AUR#660 Italians & Dutch Invest In Banking; Pres Finally Demands Information On RosUkrEnergo; Life & Death In The Red Army

THE ACTION UKRAINE REPORT – AUR
An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary

Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World


PRESIDENT DEMANDS INFORMATION ON ROSUKRENERGO
“In an effort to ensure transparent gas relations between Ukraine and
Russia, being committed to the principles of fair competition and market
economy, I order the cabinet to collect comprehensive information about
Rosukrenergo,” the president said. [Article Eight]

THE ACTION UKRAINE REPORT – AUR – Number 659
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., Kyiv, Ukraine, WEDNESDAY, FEBRUARY 15, 2006

——–INDEX OF ARTICLES——–
Clicking on the title of any article takes you directly to the article.
Return to the Index by clicking on Return to Index at the end of each article

1. ITALIAN BANK BANCA INTESA BUYS 85% OF UKRSOTSBANK
Ukrsotsbank is Ukraine’s fourth largest bank

Associated Press (AP), Rome, Italy, Tuesday, February 14, 2006

2. RAIFFEISEN INTERNATIONAL BANK EXPANDS IN RUSSIA
Raiffeisen Bank has also reached Ukraine, where it bought Bank Aval
last August, becoming the country’s largest retail bank.
By Katharina Bart and Andrew Langley, The Wall Street Journal
New York, New York, Wednesday, February 15, 2006

3. UKRAINE: DUTCH TBIH FINANCIAL SERVICES GROUP BUYS
9.55% Of VABANK, PLANS TO RAISE ITS STAKE TO 27%
Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

4. UKRAINE’S UKREXIMBANK TO OPEN REP OFFICE IN LONDON
Opened first foreign rep office in New York last fall
Ukrainian News Agency, Kyiv, Ukraine, Wednesday, February 8, 2006

5. UKREXIMBANK TO CREATE EXPORT INSURANCE AGENCY
Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

6. UKRAINE: XXI CENTURY INVESTMENTS WINS MAJOR RETAIL
AND ENTERTAINMENT FACILITY CONTRACT IN ZAPORIZHYA
Major city of over one million population in southeastern Ukraine
AFX UK (Focus), London, UK, Tuesday, February 14, 2006

7. REGAL FORCED TO SHUT DOWN GAS VENTURE IN UKRAINE
Loses long legal battle with Ukrainian state-owned group CNGG
By Rebecca Bream, Financial Times
London, United Kingdom, Wednesday, February 15 2006

8. UKRAINE PRESIDENT YUSHCHENKO DEMANDS INFORMATION
ON CONTROVERSIAL GAS SUPPLIER ROSUKRENERGO
President suddenly changes his opinion on RosUkrEnergo and gas deal.
Says Ukraine would not allow any non-transparent schemes in gas sector
Continuing controversy is damaging Ukraine’s reputation.
Interfax-Ukraine news agency, Kiev, in Russian 14 Feb
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

9. GAS DEAL WITH RUSSIA ENDANGERS UKRAINE’S 2006 BUDGET
SAYS UKRAINIAN FINANCE MINISTER VIKTOR PYNZENYK
REUTERS, Kiev, Ukraine, Tuesday, February 14, 2006

10. UKRAINIAN ECONOMICS MINISTER EXPLAINS MAXIMUM GAS
PRICE ACCEPTABLE IS 110 DOLLARS PER 1,000 CU. M.
Interfax-Ukraine news agency, Kiev, in Russian, 14 Feb 06
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

11. GAZPROM REBUFFS WESTERN PRESSURE-SAYS IT HAS NO
PLANS TO GIVE UP ITS MONOPOLY ON GAS EXPORTS
By Catherine Belton, Staff Writer, Moscow Times
Moscow, Russia, Tuesday, February 14, 2006

12. ORANGE REVOLUTION: SEVERAL OBSERVATIONS ABOUT
‘THE NATURE OF THINGS’
The list of myths and mythical constructs is quite extensive.
ANALYSIS AND COMMENTARY
: By Georgiy Kasianov,
Head, Department of Contemporary History & Politics
Institute of Ukrainian History, National Academy of Sciences, Ukraine
Published by Harvard Ukrainian Research Institute (HURI)
Harvard University, Cambridge, Massachusetts

13. EUROPE’S ENERGY MUSKETEERS MUST STAND TOGETHER
COMMENTARY: By Kazimierz Marcinkiewicz, Prime Minister of Poland
Financial Times, London, United Kingdom, Thursday, February 9 2006

14. U.S. TO SPEND MILLIONS IN BELARUS TO ENSURE FREE,
FAIR VOTING IN NEXT MONTH’S ELECTIONS
By William C. Mann, AP Worldstream, Wash, D.C. Wed, Feb 08, 2006

15. VIOLENCE FEARED AS ALEXANDER LUKASHENKO EUROPE’S
LAST DICTATOR CLINGS TO POWER IN BELARUS
By Mark Franchetti, Minsk, Belarus, The Sunday Times (UK)
London, United Kingdom, Sunday, February 12, 2006

16. DON’T ABANDON BELARUS, DEMOCRATIC REFORMERS URGE
BRIEFING: Radio Free Europe/Radio Liberty (RFE/RL)
Washington, D.C., Tuesday, February 14, 2006

17. VLADIMIR THE TERRIBLE
BOOK REVIEW: By Michael McFaul
RE: “PUTIN’S RUSSIA, Life in a Failing Democracy”
By Anna Politkovskaya, Metropolitan. 274 pp. $25
Book World, The Washington Post
Washington, D.C., Tuesday, February 14, 2006; Page C04

18. RUSSIA UNAVOIDABLY TURNS TO EXPANSION,
IMPERIAL FOREIGN POLICY
Lithuanian analyst urges West to confront Russian imperialism
COMMENTARY: By Raimundas Lopata, Political Scientist
Vilnius University’s International Relations & Political Science Institute
Vilnius BNS WWW-Text in English Friday, 03 Feb 2006
BBC Monitoring Service, United Kingdom, Saturday, Feb 04, 2006

19. FAVOURABLE DOLLAR WIND
Russia transfers 1m in funds to Latvian non-governmental organizations
COMMENTARY: By Tadas Grazvydas
Vilnius Obzor in Russian, Vilnius, Lithuania, Thu, 9 Feb 2006 pg 1
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

20. POLICY WATCH: PUTIN’S ECONOMIC ASSUMPTIONS
ANALYSIS: By Mark N. Katz, Professor of Government
and Politics at George Mason University, Fairfax, Virginia
United Press International (UPI), Washington, D.C., Sun Feb 12, 2006

21. RUSSIA UNDER PRESSURE TO GUARANTEE GAS SUPPLIES
AFTER TURNING OFF GAS TAPS TO UKRAINE
G7 ministers urge Moscow to ratify energy charter: Agreement could
open up country to foreign oil firms
By Ashley Seager, Moscow, The Guardian
United Kingdom, Monday, February 13, 2006

22. WORLD BANK PRESIDENT PAUL WOLFOWITZ SAYS RUSSIA

SHOULD BE INTERESTED IN UKRAINE’S DEVELOPMENT
Intelnews, Moscow, Russia, Monday, February 13, 2006

23. RUSSIA IN THE G8 CHAIR
Putin’s policies mean it is no longer a club of democracies
EDITORIAL:
Financial Times (UK)
London, United Kingdom, Saturday, February 11, 2006

24. ‘IVAN’S WAR’, IN THE RED ARMY: CALLED, TRAINED, KILLED
Soldiers feelings toward the regime ranged from sullen acquiescence
to outright hostility, especially in Ukraine.
BOOK REVIEW:
By William Grimes
RE: “Ivan’s War, Life and Death in the Red Army, 1939-1945”
By Catherine Merridale, Illustrated. 462 pages. Metropolitan Books. $30.
The New York Times, NY, NY, Wednesday, February 15, 2006
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1
. ITALIAN BANK BANCA INTESA BUYS 85% OF UKRSOTSBANK
Ukrsotsbank is Ukraine’s fourth largest bank

Associated Press (AP), Rome, Italy, Tuesday, February 14, 2006

ROME – Italian bank Banca Intesa has reached an agreement with the
controlling shareholder of Ukraine’s Ukrsotsbank to buy an 85.42 percent
stake of the bank, Intesa said Tuesday.

Banca Intesa has expressed hope that the move will help it play a major
role in Central and Eastern European banking.

Following the completion of a pending capital increase worth $60 million,
Intesa will increase its stake to 88.1 percent, the Italian bank said in a
statement. Banca Intesa is Italy’s second-largest by market capitalization.

Ukrsotsbank is Ukraine’s fourth-largest bank, with a network of 527
branches and more than 660,000 customers.

Banca Intesa said that it values the Ukrainian bank at $1.3 billion and that
its total investment would amount to $1.61 million, including the share
capital increase.

Intesa is already present in the region, controlling Privredna Banka Zagreb
d.d, Croatia’s second-largest bank, and Vseobecna uverova banka,
Slovakia’s second-largest bank.

