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MOSCOW, January 29 (RIA Novosti) Europe not ready for involvement in Caucasus conflict/ Moscow says ready to compromise on Europe's missile shield/ Russia, Europe will have to trade in gas anyway/ Major Russian oil producer to develop diamond deposit

Kommersant

Europe not ready for involvement in Caucasus conflict

Russia suffered its biggest failure with the Parliamentary Assembly of the Council of Europe on Wednesday, when the organization approved a resolution demanding that Russia withdraw its recognition of Abkhazia and South Ossetia's independence, a Russian analyst writes.
Fyodor Lukyanov, chief editor of the Moscow-based magazine Russia in Global Affairs, writes that the Russian-Georgian war last August is no longer a serious factor in European policy.
Russia and Georgia fought a five-day war after Georgian forces attacked South Ossetia on August 8 last year in an attempt to regain control over the breakaway republic. In response, Russia launched a military operation to eject Georgian troops from the region.
The global financial crisis has dramatically changed the world's priorities, forcing the leading European countries to reconsider their possibilities and interests, Lukyanov writes. As a result, they decided they are not ready for any serious involvement in conflicts, and that fundamental Georgian interests are less important than relations with Russia.
Europe has not forgotten the August 2008 war. However, it will not act on it but consider as evidence that Russia is an aggressive and unpredictable country.
According to the analyst, Georgia needs to maintain international interest in the conflict as the only means of remaining in the focus of global attention, especially since support for the "young Caucasus democracy" was more important for George Bush than it is for the new U.S. administration.
One unpleasant consequence of the war for Moscow is the headache over the status of Abkhazia and South Ossetia. Russia does not seem to know what to do with its "war trophy," Lukyanov writes. Despite the PACE decision, it cannot review its recognition of the two republics' independence, but neither can it expect other countries to recognize Abkhazia and South Ossetia.
The only other country to have recognized their independence is Nicaragua.
So, the future of the two newly independent states is unlikely to hamper the development of Russia's ties with the EU and the U.S., even though it will remain a stumbling block in international politics for years.
Russia is irritated by PACE's activity on the Caucasus issue, but it also suits it, Lukyanov writes. Each PACE session is a chance to let off steam and direct emotions toward drafting weak, non-binding resolutions. The same is true about Geneva talks, which will for a long time be limited to discussions on the text size of the participants' nameplates.

Nezavisimaya Gazeta/Gazeta.ru

Moscow says ready to compromise on Europe's missile shield

Russian generals, wishing to remain anonymous, have said they are suspending the deployment of Iskander missiles in the Kaliningrad Region in response to the United States' climb down on a European missile shield. In this way, Moscow is signaling to the new U.S. president its readiness for dialogue on mutual security.
To quote one of the unnamed Defense Ministry source, "it is too soon and improper to speak of practical measures to implement or suspend these plans." True: there is neither a U.S. missile base in Poland, nor approved plans to site Iskander missile systems, nor Iskanders themselves. Their adoption for service has been mooted for several years now, yet there is no information that any one of them has been set for production. They will have to be manufactured together with Topol intercontinental missiles, of which only five to six are produced a year. And the plant is unlikely to expand production, because next year it may be burdened by the manufacture of the Bulava missile.
The one who scared Europe with Iskanders was President Dmitry Medvedev, when on November 5 in his state of the nation address said Russia was ready to deploy Iskander-M theater missiles in the Kaliningrad Region in response to a U.S. missile defense shield in Poland and the Czech Republic. The Western media and politicians began to interpret his words as a threat to target missiles on NATO there and then. Moscow, through the comments of high-ranking officials, has at least 40 times explained that the missiles would only be a retaliatory step in the distant future, but their efforts were to no avail. The situation was interpreted as meaning that a missile base in Europe was a response to Russia's threat.
The comments on the postponement of the Iskander have therefore produced lively debate. The West is viewing such a turn of events as a major victory for itself. But the main thing is that President Barack Obama can now graciously abandon the European component of his national missile defense shield because "the Russians have surrended."
"Simply, the economic crisis is beginning to tell on Moscow's political rhetoric," says Nikolai Zlobin, the director of Russian and Asian programs at the U.S. Center for Defense Information. "Why should a country rapidly losing its place among the 10 largest economies quarrel with them?"

