EU report: Georgian attack started war with Russia

The result of the EU investigation is not surprising. What disturbs me is that Georgia connects with NATO and then starts a war with Russia, a war they can't possibly win. What kind of ally can they be? Clearly they were expecting a rescue from NATO. I hope they were appropriately disappointed, enough so they don't do that again.

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Georgia's attack on its breakaway South Ossetia region marked the start of last year's war with Russia, which retaliated with excessive force, an EU-commissioned report said Wednesday.

The report on the five-day war in August 2008 lay blame on both sides, but cited Georgia as starting the conflict with its night shelling in South Ossetia - an act it said was not justifiable under international law.

The EU report went on to blame Russia for conducting a military campaign deep inside Georgia. "All this cannot be regarded as even remotely commensurate with the threat to Russian peacekeepers in South Ossetia," the report said.

Russia's retaliation went "far beyond the reasonable limits of defense," it said, criticizing the devastating Russian assault on a tiny neighbor that in recent years has moved closer into the West with hopes of joining NATO.

In a first reaction, both sides said the report vindicated them. The Russian Foreign Ministry said "the core conclusion of the report is that the current leadership of Georgia unleashed the aggression."

via EU report: Georgian attack started war with Russia - World News | Tri-City Herald : Mid-Columbia news.

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Truck bomb signals trouble on Russia’s southern flank

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Putin's handling of Chechnya is back firing, like the US's handling of Iraq/Afghan/Pak. Now perhaps we see why he was so forceful with Georgia, he needs all the allies he can get in the region, since enemies are everywhere. Ronald Reagan's creation of Al Qaeda continues to give the world nightmares.

A week of extremist attacks on Russia’s seething southern flank climaxed Monday with a suicide truck bombing in Ingushetia that killed at least 20 and injured scores outside a police station in the tiny republic’s main city, Nazran.

The resulting explosion triggered a “raging fire” that destroyed a weapons room, incinerated nearby cars, and damaged nearby apartment buildings, according to an Associated Press (AP) report from Nazran. It was one of the deadliest attacks in the region in years, the AP said.

Violence by Islamist insurgents, once confined mainly to separatist Chechnya, has gradually spread throughout much of Russia’s northern Caucasus, leaving Russian authorities increasingly unable to guarantee order, or even protect pro-Moscow officials, in the mainly Muslim region. (See map.)

For Moscow, the stakes are huge. The northern Caucasus region is Russia’s gateway to the energy-rich and strategically vital southern Caucasus, which includes the former Soviet nations of Georgia, Azerbaijan, and Armenia.

Worsening violence in the area could seriously disrupt the planned 2014 Winter Olympics in nearby Sochi, into which former President Vladimir Putin invested about $12 billion along with his own personal prestige.

Concerns Moscow could lose control

Long-simmering concerns that Moscow could lose control in the volatile northern Caucasus, where Chechen rebels have waged a persistent insurgency since 1991, are spiking again given the past week of attacks.

via Truck bomb signals trouble on Russia’s southern flank | csmonitor.com.

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Iran and Russia, scorpions in a bottle

