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Russia Report: October 26, 2007

U.S. Defense Secretary Says 'Nobody Wants A New Cold War'

U.S. Defense Secretary Robert Gates

PRAGUE, October 23, 2007 (RFE/RL) -- In a wide-ranging exclusive interview with RFE/RL, U.S. Secretary of Defense Robert Gates said the United States is not in a new Cold War with Moscow and that Washington still holds out hope that democracy will take hold in Russia. In Prague to discuss U.S. missile-defense plans, Gates also told RFE/RL correspondents Ulrich Speck and Brian Whitmore that despite rising tensions, the United States can work with Russia on a number of issues.

RFE/RL: Over the past year, Russia has become increasingly aggressive. There's been a lot of saber rattling. There are a lot of conflicts over issues like Kosovo and Iran. I'm wondering if it still makes sense to call Russia a strategic partner of the United States.

Robert Gates: I think our approach should be to consider Russia a strategic partner until and unless it proves otherwise. There has been a lot of rhetoric, but in terms of specific actions so far, the Russians have not taken any irreversible decisions. And they have, in some areas, continued to play a constructive role. So my view is, we should continue to characterize them as a strategic partner. We should continue to work with them where we can. And we should try and persuade them of our point of view in those areas where we disagree.

RFE/RL: Some observers even talk of a new Cold War. You have a long experience dealing with Russia, how would you compare the old days dealing with the Soviet Union and dealing with Russia today?

Gates: We were engaged in a worldwide conflict with the Soviet Union. Often, it was through surrogates. But after all, at a certain point, we were dealing with 40,000 Cuban troops in Ethiopia, 40,000 Cuban troops in Angola. We had Cuba exporting revolution throughout Central and South American with huge Soviet subsidies. We had the Soviets subsidizing antigovernment movements in Europe. We were dealing with the Warsaw Pact, this country wasn't free -- the Czech Republic wasn't free. Neither was Poland, neither were Bulgaria or Romania or any of the others in Eastern Europe. We had an open-ended arms race going on with them. They were spending a huge amount more on their military then than they are now.

So, I mean, it was a very different world, and while some of the rhetoric has been strong, the reality, it seems to me, is that there are areas where we can cooperate and where we are cooperating. And we just don't have anything like the global competition or the global conflict that existed, and where people were worried that we had our missiles pointed at each other all the time. I just think it's a completely different world, and as I told the Wehrkunde Conference in Munich in February, nobody wants a new Cold War. And I don't think the Russians do, either.

RFE/RL: Going along the same lines of cooperation, the United States very much needs Russia's cooperation on a number of issues -- again, Kosovo, Iran, and so on. And, given Russia's authoritarian tilt, this implies on the one hand, that maybe we must work with the leaders in place there. Could you speak to the contradiction between classical "realpolitik" and the U.S. president's "freedom agenda." Is there a contradiction in our policy toward Russia, given the fact that we need Russia so badly?

Gates: No, I don't think so. And I would characterize it differently, actually. It's not just the United States that's dealing with Russia. Kosovo is above all a European matter, it's a NATO matter, it's for all of the Europeans -- the EU, and so on. So it's not just the United States trying to get the Russians to take a particular point of view on Kosovo, but it's all of Europe that is in this. And it's the same way on some of these other challenges that we face where we're talking with the Russians. Their rhetoric in terms of the Intermediate[-Range] Nuclear Forces Treaty [INF], in terms of the Conventional Forces in Europe [CFE] Treaty: these are agreements with all of the states in Europe, for the most part, and certainly in the CFE, and the Europeans clearly are concerned about the INF Treaty.

So, I guess my first problem is, this is not just a U.S.-Russian issue; this is an issue about how Russia is going to interrelate with the rest of Europe. Does Russia wish to be a part of Europe and wish to be a strategic partner with the United States? I think they do. And I think that the increasing business investments, both in Russia and Russia in Europe, can illustrate that that's true. I don't think there's any contradiction with the president's freedom agenda.

The reality is, Russia's a very different place today than it was under the Soviet Union. Is it more authoritarian than we would wish, is there greater limitation on freedom? Yes. But the reality is that it's very different than in the Soviet days. And frankly, as I said in my speech on democracy in Williamsburg a few weeks ago, it takes time to build the institutions of democracy. Just having an election doesn't mean you have a democracy. So these institutions have to grow. And you're looking at a country in Russia that in a thousand years of its history has not had a democracy. So my view is, I think we need to encourage the development of freedom in Russia, we need to encourage the development of democratic institutions, but also think we need to understand that those things take time.

In encouraging the development of democratic institutions in Russia, does the U.S. have any leverage, any influence? What can Washington do to help from the outside to increase these freedoms?

Gates: Well, we didn't think we had any leverage when we went to Helsinki in 1975, and it ended up playing a major part in the collapse of the Soviet Union and in the liberation of Eastern Europe. So I think that we can't underestimate a certain moral authority. And also, I think, we have to be persistent. After all, our engagement in the Cold War with the Soviet Union lasted almost half a century.

RFE/RL: Russian President Vladimir Putin clearly wants to establish a sphere of influence in what the Russians call the near-abroad, parts of the former Soviet Union. Georgia's bid to join NATO, and to cozy up to the United States, has clearly caused a lot of anxiety and anger in the Kremlin. And I'm wondering: how dedicated is Washington to Georgia's entry into NATO, and conversely, is it conceivable that Georgia could become a bargaining chip in the larger U.S.-Russia relationship?

Gates: I don't think we should link these things, in the relationship, at all; we'll judge these events on their own merits, these developments. Georgia in NATO, other nations in NATO, have to be evaluated on their own merits. In my view, you don't tie them to other issues; I wouldn't link them at all.

