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    Russia

    January 21, 2008

    While the West Slept: Russia Successfully Tests New ICBM

    See_no_evil

    As the West was consumed with an apparently imminent recession and politics-as-usual, Russia launched its new RS-24 missile from the Plesetsk launch facility in northern Russia, and its test warheads successfully hit designated targets on the Kura testing range on the Kamchatka Peninsula some 4,340 miles east, Strategic Missile Forces spokesman Alexander Vovk told The Associated Press.

    read more

    October 06, 2007

    Glenn Curtis on the Effects of Organized Crime and Terrorism in Russia and Europe...

    Synthetic_narcotics
    Micro photographs of Synthetic Narcotics

    Here is an excerpt-summary of Glenn Curtis' article, entitled, "Nations Hospitable to Organized Crime and Terrorism." Curtis confirms my own observations during a recent visit to Ekatrinburg, Russia--the largest of all the cities in the Russian Caucaus region, where I saw hypodermic needles scattered about on the main street. The problem has spread to Moscow as well, where there is a hidden HIV epidemic that USAID is doing their best to help stem. Because of its geographic position between the major narcotics producing region of the Golden Crescent (Afghanistan and Pakistan) and the major narcotics markets in Russia and Europe, the Caucasus region has become an important narcotics corridor. Furthermore, corruption, general weakness of post-Soviet law enforcement agencies, facilitates lawlessness in this region. Each state is reviewed below:

    Armenia:
    • Dept of State has identified Armenia as a source state for trafficking of women.
    • No laws exist against such trafficking and no plans to makes laws.
    • Despite its location and poor funding for anti-narcotics enforcement, Armenia has minimized narcotics trafficking by closing the borders with Azerbaijan and Turkey.
    • Corruption, poor law enforcement and insufficient legislation are a serious problem and real crackdowns on these elements are essential to Armenia’s stability, security and control of organized and transnational crime.

    Azerbaijan:
    • Azerbaijan has suffered significant increases in narcotics traffic and domestic addition in recent years – has accused Armenia of fostering traffic into country from Iran.
    • The long struggle with Armenia over Hagorno-Karabakh has impeded law enforcement over a wide area of the country.
    • Thousands of refugees have been generated and are easy targets for human trafficking and centers for transnational crimes.
    • Has significant institutional weakness which promotes transnational criminals.
    • Has insufficient legislation and institutional capacity for detection and prevention of transnational criminals.

    Georgia:
    • Drug business is very widespread. Its location as a corridor of drug trafficking and the weak regional government can do nothing to control it.
    • Corruption is the foundation on which public management and economic relations are built. Despite universal recognition of the problem, very little has been done by the national government to control corruption. As a result, narcotics’ trafficking goes unchecked.

    Summary: This large, sparsely populated area of the former USSR has favorable conditions for terrorist bases and intense narcotic trafficking. Basing and funding are two elements that can contribute to significant instability in the region and spill over to international problems.

    September 23, 2007

    IHT :: Politicus: America's misplaced hopes on Russia

    Putin_iran

    If you are at all uneasy about the direction in which Russia is now heading, this OpEd by John Vinocur that explores Russian obstructionism in helping to curb Iran's nuclear program will only reinforce those concerns....

    Monday, September 10, 2007
    WASHINGTON: Suppose the Russians, as Iran's monopoly supplier of nuclear wherewithal, decided they could live with a few atomic weapons in the hands of the mullahs.

    Suppose the Russians, flush with money and superpower fantasies, believed that weakening and humiliating the United States was well worth the instability that might come with Moscow's refusal to help block Iran's drive toward nuclear arms.

    Where's the downside? From Vladimir Putin's point of view, it's win-win.

    With Russia's obstructive tactics encouraging Iran to plunge ahead, he may figure the Americans will eventually strike Iranian nuclear installations. The Yanks would harvest opprobrium in much of the world.

    Still, if their strike does eradicate the Iranian nuclear program, that's fine, too. Russia's oil and gas prices are sure to shoot up. Russia becomes Iran's key reconstruction contractor, and sets out a rare claim to international righteousness.

    What's irrational about the above scenario? Or its counterpart, which is that Russian now calculates the United States in the end will sit on its hands concerning Iran?

    Nothing. Multiple versions of them get discussed within the Bush Administration, all stamped, Non Whacko.

    It's exemplary of the misery of the American situation.

    On one hand, the Administration sticks to the notion - recall, please, George W. Bush's magnanimous first-term reading of Putin's soul in his KGB eyes - that somehow, someday, but in the nick of time, the Russians are going to come around to joining an international effort to halt Iran's nuclear drive.

    On the other hand, important areas of the administration are offering a hardened assessment of what Russia ultimately wants.

    After a couple of years of talking about how Putin's richer Russia (reasonably) craved respect, a senior administration policymaker, in a private conversation, now asserts the "overwhelming evidence" is a Russia that seeks to weaken the United States. Wherever possible internationally, he says, Moscow will work to stop America from achieving success.

    The hitch is that concerning Iran, these two administration notions, expecting good from Russia while regarding it as a gathering, noxious force, are contradictory to the point of incompatibility.

    The summer showed just how much.

    In June, the Americans said they expected a United Nations Security Council resolution in July that would add a new round of modest sanctions to those already in effect against Iran. It never happened. The Russians, with Chinese assistance, sidetracked the measure.

    Reality now says the United Nations is not going to be the place where Iran's nuclear dreams die.

