Second, Europe should expect increasing disrup­tions of its energy supply. The long and intense cold wave in 2006 increased Russian demand for gas and strained Gazprom"s delivery capability.[52]  Another cold wave could knock refineries and pipelines off-line. Such disruptions would impose economic costs and could cost lives.

In the future, because of insufficient production, Russia may be unable to satisfy Europe"s growing demand for gas. Output from Gazprom"s three giant fields in West Siberia, which account for three-quarters of its production, is declining by 6 percent to 7 percent per year, and the output from a gas field brought on-line in 2001 has already peaked.[53]  Gazprom has decided to develop a field on the Yamal peninsula, but it will take years for that field to start producing.

Gazprom has been reluctant to invest in new fields. Many hopes are connected to exploration of the Shtokman gas field, which is over 550 kilome­ters offshore in the Barents Sea and under 300 meters of water.[54]  After many delays, Gazprom reconsidered its decision to "go it alone" and on July 13, 2007, signed a framework agreement with France"s Total for the first phase of Shtokman devel­opment. However, under the agreement, Gazprom retains full ownership rights to the gas through its subsidiary Sevmorneftegaz.[55]

Gazprom"s choice of a partner was politically mo­tivated, and it took a phone conversation between French President Nicolas Sarkozy and Russian Pres­ident Putin to clinch the deal. Total is cash rich but has no experience working in Arctic conditions.[56]  The chances that this joint venture will succeed are unclear. In late October 2007, recognizing that it cannot launch Shtokman even with Total, Gazprom sold another 24 percent of the project to StatoilHy­dro, a Norwegian state-controlled company, which reportedly will pay $800 million for its stake.[57]

Meanwhile, Russia"s own demand for gas is growing by over 2 percent per year. Comparing Russia"s uncertain supply with Europe"s growing demand, a senior European Commission official estimated that the EU"s annual energy needs will increase by 200 million metric tons of gas by 2020, while Russia envisions expanding its gas exports by just 50 million metric tons.[58]  In this scenario, even Russia may be unable to meet European demand.[59]

Policy Implications for the United States

From the American perspective, growing Euro­pean dependence on energy from and infrastructure owned by Russia is a negative geopolitical trend. The Kremlin has demonstrated its readiness to use energy as a political tool. Russia"s assertive Cold War–like posture is a growing concern for Washington.

It is in the U.S. strategic interest to mitigate Europe"s dependence on Russian energy. The Krem­lin will likely use Europe"s dependence to promote its largely anti-American foreign policy agenda. This would significantly limit the maneuvering space available to America"s European allies, forcing them to choose between an affordable and stable energy supply and siding with the U.S. on some key issues.

In general, greater stability, security, and rule of law in energy-exporting states would ensure that oil and gas remain readily available, ample, affordable, and safe. To achieve these goals, the U.S. govern­ment should:

• Work with key European governments to address vulnerabilities that result from over­reliance on Russia. Only a concerted response by European nations can result in the formula­tion and implemention of an effective and realistic policy on energy security vis-à-vis Rus­sia. For example, the European Commission"s Gas Coordination Group could facilitate inter­governmental coordination in natural gas. The U.S. should:
• Support the development of European joint and national natural gas reserves to increase preparedness to weather short-term and medium-term interruptions of the gas supply;
• Encourage European leaders to consider increasing use of liquefied natural gas consumption, which is a more flexible delivery system in terms of geography and infrastructure;
• Encourage Europe to increase its use of nuclear, coal, and renewable energy; and
• Work with European governments to apply anti-monopoly legislation to Russian gov­ernment-owned companies if Moscow con­tinues to deny upstream access to Western companies.
• Support diversification of energy transporta­tion routes in Eurasia, specifically the construc­tion of oil and gas pipelines linking Kazakhstan and/or Turkmenistan to Europe across the Cas­pian Sea; pipelines connecting the Baku–Tbilisi– Ceyhan oil pipeline and the Baku–Erzerum gas pipeline; and a gas pipeline to link Azerbaijan and Central Asian producers to Southern Euro­pean markets via the proposed Nabucco pipe­line. The U.S. should work with European countries and Turkey to prevent increased Euro­pean dependence on Russian and Iranian gas through the South Stream gas pipeline project.
• Continue efforts to bring Russia into full com­pliance with the Energy Charter.Russia has signed the charter but has not ratified it. Ratifica­tion and compliance would increase Moscow"s predictability and transparency in energy mar­kets and attract foreign investments. The U.S. and Europe should discourage Russia from using politically motivated pricing schemes and monopolistic practices.

Conclusion

Many European countries depend heavily on energy imports and are highly vulnerable to global energy shocks. If current trends prevail, the Kremlin could translate its energy monopoly into untenable foreign and security policy influence in Europe to the detriment of European–American relations.

In particular, Russia is seeking recognition of its predominant role in the post-Soviet space and East­ern Europe, as the latest crisis around missile de­fense deployment in Poland and Czech Republic has demonstrated. This will affect the geopolitical issues important to the U.S., such as NATO expan­sion to Ukraine and Georgia, ballistic missile de­fense, Kosovo, and U.S. and European influence in the post-Soviet space.

At a minimum, the U.S. and Europe should work to support new transit lines that bypass Russia, and European countries should cooperate strategically to ensure their longer-term energy security. It is essential that the U.S. and its Euro­pean allies combine their efforts in finding and implementing innovative ways to reduce energy dependence on Russia.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Olena Krychevska, a Heritage Foundation intern, contributed to the production of this paper.

Endnotes:

[1]  Her Majesty"s Stationery Office, "PM speech to the EU Parliament in Strasbourg," October 26, 2005,www.number-10.gov.uk/output/Page8384.asp (October 15, 2007).

[2]  BBC News, "Q&A: EU Energy Plans," March 9, 2007, at http://news.bbc.co.uk/2/hi/europe/4783996.stm (May 31, 2007).

[3]  Ibid.

[4]  Associated Press, "‘Low-Carbon Economy" Proposed for Europe," MSNBC, January 10, 2007, atwww.msnbc.msn.com/id/16560106 (August 27, 2007).

[5]  BP, "BP Statistical Review of World Energy," June 2007, pp. 11–12, 27–28, and 41, atwww.bp.com/productlanding.do?
categoryId=6848&contentId=7033471   (August 20, 2007).

[6]  Ahto Lobjakas, "Russia: EU Maintains Codependent Energy Relationship," Radio Free Europe/Radio Liberty, May 11, 2006, at www.rferl.org/featuresarticle/2006/05/ff605d50
-df88-46a9-9f0f-86b88350d1c1.html  (August 20, 2007).

[7]  BP, "BP Statistical Review of World Energy," pp. 20 and 30.

[8]  Ibid., pp. 6 and 22, and estimates from BP Statistical Review and Oil & Gas Journal, reported in U.S. Department of Energy, Energy Information Administration, "World Proved Reserves of Oil and Natural Gas, Most Recent Estimates," January 9, 2007, at www.eia.doe.gov/emeu/international/reserves.html  (August 20, 2007).

[9]  U.S. Department of Energy, Energy Information Administration, "Russia," Country Analysis Brief, April 2007, p. 4, at www.eia.doe.gov/emeu/cabs/Russia/pdf.pdf   (August 20, 2007).

[10]  Ariel Cohen, "Gas OPEC: A Stealthy Cartel Emerges," Heritage Foundation WebMemo No. 1423, April 12, 2007, at www.heritage.org/Research/EnergyandEnvironment/wm1423.cfm.

[11]  Peter Fedynsky, "Shanghai Cooperation Organization Seeks to Expand Energy and Security Influence," Voice of America, August 16, 2007, at www.voanews.com/english/2007-08-16-voa9.cfm  (August 20, 2007).

[12]  Judy Dempsey, "In Hungary, an Energy Battle with Russian Overtones," International Herald Tribune, August 9, 2007, at www.iht.com/articles/2007/08/09/bloomberg/energy.php  (August 15, 2007).

[13]  BP, "Statistical Review of World Energy," pp. 27 and 30.

[14]  Vladimir Socor, "Gazprom Achieves an Anschluss of Austria," Jamestown Foundation Eurasia Daily Monitor, May 29, 2007, at http://jamestown.org/edm/article.php?
article_id=2372192  (August 26, 2007).

[15]  Vladimir Socor, "Gazprom Takeover in Hungary Looms Behind Possible OMV Takeover," Jamestown Foundation Eurasia Daily Monitor, July 25, 2007, at www.jamestown.org/edm/article.php?article_id=2372317 (August 15, 2007).

[16]  Judy Dempsey, "Poland Supports Purchase of Refinery," International Herald Tribune, October 31, 2006, atwww.iht.com/articles/2006/10/31/business/orlen.php (May 31, 2007).

[17]  RIA Novosti, "PKN Orlen, Mazeikiu Nafta to Complete Deal in Nov.," September 27, 2006, athttp://en.rian.ru/world/20060927/54311008.html (May 31, 2007).

[18]  "Ventspils Nafta Ready to Cooperate with Russia," The Baltic Times, May 2, 2007, atwww.baltictimes.com/news/articles/17809   (May 31, 2007).

[19] Judy Dempsey, "Russia Casts Energy Web over East Europe," International Herald Tribune, October 1, 2004, at www.iht.com/articles/2004/10/01/energy_ed3_.php (August 20, 2007).

[20] Ariel Cohen, "Russia: Kremlin Takeover of the Russian Oil Industry?" Capitalism Magazine, April 21, 2005, at www.capmag.com/article.asp?ID=4196.

[21] Dempsey, "Russia Casts Energy Web over East Europe."

[22] Press release, "Nord Stream: The New Gas Supply Route to Europe," Nord Stream, July 20, 2007, atwww.nord-stream.com/uploads/media/
Nord_Stream_Press_Release_Background_info_eng.pdf (August 21, 2007), and Nord Stream, "Company," atwww.nord-stream.com/company.html?&L=0  (August 21, 2007).

[23] Vladimir Socor, "Slovak Detour Would Defeat Odessa–Brody Oil Transport Project," Jamestown FoundationEurasia Daily Monitor, February 28, 2007, at www.jamestown.org/edm/article.php?article_id=2371953  (August 20, 2007).

[24] "A Bear at the Throat," The Economist, April 12, 2007, atwww.economist.com/world/europe/displaystory.cfm?
story_id=9009041  (August 20, 2007).

[25] RIA Novosti, "Russia, Bulgaria, Greece Sign Balkan Pipeline Deal," March 15, 2007, athttp://en.rian.ru/russia/20070315/62048590.html (August 21, 2007).

[26] Ariel Cohen, "The National Security Consequences of Oil Dependency," Heritage Foundation Lecture No. 1021, May 14, 2007, at www.heritage.org/Research/NationalSecurity/hl1021.cfm.

[27] Judy Dempsey, "Hungary Chooses Gazprom over EU," International Herald Tribune, March 12, 2007, atwww.iht.com/articles/2007/03/12/news/hungary.php (August 15, 2007).

[28] BBC News, "Russia Clinches Gas Pipeline Deal," May 12, 2007, at http://news.bbc.co.uk/2/hi/asia-pacific/6649169.stm  (May 31, 2007).

[29] Sergei Blagov, "Russia Celebrates Its Central Asian Energy Coup," EurasiaNet, May 16, 2007, atwww.eurasianet.org/departments/insight/articles/eav051607.shtml (August 21, 2007).

[30] Vladimir Socor, "South Stream: Gazprom"s New Mega Project," Jamestown Foundation Eurasia Daily Monitor, June 25, 2007, at www.jamestown.org/edm/article.php?article_id=2372249  (August 15, 2007).

[31] Nabucco Gas Pipeline International GmbH, "Project Description," at www.nabucco-pipeline.com/project/project-description-
pipeline-route/index.html  (August 21, 2007).

[32] Breffni O"Rourke, "Turkey/Iran: Gas Deal Marks New Stage in Energy Cooperation," Radio Free Europe/Radio Liberty, July 19, 2007, at www.rferl.org/featuresarticle/2007/07/
4875C449-63C9-4724-B9B9-6AAD1CAF4BEF.html  (August 16, 2007).

[33] AFX News, "Italy, Greece, Turkey Sign Gas Transit Deal; Pipelines to Start by 2012—Edison," Forbes, July 26, 2007, at www.forbes.com/business/feeds/afx/2007/07/26/afx3955664.html  (August 16, 2007).

[34] GovTrack.us, "H.R. 957—110th Congress: To Amend the Iran Sanctions Act of 1996 to Expand and Clarify the Entities Against Which Sanctions May Be Imposed," at www.govtrack.us/congress/bill.xpd?
bill=h110-957&tab=summary  (August 26, 2007).

[35] Vladimir Socor, "Caspian Gas and European Energy Security," Jamestown Foundation Eurasia Daily Monitor, March 10, 2005, at www.jamestown.org/downloads/Transcript_caspian031005.pdf (May 25, 2007).

[36] Asia News, "Turkmenistan Raises Gas Prices by 50 Percent, Russia Pays," September 7, 2006, atwww.asianews.it/index.php?l=en&art=7152  (May 31, 2007).

[37] Vladimir Socor, "Uzbek Gas Output, Export Set to Grow Under Russian Monopoly Control," Jamestown Foundation Eurasia Daily Monitor, February 22, 2007, at http://jamestown.org/edm/article.php?article
_id=2371933  (May 31, 2007).

[38] Socor, "Caspian Gas and European Energy Security."

[39] Cohen, "Russia: Kremlin Takeover of the Russian Oil Industry?"

[40] C. J. Chivers and Erin Arvedlund, "Russian Oil Tycoon Is Convicted and Sentenced to 9 Years in Jail," The New York Times, May 31, 2005, at www.nytimes.com/2005/05/31/international/europe/
31cnd-russia.html  (October 23, 2007).

[41] Cohen, "The National Security Consequences of Oil Dependency."

[42] "Russian Arm Twisting," The Economist, June 22, 2007, atwww.economist.com/world/europe/displaystory.cfm?story_
id=9390152  (August 13, 2007).

[43] Cohen, "Gas OPEC."

[44] Ibid.

[45] European Commission, Directorate-General for Energy and Transport, European Energy and Transport: Trends to 2030— Update 2005, 2006, at http://ec.europa.eu/dgs/energy_transport/figures/trends_2030_
update_2005/energy_transport_trends_2030_update_2005_en.pdf  (August 27, 2007).

[46] Ibid.

[47] Ibid.

[48] Ibid.

[49] German Economic Team in Belarus, "Belarus As a Gas Transit Country," Research Center for the Institute of Privatization and Management, March 2004, at www.ipm.by/pdf/pp304e.pdf  (August 27, 2007).

[50] Daniel Kimmage, "Turkmenistan: The Achilles" Heel of European Energy Security," Radio Free Europe/Radio Liberty, June 30, 2006, at www.rferl.org/featuresarticle/2006/06/d07bcab3
-c72d-4eaa-a1eb-456b146c0859.html  (August 25, 2007).

[51] Jérôme Guillet, "Don"t Blame Gazprom for Europe"s Energy Crunch," Foreign Policy, February 2007, atwww.foreignpolicy.com/story/cms.php?story_id=3696 (May 25, 2007).

[52] Ibid.

[53]  "A Bear at the Throat."

[54]  Gazprom, "Shtokman Project," at www.gazprom.com/eng/articles/article21712.shtml  (August 22, 2007).

[55]  Vladimir Socor, "The Shtokman Gas Deal: An Initial Assessment of Its Implications," Jamestown FoundationEurasia Daily Monitor, July 17, 2007, at http://jamestown.org/edm/article.php?article_id=2372294  (August 15, 2007).

[56]  Marina Pustilnik, "LNG Politics," The Moscow News, July 19, 2007, athttp://mnweekly.ru/business/20070719/55262808.html   (August 15, 2007).

[57]  AFX News, "Oslo Shares Close Higher, Led Up by REC, Yara; Fred Olsen Energy Lower," Forbes, October 26, 2007, at www.forbes.com/markets/feeds/afx/2007/10/26/afx4267300.html  (October 26, 2007).

[58]  Lobjakas, "Russia: EU Maintains Codependent Energy Relationship."

[59]  "A Bear at the Throat."

U.S. Strategy in the Black Sea Region

12-13-2006

U.S. interests in the Black Sea area—energy transit, security, counterterrorism, proliferation of weap­ons of mass destruction (WMD), and the traffic in drugs, weapons, and people—have taken on par­ticular significance since 9/11. The Black Sea basin is a strategic region bordering the Greater Middle East and a key transit route for Caspian oil. The U.S. needs a comprehensive regional policy to protect American interests and security.

The Black Sea Nexus. The Black Sea region is a patchwork of overlapping civilizations and spheres of influence. Bulgaria and Romania are members of NATO and, as of January 1, 2007, members of the European Union (EU). Ukraine is caught between the West and Russia. Georgia leans toward the West but borders on Russia"s soft underbelly. Turkey and Russia vacillate between East and West, pulled in different directions by national interests and national pride. The Black Sea"s six littoral states (Bulgaria, Romania, Ukraine, Russia, Georgia, and Turkey) are tentatively beginning to construct a regional identity just as foreign powers and outside forces are searching for footholds in their vicinity. The region is geopolitically significant precisely because it is a nexus of cultures, international trade (both legal and illicit), ideas, and influences.