RFE/RL: So you would say there's not a risk of Georgia turning into a bargaining chip?

Gates: I don't think so, no.

There's concern in Tbilisi....

We certainly don't intend to let it become one.

RFE/RL: Ukraine also has a growing interest, or a long-standing interest, to join NATO, even if the domestic support is weaker than in Georgia. How do you judge Ukraine's chance to get into NATO in the next years?

Well, I think that's probably not a near-term likelihood. There clearly is some interest in Ukraine. But there's also, as I understand it, still substantial domestic opposition to it. So I think we'll just have to see how things evolve.

Gates with RFE/RL's Speck (center) and Whitmore

RFE/RL: A lot of analysts think that Russia is creating an alternative security architecture in the world. This came up after there was talk if Serbia loses Kosovo, that perhaps Serbia would cozy up to Russia, and they are saying, "Here's a new architecture, and we invite you to join." Is this a cause of concern in the defense and security community in the United States?

Gates: It's not a concern to me because I don't think it'll be successful, even if they are trying it. Serbia knows that its interests are with the Europeans and with the European Union, not with some kind of linkage back to the East. Russia and Serbia have had a strong political relationship going back well before World War I. Serbia can have it both ways: it can have a friendly relationship with Russia, but its economic future is almost certainly tied to Europe.

And I think these other countries, it's an open question, in my opinion, whether Russia's actions are intended to -- whether they actually think they can create some sort of an alternative architecture, or whether they're trying to build a bulwark against what they might see as NATO and the Western architecture enveloping them. So whether it's an offensive or a defensive reaction, I'm not entirely sure.

RFE/RL: The Shanghai Cooperation Organization and things like that don't cause concern?

Gates: They don't bother me very much. We can't be terrified and looking over our shoulder every time some other country makes an overture to others about associating with it. We, the United States and the NATO alliance, this is the most powerful alliance the world has ever known, and I don't think we need to be afraid of our own shadow.

RFE/RL: You travel to Germany and the Netherlands in the next days. What is your message for the Europeans? You mentioned that you want to encourage the Europeans to do more, to take over more responsibility, especially with regard to Afghanistan, sending more troops. So, your approach is to bring the Europeans more into play in regards to Russia and to Afghanistan?

Gates: No, it has nothing to do with Russia, the message I am going to have in the Netherlands at the NATO defense ministers meeting is a very simple one and that is that the nations should fulfill the commitments that their leaders made in Riga, in terms of their support in Afghanistan. It is not about us, it's about commitments that were made by the leaders of NATO in Riga and I just want to make sure that everyone understands that those obligations continue. That is the fundamental message.

RFE/RL: On missile defense, how would you assess your visit here in the Czech Republic?

Well, I think that the Czech leadership was intrigued, as was the Russian government, by the new proposals that Secretary [of State Condoleezza] Rice and I put on the table when we were in Moscow a couple of weeks ago looking for ways for greater transparency to provide the Russians reassurance. Going forward with the agreements, we made it perfectly clear in Russia that we were going to proceed with the negotiations with the Czech Republic and Poland regardless and, if those negotiations are successful, then to proceed to deploy, or build, these radars and interceptors.

However, we also said that if the question is about the threat, then we might be willing to sit down and talk with the Russians about not activating the completed systems until the threat was apparent, in other words, until the Iranians or others in the Middle East had flight-tested missiles of a range that could hit Europe, as an example. And I think the government here, as in Moscow, was taken with it, even President Putin referred to the proposals as constructive.

RFE/RL: The press played up a lot of the so-called chilly reception that you received there with Secretary Rice. Do you think that was more spin, or did you feel a chilly reception?

Gates: Well, first of all, that's inaccurate. The big piece of this was the perception that Secretary Rice and I were kept waiting for about 40 minutes. Well, the reality is that about five minutes past the time for the meeting, we were taken to the room where the meeting with President Putin was to take place, all the press was already in place, we were waiting outside the door, we waited a few minutes and an aide came to tell us that he had had to take an urgent telephone call.

We subsequently were able to confirm that that was the fact, that it was a foreign leader who had called, that it was a fairly important call, and I don't think that either Secretary Rice or I felt that we were impolitely treated or kept waiting in some kind of old Soviet way, if you will, and in fact our meeting with President Putin went about half an hour or 45 minutes beyond the scheduled time, or the allotted time. So I think that we both felt that they were very productive meetings.

RFE/RL: Coming back to the larger picture, how do you see Russia in 10 years?

Well, one of the things that impresses me is it has been about 18 years since my first visit to Russia in 1989 and certainly in terms of the well-being of the Russian people, materially, they are a lot better off than they were. And as I wrote in my book, I think one of President [Mikhail] Gorbachev's last contributions, and historic contributions, in Russia was that in dismantling the Stalinist economic bureaucracy and in paving the way for democratic change, he really gave the Russian people their future.

And I think that future is still open for the Russian people. My own view is that there will be a gradual increase in democratic reforms and freedoms in Russia. I think part of the problem in Russia was that because the economy collapsed along with the Soviet Union, in the early stages after the collapse of the Soviet Union, in the minds of many Russians democracy became confused with economic disaster, with criminal activities, with activities of the oligarchs and thievery and so on, and chaos. And so an opportunity was lost. And I think now, with stability, with economic growth, with growing prosperity, my hope is that that opportunity that we missed, that the Russians missed early in the 90s will be recaptured and that would be my hope for Russia over the next 10 years.

RFE/RL: Can we recapture it even given the backsliding on democratic reform right now and given the fact that former KGB officers are in power?

We can't recapture it but the Russians can. And frankly, the role of the KGB today, of the Russian intelligence services, is nothing like what it was in the Soviet period.