    Almost in the same stride, the Russians in July used the threat of a Security Council veto to dismantle an American-backed motion on Kosovo's independence.

    The combined effect is not only an American defeat. It's a demonstration that, unlike in the Cold War, there are no clear limits on how far this Russia feels it can push this America.

    Forget the grandiloquence of Moscow's planting flags in the Arctic and re-establishing world-wide strategic bomber patrols.

    But as the United States flails in Iraq, and faces a financial crisis that may affect command-economies and authoritarian regimes less than democracies, why shouldn't Russia see the Iran issue as a strategic hole for achieving a new global status?

    After all, Jacques Chirac, whose vision of a multipolar world consigning America to the role of everyone's opponent gets applause in Moscow, argued in his last months as French president that a few Iranian nukes shouldn't cause much lost sleep for anyone sharing his take on a remade global hierarchy.

    Chirac didn't say it, but he could have rationalized that a limited number of atomic weapons at Iran's disposal would be a reasonable price to pay for disabling an American world order that he, like Putin, reviles.

    It's a reflection of America's current incapacities that Nicolas Sarkozy, who might have interesting notions of Putin's calculations from Élysée Palace files, two weeks ago detailed the Iran situation in a tougher and more concise way than Washington.

    Sarkozy knows that some Westerners who have talked directly to Putin have been told that Russia does not want a nuclear-armed Iran. He also knows the deceit of Russia's official position that it has no evidence indicating Iran's nuclear activities are anything but peaceful.

    Draw this conclusion: If Sarkozy has been informed that Putin will act to halt Iran's drive short of a bomb, then he would not be calling the prospect of Iranian atomic bomb capability the world's biggest menace.

    There are, on good evidence, officials within the Bush administration frustrated by its own bollixed approach - hoping that the Russians will turn responsible after their "elections" next year while acknowledging Moscow is now in full confrontational mode. Assume they could only leap to praise Sarkozy for saying in a speech a couple of weeks ago what Bush would not:

    If sanctions fail, the alternatives are an Iranian bomb or the bombing of Iran. As for Russia, Sarko described its behavior as marked by a "certain brutality."

    The sanctions Sarkozy is talking about are hard, new measures outside the United Nations that would probably involve an ad hoc group including the United States, Britain, France and Japan at its core.

    This approach specifically means forgetting about the Security Council, and giving up on Russia, barring sudden and unlikely cooperation. The sanctions have to be so penalizing, obviously disadvantaging Western banks and industry, to become truly dissuasive. This requires real resolve.

    It also requires the underpinning of a tacit yet palpable threat: if these measures don't work, there's real unpleasantness to come. With a phrase, Sarkozy marked out the Iranian choice with a sharper edge than the Americans have.

    That's a significant advance.

    But unless Bush first gets publicly tougher on Russia as Iran's protector and international obstructionist, the mullahs may take America's insistence on skirting this reality as the surest sign they can get that they're home free.

    July 14, 2007

    World Policy Journal :: “From Guns to Briefcases”

    Russian_mafia

    Here is a summary of Vsevold Sokolov’s World Policy Journal article, “From Guns to Briefcases” (Spring 2004), describing the evolution of the Russian State and Organized Crime in Russia....

    Thesis: Just as the Russian State has evolved since the fall of communism, so has organized crime.

    Key Points
    Two key findings have emerged from the author’s research: (1) organized crime did not spring up from the ashes of the Soviet State, rather the current organized crime is an evolutionary offshoot of the Soviet era criminal-business partnership that existed prior to 1989; and, (2) the positive economic outlook of Russian organized crime has frequently been overlooked. In fact in the mid 1990s, it was the criminal groups that provided businesses protection and enforced contracts that the state was too weak or corrupt to do so.
    • There is a myth that the “Red Mafiya” is a monolith with global reach – run by all-powerful godfathers. Rather, the current organization is characterized by loosely structured alliances based on generational shifts, ethnic divisions, shifting loyalties and leadership.• The myth is based on assumptions derived from Italian-American criminal networks and the legacy of the infamous 1930s Russian criminal fraternity – “thieves in law”
    • This secret society declined as criminal groups began to form relationships with state officials in order to profit from the burgeoning black market that began to rise following the death of Stalin. “Self Made Men” came to power focused not on a criminal code of conduct but motivated purely by profit. Corrupt state administrators protected these organizations in return they received bribes and also black marketed goods that were hard to come by in a state run economy.
    As a result of Gorbachev’s reforms in the 1980s, the state became weaker and criminal organizations multiplied and expanded to fill the power vacuum – especially in terms of protection and financial services. With the fall of communism, organized crime stepped in during a period of “anarcho-capitalism.” Conflict now existed not between the state and crime organizations but between crime organizations seeking to dominate certain areas or services.
    • As privatization began in earnest, criminal groups began entering into long-term economic partnerships with businesses and consequently became more tied to fundamental laws of economics – competing for clients and setting prices.
    • In 2000, Putin declared he would institute a “dictatorship of the law.” Cracking down on specific criminal activity and seizing financial assets. He also took on the arduous task of eliminating the demand for extralegal protection and asserting state control. In order to battle corruption, he raised the salaries of police and public prosecutors while executing a crackdown on corrupt police.
    • This internal effort was coupled with other nations (Europe and Canada) to seize assets and curb the spread of Russian organized groups.
    • Both gangsters and law officials have cited Law reform as a major factor in stopping the spread of organized crime. Russia has also sought to reduce its own bureaucracy and make it easier for entrepreneurs to operate within the law versus outside.
    • Consequently, many criminal groups have also expanded out into legal ventures.

