*Medvedev conducts "liberal" public relations campaign amid rising unemployment
*....while Putin threatens to use LNG as new energy weapon
*Russian move against Hungarian MOL holds far-reaching strategic implications
*Turkish police launch nationwide raids targeting PKK urban network
Russian Unemployment Figures Rapidly Rising
Indeed, according to the Russian State Statistics Committee, among the country's entire population of 142 million, only 75.6 million (53 percent) are economically active. By late February 2009, 6.4 million (8.5 percent) of the economically active population qualified as unemployed under the International Labor Organization (ILO) standards. Meanwhile, only 2.2 million are officially registered in Russia as unemployed, with 1.7 million of them receiving state support (www.gks.ru).
During the past year unemployment in Russia has doubled (Moskovsky Komsomolets, April 14, 2009), and it continues to grow unchecked, threatening to quickly reach what some experts consider as the critical level of 10 to 12 percent -beyond which social upheavals will become a serious possibility (www.market-pages.ru, April 14).
Hence, Medvedev's visited INSOR in order to publicize his concern over the issue. The current 8.5 percent unemployment level, as well as its rapid growth, "Are not the indicators we need," Medvedev stated (www.gazeta.ru, April 14).
Two key INSOR experts responsible for briefing Medvedev on the issue were Yevgeni Gontmakher, Director of the Social Policies Center at the Institute of Economy (Russian Academy of Sciences), and Tatyana Maleva, Director of the Independent Institute of Social Policies. In their interviews with the Moscow-based Echo Moskvy radio station following the meeting, both experts praised Medvedev's grasp of the issue and his understanding of the general need for Russia's modernization as a remedy for unemployment among other economic and social ills. "It is not like when they talk to you in the cabinet," Maleva said pointedly in what sounded like a jibe against Prime-Minister Vladimir Putin. "There, on the contrary, the conversation goes like ‘Tell us what should be done about modernization,' but five minutes later you realize that they are talking about crisis-management suggestions which you are supposed to submit next week." Gontmakher explained: "We did not expect that much media coverage: the entire Kremlin pool and all possible TV stations. I guess he did it to show publicly that he is personally interested in this issue, not just the cabinet who presented their crisis program to him" (www.echo.msk.ru, April 14).
According to these INSOR experts, it is not the rate of unemployment which is most dangerous (in other countries it reached 20 percent), but that it is becoming chronic. This is now the case in Russia, they maintain: "Now, when we do not have a clue, when this crisis will end and the tensions ease, of course, everyone is scared that unemployment might set in for a long period," said Maleva. "As long as new jobs are not being created, this unemployment may indeed become chronic. Then, even the current 8.5 percent level spells major trouble" (www.echo.msk.ru, April 14).
They also believe that the cabinet (indirectly referring to Putin) stubbornly supports an inefficient and obsolete economy to maintain employment. This policy might postpone a social explosion, they say, but only for a while. Neither will this policy ever allow Russia to emerge as a modern and well developed economy. Gontmakher emphasized -in another thinly veiled taunt aimed at the Putin regime- that only free private business can save the situation, but this freedom has long been badly restricted within Russia.
The INSOR experts made some striking suggestions on how to restructure the entire economy and employment system. They talked about a freeze on hiring young people by obsolete industrial giants, left over from the Soviet era. They mentioned the idea of creating social workers systems, unheard-of within Russia, and getting a lot of people, particularly unemployed women in crisis-stricken cities that have grown up around dying industries, employed as social workers. Medvedev listened favorably and nodded approvingly to such ideas as the need to retrain office personnel, most of whom have fake university diplomas, he said.
The INSOR meeting of minds is a striking example of the promotion of Medvedev's image, which his staff recently launched: on April 16, the liberal opposition Novaya Gazeta biweekly ran his interview -the first he has given to a Russian newspaper. On the same day as his INSOR visit, April 14, Medvedev met with a group of top Russian human rights activists and NGO leaders. He conceded at the meeting that the current law on NGO's, (passed by the Russian Duma on Putin's orders) was unduly harsh and needed some corrections (www.24new.ru, April 14).
However, the approving nods to Novaya Gazeta and NGO's, listening to INSOR's ideas and showing a firm grasp of strategic issues make a great public relations campaign. However, it does not promote any meaningful changes in the political and economic scenes, which are still firmly controlled by Putin. More people are applying for the misery of state benefits, which Putin on January 12 ordered to be raised to 4,900 Rubles ($146). Yet, Maleva insists, 4,900 is the highest level. Many people in the regions are bitterly disappointed, when they come to collect the expected 4,900, only to go away with some 800 Rubles ($24) instead (www.echo.msk.ru, April 14).