Top U.S. Diplomat Downplays Talk Of Rift With Russia

Daniel Fried (file photo)

BRUSSELS, October 19, 2007 (RFE/RL) -- U.S. Secretary of State Condoleezza Rice and Defense Secretary Robert Gates got a frosty reception in Moscow last week when they met their Russian counterparts, Sergei Lavrov and Anatoly Serdyukov. President Vladimir Putin even appeared to mock U.S. missile-defense plans. There was widespread talk in the media of a new low in bilateral relations.

But U.S. Assistant Secretary of State for European Affairs Daniel Fried, who took part in the talks, says that impression is misleading. As he told RFE/RL correspondent Irina Lagunina, the two sides are engaged in dialogue and Washington remains cautiously optimistic that agreement can be found.

RFE/RL: How do you evaluate the results of the Moscow talks? Did the United States accomplish what it set out to achieve?

Daniel Fried: The press accounts were much more downbeat than the actual results, at least as judged by those of us who participated in them. We made progress on missile defense, on CFE -- the Conventional Forces in Europe agreement. We didn't achieve an agreement or a breakthrough, but we made progress and the Russians have acknowledged it.

Today [October 17] at NATO, an American delegation [comprised of] Eric Edelman, General [Henry] Obering, the head of the Missile Defense Agency, and I, briefed the alliance about these talks and explained that we'd actually made progress. And the NATO-Russia Council has just broken up, where we discussed missile-defense cooperation. The Russians acknowledged that while we still have some differences, they want to work with us to narrow them and make progress where we can.

RFE/RL: What is the U.S. position on the Qabala radar in Azerbaijan, which the Russians have offered as an alternative to U.S. plans for radar and interceptor sites in the Czech Republic and Poland?

Fried: We think that President Putin made a very interesting offer to put, as it were, the Qabala radar in Azerbaijan on the table. He put it on the table and the Russian government position is that it is an alternative to the [proposed] radar in the Czech Republic. In our view, everything ought to be on the table: the Polish-based interceptors, the Czech radar, NATO assets existing or that could be developed, the Russian missile-defense system -- they have a big system outside of Moscow, as you may know -- a huge one. We ought to be working together to combine our efforts, to combine our assets, to deal with threats emerging from Iran and perhaps other places. So that's the essence of our proposal.

RFE/RL: While in Moscow, did the U.S. side discuss President Putin's recent threat to pull Russia out of the Conventional Forces in Europe Treaty?

Fried: We would like to find creative ways to avoid the collapse of the CFE Treaty and we don't think that responding harshly to these Russian moves is the best way to go. Obviously, we regret them.

But we came to Moscow with new ideas about how to make progress. We think that's the best way ahead. We have some differences with Russia, differences about energy issues, about democracy, about Russia's relations with some of its neighbors. But rather than have a relationship where we relentlessly focus on our differences, we want to emphasize where we can and then deal with our differences where we must.

RFE/RL: So you don't agree with the general assessment in the media that the Moscow talks offered yet more evidence of a deterioration in U.S.-Russian relations?

Fried: We took the 2+2 talks in Moscow very seriously. We came to it in a very constructive, open, creative spirit. We're not trying to find ways to say "no." We're trying to find ways to make progress.

On strategic issues, the United States and Russia ought to be working together. [As] the Russians realized last week that we were putting new ideas on the table and that we're serious, we found that they were responding in a constructive way. That doesn't mean they've abandoned their positions, it doesn't mean we don't have differences. But the talks that Secretaries Rice and Gates had with their Russian counterparts were more positive the longer they went on.

Odd Couple In Tehran?

By Jeremy Bransten

Presidents Vladimir Putin and Mahmud Ahmadinejad in Tehran

October 16, 2007 (RFE/RL) -- Russian President Vladimir Putin and Iran’s President Mahmud Ahmadinejad met for talks in Tehran today during the first visit to the Iranian capital by a Kremlin leader in more than four decades.

Historically, Russia and Iran have long been rivals, and the last trip to Tehran by a Kremlin leader came in 1963 by Leonid Brezhnev. But Moscow finds itself in a different role these days, for its own pragmatic reasons.

The bilateral talks followed a regional summit of Caspian Sea states. As expected, Putin reaffirmed Russia’s support for Iran’s development of nuclear energy in a statement at the end of the summit. "All the Caspian countries reiterate their commitment to the Nuclear Nonproliferation Treaty on condition that each of our countries has the right to develop peaceful nuclear programs without any restrictions," Putin said.

In recent years, Russia has become one of Iran’s key international partners. Ahmadinejad, in an interview with Russian television on the eve of Putin’s visit, said the two countries are “natural allies from the geographical as well as from the political and cultural point of view.”

But the historical record belies this assertion. In fact, Russia and Iran have mostly been adversaries. In the 19th century, Russian imperial forces battled with the Persians over control of Central Asia and the Caucasus. Early in the 20th century, Russian soldiers even occupied parts of northern Persia and later tried, with Britain, to carve up the country into spheres of influence.

During World War II, the Soviet Union together with Britain reinvaded the country to secure its oil fields. Soviet troops later tried to establish a puppet regime before withdrawing. More recently, in the 1980s, the Soviet Union backed Iraq’s Saddam Hussein in his bloody war with Tehran.

Yet to paraphrase the 19th-century British statesman Lord Palmerston, in politics there are no permanent allies -- or enemies -- only permanent interests. And the interests of Moscow and Tehran currently align on several fronts.

United Against 'Unipolarism'

Politically, both countries find their new alliance a useful counterweight against pressure from the West. Both Putin and Ahmadinejad frequently talk about the need to resist “unipolarism” -- code for U.S. influence.

