Thursday, May 31, 2007

Russia talk

The Russians' test of a new rocket that is designed to be a counter-measure to the Star Wars "missile defense system" that doesn't even work yet is attracting attentions:U.S. "imperialism" means new arms race: Putin By Oleg Shchedrov Reuters 05/31/07; Putin culpa a EE UU de iniciar una nueva carrera de armamentos El País/Reuters 31.05.2007; "Wir haben sie gewarnt" Süddeutsche Zeitung/Reuters 31.05.07; Putin Defends Tests as Response in 'Arms Race' by Anna Smolchenko The Moscow Times 06/01/07.

Smolchenko reports:
President Vladimir Putin on Thursday said the country's recent tests of new missiles were aimed at maintaining "global peace," defending them as an appropriate response to an increasing U.S. military presence in Europe.

In the latest sign of cooling relations with the United States, Putin suggested that Washington's actions were provoking an arms race.

"Bear in mind, it wasn't us who initiated the new round," Putin said, adding quietly, "of the arms race." ...

"This is extremely important for maintaining global peace," he said in response to a Greek reporter's questions about the strained state of Russian-U.S. relations. In a clear reference to the United States, Putin also criticized behavior characterized by "imperialism and dictate" in a repeat of statements he made in recent months.
The state energy heavyweight Gazprom will continue to attract attention, too, particularly while energy prices remain high: EU, Russia must adhere to legal energy supply framework: Piebalgs EU Business 31.05.2007; How the Russians plan to invade Britain by Craig Murray Daily Mail 05/27/07; Russia, Energy Security and Alternative Energy by Craig Murray, blog post 05/27/07; Why Russians Love Gazprom by Jason Bush and Anthony Blanco Business Week 07/26/07

In his blog post, Murray writes:
... I have little sympathy for the view that George Bush is the only bad man in the World, and that any World leader whose interests differ from Bush's, eg Putin, is therefore a good leader. In fact, I would view it as a fruitless and difficult exercise to view which of the two is more sinister. I do not give a second's credence to the view that the attack on Iraq was wrong, but on Chechnya OK. Or that it was dreadfully wrong for Bush to support the despotism of President Karimov of Uzbekistan, but it's OK now that Putin is doing it.

In fact I rather despair of the many on the Left who seem to accept Bush and Blair's risible "With us or against us" logic, and conclude that any opponent of Bush is a good person. Anyone who believes that the Russian oligarchs are not just as evil and machinating as Dick Cheney, has switched off his critical faculties.

And finally the fact that the neo-cons have identified energy security as a problem, does not mean it is not a problem. What the neo-cons have got wrong is the solution, which is not endless wars of resource annexation, but profound measures of energy conservation and re-orientation, and a massive drive to develop carbon friendly alternative energy sources.
Now, there's nothing especially objectionable about what Murray says here. But if we're entering a new, long-term nuclear arms race with the Russians, and if Gazprom is being held up as the Russian bogeyman by Dick Cheney types looking for excuses for a new Cold War, it's worth getting in the habit now of looking closely at the claims being made.

In the case of this statement, just who exactly holds "the view that George Bush is the only bad man in the World, and that any World leader whose interests differ from Bush's, eg Putin, is therefore a good leader"? I would also oppose such a view, if there is anyone who actually thinks that.

At the same time, we don't have to assume that the Bush and Blair governments are being honest with us in their evaluation of threats. We've had a wealth of experience to show what such an assumption is a dubious process.

I'm also not aware of any contemporary parallel to the orthodox Communist Parties of the decades of the Soviet Union, who had an ideological orientation and international political ties that pushed them to defend whatever political line of the day came out of the Kremlin.

But even if there were, it still makes total sense to take a critical look at what the Russian government and Gazprom are actually doing and saying, so far as we can get that from the available news resources. And to not approach claims of threats from neo-Cold Warriors by giving them the benefit of the doubt from the start.

Murray's rather sensationally-titled Daily Mail piece lays out the significance of Russian energy sources for Europe:
Europe currently gets a quarter of its energy from natural gas, and this is predicted to increase to 30 per cent by 2016.

Already Europe is heavily dependent for this on Russia – which means on Gazprom. Some EU states such as Slovakia and Bulgaria get all their gas from Russia, while Germany gets 43 per cent and France takes 27 per cent.

Both those figures will increase dramatically as Gazprom’s new Baltic Sea pipeline comes on line and as Western Europe’s natural gas reserves dwindle fast, especially Britain’s.

