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Russia Report: November 18, 2004

18 November 2004, Volume 4, Number 45
By Roman Kupchinsky

"There is no greater nonsense than the separation of internal from external policy." Vladimir Lenin

The proposed takeover of state-owned oil company Rosneft by the state-controlled natural-gas monopoly Gazprom is close to completion. On 11 November, the cabinet gave its approval to the proposal, under which Rosneft will be traded for an increase in the government's stake in Gazprom to 50 percent plus one share.

On 2 November, Gazpromneft, a fully owned subsidiary of Gazprom, was registered in St. Petersburg with 30 million rubles ($1 million) in capitalization. Gazpromneft will unite all of Gazprom's oil-sector holdings, including Rosneft and, according to some reports, state-owned Zarubezhneft. Rosneft President Sergei Bogdanchikov was appointed general director of the new company, whose main activities will include oil-and-gas-condensate production, transportation, and storage.

Gazpromneft, according to RBK, is expected to produce 34 million tons of oil in 2004, while Bogdanchikov told Interfax on 12 October that "Rosneft plans to produce 8 billion cubic meters and Gazprom 540 billion cubic meters of natural gas in 2004." Gazprom CEO Aleksei Miller has said that the company intends to boost oil production to 45 million tons annually over the next few years, reported on 16 November.

On 3 November, embattled Yukos, Russia's largest oil exporter, informed its shareholders that it will hold an extraordinary shareholders meeting on 20 December to discuss initiating bankruptcy proceedings, in the wake of a new Russian government demand that it pay $9 billion in back taxes. Yukos CEO Steven Theede told Interfax on 3 November that the 2002 tax claim of $11.5 billion against Yukos and Yuganksneftegaz, its largest production unit, was strange since Yukos's total revenues that year amounted to just $11.4 billion.

Adding to the sense of impending doom for Yukos was an earlier announcement in late October by the State Property Fund that Yuganskneftegaz will be sold at auction with starting price considerably less than the $18 billion evaluation made by the investment bank Dresdner Kleinwort Wasserstein.

Many observers in Russia have predicted that Yuganskneftegaz will be sold to Gazprom, and that it will go for far below its market value. The sell-off of Yuganskneftegaz has been seen as the beginning of the breakup of Yukos, and government officials have said that other Yukos subsidiaries could go under the hammer as well.

Reacting to the spate of articles in the world press criticizing President Vladimir Putin's apparent decision to break up Yukos and gain even greater control over Russia's energy sector, presidential aide Igor Shuvalov told a conference in Moscow on 28 October that the merger of Gazprom and Rosneft is connected to Russia's integration with the global economy. "We are not striving to gain full control over Russia's fuel-and-energy complex, and this is not even possible now," Shuvalov said, according to Interfax.

Many oil-and-gas analysts and politicians, however, think that globalization is not the key issue driving these developments. Instead, they focus on how the Kremlin has used Gazprom to advance its political goals in such places as Belarus, Georgia, and Armenia, and they speculate how it intends to use the newly formed Gazpromneft.

On 17 February 2003, "The Moscow Times" reported a speech Putin delivered at a reception marking the 10th anniversary of the founding of Gazprom. "Gazprom, as a strategically important company, should be kept, and has been kept, as a single organism," Putin told the gathered guests. "Gazprom is a powerful political and economic lever of influence over the rest of the world."

The use of Gazprom as a "lever of influence" has not gone unnoticed throughout the region. At a Polish parliamentary hearing on 25 October, former Polish foreign-intelligence chief Zbigniew Siemiatkowski said, "we are facing a restoration of the Russian Empire through economic means and by the principle of 'yesterday tanks, today oil.'"

Writing in the Ukrainian weekly "Zerkalo nedeli" in August 2003, Oxford University's James Sherr argued: "By the end of 2000, Putin had used Russia's debt and energy cards to acquire control of Moldova's energy and financial sectors and secure a distinct revision to Ukraine's geopolitical course (albeit one substantially balanced, then and now, by the NATO-Ukraine relationship). In February 2002, Putin proposed a 'single export channel' for all exports of gas from Central Asia. Since then (June 2002), he has secured agreement to route nearly all of Kazakhstan's current and projected oil production via Russia's transit network and in April 2003 concluded similar long-term agreements over the export of gas from Turkmenistan, which has the third largest reserves in the world." "It would be prudent to conclude that Putin's talk of 'globalization' is boltovnya [empty talk]," Sherr concluded.