Oil and gas from Central Asia and the Middle East move along Black Sea shipping lanes and pipe­lines to Europe and other points west. These same shipping lanes are used for the traffic in narcotics, persons (including terrorists), conventional weap­ons, and WMD components. The Black Sea region can be a launching platform for military, recon­struction, and stabilization operations in Afghani­stan, Iraq, and possibly Iran, as well as for the protection of energy shipping lanes between the Caspian region and Western markets. It is also Europe"s new southeastern border. Thus, both the EU and the United States have strong interests in safeguarding the movement of some goods, pre­venting the movement of others, and maintaining a presence in the Black Sea region.

The U.S. presence currently has the support of Bulgaria and Romania, but U.S. relations with Rus­sia, Turkey, and Ukraine are on shaky ground. Nei­ther Turkey nor Russia supported U.S. operations in Iraq, and relations with both countries have taken a downturn ever since then. Ukraine has adopted a more pro-Russian stance since Prime Minister Viktor Yanukovich took office. Georgia is under severe economic and political pressure from Russia and preoccupied with internal conflicts and is thus ill-equipped to act as a strong U.S. ally. This tangled web of interests and alliances and the recent rapprochement of Russia and Turkey, which has anti-American implications, may hamper U.S. activities in the area.

What the U.S. Should Do. To maintain a pres­ence in the region, the Bush Administration should pursue a realistic strategy to enhance the security and stability of the Black Sea region. Specifically, the U.S. should:

• Coordinate U.S. and EU foreign policy in the region, especially in regard to the European Neighborhood Policy; increase NATO coopera­tion with non-NATO countries through the Partnership for Peace by offering technical and training assistance in security areas; and strengthen bilateral military ties with Ukraine.
• Conduct trilateral military exchanges and con­sultations (Bulgaria–Romania–Turkey) to assuage Turkey"s concerns about losing its dominant posi­tion in the Black Sea basin to the growing influ­ence of the U.S.
• Encourage the littoral states, specifically Bul­garia and Romania, to take the lead in multilat­eral regional organizations and initiatives, such as the Organization of the Black Sea Economic Cooperation, which aim to improve regional security and stability. Where appropriate, the U.S. should request member or observer status.
• Contribute to existing regional security struc­tures as either a participant or an observer. This could include providing crucial technical intel­ligence capabilities, airlift, and other specialty capacities. These structures could also be in­cluded in NATO military and disaster pre­paredness exercises to improve interoperability.
• Strengthen U.S. alliances with Bulgaria and Romania and provide assistance in the military, emergency preparedness, and technological train­ing of Romanian and Bulgarian forces in missions that are relevant to the U.S. presence there.
• Urge Russia to lift sanctions against Georgia and push for renewed multilateral talks over the resolution of Georgia"s "frozen conflicts," using the Organization for Security and Co-operation in Europe and the U.N."s Friends of Georgia Group. The U.S. should also promote replacing Russian/CIS peacekeepers in Abkha­zia and South Ossetia with an international peacekeeping force.
• Expand bilateral trade agreements with the Black Sea states, with special emphasis on investments in infrastructure for the transport of oil and gas from the Caspian region to Europe and in energy security.

Conclusion. Despite the obvious importance of such current foreign policy issues as Iraq, Afghani­stan, Iran, and North Korea, the U.S. would be unwise to concentrate on these concerns to the exclusion of all others. Shoring up alliances and improving relations with states in strategic areas bordering on main theaters of operation, such as the Greater Middle East, is of the utmost impor­tance in developing future geopolitical arrange­ments, enhancing strategic stability, and assuring military egress and resupply.

Given the current state of U.S. relations with Tur­key and Russia, the only way for the U.S. to main­tain and strengthen its footholds in the Black Sea is to develop cooperation across a broad spectrum of issues of common interest and mutual concern. The U.S. needs to learn to tread lightly, offering support where possible and backing off where nec­essary. This is not an impossible balance to achieve. If successful, it could be used as a model for cementing the U.S. presence in other strategic areas, such as Central Asia. It is time for the U.S. to launch a coordinated policy effort in the Black Sea area to gain support for addressing some of the most pressing issues of the decade: the rise of Iran, WMD proliferation, cooperation in the global war on terrorism, and energy security.

‍

Russia is building a strategic new pipeline to Europe that will affect European energy security for years to come. Called the North European Gas Pipe­line (NEGP), it will cross the Baltic Sea, directly con­necting Russia to Germany, and will bypass the Soviet-era, land-based energy transit infrastructure that traverses several former Soviet Bloc countries, including Ukraine, Belarus, and Poland.

Already under construction, the NEGP has attracted both investors seeking large returns and critics protesting Russia’s increasingly powerful energy-transit monopoly. With Europe’s steadily increasing appetite for natural gas, this new direct link will strengthen Russia’s hold over the European gas market and lessen dependence on transit coun­tries, including Ukraine, Belarus, and Poland. Although the pipeline will prove beneficial in guaran­teeing more secure Western European access to Rus­sian natural gas, it also has the potential to increase the dependence of the European Union (EU) on Rus­sia, thereby making Russia even more powerful and, possibly, more assertive in the international arena. This could have insidious consequences in a time of increasing divergence between Russia’s foreign and domestic policies and Western interests and norms.

In order to avoid EU overdependence on Russian natural gas, the U.S. and EU governments should work in concert to:

• Encourage alternative pipeline proposals, such as Nabucco, which would link energy sources in the Caspian region to southern Europe via Turkey;
• Develop alternatives to pipelines for the transit of natural gas, especially shipments of liquefied natural gas (LNG);
• Act in concert with other G-8 members to per­suade Russia to ratify the Energy Charter; and
• Provide financial and political support for intensified research and development of alter­native market-based energy sources.

Europe’s Strategic Energy Dependence

Natural gas is the second-largest source of energy in Western Europe. Most of it is extracted from British, Dutch, Italian, Romanian, German, and Danish fields, with ad­ditional gas imported from Russia, Norway, and Nigeria.[1] Russian gas imports account for 26 percent of EU con­sumption, representing 40 percent of the im­ported gas consumed by households and businesses.[2] In Central and Eastern Europe, Russian gas accounts for 87 percent of total imports and 60 percent of consumption.[3]

Demand for natural gas is expected to rise significantly over the next 15–20 years, coinci­dentally with a steady depletion of reserves in EU countries.[4] Strict EU environmental regula­tions will force EU member states to replace high-emission fossil fuels, such as coal, with cleaner burn­ing energy sources, such as natural gas and nuclear power. Social resistance to nuclear power, especially in Germany, may prevent it from becoming a major energy source there.

Liquefied natural gas would not be constrained by the limited capacity of the natural gas pipelines, but the process of liquefying gas is still expensive, and most natural gas exporters and importers have yet to develop the infrastructure necessary to make LNG shipments cost-effective. In the near term, therefore, EU consumption of piped natural gas is likely to rise, and the EU will look increasingly further afield to Norway, Algeria, and Russia to meet its natural gas needs.[5] In the near to medium term, the importance of Russia’s role appears likely to grow.

Increasing imports from any of these countries would be a costly endeavor requiring massive investments to develop the necessary extraction, production, and transportation infrastructure. Pip­ing gas from Algeria would require undersea pipe­lines, which are far more costly than overland pipelines.[6] Norway’s reserves are limited. The EU is looking to tap other sources of natural gas, such as the Caspian Basin and Central Asia, but these regions, like the Middle East, are characterized by high levels of political instability and are thus less reliable as suppliers. As for LNG imports, they are economically viable only over large distances.

On the other hand, transit infrastructure for natural gas deliveries from Russia to Europe already exists. Russia currently supplies roughly 40 percent of Europe’s imported gas, with higher percentages of Russian gas consumed in Eastern Europe than in Western Europe. (See Table 1.) Projections indicate that this percentage will increase to roughly 60 percent by 2030.[7] Given dwindling reserves and political and logistical restrictions on other potential natural gas suppli­ers, Russia is in an excellent position to capture the lion’s share of the European gas market.

EU officials have voiced increasing concerns over Russia’s reliability as an energy exporter, par­ticularly since the January 2006 Russian–Ukrainian gas dispute, when Russia cut off gas shipments to Ukraine and Ukraine responded by siphoning off gas from Russia that was destined for EU countries. Ukraine, in turn, claimed that Russia owed that gas to Ukraine under the existing contracts. The affair resulted in a temporary mid-winter interruption in the EU gas supply.

As Ukraine is the transit country for most Rus­sian gas exports to Europe, it is essential for EU energy security that Ukraine and Russia maintain stable business relations. Fully 80 percent of Rus­sia’s natural gas exports reaches the EU via Ukraine,[8] with another 20 percent through Belarus.[9] Both of these countries have long, com­plicated political histories with Russia, while Gaz­prom has supplied subsidized gas since the collapse of the Soviet Union. Last year, for exam­ple, Belarus received gas at 20 percent of the aver­age European price.[10] In February 2004, however, Gazprom briefly cut supplies to Belarus, which balked at signing new contracts.[11]

Even before the January 2006 crisis with Ukraine, Russia had long wanted to diminish the influence of transit states in gas shipment to Europe, thereby denying both Ukraine and Belarus considerable transit-fee revenue and eventually assuming owner­ship over gas transit infrastructure. In December 2005, concerned about a repetition of Ukraine’s “Orange Revolution” in Belarus, Russian President Vladimir Putin promised Belarusian ruler Alexander Lukashenko access to cheap gas.[12] This was extremely costly for Russia, both financially and politically, because of Belarus’s uncompetitive econ­omy and Lukashenko’s international pariah status.

Overall, tenuous relationships between Russia and the transit countries have created fear of polit­ical complications between supplier and transit countries, causing another gas shutoff to Western Europe and thereby generating both consumer and supplier support for a new pipeline that will bypass Central and Eastern Europe and link Western Europe directly to Russia.

The North European Gas Pipeline

Since 2003, Russia has begun to cut out the mid­dleman. In February 2003, Russia and Germany pro­posed the idea of a North Baltic pipeline extending over 2,000 miles (700 of them underwater) from Russia to Germany via the Baltic Sea. In January 2004, the Russian government issued an official decree in support of the pipeline’s construction, and several European oil and natural gas concerns have shown interest in the majority-Gazprom project. Construction began on December 9, 2005.[13]

The North European Gas Pipeline (NEGP or Nord Stream) will extend roughly 300 miles over land to Vyborg, Russia, on the Gulf of Finland and from Vyborg under the Baltic Sea to Greifswald in northeast Germany. Based on Russian President Putin’s predictions, the pipeline, with an initial annual capacity of 27.5 billion cubic meters of gas, will become operational in 2010. The NEGP’s capacity is to reach approximately 52 billion cubic centimeters upon completion of a second pipeline in 2013.[14] Gazprom has estimated the cost of con­struction at $4.7 billion.[15]

Nord Stream will supplement existing land-based pipelines, allowing for greater pipeline capacity for Russian gas exports to Europe. This is particularly significant in light of Gazprom’s development of the Shtokman gas field in the Barents Sea, with reserves estimated at 3.7 trillion cubic meters of natural gas, beginning in 2010. Gazprom’s stated intention is to use Nord Stream to transport gas from the Shtokman field to Europe.[16]

The North European Gas Pipeline Company (North Trans Gas) has been registered in Zug, Swit­zerland, to build the pipeline’s submarine section. Former German Chancellor Gerhard Schroeder, who signed the initial agreement with President Putin for construction of NEGP, is now chairman of the NEGP consortium—a fact that caused an out­cry in his home country.[17]

This is not an equal partnership. Gazprom owns 51 percent of North Trans Gas shares, and the Ger­man partners BASF and E.ON each own an addi­tional 24.5 percent.[18] Gazprom has announced that a third partner could obtain a 9 percent stake in the project with favored parties, including Gaz de France and Dutch Gasunie.[19]

The main source of supply for the pipeline will be the Yuzhnorusskoye gas field in the Yamal– Nenets Autonomous District. While this field can­not supply the entire pipeline, Gazprom represen­tatives say that by the time the second stretch of the pipeline has been completed, it will be possi­ble to start bringing in gas supplies from the Yamal, Obsko–Tazovskaya Bay, and Shtokman gas fields.[20]

As the first direct link between the Russian gas transport network and the West European gas net­work, the NEGP will mark a new stage of coopera­tion between Gazprom and the EU energy market.

Pipeline of Concern

As the Baltic pipeline complements the ones through Ukraine and Belarus, the EU will be less concerned about whether the relationship between Russia and its former allies might disrupt Europe’s main source of gas, and this diminished concern may give Russia freer rein in its own back yard. Meanwhile, the increased trade between Russia and Germany may promote increased dependence on Russia, making it easier for Russia to engage in two-tiered pricing schemes, offering gas at a discount to smaller Eastern European countries in exchange for political cooperation.

Natural gas prices vary depending on region and type of gas. In Europe, the price of gas for each individual country or region is the wholesale price minus delivery costs. Since delivery costs for ship­ments to Ukraine are low relative to costs for ship­ments to countries like France that are farther away and have no existing pipeline infrastructure, Ukrai­nians should pay less for Russian gas than do the French. In view of the European pricing formula, the “market price” that Ukrainians pay for Russian gas—roughly $95 per thousand cubic meters—is still low. Larger EU states such as France and Ger­many may therefore be reluctant to speak out against geopolitical concerns about the Nord Stream because they depend on Russia for a large percentage of their gas supplies.

Nord Stream has other drawbacks as well, including a potentially negative ecological impact on the fragile Baltic Sea basin. The Baltic Sea is a unique and sensitive ecosystem, which the Interna­tional Maritime Organization has given the status of PSSA (particularly sensitive sea area).[21] During and after World War II, the Baltic seabed was lit­tered with thousands of tons of ship wreckage and chemical weapons shells containing various types of blister agents and nerve gas, the exact where­abouts of which are still unknown.[22] Pipeline con­struction could damage these corroded chemical weapons containers, with potentially severe envi­ronmental consequences.[23]

The cost of the Baltic pipeline is significantly higher than that of constructing alternative land-based pipelines, such as Yamal–Europe II from Russia to Germany via Poland and Belarus.[24] Even if the Baltic pipeline comes on line in 2010 as scheduled, its initial throughput capacity will be a mere 27.5 billion cubic meters a year, whereas transit capacity for pipelines that run through Ukraine is 132 billion cubic meters a year.[25] While the Baltic pipeline will not have the capac­ity to fully replace existing infrastructure, the motives for its construction are clearly political as well as economic.

Advocacy for Nord Stream

Russia has launched a strong advocacy of Nord Stream. Gazprom chairman Alexei Miller has described the NEGP as “a new export route that will increase Europe’s energy security,” and Prime Minister Mikhail Fradkov has said that “in launch­ing this project we are creating the conditions for energy security in the world.”[26]

Nord Stream will alleviate uncertainty in the European market over the reliability of Russian gas supplies, allowing Russia to export its gas directly, and in greater volumes, to Europe. It will not only eliminate transit fees payable to Ukraine and other East European countries, but also reduce Gaz­prom’s dependence on those countries for export­ing gas, to the economic benefit of both importer and exporter. Moreover, as Russia invests billions in this pipeline, the Kremlin will have strong incen­tives to keep it full—and profitable.

Eliminating the middleman from trade in energy will have other economic and political benefits as well. Since the collapse of the USSR, Russia has continued to sell gas to both Ukraine and Belarus at a steep discount, trading rock-bottom gas prices for their political loyalty. These deals have proved problematic both economically and politically.

In the 2005 Ukrainian presidential elections, Rus­sia backed then-Prime Minister (and current Prime Minister) Viktor Yanukovych, whose falsification of electoral victory precipitated the “Orange Revolu­tion.” Turmoil resulted in prolonged political paraly­sis in Ukraine, as well as deterioration of Russian– Ukrainian relations. To complicate the situation fur­ther, unabashed support for Yanukovych was a source of embarrassment for Russia in the interna­tional community, which by and large decried Yanukovych and his electoral tactics as fraudulent.

Even more damaging to Russia’s international standing has been the Kremlin’s political and eco­nomic support for the Belarusian regime of Alexander Lukashenko, dubbed by Condoleezza Rice “the last true dictator in Europe.”[27] President Lukashenko has long relied on subsidies from Russia in the form of cheap gas, which he then resells to Western Europe at market prices, to maintain both Soviet-era social pro­grams and a base of popular support.

Russia was one of a handful of states, including Iran and Cuba, to recognize Lukashenko’s blatantly undemocratic re-election in the 2006 presidential race as legitimate. This prompted questions regard­ing Russia’s role in the international community, specifically its G-8 presidency. By diminishing eco­nomic and political ties to Lukashenko, Russia could better safeguard its export capacity, cut export costs, and avoid the embarrassment of being taken to task for enabling the continued existence of a Soviet-style dictatorship in Europe. This could prove beneficial to the people of Belarus as well. An end to Russian backing of Lukashenko might well result in the emergence of a genuine opposition-led government that could bring about real reform.

Nord Stream and Western Europe

Germany, Russia, and their project partners believe that Nord Stream will enhance overall EU energy security, which is particularly advanta­geous to Germany because it would make Ger­many the primary distributor of Russian gas in Europe. The pipeline will transport gas from Germany not only to the rest of Western Europe, but also to former transit countries: the Baltics, Poland, and other states of Eastern Europe.[28] But the pipeline could also detract from long-term EU goals, including reducing reliance on hydrocar­bons and enhancing financial stability in the newer EU member states.