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Asia Times Online

Things get curiouser and curiouser in the Iranian wonderland. Imagine what happened last week during Friday prayers in Tehran, personally conducted by former president Ayatollah Hashemi Rafsanjani, aka "The Shark", Iran's wealthiest man, who made his fortune partly because of Irangate - the 1980s' secret weapons contracts with Israel and the US.
As is well known, Rafsanjani is behind the Mir-Hossein Mousavi-Mohammad Khatami pragmatic conservative faction that lost the most recent battle at the top - rather than a presidential election - to the ultra-hardline faction of Ayatollah Ali Khamenei-Mahmud Ahmadinejad-Iran Revolutionary Guard Corps. During prayers, partisans of the hegemonic faction yelled the usual
"Death to America!" - while the pragmatic conservatives came up, for the first time, with "Death to Russia!" and "Death to China!"
Oops. Unlike the United States and Western Europe, both Russia and China almost instantly accepted the contested presidential re-election of Ahmadinejad. Could they then be portrayed as enemies of Iran? Or have pragmatic conservatives not been informed that obsessed-by-Eurasia Zbig Brzezinksi - who has US President Barack Obama's undivided attention - has been preaching since the 1990s that it is essential to break up the Tehran-Moscow-Beijing axis and torpedo the Shanghai Cooperation Organization (SCO)?
On top of it, don't they know that both Russia and China - as well as Iran - are firm proponents of the end of the dollar as global reserve currency to the benefit of a (multipolar) basket of currencies, a common currency of which Russian President Dmitry Medvedev had the gall this month to present a prototype at the Group of Eight (G-8) meeting in Aquila, Italy? By the way, it's a rather neat coin. Minted in Belgium, it sports the faces of the G-8 leaders and also a motto - "Unity in diversity".
"Unity in diversity" is not exactly what the Obama administration has in mind as far as Iran and Russia are concerned - no matter the zillion bytes of lofty rhetoric. Let's start with the energy picture.
Iran is world number two both in terms of proven oil reserves (11.2%) and gas reserves (15.7%), according to the BP Statistical Review of World Energy 2008.
If Iran ever opted towards a more unclenched-fist relationship with Washington, US Big Oil would feast on Iran's Caspian energy wealth. This means that whatever the rhetoric, no US administration will ever want to deal with a hyper-nationalist Iranian regime, such as the current military dictatorship of the mullahtariat.
What really scares Washington - from George W Bush to Obama - is the perspective of a Russia-Iran-Venezuela axis. Together, Iran and Russia hold 17.6% of the world's proven oil reserves. The Persian Gulf petro-monarchies - de facto controlled by Washington - hold 45%. The Moscow-Tehran-Caracas axis controls 25%. If we add Kazakhstan's 3% and Africa's 9.5%, this new axis is more than an effective counter-power to American hegemony over the Arab Middle East. The same thing applies to gas. Adding the "axis" to the Central Asian "stans", we reach 30% of world gas production. As a comparison, the whole Middle East - including Iran - currently produces only 12.1% of the world's needs.
All about Pipelineistan
A nuclear Iran would inevitably turbo-charge the new, emerging multipolar world. Iran and Russia are de facto showing to both China and India that it is not wise to rely on US might subjugating the bulk of oil in the Arab Middle East. All these players are very much aware that Iraq remains occupied, and that Washington's obsession remains the privatization of Iraq's enormous oil wealth.
As Chinese intellectuals are fond of emphasizing, four emerging or re-emerging powers - Russia, China, Iran and India - are strategic and civilizational poles, three of them sanctuaries because they are nuclear powers. A more confident and assertive Iran - mastering the full cycle of nuclear technology - may translate into Iran and Russia increasing their relative weight in Europe and Asia to the distress of Washington, not only in the energy sphere but also as proponents of a multipolar monetary system.
The entente is already on. Since 2008, Iranian officials have stressed that sooner or later Iran and Russia will start trading in rubles. Gazprom is willing to be paid for oil and gas in roubles - and not dollars. And the secretariat of the Organization of Petroleum Exporting Countries (OPEC) has already seen the writing on the wall - admitting for over a year now that OPEC will be trading in euros before 2020.
Not only the "axis" Moscow-Tehran-Caracas, but also Qatar and Norway, for instance, and sooner or later the Gulf Emirates, are ready to break up with the petrodollar. It goes without saying that the end of the petrodollar - which won't happen tomorrow, of course - means the end of the dollar as the world's reserve currency; the end of the world paying for America's massive budget deficits; and the end of an Anglo-American finance stranglehold over the world that has lasted since the second part of the 19th century.
The energy equation between Iran and Russia is much more complex: it configures them as two scorpions in a bottle. Tehran, isolated from the West, lacks foreign investment to upgrade its 1970s-era energy installations. That's why Iran cannot fully profit from exploiting its Caspian energy wealth.
Here it's a matter of Pipelineistan at its peak - since the US, still during the 1990s, decided to hit the Caspian in full force by supporting the Baku-Tblisi-Ceyhan (BTC) oil pipeline and the Baku-Tblisi-Supsa (BTS) gas pipeline.
For Gazprom, Iran is literally a goldmine. In September 2008, the Russian energy giant announced it would explore the huge Azadegan-North oilfield, as well as three others. Russia's Lukoil has increased its prospecting and Tatneft said it would be involved in the north. The George W Bush administration thought it was weakening Russia and isolating Iran in Central Asia. Wrong: it only accelerated their strategic energy cooperation.
Putin power play
In February 1995, Moscow committed to finishing construction of a nuclear reactor at Bushehr. This was a project started by that erstwhile, self-proclaimed "gendarme of the Gulf" for the US - the shah of Iran. The shah engaged KWU from Germany in 1974, but the project was halted by the Islamic Revolution in 1979 and hit hard between 1984 and 1988 by Saddam Hussein's bombs. The Russians finally entered the picture proposing to finish the project for $800 million. By December 2001, Moscow also started to sell missiles to Tehran - a surefire way of making extra money offering protection for strategic assets such as Bushehr.
Bushehr is a source of immense controversy in Iran. It should have been finished by 2000. As Iranian officials see it, the Russians seem never to be interested in wrapping it up. There are technical reasons - such as the Russian reactor being too big to fit inside what KWU had already built - as well as a technology deficit on the part of Iranian nuclear engineers.
But most of all there are geopolitical reasons. Former president Vladimir Putin used Bushehr as a key diplomatic peon in his double chessboard match with the West and the Iranians. It was Putin who launched the idea of enriching uranium for Iran in Russia; talk about a strategic asset in terms of managing a global nuclear crisis. Ahmadinejad - and most of all the Supreme Leader - gave him a flat refusal. The Russian response was even more foot-dragging, and even mild support for more US-sponsored sanctions against Tehran.
Tehran got the message - that Putin was not an unconditional ally. Thus, in August 2006, the Russians landed a new deal for the construction and supervision of two new nuclear plants. This all means that the Iranian nuclear dossier simply cannot be solved without Russia. Simultaneously, by Putin's own framework, it's very clear in Moscow that a possible Israeli strike would make it lose a profitable nuclear client on top of a diplomatic debacle. Medvedev for his part is pursuing the same two-pronged strategy; stressing to Americans and Europeans that Russia does not want nuclear proliferation in the Middle East while stressing to Tehran that it needs Russia more than ever.
Another feature of Moscow's chessboard strategy - never spelled out in public - is to keep the cooperation with Tehran to prevent China from taking over the whole project, but without driving the Americans ballistic at the same time. As long as the Iranian nuclear program is not finished, Russia can always play the wise moderating role between Iran and the West.
Building up a civilian nuclear program in Iran is good business for both Iran and Russia for a number of reasons.
First of all, both are military encircled. Iran is strategically encircled by the US in Turkey, Iraq, Saudi Arabia, Bahrain, Pakistan and Afghanistan, and by US naval power in the Persian Gulf and the Indian Ocean. Russia has seen the North Atlantic Treaty Organization (NATO) gobbling up the Baltic countries and threatening to "annex" Georgia and Ukraine; NATO is at war in Afghanistan; and the US is still present, one way or another, across Central Asia.
Iran and Russia share the same strategy as far as the Caspian Sea is concerned. They are in fact opposed to the new Caspian states - Kazakhstan, Turkmenistan and Azerbaijan.
Iran and Russia also face the threat of hardcore Sunni Islam. They have a tacit agreement; for instance, Tehran has never done anything to help the Chechens. Then there's the Armenian issue. A de facto Moscow-Tehran-Erevan axis profoundly irks the Americans.
Finally, in this decade, Iran has become the third-largest importer of Russian weapons, after China and India. This includes the anti-missile system Tor M-1, which defends Iran's nuclear installations.
What's your axis?
So thanks to Putin, the Iran-Russia alliance is carefully deployed in three fronts - nuclear, energy and weapons.
Are there cracks in this armor? Certainly.
First, Moscow by all means does not want a weaponized Iranian nuclear program. This spells out "regional destabilization". Then, Central Asia is considered by Moscow as its backyard, so for Iran to be ascendant in the region is quite problematic. As far as the Caspian goes, Iran needs Russia for a satisfactory juridical solution (Is it a sea or a lake? How much of it belongs to each border country?)
On other hand, Iran's new military dictatorship of the mullahtariat will react savagely if it ever had Russia fully against it in the UN Security Council. That would spell a rupture in economic relations - very bad for both sides - but also the possibility of Tehran supporting radical Islam everywhere from the southern Caucasus to Central Asia.
Under these complex circumstances, it's not so far-fetched to imagine a sort of polite Cold War going on between Tehran and Moscow.
From Russia's point of view, it all comes back to the "axis" - which would be in fact Moscow-Tehran-Erevan-New Delhi, a counter-power to the US-supported Ankara-Tblisi-Telaviv-Baku axis. But there's ample debate about it even inside the Russian elite. The old guard, like former prime minister Yevgeny Primakov, thinks that Russia is back as a great power by cultivating its former Arab clients as well as Iran; but then the so-called "Westernizers" are convinced that Iran is more of a liability.
They may have a point. The key of this Moscow-Tehran axis is opportunism - opposition to US hegemonic designs. Is Obama - via his "unclenched fist" policy - wily enough to try to turn this all upside down; or will he be forced by the Israel lobby and the industrial-military complex to finally strike a regime now universally despised all over the West?
Russia - and Iran - are fully committed to a multipolar world. The new military dictatorship of the mullahtariat in Tehran knows it cannot afford to be isolated; its road to the limelight may have to go through Moscow. That explains why Iran is making all sorts of diplomatic efforts to join the SCO.
As much as progressives in the West may support Iranian pragmatic conservatives - who are far from reformists - the crucial fact remains that Iran is a key peon for Russia to manage its relationship with the US and Europe. No matter how nasty the overtones, all evidence points to "stability" at this vital artery in the heart of the New Great Game.
Next: Iran, China and the New Silk Road
Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007) and Red Zone Blues: a snapshot of Baghdad during the surge. His new book, just out, is Obama does Globalistan (Nimble Books, 2009).
He may be reached at pepeasia@yahoo.com.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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AP Interview: Gorbachev criticizes Putin's party