LNG - Russia's New Energy Blackmail Tool
Russian Prime Minister Vladimir Putin recently explained: "Russia enjoys vast energy and mineral resources which serve as a basis to develop its economy; as an instrument to implement domestic and foreign policy. The role of the country on international energy markets determines, in many ways, its geopolitical influence" (Ukrayinska Pravda, 4 Feb 2009). Putin was the architect of Russia's use of energy as a foreign policy tool. He is now threatening to use Liquefied Natural Gas (LNG) as Russia's new energy weapon. In essence, this will be utilized as a means of coercing the EU in order to achieve de facto recognition of a Russian "sphere of influence" within the former Soviet Union.
Putin began his LNG offensive in November 2008 by stating that if some EU member states continue to obstruct the Nord Stream gas pipeline project, Russia "will drop Nord Stream and build liquefaction plants and send the gas to other markets. We will sell it to you [Europeans], too. But it would be more expensive [in liquefied form]" (Kommersant, November 13, 2008). The threat was issued prior to the January 2009 Ukrainian-Russian gas conflict, during which gas supplies to Europe were shut down by Gazprom. Throughout the conflict Gazprom's massive public relations machinery, along with Igor Sechin -a former intelligence officer suspected by many of orchestrating the downfall of the Yukos Oil Company- tried to undermine the credibility of Ukraine as an energy transit country. This strategy also aimed at convincing the EU that Russia's Nord and South Stream projects were more viable, as they would by-pass Ukraine.
Putin's November 2008 LNG threat was repeated on April 1, 2009 by Alexei Miller, the CEO of Gazprom: "We realize that with the growth of globalization of the Liquefied Natural Gas (LNG) market...and at a time when documents are being signed which ignore Russian interests, it is time to reevaluate our strategy towards LNG and the need to undertake new projects in this field" (Kommersant, April 2). The "documents" Miller was referring to was the recent EU-Ukrainian agreement to renovate the Ukrainian gas pipeline system -without Russian participation.
Miller's threat to divert gas deliveries from the EU and send them in the form of LNG to Asian and U.S. markets was met with skepticism by energy experts. On April 2 Kommersant reported that Gazprom will not be able to carry out its threat in the near future. Russia has only one LNG liquefaction terminal in the Far East, the Sakhalin-2 terminal, whose entire output is already contracted for export by Japan and South Korea.
Furthermore, the threat to divert Russian LNG to the U.S. market is unrealistic at the moment -and for many years to come. New gas field discoveries in the U.S. have largely dispensed with the need to import LNG from foreign markets -including Russia. The Asian LNG market is currently looking towards Australia as a long-term reliable supplier and the Russian LNG production appears to be restricted to gas swap based deals with Algeria and Egypt.
Rising coal-seam gas production in Australia is on the verge of increasing Australia's LNG exports from 20 million tons to 50 or 60 million tons within a decade, insuring a steady supply to Asian clients who are highly reliant on LNG for decades to come (www.business.smh.com.au, April 6).
A Russian LNG carrier fleet is slowly being assembled by SovComFlot whose CEO is Igor Shuvalov, one of Vladimir Putin's closest advisors. The company, in partnership with Japan's NYK Line, has four LNG carriers on order, two with Korea's Daewoo and two with Japan's Mitsubishi. In January 2007 SovComFlot took delivery of two LNG carriers built by Hyundai. A total of five LNG carriers are slated to handle LNG deliveries from Sakhalin-2. This is not a significant number considering that in 2007 more than 45 vessels were under construction to carry LNG from Qatar to world markets.
Standard and Poor noted in a June 2006 study of the Russian LNG business that a potential challenge to Russia's future LNG industry could stem from the country's domestic demand for gas. S&P observed that by invoking force majeure clauses, Russia could divert gas intended for export as LNG to local markets during peak usage periods. "Political risk, opaque legal and business systems and Russia's short history of contract law and enforcement will distinguish its LNG projects from recent LNG project financing in Qatar, Oman and Trinidad and Tobago" the S&P report argued.
