Thursday, October 23, 2014


The Power Vertical

Kudrin's Game: The Man In The Middle

Former Finance Minister Aleksei Kudrin.
Former Finance Minister Aleksei Kudrin.
Aleksei Kudrin is at it again.
 
Speaking at a conference on April 3 at Moscow's Higher School of Economics, the former finance minister said Russia needs to cut military and security spending, slash subsidies to industry, and increase funding for road construction, education, and health care.

He also warned that the government won't be able to continue relying on high oil prices to finance its expenditures.
 
"There has to be some kind of reform and it needs to be spelled out now because the budget preparations finish up in the beginning of June," Kudrin said.
 
We can probably expect to hear many more such warnings from him in the coming months.
 
Since resigning from the government in September after a very public spat with President Dmitry Medvedev, one of the big mysteries of Russian politics has been where Kudrin would land once Putin returns to the Kremlin.
 
It is more or less clear where he wanted to land.
 
Kudrin's stated reason for resigning was that he opposed Medvedev's plans to increase military spending by $65 billion over the next three years. He is apparently sincere about this as given his persistent warnings about the dangers ahead for Russia's budget.
 
But there is more to it than that. Informed speculation has it that Kudrin had hoped to be tapped as Putin's prime minister, and was furious when Medvedev, with whom he has strained relations, got the nod instead.
 
According to a thought-provoking piece by political analyst Mikhail Rostovsky in "Moskovsky komsomolets" last week, Putin was less than pleased with Kudrin's resignation. "How could you let me down in this way?" Putin reportedly said.
 
Putin stressed publicly that Kudrin remained a valued member of his team and, according to Rostovsky's report, offered him the chairmanship of the Central Bank.
 
He turned down that offer but Putin nevertheless reportedly instructed members of his economics and finance team "to do what Kudrin was telling them to."
 
Putin obviously values Kudrin greatly. The two have been close friends since serving together in the St. Petersburg city government in the 1990s. And Putin is also smart enough to understand that it was Kudrin's steady management of Russia's finances -- as much as high oil prices -- that facilitated the macroeconomic stability of the past decade.
 
Kudrin's closeness to Putin clearly gives him some leverage -- and some latitude. How else would he be able to get away with resigning against Putin's wishes, turning down the Central Bank job, and speaking out in favor of political reform at opposition rallies?
 
But what is Kudrin planning to do with this leverage?
 
After flirting with forming a center-right political party with billionaire oligarch Mikhail Prokhorov, he seems to have settled on starting up a foundation -- it is unclear whether this will be a classic think-tank, a lobbying outfit, or both -- to promote economic and political reform.
 
A recent story in "Polit.ru" compared the initiative to a similar foundation that the late former Prime Minister Yegor Gaidar formed after leaving government.
 
At first glance, this doesn't look terribly exciting, nor does it look like a great career move. Ex-government officials forming think-tanks, after all, are a dime-a-dozen.
 
But as Rostovsky points out in his "Moskovsky komsomolets" piece, given Kudrin's prominent position in the elite, there appears to be more going on here:
 
Kudrin decided to assume responsibility for formulation of a new positive agenda. He promptly raised the money necessary for establishment of a research center and set up office in the business center in central Moscow. It is from there that Kudrin intends to dish out economic recipes and say in which direction the country ought to be moving. That Medvedev will disagree with Kudrin's suggestions on some points need not be said.

Rostovsky suggests that Kudrin will play the role of something akin to a shadow prime minister -- or a prime minister in waiting -- as Medvedev struggles to keep Russia's financial house in order and carry out badly needed public sector reforms.
 
"Medvedev had a co-president when he was in the Kremlin. When he is chairman of the government, he will have a co-premier. Either a co-premier or leader of the opposition to the government. This is going to be Aleksei Kudrin," Rostovsky wrote.
 
Significantly, Kudrin has said that he was open to having his new think tank cooperate with Prokhorov's fledgling new center-right party.
 
Whether Kudrin's role will be that or a de facto co-premier or the intellectual leader of the opposition to the government depends largely on what Putin intends to do with his new term.
 
