*Gazprom uses intermediaries to penetrate Hungarian energy market
*Kazakhstan to serve as host for new SCO "Peace Mission" military exercises
*Moqtada al-Sadr pays rare high-level visit to Turkey
**New in the Jamestown blog on Russia and Eurasia (http://www.jamestown.org/blog): Russia Signs Border Defense Pacts with Georgia's Breakaway Regions
Gazprom's Murky Games in Hungary
An Emfesz press release claimed that: "RosGas is a company in Gazprom's network of business interests." Furthermore, the press release stated that: "The new gas acquisition system of Emfesz is independent of Ukraine. Gazprom, whose interest is to keep Emfesz consumers supplied with gas, has played a role in shaping the system. The supply of all Emfesz's gas consumers is continuously guaranteed and the fact that RosGas will be the gas provider of Emfesz involves no perceptible change for the latter's customers" (www.emfesz.hu, April 28).
Emfesz, the second largest Hungarian gas distributor which imports 3 billion cubic meters annually, was forced to turn to another middleman for its gas supplies after RUE was removed from the Ukrainian - Central Asian gas trade in January 2009 (www.emfesz.hu, January 9). However, the owner of Emfesz Dmytro Firtash, has several commercial interests. He is also the 45 percent owner of RUE - 50 percent of which is owned by Gazprom and 5 percent by Firtash's business partner, Ivan Fursyn.
Gazprom's spokesman Sergey Kuprianov, sharply contradicted the allegation that the company was linked to Rosgas: "It is well known that the only export channel for Russian gas is the company Gazprom Export. The company RosGas which was named today in the Hungarian media has no relation to Gazprom and is not part of the Gazprom Group" (Interfax Ukraine, 29 April).
According to company records located by Jamestown, RosGas AG was first registered in Zurich, under the name IKRON AG on December 10, 2008 and changed its name eight days later to RosGas AG while relocating to Zug -only a few weeks before the Ukrainian-Russian gas conflict began in January 2009. The two principle shareholders of RosGas are Andras Laki, and Tamas Grazda, a Hungarian national who also happens to be the acquisitions and mergers director for Emfesz and a member of the management board of Emfesz, Poland (www.moneyhouse.ch, April 3).
The immediate suspicion is that RosGas AG is yet another in a long line of shadowy intermediary companies created by Firtash and Gazprom. However, in the case of RosGas this may mask a possible attempt by Gazprom to cut gas supplies to Firtash's Emfesz, as a precursor to a company takeover -vastly increasing its share of the Hungarian domestic gas distribution network.
Hungary has been a key target for the Russian state-owned Gazprom since the collapse of communism within Central Europe. Viewed as a potential major European gas hub, Hungary first became a target of the Kremlin in 2002 when the mysterious gas trading company, Eural Trans Gas (ETG) was registered in Budapest. That year ETG took over the contract from a Russian company, Itera, acting as the intermediary for supplying gas from Turkmenistan to Ukraine. ETG was a totally opaque structure which was later exposed as belonging to Ukrainian gas trader Dmytro Firtash and his partner, Ivan Fursyn, a banker from Odessa with close ties to the administration of then-Ukrainian president Leonid Kuchma.
ETG was paid for its services with 13 billion cubic meters of gas by the Ukrainian side which it then sold on the European market for a considerable profit. Soon after it began trading, the company's owners were suspected of having connections to the Russian mafia. This was denied by the then-unknown owners of ETG, who instituted a number of libel suits against anyone alleging the company had mafia links. The Kremlin became nervous and closed down ETG in July 2004, replacing it with a new intermediary company, RosUkrEnergo (RUE).
The 50 percent owners of RUE were the same individuals that had established ETG, Dmytro Firtash and Ivan Fursin, while the remainder of RUE was owned by Gazprombank -which at the time a fully owned subsidiary of Gazprom. The Kremlin, for undisclosed reasons, claimed that it did not know the identity of Gazprombank's Ukrainian partners in RUE.
