MOSCOW, August 20 (RIA Novosti)
Moscow causes split in NATO/Russia and Belarus to give a joint response to U.S. missile defense/Abkhazia and South Ossetia want Russian bases on their soil/Iraq finds China more convenient partner than Russia/Russian companies' shares plunge after Caucasian events/U.S. could tie down Russia's Black Sea Fleet - analyst
Vedomosti, Gazeta.ru
Moscow causes split in NATO
NATO foreign ministers condemned on Tuesday Russia's military campaign against Georgia and demanded that Moscow make good on all of its pullout commitments. Georgia, on the other hand, was pledged assistance, to be provided by a Georgia-NATO commission set up especially for the purpose.
Analysts believe that, despite the harsh tone of the statements, they were actually the result of a compromise within the alliance as well as a diplomatic game.
"The public side will be as harsh as possible for a compromise solution," said Fyodor Lukyanov, editor-in-chief of the Moscow-based magazine Russia in Global Affairs. In reality, he considers it is NATO's way of hiding the split between members insisting on "punishing Moscow" and those who want to continue business with Moscow.
"In this respect, these positions have changed little since April when Georgia was denied accession to MAP, the Membership Action Plan. France and Germany have predictably remained as devoted to the hard line against Moscow as ever," he said.
"For Americans, the Georgian conflict was little more than an unsuccessful test of force in a former Soviet republic. Europe, in turn, had concerns about Georgia triggering off a major humanitarian crisis and about Russia using force outside its peacekeepers' zone of responsibility," said Alexei Arbatov, head of the Russian Academy of Sciences Center for International Security.
Arbatov believes that members from West Europe will prevent NATO from closing the door on Russia because they won't be able to handle any other crisis without Moscow's support: Iran, which has virtually announced the production of intercontinental missies, and Pakistan, as unstable as ever, are still out there.
He sees the Georgia-NATO commission as an incentive for the Georgian president. NATO and the United States have both shown that their resources to protect even their most loyal allies are limited when it comes to a direct confrontation with Russia, Arbatov said.
The NATO-Russia Council was established during the second wave of the bloc's expansion in May 2002, said Alexander Pikayev, head of the Disarmament and Conflict Resolution Department at the Institute of World Economy and International Relations. NATO then wanted to show that its eastward expansion was not aimed against Russia.
The council currently coordinates around 20 committees and working groups, some of them looking after compatibility of military contingents and missile defense systems. By suspending the Council's operation, NATO would damage itself, Pikayev said, as it also discussed the situation in Afghanistan.
"It has been a long time since major issues were discussed in this format, which is evidence of NATO's impotence," said German political expert Alexander Rahr.
Vedomosti
Gazeta
Russia and Belarus to give a joint response to U.S. missile defense
Russian President Dmitry Medvedev and his Belarusian counterpart Alexander Lukashenko agreed Tuesday to sign a joint air defense deal in Moscow this fall. Experts regard this agreement as a response to the deployment of U.S. missile defense elements in Poland.
Belarus was reluctant about making a decision, a source in the Russian Defense Ministry said. Negotiations had been on going since 2000. In December 2006, Russian President Vladimir Putin approved the text of the agreement, which was sent to Minsk for approval. After the oil and gas row between the two states, negotiations stalled.
Alexei Makarkin, Deputy Head of the Center for Political Technologies, commented on Lukashenko's motives: "Lukashenko's attitude towards the South Ossetian conflict had been extremely reserved until Tuesday, now it is obvious that the Belarusian government reviewed the situation after they understood that confrontation with Russia could be much more dangerous. After Medvedev supposedly secured the future deployment of missile defense systems in Belarus, in response to a similar agreement between Poland and the U.S., Lukashenko is likely to reach a consensus with the Russian government on natural gas issues."
Lukashenko agreed to set up a joint air defense system to compensate for his attitude towards Georgia, said Yaroslav Romanchuk of the Mizes Center in Belarus. The Belarusian leader expressed his condolences to the people affected by the conflict only a week after the fighting started, provoking displeasure from the Kremlin. Yesterday, Lukashenko said he kept out because Moscow was dominating the situation in South Ossetia: "Everything was done smoothly."
A joint air defense system means joint command and air data reporting system will be created, and information from Belarusian radars will be fed to Russian command and control centers, said Igor Korotchenko, member of the Russian Defense Ministry's Public Council. This system would dramatically increase Russia's air defense capabilities in the West, he said. Now Russia is likely to supply Belarus with new types of weapons, including air defense means, aircraft and tactical missiles, at knockdown prices, said Alexander Alesin, a Belarusian military expert.