In one scenario, Medvedev will carry out deeply unpopular social reforms, take the heat, become the fall guy, and retire to some ceremonial post. Kudrin would then step in as prime minister and implement the economic and political reforms he has long championed. (Writing on  his blog, "In Moscow's Shadows," back in January, Mark Galeotti spelled out the optimistic scenario of Kudrin eventually becoming Putin's reformist premier.)

In another scenario, Putin will play his classic game of balancing different power centers off against each other -- in this case Medvedev and Kudrin -- to preserve his role as the ultimate power broker. But Kudrin would likely tire of that game quickly.
 
Kudrin is very much the man in the middle in Russian politics. He is personally close to Putin (but reviled by his siloviki courtiers) while being politically aligned with the reformist technocratic wing of the elite. He held a prominent place in Putin's system of managed democracy and has recently made overtures to the Russian Street, offering to play the role of intermediary between the opposition and the authorities. He continues to flirt with the idea of teaming up with Prokhorov.
 
He is therefore something of a barometer and his actions merit watching as things move forward.
 
-- Brian Whitmore

Tags: Vladimir Putin,Dmitry Medvedev,Aleksei Kudrin

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Comment Sorting
Comments
     
by: Mark from: Victoria
April 04, 2012 05:03
This post does a nice job of promoting the conventional wisdom that Aleksei Kudrin was - and is - some kind of economic savant who guided Russia through the tumultuous waters of fiscal uncertainty to the golden shores of Cash Surplus Land. Well, it comes right out and says it, doesn't it? "...it was Kudrin's steady management of Russia's finances -- as much as high oil prices -- that facilitated the macroeconomic stability of the past decade."

Does that mean Kudrin could have achieved a balanced budget and a cash surplus with oil at $55.00 a barrel? The above statement seems to dangle the suggestion that Kudrin's genius was equally responsible for Russia's prosperity.

Well, let's take a look. I'm intrigued right away by Kudrin's contention that the government won't be able to continue relying on high oil prices to finance its expenditures. Really? Why not? What would lead him to make such a forecast?

Not research into world energy prices.

http://www.wtrg.com/oil_graphs/oilprice1970.gif

World oil price has risen steadily since 2003, when the world's biggest per capita consumer decided to punish a major oil producer for the 9-11 attacks on its soil, who...ummm...didn't actually have anything to do with those attacks, and dropped significantly only when the subprime meltdown sent that economy - and much of the world - into recession. Perhaps Kudrin sees another worldwide recession approaching, but based on his displayed forecasting skills so far, I would have to say that's unlikely.

But hold on! Maybe the world can just increase production, and the price will drop!!

Nope. As you can see here,

http://www.wtrg.com/oil_graphs/PAPRPOP.gif

and here,

http://www.wtrg.com/oil_graphs/PAPRPNT.gif

production by both OPEC and non-OPEC sources has increased pretty steadily since the mid-80's for OPEC and the mid-90's for non-OPEC, and it has had diddly for effect on the upward price trend. Moreover, Kurt Cobb at oilprice.com argues persuasively that the U.S. and Saudi Arabia are powerless to bring prices down, the one by tapping the strategic reserves and the other by increasing production. As evidence, he offers, "It's true that oil markets move on rumours and sentiment, but not as far nor for as long as people believe. The joint U.S.-Great Britain announcement caused oil prices to fall sharply the same day before recovering nearly the entire loss by the close. The Saudi announcement that it might increase production caused a sharper one-day fall which was largely recouped the following day."

http://oilprice.com/Energy/Oil-Prices/Why-Saudi-and-US-Attempts-to-Influence-Oil-Prices-are-Ineffective.html

See anything in there that suggests the Russian government will not be able to rely on high energy prices for much longer? I don't.

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11:12 October 22, 2014

THE BEGINNING OF THE END OF RUSSIA'S 'GAS WEAPON'

In less than a week, on October 27, Lithuania is scheduled to open its first Liquified Natural Gas (LNG) import terminal at the port of Klaipeda. The terminal, which will begin receiving deliveries in early 2015, is a significant step toward changing the energy equation in Lithuania, the Baltic states, and ultimately in Europe as a whole.