It also owns Banca Intesa Beograd, formerly known as Delta Banka, Serbia
and Montenegro’s second-largest bank, and Hungary’s fourth-largest bank,
Central-European International Bank. -30-
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2. RAIFFEISEN INTERNATIONAL BANK EXPANDS IN RUSSIA
Bank’s footprint stretched as far as Bulgaria and Romania before the deal.
Raiffeisen Bank has also reached Ukraine, where it bought Bank Aval

last August, becoming the country’s largest retail bank.

By Katharina Bart and Andrew Langley, The Wall Street Journal
New York, New York, Wednesday, February 15, 2006

MOSCOW — Raiffeisen International Bank AG’s Russian expansion is
being lauded as a bold but potentially lucrative move into the country’s
largely untapped retail banking market.

Raiffeisen, the Austrian holding company for Raiffeisen Zentralbank
Oestereich’s Eastern European assets, last week paid $550 million for OAO
Impexbank, a midsize Russian bank that caters to the country’s emerging
middle class and whose main business areas are exactly what Raiffeisen does
best — savings and consumer credit.

Matt Clark, a London-based analyst with Keefe, Bruyette & Woods, said the
deal appears aimed at cashing in on the underdevelopment of banking services
in Russia. This includes not only relatively new products such as loans and
credit cards, which can be handled through Impexbank’s 350 consumer-credit
outlets, but also deposit accounts.

“There is a great deal of money that isn’t in the banking system but is
being kept under somebody’s mattress instead,” Mr. Clark said. “As that
flows into the financial system, it will make for a lot of financial
activity for banks.”

Russians have been wary of depositing money with banks since the wholesale
banking crisis that accompanied Russia’s debt default in 1998 and wiped out
many people’s savings overnight. Attitudes are changing, however, with
retail deposits up 43% to more than $120 billion during the first 11 months
of last year, according to the Federal Statistics Service.

Last year, Russia’s central bank introduced a deposit-insurance plan that
guarantees deposits of as much as 100,000 rubles ($3,550) if a member bank
goes bankrupt.

Banks are also becoming more willing to lend to individuals as the country’s
economic growth makes retail customers more creditworthy. Real disposable
incomes in Russia rose 8.7% last year, and Raiffeisen seems sure this
newfound prosperity is spreading across the country.

With 190 branches in addition to the 350 consumer-credit bureaus, Raiffeisen
has also bought itself a significant headstart on other foreign banks with
operations in Russia.

“Raiffeisen is a first mover in Russia in that where others have bought into
retailers centered in cities such as St. Petersburg or Moscow, here we have
a network that spreads everywhere,” KBW’s Mr. Clark said.

Major players, such as France’s Société Générale SA and Citigroup Inc.’s
Citibank, have fewer than 50 branches between them, mainly in Moscow and St.
Petersburg, although SocGen also acquired a small Russian mortgage lender
last year.

Germany’s Commerzbank AG seems unwilling to pay the high multiples seen in
recent deals, analysts said, and France’s BNP Paribas SA walked away from a
deal to buy 50% of Russian Standard Bank, one of the largest consumer
lenders, on similar grounds.

Some say the successful execution of Raiffeisen’s acquisition could have
something to do with the fact that it remained in Russia after the 1998
currency devaluation and subsequent default, even as most Western banks
beat a hasty retreat, giving it a certain amount of political credibility.

Others say the bank is simply pursuing a long-standing policy of expanding
its operations through Central and Eastern Europe.

“The move is in line with Raiffeisen’s strategy of moving east,” said Elena
Rogovina, an analyst with UBS in Moscow, who adds that the bank’s footprint
already stretched as far as Bulgaria and Romania before the deal.

Raiffeisen has also reached Ukraine, where it bought Bank Aval last August,
becoming the country’s largest retail bank.

However, the risks involved in Raiffeisen’s presence in Ukraine and this new
Russian deal are myriad, analysts say. “In Russia and Ukraine, banks are
going in with currency, economic, general banking risk and political risk
considered much higher than it is for emerging European countries,”
London-based Bear Stearns analyst Christopher Wheeler said.

Since Raiffeisen International went public in April, its shares have nearly
doubled in value, snapped up by investors eager for a part of Central and
Eastern European expansion, analysts said. -30-
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Write to Katharina Bart at katharina.bart@dowjones.com and Andrew
Langley at andrew.langley@wsj.com
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3. UKRAINE: DUTCH TBIH FINANCIAL SERVICES GROUP BUYS
9.55% Of VABANK, PLANS TO RAISE ITS STAKE TO 27%

Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

KYIV – Dutch company TBIH Financial Services Group has bought 9.55%
of the shares in midsized bank VABank and intends to increase its stake up
to 27%. Reporters learned this from VABank board chairman Andrii
Snehyriov.

Snehyriov said at the next shareholders’ meeting the decision will be passed
to increase the statutory fund, as a result of which TBIH will be able to
boost its stake.

In the future, TBIH is expected to be extending its participation in the
share capital of VABank (up to 50%), but the current owners of the bank are
not planning to sell the controlling interest. TBIH also intends to invest
together with other shareholders of VABank into development of the bank.

As Ukrainian News reported, in October 2005 the Netherlands’ TBIH Financial
Services Group reached agreement with the main shareholders of VABank on
the purchase of 50% of the shares in the bank. TBIH specializes in providing
financial services, including insurance, asset management and mortgage
financing. The Kardan Group owns about 50% of TBIH.

VABank’s net assets as of January 1, 2006 totaled UAH 2,351.2 million, its
advances portfolio UAH 1,226.3 million and internal capital UAH 295.7
million. The bank finished 2005 with a net profit of UAH 15.099 million.
Businessman Serhii Maksymov heads the bank’s supervisory board.
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4. UKRAINE’S UKREXIMBANK TO OPEN REP OFFICE IN LONDON
Opened first foreign rep office in New York last fall

Ukrainian News Agency, Kyiv, Ukraine, Wednesday, February 8, 2006

KYIV – Ukreximbank (Kyiv), one of Ukraine’s ten biggest banks, is
planning to open its representative office in London (Great Britain) in
the first quarter of 2006. Reporters learned this from the bank’s board
chairman Viktor Kapustin.

London will be the second foreign city where the bank will open its
representative office [first was New York]. “We will continue broadening
our foreign network, but now our target is only London. We are greatly
interested in the Asian market and may move to the East if we feel the
interest and initiative of eastern investors,” Kapustin said.

Kapustin listed Hong Kong and Singapore among the Asian cities where the
bank’s representative offices may open. He also noted that Ukreximbank is
interested in the Russian market, as well, without yet calling any concrete
purposes or plans in this respect.

As regards extension of the domestic network, the bank’s plans are not very
specific, and will depend on necessity. Not more than 30-50 structural units
may open in Ukraine next year.

As Ukrainian News reported, on September 16, 2005 Ukreximbank opened
its representative office in New York. The state owns 100% of the shares in
Ukreximbank.

In the third quarter of 2005 the bank had a net profit of UAH 49.641
million, in the second quarter a profit of UAH 38.69 million and in the
first UAH 24.857 million. The bank ended the year of 2004 with a profit of
UAH 90.158 million, and 2005 with a net profit of UAH 180.546 million.
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5. UKREXIMBANK TO CREATE EXPORT INSURANCE AGENCY

Ukrainian News Agency, Kyiv, Ukraine, Wed, February 8, 2006

KYIV – Ukreximbank (Kyiv) plans to create a special export insurance
agency in 2006. Viktor Kapustin, head of the bank’s management board,
informed journalists about the new agency.

Kapustin did not inform about a specific date of implementation of this
idea, as the question of creation of the structure is still undergoing the
process of development. Kapustin said that the main task of the future
agency is arrangement of insurance agreements with export credits of
commercial banks with the aim of reduction of risks of export operations.

Kapustin commented that creation of such agencies is not new to the world
practices and in particular, Ukreximbank is performing active talks for
accession to the Prague club – the organization which is an international
association of 32 agencies for insurance of export credits and investments
from various countries of the world.

Kapustin said that most probably the agency will be created under
Ukreximbank, as this will be the cheapest and the most convenient option.

Kapustin has not formulated the common concept of development of the
system of export insurance agencies in Ukraine, but based on the world
experience he mentioned that such structures in the world normally exist
together with export-import banks: they are either created under the aegis
of the banks, or the banks are created under such agencies.

As Ukrainian News earlier reported, the state owns 100% stake in
Ukreximbank. The bank finished 2005 with a net profit of UAH 180.546
million and 2004 with profits of UAH 90.158 million. -30-
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6. UKRAINE: XXI CENTURY INVESTMENTS WINS MAJOR RETAIL
AND ENTERTAINMENT FACILITY CONTRACT IN ZAPORIZHYA
Major city of over one million population in southeastern Ukraine

AFX UK (Focus), London, UK, Tuesday, February 14, 2006

LONDON – XXI Century Investments Public Ltd, a real estate investment,
development and property management company in Ukraine, said it has
won a tender issued by Zaporizhya [Ukraine] city administration to build a
mixed-use complex in the city.

Zaporizhya, which has a population of over 1 mln, is one of the main cities
in southeastern Ukraine. The site acquired by XXI Century covers an area
of 1.9 hectares in central Zaporizhya.