A recent study by the Organization for Economic Cooperation and Development (OECD) titled "Russia's Gas Sector: The Endless Wait For Reform" points to yet another reason why the Kremlin is taking oil companies under its control by subsuming them into Gazprom. Production at Gazprom's major gas fields is declining dramatically, and in order to offset this, it is critical for new supplies to come from low-cost sources within Russia and abroad. "This points to an increasing role for the oil companies and the independents," the study concludes.

In 2004, Gazprom extracted 540 billion cubic meters of gas from existing gas fields. However, these fields are projected to yield only 28 percent of Russia's predicted 2020 total production of 580 billion cubic meters. As of 1 January 2004, Russia had proven natural-gas reserves of 46.9 trillion cubic meters.

An important goal for the Russian government is to supplement Gazprom's current production with associated gas from oil drilling, and therefore the merger with Rosneft, which is currently producing 8 billion cubic meters of gas annually, will help to make up for Gazprom's future projected production declines. This is the cheapest way for Gazprom to make up for dwindling production, one that avoids spending billions of dollars that it does not have for start-up costs and new pipelines.

Without an expansion of Gazprom's capacity to supply more gas to Europe, the chances of a future European energy crisis are greatly increased. At the same time, the stronger Gazprom is, the greater its potential leverage over European policies. Moreover, a decrease in gas exports could mean budget shortfalls for Russia, since a large slice of the state budget comes from Gazprom's taxes, which are paid for by gas sales to Europe.

Neil Thomas, head of European energy research for Wood Mackenzie, told Platts news service in 2003 that a new study has forecast that Europe will be 60 percent dependent on imported gas by 2015, compared with 40 percent currently. And much of this gas must come from Russia.

Europe currently imports about 160 billion cubic meters per year from Russia. By 2015, volumes could reach 300 billion cubic meters, equivalent to 40 percent of overall European demand.

Apparently, Putin has mastered Lenin's axiom of combining internal and external policy goals. The addition of Gazpromneft, with or without Yuganskneftegaz, could turn the notoriously opaque Gazprom, into a much more "powerful political lever" than anyone has imagined.

By Catherine A. Fitzpatrick

The Kremlin's 9 November announcement of a newly reorganized presidential human rights council has opened up a long-standing debate within the Russian human rights movement and abroad about the nature of President Vladimir Putin's intentions and the efficacy of such quasi-official bodies in what is perceived by many to be a worsening human rights climate.

Putin's decree reorganizes his Human Rights Commission into the Council for the Development of Civil Society Institutions and Human Rights, "Kommersant-Daily" reported on 10 November. Ella Pamfilova, chairwoman of the commission, will head the new council.

Pamfilova told journalists she sees the council's role as defending democratic principles, developing the judicial system, and fighting corruption. According to RIA-Novosti, Pamfilova spoke at a 12 November press conference, where she brushed aside concerns about increasing human rights violations in Russia. "I believe that rumors about the end of democracy are obviously exaggerated," she said. "There is nothing like that, despite a lot of things we don't like."

While the council's new, broader mandate might appear to some as going beyond human rights, Pamfilova argued that if the president can conquer corruption, everything else will go more easily. Pamfilova said she envisions helping independent organizations develop so that they can tackle corruption. The government should protect such organizations, she said, so that there will be "normal, independent organizations guided by by-laws and rules" and not by "criminality."

The Council of Europe, of which Russia is a member, has expressed concern about Putin's 13 September proposal to end the direct election of regional governors, saying that the people should retain the right to choose their local leaders. Putin made that proposal in the wake of the September terrorist attack on a school in Beslan that left more than 330 people, mainly children, dead. While Putin argued that his idea is justified by the need to combat terrorism, leaders from former Soviet President Mikhail Gorbachev to U.S. Secretary of State Colin Powell have expressed reservations about it, as well as about the curtailing of press freedom and other restrictions on democracy.