Initially, Lithuania plans to buy enough LNG to cover about a quarter of its domestic needs. But once the terminal is operating at full capacity, and once Lithuania's pipelines to Latvia are upgraded, it will be able to supply 90 percent of the three Baltic states' natural gas demand.

Oh, and by the way, Lithuania's current supply contract with Gazprom expires at the end of next year.

And this is just one of the ways the gas game is changing. Poland is also building a LNG import terminal, which is scheduled to go online in mid-2015.

And as energy analyst  Wenyuan Qiu writes in "The Moscow Times" today, a steep rise in U.S. production has made it "functionally independent of offshore suppliers." As a result, "the closure of the U.S. LNG import market is forcing producers in the Middle East and Africa to look for customers elsewhere" leading to "downward pressure on prices" in Europe.

"Russia will remain an important European energy provider because its gas is relatively economic. But Russia's ability to leverage this resource as an instrument of foreign policy is diminishing," Qiu writes.

 

08:27 October 22, 2014

MORNING NEWS ROUNDUP

Some items from RFE/RL's News Desk:

RUSSIA-UKRAINE GAS DEAL REPORTEDLY CLOSER

European Energy Commissioner Guenther Oettinger has announced substantial progress was reached in October 21 talks between representatives of Ukraine and Russia on gas supplies, but a final deal has yet to be agreed.

A summit held in Milan October 17 had produced hopes for a breakthrough, after Ukraine's President Petro Poroshenko met Russian counterpart Vladimir Putin and said they had reached a preliminary agreement on a gas price until March 31.

Oettinger said as part of tentative deals, Ukraine planned to purchase some 4 billion cubic meters of gas from Russia before the end of this year.

Oettinger also said Ukraine would pay $1.4 billion of its debt to Russia for gas supplies already received before the end of October and another $1.6 billion by the end of this year.

The head of Russia's delegation to the talks, Energy Minister Aleksandr Novak, said the price of gas for Ukraine would be $385 per 1,000 cubic meters, much lower than the $485 that Russia's state-controlled Gazprom was demanding just weeks ago.

However, the price, which was first announced by Poroshenko following his meeting with Putin on October 17, is still higher than the average of some $350 that Gazprom charges EU companies

Novak said that price would be in force from October 2014 until late March 2015 -- provided Ukraine pays in advance.

However, Novak added the EU should take responsibility for guaranteeing Ukraine pay its $5.3-billion debt for gas to Russia before the end of 2014.

Kyiv has asked the EU for an additional loan of $2.6 billion, but a spokesman stressed on October 21 that the request was not made in connection with the ongoing gas talks.

The EU has so far offered Kyiv loans totalling more than $2 billion.

Russia cut off gas deliveries tro Ukraine in mid-June, citing the $5.3-billion debt. However, Gazprom has not halted supplies transiting Ukraine en route to EU member states.

But Novak again ruled out Gazprom's agreeing to let EU states re-export its gas to Ukraine.

Oettinger announced another meeting would be held in Brussels on October 29.

Separately, the Kremlin said Putin and Poroshenko discussed Russian gas supplies to Ukraine among other issues during a telephone conversation October 21.

It didn't provide further details.

(Based on reporting by Reuters, TASS, and Interfax)

PROSECUTORS TARGET EKHO MOSKVY

The independent Russian radio station "Ekho Moskvy" said it has been informed of an unscheduled inspection by the prosecutor's office.

The station's deputy chief editor Sergei Buntman said on October 21, "We received a document dated from yesterday (October 20) that said the main directorate of the Emergency Situation's Ministry" had requested the prosecutor's office to conduct an inspection of the radio station.

Buntman said according to the document, the inspection would start on October 22 and last for 20 working days.

"Taking into consideration days off, that means almost a month," Buntman said, and he added that the inspection should not affect the activities of the station.

Buntman said, "Of course questions arise about why this decision is taken so suddenly."