After the Georgian-Ossetian conflict, the Belarus-Russia Union State has to resolve complicated issues, said Lukashenko. There are classified programs on border issues and military cooperation within the Union, said Ivan Makushok, state secretary spokesman for the Belarus-Russia Union State. The leaders of the breakaway republics also volunteered to join the Union Treaty, and, if it happens, and at least a few countries acknowledge their sovereignty, they could take part in joint military programs as well, he said.
Nezavisimaya Gazeta
Vedomosti
Abkhazia and South Ossetia want Russian bases on their soil
Abkhazia is expecting NATO to respond to the situation in South Ossetia. If the alliance acts tough on Russia, Sukhumi will take steps to strengthen its defenses. One of them could be to propose Moscow set up a Russian military base in the self-proclaimed republic.
"Russia is to stay here," Abkhazia's Security Council Secretary Stanislav Lakoba told Nezavisimaya Gazeta. "If they [Georgia] want a face-to-face clash, they will get it. Naturally, we will have both Russian bases and all the rest on our soil. This is because neither Russia nor Abkhazia has any other option. It is necessary to recognize Abkhazia, conclude a military pact, and establish military bases here. We have already heard the key words from the Russian president: Russia will not quit the Caucasus. The West's position, frankly, does not really bother us."
In Lakoba's view, "Russia will never leave this place, because its 'red line' runs here beyond which it will never retreat."
"In order to exploit the success and retain the positions gained, Russia needs to recognize the independence of South Ossetia and Abkhazia," said Dmitry Medoyev, South Ossetia's ambassador in Moscow. "Otherwise, it will be too late. Proceedings might have started to give Georgia NATO membership. In that case, if Georgia's aggression is repeated, Russia will be unable to step in and protect us, because it will have to fight NATO."
The ambassador said that, as announced by Russian leaders, troops are being pulled back, but not to Russia, yet within a 14-kilometer security zone in South Ossetia hugging the republic's borders. Asked if Russian military bases could be set up in South Ossetia, Medoyev answered: "Of course, they could."
Sukhumi, like Tskhinvali, expects support from the Russian parliament. On August 26, the Federation Council and the State Duma will meet to discuss the post-war situation and the status of South Ossetia and Abkhazia and of Russian troops on their soil.
A source in the upper chamber of parliament told Vedomosti that an agenda is being thrashed out in the Presidential Executive Office and might deal with giving legality to the presence of Russian troops abroad.
Such a question is really being discussed at the Kremlin, said a source close to the Presidential Executive Office.
The military says it is impossible to leave the same contingent in South Ossetia as before the war (500 lightly armed peacekeepers), said a source at the Defense Ministry. Their numbers should be increased severalfold and troops be reinforced with tanks and artillery.
Vremya Novostei
Iraq finds China more convenient partner than Russia
The mounting tensions between Russia and the United States over the military conflict in Georgia, have dealt the first corporate blow to Russia, as the Iraqi government, virtually controlled by the White House, made an unexpected and harsh statement dismissing Russia's LUKoil claim to having legal rights to the West Qurna-2 oilfield.
At the same time China's CNPC received good news on a similar contract it had with the deposed Saddam Hussein regime.
Iraq's Oil Minister, Hussain al-Shahristani, said LUKoil's contract to develop a block of West Qurna signed during Saddam Hussein's rule was totally invalid, which means that LUKoil's attempts to obtain priority rights to develop the oilfield, backed by the Russian government, have failed.
LUKoil would have held a 68.5% stake in the West Qurna-2 consortium developing an oilfield containing 8-10 billion barrels of oil. The Iraqi government was to be the second largest stakeholder with 25%, while Russia's Mashinoimport and Zarubezhneft were to hold a minority stake of 3.5%.
However, the contract was cancelled during the last three months of Saddam's rule because the consortium failed to commence work on time.
The delay occurred because economic sanctions prevented the Russian companies from delivering drilling equipment to Iraq. But it was obviously used as a formal pretext to cancel the contract. Baghdad possibly thought Moscow was taking America's obvious preparations for military intervention way too lightly.
After the regime changed, LUKoil tried to persuade the new government to restore the rights it had lost on the huge oilfield. A source in the company said after LUKoil President Vagit Alekperov visited Iraq last March that an agreement had been reached to set up a working group to coordinate the old West Qurna-2 contract to a new oil law currently being drafted by Iraq's parliament. It now looks like Baghdad wants to forget all about the compromise agreed then.
According to al-Shahristani, CNPC's contract was amended to make it sound like a technical service agreement. The original $670 million contract was signed in 1997, almost at the same time as LUKoil's.
He said that China had agreed to the new terms and to an increase in its value to $1.2 billion.