The new council, which is based on the commission that was created in 2001, retains its original membership: Leonid Roshal, chief of the Emergency Surgery of Department of the Russian Academy of Medical Sciences; Ludmila Alekseeva, chairwoman of the Moscow Helsinki Gruop; Oleg Orlov, head of the Memorial Society Human Rights Center; Aleksei Simonov, president of the Glasnost Defense Foundation; television hosts Vladimir Pozner and Vladimir Solovev; and Sergei Govorukhin, president of the Fund for the Disabled From Interregional Conflicts. Pollster Yurii Levada; journalist Vitalii Tretyakov; Yurii Polyakov, editor in chief of "Literaturnaya Gazeta"; Aleskandr Auzan, who for many years headed the Confederation of Consumer Rights Societies; and Sergei Karaganov, chairman of the Council for Foreign and Defense Policy, also remain.

Alekseeva said the group plans to "build a sort of countrywide human rights vertical," "Kommersant-Daily" reported.

Karaganov stressed that the council will carve out a new role in monitoring nonstate actors, as well as traditional human- and civil-rights concerns. "It's generally assumed that human rights activity necessarily means protecting citizens from the state," Karaganov said. "But you also have to protect human rights from crime, from domestic abuse, and from society itself. In Russia, for example, the rights of immigrants are not protected, and our council must protect them." Karaganov argued that the problem of racism does not stem from state policies, as the state no longer promotes racism, but from extremist groups within society. Human rights activists should intervene, he said.

The reforming of the council has opened up a long-standing debate within the human rights movement about whether it is appropriate for human rights advocates concerned about their independence to join such official bodies, especially under an administration that human rights groups generally believe is responsible for atrocities in Chechnya and other systematic human rights abuses.

The debate cuts both ways, however. "You can't imagine the difficulties this list [of potential members] encountered on the way to the president," Pamfilova said, according to "Kommersant-Daily." Apparently, some of the more outspoken people on the list faced opposition within the Kremlin.

Despite agreeing to serve on the council, Alekseeva sees the Kremlin's interest in human rights groups as an effort to bring under control yet another sector of society, just as the media, the legislature, and the governors were brought to heel. But because human rights groups constitute a network among themselves rather than a "vertical of power" from the top down, it is harder to destroy them.

"They have not imprisoned us yet, so we will continue our efforts," Alekseeva concluded, according to "Kommersant-Daily." The chief reason for the reorganization of the agency was to divide the labor between Pamfilova and human rights ombudsman Vladimir Lukin, Alekseeva said. "Lukin will now be responsible for citizens' complaints, and we will be responsible for public organizations," Simonov said, according to "Kommersant-Daily."

Even as the council gets down to protecting human rights "from society," there still appears to be plenty to do fending off attacks on civil rights from the state. While Putin officially approved the council, it could turn out to be independent-minded enough to come into conflict with individual members of the administration who are less progressive on human rights issues. On 3 November, Pamfilova openly condemned an initiative by Prosecutor-General Vladimir Ustinov to seize the relatives of terrorists during terrorist attacks and to use them in negotiations.

"The plan to punish innocent people for the alleged crimes of their relatives contradicts the fundamental principles of human rights and strikes a blow at the very concept of human rights," Pamfilova said on 3 November. UN experts too have condemned Ustinov's proposal. Two Russian civic groups, For Human Rights and Ecology and Human Rights, called for Ustinov to resign, saying his proposal is tantamount to "the legalization of state terrorism."

This type of confrontational statement might not be the norm for the new council, however. Pamfilova's first appearance in her new capacity was much more staid, as she and Valerii Bogomolov, head of Unified Russia's General Council; Nikas Safronov, the Kremlin's main portraitist; and sculptor Zurab Tsereteli reviewed entries in a children's drawing contest.

In an interview published in "Nezavisimaya gazeta" on 11 November, Pamfilova implied that the formation of the council had met with some resistance. "There were difficulties promoting the idea and there were highly divergent opinions," she said.