The complex will consist of both retail and entertainment facilities and
will require three years to construct including 12 months’ planning. -30-
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7. REGAL FORCED TO SHUT DOWN GAS VENTURE IN UKRAINE
Loses long legal battle with Ukrainian state-owned group CNGG

By Rebecca Bream, Financial Times
London, United Kingdom, Wednesday, February 15 2006

LONDON – Regal Petroleum has been forced to shut down its Ukrainian
gas production due to a long-running legal dispute with a government
body over its licence.

The row concerns a former joint venture between Regal and CNGG, a
state-owned group. CNGG wanted to remain a partner at the end of their
venture but Regal bought out the group and secured licences in 2004 on its
own. Last year CNGG made a legal challenge against the settlement and the
licences.

Rex Gaisford, chief executive of the UK-based oil and gas group, yesterday
said that Regal’s latest court defeat in Ukraine, on January 31, had led to
a halt in gas production at its two adjacent licence areas in the Dneiper-
Donets basin. -30-
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8. UKRAINE PRESIDENT YUSHCHENKO DEMANDS INFORMATION
ON CONTROVERSIAL GAS SUPPLIER ROSUKRENERGO

President suddenly changes his statements on RosUkrEnergo and gas deal.
Says Ukraine would not allow any non-transparent schemes in gas sector
Continuing controversy is damaging Ukraine’s reputation

Interfax-Ukraine news agency, Kiev, in Russian 14 Feb
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

KIEV – Ukrainian President Viktor Yushchenko’s press service has said that
he shares concerns voiced by experts and political forces about the scarcity
of information regarding Rosukrenergo, the company controversially chosen
during talks between Russia and Ukraine as the intermediary supplying
Russian and Central Asian gas to Ukraine.

The president has ordered the cabinet to collect comprehensive information
about Rosukrenergo, saying that the continuing controversy is damaging
Ukraine’s reputation. Allegations have been made in Ukraine that
Rosukrenergo, whose ownership is unclear, was chosen as part of shadow
dealings between Ukrainian and Russian officials.

The following is the text of report by Interfax-Ukraine news agency:

KIEV, 14 February: Ukrainian President Viktor Yushchenko has said that
from the very beginning of talks with Russia Ukraine insisted that all gas
market participants act transparently and this position remains unchanged,
the presidential press service said today.

The president said that Ukraine refused from non-transparent in-kind
payments for energy and declared that it is prepared to adopt market
principles in this sector.

The gas deal signed with Russia provided Ukrainian customers with fuel
at the peak of the heating season and let Ukraine receive gas at the lowest
price in Europe, he said.

He said that Ukraine would not allow any non-transparent schemes in the
gas sector. He is convinced that if there is a need for this, the cabinet
can start looking for other ways of organizing the Ukrainian gas market
and cooperating with Russia.

The president shares concerns voiced by the public, as well as political and
business representatives and international institutions, including the EU,
regarding the scarcity of information about the company Rosukrenergo
established by Gazprom (Russia) and Raiffeisen Investment AG (Austria)
from the day of its foundation until now, and about its founders, the press
service said.

All attempts by Ukraine to receive the necessary information about
Rosukrenergo have turned fruitless. Even though Ukraine is not a co-founder
of this company and is not involved in its activities, it cannot neglect the
fact that its business reputation is being damaged by a conflict involving
Rosukrenergo, the press service said.

“In an effort to ensure transparent gas relations between Ukraine and
Russia, being committed to the principles of fair competition and market
economy, I order the cabinet to collect comprehensive information about
Rosukrenergo,” the president said.

[Passage omitted: details of the Ukrainian-Russian gas deal.] [Rosukrenergo
was chosen as the gas supplier to Ukraine as part of the gas supply deal
reached by Kiev and Moscow on 4 January, after Russia cut off gas
supplies to Ukraine amid a price row.]
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9. GAS DEAL WITH RUSSIA ENDANGERS UKRAINE’S 2006 BUDGET
SAYS UKRAINIAN FINANCE MINISTER VIKTOR PYNZENYK

REUTERS, Kiev, Ukraine, Tuesday, February 14, 2006

KIEV – A deal with Russia sharply raising the price of imported gas is
endangering the 2006 budget and threatening the solvency of the state oil
and gas company Naftogaz, Finance Minister Viktor Pynzenyk said on
Tuesday.

With Ukraine facing a parliamentary election next month, Pynzenyk told
parliament the increases nearly doubling the price of gas meant around $600
million in additional state spending to offset higher costs for consumers.
That jeopardised budget targets and Naftogaz’s ability to service credits
and to invest.

“More serious is the risk related to covering losses from gas deliveries to
thermal power stations. The finance ministry estimates these at 3.3 billion
hryvnias, about $600 million,” Pynzenyk told deputies.

“If other conditions do not change, this will allow us to cover operational
expenditures of Naftogaz but there are no opportunities to service credits
and make investments. It will have a considerable impact on the budget
balance.”

Parliament was discussing the gas deal between Ukraine and Russia signed in
the New Year to end months of wrangling. The accord raised prices for Kiev
to $95 per 1,000 cubic meters from $50 previously. Gas will be sold at $110
inside Ukraine because of taxes and transport costs.

Pynzenyk said the government would be able to meet budget targets in the
near future but risks would rise later in the year due to concerns that the
gas price could further increase.

“Given that maximum prices will remain unchanged for consumers and the
economy at large at $110 we can say that there is the chance to keep the
budget balance under control in the months to come,” Pynzenyk said. “But we
want at the same time to point out risks that could emerge by the end of the
year.” -30-
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10. UKRAINIAN ECONOMICS MINISTER EXPLAINS MAXIMUM GAS
PRICE ACCEPTABLE IS 110 DOLLARS PER 1,000 CU. M.

Interfax-Ukraine news agency, Kiev, in Russian, 14 Feb 06
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

KIEV – The maximum gas price acceptable for the Ukrainian economy is
110 dollars per 1,000 cu.m., Economics Minister Arseniy Yatsenyuk has
said.

“The maximum price acceptable for the Ukrainian economy is currently no
more than 110 dollars. Talks about other prices are absolutely unacceptable
and lead to an economic crisis,” Yatsenyuk said in his speech in parliament
today.

The Economics Ministry came to this conclusion after consultations with
representatives of industrial associations, he said.

He recalled that the government set the maximum price of gas for all types
of consumers at 110 dollars for 1,000 cu.m. for five years.

“This decision was taken to restrict the activities of any gas trader on the
Ukrainian market and prevent them from selling gas at unregulated prices.
The state thus undertook commitments and made all other companies to
sell gas at no more than 110 dollars for five years,” Yatsenyuk said.

[Passage omitted: the National Commission for Energy Regulation is to
set the prices for various types of consumers]

[On 8 February, the Cabinet of Ministers of Ukraine has set a gas price
limit for all categories of consumers, including households, at 110 dollars
per 1,000 cu.m. in hryvnyas without VAT, transportation and delivery costs
until 31 December 2010.

This was envisaged in the government resolution No 128 of 9 February,
which was published on the official website of the Cabinet of Ministers,
Interfax-Ukraine news agency reported at 1026.]
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11. GAZPROM REBUFFS WESTERN PRESSURE-SAYS IT HAS NO
PLANS TO GIVE UP ITS MONOPOLY ON GAS EXPORTS

By Catherine Belton, Staff Writer, Moscow Times
Moscow, Russia, Tuesday, February 14, 2006

MOSCOW – Gazprom said Monday that it had no plans to give up its
monopoly on gas exports despite new pressure from Europe for it to
liberalize trade amid fears over the gas giant’s growing clout and further
disruptions to supplies.

Following extensive and at times stormy talks on energy security during
this weekend’s meeting of finance ministers from the Group of Eight
countries, Finance Minister Alexei Kudrin told reporters that the
government was prepared to allow independent gas producers access to
export pipelines, a statement that appeared to bow to the West’s growing
calls to end Gazprom’s monopoly hold on them.

But while analysts downplayed Kudrin’s comments, saying they referred to
“technicalities” and did not likely point to any plans to weaken Gazprom, a
spokesman for the gas giant said the company did not intend to hand over
its most strategic asset — its monopoly hold on all pipelines to lucrative
export markets — any time soon.

“This is not part of our plans,” Gazprom spokesman Sergei Kupriyanov
said by telephone Monday, when asked whether the increasingly powerful
Gazprom was prepared to allow other producers to export to Europe
directly.

Energy security was pushed to the top of the agenda for this year’s cycle
of G8 meetings by Russia as it took over presidency of the group for the
first time. Gazprom became issue No. 1 after the gas giant sent a chill
through Europe over the New Year when it forced Ukraine into agreeing to
price hikes by briefly cutting off supplies. European countries receives 25
percent of their gas from Gazprom, mostly via Ukraine.

Even as the disruptions sparked a new debate in Europe on ways to diversify
and diminish dependency on Russia, the standoff also underlined Russia’s —
and Gazprom’s — power as an energy supplier.

