MOSCOW, August 27 (RIA Novosti)
Medvedev takes first step toward new world order Medvedev wags a finger at West and has full support at home / Russian military bases to appear in South Ossetia, Abkhazia upon request / Foreign investors are not leaving Russia / Iran, Gazprom discuss swap transactions / Government ready to subsidize Russian farmers to compensate for U.S. food
Gazeta.ru, Vedomosti.ru, Vedomosti
Medvedev takes first step toward new world order
Russia's recognition of the independence of Abkhazia and South Ossetia several months after the leading Western countries recognized Kosovo's independence has closed the door on a short period of a stable world order.
Analysts say Moscow has provided a much more radical example of solving international problems without resorting to traditional mechanisms.
Russia put off the recognition of the breakaway Georgian republics for as long as possible, until it had to choose between doing it or bowing to the West - although it did not consider itself guilty of anything, and eating humble pie in this situation would have been vivid proof of its inefficiency.
Boris Shmelev, head of the Center for Comparative Political Studies at the Institute of International Economic and Political Studies, said in chess such situations are described as zugzwang, or the necessity to move when every decision has negative consequences. It is a choice between bad and worse.
Russia's recognition of Abkhazia and South Ossetia will enrage the West, and a crisis in bilateral relations that began several years ago will deteriorate into confrontation.
However, a decision not to recognize the two republics would have seriously damaged Russia's prestige and possibly destabilized the situation in Russia's North Caucasus, which would be still worse, Shmelev said.
Nikolai Zlobin, director of Russian and Asian programs at the U.S. Center for Defense Information, said Russia had delivered the final blow at the system of international relations agreed by the anti-Hitler coalition in Yalta, and opened the door to what the United States and other Western countries have demanded for the past few years - a revision of the fundamentals of the current world order.
"Dmitry Medvedev, the first Russian president to become a politician after the Cold War, has driven the last nail in the coffin of the system that has long become ineffective and inadequate, and has more than once led the international community into a dead-end," Zlobin said.
"When the West gets over its emotional reaction to Moscow's decision, many will sigh with relief there, because they will see that Dmitry Medvedev has untied their hands and actually made the decisive move toward a new world order," the analyst said.
According to Zlobin, "This offers Russia and the West new opportunities. The main thing now is not to become too involved with foreign policy maneuvering and attempts to punish each other, or else the sides will miss this rare strategic opportunity to change the world to one's liking."
Medvedev wags a finger at West and has full support at home
Tuesday's decision to recognize the independence of South Ossetia and Abkhazia is interesting from the perspective of Vladimir Putin and Dmitry Medvedev's management tactics. It is Medvedev, not Putin, who took the historic decision isolating Russia; it is Medvedev who wags a finger at the West and loses what image he had of a liberal, a Westener, and a stickler for the rule of law. It does not matter if he does it of his own accord, or has been forced to do so.
In his messages and speeches, Putin has repeatedly said that his goal is to reconstitute not only the economic, but also the political might of the country lost with the breakup of the Soviet Union. This idea seems to be rooted deeper than a mere electoral rhetoric. It has a lot of personal overtones. It can be assumed that Putin (who is certainly the brain behind the decision) is now experiencing a mixture of relief and excitement: at long last, he need not dissimulate, nor look for painful compromises, but proudly and bravely come forward with his interests, joining a serious fight at the top.
Tuesday's decision, which has gained unhesitant support inside the country, leaves the impression of a swift coup. According to the latest poll conducted by the All-Russian Public Opinion Research Center (VTsIOM), 71% of those interviewed are for recognizing the independence of Abkhazia and South Ossetia, and only 10% are against; a survey by Levada Center has shown that Medvedev's rating has risen from the pre-war 70% to 73% now and that of Putin, from 80% to 83%.
Confusion and a lack of coordination from the West are also seen as a success. Russian leaders are certain to be aware of the causes of this confusion; Russia supplies energy to it. During the Cold War, the Soviet Union also maintained uninterrupted supplies, so we do not fear another Cold War.