"Echo Moskvy" posted a copy of the document the radio station received that indicated the inspection was meant to determine if the station was in compliance with fire safety laws.

(Based on reporting by "Ekho Moskvy" and Interfax)

PUTIN, POROSHENKO DISCUSS CEASEFIRE AND GAS SUPPLIES

The Kremlin said the Russian and Ukrainian presidents stressed the importance of supporting the peace process in Ukraine and observing the ceasefire the country's south-east during a phone conversation on October 21.

President Vladimir Putin and Petro Poroshenko also discussed Russian gas supplies to Ukraine after a tentative agreement reached in Milan last week on the basic terms of future supplies, the statement said.

It didn't provide further details.

Russia raised the price it charges Kyiv for natural gas after Ukraine's pro-Russia President Viktor Yanukovych was ousted in February, then halted gas supplies to Ukraine in June when Kyiv failed to pay the higher price.

Some progress was reportedly made toward resolving the issue of Russian gas supplies to Ukraine during last week's talks in Milan.

Poroshenko said a preliminary agreement had been reached on a price of $385 per 1,000 cubic meters until the end of March -- $100 less than Russia had originally demanded.

(Based on reporting by Reuters, TASS, and kremlin.ru)

RUSSIAN INVESTIGATORS SAY 'CRIMINAL NEGLIGENCE' BEHIND TOTAL AIR CRASH

Russian investigators say the air crash that has killed the chief executive of French oil giant Total was caused “criminal negligence” by airport officials.

Christophe de Margerie and three French crew members died when his corporate jet collided with a snow-removal machine at Moscow's Vnukovo Airport late on October 20.

The Investigative Committee warned that several senior airport officials would be suspended, adding that investigators will assess the "actions and non-action" of management.

The snow plough driver has already been detained.

Investigators have said the man was drunk at the time of the accident, which his lawyer denied.

Total is one of the top foreign investors in Russia.

The Kremlin said President Vladimir Putin "highly esteemed" Margerie's business qualities and his "consistent devotion" to developing bilateral Russia-French relations.

(Based on reporting by AFP, Interfax, and TASS)

 

16:08 October 17, 2014

NEW POWER VERTICAL BLOG

I just posted a new piece on the Power Vertical blog: Putin's Class of 2014.

The iPhone-toting hipsters hanging out in their trendy downtown Moscow office are just the high-profile part of the Kremlin's new youth strategy.

Founded in November 2013, the youth group Set -- which means "Network" in Russian -- has organized patriotic fashion shows and film festivals, created an alphabet for schoolchildren that highlights the regime's accomplishments, and painted murals in seven cities on October 7 to mark Russian President Vladimir Putin's 62nd birthday....

But the rise of Set is just one side of the story. The other aspect of the Kremlin's youth strategy is stealthier -- and much more consequential.

Over the past 18 months, Putin has been quietly bringing a new cadre of officials to Moscow, reshaping the rank-and-file bureaucracy in his own image.

You can read it all here.

AND A NEW POWER VERTICAL PODCAST COMING SOON

We're in post-production for the new Power Vertical Podcast: Ukraine's Loyal Russians

A country divided between a Ukrainian-speaking west and a Russian-speaking east. An irreconcilable schism forged in history and set in stone. Lviv vs. Luhansk; Orange vs. Blue.

It's long been a truism that Ukraine was hopelessly split. It's a truism repeated endlessly by the Kremlin's propaganda machine -- and one used by Vladimir Putin to justify his Novorossiya project.

But it's a truism that the majority of Ukraine's ethnic Russians -- in cities like Odesa and Mariupol in the south to Dnipropetrovsk and Zaporizhia in the east to Kharkiv in the north  -- are proving false. Most of Ukraine's ethnic Russians, it turns out, are loyal Ukrainian citizens.

Joining me are Andreas Umland, a professor of Russian and Ukrainian history at Kyiv Mohyla University and Natalya Churikova, Senior Editor of RFE/RL's Ukrainian Service. It's in post-production now and will be up soon.

