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Russia Report: April 1, 2005

1 April 2005, Volume 5, Number 13
By Jeffrey Donovan

The Organization for Security and Cooperation in Europe (OSCE) has a problem on its hands. In the most immediate sense, that problem is about money: "The OSCE currently has no agreement on its budget for 2005," OSCE spokesman Keith Jinks said. "And the situation is that now, as we approach the end of the first quarter, there is a certain tension and that inevitably has been a subject of discussion -- a behind-the-scenes, continuing discussion -- to try to find a way of resolving the budget issue."

In an interview on 29 March with RFE/RL, Jinks acknowledged that Moscow is threatening not to pay its contribution to the 2005 OSCE budget unless the organization agrees to focus less on democracy and more on security issues.

He said the OSCE is trying to address Russian concerns, noting that a special panel is looking into criticisms leveled against the OSCE last summer by a Russian-led group of former Soviet republics.

That panel is due in June to deliver recommendations on possible reforms to the current OSCE chairman, Slovenian Foreign Minister Dimitrij Rupel. But while future reforms may shift the OSCE's resources away from Europe and toward Central Asia, Jinks said its mission will not be compromised, regardless of Russian threats.

"[Rupel has] said that human rights are non-negotiable," Jinks says. "He made that very plain. He said that there are basic standards and these can't be adjusted on the grounds of improving the security situation in the world. In other words, human rights do remain paramount in the role of the organization."

Last year, Russia contributed about $10 million to the 55-member OSCE, which operates on the basis of consensus among its members. Its refusal so far to contribute to this year's budget means the OSCE, according to Jinks, will soon have to adopt an emergency, month-to-month budget that will make launching any new or important initiatives nearly impossible.

The budget issue appears so acute that, according to a report in the "International Herald Tribune" on 29 March, the European Union recently circulated a confidential document asking member states to help support the OSCE's $240 million budget -- or risk its collapse.

Jinks, for his part, rejects that possibility. "It's not a question of the organization being in any way paralyzed or coming to any kind of crisis point," he said. "But obviously, it's not a satisfactory situation, and it's not one that the chairmanship of the organization wishes to see continue for any day longer than it has to."

Russia has long been vocal in its criticism of the OSCE, whose missions have provided guidance for democratic dissidents across the Commonwealth of Independent States.

In July, Moscow led a group of eight other former Soviet states -- Armenia, Belarus, Kazakhstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan -- in a statement that accused the OSCE of not respecting the national sovereignty and internal affairs of the countries in which it operates.

Ukraine and Kyrgyzstan have since had popular political uprisings that came on the heels of strong OSCE and Western criticism of their election processes. And the once pro-Russian government of Moldova, which also signed the statement, has since turned toward the West.

Meanwhile, questions have been raised about the possibility of political change coming in next year's scheduled polls in Kazakhstan and Belarus. Under President Alyaksandr Lukashenka, Belarus has consistently criticized the OSCE mission in Minsk, officially downgrading its status in 2002.

"Clearly, it's not just with the OSCE that relations are tense," said Dafne Ter-Sakarian, a Eurasia analyst with the Economist Intelligence Unit (EIU) in London. "Clearly, Russia is increasingly concerned about 'Western interference' in its traditional sphere of influence. So, it's got to try to curtail this if possible. [Withholding money from the OSCE] is one way that it's attempting to do so."

Russia also accuses the OSCE of ignoring what it sees as discrimination against Russian-speaking minorities in Latvia and Estonia, while spotlighting human rights and democracy shortcomings in other former Soviet republics.

But the "International Herald Tribune" quoted the confidential EU document as saying: "At the heart of the present crisis lies a more fundamental 'values gap.' Russia's main problem with the OSCE concerns those things we most value in it -- its monitoring of human rights and democracy."

The original mandate of the OSCE, which dates to 1975, was to focus on human rights, but also security and economic issues. Russia now says it wants to "balance" those three areas. But the OSCE's Jinks said the organization has always principally been about human rights and democracy.