The formation of the council also caught journalists and activists by surprise. A month ago, Putin decreed that local governments should provide financial and technical assistance to regional human rights commissions, but now he appears to be assigning a guiding role to the national body.

Pamfilova has explained the reorganization in terms of the need to separate her functions from those of Lukin's office. One activist who did not join the council, Lev Ponomarev of For Human Rights, said he thought that Pamfilova was driven to reform the body because of a lack of funding from the government. Ponomarev criticized those of his colleagues who joined the council, saying they should have set conditions for the government before agreeing. An obvious issue that should have been raised, Ponomarev said, is a recent administration-sponsored bill that would restrict foreign grants for Russian NGOs. Simonov, who remained on the council, said he disagrees with the idea of setting conditions, commenting that as a council member, he now is able to appear more frequently on national television.

Meanwhile, Pamfilova is taking credit for stalling the proposed restrictions on grants, "Nezavisimaya gazeta" reported on 11 November. She said the presidential staff and economic advisers already opposed the current draft and held out the hope that NGOs will not face additional obstacles.

"The Moscow Times" on 11 November took a frankly critical stance on the new council, calling it "an apparent attempt to boost Kremlin control over civil society." In an interview with "Moskovskie novosti," Alekseeva said she is not certain what the new body will achieve, but she nonetheless decided to remain with it. She pointed out that in 2002, when the government was preparing to forcibly close Chechen displaced-persons camps in Ingushetia, commission members were able to convince Putin to hold off. Alekseeva also credited the commission with helping to kill a harsh media bill that was drafted in the wake of the October 2002 Moscow theater hostage taking, and claimed the commission pushed through amendments to soften a restrictive law on citizenship.

Alekseeva said she sees the new council as a facilitator of human rights work at the local level, helping to protect human rights groups. For example, when the office of a human rights group in Ingushetia was searched, the authorities found a suspicious black powder. Pamfilova telephoned the president of Ingushetia and explained that the powder was photocopier toner. Alekseeva also cited work on behalf of groups in Krasnodar Krai, Orel Oblast, and Tatarstan that might have been disbanded if not for intervention from the capital. "By bringing together scattered and weak groups that had known nothing of one another's existence, we manage to build the nucleus of a civil society," Alekseeva said about her own work at the Helsinki movement. "Today, we are establishing associations of public organizations across Russia, bringing together human rights groups, environmentalists, women's and youth groups, and educational organizations. Isolated groups are easier to destroy."

At a reunion of Soviet-era political prisoners in New York on 11 November hosted by the American Jewish Committee and sponsored by the emigre-operated Gratitude Foundation, veterans of the Soviet-era labor-camp system, who had spent many years fighting for human rights, reflected that the new human rights council was probably an effort by the Putin government to burnish its human-rights image at a time when it is coming under attack for brutality in Chechnya, suppression of the media, and the failure to curb a wave of hate crimes against foreigners and minorities.

Yurii Orlov, a physicist who was sentenced to seven years in a labor camp and five years of internal exile and who served most of his term before being released in exchange for a Soviet spy, told RFE/RL that he visited Moscow in August to strategize with colleagues on how to cope with Russia's significant backsliding on human rights issues. Although the newly reformed council has just gotten started, its broader mandate could enable it to take up child protection, domestic violence, and women's rights, Orlov said. The challenge is also to protect some vulnerable groups in society from extremists as well. "Today, xenophobia is a widespread phenomenon, and not mainly at the state level," commented Orlov.

"Still, the main task today is to defend rights from the state," Orlov added. "Russia is now backsliding, and the secret police are now belligerently trying to return to their Soviet-type of status, a Stalinist status." He thinks the council might be asked to take up the issue of protecting citizens from terrorist attacks, and that the government will frame this as a human rights issue.

Orlov said he personally would have reservations about joining such a council. Still, he is willing to wait and see how the council performs. He reasons that sometimes, human rights activists can join such a body, attempt to work with authorities, and then demonstratively resign from it as a way of depriving the government of the legitimacy lent by their participation. This was the tactic chosen by biologist and former political prisoner Sergei Kovalev, who served as presidential human rights commissioner in the 1990s until his resignation over human rights violations in Chechnya.

