*Stimulus packages fail to reverse downturn in Russia's economy
*Chernobyl casts shadow over nuclear power plant in Belarus
*Ankara anxious about the future of Nabucco
Medvedev Experiments With Liberalism as Economy Plunges
There is no doubt that the economic situation is deteriorating but the recent statistics show that the decline goes far deeper than any official estimates, or even the median expert opinion. Industrial production in the first quarter contracted by 14.3 percent compared with the same period in 2008 (experts had expected 13.9 percent) and there are no signs of improvement (Kommersant, www.gazeta.ru, April 16). The GDP shrunk by 7 percent, and the annual estimates from the World Bank and the OECD of 4.5 to 5.5 percent decline now look conservative, while the government forecast of a 2.2 percent decline falls squarely into the category of wishful thinking (Nezavisimaya Gazeta, April 13). It is Finance Minister Aleksei Kudrin who has the unenviable role of explaining that the economy is not going to readily bounce back. Last week he argued against Arkady Dvorkovich and other officially-optimistic voices, stating that Russia might not have such favorable economic conditions as in the last few years within the next decade or perhaps as much as fifty years (www.gazeta.ru, April 14).
Kudrin's conclusion is that the 30 percent reduction in the state budget income in 2010 will necessitate deep cuts in spending, including subsidies to regional budgets, even if Russia again resorts to external borrowing (Nezavisimaya Gazeta, April 15). This pessimistic view might appear excessive, as three key economic parameters have stabilized: the stock exchange, oil prices, and the ruble against the dollar and euro. The problem is that only some companies and sectors may learn to accept this level of oil revenues, while many others are hopelessly inefficient. Manufacturing, for instance, registered a 20 percent decline in the first quarter of the year. Prime Minster Vladimir Putin tried to provide some reassurance for workers in the Tver railcar plant last week, but responding to a direct question about Kudrin's forecasts he said only that the Finance Minister was "under a lot of stress" and had to protect himself from pressure (Kommersant, April 16). The high point in that "anti-crisis psychotherapy session" was Putin saying he had personally prevented the purchase of railcars from China.
Such personally-delivered stimulus packages for particular enterprises destroys the coherence of Kudrin's fiscal course, which renders Russia's anti-crisis policy far less efficient compared with the main world economies (Nezavisimaya Gazeta, April 17). The Consumer Confidence Index dropped accordingly to minus 35 percent in the first quarter and 48 percent of respondents expected further negative economic developments (PRIME-TASS, April 8). It is not only the middle-class that is experiencing a massive migration from the "upper" to the "lower" categories; the super-rich are also suffering: according to the Russian Forbes on April 16, the "golden hundred" of the richest individuals is now worth only $124 billion, having lost $380 billion in one year.
The simmering discontent among the most politically active and influential social groups worries Medvedev far more than rising unemployment, which compels experimenting with new ways of management and governance. His aides whisper, for instance, that the giant state corporations created within the past few years are no longer viable in the recession and must be compelled to open up their accounts before undergoing radical "sanitation" (RBC Daily, April 17). Putin, on the contrary, has taken a defensive stance insisting that his economic model of ever-increasing state control is sound and provides the best protection against the current turbulence -which will soon blow over. His own cabinet is deeply split over the priorities in budget and extra-budget funding, so that ministers declare diverging courses and their aides resort to in-fighting (Nezavisimaya Gazeta, April 16). This uncharacteristic lack of discipline within Putin's team betrays more than his doubts about choosing a way out of the crisis; his very ability to control the forever feuding elite clans is also in doubt.
The natural response to any disturbance in the system of power created by Putin is to squash the opposition and squeeze the insufficiently loyal oligarchs; the enforcement mechanism, however, has become so corrupt that forceful responses cannot be mobilized. Complaining bitterly -and futilely- about corruption, Medvedev probably believes that the system he presides over has become incapable of acting on its own logic. Hence the hesitant steps towards a neo-perestroika policy aimed at ensuring that "the state and civil society can act in harmony and together," as he told NTV in an interview on April 12. It is a different type of "harmony"' than the effective exclusion of society from politics that flourished in the autumnal years of Putin's "era." It is not certain that Medvedev will succeed in engaging the more dynamic parts of the middle classes in a new anti-crisis social contract, and the readers of Novaya Gazeta have good reasons to doubt that he will keep his part of the bargain while Putin looms over his less-than-heroic figure. Smooth words come easy to the accidental leader who cannot hide behind the fiction of "independence of the court" from the simple but stark dilemma: if Mikhail Khodorkovsky and Platon Lebedev are acquitted, it is all over for "Putinism."