EIU analyst Ter-Sakarian believes Russia's threats are merely tactical. She said Russia's foreign policy is keenly focused on gaining entry to and influencing key international institutions such as the OSCE -- not on leaving them.

"It's more of a brinkmanship game," she said. "The most Russia can hope for is for the OSCE to be sort of conciliatory. Russia can't really afford to walk away from these institutions, because they're the only foothold it has on being an international player at all."

Still, Russian rhetoric continues to heat up. Federation Council Foreign Affairs Committee Chairman Mikhail Margelov was quoted as saying, "Unless the OSCE is reformed drastically, it will have no future."

By Victor Yasmann

Leading Russian political figures on 24 and 25 March rushed to comment on the unfolding events in Kyrgyzstan, with government officials stating unequivocally that Moscow does not plan to intervene in the former Soviet republic. Other commentators, however, urged the Kremlin to assert itself in the crisis, with many going so far as to ascribe the uprising to a Western plot to reduce further Russia's influence in the region.

Speaking to journalists in Yerevan, President Vladimir Putin said on 25 March that he was not surprised by the Kyrgyz events, RFE/RL's Russian Service reported. "They are the results of the weakness of the previous government and the accumulation of social and economic problems." Putin said Russia regrets that the Kyrgyz opposition used "illegal" means to achieve its aims. "Unfortunately, once again in the former Soviet Union, political problems were solved in an illegitimate way and were accompanied by chaos and casualties," Putin added.

Putin also said he believes Russia can work with the new Kyrgyz leadership. "These are people we know very well, and we hope they will restore order there very soon," Putin said. Putin also said Russia has no objection to former Kyrgyz President Askar Akaev settling in Russia, Ekho Moskvy reported.

The Foreign Ministry on 24 March issued a statement saying Russia will not intervene in Kyrgyzstan, "Rossiiskaya gazeta" reported on 25 March. "We regret that there have been victims there and call for a return to legal means," the daily quoted Foreign Minister Sergei Lavrov as saying. Duma Speaker Boris Gryzlov said on 24 March that "any intervention from outside Kyrgyzstan would be very unwelcome." "The Kyrgyz should regulate the situation themselves," Gryzlov said, according to ORT.

Federation Council Foreign Affairs Committee Chairman Mikhail Margelov told ORT that "it is most important that Kyrgyzstan remain a secular state and avoid the establishment of a regime such as the one the Taliban set up in Afghanistan." Federation Council Chairman Sergei Mironov said the Akaev administration created the conditions for the current unrest. "The law must not be violated neither during elections nor at any other time," Mironov said, RBK reported on 24 March. RTR reported on 24 March that the situation at the Russian military base near Kant, Kyrgyzstan, and at the Russian Embassy in Bishkek was "normal."

Duma Security Committee Deputy Chairman Mikhail Grishankov (Unified Russia) said the Kyrgyz events remind him of the recent revolution in Georgia, RBK reported on 24 March. "I am deeply convinced that the organizer of these two events should be sought in the same place -- the United States," Grishankov said. One of Russia's main goals in Kyrgyzstan now is "to neutralize the negative impact of outside countries, especially Europe," he added. Motherland party leader Dmitrii Rogozin said on 24 March that Moscow should warn all parties that Russia might use force if necessary, reported. "One must not forget that China has territorial claims against Kyrgyzstan," Rogozin said. "Without Russia's support, [Kyrgyzstan] could not exist." Deputy Duma Speaker and Liberal Democratic Party of Russia (LDPR) head Vladimir Zhirinovskii said that Russia should step in decisively "to stop the 'tulip' revolution."

ORT commentator Mikhail Leontev, known for his vocal anti-Americanism, said on 23 and 24 March that the United States is behind the events in Kyrgyzstan and that Washington has decided "to obliterate all Russian influence in the post-Soviet space." "There is no such thing as a 'velvet' revolution," Leontev said. "A revolution always means self-sacrifice, victims, and blood. If someone orchestrated mass disturbances to restore power to a bunch of disgraced former ministers and senior bureaucrats, that is not a revolution."