Transit fees from gas crossing through Eastern European countries will no longer be factored into the price that EU countries pay for gas, thereby making it cheaper. However, the countries of Cen­tral Europe, including Poland, the Czech Republic, Slovakia, and Hungary,[29] will lose some transit rev­enues that supplement their national incomes and strengthen their economies.[30] For example, in 2005, Ukraine’s annual gas transit volumes were calculated at roughly 115 billion cubic meters of gas, for which it received $1.09 per thousand cubic meters in addition to the 25 billion cubic meters it received as payment.[31]

Central Europe’s Vocal Resistance. Polish President Lech Kaczynski has argued that there is no economic justification for the NEGP.[32] Some in Poland have even compared the proposed pipe­line to the notorious Molotov–Ribbentrop pact between Hitler’s Germany and Stalin’s Soviet Union.[33] However, while the pipeline may be the result of German–Russian cooperation, which makes Poland understandably nervous, it is hardly an act of war comparable to the one that triggered World War II.

Lithuanian Prime Minister Algirdas Brazauskas[34] and a number of Estonian and Latvian politicians have also spoken out against the NEGP. One Latvian spokesperson estimated that constructing another pipeline through the Baltic countries to Germany would have cost 2.2 billion Euros, whereas the undersea Baltic pipeline will be approximately three times as expensive.[35] Former Estonian Prime Minister Juhan Parts has even attempted to invoke a 1982 U.N. convention on sea rights and advocates extending the tiny nation’s ter­ritorial waters to prevent the pipeline’s progress.[36]

German Chancellor Angela Merkel has sought to defuse tensions by promising to create a working group to examine the project that would include Poland. Whatever the outcome of such a working group, however, an enhanced role for Germany and a reduced role for the Baltic countries in gas transit between Russia and the EU, while not desirable, now looks inevitable.

European Addiction or Global Energy Market Integration?

There are advantages for the EU in an increased supply of Russian gas, but there are also potentially negative consequences, such as greater Russian monopolization of Europe’s gas market and lack of energy market diversification. Global energy mar­kets will not benefit from European over-reliance on Russian natural gas. Diversification of supply is essential for market stability, competitive practices and pricing, and breaking up the monopolistic hold that Russia currently has over oil and gas transportation infrastructure between Russia, Europe, and Central Asia.

Furthermore, Moscow has shown itself to be increasingly authoritarian in its domestic politics and increasingly assertive in its foreign policy, openly declaring that Russia will use its energy resources as a foreign policy tool. President Putin has recently made a number of statements calling for the creation of a “gas OPEC,” which would include Iran and Turkmenistan. Such a gas cartel would control the world’s first, second, and fourth largest gas reserves, which together house 73 per­cent of total natural gas reserves,[37] and would have significant influence over the price of natural gas.

Any doubts about Russian monopolistic behav­ior are put to rest by Gazprom’s recent behavior. In February 2006, reports suggested that Gazprom would try to acquire a stake in British gas firm Cen­trica, prompting the British to look for ways to block such a deal.[38] The Kremlin and Gazprom responded to this with threats to reroute oil and gas exports to Asia if the EU were to block Russian acquisition of British gas concerns.[39] As Russian foreign policy continues to diverge from Western norms and values,[40] it is important that EU depen­dence on Russia not obstruct the Europeans’ ability to conduct independent foreign policy while openly criticizing Russian policies.

At the same time, however, Russia needs the EU as an importer as much as the EU needs Russia as an exporter, especially given that not one of Russia’s proposed pipelines to Asia has yet been con­structed. It is therefore possible that this interde­pendence might be used to enhance the EU’s ability to secure greater Russian compliance with the rules and norms of the global energy market.

To date, Russia has proved resistant to ratifying the Energy Charter, which it signed in 1994. The treaty addresses investment in and transit of energy and, if ratified, would require Russia to allow other Energy Charter signatories direct access to its excess pipeline capacity. This would effectively break up Russia’s monopoly on gas pipelines to Europe and might force Russia to price its own gas more competitively in relation to other suppliers.

Recent talks between Russia and the EU pro­duced a communiqué supporting the principles of the treaty; however, Finance Minister Alexei Kudrin has stated that “some of the principles it contains do not suit us.”[41] Despite Russia’s intrac­tability, if EU leaders, with possible U.S. support, were willing to apply firm, consistent pressure on Russia, or even to threaten the Kremlin with dete­rioration of energy-trade relations, Russia might eventually be convinced to ratify the treaty.

To avoid such pressures from the EU and to increase its leverage in world energy markets, Rus­sia has made overtures to Asian as well as European consumers—specifically, to China. However, high pipeline construction costs, uncertain Siberian reserves, the inefficiency of Russia’s monopolistic, state-run natural gas sector, and recent indications that Russian gas production is showing progres­sively slower growth suggest that Russia may not be able to fulfill its supply commitments to both China and the EU. Furthermore, Russia relies on cheap Central Asian gas to provide for its home market while exporting its own gas abroad.

With increasing global competition for Central Asian gas, a number of other export routes from Central Asia have been proposed, including pipe­lines from Kazakhstan, Uzbekistan, and possibly Turkmenistan to China, Pakistan, and even India. Both the U.S. and the EU have spoken in favor of construction of the Nabucco gas pipeline, which will originate in Turkey and feed gas through Bul­garia, Romania, Hungary, and Austria as an alterna­tive to Russian-controlled pipelines. Also under consideration is a pipeline from Kazakhstan, Turk­menistan, or Azerbaijan that would link up with Nabucco, providing the first direct connection between Caspian and Central Asian gas producers and European markets. As export options increase, Central Asian states may prove unwilling to con­tinue selling their gas at a deep discount to Russia if they can get higher prices elsewhere.

No less important is the longer-term consider­ation of the need to reduce overall dependence on fossil fuels. In energy-inefficient Eastern and Cen­tral Europe, drastically increased prices and reduced transit revenues could have unexpected positive results in promoting a combination of energy conservation and more energy-efficient industries. Some Central European countries might expand electricity production from nuclear reac­tors. In Western Europe, however, a false sense of security brought on by a more stable supply of fos­sil fuels might deflect attention away from the urgent need to find new energy-saving technologies and new sources of energy. Although the Baltic pipeline will ease many short-term concerns for both Russia and the EU, in the long term, it could prove to be more of a hindrance than a help.

Policy Implications

For the United States, greater Russian influence over Europe’s oil and gas transportation infrastruc­ture is a negative geopolitical development. Russia has shown increasing resistance to security coopera­tion with the U.S. on vital issues involving Iran and North Korea, is resistant to the promotion of democ­racy in its vicinity, and has demonstrated a growing willingness to use its energy resources to influence other, smaller countries for political purposes.

Furthermore, the U.S. has a strategic interest in minimizing European overdependence on Russian energy, which would limit the EU’s ability to side against Russia on questions of great importance, such as Iranian nuclear proliferation. To avoid a sit­uation in which Europe is increasingly dependent on Russia, the U.S. Departments of State and Energy should therefore:

• Publicly endorse the construction of a gas pipeline from Azerbaijan, Kazakhstan, or Turkmenistan to Southern Europe through Turkey. Such a pipeline, connected to the pro­posed Nabucco pipeline through Bulgaria, Romania, Hungary, and Austria, would bypass Russia and offer an alternative to Russian gas in Europe, helping to break up the Russian near-monopoly on energy transportation infrastruc­ture to Europe. It would also allow Central Asian states, such as Azerbaijan, Kazakhstan, and (in the future) Turkmenistan, to play a more active role in marketing and selling their natural gas without Russian interference and detract from Russia’s ability to exercise political influence in those countries.
• Encourage EU leaders to look to increased LNG consumption as an alternative to perma­nent pipelines. Significantly cheaper than pipeline construction, LNG shipments are not restricted by limited field and pipeline infra­structure and should allow Western Europe to import its natural gas from a wider range of sources, including Norway and Nigeria. Short-term investments in LNG infrastructure will likely yield significant source diversification and long-term political and economic returns.
• Act in concert with EU countries and Japan to encourage Russia to ratify the Energy Char­ter, which would enhance Moscow’s predict­ability and transparency in energy markets. Despite having signed the Energy Charter, which would require it to allow other energy producers access to its extra pipeline capacity, the Russian Duma has refused to ratify the treaty. Given close energy trade ties and the prospect of increased trade volumes between Russia and the EU, EU leaders should pressure Russia to ratify the charter, as they did in the recent summit with Putin in Finland. Being a signatory of the Energy Charter would discour­age Russia from further two-tiered pricing schemes, strategic cutoffs of energy supplies for political reasons, and monopolistic practices. Russia should be persuaded to allow Western firms equal access to its energy reserves.
• Support research and development of mar­ket-based alternative energy sources as the only long-term solution to reducing Western reliance on non-transparent, potentially unsta­ble states for vital hydrocarbon supplies. The U.S. and EU countries should follow the exam­ple of countries like Brazil, which have been successful in reducing dependence on foreign oil by making ethanol (from sugar cane) eco­nomically viable as a source of transportation fuel. This will require not only changes in man­ufacturing regulations and infrastructure, but also reducing or eliminating agricultural tariffs and subsidies that keep the price of sugar cane and corn artificially high.[42]

Conclusion

Western economies cannot immediately achieve greater energy efficiency on a level that will signifi­cantly decrease demand for hydrocarbons. Attaining greater security in access to hydrocarbon deliveries is therefore of the utmost importance in the near-to-medium term. However, it will be a net loss to EU countries if they allow this approach to lull them into a false sense of energy security and bind them­selves too closely to an energy supplier whose actions suggest that its oil and gas are national resources to be used for its own national interests.

The economic benefits that will accrue to Russia and Western Europe from the North European Gas Pipeline will be substantial in the next 10–15 years. They will be partly offset, however, by the loss of revenues to former transit countries and the result­ing increase in Russia’s ability to use its oil and gas assets to project influence into its former sphere of influence. It is a medium-term solution and, if not supplemented by longer-term energy solutions, could eventually impose great political and eco­nomic costs.

It is vital that the EU and the U.S. work together to find and implement innovative methods of reducing energy dependence on a monopolistic Russia. At a minimum, they should work to sup­port new transit lines that bypass Russia and to limit the length of time that the EU spends being over-reliant on Russian gas.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Cen­ter for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Conway Irwin assisted in the preparation of this paper.

[1] Mark Smedley, “What Diverse New Gas Flows Might Get Into Europe,” World Gas Intelligence, January 11, 2006, on Lexis-Nexis.

[2] Jonathan P. Stern, The Future of Russian Gas and Gazprom (Oxford, U.K.: Oxford University Press, 2005), p. 143, Table 3.6, “European Dependence on Russian Gas Supplies, 2003.”

[3] Ibid.

[4] W. Czernie, “Structural Change in the European Gas Industry: Risks and Opportunities,” Worldenergy.org, at www.worldenergy.org/wec-geis/publications/default/tech_papers/17th_congress/1_4_14.asp  (June 2, 2006).

[5] “Analysis: Energy Dependence and Supply in Central and Eastern Europe,” EurActiv.com, May 15, 2006, at www.euractiv.com/en/energy/analysis-energy-
dependence-supply-central-eastern-europe/article-155274  (June 2, 2006).

[6] Ibid.

[7] Jeremy Page and Anthony Browne, “Summit Set for Angry Clash over Energy,” The Times (London), May 25, 2006, at www.timesonline.co.uk/article/0,,5-2196245,00.html  (August 1, 2006).

[8] Theodore George Tsakiris, “The Eurasia Energy Complex,” Defense & Foreign Affairs Strategic Policy, February 2006, on Lexis-Nexis.

[9] German Economic Team in Belarus, “Belarus as a Gas Transit Country,” Research Center for the Institute of Privatization and Management, March 2004, atwww.ipm.by/pdf/pp304e.pdf  (August 1, 2006).

[10] Alexander Kolesnikov, “Belarus Doesn’t Shop Around for Gas,” Kommersant, December 16, 2005, at www.kommersant.com/page.asp?idr=527&id=636019 .

[11] Stern, The Future of Russian Gas and Gazprom, p. 10.

[12] Mark Franchetti, “Putin Blesses Europe’s Last Dictator,” The Sunday Times (London), January 8, 2006, at www.timesonline.co.uk/article/0,,2089-1974862,00.html .

[13] Tsakiris, “The Eurasia Energy Complex.”

[14] Owen Matthews and Anna Nemtsova, “Roiling the Baltic Waters,” MSNBC.com, January 23, 2006, atwww.msnbc.com/id/10854978/site/newsweek/print/1/displaymode/1098/  (February 21, 2006).

[15] “German, Russian Officials Launch Work on Controversial Baltic Pipeline,” Agence France-Presse, December 9, 2005.

[16] Judy Clark and Nina Rach, “Gazprom to Develop Shtokman Alone, Pipe Gas to Europe,”Oil & Gas Journal, October 10, 2006, at www.energybulletin.net/21287.html  (October 16, 2006).

[17] “Germany: Schroeder’s New Gig Causes Trouble at Home,” Stratfor, March 30, 2006, athttp://images.google.com/imgres?imgurl=http://web.stratfor.com/images/europe/art/3_30_negp_747.
jpg& imgrefurl=http://www.stratfor.com/products/premium/read_article.php%3Fid%3D264178&
h=370&w=400&sz=42&hl=en&start=24&tbnid=aYLOrLaC-yvphM:
&tbnh=115&tbnw=124&prev=/images%3Fq%3DNEGP%26start%3D20%26ndsp%
3D20%26svnum%3D10%26hl%3Den%26lr%3D%26sa%3DN (August 3, 2006).

[18] “German, Russian Officials Launch Work on Controversial Baltic Pipeline.”

[19] “Dutch Gasunie ‘Surprised’ to Learn It Is Leading Contenders on Baltic Pipeline Deal Talks w/Gazprom,” Interfax, February 14, 2006, on Lexis-Nexis.

[20] Nina Kulikova, “Trans-Baltic Pipeline Moves Ahead,” Russia Profile.org, November 28, 2005, at www.russiaprofile.org/business/2005/11/28/804.wbp (June 1, 2006).

[21] “The Baltic Sea Designated as a Particularly Sensitive Sea Area,”Keskkonnaministeerium, 2005, at www.envir.ee/66811  (July 2, 2006).

[22] Matthews and Nemtsova, “Roiling the Baltic Waters.”

[23] “Baltic Pipeline Poses Environmental Threat—Estonian Premier,” RIA Novosti, March 11, 2005, at http://en.rian.ru/world/20051103/41987041-print.html (June 1, 2006).

[24] Keith C. Smith, “Current Implications of Russian Energy Policies,” The Action Ukraine Report, January 19, 2006, at http://action-ukraine-report.blogspot.com/2006/01/aur644russian-energy-policies.html (June 5, 2006); “Major Russian Oil and Natural Gas Pipeline Projects,” U.S. Energy Information AdministrationCountry Analysis Brief, January 2005, at www.eia.doe.gov/emeu/cabs/russia_pipelines.pdf(October 16, 2006).

[25] Tsakiris, “The Eurasia Energy Complex.”

[26] “German, Russian Officials Launch Work on Controversial Baltic Pipeline.”

[27] Nick Paton Walsh, “Europe’s ‘Last Dictator’ Defies Calls for Change,” The Guardian, May 6, 2006, at www.guardian.co.uk/russia/article/0,2763,1477717,00.html (June 6, 2006).

[28] Kulikova, “Trans-Baltic Pipeline Moves Ahead.”

[29] “North Central Europe,” U.S. Energy Information Administration Country Analysis Brief, June 2004, at www.eia.doe.gov/emeu/cabs/visegrad.html (August 3, 2006).

[30] Stephen Wagstyl, “The Pull of the West,” Yale Global Online, from The Financial Times, February 22, 2005, at http://yaleglobal.yale.edu/display.article?id=5313.

[31] Mark Davis, Ruslan Piontkivsky, Olga Pindyuk, and Dejan Ostojic, “Ukraine: The Impact of Higher Natural Gas and Oil Prices,” World Bank, December 6, 2005, athttp://siteresources.worldbank.org/INTUKRAINE/Resources/328335-1136408888892/
EnergyPricePolicyNote.pdf  (October 16, 2006).

[32] “We Are Very Vigilant When it Comes to the Polish–German Relationship: Spiegel’s Interview with Poland’s Kaczynski,” Der Spiegel, March 8, 2006, athttp://service.spiegel.de/cache/international/spiegel/0,1518,404675,00.html (June 5, 2006).

[33] Martin Helme, “Berlin–Moscow Gas Pact Easy to Thwart…If Balts Have Guts,” The Brussels Journal, December 21, 2005, at www.brusselsjournal.com/node/590  (July 14, 2006).

[34] “German, Russian Officials Launch Work on Controversial Baltic Pipeline.”

[35] “Baltic Pipeline Poses Environmental Threat—Estonian Premier.”

[36 ]Matthews and Nemtsova, “Roiling the Baltic Waters.”

[37] Sergey Blagov, “Russian Moves Spark ‘Gas OPEC’ Fears,” International Relations and Security Network Security Watch, June 10, 2006, at www.isn.ethz.ch/news/sw/details.cfm?id=16364  (October 16, 2006).