Vladimir Bukovskii, another political prisoner at the reunion who served terms in prison and psychiatric hospitals for his writings until he was exchanged in the 1970s for a Chilean communist, said he could never join such a committee. "I think it's created specifically to fake human rights activity and place it in the service of a new regime, which is a KGB regime," he told RFE/RL. "It's shameful to support it. I am 100 percent against it."

"The KGB is infamous for creating all kinds of fronts and organizations," Bukovskii commented. "We'll just ignore this one." While Bukovskii said he could imagine what was intended by the notion of protecting human rights from society as much as the state, the former dissident said he does not believe it is the main problem facing Russia today.

"The worst human rights problem now is that they can kill you, and no one will be responsible," said Bukovskii. "They kill people like during a war, and no one investigates anything." He cited the unsolved murders of parliamentarian Galina Starovoitova in 1998 and of sociologist Nikolai Girenko in June. Bukovskii said he fails to see what council members could accomplish. "They will be used by Putin as a smokescreen, for improving his image, and then discarded and forgotten," he said.

On 10 November, RFE/RL's Russian Service broadcast a roundtable discussion on the topic of Russia's so-called national idea featuring political scientist Andrei Piontkovskii, National Bolshevik Party leader and writer Eduard Limonov, and historian Andrei Zubov. The complete transcript in Russian can be found at

Piontkovskii argued that discussions of a national idea are symptomatic of a society undergoing problems. "Flourishing countries, relatively flourishing ones, don't search for national ideas," Piontkovskii said. "What kind of national idea does Japan, France, or Luxembourg have?"

Limonov argued that Russia needs a "program" in order to determine its priorities. "It would be good to define who we want to be, how we relate to our neighbors," Limonov said. "And all of that, most likely, could be called an idea, but it would be more accurate to talk about a program." (Robert Coalson)

November: Prime Minister Mikhail Fradkov to visit Egypt

15 November: Members of the independent Volcker Commission to arrive in Moscow as part of the investigation into alleged abuses of the UN's oil-for-food program during the regime of Iraqi President Saddam Hussein

16 November: Duma to consider bill on eliminating the direct election of regional governors in its second reading

20-21 November: President Vladimir Putin to attend an Asia-Pacific Economic Cooperation (APEC) organization summit in Santiago, Chile. Putin will meet privately with U.S. President George W. Bush

20 November: Sixth anniversary of the killing of State Duma Deputy Galina Starovoitova

21 November: Second round of the presidential election in Ukraine

22 November: President Putin to visit Brazil

25 November: Russia-EU summit in The Hague, with the participation of Russian President Putin

25 November: Completion of work on the federal register of citizens eligible for social benefits

27 November: Regular Congress of the Unified Russia party

28 November: Gubernatorial election in Kurgan Oblast

December: A draft law on toll roads will be submitted to the government, according to the Federal Highways Agency's Construction Department

5 December: By-elections for State Duma seats will be held in two single-mandate districts in Ulyanovsk and Moscow

5 December: Gubernatorial elections will be held in Astrakhan, Bryansk, Volgograd, Kamchatka, and Ulyanovsk oblasts

5 December: Mayoral elections in Astrakhan and Murmansk

12 December: Government deadline for determining the route of a pipeline to transport Siberian oil to the Asia-Pacific region, according to presidential adviser Arkadii Dvorkovich

19 December: Presidential election in the Republic of Marii-El

19 December: Mayoral elections in Nakhodka, Severodvinsk, and Komsomolsk-na-Amure

26 December: Presidential election in the Republic of Khakasia

29 December: State Duma's fall session will come to a close

January 2005: President Putin to visit Poland for the 60th anniversary of the liberation of the Auschwitz concentration camp

1 February 2005: Former President Boris Yeltsin's 74th birthday

March 2005: Gubernatorial election in Saratov Oblast

May 2005: Commemoration of the 60th anniversary of the end of World War II

2006: Russia to host a G-8 summit.