 

13:25 October 17, 2014

AFTERNOON NEWS ROUNDUP

Some items from RFE/RL's News Desk:

RUSSIA-WEST RIFT PERSIST AFTER DIFFICULT UKRAINE CRISIS TALKS

By RFE/RL

Italy's prime minister said he was "really positive" about the prospects for a solution to the Ukraine conflict after a meeting attended by Russian President Vladimir Putin, Ukrainian President Petro Poroshenko and European leaders, but the Kremlin suggested deep rifts remained after the "difficult" talks and accused Western officials of inflexibility.

"In general, I am really positive after this meeting," Italian Prime Minister Matteo Renzi said after the talks over breakfast during a Europe-Asia summit that was overshadowed by the crisis in Ukraine, where deadly fighting persists in the east despite a cease-fire between government forces and pro-Russian separatists.

Putin, in the spotlight and under pressure from the West to do more to bring peace to Ukraine, said the meeting -- attended by Putin and Poroshenko as well as German Chancellor Angela Merkel, French President Francois Hollande, British Prime Minister David Cameron, Italian Prime Minister Matteo Renzi, and outgoing EU leaders Herman Van Rompuy and Jose Manuel Barroso -- was "good, positive".

But his spokesman, Dmitry Peskov, gave a grimmer account.

"The talks are indeed difficult, full of misunderstandings, disagreements, but they are nevertheless ongoing, an exchange of opinion is in progress," Peskov told reporters.

He said some participants displayed "a complete lack of desire to take an objective approach" to the Ukraine crisis, which Russia blames on the European Union, the United States, and the pro-Western government that gained power in Ukraine after the ouster of a president sympathetic to Russia, Viktor Yanukovych, In February.

Kyiv, NATO, and Western governments say Russia has supported the rebels with troops, weaponry, and propaganda after illegally annexing the Black Sea peninsula from Ukraine in March.

The conflict in eastern Ukraine has killed more than 3,660 combatants and civilians since April and driven Moscow's ties with the West to post-Cold War lows, prompting punitive sanctions against Moscow and a Russian ban on many foods from the EU, its biggest trading partner for years.

The breakfast-table talks came hours after lengthy Putin-Merkel meeting that stretched past midnight and failed to resolve what the Kremlin said were "serious differences of opinion about the genesis of the internal Ukrainian conflict as well as about the causes of what is happening there now."

Western leaders have rejected Russia's denials of involvement and said Moscow must see to it that a cease-fire and steps toward peace agreed on September 5 in Minsk, the capital of Belarus, are implemented.

"It is obviously above all Russia's task to make clear that the Minsk plan is adhered to," Merkel told reporters on October 16. "Unfortunately, there are still a lot of shortcomings but it will be important to look for a dialogue here."

British Prime Minister David Cameron said Putin assured the other leaders at the breakfast that Russia does not want a divided Ukraine or a frozen crisis.

Kremlin critics say Russia has supported the cease-fire and plans for peace because the September 5 agreement followed rebel gains that left the separatists in control over large portions of Ukraine's Donetsk and Luhansk regions, giving Moscow a lever to influence its France-sized neighbor and keep it destabilized - and out of NATO - for years to come.

Putin and Poroshenko were to meet with Merkel and Hollande later on October 17.

Putin, who basked in attention at a military parade in mostly Slavic, Orthodox Christian Serbia on October 16, set the stage for tense talks in Milan by warning in Belgrade that a dispute with Kyiv over natural gas could jeopardize Russian supplies to Europe via transit nation Ukraine this winter.

He said Europe faces "major transit risks" to gas supplies from Russia.

Blaming Kyiv in advance for any possible cuts in supplies to Europe, Putin said that if Ukraine siphons gas from transit pipelines to the European Union, Russia will reduce supplies in the amount of the "stolen" gas.

Russia raised the price it charges Kyiv for natural gas after Yanukovych was ousted by street protests he had touched off last November by scrapping plans for a deal tightening ties with the EU and turning toward Russia instead.