    While Putin has emplaced numerous measures to battle organized crime, criminals (like businesses) in Russia have learned to adapt to their surroundings and still seek to make a profit in a corrupt system.

    June 19, 2007

    “Due Diligence in the Black Sea Region”

    Blackseaancientmap_3

    Tamara Makareno's 2003 article, “Due Diligence in the Black Sea Region,” explores the trend of increasing criminal activity in the Black Sea area and asserts the potential for terrorism-related activities there in the future. Is the Black Sea the next battleground in the war on terror?

    Thesis: An important economic resource for trade among Europe, the Middle East, and central Asia, over the past decade the Black Sea area has also seen a large upturn in various kinds of criminal behavior, e.g. , smuggling. The increased presence of organized crime in the region may indicate a higher risk of terrorism-related activities in the future.

    Black_sea_map

    The Black Sea is an important transportation hub for trade among Western Europe, the Middle East and Asia. It is a vital source of economic prosperity for countries bordering it. ...Energy exports are a particularly important commodity transported through the Black Sea. However, the lack of political stability in the region has allowed the increase of criminal activity, e.g., smuggling and maritime, such as piracy.

    The rise of organized crime in the Black sea has been due to 4 primary factors:

    1) financing needs of ethno-nationalist groups in area, e.g., Georgia, Moldova and Russia;
    2) rise of corruption due to weak governance;
    3) measures to boost legal economic environment have also facilitated illegal activities;
    4) advantageous geographical location of B.S. as link between Europe and Asia.

    Smuggling: weapons, narcotics, humans, cigarettes and petroleum, e.g.,

    Weapons: Bulgaria, Russia, Ukraine Romania are major source for illicit weapons trade;

    Narcotics: originally just transshipment points, now area seeing increased local demand;

    Human smuggling: Turkey and Ukraine are key points in intercontinental trade and from the Black Sea region itself;

    Smuggling Dynamics: high level of sophistication; cycle of intimidation and corruption. Indigenous criminal groups are a conglomeration of traditional criminals, new entrepreneurs; and government officials. Every Black Sea littoral state has significant smuggling routes.

    While terrorism is not a significant problem currently, wide-ranging illicit activities in the Black Sea area make it a possible attractive location for the future. Maritime crime and maritime terrorism may pose problems in future. Currently, the biggest threat in the Black Sear area is piracy, e.g., hijacking oil tankers, considering the large volume of shipments going through the Black Sea. There is some evidence of increased maritime crime, e.g., attacks on fishing and merchant vessels. There is also increasing fear that terrorists will attack ships to gain financing resources and/or attack ships for political reasons.

    The unstable and criminal environment has hampered much-needed legitimate investment; investors should keep in mind that:

    o Widespread presence of organized crime brings factors of extortion and corruption;
    o Side-effects of increased smuggling is taking a toll on the Black Sea workforce and political stability;
    o Well-established network of bogus companies, false documents, money laundering, etc. are obstacles to doing legitimate business in the Black Sea region;

    April 25, 2007

    The J Curve: About Russia...

    Red_square

    Here's another excerpt summary from Ian Bremmer's The J Curve...this from his chapter on Russia. It's a superb account of "rise of the oligarch's," and Russia's gradual slide to authoritarianism and an increased trend toward centralized control over their media and economy...

    Thesis: When a closed country falls down the left side of the J-Curve toward instability, there is no guarantee the country will reemerge as a coherent nation-state.

    From the Soviet Union came the Russian Federation, a new state that inherited much of the Soviet Union’s assets and liabilities.

    For Boris Yeltsin, the key to the country’s future as a “normal nation” lay in leading Russia through the transition from a command to a market economy, from authoritarian police state to pluralist democracy, and from empire to modern nation-state.

    The only roadmaps for a transition from Communism to free market economy in 1992 were the Warsaw Pact states of Eastern Europe--Communism cast out in favor of dissidents who needed no reeducation. In Russia, no one had capitalist policy experience. Implemented Shock Therapy,” early abandonment of state protections in favor of market based adaptation.

    Strobe Talbott: need for “Less shock and more therapy.”

    Price ceilings were lifted and inflation spiraled out of control. The black market economy proliferated. Bribery became open and commonplace. The collapse of the police state left law enforcement poorly equipped to keep streets safe.

    Deepest fear of many Russians: disintegration of the new state. Yeltsin encouraged the drive for political freedom: “Take all the sovereignty you can swallow.” Hoped to pull the Soviet Union down the left side of the J curve, but he regretted the comment once he became president. Fear of a chain reaction of breakaway movements….

    The Soviet breakup quickly produced armed conflict in the former Soviet Republics of Tajikistan, Moldova, Azerbaijan and Georgia. The Balkan experience hinted at what could occur in the former USSR.

    Russians began to see democracy and free markets not as the antidote but as the source of injustice, immorality, insecurity, etc.

    The rise of the oligarchs: Yeltsin’s government was the source of virtually everything they wanted.

    Yeltsin’s most powerful opposition came from Gennady Zyuganov’s Communist Party: mix of nationalists, fascists and militarists.

    Yeltsin’s popularity plummeted. Oligarchs came to the rescue. The deals they made with the Kremlin helped keep Yeltsin in power. Made the oligarchs the most powerful men in Russia. Yeltsin sold them control of Russia’s media. Oligarchs used the media to promote Yeltsin’s candidacy and distort the messages of his rivals. Yeltsin sheltered the oligarchs from communist opposition.