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Tri-City Herald

In some of his strongest criticism of his successors, Mikhail Gorbachev on Thursday likened Vladimir Putin's United Russia party to the worst of the communists he once led and helped bring down, and said Russia is today a country where the parliament and the judiciary are not fully free.
In an interview with The Associated Press some 20 years after the Soviet empire started its rapid collapse on his tumultuous watch, Gorbachev also said the global economic crisis showed capitalism should be tempered with elements of the socialist system he played such a critical role in sweeping away.
The last Soviet leader was interviewed in the offices of his Gorbachev Foundation, a think tank founded in 1992 to promote "democratic values and moral, humanistic principles" - as well as, some say, Gorbachev himself. A little aged and more heavyset perhaps, Gorbachev, 78, seemed feisty, friendly and often reminiscent of the man who once ruled one of two superpowers on Earth.
Gorbachev is a paradoxical figure even after all these years - widely credited around the world with a historic convulsion he admits he did not intend. He sought to fix communism, not destroy it, and in the interview said that while he was willing to let Eastern Europe go its own way he very much hoped the republics that formed the Soviet Union would stay united.
"I was a resolute opponent of the breakup of the union," said Gorbachev, who was forced to step down on Dec. 25, 1991, as the country he led ceased to exist.
He still holds out hope that one day Ukraine, Kazakhstan and Belarus will join with Russia in forming a new union.
He seemed to view the global meltdown as partly the result of years of Western hubris and excess.
"The American media trumpeted ... about the victory in the Cold War, that socialism is down. This disease of extreme self-confidence led to it - the (belief) that things would always go on this way. And it did last long ... I think that now everyone is learning a hard lesson."
"It is necessary to overcome these mistakes of super-consumerism, of super-profits." he said. "We have to think about finding - through the G20 or other institutions - new models of development (and) cooperation."
The world should look for a composite system, he said, which incorporates "the past experience of all that the capitalist system brings, like competitiveness, and what socialism gives - especially a social safety net."
Gorbachev also said the moment was right for improved U.S.-Russia relations, expressed skepticism about the wisdom of Ukraine joining NATO, and called on the world community to head off the prospect of an Iranian nuclear weapon not with confrontation but rather "a maximal dialogue."
"Let (Iran) integrate itself into the global community, build normal relations," he said.
Gorbachev had harsh words for the current Russian leadership, singling out United Russia, the party Prime Minister Vladimir Putin has built into a political juggernaut at the center of a tremendously centralized - albeit popular - power structure.
"I criticize United Russia a lot, and I do it directly," the last Soviet leader said. "It is a party of bureaucrats and the worst version of the CPSU" - the Communist Party of the Soviet Union. "Regarding our parliament, I cannot say that it is independent (and) also our judiciary does not fully comply with the provisions of the constitution."
Is the world waiting for such advice? If there are takers, most will be outside Russia, where he has become a rather marginal political figure: For every Russian who appreciates his role in ending communism there are certainly many more inclined to blame him for the privations of the process he unleashed: the impoverishment many suffered in the 1990s, the vastly unequal distribution of wealth that bedevils society even today, the failings of Russian democracy - and the humiliating loss of the once-vast empire ruled from the Kremlin.
Asked about the fateful Nov. 9, 1989, when the Berlin Wall fell, Gorbachev said that he never contemplated force to stop the process that within months saw most of the Warsaw Pact break free. He said it was inevitable that the states of that region would be free to do as they wished.
Yet even in Eastern Europe, as the region gears up to celebrate the 20th anniversary of the fall of communism, Gorbachev gets only the rarest of mentions and he is forced to share credit for the revolution with a slew of others - Poland's Lech Walesa, Vaclav Havel, Ronald Reagan and the late Pope John Paul II.
"We live more freely now than in the communist era because of what he did and achieved," said Peter Nagy, a 37-year-old public employee in Budapest. "However, he was still the leader of a dictatorial system, not a democrat. I would not accept him today as a leader."
Havel, the former Czech president, in his memoirs "To the Castle and Back" described Gorbachev as both a special and tragic case and said the collapse of communism would have been much more violent without him.
In Warsaw, former anti-communist dissident Adam Michnik said he feels "great gratitude" toward Gorbachev. "I don't have the slightest doubt that it was Gorbachev and his policy of glasnost and perestroika that opened the gates for the great changes that first took place in our country and then in this part of the continent," Michnik said.
In the interview, Gorbachev was philosophical about his declining political fortunes.
"Personally, as a politician, I lost. But the idea that I conveyed and the project that I carried out, it played a huge role in the world and the country. But now the situation is such that more and more people are starting to understand what Gorbachev did ...
"But anyway, we have gone far, and there's no return."
Gorbachev laughed when asked whether his recent appearance in Louis Vuitton ads might not cheapen such a momentous legacy, saying his foundation needed the money. He noted that he had also once appeared in Pizza Hut ads, and asked if any other offers might be forthcoming.


Monika Scislowska in Warsaw, Poland; Karel Janicek in Prague, Czech Republic; and Bernadette Tomsits in Budapest, Hungary, contributed to this report.

AP Interview: Gorbachev criticizes Putin's party

Image via Wikipedia

Tri-City Herald

In some of his strongest criticism of his successors, Mikhail Gorbachev on Thursday likened Vladimir Putin's United Russia party to the worst of the communists he once led and helped bring down, and said Russia is today a country where the parliament and the judiciary are not fully free.
In an interview with The Associated Press some 20 years after the Soviet empire started its rapid collapse on his tumultuous watch, Gorbachev also said the global economic crisis showed capitalism should be tempered with elements of the socialist system he played such a critical role in sweeping away.
The last Soviet leader was interviewed in the offices of his Gorbachev Foundation, a think tank founded in 1992 to promote "democratic values and moral, humanistic principles" - as well as, some say, Gorbachev himself. A little aged and more heavyset perhaps, Gorbachev, 78, seemed feisty, friendly and often reminiscent of the man who once ruled one of two superpowers on Earth.
Gorbachev is a paradoxical figure even after all these years - widely credited around the world with a historic convulsion he admits he did not intend. He sought to fix communism, not destroy it, and in the interview said that while he was willing to let Eastern Europe go its own way he very much hoped the republics that formed the Soviet Union would stay united.
"I was a resolute opponent of the breakup of the union," said Gorbachev, who was forced to step down on Dec. 25, 1991, as the country he led ceased to exist.
He still holds out hope that one day Ukraine, Kazakhstan and Belarus will join with Russia in forming a new union.
He seemed to view the global meltdown as partly the result of years of Western hubris and excess.
"The American media trumpeted ... about the victory in the Cold War, that socialism is down. This disease of extreme self-confidence led to it - the (belief) that things would always go on this way. And it did last long ... I think that now everyone is learning a hard lesson."
"It is necessary to overcome these mistakes of super-consumerism, of super-profits." he said. "We have to think about finding - through the G20 or other institutions - new models of development (and) cooperation."
The world should look for a composite system, he said, which incorporates "the past experience of all that the capitalist system brings, like competitiveness, and what socialism gives - especially a social safety net."
Gorbachev also said the moment was right for improved U.S.-Russia relations, expressed skepticism about the wisdom of Ukraine joining NATO, and called on the world community to head off the prospect of an Iranian nuclear weapon not with confrontation but rather "a maximal dialogue."
"Let (Iran) integrate itself into the global community, build normal relations," he said.
Gorbachev had harsh words for the current Russian leadership, singling out United Russia, the party Prime Minister Vladimir Putin has built into a political juggernaut at the center of a tremendously centralized - albeit popular - power structure.
"I criticize United Russia a lot, and I do it directly," the last Soviet leader said. "It is a party of bureaucrats and the worst version of the CPSU" - the Communist Party of the Soviet Union. "Regarding our parliament, I cannot say that it is independent (and) also our judiciary does not fully comply with the provisions of the constitution."
Is the world waiting for such advice? If there are takers, most will be outside Russia, where he has become a rather marginal political figure: For every Russian who appreciates his role in ending communism there are certainly many more inclined to blame him for the privations of the process he unleashed: the impoverishment many suffered in the 1990s, the vastly unequal distribution of wealth that bedevils society even today, the failings of Russian democracy - and the humiliating loss of the once-vast empire ruled from the Kremlin.
Asked about the fateful Nov. 9, 1989, when the Berlin Wall fell, Gorbachev said that he never contemplated force to stop the process that within months saw most of the Warsaw Pact break free. He said it was inevitable that the states of that region would be free to do as they wished.
Yet even in Eastern Europe, as the region gears up to celebrate the 20th anniversary of the fall of communism, Gorbachev gets only the rarest of mentions and he is forced to share credit for the revolution with a slew of others - Poland's Lech Walesa, Vaclav Havel, Ronald Reagan and the late Pope John Paul II.
"We live more freely now than in the communist era because of what he did and achieved," said Peter Nagy, a 37-year-old public employee in Budapest. "However, he was still the leader of a dictatorial system, not a democrat. I would not accept him today as a leader."
Havel, the former Czech president, in his memoirs "To the Castle and Back" described Gorbachev as both a special and tragic case and said the collapse of communism would have been much more violent without him.
In Warsaw, former anti-communist dissident Adam Michnik said he feels "great gratitude" toward Gorbachev. "I don't have the slightest doubt that it was Gorbachev and his policy of glasnost and perestroika that opened the gates for the great changes that first took place in our country and then in this part of the continent," Michnik said.
In the interview, Gorbachev was philosophical about his declining political fortunes.
"Personally, as a politician, I lost. But the idea that I conveyed and the project that I carried out, it played a huge role in the world and the country. But now the situation is such that more and more people are starting to understand what Gorbachev did ...
"But anyway, we have gone far, and there's no return."
Gorbachev laughed when asked whether his recent appearance in Louis Vuitton ads might not cheapen such a momentous legacy, saying his foundation needed the money. He noted that he had also once appeared in Pizza Hut ads, and asked if any other offers might be forthcoming.