In June, Russia halted gas supplies meant for domestic consumption in Ukraine when Kyiv failed to pay the higher price.

Russia is the EU's biggest external gas supplier, providing about one-third of the gas consumed there, and previous price disputes between Moscow and Kyiv have led to supply cuts that have chilled Europeans in wintertime.

Some government officials said the Western leaders would ask Putin to explain the threat of gas supply cuts.

Merkel and Poroshenko held talks earlier on October 16, and Poroshenko said he received "a great demonstration of support for Ukraine" from the German leader.

Kremlin spokesman Dmitry Peskov said Putin also met with former Italian Premier Silvio Berlusconi, whom he referred to as Putin's "old friend."

Dutch Prime Minister Mark Rutte said he spoke briefly to Putin and asked him for "maximum cooperation" over the downing of a Malaysian Airlines passenger jet in the conflict zone in eastern Ukraine in July.

More than half of the 298 people killed were Dutch citizens, and many in the West suspect the plane was shot down by the separatists with a missile system provided by Russia.

Hundreds of people have been killed since the cease-fire, with fierce fighting focusing on the devastated Donetsk international airport and shelling reported in the city of Donetsk and elsewhere almost daily.

Ukrainian military officials said three soldiers were killed and nine wounded on October 16.

NATO said it has not yet detected "significant" movements of Russian troops in a region near the border with Ukraine back to their home bases, as the Kremlin said Putin ordered last week.

A NATO spokesperson said "there is still a large and capable force sitting on the border of Ukraine, and heavy equipment still has to be pulled back [from the border]."

(With reporting by Reuters, AP, TASS, Interfax, and AFP)

GEORGIAN PM SAYS NO PROGRESS NORMALIZING RELATIONS WITH MOSCOW

Georgian Prime Minister Irakly Garibashvili says attempts by Tbilisi to normalize political relations with Russia have thus far been unsuccessful.

Garibashvili said in Tbilisi on October 16 that the Georgian government had done "all it could" to improve bilateral relations with Moscow has only achieved progress in the economic sector.

The premier's Georgian Dream party took power two years ago pledging to engage with Moscow.

Garibashvili made his comments one day after Russia announced it would sign an "alliance and integration" treaty with the breakaway Georgian region of Abkhazia.

The treaty would create a "common defense infrastructure" between Abkhazia and Russia while forming joint law-enforcement structures and a more integrated economic space.

Georgian President Giorgi Margvelashvili issued an "emergency statement" on the treaty on October 15.

Moscow recognized Abkhazia as an independent state after a brief war between Russia and Georgia in 2008.

(Based on reporting by Interfax, AFP, and TASS)

RUSSIA DETAINS TWO JOURNALISTS OVER WORKSHOP

Russian officials temporarily detained and then banned two American journalists from conducting an investigative-journalism workshop in St. Petersburg.

The men were found by a court on October 16 of violating Russian visa regulations and released after several hours.

Randy Covington, a professor at the University of South Carolina, and Joe Bergantino of the New England Center for Investigative Reporting were detained by immigration authorities while conducting the first of a two-day workshop for 14 Russian journalists.

St. Petersburg's branch of the Federal Migration Service said the men's activities "did not correspond" to the purpose of their trip to Russia.

Officials said they could no longer teach the workshop but were free to leave Russia as scheduled.

The New England Center for Investigative Journalism said the men had tourist visas and had already held a workshop in Moscow.

(Based on reporting by AP and "The Boston Globe")

18:00 October 16, 2014

EVENING NEWS ROUNDUP

Some items from RFE/RL's Newes Desk:

PUTIN WARNS EUROPE OF GAS CRISIS THIS WINTER

President Vladimir Putin has warned that Europe faces "major transit risks" to natural gas supplies from Russia this winter.

Putin told reporters in Belgrade on October 16 that if Ukraine siphons off natural gas without permission from transit pipelines to the European Union, Russia “will consecutively reduce the stolen volume at the cost of supplies."

Putin made the remarks ahead of talks in Milan on October 16 and 17 with EU leaders and Ukrainian President Petro Poroshenko.