According to the company website, one year before the dissolution of ETG, Firtash created a new Hungarian company: "Emfesz, the First Hungarian Natural Gas and Energy Trading and Service Provider Ltd., was founded in 2003 to develop a major gas and energy business in Hungary following the liberalization of the country's energy market with the passing of the Hungarian Gas Act in that year." Firtash presumably had the go-ahead to do this from Gazprom and a guarantee that he would be able to buy gas for Emfesz from RUE where he controlled 50 percent of the company. Firtash's website stated: "The company (Emfesz) has a long-term, 10 year contract with RosUkrEnergo, a Swiss gas distribution company, for the supply of gas from Central Asia to Hungary."
As the Firtash-Gazprom relationship began souring in 2008, Gazprom made a number of offers to buy a substantial share of Emfesz, however Firtash refused to sell. In April 2009 the Russian audit chamber announced that Firtash owed Gazprom $514 million, exerting more pressure on him to turn over his Hungarian operation to Moscow (www.ukranews.com, April 21).
If RosGas begins supplying Emfesz with the large quantities of gas it is contracted to sell in Hungary, it will raise questions over the source of that gas. Is it possible that RosGas is another Gazprom scheme to possibly siphon off funds for the Kremlin and reward Firtash for his long-standing loyalty to the Kremlin.
Sino-Russian Military Exercises Conceived as a Show of Unity
On April 29 the Shanghai Cooperation Organization's (SCO) Council of Defense Ministers met in Moscow to discuss enhancing military and security cooperation to counter terrorism, separatism and extremism. The meeting served as an important preparation for the SCO Summit in Yekaterinburg on June 15-16. The political disclaimer was issued ahead of the meeting, denying that the SCO is moving closer to becoming a military-political alliance. Nevertheless, recent military cooperation developments within the context of the SCO point to a concerted effort by Russia -which has held the presidency of the SCO since August 2008- to promote a greater say in Afghanistan through the multilateral organization. More specifically, the intensification of military cooperation aimed at countering terrorism, remains rooted in the Moscow-Beijing axis, which leaves some members anxious about their ability to influence or shape policy (www.ca-news.org, April 29).
SCO Secretary-General Bolat Nurgaliev, rules out the possibility of the organization being transformed into a military bloc. He admits that Afghanistan features on the agenda of many of its meetings, though its members are reluctant to contemplate committing troops. In fact, the SCO's approach towards Afghanistan could be compared to a forum within which its members exchange views on economic assistance in its stabilization. Their security concerns, relating to drug trafficking and terrorism, appear centered on considering strategies of containment as an insurance policy against NATO's failure. "The SCO has no military command and planning structure. Counter-terrorist cooperation is clearly seen in the military training exercises scenario with the participation of military contingents within the framework of SCO. Military attaches from various countries not specified by political blocs are invited to attend these large-scale exercises," Nurgaliev observed (www.infoshos.ru, December 16, 2008).
However, the emphasis on publicly displaying the military dimension may stem from its dominant members. Russia's Defense Minister Anatoliy Serdyukov, announced after the meeting that the SCO's "Peace Mission 2010" military exercises will be held in Kazakhstan. "Specific anti-terrorist activities will be practiced at drills in Kazakhstan. All previous and upcoming military exercises involving SCO countries are of a counter-terrorist nature," Serdyukov explained (RIA Novosti, April 29).
On April 28 President Dmitry Medvedev received Serdyukov and China's Defense Minister Liang Guanglie. Liang led a delegation to Russia's North Caucasus military district on a fact-finding mission, discussing counter-terrorism and the security situation in the region. Serdyukov expressed confidence in the further strengthening of Sino-Russian military cooperation, which despite claims to the contrary is the driving force behind the defense and security cooperation within the SCO (Interfax, April 28).