In this context, Putin's threat to divert gas from the EU to feed other markets appears to be a bluff. He has not abandoned the Nord and South Stream pipelines and the second string of the Blue Stream pipeline to Turkey. However, it is becoming abundantly clear that the Kremlin is worried that its plethora of projected overland and undersea pipelines represents a risky and expensive gamble in its attempt to restore influence over the former Soviet republics.
--Roman Kupchinsky
The Strategic Implications of Russian Move Against Hungary's MOL
The European Union remains a passive bystander to Russia's attempted capture of MOL, the Hungarian oil and gas company (EDM, April 3, 6). The Kremlin-connected Surgut Neftegaz became the single largest shareholder in MOL, literally overnight, through surreptitious acquisition of Austrian OMV's entire 21.2 stake in MOL on March 30. Surgut, a company known to lack transparency, has hinted that it intends to take over MOL in due course through vertical integration. Whether this intention is real, or a cover for another Russian entity that would step in after Surgut remains unclear.
What Surgut and the Russian Ministry of Foreign Affairs portray as an ordinary "market transaction" transaction is in fact an adversarial strategic move into EU territory, with far-reaching implications for Hungary, Central and South-eastern Europe, and the EU itself in terms of energy security and policy. Yet the EU's policy-making and regulatory authorities keep silent in the face of this predatory raid.
The move forms part of Russia's policy to obtain and expand control of oil and gas pipelines and processing plants in EU territory by state-controlled Russian companies. Surgut, however, is not necessarily -or not primarily- interested itself in MOL's oil refineries. The stakes are far greater because of Hungary's and MOL's unique strategic positions in the wider region.
In the oil business, MOL owns the most efficient refineries in Central Europe, with a combined capacity of more than 15 million tons annually, including one in Slovakia with a major role in that country's economy. Russian oil companies salivate (as did OMV before them) at such a target. While Surgut has never evidenced an interest in refineries in EU member or neighbor countries, the other Russian major oil producers do pursue such acquisitions; and it is widely suspected that one of them (Lukoil, Rosneft, or GazpromNeft) may be lurking behind Surgut.
Hungary sits astride the Adria-Druzhba pipeline (linking Croatia with Slovakia via Hungary), which could provide an alternative to Russian-supplied oil in Central Europe. This is why Moscow would like to use the pipeline in reverse, Druzhba-Adria, for Russian oil, as reiterated most recently by the Russian embassy in Croatia in this context (www.business.hr, April 15). Hungary's position is pivotal on this issue.
The Hungarian gas transmission system, owned and operated by a MOL subsidiary, is a highly attractive target for Russia because of Hungary's central location in the region. In this regard as well, Hungary is pivotal to interconnecting the gas transmission systems of Central and Southeast European countries. This is the goal of MOL's initiative, New Europe Transmission Systems (NETS). This project would enhance the entire region's energy security, enabling countries to deliver supplies to each other in emergency situations, including possible cuts in Russian supplies. Such a large regional market would also provide incentives to Caspian gas exporting countries to supply Central and South Eastern countries through pipelines such as Nabucco and other components of the EU-planned Southern Corridor.
Moreover, with Hungary's gas transmission system in Hungarian ownership, Moscow would be unable to achieve its current goal of gaining influence on transmission systems westward of Ukraine. Frustrated in its attempt to obtain control over Ukraine's gas transit pipelines, Moscow is attempting to leapfrog Ukraine and enter the gas transmission and storage business in countries further west, where the gas enters from Ukraine. If successful in this effort, Russia could to some extent offset the defeat of its attempts thus far to control the gas flow in Ukraine itself.
The privately-owned MOL is a partner in the EU and U.S. backed Nabucco pipeline project for Caspian gas to Europe. This is the largest international project in which MOL is involved to date. Many Hungarian observers and even some Russian commentators believe that Moscow reckons to interfere with the Nabucco project, if a Russian company gains entry in MOL.
MOL is the dominant stakeholder in Croatia's oil and gas company INA, where it also holds the operating rights (the Croatian state also holds a large stake in INA). Through INA as well as alongside it, MOL is a partner in the planned liquefied-natural-gas (LNG) import terminal on Croatia's Krk Island in the Adriatic Sea. With construction work planned to start in 2010, that terminal is slated for a major role in diversifying Central Europe's gas supplies, away from the present overdependence on pipeline-delivered gas from Russia.
By seizing a big stake in MOL, the Kremlin evidently would like to interfere with those plans and projects, peer into sensitive information and decision-making processes, and generally obtain a degree of influence on projects of significance to European energy security. Meanwhile, MOL -with cross party support from the Hungarian parliament and government- is adding to its already existing legal defenses against such a predatory move.