Ahmadinejad, in his interview with Russian television, tried to appeal to the anti-Western camp in Moscow, saying both Iran and Russia were “countries of the Eastern type with the same Eastern features.”

Economically, the U.S. embargo against Iran has driven Tehran closer to Moscow. Iran has turned to Russia to renew its civilian air fleet, to update its military and industrial infrastructure, and of course, to build its first nuclear power plant, at Bushehr.

Nina Mamedova, who heads the Iranian department at the Russian Academy of Sciences’ Institute for Eastern Studies, says Iran remains a reliable economic partner for Russia. "We are involved in a lot of mutual projects – in the spheres of oil, gas and transport. And of course for Russia it’s important to support these good relations with Iran, in order to participate in all these projects,” Mamedova said.

Nuclear Cooperation

But the nuclear issue risks forcing Russia into a corner. Next month, the International Atomic Energy Agency is due to report to the UN Security Council on Iran’s level of cooperation with UN nuclear inspectors. If the report is negative, Washington and its European allies will push for a third, tougher round of sanctions against Tehran.

Russia, along with China, has repeatedly indicated it does not favor the move, but Moscow appears to be leaving itself some maneuvering room. Putin recently told visiting French President Nicolas Sarkozy that Russia operates “on the principle” that Iran does not plan to make or acquire nuclear weapons.

If the UN’s nuclear watchdog indicates otherwise, Moscow might change its position. In a signal that Moscow could get tough if Tehran continues to defy calls to halt its uranium enrichment, Russian Foreign Minister Sergei Lavrov recently emphasized that “Iran must respond to the demands of the international community.”

In another not-so-subtle signal from Russia, cooperation on finishing the Bushehr nuclear plant has also recently foundered.

Up to now, the rapprochement between Tehran and Moscow has served Russia’s interests. But it’s not a very stable alliance. And ultimately, as many analysts note, Russia has little interest in seeing Tehran get the bomb.

(RFE/RL correspondent Chloe Arnold in Moscow contributed to this report.)

Russia Weighs In On EU's Tough New Energy Policy

By Ahto Lobjakas

Khristenko described forcing electricity and gas producers to part with their transmission networks "the most absurd idea in the history of the world economy" (file photo)

BRUSSELS, October 17, 2007 (RFE/RL) -- Seeking to contain a growing dispute over energy investment, the European Union and Russia have agreed to set up a joint panel to study the impact of EU plans to forge a unified energy policy.

The EU proposal, which has been harshly criticized by the Russian state-controlled gas monopoly Gazprom, would prevent energy-production firms from controlling distribution networks. It would also prevent foreign companies from investing in EU networks unless their home countries "reciprocate."

In February, Gazprom's deputy CEO Aleksandr Medvedev called the idea to force electricity and gas producers to part with their transmission networks "the most absurd idea in the history of the world economy." Gazprom has sought to acquire European gas-delivery networks, which as a gas producer it would not be allowed to control, under the new regulations.

But the EU, keen to boost competition in EU energy markets and wary of Gazprom's plans, says it is determined to forge ahead. And European calls for reciprocal access to energy markets have also rattled Russia, whose energy companies have a tight grip on domestic pipelines, electricity grids, and other infrastructure.

Russia Against 'Simplistic' Reciprocity

In an attempt to lower tensions, EU Energy Commissioner Andris Piebalgs met for talks in Brussels on October 16 with Russian Industry and Energy Minister Viktor Khristenko. Piebalgs announced the two sides would set up an expert panel to study the impact of the EU's efforts to establish a unified energy policy.

Khristenko, for his part, stressed that neither the Soviet Union nor Russia has failed to honor an energy-supply contract in Europe for the past 43 years. He said Russia shares the EU's belief that electricity markets must be liberalized, but he argued that the gas market is fundamentally different and must not be subjected to the same reform blueprint. This, he explained, is because the gas market depends on longer-term investment, which leads to higher risk in an inflexible sector.

Khristenko welcomed the creation of the new expert group, while also giving the impression that he believes it may result in changes to the legislation proposed by the European Commission. "We are in this context extremely interested in ensuring that the new consultation mechanism for the new initiative will work, so that we could professionally and pragmatically discuss not only the political aspects, but the risks that may arise, and understand whether there are problems," Khristenko said. "And if there are, how we will jointly react to them, and responsibly find the best way to reach the desired goal -- a high level of energy security and the dependability of supplies and distribution."

Speaking out against what he called "simplistic" efforts to reach reciprocity in EU-Russian energy relations, Khristenko referred to the EU's efforts to persuade Russia to ratify and implement an Energy Charter that would give foreign companies access to its gas and oil pipelines and give investors the same legal guarantees as in the West.

The minister claimed that according to Russia's calculations, EU investment in Russia's energy sector totals 55-58 billion euros ($78-82 billion), whereas Russia has been held to investment of just 7-8 billion euros in Europe. He also reassured his Brussels host that Russia would have no problems meeting its energy supply obligations this winter -- discounting unforeseen hiccups in transit countries.

Piebalgs said the EU will continue to seek alternative energy suppliers.

Ukraine's Mysterious Debt To Gazprom

By Roman Kupchinsky

Why was Ukraine caught off guard by the $2.2 billion gas debt?

October 11, 2007 (RFE/RL) -- Ukraine has reached an agreement on its outstanding debt to Gazprom, clearing the air ahead of negotiations on gas supplies for 2008 and mollifying wary European consumers. But behind the turbid deal stands one outstanding question -- how was such a large debt accrued in the first place?

After the Russian energy giant Gazprom threatened earlier this month to cut off natural gas to Ukraine unless it received $1.3 billion for past supplies, Russian President Putin remarked that "the large debt was totally unexpected."