Monika Scislowska in Warsaw, Poland; Karel Janicek in Prague, Czech Republic; and Bernadette Tomsits in Budapest, Hungary, contributed to this report.

Officials: Obama Letter to Moscow Floated Trade-Off on Missile Defense

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Fox News

More details are emerging about a letter President Obama sent to Russian President Dmitry Medvedev discussing plans for a missile defense shield in Eastern Europe.
Though the Kremlin disputes the account, senior U.S. administration officials say Obama suggested in his letter that those plans might be unnecessary if Moscow helped in blocking Iran's progress toward building long-range missiles.
"President Obama sent a letter to Russian President Medvedev discussing a broad range of issues, including missile defense as it relates to Iran," a senior administration official told FOX News.
"The suggestion is that need for missile defense deployment could become unnecessary if, working together with Russia, the Iran missile threat is addressed," an official told The Associated Press.
Plans for deploying U.S. missile defenses in Poland and the Czech Republic, ostensibly to guard against Iranian attacks on U.S. allies in Europe, are among a host of issues that soured U.S.-Russia relations during the former Bush administration. There have been indications Obama, who has vowed to shake up American foreign policy, might be willing to set aside the missile defense system.
The senior official told FOX News that the U.S. will continue to "consult with Poles and Czechs as we move forward with decisions on missile defense."
Obama and Medvedev were expected to meet at the G-20 economic summit of advanced and developing nations in London next month, according to the officials.
The administration has previously hinted that the policy on the missile defense shield that former President George B. Bush fiercely advocated was open to reassessment.
In Moscow, a Kremlin source told FOX News there was no quid pro quo on Iran and missile defense in the letter, but said the correspondence was considered very positive and contained a number of initiatives.
On Monday, Russian Foreign Minister Sergey Lavrov urged the United States to restore diplomatic relations with Iran, Russian news agencies reported. "This would be an important element in stabilizing the situation in the region," he said.
Lavrov is scheduled to hold talks with Secretary of State Hillary Rodham Clinton in Geneva on Friday in the highest-level meeting between the two nations since Obama took office.
At a February gathering of NATO defense chiefs in Krakow, Poland, Defense Secretary Robert Gates said that Washington would review the missile plan "in the context of our relationship with both Poland and the Czech Republic" as well as with NATO and Russia. The language marked a departure from the tone of the Bush administration, which enthusiastically promoted the plan and signed deals last year with Warsaw and Prague.
Gates said that if Moscow really wants to stop the missile shield, it should help eliminate the threat of a missile attack from Iran.
The Obama administration has been vocal about its desire to repair rifts between the U.S. and Russia. In Munich last month, Vice President Joe Biden told a gathering of world leaders, "It's time to press the reset button and to revisit the many areas where we can and should be working together with Russia."

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Officials: Obama Letter to Moscow Floated Trade-Off on Missile Defense

Image via Wikipedia

Fox News

More details are emerging about a letter President Obama sent to Russian President Dmitry Medvedev discussing plans for a missile defense shield in Eastern Europe.
Though the Kremlin disputes the account, senior U.S. administration officials say Obama suggested in his letter that those plans might be unnecessary if Moscow helped in blocking Iran's progress toward building long-range missiles.
"President Obama sent a letter to Russian President Medvedev discussing a broad range of issues, including missile defense as it relates to Iran," a senior administration official told FOX News.
"The suggestion is that need for missile defense deployment could become unnecessary if, working together with Russia, the Iran missile threat is addressed," an official told The Associated Press.
Plans for deploying U.S. missile defenses in Poland and the Czech Republic, ostensibly to guard against Iranian attacks on U.S. allies in Europe, are among a host of issues that soured U.S.-Russia relations during the former Bush administration. There have been indications Obama, who has vowed to shake up American foreign policy, might be willing to set aside the missile defense system.
The senior official told FOX News that the U.S. will continue to "consult with Poles and Czechs as we move forward with decisions on missile defense."
Obama and Medvedev were expected to meet at the G-20 economic summit of advanced and developing nations in London next month, according to the officials.
The administration has previously hinted that the policy on the missile defense shield that former President George B. Bush fiercely advocated was open to reassessment.
In Moscow, a Kremlin source told FOX News there was no quid pro quo on Iran and missile defense in the letter, but said the correspondence was considered very positive and contained a number of initiatives.
On Monday, Russian Foreign Minister Sergey Lavrov urged the United States to restore diplomatic relations with Iran, Russian news agencies reported. "This would be an important element in stabilizing the situation in the region," he said.
Lavrov is scheduled to hold talks with Secretary of State Hillary Rodham Clinton in Geneva on Friday in the highest-level meeting between the two nations since Obama took office.
At a February gathering of NATO defense chiefs in Krakow, Poland, Defense Secretary Robert Gates said that Washington would review the missile plan "in the context of our relationship with both Poland and the Czech Republic" as well as with NATO and Russia. The language marked a departure from the tone of the Bush administration, which enthusiastically promoted the plan and signed deals last year with Warsaw and Prague.
Gates said that if Moscow really wants to stop the missile shield, it should help eliminate the threat of a missile attack from Iran.
The Obama administration has been vocal about its desire to repair rifts between the U.S. and Russia. In Munich last month, Vice President Joe Biden told a gathering of world leaders, "It's time to press the reset button and to revisit the many areas where we can and should be working together with Russia."