Konstantin Zatulin, director of the CIS Institute, told TV-Tsentr on 24 March that Russia has no legal or formal grounds to intervene in Kyrgyzstan and that the Collective Security Treaty, to which both countries are signatories, does not have any provisions covering the current situation. He noted there was no foreign aggression against Kyrgyzstan and that Akaev did not ask for Russian assistance. Zatulin said the uprising was a domestic crisis caused by uneven economic development and the unfair distribution of wealth and power.

Zatulin, who usually espouses national-patriotic views, was extremely mild in describing the Kyrgyz situation. "It would be a mistake to call Akaev a pro-Russian figure and to say the opposition is controlled from abroad," he said. "We see no traces of America or anybody else there. All the events have a local character." Zatulin added that Russia might intervene in the future if the situation in Kyrgyzstan gets out of hand or if the new government asks for assistance.

Zatulin also said the Commonwealth of Independent States (CIS) is not only an organization but a geographic entity that cannot be changed. He added that there is no reason to think the new Kyrgyz administration will be more anti-Russian or anti-CIS than former President Akaev's was. He said there is a limit to how much Russia's influence in the region can be reduced. "Whatever happens, Russia will remain the strongest, biggest, and most resource-rich country in the region," Zatulin noted.

By Jeremy Bransten

A Moscow court on 28 March convicted the director of the city's Andrei Sakharov Museum and his deputy of instigating religious and ethnic hatred. The decision follows a controversial art exhibition at the museum dealing with the topic of religion. The Russian Orthodox Church has welcomed the guilty verdict. But human rights groups have denounced the ruling, saying it deals a blow to freedom of speech, as well as freedom of conscience, in Russia.

The art exhibition in question was unveiled in January 2004 and stayed open for only 96 hours. Titled "Caution, Religion," it featured 42 works by 42 artists. The show's curators said the works shared a common aim -- to provoke discussion about the role of religion in modern society.

In the end, the exhibition provoked a lot more than discussion. Within days of its opening, activists from the self-described Movement for the Renewal of the Fatherland vandalized many of the exhibits, calling them blasphemous.

The offending artwork included a painting of Jesus's face imposed on a Coca-Cola logo next to the words "This is My Blood." The vandals were charged with hooliganism but cleared after intervention by the Orthodox Church and several State Duma deputies.

Instead, it was Sakharov Museum Director Yurii Samodurov, his deputy Lyudmila Vasilovskaya, and exhibiting artist Anna Mikhalchuk who faced trial, for inciting ethnic and religious hatred under Article 282 of the Russian Criminal Code. Mikhalchuk was acquitted . But the guilty verdict for Samodurov and Vasilovskaya has shaken the Russian art world and infuriated human rights activists.

The court ruled the two instigated religious hatred by insulting Orthodox believers. It also ruled that they fanned ethnic hatred as well, because most Russian Orthodox believers are ethnic Russians. They were ordered to pay a fine of 100,000 rubles ($3,600) each.

Father Vsevolod Chaplin, spokesman for the Moscow Patriarchate of the Russian Orthodox Church, welcomed the verdict, saying it would prevent future attempts to insult believers.

Yelena Bonner, widow of human rights activist Andrei Sakharov, could not disagree more. She told RFE/RL that, in her view, the 28 March verdict confirms freedom's limitations in Russia. "This case proves that in Russia, there is no freedom of conscience as such," she said. "There is the Orthodox Church's freedom to act in an uncontrolled manner, the freedom to somewhat denigrate other religions, and a ban on atheism and agnosticism."

Yurii Shmidt, defense lawyer for the convicted curators, goes even further, accusing the Russian Orthodox Church of pursuing its own political agenda. "Our right to freely express our opinions and convictions is something they want to suppress in order to make Orthodoxy the state religion and turn Russia into a theocracy," he said.