An astonished Ukrainian Deputy Prime Minister Mykola Azarov told reporters in Kyiv, "It can't be true that the debt is as high as [Gazprom] says it is."

And Ukrainian Deputy Energy Minister Vadym Chuprun did did his best to describe a complicated situation in which Ukraine is not responsible for the debts, saying that the many suppliers, owners, and operators involved in supplying Russian-controlled gas to Ukraine had to "settle their accounts first, and when the amount drops we'll see whose debt it is and whose fault it is."

The lack of awareness was difficult to fathom, considering that one of the companies deemed responsible for accruing the debt, the Swiss company RosUkrEnergo, has three powerful members of Gazprom's management committee on its board.

Even more befuddling was the fact that when the smoke cleared and the numbers of the debt-payment agreement were crunched, the combined debt by all debtors was $2.2 billion.

Examining The Debt

The debt was purportedly incurred by two companies -- RosUkrEnergo and UkrGasEnergo (UGE), a Ukrainian-registered joint venture between RosUkrEnergo and Ukraine's state-owned Naftohaz Ukrayiny.

Much of the disagreement centered on ownership of natural gas stored in underground facilities in Ukraine.

When Ukrainian Energy Minister Yuriy Boyko on October 9 signed an agreement with Gazprom CEO Aleksei Miller to pay off the debt by November 1, it was decided that 8.5 billion cubic meters of gas belonging to RosUkrEnergo, worth $1.2 billion, would be turned over to GazpromEksport. The remainder of the debt, $929 million, would be paid by UkrGazEnergo and Naftohaz Ukrayiny from their own funds, in cash.

The full text of the signed agreement has not been published and has yet even to be seen by Ukrainian President Viktor Yushchenko, raising fears that it will forever remain hidden from public scrutiny.

Perhaps this should not be surprising, considering the opaqueness of the system under which Ukraine receives Russian-controlled gas.

The middleman Swiss company RosUkrEnergo was created in July 2004 by Russian President Putin along with former Ukrainian President Leonid Kuchma. Other key players in the deal were Yuriy Boyko, the current Ukrainian energy minister who in 2004 headed Naftohaz Ukrayiny; Dmytro Firtash, a Ukrainian businessman with no affiliation to the Ukrainian government; and Gazprom CEO Miller. RosUkrEnergo was essentially formed to replace the discredited Budapest-based EuralTransGas, which was later exposed in the Western press as being a creation of Gazprom and Firtash.

Gazprom presently owns 50 percent of RosUkrEnergo while Firtash and his partner, Ivan Fursin, a banker from Odessa, own the rest through a company called Centragas, which in turn is owned by the secretive Mabofi Holdings in Cyprus.

Medvedev, the deputy head of Gazprom's management committee, sits on RosUkrEnergo's board, as does Valeriy Golubev, who is in charge of Gazprom's sales to CIS countries. And Konstantin Chuichenko, the head of Gazprom's legal division, serves as co-director of RosUkrEnergo.

Trail Of Numbers

According to the January 2006 agreement signed between Ukraine and Russia, RosUkrEnergo -- at Gazprom's insistence -- was brought in to be the monopoly supplier of Central Asian and Russian gas to Ukraine.

The agreement stipulated that RosUkrEnergo would purchase a "basket" of Central Asian and Russian gas from GazpromEksport at $95 per 1,000 cubic meters. The total volume of gas purchased by RosUkrEnergo, according to the agreement, was 73 billion cubic meters (bcm) -- about 20 bcm more than Ukraine consumed when Ukrainian production of 20 bcm is taken into account.

The extra 20 bcm was the commission Naftohaz Ukrayiny paid to RosUkrEnergo for its services. RosUkrEnergo in turn sold this gas in Europe to, among others, Emfesz KFT, a Hungarian-based company controlled by Firtash. Emfesz then resold part of the gas to Poland -- undercutting Gazprom's price -- and sold the rest on the Hungarian domestic market.

However, in mid 2007, sources in the Russian gas industry reported that Firtash's companies had accrued a debt to RosUkrEnergo of more than $2 billion. It appears Gazprom become wary of Firtash's ability to repay the debt and decided to rein him in, but had little leverage over the maverick businessman who seemingly maintained a close working relationship with Ukrainian Prime Minister Viktor Yanukovych's administration in Kyiv and, above all, with Boyko and Yanukovych's chief of staff, Serhiy Levochkin.

Considering the complexity of the gas-transit arrangement and the internal dealings, it appears that the October 9 debt deal is just a temporary solution to a recurring problem. And one can expect that the 8 bcm of gas returned to GazpromEksport will be used as leverage over the new Ukrainian government as negotiations for Gazprom supplies to Ukraine in 2008 kick off this month.

Why The Chekist Mind-Set Matters

By Robert Coalson

President Vladimir Putin leads an elite increasing made up of KGB/FSB veterans (file photo)

October 15, 2007 (RFE/RL) -- No one knows how many people were working for or with the KGB when the Soviet Union collapsed in 1991. That information was never revealed in a country where even rudimentary lustration never got off the ground.

Journalist Yevgenia Albats, in her 1992 book "A State Within A State," estimates that 720,000 people actively worked for the agency (across the entire Soviet Union) and some 2.9 million "cooperated" with it. To a large and, perhaps ultimately, unknowable extent, many of these people now rule Russia and seem well on the way to building an undemocratic system of political and economic control that can last into the foreseeable future.

Sociologist Olga Kryshtanovskaya estimates that 26 percent of Russia's senior political and commercial leadership are siloviki, the term for people who emerged from the state security organs or the military. If one tries to account for everyone connected with the security organs in one way or another, Kryshtanovskaya's estimate rises to 78 percent of the elite.