Russian military bases to appear in South Ossetia, Abkhazia upon request
Until Russia signs agreements with South Ossetia and Abkhazia, Russia's Defense Ministry will support peace there, as stipulated in President Dmitry Medvedev's decree recognizing the two republics as independent countries.
The peacekeeping contingent will stay, a Kremlin source said, adding that Russian military bases would appear if Abkhazia and South Ossetia want to have them.
Abkhazia and South Ossetia expect to sign defense agreements with Russia, their respective presidents, Sergei Bagapsh and Eduard Kokoity, chorused Tuesday.
A Foreign Ministry source told Kommersant that they were not planning to draft a separate defense agreement, but would include defense issues in the general friendship treaty.
For the time being, President Medvedev instructed the Russian armed forces to ensure Abkhazia's and South Ossetia's security at their presidents' requests.
The Foreign Ministry was instructed to negotiate the establishment of diplomatic relations "and document the agreements reached." It will also have to draw up an agreement on friendship, cooperation and mutual assistance between Russia and the two newly-independent states. The high-ranking source said the agreements weren't ready yet, but they had made some drafts.
He said he wasn't sure if Russia would be opening embassies in Sukhumi and Tskhinvali. "The format of our missions there still has to be defined," he said. This means that Russia may be building a slightly different model of diplomatic relations with the two than with all the other countries. Foreign ministry officials refer to it as 'associated relations model,' but they still have to develop specific content for this notion.
The sources said they were not discussing South Ossetia's and Abkhazia's possible accession to Russia. "Any plans to accede to Russia can only harm Russia now, because it would then look like annexation, so we won't be discussing a reunion of North and South Ossetia any time soon," said Oleg Teziyev, a former prime minister of South Ossetia.
Foreign investors are not leaving Russia
Western politicians have denounced the Kremlin for recognizing the independence of Abkhazia and South Ossetia, but foreign investors are not leaving Russia.
News agencies wrote yesterday that the West would definitely react to Moscow's move, and at the same time published optimistic statements about major foreign automobile concerns' plans to increase sales in Russia.
Mitsubishi president and CEO, Osamu Masuko, said developments in South Ossetia were purely political and would not affect the company's plans in Russia.
Mitsubishi is building an assembly plant in the Kaluga Region and plans to sell 140,000 vehicles in Russia this year, the largest number outside Japan.
Reinhard Jung of Skoda Auto, which has an assembly plant near Kaluga, said politics and business are two separate things. The company has invested much in its Russian business, has serious development plans, and is not going to abandon, he said.
Sergei Lepnukhov, PR director of GM CIS, said: "We have come to Russia to stay. Russia ranked second in Europe in GM sales in the first quarter of the year, and we expect to become number one in the second half."
Alexander Ortenberg, head of the building concern Strabag's Russian office, has recently returned from the company's board meeting in Austria. He said: "I didn't feel any tension. On the contrary, all our plans aim at developing business and expanding [in the country]. The parent company has even chided us for not developing in Russia fast enough."
A spokesperson for Alcoa, a U.S. company and the world's leading aluminum producer, that owns two plants in Russia, said it viewed Russia as a priority market and in the long run would do its best to bring innovation to Russia so as to strengthen its market competitiveness.
He added that Alcoa had invested over $760 million in its two Russian plants since 2005.
Vladimir Buyanov of BP said the conflict with Georgia had not affected the British company's operation in Russia.
Dominique Fache, Enel's vice president and head of Enel Russia & CIS, said the Italian company's plans in Russia had not changed. "We have not received any [new] instructions from Rome," he said.
A top manager at the Finnish energy concern Fortum, which controls Russian territorial generating company TGK-10, said Finnish companies would not curtail their Russian businesses. "Finland is closely connected to Russia geopolitically and economically, and depends on its energy supplies," he said.
Pfizer Russia chief Regis Lhomme said there were no reasons to consider curtailing business in Russia. He added that the Russian pharmaceutical market had shown impressive growth in 2008 and is expected to increase by 30% by the end of the year.
Iran, Gazprom discuss swap transactions
Despite growing tensions over Iran, Tehran continues announcing its plans to develop cooperation with Gazprom.
Gholam Hossein Nozari, Iran's minister of petroleum, spoke about his country's intention to strengthen ties with Russia by boosting cooperation with the Russian gas concern.
