MOSCOW, August 26 (RIA Novosti) Kremlin ready to pay for Abkhazia and South Ossetia's independence / Russia will sacrifice contacts with the West / Moscow challenges the West and maneuvers in post-Soviet space / Russia has resources to confront the West / Russia will take back its WTO concessions / Russia's second largest air carrier eyes Austrian Airlines
Kremlin ready to pay for Abkhazia and South Ossetia's independence
When two sides armed with generally recognized but incompatible principles of international law clash, victory goes to the side that wins over more supporters.
The West will most likely have the upper hand over Abkhazia and Russia. Moscow has paid dearly for its actions in the past few weeks, but it thinks it was worth it and that it will eventually win.
Russia's direct spending on the clash with Georgia exceeded $500 million, and the Kremlin has promised as much for the reconstruction of infrastructure in the breakaway republics of Abkhazia and South Ossetia.
The United States has blocked Russia's integration into the G7 financial group, and the NATO-Russia Council has been suspended. The new members of the European Union have called for halting talks on a new partnership and cooperation agreement with Russia.
The immediate consequences of the clash are not very serious, but the media can do more damage to Russia than international sanctions. Many governments have admitted they have little room for maneuver in this situation.
Meanwhile, the leading global media are presenting Russia as an aggressive and dangerous state. This has undermined investors' trust in the Russian economy and provoked a fall in the market value of Russian companies to less than $1 trillion.
Analysts say it was an emotional rather than a structural decision, and that the Russian market and the weakened ruble will eventually regain their strength owing to Russia's high economic indicators and oil prices.
Strategically, Abkhazia is more important to Russia than South Ossetia, because it borders on the Krasnodar Territory where the 2014 Winter Games will be held in Sochi. Russia wants to ensure proper security in the region for the Games.
Support for the breakaway republics would be a symbolic gesture for Russia made to prove its ability to uphold its views and interests on the international scene.
In other words, Russia will most probably recognize the independence of Abkhazia, spurring Russians' self-esteem and damaging the country's international prestige. This will cost the Kremlin, but it appears to be ready to pay the price.
Russia will sacrifice contacts with the West
Russia has probably threatened to go back on its agreements with NATO and WTO in response to similar warnings issued by the West. The United States and European nations as well have repeatedly threatened Russia with international isolation, although both sides realize it would be a damaging move to all.
Now Russia says it is prepared to go into isolation. But is this empty rhetoric or do Russian leaders really have some new foreign political strategy which would allow them to feel so lighthearted about relations with the West?
President Dmitry Medvedev and Prime Minister Vladimir Putin have issued statements which were accurate and pragmatic acknowledgements of the recent changes. The NATO-Russia Council's effectiveness has been close to zero for some time now; Georgia's and Ukraine's accession to NATO will probably go faster in the wake of the recent conflict in South Ossetia. Ukraine will probably be able to join the Membership Action Plan (MAP) in December.
Russia also had a problem with certain requirements for its WTO accession earlier, too, but before South Ossetia, we had options of trading them for some other claims advanced by the West. Now, however, it is obvious that Russia won't join up any time soon: in addition to the U.S. threats, Georgia and Ukraine may influence the process.
Our positions may now go far apart, and for a long period, too. But one still hopes that common sense and commitment to their own interests will prevent the differences from unfolding into a deeper and broader conflict.
Despite the series of threats pronounced recently, the West doesn't seem to have worked out any consolidated position with regard to Russia and is unlikely to do it soon. Russia is important to it as a strong political player in the region and as a relatively stable economy amid the global crisis which would unfailingly supply its partners with energy. It is also impossible to have the West close its ranks against Russia, because Russia isn't posing a global threat now.
Moscow may be counting on a set of isolationist moves it has up its sleeve. What if the new Putin-Medvedev strategy involves rallying a group of countries nursing grudges against the U.S.?
Many fast-growing economies with ambitious political leaders can be found in the modern "second world." Some of them are not at all happy with America's hegemony and the resulting distribution of roles in the global economy.
Only, it is unclear so far what Russia could offer them apart from its name for a rallying cry.