Russia raised the price it charges Kyiv for natural gas after Ukraine's pro-Russia Preident Viktor Yanukovych was ousted in February, then halted gas supplies to Ukraine in June when Kyiv failed to pay the higher price.

The price standoff is the third between Moscow and Kyiv since 2006.

Russia is the EU's biggest gas supplier, providing about a third of the gas consumed there.

(Based on reporting by Reuters, AP, and AFP)

U.S. HELSINKI COMMITTEE DECRIES RUSSIAN ATTEMPT TO CLOSE MEMORIAL RIGHTS GROUP

By RFE/RL

The U.S. Helsinki Commission says Russia’s attempt to liquidate Memorial, the country's oldest and best-known human rights organization, is “an obvious attempt to silence the voice of its own conscience.”

“It is very troubling that an organization founded by [Soviet dissident] Andrei Sakharov to address the crimes of the Stalinist era now has become the target of a new wave of repression,” the commission’s chairman, U.S. Senator Ben Cardin, said in an October 16 statement.

Russia's Justice Ministry on October 10 appealed to the country’s Supreme Court to close Memorial, which comprises more than 50 bodies nationwide. The reasons for the request were not made public.

Created in the 1980s by Soviet-era dissidents, Memorial has served as a tireless rights watchdog and important source of Soviet-era records for a quarter century.

PUTIN VOWS TO SUPPORT SERBS ON KOSOVO

Russian President Vladimir Putin pledged continued support for Serbia on the divisive issue of Kosovo during a state visit that mixed meetings with officials with attendance at a military parade.

Putin is the guest of honor at Serbia's first military parade in some 30 years as Belgrade marks the anniversary of its liberation from the Nazis by partisans and Soviet Army troops in 1944, a celebration Serbia moved forward four days to accommodate Putin's schedule.

The visit highlights Serbia's delicate balance between the European Union, which it is seeking to join, and relations with Russia that are rooted in history and religion but encompass economic and geopolitical interests.

Russia angrily criticized the NATO bombing of the rump Yugoslavia in 1999 and has backed Belgrade's opposition to independence for mostly ethnic Albanian Kosovo, defying the United States and preventing Kosovo from getting a seat at the United Nations.

Putin promised Serbian President Tomislav Nikolic that Russia would stand firm over Kosovo, saying the Kremlin's stance was "a position of principle that is not to be subjected to any adjustments."

"We supported Serbia in the past and we intend to continue supporting it in the future. In Russia friendship is not an object of trade-offs," Putin said.

Nikolic said Serbia "sees in Russia a great ally and a partner and Serbia won't compromise its morals with any kind of bad behavior towards Russia."

Despite Serbia's desire to become a member of the European Union, ties between Belgrade and Moscow have become stronger since the EU started imposing sanctions on Russia for the Kremlin's annexation of Ukraine's Crimean Peninsula and support for separatists in eastern Ukraine.

Criticizing sanctions the United States and European Union have imposed on Moscow over its actions in Ukraine in an interview on the eve of his visit, Putin told the Serbian daily "Politika" that isolating Russia was an "absurd, illusory goal" and attempts to do so would hurt Europe's economy.

In a pointed reminder of Russia's nuclear might, Putin said: "We hope our partners will realize the futility of attempts to blackmail Russia and remember what consequences discord between major nuclear powers could bring for strategic stability."

Putin used the visit to promote South Stream, a Russian gas pipeline project that that the EU has suspended in member states.

Serbia has recently indicated it will not start building South Stream. Prime Minister Aleksandar Vucic said last week "it makes no sense" to start without an agreement on the pipeline's legality between the EU and Moscow.

"It is necessary to unblock the situation with South Stream," Putin said. "I am convinced that this project will make a palpable contribution to Europe's overall energy security. Everyone wins from this: Both Russia and European consumers, including Serbia."

The European Commission released a report on candidate countries earlier this month that warned Belgrade's plans to build a portion of the pipeline and its refusal to follow the EU's lead on sanctions against Russia could jeopardize Serbia's bid for EU membership.