Gazeta.ru, RBC Daily, Vedomosti

Russia, Europe will have to trade in gas anyway

Following Europe's decision to build the Nabucco pipeline, Russian energy giant Gazprom decided to expand the South Stream pipeline project. Analysts point to a degree of bluff and psychological pressure in these developments.
The European Commission announced it was adding Nabucco to its 3.5 billion euro energy plan. Immediately after the announcement, Gazprom deputy CEO Alexander Medvedev said the company would increase South Stream's capacity.
Alexander Shtok, due diligence director at 2K Audit Business Consulting, said the planned increase by 16 billion cubic meters matches exactly the gas requirements of Nabucco.
Analysts have said more than once that Nabucco with its annual capacity of 31 billion cu m will not seriously ease Europe's gas needs (700-800 billion cu m). However, Nabucco and Russia's South and Nord Streams have traditionally been viewed as rival projects. If Europe opts for Nabucco, this will create a precedent and encourage related and similar projects to supply natural gas to Europe.
Alexander Shatilov, an analyst at the Russian Center for Current Politics, said: "The EU is still choosing, weighing all the pros and cons of rival projects. On the one hand, it does not want to be dependent on the 'unpredictable imperial' Russia, especially in view of the recurring gas conflicts with Ukraine. On the other hand, Nabucco is a risky project."
It is costly and will run across a large number of transit countries, which may act up any time. Besides, Europe will have to discuss gas supplies with Iran, whose leader, Ahmadinejad, is unliked in Europe.
However, Europe is only considering the situation and its dialogue with Russia will continue for a long time yet, analysts say.
Dmitry Baranov, an analyst with the Finam investment company, said: "There is a degree of bluff and psychological pressure in these discussions."
Valery Nesterov from Troika Dialog said Russia and Europe would have to trade in natural gas anyway, and that the only thing that may change is the volume of Gazprom's supplies.
The $10 billion Nabucco pipeline is expected to link energy-rich Central Asia to Europe through Turkey, Bulgaria, Romania, Hungary and Austria, bypassing Russia and Ukraine.
Gazprom is building the South Stream pipeline under the Black Sea to the Balkans and other European states to diversify its gas export routes.

Kommersant, Gazeta

Major Russian oil producer to develop diamond deposit

Russia's largest private oil producer, LUKoil, plans to cut its 2009 investment program to one-third yet intends to continue exploration at a diamond deposit in the Arkhangelsk Region, north of European Russia.
Top diamond producer De Beers abandoned the project two weeks ago after 15 years of fighting. Analysts say LUKoil will be able to sell the non-core project at a considerable profit in the future.
Arkhangelskgeoldobycha (AGD), a LUKoil subsidiary, and France's Foraco have signed an agreement worth 10.5 million euros on large-size well drilling at the Grib kimberlite pipe diamond deposit (Verkhotina, Archangelsk Region).
According to AGD, Foraco is to drill eleven 24-inch straight holes down to 600 meters (total length 6,600 km) from April to October 2009.
If LUKoil considers the project profitable, it will develop or sell it.
Pyotr Klyuyev from 2K Audit Business Consulting said: "Foraco will benefit from this situation in view of the depletion of global diamond reserves."
De Beers has evaluated the deposit's recoverable reserves at 67 million carats, worth over $5 billion.
Mikhail Zanozin from the Uralsib financial company said: "LUKoil apparently decided that it would be better to invest in the project rather than sell it now at a low price, or freeze it. Although diamond mining is a non-core business for the company, and it plans to slash investment in its core businesses - exploration and refining, spending on the diamond deposit looks moderate."
Maxim Khudalov from the Metropol investment financial company said LUKoil would be able to dictate the sale terms after it completes exploration of the diamond deposit and the global financial crisis ends.
In the past, De Beers and LUKoil intended to conduct exploration independently of each other, but now Russia's largest diamond miner, Alrosa, may become a co-investor in the project, Khudalov said.
Arkhangelskgeoldobycha (AGD), registered in August 1995, is conducting exploration at the Verkhotina license and preparing a feasibility study for it.
Foraco is a specialist in deep and shallow water well drilling.

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