[38] Stefan Wagstyl, “Gazprom Attacks EU Gas Market Plans,” FT.com, April 25, 2006, atwww.ft.com/cms/s/335a18ec-d48a-11da-a357-0000779e2340.html  (October 16, 2006).

[39] Peggy Hollinger, “Gazprom Threat Adds to EU Fears on Supply,” The Financial Times, April 20, 2006, at https://registration.ft.com/registration/barrier?
referer=http://www.euractiv.com/en/energy/record-oil-prices-gazprom-eu-worried/
article-154523&location=http%3A//news.ft.com/cms/s/
1bfa611c-d09c-11da-b160-0000779e2340.html (June 6, 2006).

[40] Dmitri Trenin, “Russia Leaves the West,” Foreign Affairs, Vol. 84, No. 4 (July/August 2006), pp. 87–96.

[41] Stephen Boykewich, “A War of Words on Energy at G8 Talks,” The Moscow Times, June 13, 2006, at www.themoscowtimes.com/stories/2006/06/13/003.html.

[42] Ariel Cohen, Ph.D., “Increasing the Global Transportation Fuel Supply,” Heritage Foundation Executive Memorandum No. 986, October 25, 2005, atwww.heritage.org/Research/EnergyandEnvironment/em986.cfm   (August 2, 2006).

‍

U.S. Policy and the Georgian-Russian Crisis

10-10-2006

Amid great power fretting over North Korea’s nuclear test and continuing Iranian truculence against the West, Russia escalated its confrontation with the neighboring Georgia. Moscow is now using Georgia’s arrest of four alleged Russian intelligence officers two weeks ago as a pretext to escalate its conflicts with Tbilisi. This is a dangerous development for the West, and specifically the United States, which could see its influence in the Caucasus region crumble if Russia is successful in forcing Georgia into its sphere of influence. U.S. policy must walk a fine line of encouraging settlement of the current dispute without becoming a liability through over-involvement.

Georgia may have overplayed its hand in arresting the Russian military intelligence officers, whom it accused of sabotage, and not just expelling them quietly—the normal modus operandi in such cases. In response to the arrests, Moscow recalled its ambassador from Tbilisi, evacuated diplomats and their families, and halted issuing visas to Georgian citizens. The Russian military forces stationed in Georgia are on high alert. Russia cut air and railroad links to Georgia, and blocked money transfers from Georgians working in Russia, an important source of income for many Georgian families.

Bearing the brunt of this invigorated conflict is one-million-strong Georgian Diaspora in Russia. Ethnic Georgians, including children, were loaded onto cargo planes and expelled from Russia. Russia cites their illegal immigration status. Prominent Georgian intellectuals who are Russian citizens are being harassed by the tax police. Georgian businesses in Moscow are being singled out by law enforcement authorities. The handling of this crisis is further damaging Russia’s international standing as a dependable member of the G-8.

Georgian Overkill?

Since Mikheil Saakashvili rose to power in the Rose Revolution of 2003, Russia has warily witnessed anti-Russian statements by Georgian leaders, a relentless push to evacuate Russian military bases (to which Russia had agreed previously), an attempt to join NATO, and opposition to Russian membership in the World Trade Organization. In response, the Putin administration has embargoed Georgia’s key exports into Russia: Borjomi mineral water and wine.

Russia has made little secret of its desire to spark a war in the Caucasus to force regime change in Tbilisi. (See Ariel Cohen, “Preventing a Russian-Georgian Military Confrontation,” Heritage Foundation Webmemo No. 1024, March 31, 2006, at http://www.heritage.org/Research/RussiaandEurasia/

wm1024.cfm.) It may get its wish. In September, South Ossetian separatists, who receive Russian military support, fired on a Georgian helicopter carrying the Georgian Minister of Defense. This provocation, if successful, could have led to renewed hostilities in the small secessionist territory that is a part of Georgia.

Geopolitical Roots

Russia’s regional and global strategic aims explain why Moscow is escalating its conflict with Georgia. First, Russia has attempted before to block NATO enlargement into former Soviet territory. In 1999, Russia fulminated against the Baltic States’ NATO membership. But at that time, Russia was extricating itself from the 1998 economic crisis while a power struggle was afoot in Moscow to succeed President Boris Yeltsin. In part because energy prices were much lower in 1999, Western European countries supported the Baltic States’ NATO bid despite Russian protests. Today, with the West increasingly dependent on Russia’s Gazprom, they are taking Russia’s foreign policy positions much more seriously.

Second, the Kremlin is now buoyed by $250 billion in petro-dollar reserves. These funds can buy a lot of hardware for the Trans-Caucasus Military District and pro-Russian separatists in Abkhazia and South Ossetia.

Third, Russia is uneasy over the Baku-Tbilisi-Ceyhan main export pipeline (MEP), which takes Azeri oil to Mediterranean markets and crosses Georgia but bypasses Russia. Soon the Absheron-Erzurum gas pipeline will come online, bringing Azeri gas to Turkey and Europe, again bypassing Russia. Gazprom fears that this gas pipeline may eventually allow Turkmeni and Kazakhstani gas to circumvent its pipeline network on its way to Europe.

A Balance of Power Shift

If Georgia comes under the Russian sway, neighboring Azerbaijan and Armenia will feel the full weight of the Russian presence. Foreign policy experts in Moscow believe that the Russian government is angry that Azerbaijan has not allocated enough oil patches to Russian companies and has facilitated its oil exports via Turkey instead of Russia. With increased power in the region, Russia will act on these concerns.

Armenian opposition openly seeks a more pro-Western and less pro-Russian policy, pointing out that close ties with Moscow did not improve Armenia’s abysmal living standards and did not bring international recognition of the independence of Nagorno-Karabakh, a breakaway province of Azerbaijan, populated mostly by Armenians.

A pro-Russian Georgia in the Collective Security Treaty Organization of the Commonwealth of Independent States would permit Russia and Iran to dominate Azerbaijan and Armenia, severely limiting U.S. policy options there. Furthermore, such a development would put to rest American ambitions in Central Asia and could cut off strategically important Kazakhstan from western energy markets.

The Kosovo Ripple Effect

Russia has warned repeatedly that it will retaliate severely if Kosovo is granted independence against the will of Serbia, a historic ally, and Russian President Vladimir Putin has called for the imposition of the Kosovo criteria on separatist enclaves in the former Soviet Union, including Transnistria (a part of Moldova), Abkhazia, South Ossetia, and Nagorno-Karabakh. Under this policy, Russia would enforce referenda in these territories and recognize their independence, opening the door to their eventual incorporation in the Russian Federation. This approach would create a dangerous precedent for the Crimea, where the majority of the Russian-speaking population is pro-Russian; Russian-speaking Eastern Ukraine; and the predominantly Slavic Northern Kazakhstan.

Violations and alternations of the current borders of the former Soviet Union could generate severe tensions in Europe and open a Pandora’s box of territorial claims and ethnically based border challenges there and elsewhere, such as in Iraq and Kurdistan.

Conclusion

The United States today is preoccupied with Iraq, Afghanistan, Iran, and North Korea. Russia is a key player in all of these, and its increased cooperation in these disputes would be welcome. The future of U.S.-Russian relations and global security requires that Moscow behave responsibly and constructively. Quickly defusing the Georgian crisis through diplomacy would be a good place to start. Washington should encourage the European powers, the European Union, and Turkey to become more engaged in defusing the Georgian-Russian confrontation. Finally, the U.S. should advise Georgia not to escalate its rhetoric on Russia unnecessarily or needlessly antagonize its large neighbor. After all, a peaceful and prosperous Caucasus is in Russian, Georgian, and American interests.

‍

“The Party has been, and remains, the main organizing and coordinating force capable of leading the people along the path of profound Socialist renewal.…”

—Mikhail Gorbachev

With the fall of the USSR, the Russian post-Soviet elite was demoralized by the collapse of Soviet power and sought a new direction. For a time, ideol­ogy took a back seat to market reforms, competition, and repudiation of government control. However, “men of the state” and “men of force”—known in Russian as “derzhavniki” and “siloviki”—have reversed this trend.

The resurgence of nationalist rhetoric has acceler­ated markedly since the 2000 election of Russian President Vladimir Putin and the rise of oil prices. With Putin’s departure scheduled for 2008, his United Russia party will require more than fond memories of the popular president to maintain the support and trust of the people. It needs a coherent political doctrine. This effort has finally been accomplished.

In February 2006, Vladislav Surkov, Putin’s deputy chief of staff and chief political strategist, delivered an extensive speech at a United Russia political semi­nar.[1] For the first time, he outlined the underlying ideology, goals, and aspirations of the Russian Feder­ation’s largest political party. Surkov’s speech was sub­sequently published in two consecutive issues ofMoskovskie Novosti, a formerly liberal weekly, under the title “The General Line” in direct allusion to the term applied to Soviet Communist Party policy between the 1920s and 1980s. The speech was later widely reprinted elsewhere, and media leaks from the Kremlin indicate that such wide circula­tion amounts to publication of the new official Kremlin doctrine.[2]

Surkov’s speech defines the strategic direction that Putin wants Russia to pursue, the goals to which she should aspire, and how the party can lead the country to achieve those goals. Much of it was reflected in Putin’s State of the Federation speech to both houses of the Duma, Russia’s parlia­ment, on May 10. It combines democratic and mar­ket rhetoric with deliberate actions of power centralization and ideological and economic nationalism bordering on protectionism.

This ideological treatise is a great insight into the Kremlin’s thinking and policy. Recent steps under­taken by the Russian Federation and public state­ments by Russian officials indicate that Russia may be asserting its dominance abroad, especially in the former Soviet area. The speech provides a number of reasons for the United States to reevaluate its policies toward Russia and act on the basis of what is realistic and possible.

Importance of Surkov’s Speech

Surkov’s speech is intended both to outline a social contract between the Russian leadership and the Russian people and to ensure that United Rus­sia continues to enjoy its position as the dominant party in Russian politics. If this social contract is accepted, United Russia will have succeeded in cre­ating an ideological framework for national unity and a road map to national greatness; at the very least, it will have ensured its position as a ruling party until the presidential elections of 2012 or even beyond. This is a greater accomplishment than previous attempts to create a ruling party in post-Communist Russia, such as Russia’s Choice (1993) and Our Home Russia (1996).

The text of the speech and the timing of its deliv­ery reflect Russia’s social, political, and economic trajectory, including aspirations of single-party rule, energy superpower status, and geopolitical conflicts and alliances. All of this is contingent upon United Russia maintaining its status as the only political party in Russia with the means to implement its political agenda.

Democratic Rhetoric vs. Restrictive Reality

On the positive side, Surkov entreats Russians to become more active in politics, to familiarize them­selves with all sides of current debates, and to be part of the solution to Russia’s myriad pressing problems. His refusal to condone expropriation of private property is also hopeful. The development of a propertied class that is encouraged to partici­pate politically may be a decisive factor in the future growth and strengthening of democracy in Russia. The growth of such a class may increase calls for stronger protection of property rights and rule of law as well.

These would be welcome developments, as they not only help to improve the current situation in Russia, but also would enhance the security of for­eign investments in Russia. Unfortunately, how­ever, the current situation indicates that it is the bureaucracy, not the elected political leadership, that calls the shots in Putin’s and Surkov’s Russia.

Also promising are Surkov’s calls for picking up the pace of economic reform and integrating more fully into global markets. Increased openness to trade will likely foster improvements in economic efficiency, management, and transparency, all of which have suffered throughout the post-Commu­nist transition.

These democratic and free-market ideals will benefit Russian society if they are put into practice. However, calls for strengthening democracy coin­cide with legislation restricting representation and participation. Assets continue to be concentrated in the hands of a well-connected few. Simply put, in today’s Russia, democratic rhetoric is contradicted by increasingly centralized political practice.

Single Party Rule: A Democratic Deficit

United Russia was created in December 2001 by combining the pro-Putin Unity and former Prime Minister Yevgeny Primakov’s and Moscow mayor Yuri Luzhkov’s Fatherland–All Russia parties. It was a political construct of the Kremlin: the party of power, meant to occupy the center of Russia’s body politic.

United Russia is now the most powerful political party in the Russian Federation, with an estimated 100,000 members. Its showing in the March 12, 2006, regional and local elections, in which it won 197 out of 359 regional legislative seats, was a clear indicator of its strength.[3] Surkov suggests that, as with Germany’s Christian Democrats and Japan’s Liberal Democratic Party after World War II, United Russia should remain the dominant force in Russian politics for the next 10–15 years, and recent changes in the electoral system may ensure that this will come to pass.

At this point, no opposition group in Russia appears capable of posing any real threat to United Russia’s overwhelming share of popular support in the 2007 parliamentary or 2008 presidential elec­tions. However, the Kremlin is taking steps to rein in potential political challengers, first by abolishing the election of Duma members in “single mandate” electoral districts, opting instead for national party lists. Such a proportional electoral system seriously weakens the relationship between a voter and his elected representative. Deputy Director of the Cen­ter for Political Technologies Boris Makarenko has called this a “further stage in the consolidation of a monolithic system.”[4]

Rodina (Motherland), a leftist nationalist party that many suspect was created by Kremlin officials to siphon off support from the nationalist Liberal Democratic Party of Russia (LDPR) and the Com­munist Party, was barred from participation in the December 2005 Moscow City Duma elections for inciting racial hatred.[5]

The Duma is considering several amendments to electoral law. Ostensibly aimed at strengthening the party system by creating a small number of large parties, these laws, if passed, will rob the opposi­tion of their only means of competing with United Russia: through coalitions.[6] Another legislative proposal would authorize governors, who are Kremlin-appointed, to abrogate mayoral powers. Although so far ignored by the West, such extraor­dinarily broad powers will prove effective in con­solidating the Kremlin’s top-down authority.[7]

If all of the proposed electoral changes come to fruition, governors, mayors, and political parties will all be Kremlin-controlled, ensuring a predict­able outcome in the future parliamentary and pres­idential elections. The Kremlin is consolidating its own power at the expense of opposition forces and raising the possibility that United Russia will dom­inate politics in the Russian Federation for at least the next two electoral cycles (2007–2008 and 2011–2012).

At present, the majority of United Russia’s popu­lar support is derived from the popularity and cha­risma of President Putin, whose approval ratings fluctuate between 65 percent and 75 percent.[8] It is unlikely that the next president will share Mr. Putin’s appeal and popular support. United Russia must therefore replace the personal legitimacy of its leader with a more long-lasting ideological founda­tion to provide legitimacy for future leaders. Creat­ing a sense of unity, pride, and common purpose that is closely linked both to Putin and to United Russia may allow the party to stay in power even with a weak next president.

Strategic Resources

By maintaining control of the executive branch, the judiciary, security services, government-owned companies, and the parliament, United Russia offi­cials will be able to secure control over their share of the profits from nationalized resources[9] and, in many cases, expand the assets that they effectively control. At a recent conference in Moscow, Minister of Economic Development and Trade German Greff cited the acquisition of assets by large state-owned companies as a threat to Russia’s economic health. Minister of Finance Alexei Kudrin echoed this sen­timent, asserting that the state should play a smaller role in Russia’s economy.[10] Economists in Russia, Venezuela, and Bolivia agree that asset holding by the “state” or “people” in reality means beneficiary ownership by specific politicians and senior bureaucrats.

Government officials are reluctant to release their hold on strategic economic sectors because these same officials control and benefit from these assets. Gazprom, Russia’s behemoth state-owned gas firm, is chaired by First Deputy Prime Minister Dmitry Medvedev. Rosneft, the state-owned oil firm that forced a sale of Yugasnknefte­gaz, the production arm of YUKOS, below mar­ket price, is chaired by Igor Sechin, the Kremlin deputy chief of staff. Alexei Kudrin, despite his calls for less government control over the econ­omy, chairs the Russian state diamond monopoly, Alrosa.[11]

The melding of business and politics has created a pressing need by government officials to maintain the status quo at all costs. As is true elsewhere in the world, men whose wealth relies on government control of strategic economic sectors are unlikely to loosen their grasp on those resources, or on the political machinery that controls those resources, for the sake of reform.

Surkov stresses in his speech that the nationaliza­tion of strategic resources is in the interest of distrib­uting wealth among the Russian population. Russian GDP per capita has grown dramatically, from $1,170 in 2000 to $3,400 in 2004. However, income ine­quality in the Russian Federation remains remark­ably high. Energy superpower status certainly benefits Russia as a whole, but it benefits members of the political–bureaucratic–security elite with access to government-controlled resources far more than it benefits others.

Aside from its domestic implications, Russia’s energy superpower status is a means to protect sovereignty and exert influence abroad. Auton­omy is desirable for any state; however, Russia is using zero-sum game analysis and tactics in the global energy markets to promote its economic interests.

Alexei Miller, CEO of Gazprom and Deputy Energy Minster of the Russian Federation, recently threatened that “attempts to limit Gaz­prom’s activities in the European market and politicize questions of gas supply” might induce Russia to shift its export focus to Asia,[12]and these sentiments were echoed by President Putin him­self.[13] Russian leaders were particularly upset about resistance in Europe to selling gas-distribu­tion networks, such as Centrica in the United Kingdom.