    The Yeltsin experience created a culture of official secrecy that pulled Russia away from the transparency necessary for a successful transition to the right side of the curve and yanked Russian society back to the left.

    Boris Berezovsky bragged that seven men owned half of Russia’s GDP.

    In August 1998, the ruble was devalued and announced that Russia would not meet its obligation to foreign bondholders. Led to a new Russian financial crisis. Pushed foreign investment out of Russia and financial markets into a downward spiral.

    Yeltsin orchestrated a smooth transition in 2000 to a relative unknown, Vladimir Putin. First consensual transfer of power in 1000 years of Russian history. Yeltsin’s surprise early resignation helped the process. The oligarchs helped Putin’s ascendance.

    Putin promised predictability. His popularity soared in his hard line toward the Chechen rebels. Young dynamic leader, sober approach that conveyed strength and resolve: what Russia wanted. But Putin’s greatest potential enemies were the oligarchs.

    Foreign investors recovered confidence in the Russian government. Bond market and equity markets performed consistently well.

    Putin wasn’t in a hurry to pursue to pursue political reform. Democracy was put on hold in Russia. Putin witnessed the chaos of early Russian capitalism.

    Putin’s conviction that a greater centralization of power could support reform wasn’t entirely mistaken. The problem with the Yeltsin presidency: not a lack of democracy but a lack of central authority that was the problem.

    When Putin took office, he decided that rebuilding strong central authority and consolidating the Russian state had to be his priorities. Needed to find an arrangement with the oligarchs. Called them together and this was the deal: oligarchs could keep the cash and property they’d amassed without fear of prosecution as long as they paid their taxes and steered clear of political conflict with Putin. Precluded them to use the media against him.

    Two of the oligarchs, Berezovsky and Gusinsky used their holdings in the media to criticize Putin. Putin raided their media offices and placed them under criminal prosecution for money laundering and other charges.

    The move up the left side of the J Curve began in earnest.

    Putin retained oligarchs who followed the rules: Alexander Voloshin (Yeltsin’s capable and savvy Chief of Staff) to push through Putin’s early economic reforms and point man for dealing with the new Bush administration. Voloshin became the intermediary with the oligarchs too. The oligarchs retained their influence, including over tax legislation. Putin wasn’t too concerned. Berezovsky and Gusinsky fled into exile. The one left who wouldn’t follow the rules was Mikhail Khodorkovsky, the CEO of the oil giant Yukos and Russia’s wealthiest man, worth an estimated $8 billion.

    Khodorkhovsky was rumored to have political designs on the Kremlin. Putin saw him as a clear challenge to his authority. Khodorkhovsky blocked passage of some initiatives that encroached on Kremlin control of domestic and foreign policy. Campaigned publicly for the privatization of Russia’s external pipeline system. Almost sold his company to Exxon-Mobil, passing ownership of a Russian company to foreign hands. Then he signed an agreement with China to build a private pipeline linking Russia with China.

    The Kremlin responded by arresting his business partner, Platon Lebedev on charges of fraud and tax evasion. Khodorkovsky stepped up his political activities.

    Putin was determined that Russia’s oligarchs wouldn’t be permitted to conduct their own foreign policy. On October 25, 2003, armed agents stormed his private plane during a refueling stop, arrested him and returned him to Moscow for prosecution. Putin stressed that Khodorkovsky was a unique case and sought to calm investors by telling them that Russia was open for business.

    Khodorkovsky, like all the oligarchs was guilty of some crimes but he committed them with the complicity of Boris Yeltsin’s government. Berezovsky and Gusinsky ruthlessly stripped Russia of billions in national treasure.

    Lesson: A stability built on obsessive risk aversion drives a nation up the left side of the J curve, because openness involves risks. If the process of opening never comes, the society becomes incapable of reinventing itself and begins an inexorable process of decay.

    Putin sought to constrain the abundant power of regional governors by organizing Russia’s 89 provinces into 7 federal districts to be presided over by supergovernors appointed directly by the president.

    Reigned in oligarchs by bringing the media under direct Kremlin supervision.

    As the former communists of Putin’s administration sought to bring stability and predictability to Russia’s politics, they recreated what they knew: a left-side of the J Curve system of vertical power and central control.

    Following the Beslan attacks in September 2004, Putin seized the opportunity to further centralize power. He gained control over the body that approves would-be judges for Russia’s highest courts. He sacked his prime minister, Mikhail Kasyanov so that he wouldn’t take the reigns from Putin. Putin maintains heavy influence in the Russian parliament, security forces, judiciary and the loyalty/obedience of the oligarchs.

    The ongoing conflict with the Chechen separatists and terrorist threats to the Kremlin create the single most dangerous challenge to Russian stability. Chechen militants are responsible for the only known incident of radiological terror against a civilian population—buried a high-isotope cesium in Moscow’s Ismailovsky Park in November 1995. Dirty bomb threat is a real possibility.

    Another threat to Russian stability is the rivalry between China and Russia over influence in Siberia. Ethnic Chinese already control nearly half the Siberian economy.

    Another issue: Political pressure for democratic reform. What happens when Putin has consolidated power and carried out the many components of his economic reform package, when the controversial dislocations from energy reform are at an end and Russia is a full member of the WTO? Will he be willing to start spending political capital to create a representational political system? The further up the left side of the curve a state moves, the more difficult it becomes for a regime to let go of the power and control established.