It is also natural that all "second world" countries have their own interests to uphold. Even the CIS allies haven't rushed to stand by Russia now. Iran is as dangerous for Russia as it is for the US. China is dependent on the U.S. as much as the U.S. depends on it. Moreover, China is least likely to support Russia's drive to recognize South Ossetia and Abkhazia, not when it has Tibet and Taiwan to deal with.
Moscow challenges the West and maneuvers in post-Soviet space
Along with its recent steps aimed at recognizing Abkhazia and South Ossetia, Moscow has demonstrated that it can be grateful to the post-Soviet republics whose governments are eager to renounce NATO.
Moldova is definitely on the list of such states. Its government has stated on several occasions that it is willing to sign an international declaration that would guarantee the republic's permanent neutrality. Moreover, it has of late tried to dissociate itself from the GUAM (Georgia, Ukraine, Azerbaijan and Moldova) Organization for Democracy and Economic Development.
Yesterday's meeting between Dmitry Medvedev and Vladimir Voronin started with the Russian president's harsh statements, which have been more typical of Vladimir Putin. Stating that "the Georgian leaders have gone mad," the Russian president told his Moldovan counterpart that "now is the time to settle the Transdnestr problem - there is a good opportunity to do it." Moreover, Medvedev underscored that "Russia is ready to apply all efforts to resolve the Transdnestr crisis once and for all."
A statement of this kind can be described as unprecedented - Russian officials didn't promise to resolve the problem "once and for all" even when they prepared a reconciliation plan for Chisinau and Tiraspol back in 2003. The plan was later dubbed "Kozak's memorandum" - at that time Dmitry Kozak was deputy head of the Presidential Executive Office.
Yesterday the presidents of Russia and Moldova agreed that in the near future they would hold negotiations, inviting all the parties involved. Dmitry Medvedev is likely to meet with Transdnestr's leader Igor Smirnov - an agreement has already been reached.
RBC Daily, Kommersant
Russia has resources to confront the West
Although Russia seems like a weaker player than the Soviet Union in this new round of sparring with the West, Moscow still has the resources for this confrontation, Russian experts say.
Still, as regards the recognition of South Ossetia and Abkhazia as independent countries, Russia will probably have to let it lie for a while.
Although Russia imports 40% of the food it consumes, it is still capable of producing enough bread and potatoes to meet its own needs, while a number of non-Western countries such as Brazil are highly interested in exporting their meat.
"A complete embargo on Russia is impracticable," said Valery Mironov, chief economist at the Development Center economic research foundation. "Even if one G7 country halts exports to Russia, they should bear in mind that most transnational companies have operations in other countries such as China which is likely to preserve economic relations with Russia in any case."
"There is nothing the West can do. Let them try it, for God's sake, they'll bring sanctions upon themselves. We could cut off their gas for starters," Valery Galchenko, member of the United Russia general council, said heatedly.
Financier Sergei Aleksashenko, a former deputy chairman of the Russian Central Bank, sounded calmer: "Russians will probably face a cooler attitude, top leaders included. They could complicate visa applications. But they couldn't divest all capital because the profit rate is too high."
Political analyst Sergei Kurginyan insists that the current political and economic system in Russia has been specifically geared to integration with the West, not to confrontation. This explains many decisions of the Russian government, including the investment of Russia's Stabilization Fund in US securities.
Obviously when US Congress adopted the controversial "USA Patriot Act" in the first half of the lucrative oil decade, the Kremlin completely ruled out a possible confrontation with the West.
Sergei Lopatnikov, a research professor of civil and environmental engineering and senior scientist at the University of Delaware Center for Composite Materials, said: "It is more important to take into account political risks than economic ones when operating outside the country."
Vasily Duma, former president of the Slavneft oil company, now deputy head of the Federation Council's natural resources committee, sounds concerned about the Stabilization Fund's future. "Anything might happen if one trusts money to strangers," he said.
The future of Russia's Stabilization Fund, along with some $300 billion to $700 billion deposited by the Russian elite in U.S. and European banks, will probably be among the important reasons to delay the recognition of Abkhazia and South Ossetia.
Russia will take back its WTO concessions
Russia will withdraw from the economically damaging agreements it has signed in the hope of gaining accession to the World Trade Organization. It will do so in response to American threats to close the WTO door for it over the war in South Ossetia.