That is a view shared by Nikolai Khramov of the Russian Radical Party, which also protested the verdict. "We are extremely worried by this court case," he said, "and we do not see it as an isolated episode but as a stage in the attempt to turn the Russian Federation from a secular, law-based state into a de facto clerical state where Orthodoxy, as interpreted by the Moscow Patriarchate, becomes the de facto state religion, where the Patriarchate assumes the position once held by the ideology department of the [former] Central Committee [of the Communist Party.]"

Activists say the verdict is a consequence of Russia's postcommunist law on freedom of conscience and religious associations, which they believe is flawed and contradictory. While the law defines Russia as a secular state, it also recognizes what it calls the "special contribution of Orthodoxy to the establishment of the state system in Russia."

The law also makes a distinction between Orthodoxy and other faiths. Activists believe this lays the groundwork for court rulings that favor Orthodox views over others.

For his part, curator Samodurov said the fact that a court has become the arbiter of what is proper art -- and what is not -- should worry all artists and those concerned about the freedom of creative expression and censorship. "For the first time, a court, in the name of the state, has formulated the idea -- through its guilty verdict -- that there exists art that is close to the Western consciousness but alien to Russia," he said. "In essence, in my formulation, the court has said there is one type of art that is degenerate and another type of art that is 'normal.'"

Samodurov and Vasilovskaya have 10 days to appeal their conviction. They say they are ready to pursue their case all the way to the European Court of Human Rights in Strasbourg.

(RFE/RL's Russian Service contributed to this report.)

By Jeremy Bransten

Both houses of Russia's legislature have approved the creation of a new institution. The Public Chamber, which was suggested by President Vladimir Putin, is supposed to act as a type of collective ombudsman. Its role will be to analyze draft legislation and the activities of the parliament, as well as to monitor federal and regional administrative bodies. It will only have consultative powers. The Kremlin argues that the chamber will strengthen democracy. But critics say it represents a calculated move to diminish the power of parliament and strengthen the Kremlin's centralization of power.

To hear Kremlin supporters explain it, Russia's newly approved Public Chamber is proof of Russia's continuing commitment to democracy. The State Duma on 16 March overwhelmingly approved the Kremlin-proposed bill on creating the new institution by 345 votes to 50.

"We are creating an additional opportunity for the development of civil society in the country," Duma Speaker Boris Gryzlov said after the bill's passage. "It is a completely public organization that will receive broad rights, according to the law. It will have the right to analyze Duma bills, especially bills that deal with constitutional issues. And it will have the right to check the work of the executive. I think that our voters, the citizens of Russian, can only welcome the passage of this law."

But the reception from many civil society groups -- as well as independent deputies who voted against the bill -- has been frosty. The first objection regards the staffing of the chamber.

According to the bill, the Public Chamber will have 126 members. One-third will be selected by President Putin. The Kremlin says these individuals will be widely respected and recognized personalities who are neither politicians nor businesspeople. The second third will be nominated by civil society organizations. Once these first two-thirds have been installed, they will select the chamber's remaining 42 members.

Independent Duma Deputy Oksana Dmitrieva questioned the need for what she sees as an alternative parliament staffed by nonpoliticians -- many of whom will be close to the Kremlin. "It's a kind of smokescreen, perhaps to distract the public's attention from what is a real diminishment of democracy," Dmitrieva said. "In any case, there are independent deputies and opposition factions in the parliament already that criticize the government's actions. I think there will be attempts to [replace these opinions with those of] the Public Chamber, which will say: 'Everything's fine. There are just a few minor issues, which we will address and everything will be resolved.' In the public forum, real politicians will be replaced with some cultural representatives, who may be very worthy people in their fields but who are not professional politicians and who cannot effectively battle many of the government's and the president's extremely misguided actions."

While Dmitrieva worries that the Public Chamber might usurp parliament's role, some civil society representatives see the institution as a Kremlin attempt to bring the nongovernmental sector under direct control.