The Rise Of The Chekisty

At the top of this vast pyramid of power stand those -- like President Vladimir Putin -- who were formed and socialized with the KGB during the 1970s, when Yury Andropov was reinvigorating the agency and instilling a new sense of mission and pride following the gradual and partial exposure in the 1950s and 1960s of the crimes committed by the secret police under Lenin and Stalin.

Although it would be an exaggeration to speak of this group in terms of conspiracy, it definitely forms a network or community of like-minded professionals, a largely mutually supporting community sharing common values, a common worldview, and common approaches to problem solving. Albats, writing in "Novoye vremya" this month, described this group as "a union of people bound by a common past, a common education, and even a common language of gestures...."

It is important to distinguish ordinary siloviki, a broad term that encompasses a wide range of views along the nationalist-patriotic-militarist spectrum, from the chekisty, the KGB products who are directing Russia's political and economic development and who see themselves as the nearly messianic saviors of Russia from a raft of internal and external enemies.

The term "chekist" comes from the Russian abbreviation ChK, or Extraordinary Commission, which was the original secret police organization set up under Lenin by the sadistic Feliks Dzerzhinsky, and an abbreviation that was echoed by the August 1991 KGB-led coup attempt against Soviet President Mikhail Gorbachev, which called itself the State Committee for the Emergency Situation (GKChP). In a 1967 speech, Andropov praised Dzerzhinsky as "a man infinitely devoted to the revolution and ruthless toward its enemies." Dzerzhinsky himself wrote in 1919 that "I know that for many there is no name more terrifying than mine."

Enemies All Around

Ignoring the ChK's dark history of political oppression and domestic terror, modern-day chekisty are proud to wear this badge. As Federal Antinarcotics Committee Chairman Viktor Cherkesov, a leading member of Putin's inner circle who made his reputation fighting political dissent as the head of the KGB's Leningrad Directorate, wrote in "Komsomolskaya pravda" in 2004: "I remain faithful to the main thing -- to the sense of my work as a chekist. To the sense of my chekist fate. I did not reject this faith during the peak of the democratic attacks in the early 1990s, as everyone knows. I will not reject it now." Duma Deputy Anatoly Yermolin, a longtime KGB hand and a graduate of the KGB's Andropov Academy who now serves on the Foreign Affairs Committee, told RFE/RL on October 10: "I like the word [chekist]. I got used to it during long years of service in chekist units."

Putin awards a medal to Marshal Dmitry Yazov, one of the 1991 coup plotters (ITAR-TASS)

The chekist mind-set has a number of important facets that are influencing the way this network is guiding Russia's development. First and foremost, stemming from the origins of the ChK and having received reinforcement during the long years of the Cold War, is a fundamentally martial orientation. "Our profession, of course, is a military one," Cherkesov wrote in his 2004 article. This mentality colors the chekists' perceptions of everything from developments on the world stage to domestic political disputes, sometimes even giving chekist actions and statements a tinge of paranoia. "The collapse of the chekist community -- the system of ensuring national security -- is necessary only to the enemies of that security," Cherkesov wrote. He goes on to cite the need for "cleansing...the antistate and antisociety viruses that have infected our society." In 1994, KGB Major General Boris Solomatin wrote in "Trud" that "through the efforts of some journalists and politicians, state-security officers are being made outcasts in their own state."

Among the many "enemies" the chekist feels threatened by, pride of place has always been given to the United States, which was routinely called "the main enemy" by the KGB. Many chekisty believe the United States is determined at the least to subordinate Russia, if not to see the country broken up into insignificant entities. The war in Afghanistan in the 1980s was the most direct sustained conflict between the CIA and KGB, and the sting of the KGB's "defeat" and the sometimes sophomoric crowing of the United States about that outcome can hardly have been forgotten by Andropov's successors. Some of the most powerful chekisty in Putin's inner circle, including deputy presidential-administration head Viktor Ivanov and Federal State Reserves Agency head Aleksandr Grigoryev, served in Afghanistan.

By Any Means Necessary

The martial mind-set of the chekisty gives their thinking a distinctly teleological flavor; that is, the ends justify the means. Feeling surrounded by enemies, certain that only they understand what is needed to save the country, and operating with impunity, the only limits to chekisty action are those of their own imaginations and consciences -- and there is considerable evidence that their consciences are no limit at all.

In her book, journalist Albats describes how a KGB general threatened her for serving as a member of the State Commission to Investigate the Activities of the KGB during the (August 1991) Coup. The general needn't have bothered, since that commission was headed by silovik General Sergei Stepashin and its work led to nothing.

Members of an independent commission set up in 2002 by longtime dissident and rights activist Sergei Kovalyov to investigate the possible involvement of the Federal Security Service (FSB; one of the KGB's main successor organizations) in a series of 1999 apartment-building bombings were not so lucky: Duma Deputy Sergei Yushenkov was shot dead in Moscow in April 2003; Duma Deputy and investigative reporter Yury Shchekochikhin died of suspected thalium poisoning in July 2003; former KGB investigator Mikhail Trepashkin, who served as the commission's investigator, was arrested in October 2003 and sentenced to four years in prison in a closed trial; and the commission's key witness, former FSB officer Aleksandr Litvinenko, died of radiation poisoning in London in November 2006. The Russian secret services' involvement in the February 2004 assassination in Doha of former acting Chechen President Zelmikhan Yandarbiyev was established by a Qatari court.

A State Within A State

When the Soviet Union collapsed and the country passed through the traumas of the 1990s, the KGB and the chekist community were able to maintain relative cohesion because of two key factors: secrecy and information. Their ability to resist lustration, to have the instigators of the 1991 coup attempt exonerated and even honored, and ultimately to place one of their own in the presidency -- all of which seemed virtually impossible in 1992 and 1993 -- must have proven the crucial importance of maintaining and monopolizing these assets.