Surkov asserts that in the global economy, Russia can either be a spider or a fly—an apt metaphor, as it reveals Russia’s attitude toward competition in global markets, which includes neither compro­mise nor cooperation.

“Enemies of the People”

Russia is to achieve full autonomy as a global geopolitical player by successfully manipulating energy markets. Energy superpower status under the guidance of United Russia is the key to Russia’s future, and anyone who would thwart Russia’s aspirations—oligarchs, opposition groups, terror­ists, foreign powers—is an “enemy.” Surkov seeks to rally popular support by identifying those who seek their own ends and oppose United Russia’s grand strategy as being among these common enemies.

“Oligarchic revanchists” provide a perfect scape­goat for the troubles of the post-Communist period, an ideal backdrop for the emergence of the great leader who creates order out of chaos, and a conve­nient rationale for nationalization of the most lucra­tive sectors of the Russian Federation’s economy. Surkov and others often allege that in the 1990s, oligarchs stole all of Russia’s assets and profited from them, denying ordinary Russians their rightful share of national resources. According to Surkov’s narrative, President Putin (despite being a senior Yeltsin official and designated successor) saved both Russia and its valuable resources from the oli­garchs. In this new age of order and democracy, these greedy individuals are no longer permitted to use Russia’s resources to their own advantage, but must use them instead for the Fatherland and the people.

Despite their alleged heinous crimes, however, oligarchs are deserving of membership in Russia’s elite—provided that their transgressions do not contradict Kremlin policy. Roman Abramovich, former partner of Boris Berezovsky in ownership of Sibneft, the Siberian oil company, is responsi­ble for the expatriation of billions of dollars. Putin however, recently reappointed him gover­nor of Chukotka, a province in the far Northeast of Russia.

“Isolationists,” or nationalist extremists, are a threat to the leadership of the Russian Federation because they are bad for both domestic stability and international perceptions of Russia. Isolating ultra-nationalists is necessary to maintain an image of respectability abroad and the ability to keep order at home, despite alarmingly frequent instances of hate crimes.

However, Russian law enforcement has been remarkably lenient in punishing the crimes of these “enemies of the Russian Federation.” For example:

• In early 2006, a Russian nationalist wielding a knife stabbed nine people in a Moscow syna­gogue. He was sentenced to 13 years in prison, but despite his claims that the attacks were inspired by anti-Semitic Web sites, the charge of inciting interethnic hatred was dropped, much to the surprise and consternation of human rights activists.[14]
• In 2004, a nine-year-old Tajik girl was murdered in a brutal attack by a group of Russian nation­alists whose ringleader was sentenced to five and a half years on a charge of “hooliganism.”[15]
• In 2006, an Armenian teenager was stabbed to death in Moscow by skinheads, apparently on racist grounds.[16] According to an Amnesty International report, in 2005, 31 people were murdered and 382 others were attacked in race-related incidents in Russia.[17]

In addition to racially motivated crime, Russian officials have exhibited an alarming degree of reli­gious intolerance. Young Russian Orthodox Chris­tians, who claimed that the exhibit had offended them, vandalized an exhibition of atheist art at the Sakharov museum. A Moscow court dismissed the case against them.[18] In January 2005, a group of Duma representatives called for the banning of all Jewish organizations in Russia, claiming that these groups incite ethnic hatred and “provoke anti-Semitism.”[19] There have been recent calls for offi­cial Russian Orthodox chaplains in the Russian military and the teaching of Russian Orthodoxy in state schools without any corresponding proposals with respect to other religions.

The Kremlin is doing very little to combat these “oligarchic revanchists” or “isolationist national­ists.” The reason is that these elements, in addi­tion to being useful as political scarecrows and scapegoats, provide justification for new laws to restrict the activities of non-governmental organi­zations (NGOs) that have little to do with political extremism.

As for enemies from outside the Russian Federa­tion, the Kremlin seems similarly ambivalent about the West, which is an invaluable trade partner but which also embodies democratic values and the rule of law. This foreign menace is all the more rea­son to support United Russia’s vision: a plan to ensure that Russia no longer has to bow to Western influence.

Why the West Should Be Concerned

Taken at face value, Surkov’s speech identifies Russia’s goals in both domestic and foreign policy and indicates whom Russia might consider ene­mies and friends. The doctrine also sheds light on a reality that many have been loath to admit: The period of the post-Communist honeymoon is over.

While the United States and the Russian Fed­eration can have common interests and reasons to cooperate, the U.S. must evaluate Russian poli­cies over the past five years. From the perspective of American national interests, these include (among others) developing ties with China and Iran, energy security, non-proliferation, democ­racy, human rights, and the rule of law. Russia is no longer weak and does not rely on Western funds and favor to maintain its place in the global order.

President Putin’s May 10, 2006, State of the Fed­eration address indicates that the Russian leader­ship intends to refashion the state as a capable counterweight to the United States, not only eco­nomically, but demographically and militarily as well. Putin called for women to return to their tra­ditional role of childbearing, and for government subsidies to mothers, in order to reverse the current population decline. He also emphasized the need for drastic improvements in all aspects of Russia’s military, from manpower to better ballistic missile defense, as protection against those that would undermine Russia’s sovereignty. In a not-so-veiled reference to U.S. foreign policy, he stated, “Com­rade wolf knows whom to eat—he eats and does not listen to anyone.”[20]

The goal of United Russia and its president is to make Russia once again an autonomous interna­tional player by returning to the values that made it strong in the past. If United Russia is successful, the U.S. and other Western powers must engage Russia on an entirely new level: as a competitor, not as a junior partner.

Will the Doctrine Work?

The predictive value of the doctrine outlined in Surkov’s speech is contingent on its fulfillment, which in turn relies on United Russia’s performance for the next 10 to 15 years. United Russia must attempt to hold on to hundreds of thousands of its current members once President Putin is no longer at the helm.

Surkov’s speech appeals to a broad range of the Russian population. Its nationalist undertones are tempered by denunciation of ultra-nationalists. Its excoriation of oligarchs is offset by its call for pro­tecting Russian businessmen and creating a new Russian business elite.

As in China, economic growth may provide an antidote against a decline in the party’s popularity. At the moment, Russia is flush with cash, benefit­ing from skyrocketing prices of oil and gas. But energy prices are volatile, and many oil and gas consumers are becoming convinced of the need to diversify supply sources, especially as Russia’s mis­handling of the Ukrainian and Georgian supply controversies contributed to Europe’s mistrust of Moscow. It is possible that a synthetic ideology will not suffice to keep United Russia in power once the Kremlin’s coffers are not so full.

Russia’s economy has seen healthy growth— about 7 percent a year for the past five years—and there is little expectation that oil and gas prices will decline any time soon. However, the high costs of exploration and of oil and gas in Russia’s inhospitable physical and investment climate, as well as stifling government control, make eco­nomic slowdown a real possibility. Although Surkov says quite clearly that reprivatization is not a desirable option, Russia has weak rule of law and a track record of arbitrary changes in and application of its tax codes. Lack of predictability and insufficient protection of investor rights is a strong deterrent to foreign investment, specifi­cally in non–natural resources sectors of the econ­omy. If these sectors do not grow, the Russian economy will be at the mercy of fluctuations in commodity prices.

Instead of privatizing Gazprom, however, Rus­sia has transferred to it a significant part of the oil sector and is using the giant company as an instru­ment of foreign policy. As the government’s appe­tite for spending grows, Russia will likely have to rely on its stabilization fund to finance the govern­ment budget.[21] The Kremlin may be faced with mounting economic difficulties sooner than expected.

How the United States Should Respond

In order to protect not only U.S. interests, but also the sovereignty and territorial integrity of the states of the former Soviet Union, the U.S. should adopt the following measures:

• Recognize that Russia is an autonomous actor no longer willing to play second fiddle to the United States. It is seeking to limit U.S. pres­ence and influence in the areas in which it has the ability to project military and political power. These areas include Central Asia, the Caucasus, Eastern Europe, and the Middle East. The U.S. should promote the principle of territorial integrity in Georgia and Moldova. Overall, it should encourage negotiations and non-military solutions.
• Continue to support diversification of energy transit routes in Eurasia, specifically from Kaza­khstan and/or Turkmenistan across the Cas­pian, to be linked with Europe through the Baku–Tbilisi–Ceyhan oil pipeline and the Baku–Erzerum gas pipeline via Turkey.
• Encourage Russia to sign the Energy Charter, an international treaty on energy production and transportation, which promotes foreign investment in the energy sector through trans­parency and accountability.
• Support free media, the rule of law, and demo­cratic political development in Russia through NGOs. These include both indigenous Russian NGOs and foreign NGOs working in Russia. The Department of State and the National Endowment for Democracy should identify, support, and expose to their peers abroad those young politicians, writers, and media personal­ities who disseminate the values of democracy, tolerance, and human rights and support polit­ical and economic liberty.

Conclusion

Vladislav Surkov’s ideological treatise is a great insight into the Kremlin’s thinking and policy. Recent steps undertaken by the Russian Federation and public statements by Russian officials indicate that Russia is trying to assert its dominance abroad, especially in the former Soviet area.

Surkov’s speech provides a number of reasons for the United States to reevaluate its policies toward Russia on the basis of what is realistic and possible. There may be relatively little that the U.S. can do to affect Russian domestic politics, but America can and should be prepared to support those who seek freedom.

Ariel Cohen, Ph.D., is a Senior Research Fellow in the Douglas and Sarah Allison Center for Foreign Pol­icy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. The author wishes to thank Con­way Irwin for contributing to this paper.

Appendix

The World According to Surkov

Russia’s Historic Legacy

At present, there is no consensus in Russia as to the assessment of events in its past, nor is there any consensus as to which direction it should take in the future. Russia is a European country, but there are differences between the Russian Federation and countries with deep traditions of Western demo­cratic values. “The fundamental values of democ­racy are ingrained in the citizens of the U.S.A., England, France. Wake them up in the middle of the night—they’ll start telling you about human rights and so forth.” These values should take on greater meaning in the daily lives of Russians, and Russians should develop their ability both to act according to these values in their interactions with one another and to triumph over opponents by means of an ideological offensive. “[T]he party, so that it may retain its dominant position in the polit­ical system (and that is our fundamental goal), must more actively master the skills of ideological warfare.”

Nikolay Berdyaev, an important early 20th cen­tury Russian philosopher, said, “It is necessary to strive for a free and fair society. Without freedom there can be no justice. Justice demands freedom for all people.” Berdyaev was a Russian thinker, and this was a Russian thought, unlike the works of Marx or Hegel. Russians should respect their ances­tors and should not pass undue judgment on the Soviet Union, as it is associated with “all our close kin, it is in fact we ourselves.”

There were two great achievements of the Soviet Union. The first was its powerful ideological mes­sage, which spread worldwide and included an understanding of freedom and justice. Soviet power—ideological, military, and even moral— was hugely influential on a global scale. It was even popular among Western intellectuals and contrib­uted to the liberation of colonies. It played a major role in world history, and that is something that Russians should remember.

The other astonishing achievement of the Soviet Union was industrialization. Russians today are profiting from this inheritance, which includes rail­roads, pipelines, factories, and nuclear weapons.

The Soviet Union had its negative side as well. Its repressive, closed Soviet society, “in which results are evaluated by party-dogma rather than pragma­tism, produced an ineffective elite…. Society was not only unjust, it also wasn’t free. It did not address the question of material needs” and “obviously fell behind the new quality of life of the Western coun­tries in satisfying the demands of the people.”

A Time of Crisis

The Soviet Union’s downfall was inevitable. “The Russian people themselves chose this fate—they rejected the socialist model” as inconsistent with their search for freedom and justice. However, the USSR tried to reform, to embrace the democratic values embodied in the Soviet constitution. The constitution of the USSR and its language about democracy made “the Soviet Union, uncondition­ally, the greatest modernization project. It already carried with it the seeds of democracy.” The col­lapse was the result of the Soviet people’s finally holding their country accountable for its promises of democracy, and “the loss of territory, the loss of population, the loss of a huge part of our economy” was the price that Russia paid.

After the downfall, because of disillusionment with the Soviet government, there was widespread belief that “government is evil…and having reduced it to nothing, everything would turn out fine. Of course, this vacuum [of power] was filled, and it was exactly these ambitious and self-serving commercial leaders who placed themselves in the myriad opportunities for power…. [E]ntire minis­tries, regions, parties found themselves under the control of independent financial groups, moreover under direct and literal control.”

The framers of the Soviet constitution did not foresee leadership by commercial interests. The constitution was not written for the purpose of sub­jugating elected officials to people with money. Democracy in the oligarchic period of the 1990s was not rule by many, nor was it rule by a substan­tial number. “You could count these people on your fingers…. [A]s a result, all the foundations of democracy were distorted.… If that was a democ­racy, then I don’t know what democracy is.”

Freedom of speech during this period took on its own special meaning. “[L]eading television net­works became weapons in the hands of famous oli­garchic groups” who used them to gain access to and divide among themselves even more govern­ment assets. Although privatization in and of itself is a good thing, it was carried out by means of awk­ward and confusing schemes, such as rigged oil-for-food auctions.

“In the federal system chaos ruled.” Centrifugal forces threatened Russia’s territorial integrity in the 1990s, especially rebellion in Chechnya and the inability of disparate regions to agree on a federal budget. In the midst of these centrifugal forces, Russia “was on the verge of losing its sovereignty.”

Russia’s Democratic Development

“If we want our society to be democratic, to pos­sess sovereignty and be an actor in world politics, we must develop our democracy, and here fundamental human rights are part of the strengthening the struc­ture of civil society. I see the [United Russia] party first of all as an instrument of civil society, as an instrument of societal participation in political life and in power…a self-regulating and non-commercial organization of a completely different kind…an insti­tute of civil society, a self-organization of citizens.”

Regarding changes in the political system in Rus­sia, such as the move to proportional representa­tion in the parliament, a proportional system is more democratic, as it will require a greater num­ber of votes for United Russia to have a majority in parliament: “more votes than all other electoral lists combined.” This is a means to strengthening the opposition and the party system in general.

As for presidential appointment of governors, and the oft-repeated question of how this helps to win the war on terrorism, it helps to avoid the chaos of the 1990s, in which there were too many parties, leading to the atomization of society. The goal of these changes is to “benefit society, strengthen its foundations.”

Among the political reforms of the past few years is the creation of the Public Chamber: “a new organ for the realization and development of opportunities for cooperation between government structures and societal organizations.” In effect, the Public Chamber is intended as an intermediary between the Kremlin and non-governmental organizations.

But democracy has one great enemy: corruption. It also has a downside: poverty. The government of the Russian Federation has yet to prove its effec­tiveness in providing a social safety net and seeing that wages are paid; for the “stable development of free society, free economics demands fairer distri­bution of GDP.”

The Path to Greatness: Obstacles and Opportunities

The fundamental threats to Russian sovereignty are international terrorism, military conflict, lack of economic competitiveness, and “soft” takeovers by “orange technologies [U.S.- and Western-sup­ported opposition movements] in a time of decreased national immunity to foreign influence.”

Although military conflicts are not a current threat, anything can happen, and the army, navy, and nuclear weapons are the “foundations of [Rus­sia’s] national sovereignty.” Russia’s economic growth, though impressive, started from a very low level. Structural reform has dragged out for far too long, and this will eventually take its toll on growth. Other problems include enormous govern­ment expenditures, budgetary problems, and lack of development.

The liberal idea that with full liberalization, all of these problems will right themselves is erroneous. Russian society must “work out a realistic model of further development. President Putin himself already outlined this model, although we find our­selves at the beginning of the road. We must use our competitive advantage and develop it.”

Energy Superpower

Russia should be an energy superpower. The energy industry is the state’s main enterprise and brings in the lion’s share of Russia’s GDP. Becoming an energy superpower requires technological improvements in the fuel-energy complex; other­wise, Russia relegates itself to the role of exporter of raw materials, at which point “we become spetsnaz, guarding their [the West’s] pipelines.” Russia already has the resources—research organizations, people, and specialists—with which to achieve technological advances in its energy sector.

As regards Russia’s strategic industries, “national is not necessarily governmental. But the fuel-energy complex, strategic communications, the financial system, and defense must be chiefly Rus­sian,” while other industries must open themselves to foreign investment.

It is necessary for Russia to control certain sec­tors in order to carve out a place in the global hier­archy. “Only the direct participation of Russian companies in the creation of global information links will be able to guarantee Russia a place in polite society. Our sovereignty and who we are in the world’s spider web [the Russian term for the Internet]—spiders or flies—depends on this.”

Another threat to Russia’s sovereignty is “soft invasions…. [T]hey blur values, declare the gov­ernment ineffective, provoke internal conflicts. ‘Orange technology’ shows this very clearly.” There is only one way to prevent a “soft invasion” or “color revolution,” and that is by creating a “nation­ally-oriented leading layer of society.”

It is also vital that Russia not give up its sovereign interests for the interests of others. Russia must par­ticipate in the global economy’s multinational corpo­rations: “multinational, not trans-, supra-, or just national. The economic future is not in the disap­pearance of great nations, but in their cooperation.”

There are problems with Russia’s business elite: namely, that many Russian businessmen take their families and assets offshore. “It is not important that he have offshore accounts, let him have them. But mentally he does not live here, in Russia, and such people will not help Russia, and they will also not take care of Russia.” Russia’s future relies on transformation of the Russian business elite into a national bourgeoisie.