    Putin’s relative popularity and the stability he’s built in Russia have risen and may fall with oil prices. Putin faces growing dissent as reforms begin to hit Russians the pocketbook. Oil markets are cyclical and oil prices will drop. What will happen when the entire J Curve shifts downward?

    Were Putin to subvert the constitution in an attempt to stay in power past 2008, it would be a disaster for Russia’s hopes of transitioning to the Right side of the J Curve. A reinvigorated Russia might move successfully through a period of uncertainty. But does Putin have a tolerance for political risk?

    Neither the U.S. nor any other nation can shepherd these countries through the dangerous transition from the left to the right side of the curve. But they can craft a strategy designed to strengthen forces within those countries to manage their own revolutions.


    April 21, 2007

    How is Suleiman Kerimov Doing?

    KerimovHow is Suleiman Kerimov faring in the aftermath of his serious car accident last November? All indications show Kerimov recovering, but that road to recovery hasn’t been an easy one….

    Recall that on November 25, 2006 in Nice, Kerimov was driving a friend’s Ferrari Enzo and crashed it against a tree at high speed. The crash set the car on fire and Kerimov reportedly received severe burns to over a third of his body. His companion, Russia’s famous TV hostess Tina Kandelaki, escaped with minor injuries. She refused medical assistance and rushed to Moscow and subsequently denied that she had been in the car with Kerimov, blaming her skin condition on “the mumps.”

    Suleiman Kerimov (41, married with three children), is the owner of Nafta-Moscow, one of the holders of Bin Bank (19.99 percent), Sberbank, Gazprom and MGTS. He's one of the biggest individual shareholders in Gazprom with a 4.5% stake, making him the leading stakeholder in the gas giant. His wealth exceeds $13 billion, placing him in the top 100 world’s richest men, and among Russia’s top 10 billionaires.

    Given the severity of Kerimov’s burn injuries and the complex treatment regimen he’s endured (IVs, antibiotic creams, tetanus immunizations, hyperbaric chamber treatments, debridements, escharotomy procedures, skin autografts, plastic surgery, physical therapy, etc.), these past several months of recovery in the hospital have undoubtedly been a significant life event for Kerimov.

    All reports indicate that he’s maintained his sense of humor throughout his recovery (he’s reported to have told friends that “a tree decided to cross the street and I ran into it!”).

    Following his accident on the Cote d’-Azur, Kerimov was first taken to the nearest hospital in France and then transferred to Brussels for treatment at the Queen Astrid Military Hospital in Brussels which specializes in severe burn treatment. In January, however, a dangerous strain of bacteria was detected in the Queen Astrid Military Hospital. Although the name of the bacteria wasn’t specified, in order to prevent its spread, the hospital said it would only admit new patients in exceptional cases.

    Kerimov_ferrari_accident

    The accident may have slowed Kerimov’s dealings in business and politics, but it has not stopped him. After refusing to run as part of Russia’s Liberal Democratic Party’s regional regional legislatures on March 11, the State Duma faction of the Liberal Democratic Party headed by Vladimir Zhirinovsky ousted him. Instead, Kerimov moved closer to the Kremlin by joining Vladimir Putin’s United Russia Party.

    Following his accident and perhaps realizing his own mortality, it’s probably no coincidence that Kerimov announced his intent to donate $100 million to construct a cathedral mosque in Moscow to be the main mosque of Muslims in Russia. The statement of intent came after Kerimov met with Chairman of Russian Mufti Council Sheikh Ravil Gainutdin last week. The first tranche of $10 million was reportedly transferred to a special fund set up to back up the construction.

    In January, a proposed partnership between Kerimov's Nafta-Moskva investment group and the Moscow City Government to control some of the city's leading hotels collapsed after the most attractive assets were withdrawn from the package and city officials raised their valuation for the remaining hotels. Nafta-Moskva was set to buy a controlling 51 percent share package in the United Hotel Company at a cost of about $1 billion.

    And then earlier this month, the Kommersant business daily said that Kerimov had emerged as a white knight for bankrupt oil firm Yukos and was negotiating to take over its multi-billion-dollar debts. Quoting unnamed sources close to Yukos’ creditors, Kommersant said Kerimov had held talks with Yukos president Steven Theede to take over the debts. Yukos board chairman Viktor Gerashchenko told radio station Ekho Moskvy that a mysterious investor had proposed to the owners of the oil firm to pay its debts and take it over. Nafta Moskva denied the reports with the following statement:

    “Neither Nafta Moskva nor its official representatives have held any talks and have no intention to hold any talks related to Yukos, or to acquisition of the company’s shares.”

    Kerimov’s investment group also plans to start construction on a new housing development outside of Moscow, reported to be a town for the city’s middle class.

    And Kerimov’s black Enzo Ferrari? The wreck was evidently put up for sale at eBay Internet auction, according to Caradisiac.com. …But why would anyone want it?
    Kerimov_ferrari_crash_3
    Photo: RussianSpy.com

    April 19, 2007

    A Note from Lviv, Ukraine...

    Lviv_opera_house

    We arrive in Lviv, Ukraine aboard another sleeper train. As we drive to our hotel I'm attracted by these old 17th and 18th Century buildings and churches that remain untouched by the Soviet occupation. The city has a long history of occupation and conquest by the Tatars, Turks, Poles, Hapsburgs, and others, but the people have not lost their spirit, and they finally have the independence they have craved for so long.