Gazprom’s Kupriyanov conceded that the gas giant would consider any
government plans to weaken its monopoly on exports. But given President
Vladimir Putin’s direct backing for Gazprom, such plans are unlikely any
time soon, analysts said. In early 2003, Putin said earlier plans to break
up the gas giant’s monopoly should be shelved because the company was too
important as “a powerful political and economic lever of influence over the
rest of the world.”

Liberals in the government that had been pushing in the past for a gradual
breakup of Gazprom, like Kudrin, have largely been sidelined in the debate.

Analysts, however, said Kudrin’s remarks over the weekend were little more
than polite diplomacy. “This was a little bit of politics and a little bit
of diplomacy,” said Troika Dialog’s oil and gas analyst, Valery Nesterov.
“He couldn’t say anything else. Under regulations, Gazprom should allow
access to its pipelines … But the whole system of its monopoly won’t be
demolished. It’s evident Gazprom won’t be broken up.”

Under the current system, Gazprom’s ownership of all gas pipelines to
Europe has meant it has been able to force landlocked Central Asian states
such as Turkmenistan and Uzbekistan, which have no alternative export
routes, to sell gas to it at prices of little more than one-quarter of
European prices, which have climbed to over $200 per 1000 cubic meters.

In Russia, independent producers such as Novatek and LUKoil also have
little choice over the price at which they sell to Gazprom, because without
pipelines they have no access to markets.

LUKoil, for instance, currently sells gas to Gazprom at just $22 per 1000
cubic meters.

Gazprom’s Kupriyanov said Gazprom’s own production units were treated no
differently and sold gas to Gazprom at roughly the same price as LUKoil.

In theory, some independent producers can already sell to Europe, but only
if they sell through Gazprom’s export arm, Gazexport, first, Kupriyanov
said.

“This is possible already,” he said. “For example, we have an existing
agreement with [German company] Wintershall to develop a field. When it
begins extracting, it can immediately sell the gas for export.” Under that
agreement, however, all gas will be sold through Gazexport, meaning that
essentially Gazprom will continue to control the process.

TNK-BP’s plans to develop the vast east Siberian Kovykta field have been
stalled for years because Gazprom will not allow the 50-50 Russian-British
venture access to its export pipelines.

The standoff with Ukraine, which ended Jan. 4 when the two parties signed a
price agreement, sparked new concern about Gazprom’s monopoly powers.
Many in the West feared the gas giant was being used by the state as a
weapon to influence foreign policy issues.

As a result, at this weekend’s G8 powwow much time was given over to debate
on energy issues. Normally, such meetings concentrate on monetary issues
such as exchange rates. A debate on terrorism and money laundering lasted
just 10 minutes, the Financial Times reported on Monday.

European leaders made it clear at the summit that their main aim was to
engage Russia on the issues of energy security.

French Finance Minister Thierry Breton called for Russia to loosen
Gazprom’s monopoly on exports and ratify the Energy Charter, an
international treaty which provides an international legal framework for
energy deals. Russia has signed the treaty, but has not ratified it yet.

Breton said Russia’s ratification of the treaty would mean there would have
been a framework for resolving the standoff with Ukraine.

General Counsel for the Energy Charter Secretariat Graham Coop said in a
telephone interview that Article 7 of the treaty did not allow parties to
“interrupt or reduce” supplies of energy in the event of disputes over
transit.

By being a signatory to the treaty, “Russia is already bound by this
provision” to the extent that it does not contradict other Russian laws, he
said.

However, Coop said that applying this article in the Ukraine-Russia gas
standoff could be complicated because many transit and supply
agreements were under question simultaneously.

An additional protocol currently being discussed would force Russia and
other parties to allow access to available capacity within export
pipelines, he said.

Gazprom’s Kupriyanov declined to comment on calls for Russia to sign the
Energy Charter. Kudrin also sidestepped questions on the issue over the
weekend. -30-
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12. ORANGE REVOLUTION: SEVERAL OBSERVATIONS
ABOUT ‘THE NATURE OF THINGS’
The list of myths and mythical constructs is quite extensive.

ANALYSIS AND COMMENTARY: By Georgiy Kasianov,
Head, Department of Contemporary History & Politics
Institute of Ukrainian History, National Academy of Sciences, Ukraine
Published by Harvard Ukrainian Research Institute (HURI)
Harvard University, Cambridge, Massachusetts

Shortly after the events of November-December 2004 ended, one of the most
established Ukrainian historians delivered a scholarly report devoted to the
Orange Revolution, its outcomes and lessons. The presentation took place at
the stronghold of official Ukrainian scholarship in Kyiv. The speaker’s main
message was unmistakably clear: the Orange Revolution is a natural outcome
(zakonomirnyi rezul’tat) of Ukraine’s historical development.

The reaction to this statement was rather surprising (in light of the
intellectual tradition to which the majority of listeners belonged): part of
the audience laughed, others (taking the author’s generalizations too
seriously) started to argue, and the rest preferred to play the role of
silent skeptics, limiting themselves to body language.

What was noteworthy, however, is that the idea of “naturalness” so dear to
many in the audience was sustained by a minority only. The episode
stimulated me to start collecting data on the emerging “orange mythology”
that has the potential to become an established field of scholarly endeavor.

The list of these myths and mythical constructs is quite extensive. The
most prominent might be presented as follows:

[1] the naturalness of the Orange Revolution and Yushchenko’s
victory (as opposed to the constructivist myth of its artificial and
manipulative nature);
[2] the myth of “the revolution of millionaires against billionaires”
(as opposed to the myth of an all-national mass revolt);
[3] the “treason of the clerks” myth (combined with that of a
“conspiracy at the top”);
[4] the myth of the “hand of Moscow” (in opposition or complement
to the myth of “the West’s intrusion,” as well as to the myth of a “divided
Ukraine”);
[5] and the myth of the Orange Revolution itself, which characterizes
the events of November-December 2004 as a manifestation of the eternal
drive of Ukrainians towards freedom, liberty and democracy.

[MYTH ONE] The most salient myth is that of the naturalness of the
Orange Revolution. Despite the obvious methodological obsolescence of
its very formulation, it deserves comment at least for the fact that it
still holds a strong appeal for a considerable number of people, including
professional scholars, not to mention the “orange” politicians.

The Orange Revolution occurred simply because it had to. It was Ukraine’s
return onto the right track after a decade of moving toward a dead end.

It might be worth considering a different perspective, however: the events
of the spring to the fall of 2004 could be presented as a mix or chain of
deliberate policies, planned strategies and actions, spontaneous reactions,
unpredicted developments, reconfigurations of political groupings,
unexpected outcomes, uncertainties, situational alliances, and so on.

The Orange Revolution was the outcome of fortuitous circumstances,
fortunes and misfortunes, calculated responses and sudden reactions.

What might be considered truly natural is that the intellectual, managerial,
and political potential of the system created by the late Soviet
nomenklatura together with the nouveaux riches of the period of “initial
accumulation of capital” has expired. In this sense Ukraine’s “transitional
period” is over. But this is another story.

[MYTH TWO] The next mythical construct represents something quite
opposite to the natural myth: that Yushchenko’s victory is the result of a
well-designed political project, carefully planned by a group of political
technicians and spin-doctors and then implemented by professional
revolutionaries and natural-born managers.

It also might be taken for granted, particularly in light of the factual
part of the story. Yushchenko won the election. There are winners and
losers. There are those who are in power now and those who try to play the
role of opposition. Of course, there is nothing wrong with the facts here.
However, there is something deficient with the interpretation and
understanding of the facts, because there are at least some other options.

It is tempting, for instance, to formulate this suggestion in the following
manner: the elections were lost by the pro-government team rather than won
by the opposition; a considerable portion of the voters cast their votes
against Yanukovych rather than for Yushchenko. The same might hold true
on the other side-Yanukovych supporters voted against an imagined
Yushchenko, not for the actual Yanukovych.

The Yushchenko team demonstrated a relatively high level of external
mobilization and representation, while Yanukovych’s was much more
sophisticated in the internal mobilization of power and in excessive
pressure. The first model proved to be more effective in the period of overt
conflict; however, the second one was successfully used in previous years
and also provided Yanukovych with a considerable number of votes even
in the third round of voting, when it did not work in full force.

In fact, there was a stalemate in October-November 2004, when the potential
of both models was exhausted. But then there was the Maidan. I still have a
strong impression that both of the competing sides were genuinely surprised
by the scale, persistence and devotion of the Maidan crowds.

Good news for some, bad news for others: the Maidan saved Yushchenko
and buried Kuchma. The Maidan won the election. The Maidan saved itself.
There is still some mystique about the Maidan, where rational considerations
lose their explanatory power, but this also might turn into another kind of
mythology.

[MYTH THREE] The next myth about the Orange Revolution-a revolt of
millionaires against billionaires-speculates about the role of money in
these events, about “money sacks” orchestrating events and manipulating
naive and manageable masses. There is no doubt that huge funds were
involved on both sides. Large-scale manipulations of public opinion or
internal management of specific kinds were also evident in the practices
of both sides. Needless to say, they should be taken seriously.