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Moscow, Tehran force the US's hand

Image by Army.mil via Flickr

Asia Times Online

It may seem there could be nothing in common between the blowing up of a bridge in the Khyber, the usage of an air base nestling in the foothills of the Pamirs and the launch of a 60-pound (37.2 kilogram) satellite into the night sky that will circle the Earth 14 times a day.
But band them together and they trigger the political and diplomatic equivalent of what is known in the game of chess as zwischenzug, which means an intermediate move that improves a player's position.
Persians, who invented chess, would have mastery over zwischenzug.
Iranian Foreign Ministry spokesman Hassan Qashqavi said in Tehran on Wednesday, "Iran has no plans to stop its nuclear activity. At its forthcoming meeting, the 'Iran Six' should draw up a logical approach and accept the fact that Iran is a nuclear state."
The Taliban don't play chess
It is unlikely the Taliban factored Iran's imminent zwischenzug when they blew up the 30-meter iron bridge in the Khyber Pass 24 kilometers west of Peshawar in northwest Pakistan on Monday, which halted the supplies for North Atlantic Treaty Organization (NATO) troops in Afghanistan. But the disruption of traffic once again exposed the vulnerability of the main NATO supply route and focused attention on Tehran.
This is forcing NATO into a major policy shift. NATO's top military commander in Afghanistan, General John Craddock, admitted that the alliance would not oppose individual member nations making deals with Iran to supply their forces in Afghanistan. To quote Craddock, a four-star American general who is also NATO's supreme allied commander, "Those would be national decisions. Nations should act in a manner that is consistent with their national interest and with their ability to resupply their forces. I think it is purely up to them."
Craddock was transferring rapidly to the operational plane what the alliance's secretary general Jaap de Hoop Scheffer had said only a week ago that NATO member countries, including the United States, should engage Iran to combat the Taliban in Afghanistan.
Scheffer wouldn't have spoken without Washington's nod. Craddock underscored it. NATO is keen to use the new highway built by the Indian government from central Afghanistan to the Iranian border at Zaranj, which would allow access to Iran's deep-sea Persian Gulf port at Chabahar. The road is largely unused. The Indians completed work on the highway hardly a fortnight ago.
NATO is scrambling. It must somehow reduce dependence on Pakistani supply routes, which are currently used for ferrying about 80% of supplies. The irony cannot be lost on onlookers. NATO seeks an Iranian route when Tehran is demanding a US troop pullout from Afghanistan.
Last Thursday, Iranian Foreign Minister Manouchehr Mottaki remarked that Iran had paid attention to the plans of US President Barack Obama's administration to withdraw US troops from Iraq and "we believe this should be extended to Afghanistan as well".
The irony deepens insofar as a fortnight ago US Secretary of Defense Robert Gates in his first congressional testimony in the new administration leveled allegations about increased Iranian "interference" and doublespeak in Afghanistan, and implied that Tehran was fueling the insurgency.
Russia's zwischenzug
The heart of the matter is that the US's efforts to open supply routes from the north across the Amu Darya have got caught up in the great game in Central Asia. American spokesmen blithely claimed Russia and the Central Asian states were providing supply routes. But the geopolitics do not bear that out.
Kyrgyzstan President Kurmanbek Bakiyev dropped a bombshell on Tuesday by demanding the closure of the US military base in Manas, which is used for ferrying supplies for Afghanistan. He said this after talks with Russian President Dmitry Medvedev, during which Moscow pledged to Bishkek that it was writing off $180 million debt and would also provide Kyrgyzstan with a $2 billion soft loan and an outright grant of $150 million.
NATO's envoy to Central Asia, Robert Simmons, rushed to Bishkek in a last-ditch attempt to stall the Kyrgyz move, but only to regret the development and admit that NATO's Afghan operations would be adversely affected. Washington still hopes to salvage the situation, but that involves taking Moscow's help.
Moscow is willing, as always - provided the US is prepared to shelve its untimely geopolitical agenda to broaden and deepen its (and NATO's) strategic presence in Central Asia on the pretext of developing new supply routes for Afghanistan. Plainly put, Moscow feels irritated about Washington's abrasive diplomacy in Central Asia in recent weeks.
The US signed an agreement with Kazakhstan, Russia's key ally, offering to procure "a significant part" of its supplies for Afghanistan from that country. and in turn is pressuring it to make troop deployments in Afghanistan. Conceivably, Moscow (and Beijing) view with disquiet the US move to court their key Shanghai Cooperation Organization (SCO) and Collective Security Treaty Organization (CSTO) ally into the Western strategic orbit. Conceivably, Moscow's zwischenzug to evict the US military from Kyrgyzstan would enjoy tacit Chinese encouragement as well.
Nyet to selective engagement
Washington prefers "selective engagement" without addressing the underlying factors that caused the chill in relations. The Kremlin remains cautiously optimistic that Obama may address relations from a fresh perspective. The mood is reflected in a pithy comment by former Russian president Mikhail Gorbachev that "there are grounds for optimism, so far".
But an underlying sense of exasperation is visible. As a Moscow commentator put it, the George W Bush era may be over, but the "consequences are still there"; Obama might have new ideas, but the "old wire-pullers" are still there in the establishment in key positions; and, therefore, Obama might need "years rather than months to shape a new foreign policy".
So, Moscow resorted to zwischenzug. Last Saturday, the influential Moscow paper Nezavisimaya Gazeta reported that Russia proposed to reopen the key Soviet air base of Bombora on the Black Sea coast in Abkhazia. On Tuesday, Russia signed an agreement with Belarus setting up an integrated air defense system. On Wednesday, Medvedev used the CSTO forum to reiterate he was open to cooperation with the US in the fight against terrorism in Afghanistan.
Again, in related comments on Wednesday, Russian Deputy Foreign Minister Grigory Karasin said, "We hope that we and the United States will hold special and professional talks on this issue [of transit routes to Afghanistan] in the near future. We will see how effectively we can cooperate ... The US, Central Asia, China - we are all interested in a successful anti-terrorism operation in Afghanistan."
Karasin assured that the US's eviction from Manas "would not prove an obstruction". He said, "We [Russia] hope that we and the United States will hold special and professional talks on the issue in the near future. We will see how effectively we can cooperate."
In sum, the ball is in Obama's court. The big question is whether he can bulldoze the hardliners and jettison the heavy baggage of geopolitics that his faltering Afghan war is needlessly carrying.
Meanwhile, the shadow of US-Russian relations falls on the Hindu Kush. The Russian media reported that a high-level Afghan military delegation is expected in Moscow in the "near future". With a growing possibility that Obama may withdraw support for Afghan President Hamid Karzai, Moscow will be weighing its options.
The US is perched on a slippery slope in Afghanistan. The Taliban resurgence continues and the security situation is deteriorating, but NATO is unable to increase its force level or evolve an effective strategy. NATO supply lines have come under threat, but alternate routes are yet to be negotiated. The US's rift with the Karzai regime is widening, but a replacement is never easy to be catapulted into power in Kabul. Again, Washington should pressure Islamabad, but the situation in Pakistan is far too fragile to take any greater pressure.
It is against this complex backdrop that Iran's satellite took off into the star-studded night sky on Monday. Named Hope, its launch has a multiplier effect on geopolitics. Warning bells are ringing in Western capitals that any expectation of Tehran lowering its guard is misplaced. The launch can be seen as a technological feat, which it indeed is, but Hope also gives a hard message about Iran's military capability.
Experts estimate that the two-stage rocket used for its launch could easily carry a small warhead to a target 2,500 kilometers away. It may not be an inter-continental ballistic missile, but southern Europe comes within its range, as indeed the whole of Israel. Simply put, Iran has in hand a credible deterrent against a US-Israeli military attack.
White House press secretary Robert Gibbs described the launch as of "acute concern to this administration". German Foreign Minister Frank-Walter Steinmeir said after his first meeting with US Secretary of State Hillary Clinton, "We want to be helpful in making sure that the outstretched hand of President Obama is a strong hand." No doubt, these are strong words.
But an unmatchable German word is more to the point - zugzwang. It literally means "compelled to move". That is, a situation develops on the chessboard when any move a player makes can only weaken his position, but he is nonetheless compelled to make his move.
It may be far-fetched to say that Moscow and Tehran coordinated their respective zwischenzug, but certainly both keenly await Washington's zugzwang .
Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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Moscow, Tehran force the US's hand