Indeed, Russia and China will hold around 25 joint military "events" during 2009, which according to the Russian Defense Minister demonstrates the growth in their bilateral military cooperation. The key joint military exercise which they discussed was "Peace Mission 2009." This was first raised during Serdyukov's visit to Beijing in March 2008 and has now been set for July and August 2009, held in three stages, commencing with military-political consultations in the Russian Far East before its final active parts take place in north-eastern China.
More than 2,000 Russian and Chinese troops will participate in the joint counter-terrorist exercise. The first deputy chief of Russia's General Staff Lieutenant-General Sergey Antonov, explained the ambitious nature of these plans: "Some 1,000 officers and men from the Far Eastern military district with armaments and equipment will represent Russia. Apart from heavy ground equipment -tanks, armoured personnel carriers and self-propelled artillery pieces- Russia will also provide frontline and military transport planes. The question of using strategic aircraft remains undecided for the time being. China will delegate approximately the same amount of personnel" (ITAR-TASS, April 30).
These plans will be finalized, including the scenario and the specific tasks assigned to each side, at a bilateral meeting of military experts in Khabarovsk at the end of May. Essentially functioning as a command staff exercise with troops involved, its active phases will occur in north-eastern China close to the border with Mongolia, using the Qiqihar airbase, 250 kilometres northwest of Harbin, where aircraft will be based (www.ruvr.ru, April 29; ITAR-TASS, April 30).
The "Peace Mission" concept began in 2005 with the first ever Sino-Russian joint military exercise, and was enlarged into a full SCO event in Chelyabinsk in August 2007. It appears that the same model will now be used for the "Peace Mission" counter-terrorist exercises in 2009, which by General Antonov's admission will involve "heavy ground equipment," and is likely to culminate in another large-scale show of force in Kazakhstan in 2010.
Unfortunately, from the perspective of Moscow and Beijing, some SCO members have reservations concerning the practical value of these exercises. In the aftermath of "Peace Mission 2007," defense officials in Tashkent characterized the exercises as Soviet in their style, and hardly serving the genuine security interests of the SCO's Central Asian members; indeed, the Uzbek participation in the exercise was restricted to officers sent to the command staff headquarters.
More recently, this divisive element at the heart of the SCO was demonstrated during counter-terrorist exercises held in Tajikistan. The SCO three-day long counter-terrorist exercise involving 1,000 troops was staged in mid-April, 50 kilometers south of Dushanbe. Russian and Tajik special forces rehearsed countering a terrorist incursion from Afghanistan. The scenario saw "al-Qaeda" members cross the Afghan-Tajik border then capturing a chemical factory, and taking hostages. Despite the importance of the SCO exercise, and the portrayal of organizational unity, Uzbekistan refused to take part. Tashkent merely stated that its Special Forces and Special Services were "occupied" with other activities (RIA Novosti, April 18).
Central Asian SCO members struggle to convince the dominant members of the organization to plan military exercises that meet their genuine security needs. Moscow and Beijing are forging ahead with plans for a new phase of "Peace Mission" exercises, which will involve a show of conventional force that fails to address the requirements of modern counter-terrorist operations. Differences over these exercises reveal a level of disunity that could prove embarrassing if a real operation were undertaken.
--Roger McDermott
Iraqi Cleric Moqtada al-Sadr Visits Turkey
Moqtada al-Sadr, the most prominent Shi'ite opponent of the United States' military presence in Iraq, paid an official visit to Turkey for talks on the political situation in neighboring Iraq. This was al-Sadr's first public appearance since 2007. The Turkish media reported that Ankara had sent a private plane to Iran to take al-Sadr to Turkey. To ensure his security, a close protection team from the National Security Agency (MIT) went Iran to minimize the risks during his trip to Turkey (Aksam, May 2).
Al-Sadr reportedly previously asked to visit Turkey, which had been refused. However, on this occasion, al-Sadr's request was accepted as a high level visit (Aksam, May 1). It was planned by Turkey's new Foreign Minister Ahmet Davuoglu and the U.S. was consequently informed. Turkish political observers believe that al-Sadr's visit to Ankara might serve Western interests, as it provides a tool to reduce Iranian influence on Iraq (Milliyet, May 3).