Moscow's desire to join the organization was its only weak spot.
Sergei Yushin, head of the executive committee of the National Meat Association, said: "The unequal agreements mostly concern Russia's meat market, in particular chicken meat. Russia accepted unfavorable accession conditions, giving the United States over 74% of poultry meat quotas. As a result, the poultry meat market is oversaturated, with an excessive share of imports from the U.S."
"This does not suit Russian producers, because poultry meat prices in the Russian market are unjustifiably low, whereas production costs have grown over the past year," Yushin said.
On August 25, German weekly magazine Der Spiegel published an interview with U.S. Secretary of Commerce Carlos Gutierrez, who said: "We have worked with Russia and we have been an advocate for Russia's entry into the world community. We have welcomed them into the group of the leading industrial nations. We welcomed Russia's desire to join the World Trade Organization. They are putting all that at risk."
Sergei Karykhalin, chief analyst at the Kapital asset management company, said: "The United States has broadly hinted that it might reciprocate to Moscow's policy by freezing its accession to the WTO. Why then should Russia honor its agreements?"
Russia will not risk much by taking such a decision.
Alexander Razuvayev, chief market analyst at Sobinbank, said: "I don't think this decision will have a major influence on Russia's macroeconomics. Its economic model is based on commodities export, which is not regulated by WTO norms."
"They often made unacceptable requests to us at the talks," he said. "If the West really wanted to integrate Russia into the global economy, the country would have long been accepted to the organization."
Russia has now hinted that it is not eager to join.
Alexei Makarkin, deputy head of the Center for Political Technologies, said: "Our WTO accession chances were dim before the military conflict in the Caucasus, in part because Americans refused to cancel the Jackson-Vanik Amendment. In addition, Ukraine has joined the WTO, which promised difficult accession talks with it. Even before the war, Georgia refused to approve Russia's accession, and our changes plummeted to zero when the conflict began."
Russia's second largest air carrier eyes Austrian Airlines
Sibir Airlines is bidding for a 42.75% government stake in Austrian Airlines. Despite a formidable rival, Lufthansa, Russia's second largest air company has a chance of becoming a co-owner of one of the most famous European lines.
The ultimate choice of the Austrian authorities will, however, depend on politics, analysts believe, although the current worsening of relations between Russia and the West over the Georgian-Ossetian conflict is unlikely to play a big role.
September 12 is the final day by which bidders are to submit a strategy for the company's development. The tender itself will close before the end of October. Initially, Aeroflot wanted to participate, but later abandoned the idea.
Sibir is interested in Austrian Airlines above all as a way to develop its international business, which is hemmed in by intergovernmental agreements. Sibir often has problems obtaining permission for international flights. For example, it has long been trying in vain to start flights to Paris.
Boris Rybak, Infomost general director, said that Sibir has a chance of victory. "Economically, an alliance with Lufthansa would be more ideal," said the analyst. "But this tender will largely depend on the seller's attitude, that of the Austrian government, and on political considerations." Austria's official representatives have already intimated Lufthansa does not suit them as a potential buyer, Rybak said.
The German carrier's priority in the region is its own hub in Munich, and the Austrian authorities fear that it will move the best paying Austrian Airlines flights there.
Peter Leonov, general director of Hungary's Malev, said that one of the main requirements by the Austrian authorities is to develop the Vienna hub, which is also government-owned.
"The Austrians would not opt for big-time bidders - Lufthansa and Air France-KLM - which simply want to corner the market from Austrian Airlines, rather than develop the company and its hub in Vienna," the Malev head said.
Rybak said that tensions between Russia and the European Union over the conflict between Georgia and South Ossetia are "creating a negative political background" for Sibir to buy Austrian Airlines "and could create problems in finalizing the deal." But the analyst is confident this will not be the decisive factor.
"We have looked into all the political risks of a possible deal," said a high-placed source in Aeroflot, "and are sure the situation surrounding Georgia is unlikely to affect the Austrian government's choice."
Leonov added that Austrian Airlines' financials are now so low that the seller will just go for the largest bid.
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