Unlike oil, natural gas is transported in fixed pipelines, so there is little opportunity for short-term switching of suppliers.

Already highly dependent on Russia, the EU is now moving into a position where inside ten years any interruption of Gazprom supplies, particularly in winter, would be devastating.
The distinction he makes between oil and gas delivery is an important economic point. The world oil spot market has made the particular source of oil less important than it once was, though of course some countries have better quality oil than others.

So, as a hypothetical example, if Venezuela stopped selling oil to the United States, that wouldn't mean that the US oil supply would be reduced by the amount that Venezuela currently supplies.It means that someone else would get Venezuela's direct supply and the oil that someone else currently gets would wind up in the US. That's a gross oversimplication, but that's the concept behind his reference.

There's not the same kind of spot market for natural gas.

The more hopeful side of this is that trade interconnections can reduce the potential for conflict. In the rightwing narrative of the end of the Cold War, the role that increased business interactions played in the 1970s and 1980s is downplayed or ignored altogether. The Murray quote above emphasizes the Europeans consumers fixed dependence of Russian supplies. The flip side of it is that Gazprom can't replace its European customers from one day to the next.

Now, I know that it's only in the imaginations of economists that business and consumers make perfectly rational decisions based on full knowledge of the alternatives. But with Europe this dependent on Russian natural gas, European leaders are more will think a bit more carefully than would otherwise be the case before taking actions that the Russians might legitimately interpret as threatening. And with Russia making big money off their European customer, Russian leaders will also be more conscious that they have a lot to lose from provoking unnecessary tensions.

Given the prospects for most people of a new Cold War and nuclear arms race, that sounds like a good thing to me.

Murray's article explains the reasons for worry over Gazprom and its clout. He also reports on how Gazprom dominates Russian TV and print news:
The company is also key to Putin’s harsh internal control. Kuprianov often appears on the nation’s TV screens, which is easily explained. A year after taking power, Putin decided to stamp out independent media in Russia.

When the only independent national TV channel was closed down in 2001, it was Gazprom Media which took it over and turned it into a propaganda arm of the Kremlin.

Gazprom went on to buy up Russia’s two large independent national newspapers. The last significant remaining one, Kommersant, was bought personally last November by the sinister Uzbek oligarch Alisher Usmanov, chairman of Gazprominvest Holdings.

The Editor-in-Chief was immediately sacked while the defence correspondent, Igor Safronov, mysteriously fell to his death from a window three months later.

Gazprom now controls awhole raft of formerly independent media outlets encompassing TV, radio and newspapers, all faithfully echoing the Kremlin line.
This bit from the Bush/Blanco article is also interesting:
While Gazprom makes headlines for its exploits abroad—45% of the gas consumed in Germany now comes from the Russian giant—the great bulk of Siberian gas always has been burned at home at prices heavily regulated by the state. Long after the Soviet Union was dismantled and the old gas ministry evolved into Gazprom, the Kremlin continued to curry favor with the masses by setting gas prices well below market rates.

It wasn't until Putin succeeded Boris Yeltsin in 2000 that Moscow began raising domestic gas rates in hopes of discouraging consumption in those places where gas was available and freeing more of it for export. Prices are still only one-fifth of rates in Western Europe and certainly no spur to conservation.

Gazprom says it loses money on domestic sales, although most outside analysts doubt this claim. What's not in dispute is that the company makes healthy profits selling abroad. Last August the connection between the two markets became evident in an unlikely fashion in out-of-the-way Kalyazin.

In attendance at a large town meeting were not only Gazprom representatives but also Ulrich Hartmann, chairman of the parent of Germany's largest gas supplier, E.ON Ruhrgas, a major Gazprom customer and joint-venture partner. Hartmann's presence in the provincial Russian town signaled Kalyazin's role as a showcase for new energy-saving technologies, which Ruhrgas hopes Gazprom will adopt more generally.

"The more Gazprom can economize on gas," Kalyazin Mayor Ilyin explains, "the more gas it will be able to export, including to Ruhrgas and to Germany." (my emphpasis)
The fact that Gazprom sells natural gas for lower prices domestically is one of the big complaints of Western critics. That's why it's noteworthy to see Business Week reporting that "most outside analysts" believe that Gazprom also makes a profit on domestic sales.

The complaint is almost the opposite of a complaint about "dumping", in which a country sells exports at a price below it's production costs to undercut competitors. In this case, Gazprom is criticized for making too much profit in its sales abroad. That's not  to say there's nothing to the complaint. But we need to see such claims in the clear light of day, not through some 20-year-old Cold War lens.

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