During his visit, Turkey's special envoy to Iraq Ambassador Murat Ozcelik, organized Al-Sadr's program, including meetings with President Abdullah Gul and Prime Minister Tayyip Erdogan. In these discussions, both sides exchanged views on the current situation in Iraq and evaluated developments ahead of the early elections scheduled for December (www.trt.net.tr, May 1). Ankara advised al-Sadr to form a political organization to join the democratization process in Iraq. It was also reported that during the Shi'ite meeting in Istanbul, supporters of al-Sadr agreed to form women's and youth organizations -considered to be their first steps toward forming a political party within Iraq (Sabah, May 4).
Al-Sadr attended the Shi'ite summit in Istanbul, where 70 leading figures, including five Iraqi parliamentarians and the commander of al-Sadr's Mahdi Army, Sheik Salah al-Obeidi, discussed the future of Iraq (Hurriyet, May 3). Acting as a spokesman for al-Sadr, Sheik al-Obeidi said, "As a good, old friend, we have trusted Turkey and have no hesitation to travel in the country." Al-Obeidi stated: "We have put down our arms. Arms will not be raised, especially against the Iraqi soldiers, however the resistance will continue. There is economic, political and cultural resistance against the outside forces who are invading our land." Nevertheless, al-Obeidi also left the door open for a possible future resumption of the armed struggle, "only if al-Sadr wants to resume armed resistance we would do that as well" (Hurriyet, May 3).
It appears that the main reason for the Turkish government inviting al-Sadr, was to ensure his support for Ankara's policies toward the oil rich Iraqi city of Kirkuk, which is mainly composed of Kurds, Turkomans and Arabs -though almost all its ethnic elements are Shi'ite. Al-Sadr supports Turkey's position over the status of Kirkuk, arguing that it should belong to the central government. In fact, during their meeting in Istanbul, al-Sadr reportedly declared his support for Ankara's position (Yeni Safak, May 4). The Kurdish daily, Helwer Post ran an in-depth analysis to explain al-Sadr's opposition to the federal structure of Iraq, and particularly the special status of Baghdad and Kirkuk and the distribution oil wealth. The Helwer Post suggested that because al-Sadr's support base is concentrated in Baghdad and to some extent Kirkuk, this limits his ability to share the wealth of oil revenues. The status of Baghdad within a loose federation restricts al-Sadr's group accessing the oil rich regional administrations. If Iraq emerges as a viable federation, in the near future the al-Sadr group will be economically and politically marginalized within Baghdad (Helwer Post, April 11). Given that al-Sadr cannot prevent an Iraqi federation, in order to access oil revenues he must keep Kirkuk within the control of Iraq's central government rather than under the Kurdish Regional Government. Thus, it is critical for al-Sadr to cooperate with Turkey.
The timing of the visit was also significant. On May 3, the Turkish press reported that UN diplomats working on the status of Kirkuk for more than one year had finally drafted their report. They suggested delaying for five years the planned referendum to determine the status of Kirkuk (NTV, May 3). As expected, Kurdish leaders strongly opposed these recommendations. Iraq's President Jalal Talabani, a Kurd himself, clearly stated that he will not negotiate on the status of Kirkuk, which is already determined through the constitution (Yeni Safak, May 4).
As part of Turkey's strategy to maintain the territorial unity of Iraq, Ankara has held talks with a variety of groups within the country in an effort to promote its stability. In 2006, for instance, Turkey invited Iraqi Sunni representatives to discuss the future of Iraq (Milli Gazete, December 15, 2006). Al-Sadr and Turkey may now agree on the Kirkuk issue, which is an issue of vital importance to both sides. Given that the UN report advocated a five-year delay to the referendum on determining the status of Kirkuk, al-Sadr, using the strategy of abandoning the insurgency and seeking Turkey's support, may re-emerge as a powerful actor after the major defeat in 2007 inflicted on his Mahdi Army.
--Emrullah Uslu