Serbia has recently indicated it will not start building South Stream. Prime Minister Aleksandar Vucic said last week "it makes no sense" to start without an agreement on the pipeline's legality between the EU and Moscow.Serbia has recently indicated it will not start building South Stream.

Putin told "Politika" the pipeline project would bring Serbia more than 2 million euros in new investment and "substantially strengthen the country's energy security."

Putin's warm Serbian welcome may contrast with greeting he faces hours later at an October 16-17 Europe-Asia summit in Milan, where he will meet Western leaders angry over Russia's role in the Ukraine crisis.

NATO says Russian has sent troops and weapons to help pro-Russian separatists fighting government forces in a conflict that has killed more than 3,660 people in eastern Ukraine since April, including 298 passengers and crew abroad a Malaysian jet shot down there in July.

Putin said the importance of the liberation anniversary events could not be overestimated.

"Seventy years ago, our peoples together crushed the criminal ideology of misanthropy that threatened civilization," he said in the interview.

In a veiled swipe at the United States, he said "it is important today that people in various countries, on various continents remember what terrible consequences certainty in one's own exceptionalism can bring."

Putin said he hopes for peace in Ukraine but suggested Ukrainians whose protests toppled a president sympathetic to Moscow in February presented a Nazi-like threat.

"Unfortunately the vaccine against the Nazi virus ... is losing its potency in some European states.," he told "Politika," adding: "particular concern on this score is prompted by the situation in Ukraine, where there was an anticonstitutional coup d'etat in February whose driving forces were nationalists and other radical groups."

In comments to RFE/RL's Balkan Service, Vucic pointed to the complications his country is facing as it balances its foreign policy between the EU and Russia.

"We are not part of the EU and nobody asked us about sanctions against Russia so why should we have to accept them now?" Vucic asked.

Vucic said Serbia respects what EU stands for and what EU membership offers but rejects Brussels' recent habit of telling Belgrade about changes it must make to be admitted.

However, he told reporters last week that Serbia's "strategic goal is not in question – Serbia is on the EU path."

That may not always be evident to the naked eye.

In anticipation of Putin's visit, shops around Belgrade have been selling T-shirts with Putin's face printed on them.

"Nothing better could happen to us," Belgrade resident Vukan Baricanin, a retired economist, said of Putin's visit. "Putin is a famous personality. He turned a country that was on the verge of bankruptcy into a world power."

But Dragan Sutanovac, Serbia’s defense minister between 2007 and 2012, denounced “a desire for idolatry in regard to Putin.”

(With reporting by TASS, Reuters, AFP, AP, and Interfax)

RUSSIAN AMBASSADOR AGAINST 'PUTIN PUB' IN BISHKEK

By RFE/RL's Kyrgyz Service

Russian Ambassador to Kyrgyzstan, Andrei Krutko, has protested the new "Putin Pub" restaurant in Bishkek.

Krutko said late October 15 that naming "a dubious drinking site" after "our president" is "unethical" and therefore he asked Bishkek authorities to remove the commercial banners and billboards advertising the pub.

Krutko added that he would do everything possible "either to shut down the place or to make it change its name."

Last month, Bishkek authorities removed all billboards and banners in the city that advertised the "Putin Pub."  

The billboards carried a black screen with white and black silhouetted portrait of the Russian President Vladimir Putin in a circle with the name of the restaurant -- "Putin Pub," below.  

(With reporting by "Vecherny Bishkek")

17:35 October 16, 2014

UKRAINE CALLS ON ITS CITIZENS TO DITCH VKONTAKTE

VIa slon.ru:

Ukraine's Security Service has urged Ukrainians not to use Russian social networks.

Markiian Lubkovsky, an adviser to the Interior Minister told the television channel "112 Ukraine" that the site "VKontakte" is an "element of pressure and influence." 

"We urge all Ukrainians, all of our citizens to be careful not to use these networks, because they are now part of the information war against Ukraine," he said.

Read it all here. And a big h/t to Kevin Rothrock for flagging.

 

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The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It covers emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or