VLADIMIR PUTIN IS TIGHTENING THE CIRCLE OF HIS FRIENDS
by Vladimir Soloviov, Mikhail Zygar
Translated by A. Ignatkin

Source: Kommersant, August 15, 2006, pp. 1, 5
Agency WPS
What the Papers Say Part B (Russia)
August 15, 2006 Tuesday

The Launch;

A regional alternative to the World Trade Organization; An informal
summit of the Euro-Asian Economic Community opens in Sochi today. The
presidents of Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and
Belarus have confirmed their attendance. Armenian leader Robert
Kocharjan and new Ukrainian Prime Minister Viktor Yanukovych have
been invited.

An informal summit of the Euro-Asian Economic Community opens in
Sochi today. The presidents of Kazakhstan, Kyrgyzstan, Uzbekistan,
Tajikistan, and Belarus have confirmed their attendance. Armenian
leader Robert Kocharjan and new Ukrainian Prime Minister Viktor
Yanukovych have also been invited to Sochi.

The Kremlin attaches considerable importance to the forthcoming
meeting. The Russian authorities want it to demonstrate that they are
not concerned about the failure of World Trade Organization (WTO)
membership talks. When negotiations with the United States broke
down on the eve of the G8 summit in St. Petersburg, Moscow decided
to organize an "alternative WTO" – based on the Euro-Asian Economic
Community (EAEC).

In fact, Russia began demonstrating exactly how it perceives the
future economic integration within the framework of the EAEC even
when preparations for the summit were under way. Mounting mutual
dependance of the neighbor states (with both states’ consent, that
is) for starters. Mounting pressure applied to the neighbors still
resisting as phase two. Expansion into the countries that have so
far escaped being in the focus of Moscow’s attention afterwards.

Traditionally for the Kremlin, energy sphere will become the number
one tool and lever. That is why establishment of the EAEC common
energy market is going to become the central issue of the informal
summit that will end on August 17.

Kazakh media outlets report on the eve of the Sochi summit that a
colossal project of water supply for Central Asia – Moscow’s latest
initiative – will become the most important issue on the agenda.

Water has always been a strategic resource in and for Central Asia.

Almost 80% of the water resources of the region are concentrated in
Tajikistan and Kyrgyzstan while the major consumers are Uzbekistan
and Kazakhstan. Tension usually mounted in summertime when water was
in a higher than usual demand but Kyrgyzstan began storing it up in
reservoirs for electric power production in winter. Kazakhstan and
Uzbekistan inevitably brought economic leverages into play to bow
Kyrgyzstan, dependent on exported energy as it is, to their will.

The Kremlin is trying to turn the tables now and make use of the
opportunities this situation is presenting. The idea of an Eurasian
water-energy consortium was first conceived of in Moscow in early
summer. Sources in Moscow and Astana imply that the project may be
financed by the Eurasian Bank Russia and Kazakhstan established not
long ago… Inter RAO EES, a subsidiary of the RAO Unified Energy
Systems, is already building the Sangtuda 1 hydroelectric power plant
and Russian Aluminum the Rogun hydroelectric power plant in Tajikistan.

Realization of the water-energy consortium initiative will put in the
Kremlin’s hands a major geopolitical tool that will certainly boost
its positions in Asia. On the other hand, it will pave way to energy
expansion into the Indian, Pakistani, and Chinese markets.

Eager to do its neighbors great favors, Russia has never yet failed
to encounter one and the same old problem. A great deal of CIS
countries are in the focus of Washington’s interests and attention,
and Vladimir Putin will have to have "friendly chats" with the CIS
leaders who seem to be on too intimate terms with the United States.

Russia has several "problematic" countries to deal with in this
respect and Kyrgyzstan is one of them. Encouraged by Moscow, Kyrgyzstan
asked the United States to revise the terms of the presence of Khansi
airbase in Bishkek airport Manas in 2005. In short, Bishkek wanted
$207 million in rent per year. According to our sources, the Kremlin
feared at first that Washington would accept the new terms but the
latter turned the demand down. Moscow expected that it would result in
curtailment of American military presence in Central Asia but Bishkek
let it down. All of a sudden, it abandoned its new demands and let
the Americans stay for a much lower price that it had demanded at
first. The Kyrgyz-American talks ended on July 14. Under the terms
of the new agreement, Washington is expected to pay $150 million per
year for the airbase. Putin will certainly expect an explanation from
President Kurmanbek Bakiyev of Kyrgyzstan now.