Image by Army.mil via Flickr

Asia Times Online

It may seem there could be nothing in common between the blowing up of a bridge in the Khyber, the usage of an air base nestling in the foothills of the Pamirs and the launch of a 60-pound (37.2 kilogram) satellite into the night sky that will circle the Earth 14 times a day.
But band them together and they trigger the political and diplomatic equivalent of what is known in the game of chess as zwischenzug, which means an intermediate move that improves a player's position.
Persians, who invented chess, would have mastery over zwischenzug.
Iranian Foreign Ministry spokesman Hassan Qashqavi said in Tehran on Wednesday, "Iran has no plans to stop its nuclear activity. At its forthcoming meeting, the 'Iran Six' should draw up a logical approach and accept the fact that Iran is a nuclear state."
The Taliban don't play chess
It is unlikely the Taliban factored Iran's imminent zwischenzug when they blew up the 30-meter iron bridge in the Khyber Pass 24 kilometers west of Peshawar in northwest Pakistan on Monday, which halted the supplies for North Atlantic Treaty Organization (NATO) troops in Afghanistan. But the disruption of traffic once again exposed the vulnerability of the main NATO supply route and focused attention on Tehran.
This is forcing NATO into a major policy shift. NATO's top military commander in Afghanistan, General John Craddock, admitted that the alliance would not oppose individual member nations making deals with Iran to supply their forces in Afghanistan. To quote Craddock, a four-star American general who is also NATO's supreme allied commander, "Those would be national decisions. Nations should act in a manner that is consistent with their national interest and with their ability to resupply their forces. I think it is purely up to them."
Craddock was transferring rapidly to the operational plane what the alliance's secretary general Jaap de Hoop Scheffer had said only a week ago that NATO member countries, including the United States, should engage Iran to combat the Taliban in Afghanistan.
Scheffer wouldn't have spoken without Washington's nod. Craddock underscored it. NATO is keen to use the new highway built by the Indian government from central Afghanistan to the Iranian border at Zaranj, which would allow access to Iran's deep-sea Persian Gulf port at Chabahar. The road is largely unused. The Indians completed work on the highway hardly a fortnight ago.
NATO is scrambling. It must somehow reduce dependence on Pakistani supply routes, which are currently used for ferrying about 80% of supplies. The irony cannot be lost on onlookers. NATO seeks an Iranian route when Tehran is demanding a US troop pullout from Afghanistan.
Last Thursday, Iranian Foreign Minister Manouchehr Mottaki remarked that Iran had paid attention to the plans of US President Barack Obama's administration to withdraw US troops from Iraq and "we believe this should be extended to Afghanistan as well".
The irony deepens insofar as a fortnight ago US Secretary of Defense Robert Gates in his first congressional testimony in the new administration leveled allegations about increased Iranian "interference" and doublespeak in Afghanistan, and implied that Tehran was fueling the insurgency.
Russia's zwischenzug
The heart of the matter is that the US's efforts to open supply routes from the north across the Amu Darya have got caught up in the great game in Central Asia. American spokesmen blithely claimed Russia and the Central Asian states were providing supply routes. But the geopolitics do not bear that out.
Kyrgyzstan President Kurmanbek Bakiyev dropped a bombshell on Tuesday by demanding the closure of the US military base in Manas, which is used for ferrying supplies for Afghanistan. He said this after talks with Russian President Dmitry Medvedev, during which Moscow pledged to Bishkek that it was writing off $180 million debt and would also provide Kyrgyzstan with a $2 billion soft loan and an outright grant of $150 million.
NATO's envoy to Central Asia, Robert Simmons, rushed to Bishkek in a last-ditch attempt to stall the Kyrgyz move, but only to regret the development and admit that NATO's Afghan operations would be adversely affected. Washington still hopes to salvage the situation, but that involves taking Moscow's help.
Moscow is willing, as always - provided the US is prepared to shelve its untimely geopolitical agenda to broaden and deepen its (and NATO's) strategic presence in Central Asia on the pretext of developing new supply routes for Afghanistan. Plainly put, Moscow feels irritated about Washington's abrasive diplomacy in Central Asia in recent weeks.
The US signed an agreement with Kazakhstan, Russia's key ally, offering to procure "a significant part" of its supplies for Afghanistan from that country. and in turn is pressuring it to make troop deployments in Afghanistan. Conceivably, Moscow (and Beijing) view with disquiet the US move to court their key Shanghai Cooperation Organization (SCO) and Collective Security Treaty Organization (CSTO) ally into the Western strategic orbit. Conceivably, Moscow's zwischenzug to evict the US military from Kyrgyzstan would enjoy tacit Chinese encouragement as well.
Nyet to selective engagement
Washington prefers "selective engagement" without addressing the underlying factors that caused the chill in relations. The Kremlin remains cautiously optimistic that Obama may address relations from a fresh perspective. The mood is reflected in a pithy comment by former Russian president Mikhail Gorbachev that "there are grounds for optimism, so far".
But an underlying sense of exasperation is visible. As a Moscow commentator put it, the George W Bush era may be over, but the "consequences are still there"; Obama might have new ideas, but the "old wire-pullers" are still there in the establishment in key positions; and, therefore, Obama might need "years rather than months to shape a new foreign policy".
So, Moscow resorted to zwischenzug. Last Saturday, the influential Moscow paper Nezavisimaya Gazeta reported that Russia proposed to reopen the key Soviet air base of Bombora on the Black Sea coast in Abkhazia. On Tuesday, Russia signed an agreement with Belarus setting up an integrated air defense system. On Wednesday, Medvedev used the CSTO forum to reiterate he was open to cooperation with the US in the fight against terrorism in Afghanistan.
Again, in related comments on Wednesday, Russian Deputy Foreign Minister Grigory Karasin said, "We hope that we and the United States will hold special and professional talks on this issue [of transit routes to Afghanistan] in the near future. We will see how effectively we can cooperate ... The US, Central Asia, China - we are all interested in a successful anti-terrorism operation in Afghanistan."
Karasin assured that the US's eviction from Manas "would not prove an obstruction". He said, "We [Russia] hope that we and the United States will hold special and professional talks on the issue in the near future. We will see how effectively we can cooperate."
In sum, the ball is in Obama's court. The big question is whether he can bulldoze the hardliners and jettison the heavy baggage of geopolitics that his faltering Afghan war is needlessly carrying.
Meanwhile, the shadow of US-Russian relations falls on the Hindu Kush. The Russian media reported that a high-level Afghan military delegation is expected in Moscow in the "near future". With a growing possibility that Obama may withdraw support for Afghan President Hamid Karzai, Moscow will be weighing its options.
The US is perched on a slippery slope in Afghanistan. The Taliban resurgence continues and the security situation is deteriorating, but NATO is unable to increase its force level or evolve an effective strategy. NATO supply lines have come under threat, but alternate routes are yet to be negotiated. The US's rift with the Karzai regime is widening, but a replacement is never easy to be catapulted into power in Kabul. Again, Washington should pressure Islamabad, but the situation in Pakistan is far too fragile to take any greater pressure.
It is against this complex backdrop that Iran's satellite took off into the star-studded night sky on Monday. Named Hope, its launch has a multiplier effect on geopolitics. Warning bells are ringing in Western capitals that any expectation of Tehran lowering its guard is misplaced. The launch can be seen as a technological feat, which it indeed is, but Hope also gives a hard message about Iran's military capability.
Experts estimate that the two-stage rocket used for its launch could easily carry a small warhead to a target 2,500 kilometers away. It may not be an inter-continental ballistic missile, but southern Europe comes within its range, as indeed the whole of Israel. Simply put, Iran has in hand a credible deterrent against a US-Israeli military attack.
White House press secretary Robert Gibbs described the launch as of "acute concern to this administration". German Foreign Minister Frank-Walter Steinmeir said after his first meeting with US Secretary of State Hillary Clinton, "We want to be helpful in making sure that the outstretched hand of President Obama is a strong hand." No doubt, these are strong words.
But an unmatchable German word is more to the point - zugzwang. It literally means "compelled to move". That is, a situation develops on the chessboard when any move a player makes can only weaken his position, but he is nonetheless compelled to make his move.
It may be far-fetched to say that Moscow and Tehran coordinated their respective zwischenzug, but certainly both keenly await Washington's zugzwang .
Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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• US base closure may alter Afghan plans (guardian.co.uk)
• Kyrgyzstan Says It Will Close U.S. Base (nytimes.com)
• Dispute Mounts Over Kyrgyz Base (nytimes.com)
• Secret Report Urges New Afghanistan Policy (cbsnews.com)
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Russia says it wants to help US in Afghanistan