Lyudmila Akeseeva heads the Moscow Helsinki Group, one of the country's leading human rights organizations. She notes Putin's recent moves to strengthen what the Kremlin calls the "vertical of power" throughout Russia -- meaning top-down, centralized administration. Putin has mostly concentrated on political institutions so far, but she fears Russia's burgeoning civil society is now being targeted.

"There has been this idea to organize civil society, which has already developed in our country, according to this vertical of power," Alekseeva said. "But this is a crazy idea. As soon as you organize civil society into this vertical of power, it stops being civil society. It becomes a pathetic appendage of the government. And it is destroyed."

Aleksei Simonov heads the Glasnost Defense Foundation, another prominent human rights organization. He stressed the Public Chamber's lack of real powers and said that an organization that gets both its budget and premises from the government cannot claim much independence, making it little more than a Potemkin village.

"I don't see the point of this institution," Simonov said. "What is a Public Chamber? It can listen to something and advise something. It is a state organ that is going to receive generous state funds [and] that will receive premises. As far as I understand, an entire museum is being cleared out to free up the space for this Public Chamber. This is all being done just to create the illusion of activity. What's the point?"

The Public Chamber is due to begin its work on 1 July and be fully staffed by the end of the year.

(RFE/RL's Russian Service contributed to this report.)

By Nikola Krastev

Oil production in Russia has been increasing at a spectacular rate since 2000. But growth in gas production has been relatively modest. The Russian gas industry has been waiting for two things to happen -- the introduction of pricing reform and the large-scale entry of oil companies onto the gas market. So far, neither has happened. Challenges include aging fields, ambiguous laws regarding foreign investment, and the influence of the state monopoly Gazprom on how the production and trade of gas is organized. But as a recent conference of Western investors indicated, Russia's vast gas and oil reserves continue to attract major interest.

Hundreds of potential foreign investors who attended the conference in New York heard warnings that they should clearly calculate their risk tolerance before committing to the Russian energy market.

The circumstances were summed up by Peter Roberts, a partner in the Jones Day law firm, which has extensive operations in Russia and elsewhere in the Commonwealth of Independent States (CIS). Roberts told the conference that the incomplete regulatory framework in the gas industry is a major obstacle for foreign investors.

"There's duplication, contradiction, and overlap, which causes frustration," he said. "The Russian government recognizes this. They have a plan to reform the Russian legislative sector for the period up to 2020. At the moment, it's not very well formulated. It's long on principle but short on detail, but it's a step in the right direction."

A key part of the regulatory framework is the Gas Law of 1999. It helps regulate natural-gas development, pricing, and marketing. The law mandates that the state retain ownership of at least 35 percent of common stock of Gazprom, the huge energy company. It also says that foreign investors may not own more than 20 percent of Gazprom common stock, or of regional gas enterprises' common stock.

Antoine Halff, director of global energy for Eurasia Group, a consultancy firm, said that, in Russia, one has to look not only at that gas law but also consider the constitution, the Civil Code, regulations concerning monopolies, subsoil law, and licensing law. Halff said that the oil and gas sectors in Russia are still evolving. Russian companies are still trying to find their role within Russia and trying to expand their presence overseas.

"What we are witnessing in Russia is a trend which is not unlike that in other [oil-]producing countries," Halff said. "Volumes might go down -- and I think that they are widely expected to go down tremendously this year -- but at the same time the value extracted for each barrel of Russian crude is likely to continue to go up, in line with international markets, but also in line with Russia's own conditions and marketing efforts overseas."

Other participants in the conference said competition for investment opportunities in Russia's energy sector will increase in the next three years. International and Russian oil companies and state oil companies from China and India will continue to drive the pressure for investment.

Andrew Somers, the president of the American Chamber of Commerce in Russia, said that during the recent presidential summit in Bratislava, the commercial energy dialogue between Russia and the United States was endorsed anew by Presidents Vladimir Putin and George W. Bush.