    We take a walking tour of Lviv and I can't help but think that Lviv must look much like Prague did before its extensive post-Cold War renovations and reconstuction projects. In many respects, time seems to have stood still here. Lviv is in Western Ukraine, and it's here that the Orange Revolution began...where the first Ukrainian flag was raised as the Soviet Union dissolved. And yet, as I talk to students here in a local Catholic university, it's clear that the people of Ukraine are still fighting for their own identity. The regional divisions between eastern and western Ukraine, as pronounced as they may be, seem to only scratch the surface of this identity crisis. "We are searching...competing," one third year university student tells me. "We are asking what our relations are with Russia...what our relationship should be to Europe."

    Lviv_street_adjacent_to_city_hall

    When asked what it means to be Ukrainian, the first caveat I hear is that this is a complex question. "Oh! This is complicated!" says one faculty member of the university. There seems to be an initial reluctance to even discuss the issue, but eventually the flood walls are breached and a sophisticated, nuanced discussion ensues.

    Religious differences are immediately downplayed--there are several Catholic churches and cathedrals here and in at least one cathedral downtown where the masses are still said in Polish. There is some religious politics between the Independent Orthodox Church and the Russian Orthodox Patriarch, but "there are not so many religious differences," says the president of the university's student union. "To be Ukrainian," a young lady and 2nd year student beside me says, "is to be tolerant. We all have different associations, different languages and different backgrounds and ethnicities." One young man quickly agrees: "My parents and grandparents are Russian, Jewish, and Polish, but I'm Ukrainian. I feel at home here!"

    Politics is viewed with disillusionment and disdain by these students. I'm taken a bit by surprise, because at least half of them are political science majors. "The easiest way to division," a student explains, "is through politics." I ask a young political science student if she would consider entering into politics at some point. She shakes her head slowly, "I don't think so. To be in politics, you must be corrupt. If you are not corrupt, you must deal with the corrupt. That is not something that appeals to me." This worries me, because disillusionment is the enemy of good government.

    Dominican_church_lviv

    But on a positive note, it's also clear that the disillusionment these students may feel hasn't (yet) led to complacency. When asked about the current constitutional crisis in Kyiv, a young man exclaims, "It is very superficial what Yuschenko and Yanukovych are doing right now." When I ask what would make the situation better, the answers come in rapid fire succession: "We need help on how to make policies," says one. "We need the political will to do changes," says another. Perhaps the most incisive comment I hear comes from the president of the student union: "Everyone is taking from Ukraine, but no one gives back," he says in flawless English. "Honesty is needed. Inside this nation, we are not honest with ourselves."

    A hotbutton issue among the Lviv college students is language. Here the divisions of the country are more apparent, and controversial. The national language in Ukraine is Ukrainian; but from Kiev eastward, the spoken language is Russian. With Ukraine's assimilation into the Soviet Union, an entire generation, I'm told, does not speak Ukrainian. "The Ukrainian government doesn't have the political courage to make Ukrainian the required language...the dominant language," a student tells me. "Just as the Baltic countries made language a requirement for citizenship, Ukraine should do the same." The scale of the issue isn't entirely clear to me until I'm told that Russian is spoken by 70% of the population--as their primary language! How did this happen, I wonder? "Over time, it became fashionable to speak Russian," a faculty member from Lviv informs us. "It's prestigious because learning Russian requires education. It's not that Ukrainians in the east can't speak Ukrainian," she says. "Some East Ukrainians can speak Ukrainian better than I can!" Some students are clearly angered at the emerging (if not already present) dominance of the Russian language in Ukraine. Says one woman: "Some of our vice ministers can't speak two sentences in Ukrainian without horrible mistakes...just to demonstrate how difficult it is. It's disrespectful, and it removes any stimulus to learn Ukrainian. There are not enough Ukrainian language schools in east Ukraine."

    In an effort to more fully understand their identity crisis, we ask: Do Ukrainians feel more European or more Russian? After just a little prodding, girl beside me answers cogently, "I feel more European than Russian. But I don't like it that Europe or Russia must decide that they have a choice of accepting Ukraine or not. We have a long, rich history, and we must be Europeans in our thinking." Another faculty member from the University clearly resents Russia's aura of superiority when it comes to its relationship with Ukraine: "The Russians look at us and say 'Oh the Ukrainians, they are good at baking bread. And we Russians...we're good at conquering the world.'"

    Lviv_street

    At sunrise this morning, I go for a jog around this fascinating city. I'm alarmed at the state of disrepair of the city's old buildings. The brick and stucco is crumbling and graffiti mars the facades. I see little-to-no renovation, but when I ask a senior city official about the problem and about what it means for UNESCO recertification in the future, he recognizes it as an issue but boasts at how during a recent visit UNESCO representatives were impressed that the renovations conducted have not interfered or marred the original achitectural design. And yet, as I jog along the polished cobblestone streets, I don't see any visible signs of renovation. I also hear a comment from our interpreter that an international donor has provided $800,000 to renovate a street across from city hall. In the grand scheme of things, that's really not much...but it's a start. For this quaint and beautiful city of Lviv, that's what is so desperately needed: Faith.

    Faith in Lviv, at home and abroad....

    Catholic_monastery_lviv

    April 18, 2007

    A Note from Kiev....

    Kyiv_ukraine

    Some stream-of-consciousness impressions of Kyiv, Ukraine...

    We arrive in Kyiv (formerly "Kiev"), Ukraine on board an Aerosvit Boeing 737--a comfortable ride after my recent Aeroflot experience. From the air, it's immediately apparent that there are immense wide open spaces in Ukraine with dark, fertile soil that is reportedly the most fertile in Europe, but because of political and bureaucratic obstacles it is often not farmed or used for other agricultural purposes.