Image via Wikipedia

The Associated Press

President Dmitry Medvedev said Wednesday that Russia and its ex-Soviet allies want to help the United States stabilize Afghanistan, saying Moscow wanted "full-fledged" cooperation with Washington.
He spoke a day after the ex-Soviet republic of Kyrgyzstan announced it would evict the U.S. from an air base key to the Afghan war. Kyrgyzstan made the move after getting a promise for $2 billion in loans from Russia -- which resents the American presence in a region Moscow regards as part of its traditional sphere of influence.
The possibility of the base closure poses a serious challenge to the new U.S. administration and President Barack Obama's plan to send up to 30,000 more American forces into Afghanistan this year.
"Russia and other (alliance members) are ready for full-fledged comprehensive cooperation with the United States and other coalition members in fighting terrorism in the region. This fight must be comprehensive and include both military and political components. Only in the case will this have a chance to succeed," Medvedev said.
It was not clear if Medvedev's reference to "full-fledged" cooperation was an attempt to reassure Washington or an indication that Moscow would seek concessions in exchange for helping keep the Manas air base open.
In Washington, Defense Department spokesman Bryan Whitman said Wednesday that about 1,000 U.S. troops -- and dozens each of French and Spanish -- are working at the base to move 15,000 people and 500 tons of cargo monthly through the facility for the Afghan campaign.
"Kyrgyzstan has been a good ally. And we certainly appreciate the arrangement that we have with them right now," Whitman told Pentagon reporters. "The base does contribute to the security and stability of Central Asia and Afghanistan."
Use of the facility is laid out in a July 2006 U.S.-Kyrgyz agreement that requires the U.S. to pay $17.4 million a year, renewable each year through July 2011 -- and with the option by either side to back out of the agreement with 180 days notice, Whitman said. Total U.S. assistance to the country is about $150 million a year, including health, police, human rights and economic programs.

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Russia says it wants to help US in Afghanistan

Image via Wikipedia

The Associated Press

President Dmitry Medvedev said Wednesday that Russia and its ex-Soviet allies want to help the United States stabilize Afghanistan, saying Moscow wanted "full-fledged" cooperation with Washington.
He spoke a day after the ex-Soviet republic of Kyrgyzstan announced it would evict the U.S. from an air base key to the Afghan war. Kyrgyzstan made the move after getting a promise for $2 billion in loans from Russia -- which resents the American presence in a region Moscow regards as part of its traditional sphere of influence.
The possibility of the base closure poses a serious challenge to the new U.S. administration and President Barack Obama's plan to send up to 30,000 more American forces into Afghanistan this year.
"Russia and other (alliance members) are ready for full-fledged comprehensive cooperation with the United States and other coalition members in fighting terrorism in the region. This fight must be comprehensive and include both military and political components. Only in the case will this have a chance to succeed," Medvedev said.
It was not clear if Medvedev's reference to "full-fledged" cooperation was an attempt to reassure Washington or an indication that Moscow would seek concessions in exchange for helping keep the Manas air base open.
In Washington, Defense Department spokesman Bryan Whitman said Wednesday that about 1,000 U.S. troops -- and dozens each of French and Spanish -- are working at the base to move 15,000 people and 500 tons of cargo monthly through the facility for the Afghan campaign.
"Kyrgyzstan has been a good ally. And we certainly appreciate the arrangement that we have with them right now," Whitman told Pentagon reporters. "The base does contribute to the security and stability of Central Asia and Afghanistan."
Use of the facility is laid out in a July 2006 U.S.-Kyrgyz agreement that requires the U.S. to pay $17.4 million a year, renewable each year through July 2011 -- and with the option by either side to back out of the agreement with 180 days notice, Whitman said. Total U.S. assistance to the country is about $150 million a year, including health, police, human rights and economic programs.