One other subject will be raised in Sochi. Russia will do its best
to persuade Kyrgyzstan not to join the HIPC (Heavy Indebted Poor
Countries) program under the aegis of the World Bank and International
Monetary Fund. Kyrgyzstan will be told that membership of the program
will cost it tis sovereignty and place it at the beck and call of
the United States. Moscow will offer Kyrgyzstan dependence on Russia
instead.

Yanukovych as a special guest at the informal summit is the Kremlin’s
other potential headache. According to what information is available at
this point, Putin invited the new Ukrainian prime minister to Moscow
because of the alarming rumors from Kiev that Yanukovych’s contacts
with American negotiators become more and more frequent and that the
sides have all but reached mutual understanding already.

Neither do Yanukovych’s latest statements permit the Kremlin to
relax. The Ukrainian prime minister is resolved to demand a lower
gas price from Russia: $95 per 1,000 cubic meters. This is not
an initiative guaranteed to find Putin or Gazprom particularly
sympathetic. Last but not least, Moscow cannot help noticing that
Yanukovych, the erstwhile "pro-Russian candidate," isn’t even thinking
of keeping his central pro-Russian campaign promises. (On a working
visit to the Crimea on August 11, Yanukovych announced that making
Russian the second state language is not possible for the time being.)

There are some guests expected in Sochi whose pro-Russian stance
is not something Putin doubts, but even that doesn’t make Russia’s
relations with their respective countries exactly cloudless.

The Russian-Belarusian talks promise to be particularly difficult.

Moscow is resolved to make no more advances to Minsk. Establishment of
a union state is one of the worst problems in the Russian-Belarusian
bilateral relations. Russia wants a common currency introduced in
both countries as soon as possible but Belarus never misses a chance
to delay and impede the process. Alexander Lukashenko demands from
Russia a recompense for the budget losses the forthcoming unification
of the two countries will entail. Belarusian economists maintain that
processes of integration has cost Belarus almost $2 billion in the
last twelve months. Russia, however, has an ace up its sleeve. The
Kremlin is enraged – and doesn’t bother concealing it – that Belarus
is exporting Russian gas and oil products to the third countries
without compunction. According to official estimates alone, Belarusian
petroleum product exports increased by almost 60% in January-May 2006,
to $3.2 billion. More than ample compensation for what losses Belarus
claims it is suffering.

There is one other factor that doesn’t make Russian-Belarusian
bilateral relations any more easier. When Lukashenko was re-elected
this spring, Gazprom announced that the price of Russian gas sold
to Belarus should be raised to match the European average. Moscow
is even prepared to discuss the matter, as long as Beltransgaz turns
over some elements of the gas transportation framework to Gazprom.

But official Minsk wouldn’t hear of it, so the gas price could soar
from $46 to $180-200 per thousand cubic meters. This would be a
near-fatal blow to the struggling Belarusian economy.

Lukashenko has made some frantic attempts to establish a dialogue
with Iran and Venezuela and even evinced vivid interest in the project
of the pipeline from Iran to Pakistan to India. And yet, it is clear
that all these contacts are merely a show, an attempt to make Moscow
more amenable.

Rapprochement with Islam Karimov of Uzbekistan, another "faithful
friend" of Russia, is not following the script Russia has chartered.

Tashkent found himself in international isolation after the massacre
in Andijan. Russia moved in, supported Karimov wholeheartedly, and
even signed a treaty of the relations of allies with him. Expecting
Uzbekistan to sell Russia its major assets in return. Well,
considerably glitches have developed in the process. Establishment
of an uranium-mining joint venture to develop the Aktau deposit came
to grinding halt because of the Uzbek redtape on the government level.

The future of the American-Uzbek Zarafshan-Newmont is another
unknown. US-based Newmont Mining withdrew from the project when the
Uzbek authorities slapped back tax claims on it ($11 million for 2005
and $37 million for 2002-04). Moscow hoped that Interros would take
the Americans’ place, but no progress at all has been made yet…

In fact, Moscow has a strong argument to be used in the disputes with
Uzbekistan. The matter concerns the group of Uzbeks currently in the
detention cell in the Russian city of Ivanovo. Suspecting them of
organization of the revolt in Andijan, Tashkent has been clamoring
for their extradition for a year now. Russia is prepared to turn the
Uzbeks over to Tashkent but only in return for serious condescensions
on the part of Uzbekistan. After all, the Russian authorities have
already granted the men in question the status of political refugees,
and their extradition to Uzbekistan will almost certainly make trouble
for Moscow’s image in the West (not to mention political problems it
will generate).

On the other hand, damage to its image in the eyes of the international
community is not what worries Moscow that much nowadays. Mad at the
West, the Kremlin is out to nail together a team of its own. Should
it set the West seething, Moscow will be only pleased.