Any talk of contradictions between business and government is a “delusion. Business is in contradic­tion with society, because a government official takes his cues from society.” Disavowing a populist position calling for expropriation of the assets of the rich, Russia must protect its business class, who in return must “pay taxes and respect traditions and morals.” The other element of a leading class of society is an effective bureaucracy. “The bureau­cracy must make a transition from quasi-Soviet, quasi-competent, accustomed to defeat, to a com­petitive, competent community of civil servants, because it is here that we lose in relation to the cor­poratism of other governments.”

Russia’s educational system is “not bad, but we must develop it, reorient it, and very important is that it produce a national elite.” Education is “the creation of a nation, the organization of life and the culture of the nation.”

Russia’s Enemies

Russia’s enemies are those who demand that Russia take a step back and those who demand that Russia take two steps back.

The first group are “oligarchic revanchists”— those who profited from the chaos of the Yeltsin era and are nostalgic for those times. “Whereas before­hand they influenced decisions, now, to be honest, they exercise no special influence. People have many motives for turning back the clock. There are potential leaders of this school of thought. And for­eign sponsors. Unconditionally, we cannot have a restoration of the oligarchic regime because that is a road to nowhere…leading to a great loss of sover­eignty and democracy…. But the potential danger of their return exists, we shouldn’t dismiss them.”

The second group—those who would take two steps back—are “isolationists.” They call themselves “patriots,” but one should not sully the word by using it to describe them. They are neo-Nazis. “The difficulty of establishing democracy in our country, the double standards of Western politicians stimu­late disappointment in democratic values. Secret CIA prisons in Europe, illegal use of force in Iraq, ‘orange’ revolutions in neighboring countries—these hardly contribute to the popularity of democratic ideas.” Analysis of this new “enemy list” follows.

The Role of United Russia

“United Russia’s goal is not just to win in 2007, but to think about what everyone should be doing to guarantee the domination of the party for the next 10–15 years” in order to prevent these enemy political forces from knocking Russia off its current political path.

People should engage in political debate; if you do not discuss among yourselves, how will you convince others? Forget about right and left. The party is for people of all stripes—left, right, sol­diers, teachers, businessmen. “All who aren’t against us are for us,” and efforts should be made to form coalitions, even with opposition parties.

Political discussions can be used to develop new approaches for achieving the national project. In order to educate themselves, party supporters should “study the ideological documents of the president and the party.”

[1]For a detailed summary of Surkov’s speech, see the Appendix.

[2]Vladislav Surkov, “General’naya Liniya,” Moskovskie Novosti, No. 7 (1324), March 3–9, 2006, pp. 10–11; Vladislav Surkov, “General’naya Liniya,” Moskovskie Novosti, No. 8 (1325), March 10–16, 2004, pp. 10–11.

[3]Marina Mokhovets, “The March 12 Triumph: United Russia Is Today’s CPSU,” WPS Media Monitoring Agency, March 17, 2006, at http://www.wps.ru/en/index.html (May 11, 2006).

[4]Aleksei Titkov, “Proposals for Transition to a Proportional Electoral System and the Prospects for Multi-partisanship in Russia,” Carnegie Moscow Center, May 24, 2004, athttp://www.carnegie.ru/en/pubs/media/70524.htm (May 1, 2006).

[5]For example, Rodina leader Dmitry Rogozin has appeared in a television spot calling dark-skinned migrants from the Cau­casus and Central Asia “trash” and suggesting that the streets of Moscow should be swept of such “trash.” Rodina was expected to make a strong showing in the elections, and analysts suggest that the real reason for its exclusion was to ensure electoral victory for United Russia. See Claire Bigg, “Russia: Nationalist Party Barred from Moscow Election,” Radio Free Europe/Radio Liberty, November 28, 2005, athttp://www.rferl.org/featuresarticle/2005/11/b058b58d-
c196-4cb1-b0f8-6db948f452c7.html (May 11, 2006).

[6]“Duma Set to Toughen Election Laws,” Kommersant, April 11, 2006, athttp://www.kommersant.com/page.asp?idr=1&id=665355 (May 11, 2006).

[7]Francesca Mereu, “Mayors Could Lose Their Powers,” Moscow Times, April 5, 2006, athttp://www.themoscowtimes.com/stories
/2006/04/05/002.html.

[8]Yuri Levada Analytical Center, “Putin Approval Stands at 72% in Russia,” Angus Reid Global Scan: Polls and Research, April 14, 2006, at http://www.angus-reid.com/polls/index.cfm/fuseaction
/viewItem/itemID/11551.

[9]Natalya Olenich, “The Laws of Attractiveness,” Gazeta.ru, March 13, 2006, athttp://toolkit.dialog.com/intranet/cgi/present?STYLE=739318018&PRESENT=DB=985,AN=222750
611,FM=9,SEARCH=MD.GenericSearch (May 11, 2006).

[10]Gleb Bryanski, “Ministers Call State’s Asset Grab a Threat,” The Moscow Times, April 5, 2006, at http://www.themoscowtimes.com/stories/2006/04/05/043.html.

[11]Ibid.

[12]Peggy Hollinger, “Gazprom Threat Adds to EU Fears on Supply,” Financial Times, April 20, 2006, at https://registration.ft.com/reg­istration/barrier?referer=http://www.google.com/search?sourceid=navclient&ie=UTF-8&rls=GGLG,GGLG:2005-40,GGLG:en&q=hollinger+threat&location=http%3A//news.ft.com/cms/s/1bfa611c-d09c-11da-b160-0000779e2340.html (May 11, 2006).

[13]Guy Chazan, “Putin Uses Asia in Power Play on EU,” The Wall Street Journal, April 27, 2006, at http://online.wsj.com/article/SB11460
7528829736665-search.htmlKEYWORDS=Putin+Europe+gas&
COLLECTION=wsjie/6month (May 11, 2006).

[14]“Moscow Synagogue Attacker Appeals Sentence on Mental Health Grounds,” Israeli Insider.com, April 4, 2006, at http://web.israelinsider.com/Articles/Briefs/8190.htm (May 11, 2006).

[15]Claire Bigg, “Russia: Sentences in Tajik Girl’s Slaying Spark Public Outcry,” Radio Free Europe/Radio Liberty, March 31, 2006, athttp://www.rferl.org/featuresarticle/2006/03/474fe30c-
5ee2-4543-9401-f8b29f08cdbd.html (May 11, 2006).

[16]“Moscow Police Arrest Teenager in Connection with Fatal Stabbing of Armenian Student,”PRAVDA.Ru, April 24, 2006, at http://english.pravda.ru/news/hotspots/24-04-2006/79470-
Armenian-0 (May 30, 2006); see also Nick Paton Walsh, “Armenian Student Killed in Moscow Race Attack,” The Guardian, April 24, 2006, athttp://www.guardian.co.uk/russia/article/0,,1759814,00.html (May 26, 2006).

[17]“Human Rights Group Raps Russia for Tide of Racial Violence,” The Wall Street Journal, May 5, 2006, at http://online.wsj.com/article/SB114678700255544348
-search.htmlKEYWORDS=amnesty+international+
russia&COLLECTION=wsjie/6month (May 11, 2006).

[18]Lera Arsenina, “Secular Court Supports Religious Zealots,” Gazeta.ru, August 12, 2003, at http://www.gazeta.ru/2003/08/12/Secularcourt.shtml (May 11, 2006).

[19]Steve Gutterman, “Russian Lawmakers Target Jewish Groups,” Associated Press, January 25, 2005, at http://www.boston.com/news/world/europe/articles/2005/
01/25/russian_lawmakers_target_jewish_groups?mode=PF (May 25, 2006).

[20]Anatoly Medetsky, “Comrade Wolf Eats Without Listening,” The Moscow Times, May 11, 2006, at http://www.themoscowtimes.com/stories/2006/05/11/003.html.

[21]Rudiger Ahrend and William Tompson, “Russia’s Economy: Keeping Up the Good Times,” OECD Observer, October 2005, athttp://www.oecdobserver.org/news/fullstory.php/aid/1658/
Russia’s_economy_:_Keeping_up_the_good_times.html
(May 11, 2006).

On March 26, Ukraine’s voters elected 450 members to the Verkhovna Rada, Ukraine’s parliament, from an array of 45 parties and blocs. Charles Tannock, a British Member of the European Parliament (MEP), who oversaw the Parliament’s election observers, said Ukraine had passed an important test of democracy in an “exemplary” fashion. Now the difficult task of forming a ruling coalition must begin. No matter who is the next prime minister, Washington should continue to support liberalization in Ukraine and the country’s membership in the World Trade Organization and NATO.

The Emerging Coalition

The parliament now has one month from the publication of final results to assemble, two months to form a majority, and three months to nominate a cabinet.

In the newly elected Rada, the Party of Regions led by the pro-Moscow former Prime Minister Victor Yanukovich holds 186 seats; the Yulia Tymoshenko Bloc, 129; the Our Ukraine Bloc (the party of President Viktor Yushchenko now led by Prime Minister Yuri Yekhanurov), 81; the Socialist Party of Ukraine, 33; and the Communist Party of Ukraine, 21.

Together with Socialists, Our Ukraine and the Yulia Tymoshenko Bloc have enough seats to relegate Yanukovich’s Regions Party to the opposition; however, it remains unclear whether Yushchenko and Tymoshenko will be able to overcome personal animosity and forge a coalition.

Tymoshenko, formerly President Yushchenko’s ally and prime minister, has pushed publicly for a reunification of the Orange Coalition. President Yushchenko appears willing. Yushchenko may find the idea disagreeable, but it may be the only way for him to preserve his support in western Ukraine.

Tymoshenko said she is confident that “a democratic coalition will be born as we have a common vision for Ukraine’s future and for the future coalition.” That vision includes political and judicial reforms, membership in the World Trade Organization (WTO), and fighting corruption. While she would likely strengthen relations with Euro-Atlantic organizations, Tymoshenko would almost certainly complicate Ukraine’s relations with Moscow. She has pledged to annul Ukraine’s controversial gas contract with Gazprom, signed in January of this year. ?he contract grants exclusive management of Russia-Ukraine gas sales to a non-transparent “RosUkrEnergo” company.

Yushchenko and Tymoshenko do have their ideological differences. Yushchenko is a former central banker committed to liberal economic reform who has pursued a strategic course toward integration with Europe and stable relations with Russia and all of Ukraine’s neighbors. Tymoshenko is a populist who seeks to increase welfare spending and attack those businessmen who profited illicitly from the rule of former president Leonid Kuchma.

The Russian Connection

Yanukovich is expected to lead the biggest parliamentary faction and will likely play a key role in shaping Ukrainian politics—although the Orange Coalition, if revived, could keep him at bay. He has the support of the industrial magnates of eastern Ukraine and calls for closer ties with Moscow and to an end to Kiev’s bid to join NATO. Still, Yanukovich does support European Union membership for Ukraine, but this is unlikely in the near future.

Although Moscow appeared calm during Ukraine’s parliamentary-election campaign, while supporting Yanukovich, Russian President Vladimir Putin called for cooperation with Ukraine and qualified the election as a reflection of Ukrainians’ support for good relations with Russia.

According to polls conducted by the Democratic Initiatives’ Fund and the Social Monitoring Center 42 percent of Ukrainians prefer closer ties to Russia, while only a quarter support NATO membership.

It will take weeks of negotiation before the Orange Revolution parties divide up governmental posts. Hopefully, the next Ukrainian government will not be characterized by the murky practices of the Kuchma Administration or the squabbling of the first year of Yushchenko’s rule. Regardless of the color of the ruling coalition, it will face popular pressure to push through economic reform to boost growth and raise living standards.

Recommendations

The U.S. praised Ukraine’s parliamentary elections even though they were a setback for Yushchenko’s party. “The Ukrainian people have shown the world that they are committed to important ideals of economic freedom and democratic progress and open trade,” said White House spokesman Scott McClellan. “That lays the groundwork for a promising future.” The EU also expressed satisfaction with the election process and proclaimed its support for Ukraine’s ambition to continue working towards EU accession.

Now the difficult task of putting together a functioning cabinet begins. In the aftermath of the elections, it matters less who is going to be the prime minister than what policies the prime minister and his cabinet will execute. To aid Ukraine’s painful post-Soviet transition, the Bush Administration should:

• Support free market economic policies, transparency, and the rule of law. The new cabinet must learn from the mistakes of the first year of the Yushchenko Administration and implement much-needed economic and administrative reforms, such as focusing on inflation. It is important that Ukrainian voters retain their trust in democratic government. Improving the rule of law and fighting corruption will be paramount tasks.
• Boost Ukraine’s integration into global and Euro-Atlantic structures. Specific targets should include accession to the WTO, a plan for an associate membership in the European Union, and closer cooperation with NATO. While the Ukrainian electorate favors close ties with Russia, Ukraine’s future and its economic interests lie primarily in the West.

Yushchenko’s third cabinet must be more efficient, coherent, and transparent than its predecessors. Otherwise, the Ukrainian electorate could sour on the ideals of the Orange Revolution for years to come. It is not too late to restore the confidence that led Ukraine towards real democracy.

‍

Preventing a Russian-Georgian Military Confrontation

04-30-2006

The pending appeal of Eduard Kokoity, leader of the secessionist territory of South Ossetia, to the Russian Federation’s Constitutional Court to allow his territory to join Mother Russia could trigger destabilization in the Caucasus, sparking a Russian-Georgian military confrontation and unpredictable consequences for the region and the world. The tasks ahead for Georgia’s leaders are perilous, and they need as much assistance as Washington and other Western allies are able to offer.

Russian-Georgian relations have deteriorated to the point that some Kremlin officials are seriously weighing a military operation, which they hope will hand Georgia a military defeat and topple President Mikheil Saakashivili.

“It’s springtime—a time to start a war with Georgia,” said ? veteran foreign policy adviser who often speaks informally for the Kremlin. He mentioned Ossetia (and not secessionist Abkhazia) as the potential flashpoint.

Last week, a prominent Duma member from Vladimir Zhirinovsky’s Liberal Democratic Party concurred that a February statement by Kremlin political strategist Gleb Pavlovsky about a Saakashvili assassination was more than boasting—it was a warning.

Georgians are persistently irritating Russia. The have successfully negotiated the withdrawal of Russian military bases and are applying to join NATO. They threaten to raise objections to Russia’s membership in the World Trade Organization. And Saakashvili has asked UN Secretary-General Kofi Annan to “internationalize” peacekeeping operations in Abkhazia and Ossetia, an idea Moscow so far rejects.

Christian Ossetians, say the Russians, are Russian citizens and want to join their brethren in North Ossetia, a part of the Russian Federation. “Saakashvili is out of control, and needs to be brought to heel,” said the Kremlin’s informal spokesman. “If Georgians keep quiet and behave, we may even tolerate their joining NATO, but if they are loud, we’ll take measures.”

However, other Moscow insiders note that this rhetoric parallels invective directed against the previous Georgian president, Eduard Shevardnadze. “Russia needs to realize that it has a problem with Georgia, not with Saakashvili or Shevardnadze,” said the editor of a leading foreign policy magazine who spoke on condition of anonymity.

If Kokoity’s appeal to the Russian Constitutional Court, not known for its independence from the executive branch, is accepted and a referendum ?n formal secession and then accession  to Russia follows, Georgia might take military measures to prevent its disintegration. But such steps, Moscow hopes, would trigger a massive Ossetian response, supported by “volunteers” from the North Caucasus and beyond.

In addition to Ossetians, some also mention Ramzan Kadyrov’s Chechens. “We armed Ramzan, who now controls between five and seven thousand bayonets,” one Russian expert said. “He is eager to go to Georgia and fight—all the way to Tbilisi. He is smelling loot, and Moscow is very uneasy about his de facto pro-independence policies.”

Georgian officials now visiting Washington to coordinate Georgia’s NATO application acknowledge that Russia, upset with Tbilisi’s push to receive a NATO Membership Action Plan in the fall, is planning a “provocation.” “Russia is focused on [the] NATO issue in a negative way, which makes her more aggressive,” said Giorgi Manjgaladze, the Georgian Deputy Foreign Minister who is managing his country’s NATO accession.

However, Georgia does not desire to be dragged into a military conflict. “We will protest by diplomatic means but will not take military steps if a referendum or other provocation in South Ossetia takes place,” said Nika Rurua, Deputy Chairman of the Defense and Security Committee of the Parliament.

All members of the delegation to Washington, including Mamuka Kudava, First Deputy Minister of Defense, agree that their country is a target of a Russian “black PR campaign.” However, the Georgian delegation followed the advice of Ambassador Juri Luik, Estonian envoy to Washington, to ignore Russian threats—just as the Baltic states did in the 1990s.

But there is a fundamental difference between the Baltic accession in 1999 and Georgia’s today. First, in 1999, Russia was digging itself out from under the rubble of the 1998 economic crisis and was still adrift in the post-Yeltsin transition. Moscow had not yet made taunting America its foreign policy priority, despite efforts by then-foreign minister and prime minister Yevgeny Primakov.

Second, the Kremlin was not sitting on $200 billion in extra cash, as it is now. Today, as always, governments and bureaucracies do things not only because they need to but because they can.