    Judging from the languages spoken around me in the passport control line at the airport, it's clear that the vast majority of visitors to Kyiv are Russian. One young lady beside me pokes fun at the Ukrainian's "funny way of speaking." This is a rather common outward sign of Russia's condescension toward Ukraine, and perhaps their resentment toward the Orange Revolution and its aftermath.

    But did a real "revolution" occur here? This is the question I ask myself as I walk around the city.

    Indeed, this is a fascinating time in Ukraine, but a turbulent one. A few weeks ago, Ukrainian president Viktor Yuschenko dissolved the country's parliament (the "Rada"), and called for new elections, causing an uproar across the country that has been publicized worldwide. Indeed, Ukraine remains hostage to its legacy as a former Soviet republic. Divided by east and west. Stuck in a Soviet legacy where change is avoided...even feared. More specifically, as one senior U.S defense official tells me, "there are those have travelled to the west and have had their eyes opened and those who haven't. Those who fall into the former category favor integration into the West and to Europe; those in the latter category--The Party of Regions, led by Prime Minister Viktor Yanukovych--do not. There is a more worrisome development that is largely invisible--because salaries are so low and with the recognition of opportunities for better work and careers in Western Europe, Ukraines best and brightest are leaving in droves.

    Driving through Kyiv's city center, there is a scattering of demonstrations that seem remarkably well-organized...too organized, in fact: there are encampments with colorful tents and large nylon embroidered party flags in various city parks and squares, strategically positioned so that they face each other. And yet, each side remains remarkably civil to the other.

    War_memorial_kiev

    Ukraine is in the midst of a constitutional crisis. After 20 members of parliament who were formerly loyal to Yuschenko defected to Yanukovych's Party of Regions (it's widely believed that they were bribed to do so), President Yuschenko dissolved the Ukrainian parliament. Yanukovych challenged Yuschenko's decree, and the matter now rests with the country's constitutional court to decide. No one quite knows how the court would ultimately decide this case--the court is evenly split, with only two or three swing judges. Even the Constitutional Court's objectivity has been thrown into suspicion after allegations that some judges may have been bought off. In any event, the pressures currently placed on the court are enormous--five judges have said that as a result of the pressure they are under, that they wish to recuse themselves from the case.

    It is precisely this political pressure (in addition to the fact that the constitutional grounds for the dissolution of the Rada are shaky at best) that may well cause Yuschenko to decide to suspend his decree and come to a compromise with Yanukovych in order to avoid a certain political train wreck. In the meantime, it's a near certainty that the court will do everything it can to avoid making a decision.

    What does all this say about Ukraine? A Danish diplomat I spend some time with remarks, "If Turkey was described as the 'Sick Man of Europe,' Ukraine is absolutely the 'Naive Man of Europe." He's one of the pessimists. Short-term optimists, it turns out, are nearly impossible to find here. Another diplomat I speak to is a long-term optimist: "While Yuschenko may have squandered the opportunity for rapid political change," he tells me, "the social winds of change are in full gale."

    Nonetheless, Ukraine's current trajectory is plainly worrisome as it is drawn closer and closer to the Russian center of gravity. The Russians want to restore their empire, and as another diplomat tells me, "For them, Ukraine represents the jewel in the crown."

    Kiev_war_memorial

    Russia opposes Ukraine's accession into NATO with every fiber of their being, because it would establish a precedent for other former Soviet republics (Armenia, Azerbaijan, etc) to follow suit. Restoring Russia's empire, they know, is not possible without Ukraine. This, therefore, is Yanukovych's distinct advantage--in addition to his political acumen: he has Vladimir Putin's full support and influence, as well as the financial backing of the Kremlin and Ukraine's richest man, Rinat Akhmetov--worth a reported $12 billion (I subsequently discover that he also owns the Pearl Hotel, where we're staying).

    Yanukovych has been able to use his substantial financial leverage to his own political advantage by hiring a K Street Lobbying firm in Washington, D.C. headed by power lawyers Paul Manaford, Phil Griffin and Bruce Jackson to lobby the Bush Administration and Congress on behalf of Yanukovich and his Party of Regions for an initial sum of $9 million. They continue to work on Yanukovich's behalf, but reportedly have not applied through the State Department as foreign agents. Astounding....

    Yanukovych single-handedly rolled back Yuschenko's NATO accessions plans in an uncoordinated surprise visit to Brussels last year. And yet, even Yanukovych recognizes the dangers in ceding too much control to Russia. He saw the dramatic result of handing over control of Byelorussia's pipeline rights to Gazprom in return for short-term gains of relative price stability for energy. The result was a measurable loss of sovereignty and an effective re-assimilation into Russia's sphere of influence. U.S. officials seem to agree that loss of Ukrainian sovereignty is not something Yanukovych would accept were he to have complete control either.

    From a U.S. perspective, Ukraine will always have a close relationship with Russia. "We can change a lot," one official says in a resigned tone, "but geography isn't one of them." We regard Ukrainian membership in NATO as a Ukrainian choice. The door to NATO is wide open and would surely be fast-tracked whenever they do elect to join NATO--but the choice is theirs alone to make (not Russia's).