As a result, chekist systems -- political, administrative, or commercial -- must be closed and opaque. Within Putin's administration, we see the complete elimination of normal checks and balances, only partially replaced by internal checks of dubious and unconfirmable reliability. Speaking of possible illegalities within the security services, Cherkesov wrote that "people must know that, in addition to the prosecutor's investigation, their fate will always be protected by the involvement of the agency itself, by the strength of our fraternity of service." The chekist community develops its own methods of disciplining individual members without endangering the hidden fraternity itself.

The KGB always worked as a state within a state, and that capacity served it well during the crises of the 1990s and to the present day. The Putin administration works in the same way that the KGB did, salting organizations throughout society with representatives of the chekisty, who can be counted on to facilitate the chekist agenda when necessary. This phenomenon regularly rears its head with regard to prosecutors and judges, but shadows of it emerge occasionally in the work of journalists, regulators, politicians, businesspeople, and others. "There is no area of our lives -- from religion to sports -- where the [KGB] doesn't pursue some interest of its own," KGB defector Oleg Kalugin said in the early 1990s. And those ends are pursued through pressure, manipulation, sabotage, and subterfuge instead of by means of the rule of law or institutionalized procedures that might produce unwelcome results or restrictive precedents.

A 1993 Moscow conference on "The KGB: Yesterday, Today, And Tomorrow" adopted a resolution stating: "We believe that the development of a democratic process in the country is impossible while state security services continue to perform functions of state management." This statement has been borne out by events of the last 15 years. At the same time, the international community has found Russia to be an increasingly unreliable player whose words and actions often seem fundamentally out of sync. The rise of the silovik in Russia would be an alarming enough phenomenon both within Russia and abroad; the rise of the chekist is an order of magnitude more worrisome.

A Bread-And-Butter Issue

By Lyubov Chizhova

Russians are seeing prices in the shops skyrocket

MOSCOW, October 17, 2007 (RFE/RL) -- Grocery shopping has become a full-time preoccupation for Galina Gracheva, a young mother of three living in the Russian capital.

She methodically combs through all of her neighborhood stores, carefully comparing prices on staples like eggs, bread, and oil. Food prices have spiked throughout the former Soviet Union, and even in the region's most prosperous city, people are feeling the pinch.

"Baby food has gotten much more expensive," Gracheva says. "Bread is more expensive. Meat -- my sons need meat. I wish they would lower prices. Or raise salaries. Maybe they'll help multichild families."

Rosstat, the federal state statistics service, has marked a 17 percent price hike in basic foodstuffs since the start of the year, a jump that officials variously attribute to everything from global overpopulation to biofuel production to poor harvests at home, RFE/RL's Russian Service reports.

Pressure Increasing On Officials...

Questions about food prices are expected to dominate the annual live question-and-answer session on October 18 between President Vladimir Putin and the Russian public. The official website monitoring the session reports that the most popular query submitted ahead of the event is whether the price hikes signal the start of another financial crisis like the one that crippled Russia in 1998.

Many Russians, whose average monthly income broke the $500 barrier for the first time this summer, are deeply alarmed by the reality staring back at them from market shelves. The price of bread -- a highly symbolic staple Russians refer to as "our wealth" -- has more than doubled. A package of 10 eggs has risen from $1 to $1.60; a bottle of olive oil that previously sold for $1.20 now costs $2.

Many Russians, alarmed by the price hike, have resorted to an old Soviet-era habit: hoarding. Flour, pasta, salt, sugar, and matches are all being bought up and stored as a buffer against continued inflation.

As ever, the people hit hardest by the vagaries of the market are the country's pensioners. "I receive a pension of about 5,000 rubles a month [$260]," says Tatyana Ivanova. "I went to the store, and cheese is 300 rubles [$15]. Why is that? Can't Putin do something? Zubkov came, apparently, and started to work on the problem. But then he dropped it."

Viktor Zubkov, Russia's new prime minister, has been front and center in the public battle against the price hikes. A recent newspaper article quoted a Russian shop director as telling the prime minister that the reasons for the skyrocketing costs "are a mystery for us." Zubkov, reportedly deep in thought, replied, "For us as well."

Other officials apparently find the issue less mysterious. Aleksei Gordeyev, the Russian agriculture minister, has pointed to global population growth outpacing food-production capabilities. "Along with the 1 billion members of the upper class residing in developed nations, the middle class in China, India, and Vietnam is increasing by 800 million people," he said. "The need for food products is increasing sharply. Another serious factor is that a lot of biomass -- mainly grain and oil cultures -- is now being used for the production of biofuel."

More locally, a series of droughts and poor harvests are blamed for low grain yields and higher prices. In Soviet times, Russia harvested between 100 million and 120 million tons of wheat a year. By 2002, that number had dropped to 85 million tons; the final projected yield for 2007 is expected to be 75 million -- less than half of what is traditionally considered safe food-provision norms for Russia, especially as Russia continues exports of wheat and other grains.

Arkady Zlochevsky, the president of the Russian Grain Union, said Russian prices are in step with the world market. "Yes, there are current conditions that are causing price growth," he says. "The government is taking measures, and soon tariffs will be implemented, and this will influence exports and restrain price hikes."

...To Act Before Upcoming Elections

High food prices, of course, are a distinct political liability in an election season. As Russia heads toward a parliamentary vote in December and a presidential ballot in March 2008, Russia's opposition parties have been quick to try to use the economic situation to advance their political ends.