"The [U.S.] business community in Russia has, I would say, excellent relations with the government," Somers said. "We feel we have a hearing. We have access to all of the key ministries at every level of decision-making. And despite some disturbing trends in the past year, our access and our efforts to work with the Russian government on business issues has remained, basically, very positive."

Somers said the Chamber of Commerce succeeded late in 2004 in negotiating equal access to Russia's energy-transportation infrastructure for smaller American investors who felt neglected in the past. He also said that the Subsoil Law -- how the Russian government will apportion licenses to provide the ability for companies to exploit Russian mineral resources -- appears neutral in terms of foreign and Russian investors and that the latest draft is likely be approved by the Russian parliament.

Other participants said Russia's energy sector is booming, but that there have been serious attempts to undermine foreign presence in some fields. For instance, recently there was a proposal by the Russian Ministry of Natural Resources to limit investment in so-called strategic energy fields only to companies with a minimum of 51 percent Russian ownership. The proposal sent chills throughout the foreign investors' community in Russia.

Peter Roberts of the Jones Day law firm said foreign investors willing to expand in Russia's gas industry have to consider risks related to the incomplete regulatory framework, the desire of Russian companies to expand overseas, and competition for investment opportunities within Russia. He also underlined the special situation with Gazprom, where the relationship with investors is not clear in practice.

"This is an issue particularly with Gazprom," he said. "It has a huge position within the Russian market, everybody is aware of that. But there is something to be aware of as to how Gazprom aligns itself with foreign investors and how the foreign investors will align themselves with Gazprom."

Roberts said the Russian government's role in Gazprom needs to be clarified in order to give it a good chance to join the World Trade Organization.

Another stumbling block for foreign investors in Russia's oil and gas industry is the so-called production-sharing agreements (PSA). There is no single law regulating them, but a dozen pieces of legislation that sometimes contradict each other.

In 2004, for instance, Russian courts nullified a PSA for a gas-production project in Sakhalin won in 1993 by the U.S. companies Exxon-Mobil and Chevron Texaco. The courts ruled the PSA did not qualify for a license. By the time the agreement was nullified, the companies had spent more than $60 million in exploration work.

April: Term of Tula Oblast Governor Vasilii Starodubtsev to expire

April: Russian Soyuz spacecraft to bring new crew to the International Space Station

4 April. President Vladimir Putin to meet with Belarusian President Alyaksandr Lukashenka in Sochi

4 April: Foreign Minister Sergei Lavrov to visit Bratislava

10 April: President Putin to visit Poland

13 April: Duma to review implementation of law on monetization of in-kind social benefits and to hear report by Finance Minister Aleksei Kudrin

15 April: Duma expected to vote on second reading of amendments to the law on forming the State Duma that would introduce the proportional-representation system and eliminate the single-mandate districts

16 April: Opposition in Bashkortostan planning a major demonstration calling for the resignation of republican President Murtaza Rakhimov

17 April: Krasnoyarsk Krai and Taimyr Autonomous Okrug to hold referendums on the question of merging

18 April: Moscow Arbitration Court to begin hearing case against Yukos regarding suspected tax arrears for 2003

9 May: Commemoration of the 60th anniversary of the end of World War II

10 May: Russia-EU summit to be held in Moscow

30-31 May: Foreign Minister Lavrov to visit Japan

23 June: Yukos shareholders meeting

4 July: 750th anniversary of the founding of Kaliningrad

6-8 July: G-8 summit in Scotland

August: CIS summit to be held in Kazan

September: First-ever Sino-Russian military exercises to be held on the Shandong Peninsula

1 November: New Public Chamber expected to hold first session

2006: Russia to host a G-8 summit in St. Petersburg

1 January 2006: Date by which all political parties must conform to law on political parties, which requires at least 50,000 members and branches in one-half of all federation subjects, or either reregister as public organizations or be dissolved.