According to him, one of the options discussed is exchange (swap) transactions. "Using this instrument, we will receive Russian gas in the country's north and transfer it [to Gazprom] in the south," he said.
The minister refused to comment more on the issue. Judging by all signs, Gazprom will help to supply fuel to the Iranian northern regions short of gas and get an opportunity to export part of gas produced on the Iranian shelf.
Theoretically, the plan looks promising as it will allow Gazprom to expand its presence on the gas market in Southeast Asia. However, in practice it may prove too complicated. Iran and Russia do not have a common border, so gas can be supplied only via neighboring countries, including Turkmenistan, which also supplies gas to Iran, Azerbaijan, which has its own gas supply potential, and also Armenia and Georgia (in the latter case, Russia will need additional transit agreements with Tbilisi).
The most realistic version is to supply gas via Azerbaijan, which does not regard Iran as a promising market seeking to bring its gas to Europe. However, the Azerbaijani route will need [Gazprom's] additional investment in the infrastructure to modernize the Ali-Bairami-Astara-Rasht web.
Besides, Iran has gas in the south which could be exported to Southeast Asia. At present, it has no opportunity to do so (it supplies only small amounts of gas to Turkey). Negotiations on construction of an export pipeline to Pakistan and India have had no success for many years, so Gazprom cannot consider this route for its gas supplies under the swap transaction.
The only remaining opportunity is to supply liquefied natural gas from the South Pars field. However, the building of two out of the three planned LNG plants (Pars LNG and Persian LNG) has been practically frozen because of Western investors' refusal to participate in the project.
Shell, Pepsol and Total have left Iran under pressure from the U.S., which imposed sanctions on Tehran and its partners, and the governments of their own countries.
The third project, with Norway's StatoilHydro acting as operator, has been implemented without any cardinal change. However, it may be terminated, as well.
Thus, Gazprom can get gas in southern Iran only if it helps to produce and liquefy it. However, the Russian gas concern does not possess the necessary experience and technologies of LNG production.
Government ready to subsidize Russian farmers to compensate for U.S. food
At a meeting of the government's commission on the agro-industrial sector Wednesday, First Deputy Prime Minister Viktor Zubkov is expected to announce new subsidies for agriculture, amounting to 21 billion rubles a year, already being penciled into a draft budget. Some of this sum will go into supporting poultry production: the day before Russia said it was ready to tear up part of WTO agreements and cut poultry supplies from the U.S.
Very soon, a source in the Ministry of Agriculture said, talks could begin with the U.S. on a large reduction of American poultry meat imports to Russia: the Russian Union of Poultry Breeders has already held negotiations with American producers' associations and reached an understanding of "an acceptable level of supplies." No state-level talks on reviewing poultry imports have yet been held, however. Efforts are also continuing to specify the levels of harmful agents that can be used to treat poultry meat. Their results could have an effect on supplies from the U.S. too.
Russian lobbyists are prepared to substitute poultry imports at short notice. "Cuts in American imports will only improve the quality of food on our counters, which will be wholesome and environmentally sound," said Sergei Lisovsky, deputy chairman of the committee on agro-food policy. According to his estimates, the Russian poultry meat market sells 3.4 million tons annually ($8-8.5 billion in wholesale prices), of which 2.1 million tons is Russian-produced ($5.4 billion in wholesale prices), and 1.3 million tons imported ($2.5 billion in wholesale prices), with 70% coming from the U.S. (900,000 tons worth $1.75 billion in wholesale prices). Real demand for poultry meat in Russia is 2.8 million tons at most, i.e. already supply is running ahead of demand.
Many Russian companies which wanted to expand had to curtail production, said Lisovsky. Therefore, he said, if overseas imports are reduced, "Russian producers will be able to fill the Russian market even today, and especially in a year's time, when they will be able to come up with the missing 700,000 tons to meet the requirements in full."
Natalia Zagvozdina, an analyst at Renaissance Capital, estimates the Russian poultry meat market at 3.5 million tons ($9 billion in retail prices), with imports accounting for $2.7 billion to $3 billion.
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