Nevertheless, they should not be overemphasized as a major and decisive
investment into the election outcome. The basic rule of fund-raising says
that individual, grass-roots contributors bring in much more than
corporations. The biblical parable tells us about the comparative worth of
the widow’s mite in comparison to the sovereigns donated by the rich.
Both types of contribution give us a genuine clue to the story of the
Orange victory.

Thermoses of coffee, blankets, sandwiches, personal cash, overnight
accommodations proposed by Kyivans to the Maidan fighters, hours of
standing in the freezing streets and “all that jazz” proved to be a real
investment not to be measured in the flow of money. In physical terms,
pro-Yanukovych billionaires invested much more than the pro-Yushchenko
millionaires.

The same applies to the manipulation story: the opposition had little or no
chance to prevail in the mass-media space and, with some rare exceptions,
it did pretty badly in campaign management until the middle of November
2004.

With limited resources the opposition tried popular protest tactics,
involving people in actions by manipulating them and using channels
traditionally dominated by the proto-middle class (Internet, cell phones,
visible symbols).

The Yanukovych people did their best in using familiar practices of the
so-called administrative resource, temnyky and orchestrating Soviet-style
manifestations of popular will. However, none of these strategies would
have prevailed if the “ordinary Ukrainian” had not come out to the streets
on his or her own.

[MYTH FOUR] Another myth about the Orange Revolution is closely related
to the very notion of Ukraine as a battlefield between Russia and the West.

The open-hearted, naive and ridiculous statements by the First-Lady-to-be
[Mrs. Yanukovych] regarding “American valenky” and “drug-injected
oranges,” as well as speculations about a “fifth column,” the “hand of
Moscow,” and Russian spin-doctors had their equivalents in scholarly
formulations and analytical reports.

In the most simplified form it is presented as follows: Yanukovych and his
people relied upon the political and financial support of Russia,
conventionally identified with authoritarianism, anti-Western sentiment, and
imperialist ambitions. Yushchenko turned his hopes to the West (primarily
to the U.S., somewhat less to the E.U.) no less conventionally and often
naively identified with pure democracy, true transparency, accountability,
and popular participation.

The West and democracy won this geopolitical game; Russia and
authoritarianism lost. As a by-product of this scheme, the Ukrainian
population is divided into a pro-Russian and anti-Western East and a
pro-Western and anti-Russian West.

In mythical correspondence these schemes are usually taken for granted.
However, as many professional commentators observed, this outside “third
factor” is sometimes overestimated. No doubt, international support for
Yushchenko played an extremely important role, particularly at the final
stage of confrontation.

It was very important that Russia received a clear message from the West
at the right moment. It was very important that Kuchma received a clear
message about the use of force against peaceful protesters.

However, all external influences would be fruitless without the average
Ukrainian who rose in revolt against the boredom of Kuchma’s last years,
against obscurity and pessimism, helplessness and feelings of inferiority,
double standards and the corrupted state but not, in fact, against a
pro-Russian regime as such. Likewise, those who supported Yanukovych
did not protest against the “corrupt West.”

The history of the Orange Revolution as already written or in the process
of being written by scholars, literati, occasional observers, and real or
imagined participants has a tendency to be painted in orange colors only.
Blue and white are strikingly misrepresented in contemporary writings. Yes,
it is a natural outcome of the pre-revolutionary situation, as someone might
say.

But it would be unnatural for professional historians to focus their
attention on the victorious side only-and this tendency is unfortunately
obvious. Those who lose often have a deeper wisdom and may be much
more responsive and interesting for historians than those who actively
enjoy the fruits of victory.

Lack of space prevents me from proposing a more extensive analysis of
the “orange vision” which naturally has become a part of the national
mythology (it is now officially recommended to include a chapter on the
Orange Revolution in school textbooks).

Rather, these comments are offered as an initial discussion over the issue
which will, as I hope, soon turn from a fashionable topic and
career-accelerator tool into true scholarship. The scholarly potential of
the problem is huge; the list of significant scholarly topics extensive. The
number of scholars who have proven their aptitude for thorough, open-
minded, and impartial analysis is sufficient both in Ukraine and abroad.
Viriu. Znaiu. Mozhemo. -30-
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13. EUROPE’S ENERGY MUSKETEERS MUST STAND TOGETHER

COMMENTARY: By Kazimierz Marcinkiewicz, Prime Minister of Poland
Financial Times, London, United Kingdom, Thursday, February 9 2006

In the past few weeks, European governments have faced growing pressure
to fulfil one of their most basic functions as public authorities, namely to
secure natural gas supplies for their national markets. Not only the
countries of central and eastern Europe but also those in the Mediterranean
basin, such as Italy, have been forced increasingly to limit natural gas
consumption by their industries.

Political ambitions, terrorism and even climatic conditions are now
threatening the energy security outlook for most European Union member
states as well as other countries.

On January 1, Gazprom, the Russian company, reduced the amount of natural
gas transmitted to EU member states via Ukraine’s transmission system.
Basically, a dispute between third countries directly touched a number of EU
members. More recently – due this time perhaps to climate conditions –
natural gas supplies again have been limited.

The shortages provided tangible evidence of institutional weakness in
European energy security structures. The citizens of affected countries
expect effective responses from the EU. But up to now, the relevant
governments have been unable to respond adequately because Europe lacks
the necessary treaty provisions.

It must be underlined at this point that energy security is a fundamental
matter: a cut to energy supplies leads to economic disequilibrium and causes
losses across a range of sectors. The governments concerned must protect
their citizens and industries against such a scenario. At the same time, we
are fully aware that security comes at a price and that it brings its own
value.

We cannot remain defenceless nor isolated amid this increasingly threatening
situation. The long-term strategic interests of EU member states demand a
new initiative. In Europe, there is a widespread feeling that EU countries
should act in solidarity: after all, the Union is a vehicle for deeper
economic co-operation. Yet, the field of energy security is not within the
scope of the EU’s competencies. This is a paradox.

In 1950, it was precisely in the then-strategically important sector of coal
energy that the great process of European integration began, resulting
eventually in the European Coal and Steel Community. A few years later,
Euratom, the European Atomic Energy Community, was created. The
problems of energy security were thus at the very heart of the European
integration process. We should remember this heritage.

Up to now, EU activity on the fringes of the energy security problem – for
example in the security of natural gas supplies – has been market-related
and has served mainly to achieve a single market for natural gas. This was
intended to make it more secure.

Yet, a difficulty here is in finding bridging solutions aimed at
liberalisation of the market, a goal the European Commission rightly
promotes, while emphasising the necessity of effective provision of energy
security that rests upon EU member governments.

It is the right time, in my view, to suggest a common effort to face not
only current but also future challenges. That is why I want to propose to
our partners from the EU and the Nato alliance a treaty on energy security.

It would be an expression of solidarity for all parties, uniting them in the
face of any energy threat provoked by either a cut or a diminution of supply
sources that may occur because of natural disasters, disruption of wide
distribution and supply systems or political decisions by suppliers.

Such an energy security treaty could follow formulas contained in the 1949
Washington Treaty, an agreement that allowed for effective transatlantic
co-operation, or provisions of the modified Treaty of Brussels that
established the Western European Union in 1948.

A European energy security treaty along these lines could become a real
tool that would give us some badly needed certainty, as well as security in
crisis situations. That is why it is essential that the treaty contains a
clearly and firmly stated guarantee clause based on the “musketeer
principle”: “All for one – one for all”.

Our president is raising this issue today in Washington and I will shortly
present an initiative that expands on this idea. It seems clear that Europe
will continue to depend on external energy supplies.

I am convinced that the latest – unprecedented – curtailment of natural gas
supplies to the EU, in one of the harshest winters of recent years, created
a sufficient predicament to encourage bold and firm action. An energy
security treaty would give us ways and means to provide stability and
security that we all wish for.

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14. U.S. TO SPEND MILLIONS IN BELARUS TO ENSURE FREE,
FAIR VOTING IN NEXT MONTH’S ELECTIONS

By William C. Mann, AP Worldstream, Wash, D.C. Wed, Feb 08, 2006

WASHINGTON – The United States is spending millions of dollars to
ensure the voting in Belarus’ presidential election next month is free and
fair, the State Department said Tuesday.

Dan Fried, the assistant secretary of state for Europe, said he and European
officials have met with Alexander Milinkevich, the main opposition candidate
in the March 19 election. Fried insisted, however, that neither the United
States nor the European Union has thrown its official support behind
Milinkevich’s candidacy.

“Our position is not to pick winners. Our position is to do what we can to
promote a free and fair election,” Fried told reporters. “It is also true
that the Belarusian opposition has united around Milinkevich.”

Still, he said, “as far as I can tell, the opposition is a collection of
different groups with different political views, but they are now united
around a platform of democracy and basically a kind of democratic
patriotism.”

The former Soviet republic’s president, Alexander Lukashenko, has been in
power since the creation of independent Belarus in 1994. While the
Belarusian constitution limited the presidency to two five-year terms, he
had it changed in a 2004 referendum that the United States says was neither
free nor fair by international standards. Lukashenko, an ally of Moscow, is
now standing for a third term.

Fried said Congress has provided more than $21 million (A17.5 million) to
finance pro-democracy activities in the landlocked country surrounded by
Russia, Ukraine, Poland, Latvia and Lithuania.