    St_sophia_cathedral_kyiv


    Kyiv is a beautiful and clean city, filled with ancient European architecture dating back to 900 AD. We tour the St. Sophia's Cathedral and have the opportunity to see one of the oldest standing churches in all of Europe. It has been magnificently restored to show the original frescoes and mosaics, as well as the original architectural components of its construction. It's a remarkable site. In these former Soviet Republics, history has often been revised extensively to fit the visions of tsars, kings, queens, generals, patriarchs and dictators. Ukraine is no exception. Conflicting accounts of this region's history abound, with muddled versions inspired by the invasion of the Mongol hoardes, Tatars, the conquests of the Vikings, Polish-Lithuanian Empire and the Austro-Hungarian Empire, not to mention the Bolsheviks and Soviets. With the ghosts of empires past, I've learned, it's best to look for the ground-truth in what has been left of the architecture (as well as what is known to have been destroyed).

    With all of Ukraine's issues, the people are clearly its great strength. Change is a difficult thing for the older generation who lived during Soviet times to accept, let alone embrace. But the younger generations of Ukrainians who crave economic opportunity, integration and equality with the rest of Europe will most certainly be the future super-agents of change for this country, as well as the long-term cause for optimism.

    The question here in Kiev is whether you are a optimist or pessimist about Ukraine's future.

    After my own visit here, I'm a cautionary long-term optimist for Ukraine....

    Kiev


    April 16, 2007

    A Note from St. Petersburg...

    St_petersburg_the_hermitage

    I am now departing St. Petersburg after a full day and overnight visit. We took an overnight train/sleeper car from Moscow yesterday, departing at around midnight and arriving at 8:00 am-- so we awoke in St. Pete fully rested. It's certainly an excellent way to travel, and cheaper than flying! We check into the Grand Hotel Europa--and I'm immediately impressed by its layout, design and luxury.

    Just down the street, I meet a friend at "Dom Knigi" on St. Petersburg's main avenue--Nyevsky Prospect. It's a Russian version of Barnes and Noble, in a multiple story building with a very distinctive signature glass globe towering above it. It caters to a multinational consumer audience and has a nice cafe on the second floor. On our way to a breakfast cafe, we passed the popular "Coffee House" which has become a chain throughout Moscow and St. Petersburg--it's an unauthorized and unabashed Starbucks clone that bears every likeness to it's U.S. counterpart. I'm told that the Starbucks name in Russia has been legally copyrighted by an opportunistic businessman in Russia who reportedly is asking a wildly expensive dollar amount for its acquisition--Starbucks has reportedly declined to pay his asking price. Western business investment in St. Petersburg is lagging behind Moscow, but has accelerated in the past year from 6% to 14%. Nonetheless, the current environment favors large corporations--especially those with West European foreign subsidiaries who can more easily pay the "incentive" fees (read "bribes") to city officials in establishing there presence here. U.S. companies are not authorized to pay bribes in any form. The city's corporate-centric approach penalizes multinational small businesses from gaining a foothold here by subjecting them to at least 13 separate and distinct inspection regimens...tax inspectors, building inspectors, safety inspectors, business license inspectors, cleanliness inspectors...the list goes on and they can descend at any moment, en masse, on all small businesses that fall out of favor with city officials--especially if they are deemed to be more competitive than their favored Russian counterparts. Corruption remains a substantial dis-incentive for small businesses in Russia. On the other hand, I'm told that the consulate is now rarely required to weigh in on business disputes between St. Petersburg city officials and U.S. corporations, which they regard as a promising sign for the future.

    St_petersburg_1812_monument

    The weather in St. Petersburg is spectacular as we make our way through the ancient Russian cathedrals with their breathtaking frescoes and mosaics of saints, past patriarchs, the holy spirit (manifested as a silver dove) and the risen Christ. We climb the narrow outer stairwell of the St. Isaac's Cathedral, and emerge at the top dome with a superb 360° view of the tremendous Italienate and Russian Orthodox architecture--a rare occasion for a port city that is often enshrouded by clouds and mist.

    As we walk, we suddenly find ourselves in the massive square behind the Hermitage Museum. Young boys on skateboards and bikes race around the square, entire families are out too, walking together arm-in-arm in short sleeves. Spring seems to have finally arrived in St. Petersburg! I'm struck by the large number of Russians who are flooding into the Hermitage to visit the exhibits. When I was here two decades ago, there were not nearly as many Russian visitors. Today, they fill the hallways, and tourists like me appear to be relatively few. By contrast, I'm told that during the Summer months the tourist population increases a hundred-fold as the Baltic cruise ships arrive and dump their (mostly elderly) passengers out on St. Petersburg's ports--some of those elderly tourists have trouble coping with the heat and the crowds, and ultimately succumb to the bustle and heat--meeting their maker in St. Petersburg!

    St_petersburg_john_at_the_hermitage

    My second visit to the Hermitage is as fascinating as my first. This is without question the most impressive art museum in the world, with works dating back to the Stone Age. Through the maze of massive elaborate rooms are displayed countless masterpieces--sculptures by Michelangelo and Bernini; paintings by DaVinci, Renoir, and Monet; ancient marble sculptures of Jupiter, Dionysis, and Mercury.... Walking around the Hermitage, it is difficult to visualize this as an actual residence or palace of the tsars until you find yourself walking through the recreations of those rooms--the White Room, Catherine the Great's's Bourdois in red, the Gold Room.... You leave awestruck and a bit exhausted from all the walking and the blur of masterpieces you have seen throughout its six buildings!

    St. Petersburg is indeed a beautiful city and well-deserving of the title "Window to the West." I leave this remarkable and historic city, wishing I could stay longer....

    St_petersburg_russia_view