Third, while Russia is still uneasy over the Baku-Tbilisi-Ceyhan main export pipeline (MEP), Gazprom is livid over the forthcoming Baku-Erzurum gas pipeline, which may allow Turkmenistan and even Kazakhstan to export gas to Ukraine and Europe, bypassing Gazprom’s pipeline network.

Finally, the Baltic candidates to NATO had strong and vociferous supporters in Poland, Hungary, and other Central European countries, as well as from powerful Central European natives living in the U.S. Georgia lacks all of these.

Russia today is determined to prevent Georgia and the Ukraine from joining NATO. The Russian military feels that it is losing face by being pushed out of its former Soviet dependencies—first from its Georgian military bases, then from Ossetia and Abkhazia, and eventually from the dachas and sanatoria along the Black Sea coast. Military leaders may even hope for promotions, decorations, and more money if the next Caucasus war erupts.

Spring does not bring political sunshine to the Caucasus this year. Georgia will need the political wisdom and support of friends in Washington and elsewhere as it negotiates the latest Ossetian crisis and the larger political minefield of the Caucasus.

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Flawed Presidential Elections in Belarus: How the West Should Respond

04-16-2006

On March 19, Belarus, the last dictatorship in Europe, will hold presidential elections. These elections occur in an atmosphere of political repression, and in all likelihood, President Aleksander Lukashenko will win an easy victory, thanks to thuggish tactics, a crooked electoral system, and a large slush fund courtesy of Russia. With Belarus’s terrible human rights record and its intimate relations with other rogue regimes, including Iran, Syria, and Saddam Hussein’s Iraq, the West cannot be complacent. The United States and the European Union should take steps to strengthen the Belarusian opposition and prod the Lukashenko regime to change course.

The country suffers from President Aleksander Lukashenko’s cult of personality and his 12 years of heavy-handed rule. Lukashenko took office in 1994 and extended his term two years later by way of an illegitimate constitutional amendment. A rigged “referendum” in 2004 abolished presidential term limits. In 2006, Lukashenko criminalized “disseminating lies” about Belarus abroad—that is, criticizing his regime and making jokes about him.

Travel in and out of the country is restricted, unexplained arrests and kangaroo courts substitute for rule of law, and citizens have little freedom of speech. Political power is concentrated in Lukashenko’s hands. Lukashenko also controls the country’s finances, circumventing parliament and his cabinet. He has even admitted to the existence of a “presidential reserve fund” containing over $1 billion.

Belarus’s relationship with Russia is key to the Lukashenko regime. Russia sells gas to Belarus at a steep discount—$46.68 per thousand cubic meters (tcm)—which Belarus then resells to Europe at or just below market rates of about $250/tcm. All proceeds go to Lukashenko’s presidential fund. These proceeds fund an extensive social safety net, assuring Lukashenko’s reelection, while keeping the population at subsistence level.

A Rogue State

Lukashenko’s friendly relations with rogue regimes, particularly his willingness to sell arms to Syria, Iran, and (until March 2003) Saddam Hussein’s Iraq, are a source of unease in the West. Belarusian exports to Iran have included tank parts, conventional weapons, and Soviet-trained Belarusian scientists to work with Iranians on uranium enrichment and the Shahab missile system. The two countries have pledged mutual support in the face of international criticism. Their close cooperation could blunt the effectiveness of sanctions on either country.

Stolen Elections

In the run-up to presidential elections, human rights abuses and political abuses have run rampant. Lukashenko has already slashed the time candidates had to fulfill eligibility requirements, criminalized criticism of his regime, and banned demonstrations. Secret police have targeted opposition groups, and hundreds have suffered arrests and prosecution as a result. While Minsk has officially invited Organization for Security and Cooperation in Europe (OSCE) election monitors, each monitor must have an invitation from the pro-Lukashenko Central Election Commission (CEE). This commission has publicly stated that the expected number of observers (700 to 800) is excessive and that no monitors from Georgia, Latvia, or Lithuania will be invited. U.S. envoy to Belarus George Krol has described the odds of these elections being free and fair as “dismal.”

Three opposition candidates are campaigning for the presidency: Sergey Haydukovich, Aleksandr Kozulin, and Aleksandr Milinkevich. Their electoral campaigns have been marred by detentions, harassment, and police beatings. On March 2, Kozulin attempted to enter the all-Belarusian People’s Congress but was beaten and arrested by police; journalists and Kozulin supporters were arrested, as well. Authorities declared illegal an election rally for Milinkevich, attended by thousands, and security forces dispersed the crowd. On March 9, members of Milinkevich’s campaign were sentenced to 15 days in prison for participating in an illegal demonstration.

Throughout the campaign season, the opposition candidates have been denied access to media outlets. The government has shut down several newspapers, and while others publish from Russia, their shipments are blocked at the border. Journalists have been beaten and harassed, and members of Lukashenko’s entourage are suspected in the disappearance of two prominent journalists investigating stories damaging to Minsk officials.

The presence of foreign media in Belarus has been insufficient to counteract Lukashenko’s methods. Belarusian-language broadcasting by Radio Free Europe/Radio Liberty is popular but not enough to compete with the state-run media.

The U.S. and countries in Europe have condemned Lukashenko’s electoral tactics. That Lukashenko will be reelected, however, is all but certain. Still, the West should support opposition forces in Belarus and the movement for future democratic change.

The Belarus Democracy Act, passed by the U.S. Congress in 2004, provides for sanctions and visa bans against Belarusian officials, freezing Belarusian assets, banning government loans and investments in Belarus, and funding for expansion of broadcasting to Belarus. Thus far, these tools have seen little use. Employed more aggressively, these measures could put pressure on Lukashenko to pursue a more democratic course.

Recommendations for the U.S. and EU

The U.S. and the EU should take several steps to promote freedom in Belarus:

• Shine a spotlight on the upcoming elections. A stronger foreign media presence will pressure Belarus to adhere to international electoral norms. Western officials, human rights activists, and non-governmental organization representatives should speak up on behalf of Belarusians to encourage the media to cover the run-up to the elections and the poll itself. To make an impact, Radio Liberty America should increase its broadcasts in Belarusian.
  
• Avoid conferring legitimacy on Lukashenko’s presidency. In the likely event that elections are not free and fair, the countries of the West should announce that they do not view Lukashenko as a legitimate head of state.
  
• Freeze Belarusian state assets in the West.
  
• Begin criminal proceedings against Lukashenko and his supporters. The regime’s more heinous acts, such as political killings, should have repercussions.
  
• Monitor Belarus’s relations with rogue states. This should also include investigation of its criminal activities, such as arms smuggling, illegal arms trading, and possibly money laundering.

Conclusion

Strong pressure for change from the democratic opposition within Belarus and from foreign countries via punitive measures against Lukashenko’s regime may prove effective in dislodging Eastern Europe’s last Soviet-style dictatorship.

U.S. Should Warn Russia Over Its "Soviet" Middle East Policy

04-06-2006

In recent weeks, Russia has distanced itself from positions on the Middle East that it once held in common with the U.S. and the European Union. In February, Russia negotiated with Iran to establish a joint uranium-enrichment venture to supply nuclear reactor fuel to the Islamic Republic. As well, it is selling anti-aircraft missiles to Syria. And on March 3, a high ranking delegation of the Hamas terrorist organization visited Moscow at Russian President Vladimir Putin’s invitation.

As Russian Foreign Minister Sergey Lavrov visits Washington to discuss the Middle East on March 6-7, Secretary of State Condoleezza Rice should inform her Russian counterpart that Moscow is playing a dangerous game in the Middle East. It is jeopardizing Russia’s G-8 presidency, its position in the Middle East Quartet, and its international standing. Russia cannot go on playing this two-faced game with the West.

Russia may have several aims in pursuing this new Middle East policy. Among them, keeping the price of oil high will certainly accrue to Russia’s short-term advantage. Russia may sense an opportunity to increase its standing in its own backyard, at the expense of the power of its putative Western allies. Most foolhardy of all, Russia may be trying to placate Islamist extremists for the sake of its own security—a policy that is doomed to fail.

Back to the Soviet Past?

As it did during theSoviet era, Russia now seeks to maximize its policy options in the Middle East while restraining the U.S.’s ability to maneuver. In the 1980s, for example, Mikhail Gorbachev’s Soviet Union became a major arms supplier to the Ayatollah Khomeini’s Iran, while also selling arms to Saddam Hussein’s Iraq, with which Iran was engaged in a long war for most of the decade.

The USSR, and later Russia, joined Iran in demanding that the U.S. withdraw its military forces from the Persian Gulf, where they ensure the security of the world’s prime oil supply and shipping lanes. A nuclear-armed Iran, closely allied with and armed by Russia and China, could challenge the U.S., its interests, and its allies in the region.

Today, Russia is the lead supplier of Iran’s civilian nuclear efforts and ignores that country’s military nuclear program. In December 2005, Russia announced that it would sell Iran $700 million worth of TOR-M1 (SA-15) short-range surface-to-air missiles and is now reportedly negotiating the sale of long-range anti-aircraft SA-10 missiles (known by their Russian designation, S-300). Buttressed by radars and computers, these missile systems could form a nationwide air-defense that would make future air strikes to disarm Iran’s nuclear weapons program all but impossible.

Russia has also sold Iran a $1.2-billion Bushehr nuclear reactor, to be completed in the fall of 2006, and plans to supply at least two more and possibly as many as five more reactors, which will cost $8 to $10 billion altogether. These reactors could be used to produce fissile material for a clandestine nuclear weapons program. In addition, Russia has trained hundreds of Iranian nuclear physicists and engineers; provided Teheran with ballistic missile technology; and launched an Iranian spy satellite.

Despite all of this, Moscow couldn’t favor the idea of an Iran armed with nuclear missiles, because it would likely seek influence in Russia’s own backyard—the Caucasus, Central Asia, and the oil-rich Caspian basin. As further evidence, Russia is placating Islamist extremists in other parts of the Middle East. Something else is at play.

Breaking Ranks with the West

Russia has broken with the joint position of the Quartet—which includes the U.S., U.N, EU, and Russia—that no negotiations with Hamas or cash assistance to a Hamas-lead Palestinian Authority will be possible until it renounces terrorism, disarms terrorist organizations, respects past agreements including the Road Map, and recognizes Israel.

During his February 2006 visit to Spain, President Putin announced that he would invite the leaders of Hamas to Moscow. He declared that Russia never considered Hamas a terrorist organization and that Hamas’ election was a great failure of President Bush’s foreign policy. Coddling Hamas, without securing a complete renunciation of terror and recognition of Israel, is simply appeasing a terrorist organization responsible for the deaths of hundreds of innocent civilians. Hamas controls veritable “brainwashing factories,” where thousands of children as young as four are conditioned to become suicide bombers. Still, Russian Chief of General Staff Yuri Baluyevsky has already suggested that Moscow will sell weapons to the Palestinian Authority lead by Hamas.

These games that Russia is playing with radical Islamists are reminiscent of those Joseph Stalin played with Hitler until the Nazis invaded USSR in 1941. Russia has already suffered atrocities at the hands of Islamist militants, such as at the Beslan school and Dubrovka theater, where hundreds of hostages, including children, died. This legitimization of Hamas is self-defeating. Appeasement will invite further Islamist aggression against Russia, especially as it is already dealing with expanding Islamist insurgencies in Chechnya and elsewhere in North Caucasus and faces a growing internal Muslim population.

Putin also broke with the West when he suggested that the media practice self-censorship in view of the row over the publication of cartoons depicting the Prophet Mohammad. Russian authorities have already closed down two newspapers for the offense of publishing similar cartoons.

Pulling Chestnuts from Middle Eastern Fires

Russia, an observer member of the Organization of Islamic Conferences, is pursuing a course that dilutes the solidarity and coordination of the G-8 and could lead to the destabilization of the Middle East. Among its troubling actions:

• Selling nuclear reactors and weapons to Iran, and anti-aircraft missiles to Syria and possibly to the Hamas-dominated PA;
• Empowering Iran to become a regional hegemon and deny U.S. access to the Gulf;
• Positioning itself to be a co-equal party alongside the U.S., while placating radical Islamist forces; and
• Stirring regional instability, which leads to higher oil prices, from which Russia benefits as a high-production oil exporter state.

A Message to Moscow

Russia should no longer be able to get away with aiding and abetting Iran and Hamas while paying lip service to solidarity with the West. During Mr. Lavrov’s visit to Washington, the Administration must make clear that Russia’s current policies will not improve its fortunes. Secretary Rice should tell Mr. Lavrov that Moscow is jeopardizing its role as a member of the Quartet and its presidency of the G-8 when it pursues a quasi-Soviet Middle Eastern foreign policy.

Russia’s Gas Attack on Ukraine: An Uneasy Truce

01-04-2006

In a compromise deal struck on January 4, the price that Ukraine pays for Russian gas will rise from $50 to $230 per one thousand cubic meters. This is less of a blow to Ukraine than it seems. The country will switch to Turkmenistan as its principal gas supplier and also purchase gas from Kazakhstan and Uzbekistan for about $95 per thousand cubic meters for five years—about a third of the price that Western Europe pays for gas. Ukraine will still buy Russian gas, but much less than in the past.

By more than quadrupling the price of Russian gas, Moscow has attempted to deal a decisive blow to President Victor Yushchenko, whom Russian leaders perceive as pro-American and anti-Russian, and to influence the outcome of Ukraine’s March parliamentary elections. Ukraine will pay a heavy price: between 5 and 10 percent of its GDP will go to cover the new energy costs, and its economic growth in 2006 and beyond could stagnate.

The attack may also have been a misstep: Russia’s willingness to excessively politicize its energy supplies delivered a blow to the country’s image as a reliable energy producer. Tens of billions of dollars in future foreign investments and contracts may be now at risk—much more than the value of Ukraine’s gas imports.

As a result of Moscow’s ill-considered gambit, Europeans are likely to turn to Turkmenistan, Azerbaijan, Algeria, Nigeria, Qatar, and Iran to diversify their gas supplies. They will be wary of over-dependence on Gazprom. Ironically, Russia, which just assumed chairmanship of the G-8, has proclaimed energy and energy security as a central focus of its term.

Blame Both Ways

Ukraine is also to blame: it ignored the problem of subsidized gas and did not prepare its economy for inevitable price hikes by increasing energy efficiency and improving management. The price of Russian gas supplied to Ukraine during 2004-2005 was less than one-third of what Europeans were paying, and it was clear that the gravy train would end after the Orange Revolution, which Russia decried.

Ukrainian leaders should have taken steps, such as creating a larger gas reserve, setting money aside to ease the transition to higher prices, and signing contracts with other suppliers. But they did not. Instead, the Yushchenko administration found itself rudderless in economic policymaking and failed to repair relations with Russia so that Moscow would give Kyiv a break, as it had in the past. Russia is now accusing Ukraine of siphoning off gas set aside for sale in Europe, something Ukraine claims it has the right to do. Ukrainian companies and officials were also allegedly reselling subsidized gas to Europe at market prices.

The new arrangement makes things even more complicated, as it hands over all Ukrainian gas imports to a Swiss-based company, RosUkrEnergo, half of which belongs to Gazprom and the other half of which is managed by the Austrian Raifeissen bank on behalf of undisclosed shareholders. There are published allegations that RosUkrEnergo is non-transparent and even may have ties to organized crime.

Recommendations for the Administration

The U.S. is interested in political stability, transparency, and economic growth in Ukraine and Central Europe. Washington has invested heavily in the Yushchenko administration and would not want it to fail prior to the crucial March parliamentary election. Voters are likely to blame an already-unpopular Mr. Yushchenko for failing to keep gas prices low.

The U.S. has also high stakes in successfully integrating Russia as a major energy supplier into the world economy—if at all possible in view of the current energy power grab by the state. Turning oil and gas into the tools of statecraft—just as the Organization of Petroleum Exporting Countries (OPEC) did in the 1970s—runs against Western interests. Furthermore, U.S. energy companies hope to expand their energy partnerships with Russia, including the development of the giant Shtokman gas field in the Barents Sea and investment in new fields such as the three Sakhalin Island projects in the Pacific.

In light of these considerations, the Bush Administration should:

• Support a gradual transition to market energy prices and better management for Ukrainian industry. This can only be accomplished by making Ukrainian industry more energy-efficient and thus, more competitive in a higher energy price environment. Such transition will save Ukrainian economy billions of dollars. U.S. Departments of Commerce and Energy and the private sector should work with the Government of Ukraine to develop and implement a three year transition program to achieve western energy consumption standards in the industry.
  
• Work with the Ukrainian government on a medium- and long-term energy security plan to diversify energy sources for Ukraine in both oil and gas. This should include a plan to purchase oil from Kazakhstan and Azerbaijan and gas from Turkmenistan and Azerbaijan, including building a trans-Caspian oil and gas pipelines.
  
• Clarify to Russia that its heavy-handed energy geopolitics will backfire. Moscow risks undermining its claim to become a major energy player in Europe and the world, hurting perspectives for joint ventures, investment, and energy trade. The U.S. Department of Energy should explain this to its Russian counterparts while promising serious U.S. energy investment if Russia returns to privatization of its oil and gas companies and pipeline consortia.
  