Protests Planned Against Belarus Nuclear Plant
Plans are underway for the annual Chernobyl Path March in Minsk on April 26, but this year they will be accompanied by similar demonstrations in the contaminated zone and in Astravets, the location chosen earlier this year for the construction of a new nuclear power plant in Belarus.
Earlier, two sites in Mahilou region appeared to be the favored locations for the station, but evidently they were rejected because one suffered from unstable soil conditions and the other might have "tectonic faults." An equally viable reason -that the Mahilou region is within the zone contaminated by the 1986 nuclear disaster at Chernobyl, was not discussed. In turn, a widespread criticism of the Astravets site, that it suffered a 7.0 magnitude earthquake in 1907, was dismissed by an expert from the prospecting company Belhealohiya (Belarus Geology), Volha Boyeva, who said that the proposed location is some 15 miles to the north of the rupture (Belapan, March 12).
In December 2008, the decision to use the Astravets site was announced by First Deputy Premier Uladzimie Syamashka, who said that work on the construction of houses for the builders would commence on January 19, 2009 and on the plant itself two days later. The station is to be a third generation water-pressurized plant, which is usually referred to by its Russian acronym VVER (www.charter97.org, Dec 19).
The current site is close to the villages of Mikhalishki and Hoza in Hrodna region, near the Lithuanian border and only 20 miles from the capital Vilnius. As news about the new location circulated last November, a steering committee was formed to create a public initiative entitled "The Astravets Nuclear Power Plant is a Crime" (ANPPC), headed by two locals, Ivan Kruk and Mikalai Ulasevich. They were reportedly refused permission to hold a public meeting in Astravets cinema and concert hall. Instead, on March 3, local officials held a partially closed meeting with experts, doctors, state officials, and media called "Construction of the Nuclear Power Plant in the Republic of Belarus -Security and Reliability," and opponents were not permitted to voice their opinions (Vyasna, April 9).
In mid-April, Ulasevich held a press conference in Minsk, at which he declared that the building of the station was not a civic decision, but rather a military-political one. He stated also that local authorities recently searched his apartment, as well as those of other activists opposing the construction, (Vyasna, April 14). According to one source, the district authorities sent out bogus leaflets on behalf of the "United Gay Party" purporting to come from ANPCC, ostensibly in the belief that such an agency would be universally condemned by the public (Bellona, March 16). A protest was also held in the city of Salihorsk by several young men, who posed as mutants and handed out literature, alongside a poster with the slogan "No to new Chernobyls" (www.charter97.org, April 15).
President Alyaksandr Lukashenka has the final decision on both the location and acceptance of the project. Despite the current financial difficulties facing Belarus, and the daunting costs of completing the station estimated at 4.5 to 5 billion Euros (Narodnaya Volya, April 15), it is to go ahead as planned. It will comprise two 1,000-megawatt reactors in its first phase scheduled for completion by 2016 (reactor one) and 2018 (reactor two), Lukashenka remarked that Russia was prepared to issue its neighbor a loan for the project and referred to a recent opinion poll of the Institute of Sociology that revealed that 60 percent of Belarusians support the project (Belarusian Telegraph Agency, April 7). The actual figure was 54.8 percent (www.minenergo.gov.by, Dec 20).
According to the Belarusian Ministry of Energy, the country will sign an agreement with Russia for the joint construction of the Astravets station, but it is plausible that a foreign engineering company will be employed to draw up the details (Belarusian Telegraph Agency, April 13). Russian ambassador to Belarus, Aleksandr Surikov, in a recent interview with the news agency Belapan, stated that Russia supports the idea of the station, and he also remarked that there would be an opportunity to expand the plant beyond its initial size (Narodnaya Volya, April 15).
The plans are causing some anxiety in several quarters. Lithuania's Foreign Minister, Vigaudas Ushatskas, expressed concern that the plant was so close to the border with his country (Bellona, March 16). Lithuania's Ignalina nuclear plant, which is a graphite-moderated RBMK, is slowly being phased out, while the location is in an environmentally clean zone close to several nature reserves.
The third issue is the projected costs and Belarus' inability to pay them. In essence, the project will be almost entirely Russian in operation, including fuel and reactors, as well as potential ownership if the loans are ever recalled. It would add to the Russian economic interventions in Belarus, which include the project "Minsk City" at a cost of $4.5 billion and the presence of subsidiaries of seven Russian banks (Narodnaya Volya, April 15).
Finally, there is a more general problem of resorting to nuclear power in the country most affected by the Chernobyl disaster. About one fifth of Belarus' residents inhabit areas contaminated by that accident, but the government has adamantly maintained that the land is safe to cultivate. The new project in Astravets has given new significance to the Chernobyl anniversary in Belarus.
