What’s in it for Putin?

If there’s one mystery trumping all the others in the recent Russian-Ukrainian gas supply row, it is the one concerning the role and intentions of the Kremlin, particularly with respect to Vladimir Putin: Why fight a public battle over an issue that is almost as intransparent and complicated as the geological processes that created the gas in the first place? Veronica Khokhlova is trying to make some sense of the deal –

On the surface, it’s all clear and nice: they’ve reached an agreement, and we aren’t paying what Gazprom initially wanted us to pay. Europe can relax, too. But … it’s a complex deal. The Reuters piece [she cites on her blog] doesn’t mention Rosukrenergo as part of the scheme, an intermediary company that will be buying Russian gas from Gazprom for $230 and then selling both Russian and Turkmen gas to Naftogas for $95. A Gazprom affiliate and Austria’s Raiffeisen Investment AG own 50/50 stakes in Rosukrenergo, which, in a way, means that Gazprom will be buying gas from itself. Rosukrenergo is registered in Switzedrland, and Raiffeisen Investment AG has, allegedly, nothing to do with Raiffeisen Bank. Oleksandr Turchynov, former head of SBU and Yulia Tymoshenko’s man, launched an investigation into Rosukrenergo in summer 2005, but was not allowed to finish it.”

And Jerome at Eurotrib keeps arguing that all this is (simply) a matter of oligarchic infighting at the expense of the peoples involved (as they are paying significatnly higher energy prices than those paid by their countries/oligarchs energy corporations).

Be that as it may – the real question at hand is, as I see it, the following: did Russia/Putin want to appear weak in this matter, demonstrating to the west that he needs to do in Russia what he deems necessary (remember Yukos, the NGO law), or is the Kremlin/Putin indeed so weak that it has to accept oligarchic infighting to the extent of creating a foreign policy crisis, and that, as a result, the Kremlin needs to tighten its grip? Quite frankly, neither alternative is likely to make anyone happy.

Interesting Take on Yukos

A very interesting take on the Yukos situation from the Moscow Times. And one which relates directly to some of the privatisation issues we were debating recently. Boris Kagarlitsky, director of the Institute of Globalization Studies, argues basically that given that the Russian economy is dominated by an oligarchic structure of raw materials quasi-monopolies, and given that a majority of the population seem to want these monopolies returning to state ownership, the only ‘democratic’ solution is an authoritarian one. Khodorkovsky had another idea, and hence off he went to prison. Any comparisons with or lessons for Iraq here? Can democracy be introduced like this? Off you go.
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Russia: ‘Managed democracy’ shows its true colors

Well, well. The richest man in Russia got arrested yesterday. Rather unusually brutally too, FSB raid, as demonstartions. What’s going on?

Let’s turn to not mainstream media but rather The Moscow Times who of course are all over this.

First, some kremlinology:

Analysts have said the attack is an attempt to curb Khodorkovsky’s political ambitions. Not only has the nation’s richest man has been openly funding opposition parties ahead of elections, but he also has attempted to push his own policy agenda on key state issues such as pipeline strategy.

The onslaught also comes amid a vicious battle for position between the old elite that came to power and wealth under former President Boris Yeltsin — including Khodorkovsky — and a hard-line faction known as the siloviki that arrived in the Kremlin with President Vladimir Putin.

Analysts said Tuesday that the new burst of activity from prosecutors came amid signs that the Kremlin faction backing the old elite, known as the Family, might be beginning to cave in. The head of the presidential administration, Alexander Voloshin, has been seen as the main protector of that group.

“Rumors of Voloshin’s upcoming resignation are continuing to come from the Kremlin and, judging by their frequency and their consistency, it seems he will not survive the elections. He is gradually losing real control over the Kremlin apparatus,” said Andrei Ryabov, political analyst at the Moscow Carnegie Center. “What’s happening now is a sign of the shift in the balance of power.”

Ryabov added: “Another reason for the recent burst also appears to be Yukos’ increasing activity in trying to sell a stake to a foreign oil major. If such a deal happened, this would not suit the siloviki as YukosSibneft would then fall completely out of their control.”[*]

What will happen?

Kremlin-connected political analyst Sergei Markov said Khodorkovsky’s arrest could usher in new rules of the game for big business and the state.

“After Khodorkovsky’s loss there could be a change in the rules of the game,” he said. “Khodorkovsky will be made an offer he can’t refuse. He can accept the new rules of the game, or he can stay in prison.

“Those who do not agree with the new rules of the game will lose control over their property. That was what happened with [Vladimir] Gusinsky and [Boris] Berezovsky.”

Markov speculated that Khodorkovsky could be forced to give up his stake in Yukos and step down in favor of other managers more ready to cooperate with the state. He could not say exactly what the new rules for business might involve, apart from plans to raise taxes on extraction of raw materials.[*]