“In historical experience, you do what you can to send two messages: to
exert diplomatic pressure on authoritarian regimes, to support civil
society,” Fried said. “And that’s what you do, and in many cases
democracy advances in ways that you don’t expect.”

The historical experience he referred to was the uprisings in Georgia,
Ukraine and Kyrgyzstan, where throngs of demonstrators

“Our support is for democracy, not a particular path to it,” he said. “I
don’t want to create the impression that we see the only outcome as being
some massive street-based change. As I said, our assumption is that after
the election, this would be a long-term process.”

Milinkevich said Friday at a democracy conference in Vilnius, Lithuania,
that “I have no doubt the people of Belarus will come into the streets if
the government tries to fake the election.” He added: “We do not want
revolution, only just and fair elections.”

Fried said the United States would not any under circumstances “support
street violence even in response to flawed elections.”

Still, he said, “Peaceful demonstrations are a right, and certainly we’re
not going to suggest that people don’t exercise that right. So that’s what
happens. It’s not up to us.

“But under no circumstances would we support violence. That is not what
we do, and that is not what we favor.” -30-
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LINK: http://www.huri.harvard.edu/news.html, huri@fas.harvard.edu
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15. VIOLENCE FEARED AS ALEXANDER LUKASHENKO EUROPE’S
LAST DICTATOR CLINGS TO POWER IN BELARUS

By Mark Franchetti, Minsk, Belarus, The Sunday Times (UK)
London, United Kingdom, Sunday, February 12, 2006

SITTING in his campaign headquarters, a run-down flat in a Soviet-era tower
block, Alexander Milinkevich seems an unlikely choice to take on Europe’s
last dictator.

As he prepared to run for the presidency of Belarus, however, the softly
spoken former physics professor was in combative mood last week. He
vowed that people would take to the streets if, as widely expected, President
Alexander Lukashenko rigs the vote in an attempt to cling on after 12 years
in power.

His defiance has raised the prospect of clashes between the police and
opposition supporters in this impoverished nation of 10m people sandwiched
between Russia and Poland. Lukashenko, 51, a moustachioed former collective
farm boss, warned: “If there are any provocations, we’ll give them such a
going-over they won’t know what’s hit them.”

“The elections won’t be free and fair,” said Milinkevich, 58, whose 25-year
academic career came to an abrupt end in 2001 when he was sacked because
of his links with the opposition.

“We are not in favour of a revolution but I have no doubts that people will
take to the streets to protest peacefully when the results are announced.
We know Lukashenko is capable of ordering the police to shoot at
demonstrators, but more and more people are tired of living in fear. We
want democratic elections.”

Following the success of non-violent uprisings in Georgia and Ukraine which
replaced pro-Russian regimes with more western-minded leaders, America
and Europe have openly supported Milinkevich’s bid.

Both Washington and the European Union have imposed travel bans on
Lukashenko and his closest aides. On a recent trip to Brussels and Berlin,
Milinkevich met Angela Merkel, the German chancellor, and Jose Manuel
Barroso, president of the European commission.

The Kremlin has shunned him even though President Vladimir Putin is known
to dislike the erratic Lukashenko, who championed Saddam Hussein in Iraq
and once described American congressmen as “dumb asses”.

As battle lines are drawn in the build-up to the vote on March 19, both
Russia and the West are increasingly alarmed at the risk of bloodshed.

After suffering years of police harassment, beatings and arrests,
opposition youth movements have forged close contacts with those who
helped to spark events in Georgia and Ukraine.

“We have studied the revolutions in Serbia, Georgia and Ukraine. I even
took part in the demonstrations in Kiev,” said one leader of Zubr, a 2,000-
strong youth movement which has had hundreds of activists detained since it
was founded four years ago.

“Everything is much harder here because this is a truly totalitarian regime
and there is real fear. What’s crucial is to have a lot of protesters come
out as soon as the results are announced. If that happens then it will
become a wave too big for the police to attack.”

Both Milinkevich and the Zubr activist said disgruntled police officers had
secretly told them that they would join the street protests if they swelled
into a mass demonstration.

Lukashenko has turned his country into a virtual Soviet-era theme park,
where criticising the president can lead to a lengthy jail term. He was
barred under the constitution from running for a third term but overcame
that hurdle in 2004 by holding a referendum, widely believed to have been
rigged as well as being illegal, to change the rules. Small crowds of
opponents who took to the streets were brutally dispersed by club-wielding
police.

Surrounded by a handful of aides taking turns to work on the only two
laptops available, Milinkevich conceded that trying to unseat Lukashenko by
democratic means was both dangerous and all but impossible. Most of the
president’s political rivals have either been jailed or have vanished and
are feared dead.

Minsk, a city of large avenues kept spotless by an army of street cleaners,
is one of the most heavily policed places in the world.

The president’s secret police, who have retained their Soviet-era acronym
of KGB, are extremely powerful. Critics of the regime are followed and
their telephones tapped. Handing out leaflets in support of the opposition
is enough to warrant arrest.

“I understand perfectly well that something could happen to me,” said
Milinkevich. “I could get arrested or something worse could happen, but
we can’t go on living in fear. We have to confront it. The more we are, the
bigger the chances of success.”

All television and radio stations are state-owned, as is more than 80% of
the economy. While even Lukashenko’s most trivial pronouncements are
reported on the evening news bulletins, Milinkevich will be allowed to air
his views in only two 30-minute television slots after campaigning starts
later this month.

As a result many voters, even in Minsk, have never heard of him and are
barely aware of the opposition. An independent poll last month nevertheless
put his share of the vote at 24% and rising fast, against 54% for
Lukashenko. In the capital he was said to be leading the president by 41%
to 38%. Under the constitution, the election will go to a second round if
nobody wins at least half the votes in the first.

Two other candidates are running. Sergei Gaidukevich, a close ally of
Lukashenko, is said by opponents to have been asked to put his name
forward to give the vote a semblance of legitimacy. The fourth, Alexander
Kozulin, is the former rector of the state university.

In a sign of his apparent concern at the growing popularity of Milinkevich,
Lukashenko had ordered the elections to be brought forward by four
months. He also had a law passed allowing him to order the police to
shoot at demonstrators.

European leaders have warned that if the elections are not free and fair
sanctions will be imposed on Belarus, which was described by
Condoleezza Rice, the American secretary of state, as one of six “outposts
of tyranny” ­ alongside Iran, North Korea, Burma, Cuba and Zimbabwe.

Lukashenko has warned foreign diplomats against trying to interfere. “The
embassies should know that they can be out of here at 24 hours’ notice
and no one will help them,” he said recently. -30-
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16. DON’T ABANDON BELARUS, DEMOCRATIC REFORMERS URGE

BRIEFING: Radio Free Europe/Radio Liberty (RFE/RL)
Washington, D.C., Tuesday, February 14, 2006

WASHINGTON – Democratic reformers in Belarus are urging the international
community not to abandon them after the country’s 19 March presidential
election. Three of these reformers — Svetlana Zavadskaya, Olga Stuzhinskaya
and Marina Rakhlei — told a recent RFE/RL briefing audience that while the
democratic opposition in Belarus may not win the March presidential
election, it is gaining valuable experience and building community networks
that will serve as a foundation for future change.

Belarus is standing at a “historical threshold,” according to Zavadskaya,
president of the Dmitry Zavadsky Foundation, an organization she founded
in honor of her husband, a cameraman for ORT Russian Television who
disappeared under suspicious circumstances in 2000, to help independent
journalists.

She believes that, without help from the international community, the March
election will be the “last chance for the Belarusian opposition to bring
about change.”

Although the opposition has united around a single candidate, Alyaksandr
Milinkevich, to challenge President Alyaksandr Lukashenka, Zavadskaya
said it is virtually impossible to access the state-controlled media to inform
the public of Milinkevich’s candidacy and platform.

In addition, Zavadskaya said, Belarus has “no alternative media” that could
be used for that purpose. In her comments, Zavadskaya cited U.S. Secretary
of State Condoleezza Rice’s recent statement that a fair election is
impossible in Belarus without an independent media to “get through the
information blockade.”

Olga Stuzhinskaya, Brussels coordinator for the opposition group
“Democratic Belarus,” said that the international community has tried to
help Belarus by providing funds to non-governmental organizations (NGOs)
operating in the country. But recent laws adopted by the Belarusian
government, she said, prohibit NGOs from receiving funds from abroad,
while new “anti-revolution laws” that criminalize free speech impede their
ability to function.

Stuzhinskaya agreed with Zavadskaya that, while a Milinkevich victory
appears impossible, polling shows 25 percent of Belarusians are
pro-Milinkevich — a result she characterized as good progress, considering
the campaign is mostly “door-to-door” and lacks media coverage.
Furthermore,Stuzhinskaya cited the fact that more than 200,000 signatures
were collected in support of Milinkevich’s candidacy.

Marina Rakhlei, a journalist for the independent BelaPAN News Agency,
described the situation among independent media in Belarus as “dramatic
and deteriorating.” At a time when state media is flourishing — state
television operates with $44 million budget grant and state-controlled
newspapers have seen their funding doubled since 2004 to $11.5 million —
Rakhlei said that “from October 2005 to January 2006, 31 independent
newspapers disappeared,” adding that 90 percent of election coverage in
the country focuses on Lukashenka.