--David Marples
Turkey's Energy Minister Pressures Nabucco Partners
On April 17 Turkey's Energy Minister Hilmi Guler, attended a meeting on the future of the Turkish energy sector where he highlight the need to invest in renewable energy resources and diversify its hydrocarbon supplies. In that context, Guler sent important messages to Turkey's Nabucco partners. Asked about the current standing of the Nabucco project, he said that draft intergovernmental and host government agreements had been conveyed to Ankara's partners. "We told them that if we receive their response this month, we are ready to sign the agreement in June...we have full confidence that we can conclude the project, provided that our partners respond to the letter promptly" (www.haberturk.com, April 17).
During the past fortnight Guler has repeatedly stressed this point. On various occasions, he expressed Turkey's dissatisfaction with the slow pace of progress and tried to pressurize its European partners. Satisfied with the results of the Budapest Summit in January, where the EU supported the Nabucco project by earmarking 250 million Euros ($324 million) to help the consortium secure loans, Turkey wanted to fast track the process. Noting that Turkey was the driving force behind the project, Guler argued that the Europeans were preoccupied with small details and if Ankara took charge, the project would be completed within three years. He contended that the Europeans have finally realized that Turkey could not be reduced only to a "transit country" (Radikal, February 1).
By mid-March, however, the EU debated reducing funds allocated for Nabucco and removing it from its priority energy projects, before eventually deciding to maintain the project. Guler said that even if the EU were to drop its financial backing, it would not affect the scheduled progress of Nabucco:
"The Nabucco project will be concluded under any circumstances. Just as we finished the Baku-Tbilisi-Ceyhan pipeline, Shah Deniz project and the Turkey-Greece interconnector, we will also finish this project. The credit issue can be considered as a detail. There will be alternatives and we will discuss them with our partners" (www.cnnturk.com, March 19).
However, despite his powerful rhetoric, Guler failed to address how Turkey will generate the necessary funding in the midst of the global economic crisis. Guler was assuming that as long as a consensus existed on the political-strategic level, the remaining problems over financing could easily be resolved. As the subsequent developments showed, that consensus cannot be taken for granted.
The declining commitment of the European partners was obvious and Guler's statements also reflected those changes. On April 12, he again criticized the attitude of the Nabucco partners, which he repeated within different platforms. According to Guler, in their initial responses to Turkey's draft proposals, its partners raised issues which had already been agreed. To avoid such problems, and accelerate the process, Guler sent the Europeans a letter requesting that they "submit to Turkey what they all agree on and sign on to it" (Anadolu Ajansi, April 12).
Funding problems aside, questions about how to supply Nabucco are far from settled, which has a direct bearing on any evaluation of the project by investors. The declining European interest in Nabucco has already forced Azerbaijan -the only country to commit gas to the project- to reconsider exporting through Russia. A related political challenge has been posed by the tensions between Turkey and Azerbaijan, caused by Baku's discomfort surrounding Turkish-Armenian rapprochement, which might ignore its concerns. Although Guler ruled out the negative implications of the Turkish-Azeri frictions for the Nabucco project, uncertainty over Baku's plans further complicates the investor climate, delaying a European response to Turkey's draft proposals.
Against this background, the haste with which the Turkish government is seeking to move the process forward might be an indication of an underlying sense of nervousness about the fate of the project. Ankara appears impatient to secure European commitment to the Nabucco project and start without further delay. It has blamed its European partners for the current stalemate in the negotiations.
On the other hand, the Turkish government rarely acknowledges its own part in these delays, such as the covert threat to use the Nabucco as a bargaining chip to accelerate Turkey's stalled EU accession process, or its insistence on privileged access to gas transiting its territory to serve domestic demand, or its futile efforts to include Russia in Nabucco. No matter how justified Turkey might be on these issues, the government might have miscalculated the potential damage caused by its bargaining tactics (Taraf, March 3). Turkey's aggressive rhetoric about becoming an energy hub may alienate some of its Nabucco partners.
Nor has Ankara appreciated the complexity of energy geopolitics in general or the discussions taking place inside the EU. Turkey mainly acted on the assumption that given its strategic location it could dictate terms to Brussels, forgetting that Nabucco had to compete with other rival projects to receive European backing (EDM, March 4, 5, 16). Likewise, Turkey hoped that the U.S. administration might support the project. But as Obama's European trips showed, Washington does not enjoy the leverage over major EU members ascribed to it by Ankara. It is unclear when a European response will emerge, but it could disappoint the Turkish government.
--Saban Kardas