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Russia in Outer Darkness

Image by robertodevido via Flickr

Asia Times Online

In outer space, as everyone knows, the absence of the force of gravity produces the appearance of weightlessness. Everything floats away.
The markets have decided that Russia is now without gravity; its equities are without weight, and at risk of floating away. Late last year, the RTS, the principal stock market index, starting decoupling from the price of the principal Russian export, oil, as the latter started to plummet. The emerging market investment funds, which have also moved with oil and Russia's other exportable commodities, also decoupled from commodity prices and the RTS.
Since the start of January, the RTS and the oil marker have been
in negative correlation. That means that even if the oil price goes up, Russian share prices go down. This is the equivalent of outer space.
It is no surprise, therefore, that everyone in the Russian market is gasping for an oxygen mask and a safety belt.
President Dmitry Medvedev and Prime Minister Vladimir Putin believe they are the constitutionally elected heads of government and imagine their government is the air supply and safety-belt of the state. Those officials aligned with them - Deputy Prime Minister Igor Shuvalov with Medvedev, Deputy Prime Minister Igor Sechin with Putin - like to think that, although elected by no one to nothing, they too are the safety belts, and pilots, of the state. Watch them closely - the more carefully Shuvalov brushes at his coiffure and Sechin draws his face into a scowl, the more you can be certain they think they are in charge of Russia's mass, motion, weight, air supply.
Without a banking and state audit system accountable to parliament, without a parliament accountable to the voters, and with regional governors and mayors appointed, not elected, where else can the force of gravity be located? If not with them, then all of Russia has indeed decoupled, and equity is in danger of valuelessness.
That is what these oscillating lines on the dials of the national control-panel mean:
In fact, once decoupling commences, there is no telling what the control-panel indicates for Russia's pilot enterprises - the dominant exporters and producers of value, such as Gazprom (gas and oil), Rosneft (oil), Norilsk Nickel (nickel, copper platinum group metals), Rusal (aluminum), Evraz (steel), Metalloinvest (iron ore), Polyus (gold), Uralkali (potash). That is because their public reports do not reveal the full extent of their debt; their shareholder stakes, pledges, and obligations; their margins; cashflow, and free cash; the ownership of their assets; their future.
Brokerage analysts, who try to measure these indicators, and issue buy/sell recommendations to the investment market, are now, more than ever, navigating by their own book - and shooting in the dark.
So are the principal enterprise owners and stakeholders, the so-called oligarchs. Each of them has now proposed to each of the senior government officials a plan calculated to cancel or refinance his debts with state money but leave him in just as much control as before. This is the reason the market has been confused by as many state takeover or consolidation plans as there are oligarchs with billion-dollar obligations they can't meet.
The evidence available from documents and inside sources close to the oligarchs themselves raises the following questions, and also answers them.
Why did Vladimir Potanin, controlling shareholder of Norilsk Nickel, place in a Monday morning newspaper on January 12 a scheme for merging Norilsk Nickel with steelmakers Evraz and Mechel, iron-ore miner Metalloinvest, and potash miner Uralkali, and vesting the lot in a new state company, in which Russian Technologies, the arms export-based state holding, would hold a 25% stake?
There can be no claim of stakeholder and management coordination, or raw material supply and production cost synergies, because Potanin didn't consult the others, or come up with an integrated value scheme. The simple driver of Potanin's plan was to create so much debt for the state to absorb, that he and the Norilsk Nickel group would be left to retain control of itself, and reduce the state shareholding in the scheme to 25%. The controlling stakeholders of the companies Potanin proposed to merge into the new state company have subsequently issued their refusals to go along. Each has his own plan.
Why did Oleg Deripaska, in a letter to Medvedev on January 20, invite the Kremlin to accept a US$45 billion valuation for Rusal, and issue $6 billion in state loans to cover part of Rusal's debt, in return for an issue of 15% non-voting shares in Rusal, and a promise to pay the state dividends - if and when aluminum prices rise enough for Rusal to declare a profit? Again, the answer is that Deripaska wants a bailout with minimum loss of control for himself.
Asked why the Norilsk Nickel consolidation plan didn't have room for Deripaska's Rusal, Norilsk Nickel's chief executive, Vladimir Strzhalkovsky, has responded that he isn't seeking a merger with Rusal because the aluminum company has too much debt. As it stands, the proposal from Potanin would pool $28 billion of debt to $60 billion in sales, according to Interros, Potanin's holding company.
Just a little memory is required to see this as a reprise of the very first state bailout, which made Potanin and the other oligarchs what they became and what they are today. In 1995-96 that was called loans-for-shares. It was the scheme by which the state treasury loaned the oligarchs money for cut-price privatization of the control stakes of the natural resource assets they incorporated as their own. Having leveraged these shareholdings in the dozen years that followed, in order to create even larger conglomerates inside Russia and parallel asset empires in safe-havens abroad, and having squirreled away billions of dollars in personal dividends, they have come back to the government with a request to play the same game all over again.
According to one oligarch, he is disappointed to find there is no government where he expects to find it, only bitter rivals at each others' throats. What he means is that it was much easier, and also cheaper, when he had to deal with president Boris Yeltsin.
A lesser known, but oligarch-sized figure, Vyacheslav Kantor, controlling shareholder of Acron, a fertilizer producer and exporter, submitted his plan to Putin and Sechin just before they appeared for an inspection of his Novgorod factory on January 25. Kantor's scheme puts himself in control of a state-financed company that would take over mining licenses Kantor has borrowed to buy and develop, but which he cannot afford any longer. He is asking for a bailout of $700 million of debt, and a credit line from a state bank of up to $2 billion for his mining undertakings. In this Acron scheme, the state equity stake in exchange would be a non-controlling one.
Other schemes that have been tabled at Sechin's office in the mineral fertilizer sector indicate the creation of a state company to consolidate existing state stakes in phosphate and potash companies, and impose a fine on Uralkali, owned by Dmitry Rybolovlev, which would oblige him to give up his stake in his company.
Alisher Usmanov, the controlling shareholder of the Metalloinvest group, said he is opposed to the mega-merger of Potanin, because it under-values his own assets, and dilutes his control. Usmanov said on January 28 that one option he prefers is a scheme of merger between Norilsk Nickel and Metalloinvest without a significant stake stake. Alternatively, to absorb his own debts, he offers a scheme incorporating Metalloinvest, Norilsk Nickel, and steelmaker and coal-miner Mechel, plus diamond-miner Alrosa. Announcing the obvious, Usmanov has said: "If the Russian government would participate in this merger and restructure the debts of the companies everybody would win from it."
A frank admission from one oligarch headquarters: "This global [state] company would be impossible to manage, it is true. But the reasoning here is that this is a measure only for the crisis period. Later, each of the companies would be able to buy back their shares from the state, and separate again."
The presumption of all these plans is that, if and when global demand recovers, commodity prices revive, export revenues grow, share prices pick up, and the international capital markets can accommodate Russian debt financing needs again, the oligarchs would borrow abroad to buy out the state - and resume the same unconstrained control of their enterprises as they enjoyed before all the trouble began. That's a big if; the when may be a long time coming.
Putin has responded ambiguously in a lengthy interview on January 25: "First, there are no final decisions here. Second, what you're speaking about was suggested by the owners of these companies. But you know that if you get two poor people together, it won't be a richer family. So it all depends on the specifics. Where there can be any positive synergy from consolidation - say, when one party has mineral resources, the second has financial possibilities, and the third has access to the markets - it will be in demand. You don't need a lot of brains to combine debts with debts, and it won't bring any results. That's why we'll keep a balanced, careful approach to this problem. Once again, the main goal here is to increase competitiveness."
But the same day Putin also said he favored Kantor and his plan: "The owners of this enterprise [Kantor's Acron] not only keep jobs in quite difficult conditions, they also develop the social sphere. Owners of the enterprise are not poor people. If those who deal with real production also have a feeling of social responsibility, we will support such people."
Then in Davos, on January 28, Putin declared: "Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake. True, the state's increased role in times of crisis is a natural reaction to market regulation setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent."
"The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation. In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly, and I am sure nobody wants to see it repeated. Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, has been eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state."
As clear as this looks, its application is anything but. Hence, the dislocation between what Russians say, and what the market does.
Sechin has been quoted by Interfax as saying that the decision on the consolidation plans is up to the shareholders. If that were believable, Rybolovlev of Uralkali would be relieved that he will be deciding the future of the potash miner, not Sechin. But at Uralkali headquarters in Moscow, and in Geneva where Rybolovlev is based, it is the state shareholder, and Sechin's fiat, which are expected to decide. This is why Uralkali's share price is at a substantial discount to its peers, at home and abroad; and why its downward trajectory is disconnected from the potash commodity price.
Deputy Prime Minister Shuvalov has said: "We see that many enterprises that we work with, and their shareholders, have started to feel that the state will save them no matter what. Against this background, they have begun to think ... that the state will help them no matter, help them to refinance their foreign debts and give them special programs to buy their production. We have nothing like this in our plans. Just because the enterprise is important and has several tens of thousands of workers, we do not simply intend to give out resources and wait for them to come for more later. The shareholders and heads of these enterprises must for themselves look at their own personal responsibility."
Those oligarchs who are uncomfortable with state takeover risk, and think they can refinance from the same international banks, to which they are already mortgaged, are now trying to escape.
One of them, Igor Zyuzin, owner of Mechel, is well aware that he's on others' hit-lists. He and Alexei Mordashov, controlling shareholder of steelmaker Severstal, are reported by bank analysts and industry sources as having decided to pull back last month's applications for state bank loans. Since they don't admit to lodging their application; the state bank won't say if applications have been lodged; and no one will acknowledge whether the state bank said yes or no to Zyuzin and Mordashov, there is no way of gauging whether Zyuzin and Mordashov are today more or less desperate. The international markets are in two minds - Severstal's share price is up 10% over the past four weeks; Mechel's is down 21%.
If Putin means what he was saying in Davos, this is exactly what should be happening for the greater benefit of all. "The constant temptation of nestling close to the sources of state well-being is perfectly understandable," the prime minister told the Davos audience. "But at the same time, these sources are not inexhaustible, nor are they cure-alls."
But Putin will not return to Moscow to tell parliament which of the oligarch enterprises will be saved by state financial guarantees, budget funds, or state bank cash. Nor will state auditors and valuers be allowed to testify to parliament on the terms of the new round of loans-for-shares. These are state secrets. And the funny thing about state secrets is that in the marketplace, outside the state, they perform like heavily discounted promissory notes.
In due course, the market will get Putin's message from the enterprise shareholders. It will discount the value of what they say.
In the meantime, the market will apply the outer-space discount. That deals with the risk of not being able to anticipate anything at all. Uncertainty and fear are now making Russian assets worth less than they were during the last two national crises - in 1991, when the Soviet system collapsed; and in 1998, when the Treasury and the banking system defaulted.
John Helmer has been a Moscow-based correspondent since 1989, specializing in the coverage of Russian business.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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