The Union of Rightist Forces scheduled a protest against a Moscow supermarket that is part of a chain owned by a wealthy supporter of the pro-Kremlin party Unified Russia. Grigory Yavlinsky, the head of Yabloko, alleged that price hikes in a number of Russian regions are higher than official figures indicate, and placed blame for the spike on "collusion" between "political monopolists and economic monopolists." The problem, he added, is exacerbated by increased corruption and bribe-taking in a season when politicians are uncertain of their future and trying to get maximum gains while they can.

The Kremlin has its own allegations about price rings run among the country's largest food suppliers; the Federal Antimonopoly Service claims to have unearthed price-fixing networks in nine Russian regions. The government has vowed to crack down on monopolists. But it has stopped short of immediate relief measures, like artificial price regulation. "Artificial regulation will lead to a deficit, and eventually to the same price increases," said Arkady Dvorkovich, an expert with the presidential administration.

Oleg Shein, the deputy chair of the State Duma Committee on Labor and Social Policy, has proposed a multipronged system for tackling the pricing crisis: higher tariffs on grain exports, lower fuel costs for agricultural producers, and pension and salary hikes. "We need to increase pensions in proportion to price growth," Shein said. "Civil servants have felt this as well -- schoolteachers, for example, make just 3,000 rubles a month [$155]. It's the same for doctors and artists."

Yevgeny Gontmakher, of the Russian Academy of Sciences' center for social sciences and innovations, says the root of the problem is the failure of the government to honestly assess the situation. Exports continue despite deficits and reserve-dipping at home; domestic producers, meanwhile, lobby against cheap imports. "Most importantly," Gontmakher says, "our government recently promised that inflation is decreasing and will stay under 8 percent per year. All evidence pointed to the contrary, so either they were afraid to report to President Putin, or they were giving him false information."

This, Gontmakher says, is called "manual" economic governing -- "only after receiving a direct order from above does the government start doing something." He adds that it's reasonable to expect that one such direct order might eventually resolve the food-price crisis -- right before Duma elections on December 2.

Cobblers Face The Boot In Moscow

By Chloe Arnold

Yukhan Bavidov, one of Moscow's vanishing cobblers

MOSCOW, October 14, 2007 (RFE/RL) -- Russian winters are unkind to boots and shoes, and have traditionally provided ample opportunity for the ubiquitous cobbler's shop in Moscow. But with more money in their pockets, many Russians today's are buying new shoes instead of mending their old ones. Now the trade faces a more formidable threat: Moscow Mayor Yury Luzhkov, who is calling for a crackdown on street stalls.

"My name is Yukhan Daniilovich Bavidov," says a man working in a small street stall. "I've been here in Moscow since 1955. I've had two cobbler's stalls, and I've been in this one for 35 years. Before that I worked in a stall on Chekhov Street, as it used to be called. Now it's Little Dmitrovka Street."

A Service In Demand

Trade is brisk at Bavidov's tiny stall, located just a stone's throw from the Bolshoi Theater in central Moscow. A long row of shoelaces, in every size and color, hangs from a piece of wire that stretches the length of his shop window. Inside, there's just enough room for a cobbler's wheel, a rickety stool, and a battered leather satchel full of tools.

"What is he going to do with the people who work in them? Are they just supposed to lie down and die? You have to provide for people."

A distraught young woman in an expensive suit comes in to have the heel of one of her gold stilettos repaired. She perches on a pile of boxes, as Bavidov lovingly tends to the shoe. Then an old man arrives with three pairs of well-worn winter boots wrapped in a paper bag.

Like many of Moscow's cobblers, Bavidov is an Assyrian Christian, descendents of the ancient kingdom of Assyria through which the Euphrates and Tigris rivers flowed. Bavidov's parents lived in Ottoman Turkey until the empire targeted the Assyrian diaspora in 1914, reportedly massacring hundreds of thousands.

Like thousands of others, Bavidov's parents fled to Russia and the South Caucasus, where they were granted asylum by the tsar.

"From the time of World War I we started to work, to labor, so the sweat stood on our brows, he said. "And then, in 1949, 90 percent of the Assyrian population was banished to Tomsk in Siberia. Most came from Azerbaijan and Georgia. When they arrested us, they forced us to say that we were Kurds, not Assyrians. But we kicked up a great fuss. We wouldn't say we were Kurds. We are Assyrians, and we will always be Assyrians."

Not Following In Dad's Footsteps

Bavidov's family was rehabilitated in 1955 and he moved to Moscow, where he was apprenticed to an Armenian shoemaker. Bavidov says that in those days, 90 percent of Moscow's Assyrian community worked as cobblers and shoe-shiners. The more experienced ones had their own stalls, the younger ones simply set up shop on the pavement.

But today, he says sadly, their children don't want to follow in their fathers' footsteps.

"The old ones have gone, the young ones don't want to be cobblers," he added. "They've become too bright. They have different qualifications. Look here, I have four children. The first went to university. The second went to university. The third went to a vocational college. Do you really think they'd want to become cobblers now?"

Bavidov sets to work hammering a steel cap onto the heel of a man's leather shoe. But this is a sound fast disappearing from the streets of Moscow. It isn't just that Russia's Assyrian community is moving away from the cobbler's trade.

Beware Of Luzhkov

Yury Luzhkov, the powerful mayor of Moscow, has declared war on the thousands of stalls and kiosks that clutter the capital's streets.

This week, he told television viewers that street stalls were unsanitary and provided poor service -- and vowed to get rid of them all.

But Bavidov, who has lived through exile to Siberia, World War II and the births of four children, seven grandchildren, and one great grandchild, is not worried.

"Oh yes, I read an article about this! But how is he going to do it? OK, so he clears them all away. Fine. But what is he going to do with the people who work in them? Are they just supposed to lie down and die? You have to provide for people. But what do I have to be afraid of now? What do I have to fear? Let's just wait and see what happens."