She noted that foreign newspapers are not available to the Belarusian
public — “only the foreign embassies get them.” As a result of unequal
access to the media, Rakhlei concurred with her colleagues that the
upcoming election cannot be free and fair.

The February 7 briefing at RFE/RL’s Washington office was co-sponsored
by the Russian and Eurasia Program of the Center for Strategic and
International Studies (CSIS) and the International League for Human Rights
(ILHR). -30-
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Radio Free Europe/Radio Liberty is a private, international communications
service to Central, Eastern and Southeastern Europe; the Caucasus; and
Central and Southwestern Asia funded by the U.S. Congress through the
Broadcasting Board of Governors. Washington, DC 20036,
tel: 202-457-6900, fax: 202-457-6992, http://www.rferl.org. CONTACT:
Martins Zvaners (202) 457-6948; Melody Jones (202) 457-6949
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17. VLADIMIR THE TERRIBLE

BOOK REVIEW: By Michael McFaul
RE: “PUTIN’S RUSSIA, Life in a Failing Democracy”
By Anna Politkovskaya, Metropolitan. 274 pp. $25
Book World, The Washington Post
Washington, D.C., Tuesday, February 14, 2006; Page C04

Since coming to power in 2000, Russian President Vladimir Putin has had
one clear central objective: strengthening the Russian state, at home and
abroad. For Putin, Russia’s second post-Soviet leader and a former KGB
official, the disappearance of the Soviet Union in 1991 was a tragedy that
produced anarchy, corruption, instability and uncertainty.

He pledged to end the chaos by restoring the state power that had been lost
under his predecessor, Boris Yeltsin. Everything else, such as free-market
economic reforms or careful, balancing diplomacy, was a means to this end.

Above all, Putin believed that the way to make Russia stronger was to shift
more authority to the Kremlin. Motivated by this conception of
state-building, Putin has shrunk or eliminated every serious check on
presidential power. Russia’s two houses of parliament, its independent
media, regional governors, the prime minister’s office, independent
political parties and civil society — all are weaker today than they were
in 2000, leaving the presidency as the country’s sole meaningful center of
decision-making.

Putin’s more autocratic state is supposed to be a more effective state. But
has it delivered? In “Putin’s Russia,” Anna Politkovskaya answers with an
emphatic no.

A courageous investigative journalist who has produced jarring and tragic
accounts of Putin’s brutal war in Chechnya, Politkovskaya makes her case
against Putin not by systematically cataloguing the democratic rollbacks
that he has successfully pursued in the past six years; on the contrary,
despite the book’s subtitle, it contains almost no direct discussion of
Russia’s increasingly autocratic politics.

Instead, she focuses on dark dramas of individuals in the Putin era. If a
theme unites the snippets of everyday life stitched together in this volume,
it is that the state is not effective but corrupt — unable and unwilling to
provide basic public goods to the suffering people of Russia. “Putin’s
Russia” suggests that fear is the only public good that today’s Kremlin
provides effectively.

Politkovskaya devotes considerable space to showing how Putin’s
government does little to provide the most basic of state services: a
professional army capable of defending the country. Instead, Russia’s
army “is mostly a prison camp behind barbed wire where the country’s
young are locked up without trial.”

Rather than protecting civilians from terrorism or violent crime, the
Russian armed services, Politkovskaya argues hotly, have themselves
become a perpetrator of terrorism — first through their activities in
Chechnya, where civilians are tortured, raped and murdered, and second
through a brutal and unaccountable system of initiating draftees (known
as dedovshina ) that reportedly kills and wounds hundreds every year.

Effective states have independent courts capable of enforcing the rule of
law, but Politkovskaya makes the case that Russia has no such institutions
.

She tells the (overly) detailed story of a violent fight for property among
thugs in Yekaterinburg, a city in the Ural Mountains, to demonstrate how
Russia’s courts serve the interests of criminals and oligarchs, not the rule
of law.

Effective states draw borders between the activities of the government and
the private sector. Politkovskaya argues that in Putin’s Russia, one can
become rich only by maintaining close relations with the authorities.
Corruption, a problem Putin pledged to fight by building a stronger state,
has instead exploded during his tenure.

Effective states provide their citizens a basic level of subsistence. Not
Putin’s Russia. To make the point, Politkovskaya tells of a World War II
veteran who froze to death in his apartment in Irkutsk because local
government authorities would not repair a broken heating pipe.

Putin and his comrades simply do not care about people, in Politskovskaya’s
account: “Their line is wholly neo-Soviet: humans have no independent
existence; they are cogs in a machine whose function is to implement
unquestionably whatever political escapade those in power have dreamed
up. Cogs have no rights, not even to dignity in death.”

This is strong stuff, from a woman who obviously feels passionately for
her people and her country. In the tradition of the great Soviet dissidents,
Politkovskaya is unwavering in telling the gruesome truth about the
injustices that she has witnessed.

She also unapologetically criticizes Putin and the political and economic
system that he has consolidated. Her stories are certainly true, but they
are not the only dramas unfolding in today’s Russia. Every day that an army
private is hazed to death, a middle-class family in Moscow drives to Ikea to
purchase furniture for their newly renovated dacha. Every day a veteran dies
tragically from the state’s neglect, millions of other retirees receive
their state pensions on time, something that rarely occurred under Yeltsin.

In the aggregate, Russians are wealthier today than they were when Putin
took office. Driven by high oil prices (not Putin’s state-building),
Russia’s GDP has grown steadily for the past six years, investment is
booming, and the Russian stock market was among the hottest in the world
last year. The number of people below the poverty line has dropped
significantly, and consumer spending is skyrocketing.

Of course, the trends of state corruption and decay outlined in
Politkovskaya’s book do threaten the more positive economic story. As this
clash between bad political trends and good economic trends deepens, the
evidence in “Putin’s Russia” suggests that the dark side — the forces for a
non-transparent government and a noncompetitive economy dominated by
the state — will win out.

And yet hidden within Politkovskaya’s bleak stories are flashes of
individual inspiration. The dominant tone in “Putin’s Russia” is one of
despair that echoes the Soviet era. But a few of the victims-turned-heroes
in Politkovskaya’s stories are taking actions that no Soviet citizen would
ever have contemplated.

For instance, Nina Levurda, a Russian mother whose son died in Chechnya,
is trying to sue the state — not in response to the tragic loss of her son
but because of the inhumane manner in which the state reported (or did not
report) his death to her.

Judge Vladimir Bukreev — another courageous, very un-Soviet citizen
described in these pages — dared to convict a decorated soldier of the rape
and murder of a Chechen woman, despite pressure from the Ministry of
Defense.

That Politkovskaya herself has withstood poisoning and harassment
to tell the truth about Putin’s Russia should give even the most pessimistic
observer of current Russian affairs some hope.
-30-
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By Michael McFaul, a senior fellow at the Hoover Institution, Stanford
University professor and nonresident fellow at the Carnegie Endowment
for International Peace (CSIS), Washington, D.C.
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http://www.washingtonpost.com/wp-dyn/content/article/2006/02/13/AR2006021302349.html
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18. RUSSIA UNAVOIDABLY TURNS TO EXPANSION,
IMPERIAL FOREIGN POLICY
Lithuanian analyst urges West to confront Russian imperialism

COMMENTARY: By Raimundas Lopata, Political Scientist
Vilnius University’s International Relations & Political Science Institute
Vilnius BNS WWW-Text in English Friday, 03 Feb 2006
BBC Monitoring Service, United Kingdom, Saturday, Feb 04, 2006

VILNIUS – The state Russian President Vladimir Putin is creating unavoidably
turns to expansion and imperial foreign policy, while the civil society
becomes only a signboard in his project for the strong state, says
Lithuanian political scientist Raimundas Lopata. In his opinion, harmonized
efforts of Western countries could help Russia find its boundaries.

Lopata, director of the Vilnius University’s International Relations and
Political Science Institute, made an opening speech at an international
discussion Process and Experience of Democratic Reforms in the Context of
European Neighbourhood Policy and Trans-Atlantic Relations that started at
the Parliament on Friday [ 3 February].

The political scientist raised a question whether the international
community should ignore the Kremlin’s attempts to reanimate the former
empire. In Lopata’s words, meetings between the Russian president and
foreign leaders give the impression that it is the closest friends talking.

Nevertheless, when analysing the development of international relations in
the last 15 years it is possible to state that from the point of view of
values the distance between the Western world and Russia is not decreasing,
but in fact consistently increasing, he said. In his words, countries and
territories that are in-between Russia and the West face the biggest
problems; that is, feel the growing tension in relations with Russia.

“Unfortunately, it is not always possible for these countries to compensate
for this tension by looking for support in the West that often demonstrates
a warm, light, ostensibly unproblematic flirt with Moscow,” said Lopata. In
his opinion, this may be due to insufficient coordination of joint actions
between the West and in-between territories, and the lack of coordination
will allow development of imperial ambitions to prevail in Russia.