The new deal is expected to be signed in late August. CNPC will lose the possibility of putting the West Qurna reserves on its balance and to market part of the oil produced. However, it will be the first foreign company to sign an oil service contract with Iraq's new government.
Kommersant
Russian companies' shares plunge after Caucasian events
The Mechel case and the war in the Caucasus have frightened investors off more than the financial crisis. Russian indexes are falling faster than global markers, and on August 19 Russian firms' aggregate capitalization dropped below $1 trillion for the first time since June 2007.
"A most unfavorable market situation has evolved in Russia as a result of several factors," says Andrei Kilin, Alfa Capital's asset manager. Traders say it was mostly non-residents who were selling shares. It seems Western investors are losing their common sense when assessing the current situation on the Russian market.
"The first pages of newspapers and magazines in all countries are full with negative rhetoric toward Russia, so non-residents are selling their shares as a result," says Roland Nash, head of research at Renaissance Capital.
Whereas Russian analysts use such definitions as "non-flying weather" and "they have given the market nightmares," Western media is writing that Russia has been turned into an "investment Gulag" (see The Fool Internet resource), and that Russian papers have become cheap but dangerous (Barron's).
The Russian players have their own version of events. They think there are "bears" operating on the market whose aim is to push the indexes down to the minimum and force Russian players to sell more shares.
"In the current situation, a fall of another 10% on the RTS index is quite possible, and it will make Russian players actively sell their shares," says Arno Cook, Uralsib's senior trader.
When shares fall to new lows, speculators will start buying up Russian assets.
"Russian companies' shares are extremely cheap today, but nervousness, the lack of understanding of prospects for settling the conflict and the continued stress on international markets are stopping investors from buying shares," says Ivan Ivanchenko, VTB Capital's leading analyst for investment strategy.
Experts share the opinion that the level of risks which is being put into Russian shares now is much higher than the really existing one.
"Russia is a major world power, and Europe and the United States need it as much as Russia needs them; the U.S. and European economies are on the verge of recession, their domestic consumption is falling, so the exports of goods and services, including to Russia, is very important for them," Ivanchenko says.
RBC Daily
U.S. could tie down Russia's Black Sea Fleet - analyst
The United States could send its warships to help Georgia. Yesterday the Russian General Staff confirmed this news: according to its sources, American naval forces will enter the Black Sea by the end of August. If this happens, Russia's Black Sea Fleet will be tied down, Georgia finds itself protected by U.S. ship air defenses, and all of the North Caucasus will come within the range of U.S. naval missiles.
Talks on the passage of warships through the Bosporus and Dardanelles between Ankara, which controls the straits, and Washington have been going on for at least a week now. On the one hand, the Turkish leaders are angry with the U.S. for supporting Kurdish separatists. On the other, Turkey is a U.S. NATO ally and is unlikely to bargain long.
Under the Montreux Convention, warships of nations that have no direct access to the Black Sea may stay there no longer than 21 days and on condition that their combined displacement is not more than 30,000 tons. Formally, this prevents the U.S. 6th Mediterranean Fleet from sending an aircraft carrier to the Black Sea.
But, in the opinion of military expert Konstantin Makiyenko, even a modern cruiser and a few destroyers will be enough to neutralize Russia's Black Sea Fleet: "Today it is a museum-like collection of mismatched forces."
Theoretically, Moscow could send forces from other fleets to the Black Sea, but there is practically nothing to send. "The Northern Fleet acts as a nuclear deterrent," Makiyenko said. "The Pacific Fleet is too far away and has no forces suitable for the task."
The Baltic Fleet is compact-sized and well-balanced and has what is required, but its ships will be exposed to NATO's might while still en route to the Black Sea.
"If the Americans approach Poti and Batumi, we will have only one option left to save face: turn our ships back," said a Black Sea Fleet source. "Our peacekeeping mandate entitles us to stay in Abkhazian waters, especially since things will be calm there in the next few months. But it will be a troubled companionship, with possible provocations."
Russia has no time to restore its fleet, say military analysts and urge efforts to build up an aircraft task force in the region.
"The Black Sea is no ocean and within easy range of aircraft," Makiyenko said. Also, Russia must urgently strengthen Abkhazia's and South Ossetia's military and develop its control, command, communications and intelligence.
"If South Ossetia had had a strong army, our intervention could have been limited to air support," Makiyenko believes. "Our first encounter with far from the best foreign army has shown that the Georgians were equipped with better aircraft, tanks and communications. And what if they had fighter planes and state-of-the-art air defenses? It was our luck that Georgian soldiers proved to be so chicken-hearted." The pro-nuclear bias should be corrected, and as soon as possible, say specialists.
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