--Vladimir Socor
Turkey's PKK-DTP Operations Further Complicate Kurdish Solution
Simultaneous operations recently conducted in twelve Turkish cities against what police sources described as urban networks of the outlawed Kurdistan Workers Party (PKK) in which 120 people were detained, including senior members of the pro-Kurdish Kurdistan Society Party (DTP) represented in the Parliament, was widely seen as jeopardizing attempts to find a peaceful solution to the Kurdish question. "They [the Kurds] have given a message following the local elections that nobody should fear from the Kurds. But they [the political authorities] could not stand this. They have launched an operation against our party [DTP] following the elections," Ahmet Turk, DTP Chairman and Deputy stated in London (Sabah, April 21).
Emine Ayna, DTP Deputy Chairman, claimed that the underlying reasons for launching the operations were political and also aimed at sabotaging the ceasefire extended by the PKK until June 1 (Milliyet, April 15.) Although the DTP won only 5.5 percent of the vote at a national level during the March 29 local elections, it now controls eight provincial municipalities in the east and in the Kurdish-dominated southeast, doubling the number of municipalities it won in 2004.
Turkish security forces initiated a nationwide operation early last week describing it as the culmination of a two-year long investigation into the PKK's urban network during which DTP members -including several senior local party members- were also detained.
Police sources told Jamestown that on April 20 they had received a tip off relating to a major assault being planned in the Kurdish dominated southeastern province of Diyarbakir -which was at the center of police raids. A group known as the Kurdistan Democratic Society Confederation (KCK), affiliated with the PKK, has been controlling all illegal activities of the organization within Turkey, according to police intelligence sources (Zaman, 15 April).
Taking its orders from the PKK camps in northern Iraq, the organization has been accused of inciting public hatred and organizing Molotov cocktail attacks on private and public vehicles as well as police and gendarmerie property. KCK militants have also been accused of attending the PKK's international meetings and implementing its orders. The same sources indicate that the KCK operates similar to a state, with its own parliament and decision-making mechanisms. The group allegedly takes orders from PKK leaders such as Murat Karayilan, Sabri Ok, Cemil Bayik and Zubeyir Aydar (Today's Zaman, April 14).
A police source told Jamestown that while the KCK gives the impression that it is a civilian grouping preparing the basis for a Federal Turkish state as outlined in the eight-point declaration of the DTP, it is also covertly linked to the PKK's armed wing -the Peoples' Defense Forces. However, police sources ruled out any links between the pending court hearing of the DTP's closure case and these operations.
"It is inevitable that the latest operations are being perceived as attempts to further justify and influence the court's pending decision on the DTP. But the main aim behind the start of the operations has not been to facilitate the work of the court to close the DTP but apparently an imminent threat emerged of possible attacks against various Turkish targets," police sources told Jamestown.
The Supreme Court of Appeals Chief Prosecutor Abdurrahman Yalcinkaya filed a closure case against the DTP on November 16, 2007 for being the "focal point of separatist acts" and for "alleged ties to the PKK." The case is still under consideration by the court. Police sources recalled that the court has numerous documents establishing linkage between the DTP and the PKK, which does not necessarily require additional evidence as a result of the latest operations.
"The DTP closure case is a political one and I do not believe the party will be closed down," said a Turkish legal expert speaking to Jamestown on April 15. According to Altan Tan, a Kurdish intellectual and a politician, if the aim of the latest operations against the PKK and DTP has been to shut down the political channels for the Kurdish problem and to force the DTP to go to the mountains (to fight) then the operations were wrong (Sabah, April 20).
Moreover, the DTP's gains in the southeast during the March 29 elections have brought a great deal of psychological relaxation to the already tense region, Tan added. These massive anti-PKK operations during which many DTP members were also detained, comes at a time when expectations were raised for an increased emphasis on non-military solutions to address the PKK problem and resolve the Kurdish question. The operations have also come in the midst of a decision to indefinitely postpone a Kurdish conference planned to be held later this month in Northern Iraq.
Turkey has been fighting against the PKK, -which seeks self rule for the Kurdish dominated southeast- for almost 30 years now. Ayna declared that the DTP will organize a nationwide walk to Ankara to protest against the latest detentions, as well as to force a halt to the Turkish military operations in response to PKK's ceasefire decision by June 1 (Turkish news agencies, April 21).
--Lale Sariibrahimoglu
