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How To Score Putin's G8

Russian President Vladimir Putin at the G8 summit, St Petersburg. Photo courtesy of AFP.
by Martin Walker
UPI Editor Emeritus
Paris, France (UPI) Jul 17, 2006
It says a lot about the current state of relations between Russia and the West that we may score the results of this latest G8 summit as if it were a sporting contest, or even one of those old Cold War summits where the outcomes were always counted narrowly to see if either side had scored an advantage.

The host, Russia's President Vladimir Putin, marked one signal success in ensuring that the event took place at all, after various voices had called for the event to be cancelled or scaled down to signal Western disappointment at what senior White House aides called "our concern about the backsliding of democracy in Russia."

And before the event opened, Putin could also chalk up two more successes in the killing of the most prominent Chechen rebel leader, Shamil Basayev, and the successful sale of over $10 billion worth of shares in the state-owned Rosneft oil company. It was the 5th-largest initial public offering in history and valued the whole of Rosneft at some $80 billion.

Above all, it showed that the global markets are prepared to wink at the state-sponsored looting of the Yukos group, whose Yugansk subsidiary was swallowed by Rosneft in a process that Yukos lawyers say amounted to asset laundering.

The one setback for Putin was that U.S. President George W. Bush held back at the last moment from granting him the complete triumph of dropping the remaining U.S. objections to Russia's entry into the World Trade Organization.

But this was more than compensated by the Europeans, who gave Putin exactly what he wanted -- the keys to their energy distribution systems. The text of the new G8 energy agreement drops the restrictions on Russian purchases of EU energy distributors in return for EU purchases of Russian oil and gas pipelines.

"We will work to reduce barriers to energy investment and trade. It is especially important that companies from energy producing and consuming countries can invest in and acquire upstream and downstream assets internationally in a mutually beneficial way," the draft text says.

This means that Russia's Gazprom giant will now be able to buy European companies that sell and distribute energy to the retail market, so that it can take one profit on the sale of gas, another on shipping it via pipeline and a third from selling to European customers -- the fabled access to the downstream profit chain that Arab oil companies have found it so hard to crack.

"Of course I trust Mr. Putin. That he is someone who in making a deal, will respect that deal," said European Commission president Jose Barroso as he arrived in St. Petersburg Saturday. "Europe's first priority is an open and transparent energy market. In practice, this means open access to all parties so long as they play by the rules."

Those rules are supposed to include the right in return for Western companies to buy, build and operate Russia pipelines, but Russian courts and officials have proved adept at frustrating such efforts in the past, and have repeatedly made it clear that "strategic assets" are not for sale to non-Russians.

Energy-hungry Europeans, already intimidated by threats from Gazprom chiefs to shift their energy sales to China and Asia if the EU countries were not prepared to deal on Russian terms, have sought to put an acceptable face on the implications of the new energy agreement.

The current head of the EU Council, Finnish President Matti Vanhannen, was asked if EU customers would soon be getting their gas bills direct from Gazprom, replied: "One Finnish company is already totally owned by a Russian company. Don't be afraid of that kind of normal business."

EU politicians from Poland and Baltic and Eastern European states, who have rather more direct experience of a dependent economic relationship with the Kremlin, are deeply unhappy at this.

"No Russian official statement of assurance is reliable," warned former Lithuanian president Vytautas Landsbergis. And a poll of EU citizens in Friday's Financial Times found that only 20 percent of people replied "yes" when they were asked "can the EU trust Vladimir Putin?"

Polish officials, not present at the G8 summit but worried at the direction of EU policy, fear that a discreet reversal is under way of what seemed like Russia's strategic defeat with the "Orange Revolution" that brought pro-Western democrats to power in Ukraine eighteen months ago.

Their hopes of a swift and secure entry into the key institutions of the West, the NATO alliance and the EU itself, have been frustrated and inter-party and personal bickering among pro-Western groups has now opened the way for the discredited pro-Russian party to return to power amid anti-NATO demonstrations.

So with the exception of the WTO deal, Putin is emerging from this G8 summit with his diplomatic reputation enhanced and with Russia's state-dominated energy industries poised to maximize their future profits and influence in Europe. And Putin achieved this without making any concessions to Western complaints about his reversal of Russia's democratic course.

In fact, he mocked his critics, telling French TV interviewers that Western criticism of his retreat from democratic reforms were a modern form of colonialism.

"If you look at newspapers of 100 years ago, you see how, at the time, colonialist states justified their policies in Africa or in Asia. They talked of their civilizing role, of the white man's mission," Putin said.

"If you change the word 'civilizing' to 'democratization', you find the same logic, you can read the same things in the press today," he went on, adding that he would "categorically object to using all possible levers, including the idea that our society needs democratization, for interfering in our internal affairs".

And Putin managed to achieve all this without giving an inch on his opposition to sanctions or other serious pressures against the nuclear ambitions of Iran, and made it clear that he thought Israel was at fault for over-reacting in the attacks on Lebanon. Since he got France's Jacques Chirac and the Europeans to agree, he made Bush look isolated.

The score card of this G8 summit, therefore, looks at first glance like a clear win for the home team -- except that the energy-dependent Russian economy remains as hollow as ever, its investment and infrastructure deficits continue to grow and its demographic prospects cast an ominous cloud over Russia's future.

And with his success on the energy charter deepening Russia's dependence on its oil and gas deposits, while failing to secure WTO membership, Putin has delayed yet further the day when Russia develops a real economy that makes goods and services -- rather than raw materials and weapons -- that the world wants to buy. Economically as well as politically, Putin's Russia is still far from being a normal country.

Source: United Press International

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