• Insist that Russia’s World Trade Organization accession negotiations include full separation of Gazprom’s production and transportation (pipeline) assets and that both Russian and Western private investors’ representatives on the Gazprom board of directors be fully involved in strategic decision making. Such participation would mitigate abuse of Gazprom as a tool of foreign policy by politicians and the federal bureaucracy.

Shared Interests

It is in the best interest of Russia, Europe, and the U.S. to move to a gradual schedule of price increases, energy efficiency, good management and transparency in Ukrainian economy. It is equally in Russian and the U.S. interest for all parties involved to focus on energy economics that benefits both countries, while avoiding provocation and escalation.

Competition over Eurasia: Are the U.S. and Russia on a Collision Course?

10-24-2005

Russia and the United States continue to bicker over the post-Soviet space. They often remind one of an old married couple who forever exchange accusations but never reach a common ground. Do they need counseling? Are they moving towards divorce? The potential for Russia and the U.S. to pursue a parallel foreign policy in the region--one based on interests, not emotions--is greater than many think. This, however, is often difficult to achieve.

Today, the Bush Administration’s national security priorities include Iraq, nonproliferation, the war on terrorism, Iran, China, energy, and democratization. With the exception of Iraq, all of these Administration priorities require good relations with Russia. Therefore, ties with Moscow should be high on the U.S. foreign policy agenda.

U.S. support for small countries or for the "multi-color" revolutions on the Russian periphery may be important, but it should not dictate U.S. grand strategy, which is defined by national interests. The U.S. went out of its way to support Georgia, Ukraine, and Kyrgyzstan in their pushes for democratic change. At the end of the day, however, we cannot support our friends by derailing our relations with Moscow. Nor should we shy away from the important task of promoting democracy worldwide.

Moscow’s View

Russia’s misperceptions regarding her own neighbors, as well as her misreading of many U.S. goals in the region, have made pursuing U.S. policy in Eurasia particularly difficult. For centuries, Russians viewed Ukrainians as "little brothers," heaping scorn on their attempts to pursue independence or even to develop a language and culture of their own. The Russian elite fail to recognize Ukraine’s distinct culture or the separate interests of its ruling class.

There is a deep conviction in Moscow that everyone in the neighborhood will be happy under more, not less, Russian influence. Moscow believes that the countries and peoples that it dominated for centuries are ungrateful to Russia for carrying out its mission civilisatrice and for its historic achievements--such as the defense of the Georgians from the Turks in the 18th century and the protection of Ukrainians from the Poles in the 17th--which are no longer perceived as vital or important.

Today, real concerns, such as Moscow’s support for separatism in Trans-Dniester, Abkhazia, South Ossetia, and Karabakh and business priorities such as energy transit, oil, gas and electricity supply, and migration, dictate attitudes in the "near abroad" towards Russia much more than historic memories do.

Americans often feel the Russian elites and policymakers believe that the U.S. has no business in the Commonwealth of Independent States (CIS). U.S. political agendas, such as the promotion of democracy and the establishment of military bases to pursue the war on terrorism, are easily dismissed. Moscow indicated its deep apprehension about a vital energy artery when it opposed the Baku-Tbilisi-Ceyhan pipeline from the Caspian, which after 10 years in the making will finally open for commercial operations this fall.

Washington’s View

The Cold War left its scars in Washington. Some in the U.S. still view Russia as an inherently evil imperial power, despite repeated statements by its leaders that Russia is not interested in re-creation of the Soviet Union and does not have the power, finances, or raison d’etat to pursue it. In some quarters, there are still voices which say, "We love Russia so much, we want several of them," dreaming of a Russian dissolution along regional lines: the North Caucasus, Far East, or Siberia and Iran.

These people do not recognize the danger that chaos in nuclear-armed Russia could pose for the area from the Baltic to the Pacific, from the Arctic to the Black Sea, and to the rest of the world. If Russia collapses, China and the Islamist circles which are fanning the flames of separatism in the North Caucasus will win. Nuclear weapons may fall into the hands of rogues. Extremists and criminal elements, already at large in the North Caucasus, would have a field day. This is not at all in America’s interests.

While it is not the policy of the Bush Administration to pursue Russia’s breakup, some in Moscow confuse the academic writings of former government officials with actual strategic goals. This is simply wrong. Russia, in turn, does not help by pursuing heavy-handed policies in Chechnya and elsewhere in the region--policies which alienate local populations and swell the ranks of the opposition. Tensions in the region also stem from regimes and leaders who have overstayed their welcome.

It is time to discuss and understand better what the two countries mean by "stability" and "democracy."

Challenges to Democratization

Washington is right to support democratic forces around the world, including in the former Soviet Union. Those Russian "experts" who describe the orange and other revolutions as purely artifacts "made in the U.S.A." are wrong. They do not recognize the depth of frustration with Eduard Shevardnadze’s final years of malaise or Leonid Kuchma’s pervasive corruption.

There are also those in Moscow’s "political technology" circles--paid consultants who read too much Machiavelli--who cynically deny people the right to express their opinion as to how they are governed. They state publicly that people vote for those who pay better. If that’s the case, the outcome in Ukraine would have been different. They are reminiscent of Stalin, who cynically observed that it does not matter how people vote; it only matters who counts the votes.

These are the "experts" who advocate using "all means possible"--meaning brutal force--for regimes to cling to power. We have seen the high price people have paid in places like Andijan when rulers follow this advice. We know how dictators abuse their office to enrich themselves and their families. If people perceive Russia as supportive of dictators, its popularity will plummet in Minsk, Tashkent, or Ashghabad.

This is not in Russia’s interest, any more than it is in America’s interest to support regime change for the sake of regime change or to abuse democratic processes to put into power those who spew pro-American or anti-Russian slogans. The U.S. should not support every firebrand who spouts anti-Russian rhetoric. Radical nationalist forces, which supported the Nazis in World War II, such as the Organization of Ukrainian Nationalists and Ukrainian Insurgent Army, known as OUN and UPA, are still active in Ukrainian politics. Shamil Basaev, the terrorist Chechen Islamist, and the radical Islamist Hizb-ut-Tahrir party produce plenty of anti-Russian rhetoric, but this does not mean that they are friends of the U.S.

Nor should the U.S. support self-serving carpetbaggers. It does America no good to support leaders who, once they obtain power, proceed to plunder the meager resources of their countries or argue endlessly about re-nationalization and re-privatization (meaning, who is going to get how big a cut of the pie). Such petty bickering betrays the trust that their people have placed in them.

There are also those in the U.S. whose organizational budgets and press coverage depend on supporting revolutions of different colors. They disregard that the policy outcomes of the revolutions they support may be negative for the country involved and not in line with U.S. interests. For example, radical Islamist forces coming to power through the ballot box will not contribute to U.S. security any more than did the "democratically" elected Chancellor of Germany, Adolf Hitler.

Some in Washington close their eyes to the deficits in democracy and transparency plaguing the multi-color revolutions in the post-Soviet space. However, recent events, such as the firing of the Yushchenko team in Ukraine, make it impossible to ignore the post-revolutionary flaws.

Nor does it make any sense for Moscow to blindly support "pro-Russian" regimes that are steeped in corruption and reign through oppression. Sooner or later, the abuses of dictators such as Turkmenbashi of Turkmenistan or Lukashenko of Belarus are quite likely to result in regime change. All the Russians will have done by uncritically sticking with them to the bitter end is to assure that whatever regimes follow will be, unsurprisingly, anti-Russian.

Democracy can be extremely beneficial for the newly independent states with no tradition of statehood. It can be a source of legitimate governance and provide stability after mismanagement and corruption undermine people’s faith in the government. One can argue that we are witnessing this in the Baltic States. Russia itself could benefit from appreciating and implementing democratic values and processes more than it currently does.

The countries of the post-Soviet space, however, are real countries with their own interests, and this is what some in Moscow prefer to ignore. These countries will find their diplomatic voice between Moscow, Washington, Beijing, and Brussels.

Russian Goals

Russia claims it wants stability in the post-Soviet space. President Vladimir Putin and senior Russian officials have said that they do not mind change but want it to come without violations of the law and constitutions. However, Moscow applies this paradigm to those regimes that make it uncomfortable, such as Ukraine, but not to those authoritarian states which violate their own laws and jail or kill their own citizens, such as Belarus, Turkmenistan, and Uzbekistan. Russia should work with the United States and the European Union to promote, not hinder, democracy in the CIS.

Russian military goals in the countries of the Common Security Treaty Organization (CSTO), the military bloc of the CIS, are clear: joint control of borders and air space; joint rapid reaction task forces to combat terrorism; Russian bases in Kyrgyzstan, Uzbekistan, Tajikistan, and Armenia; and no foreign bases.

Russia provides support to separatist forces and statelets, such as Trans-Dniester, Abkhazia, North Ossetia, and Karabakh. The aim of this support stems from Moscow’s long-standing desire to weaken post-Soviet states, such as Moldova, Georgia, and Azerbaijan. However, separatism may be a double-edged sword. Russia would view with extreme prejudice outside attempts to militarily strengthen Chechen, other North Caucasus, Tatar, Fenno-Ugric, or Yakut nationalists who live in the Russian territory. Those who live in glass houses should not throw stones.

Russia views itself correctly as the economic engine of the CIS. It is pushing for higher prices for its energy, which it supplies, often at a discount, to its neighbors. It also lobbies for the Common Economic Space (CES), a free trade zone and a common market for Russia, Ukraine, Belarus, and Kazakhstan. However, Moscow is not convinced that free movement of labor in the CES is desirable, and a common currency of Russian design is not likely to be introduced any time soon. Membership in the CES may also prevent these states from joining the World Trade Organization.

The Chinese Elephant in the Room

Russia seems to be oblivious to the growing power of China. Beijing has launched--and Russia has accepted--the Shanghai Cooperation Organization (SCO), which sets a precedent, committing China to fight "separatism, extremism and terrorism" in countries of the post-Soviet space.

China views Central Asia as its "near abroad," a strategic rear. As its economic muscle grows, so will its geopolitical appetites. Chinese troops will take part in maneuvers in Central Asia and will be part of the SCO rapid reaction force deployed in Central Asia, acquiring local knowledge and building relations with indigenous military forces and political elites.

China is the largest consumer of Russian military hardware and technology and is likely to surpass Russia technologically in the next couple of decades. But the giant shadow being cast by Beijing goes far beyond the purely military and security realms. It directly affects economics and business as well.

As the recent $4.18 billion acquisition of Petrokazakhstan oil company by China National Petroleum Company demonstrates, Russian energy interests may be adversely affected by China’s quest for oil and gas. China also provided a $6 billion loan to Rosneft to purchase Yuganskneftegaz, an oil asset with a capacity of 1 million barrels a day, and succeeded in derailing Japanese plans to build an oil pipeline to Nakhodka. Instead, Yuganskneftegaz is likely to get Moscow’s permission to build the pipeline to the Chinese city of Daikin, in northeastern China.

China has indicated its willingness to invest billions of dollars in Russia and Central Asia, including in strategic areas such as the Far East, Siberia, and even along the Moscow-St. Petersburg highway. However, resource-poor and population-rich China may only be a threat in the long term. In the meantime, Russia’s security and territorial integrity is under attack not from the United States, but by radical Islamist and nationalist elements in Chechnya and the North Caucasus. In fact, the U.S. can and should help Russia to fight radical Islam in that area.

Finding Common Ground

As the earlier discussion of U.S. foreign policy indicates, many of America’s goals are dependent on cooperation with Russia. These include Iran, the global war on terrorism, nonproliferation, energy, and the rise of China (not necessarily in that order). Specifically, Russia and the U.S. have to agree on a joint threat assessment. They need to realize that they are facing common threats from common sources, such as radical Islamist militants, before they can develop and implement joint policies in these areas.

Joining Forces in the War on Terrorism. While the subject of this lecture is the U.S. and Russia in the former Soviet sphere, one cannot ignore the largest "hot" conflict in that region, which is Chechnya and, increasingly, the North Caucasus where Russia’s grip is becoming more tenuous. Here, Wahhabi/Salafi madrassahs and Islamic "communities" (jama’ats), which do not recognize secular jurisdiction, are growing by leaps and bounds. Funding and ideological preparation of imams, propagandists, and military leaders comes from the same sources as those of al-Qaeda and other radical organizations in Europe, the Middle East, and elsewhere.

With Wahhabi/Salafi influence growing in Uzbekistan and inside Russia itself, in the Northern Caucasus as well as in places like Tatarstan, Bashkortostan, Azerbaijan, and even predominantly Shiite areas, the whole southern "soft underbelly" of Russia can be destabilized. Russian leaders need to recognize this. U.S. policymakers should realize that if vast lands between China and the Black Sea destabilize or fall into the hands of extremists, this will threaten U.S. security interests. Energy supply from the Caspian basin will be in danger, and terrorist access to weapons of mass destruction technology will expand.

U.S.-Russian cooperation in stemming the flow of finances, arms, preachers, and trainers is necessary. The joint U.S.-Russian Kislyak-Burns Committee on Anti-Terrorism, named after the two deputy foreign ministers who chair it, needs to expand its operations and focus on specific projects with participation of border police, banking regulators, customs officials, and security services on both sides.

Developing Energy Resources. While meeting with Western policy experts on September 5, President Vladimir Putin talked about building a pipeline from Siberia to "the North" to supply U.S. markets with Russian oil. However, Mr. Putin did not specify at which port in the Arctic Ocean the pipeline would terminate.

Ports suggested by the Russian oil pipeline monopoly Transneft freeze five to six months a year, but there exists an Artic port which stays ice-free year-round and is yearning for more cargo, including oil and gas. This is Murmansk with its huge, deep natural fjord and a large population that would welcome employment. In the meeting with President Bush on September 16 and at the 2006 G-8 Energy Security meeting in Russia, the U.S. and Russia need to agree that the pipeline will be built to Murmansk.

Moreover, President Putin did not mention which companies will develop the fields and which will comprise the consortium that will build the pipeline. Negotiating that agreement should take priority on the highest level. As the demand for hydrocarbons is high and so are prices, decisions need to be made within three to six months to ensure that deals are signed and development started.

In September, the Russian state-owned gas monopoly Gazprom shipped a tanker with liquid natural gas (LNG) to the U.S. For now, it was a trial shipment and a swap in which Russian gas was substituted by gas from a third country, but next year, Gazprom is planning to send to the U.S. five ships of LNG. Russia is inviting U.S. companies to participate in developing the giant offshore natural gas field called Shtokman. Decisions on participation also need to be made fast, as the U.S. natural gas market is experiencing shortages of supply and prices are likely to rise.

As the U.S. is expecting to boost the global oil supply through the Baku-Tbilisi-Ceyhan (BTC) Main Export Pipeline, Kazakhstani supplies to that route will be increasingly important. The U.S. can invite Russian companies to join in building a trans-Caspian pipeline to connect the giant Kazakhstani fields of Tengiz, Karachganak, and Kashagan to the BTC. A Russian stake in this project is likely to dampen Moscow’s opposition.

Balancing the China Card. Some in Russia believe that Moscow can play the China card against Washington, just as President Richard Nixon and Dr. Henry Kissinger played the China card against the USSR over 30 years ago. However, a carte blanche for Beijing may quickly limit Russia’s freedom of maneuver in the Far East, Siberia, and Central Asia. Russia’s relations with Japan are already deteriorating because of the Sino-Russian rapprochement.

Russia can put itself in an advantageous position by signaling to Beijing that it has better options than becoming China’s raw materials appendage. Seen in this light, Russia should not fear the U.S. presence in Eurasia, as a new balance-of-power game is being played there. Russia should drop its objections to U.S. military bases, such as Karshi-Khanabad in Uzbekistan, which may be evacuated in the near future, and should work closely with the U.S. and NATO to develop a new geopolitical geometry for the 21st century.

Inviting the U.S. and possibly India and Japan to expand their investments in the Far East and Siberia; joining U.S., European, Japanese, and Indian firms in large-scale investments in Central Asia--all this would enhance Russia’s freedom of maneuver vis-à-vis China. Finally, inviting the U.S. to participate as an observer in the Shanghai Cooperation Organization would help to keep this organization from becoming hostile to the U.S. and driving up tensions across the region.

Conclusion

Russia and the U.S. can benefit if they work together to address their national interests, which are less mutually exclusive than many currently think. We will benefit if we try to work together for a prosperous and democratic Eurasia, with Russia occupying a place of honor. However, the question is: Do we play a zero-sum game, a win-lose game, or a win-win game? Russia is playing a win-lose game against the U.S. but may think it is playing a win-win game with China. But are there even hieroglyphics for "win-win" in Chinese geopolitics?

In the future, does Russia want to be a member of the community of democracies or a junior partner in a coalition led by China? Talking about Eurasia, one quickly touches the third rail of the debate between Westernizers and Eurasianists, which has been going on for a century and a half. Do the Russian elites, who are culturally European, want to be politically European as well? The majority of them did a hundred years ago, as well as in the early 1990s. Does Russia want to be politically like Uzbekistan or Pakistan? Or like the U.S. and Canada? Or maybe like Korea, Taiwan, and India? After all, democracy ceased to be a Western invention a long time ago.

When the chips are down, Russia may also reassess its rapprochement with China and the cold shoulder it is increasingly providing to Washington. France and Germany are improving relations with the U.S. Shouldn’t Russia? It is not too late yet, but the sand in the geopolitical hourglass may be running out.

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