“The state Vladimir Putin is creating unavoidably turns to expansion and
imperial foreign policy. It is hardly necessary explaining to you that if
civic society is not being created people unavoidably start associating
boundaries of the state with borders of the former empire.

Even if we agree with the statement that the internal political set-up of
Russia is its own business, can the international community overlook
Kremlin’s efforts to revive the former empire?

If this process gains momentum, the consequences will be felt not only by
the already mentioned in-between states, but most probably also by those
states whose leaders now are flirting with Moscow so nicely,” said the
political scientist, adding that flirting should have its boundaries in
high-level politics.

In Lopata’s words, it is up to the external, democratic world whether Russia
will be assisted in finding these limits. “It is a paradox, but in order to
solve these tasks, yet another circumstance will be of major influence.
Namely, how will we or the West be successful in talking among ourselves. In
other words, will we manage to find an adequate institutional form in order
to adopt common strategic decisions?” said Lopata.

Friday’s discussion at the Parliament is attended by the representatives of
the Foreign Affairs Committees of the European Parliament and the
parliaments of Estonia, Denmark, Finland, Georgia, Iceland, Latvia, Moldova,
Norway, Poland, Sweden and Ukraine, as well as representatives of
non-governmental organizations. Designed to discuss the situation in the
“Europe’s last dictatorship” of Belarus, the event is also attended by some
members of the country’s opposition. -30-
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19. FAVOURABLE DOLLAR WIND
Russia transfers 1m in funds to Latvian non-governmental organizations

COMMENTARY: By Tadas Grazvydas
Vilnius Obzor in Russian, Vilnius, Lithuania, Thu, 9 Feb 2006, p 1
BBC Monitoring Service, UK, in English, Tuesday, Feb 14, 2006

Turn in any direction and there are scandals. To be more exact, there is one
major scandal that keeps growing; meanwhile, it seems the second one is a
small one that is not to be taken into consideration.

First, in Latvia, they announced quite loudly that scheming Russia had
learned from the British diplomats, who had provided the non-governmental
organizations in Russia with financial assistance. Latvia announced that
Russia had followed in the steps of the British and had quietly transferred
$1 million (for some reason, Russia has transferred this amount in US
currency) to the Russian-speaking non-governmental organizations in Latvia.

Russia has done this so that these organizations can spoil the upcoming
parliamentary election. Moscow demonstrated indignation and demanded
Latvia either to present evidence or to apologize. Riga is thinking and
probably choosing between the two options. The result is that the events
are developing without much ado and there is no real intrigue.

Meanwhile, in Lithuania, the scandal called “the election in Belarus” is
gaining momentum. Why? Because Lithuania is participating in the development
of the scandal. One can never become bored if we [Lithuanians] are there. We
create the wind in order that a favourable wind makes the vessel of dollar
democracy reach the impoverished and exhausted Belarus, or, to be more
exact, a certain part of Belarus.

We will not spare any effort to do this. Even if our own rear end is
patched, we will still do anything to be in the forefront of this democratic
process.

For example, the Vilnius university that taught in Russian did not manage to
overcome all the bureaucratic procedures and was closed. The students of the
Lithuanian-speaking universities mention they have problems now and then.
There are many of them, both students and problems. Meanwhile, the
Belarusian University that Lithuania has opened in order to annoy
Lukashenka, has no problems whatsoever.

Somebody might ask if I want this university to have problems. No, I do
not want that. We should let these people study; as a result, Lithuania will
have new friends and new connections. However, I also do not want us to
sort Belarusians (or representatives of any other nation) according to the
criteria we find useful currently. What if these criteria change tomorrow?
The nation will remain the same and it will still remember what the
attitudes were yesterday.

About what is our northern neighbour [Latvia] so unhappy? They are unhappy
because, purportedly, Russia is supporting only one political force. This
means Russia is interfering with the internal affairs of the country. What
are we, together with some of our Euro-Atlantic integration brothers, trying
to achieve in Belarus? Are we not doing the same? Again, somebody might
ask me: “Are you against democracy?” God forbid! I am very much for
democracy!

But, there are certain sides to this story that trouble me. Just recently,
there was an election in Palestine. What has changed? Does anybody feel
better now? Anyway, there is no need to look for examples so far away.

There are similar examples in Ukraine, Georgia, and Moldova; the latter
country is the last communist regime in Europe. Democracy also has won in
these countries, but has this solved the problems, the main problems, that
these countries have? On the contrary, as far as I am concerned, there are
even more problems now.

Perhaps the problem is that, alongside democracy, there is something else
that hides behind the shield of the democracy.

Moreover, once a revolution is over, the gap between the interests the
exporters of democracy and the citizens of the country starts growing.
Today, in a way, the exporters are urging the citizens of a foreign country
(in this case Belarus) to oppose the current authorities if the opposition
candidate does not win the election.

This is since, according to them, the election can be fair only if the
opponent of the “last European dictator” wins. The nation may have their
own reasons, but why would they care about that if they want another
revolution to happen!

By the way, it seems that everything is all right with the democracy in
Lithuania; however, in my opinion, there are some facts showing that our
democracy does have some faults. Last week we could see the evidence
once more. When first Russian President Boris Yeltsin celebrated his 75th
birthday, former Lithuanian President Algirdas Brazauskas did not send him
any birthday wishes. But Yeltsin, more than any other Russian politician,
did a lot for Lithuania.

For example, he and Brazauskas signed the agreement on the state borders,
one of the most important agreements that have been signed. Truth to be
told, this agreement was shelved by the Duma for several years until it
ratified it. However, this shows that Yeltsin was not afraid to go against
the dominating political moods; he decided to help Lithuania.

The Kauno Diena daily wrote that Brazauskas did not find it necessary to
congratulate Yeltsin. “Quite often, Lithuanian politicians avoid
demonstrating their contacts with colleagues in Russia publicly, because
they do not want to be accused of being under the influence of Russia,”
reads the article in the paper.

This very suggestive example confirms the fact that Lithuanian political
life is based on the wish to take into consideration what certain official
say, as opposed to taking into consideration the interests of the whole
nation. We are behaving in an obstinate manner in our relations with our
most problematic neighbour [Belarus].

Maybe this neighbour has problems because it is behaving in an obstinate
manner? Perhaps we should learn something about democracy? We could
do so during the breaks when we are not teaching our neighbours. -30-
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20. POLICY WATCH: PUTIN’S ECONOMIC ASSUMPTIONS

ANALYSIS: By Mark N. Katz, Professor of Government
and Politics at George Mason University, Fairfax, Virginia
United Press International (UPI), Washington, D.C., Sun Feb 12, 2006

WASHINGTON, D.C. – The recent translation into English of an
article by Vladimir Putin originally published in 1999 in a Russian
technical journal allows Western audiences to gain important insight into
his economic thinking. The article lays out a plan for building Russia’s
economic strength that Putin has largely followed — with considerable
success — since his surprise elevation to the presidency at the end of
1999. The article, however, also reveals certain assumptions on Putin’s
part which his continued adherence to negatively affects Russia’s economic
growth both now and in the future.

The English translation of Putin’s article appears in the January-February
2006 issue of Problems of Post-Communism — a highly regarded American
academic journal. It was translated by Professor Harley Balzer of
Georgetown University — one of America’s leading experts on Russia. In an
introductory note, Balzer estimates that Putin must have completed the
article in 1998 — at about the time he became director of the Federal
Security Service (the successor to the KGB).

In the article, Putin makes the following points:

1) the Russian economy must grow at twice the growth rate in the West in
order to reduce “Russia’s lag behind the developed countries in terms of
GDP per capita;”

2) Russia can achieve such a rate of economic growth “on the basis of
extraction, processing and exploitation of mineral raw material resources”
such as oil and natural gas, which Russia has an extraordinary abundance
of; and

3) the profits from the raw materials sector can be used to develop
other sectors of the economy, which will provide far greater employment
opportunities than the raw materials sector allows.

Putin recognized that Russia needed to create corporations “capable of
competing on equal terms with Western multinational corporations.” However,
the legacy of the Soviet planned economy with its “complete isolation from
world markets” made this difficult. But while Putin understood the need for
Russian corporations to be able to compete in the free market, he did not
trust the free market to produce Russian corporations that could or would
do this.

State guidance, he asserted, was needed to defend the “interests
of society as a whole,” and adjudicate between competing business
interests. For if allowed to act on their own, corporations would engage in
“monopolistic behavior…that in many cases inhibits innovation.”

Herein lies one of Putin’s assumptions that negatively affect the Russian
economy: Putin expressed the belief that private corporations (at least in
Russia) would not innovate, and thus needed state guidance in order to do
so effectively. Western experience, of course, shows that private
corporations are far better at the sort of innovation that leads to
economic growth than are governments.

The fact that he held this belief in 1998 shows that Putin was predisposed
to reasserting state control over independent Russian oil firms such as
Yukos even before he became president. Putin’s success in seizing control
of Yukos without completely frightening away foreign investment or reducing
Russia’s ability to sell oil, though, suggests that his acting on this
belief has at least not harmed Russia. But will state-run petroleum firms,
whose leaders report to the Kremlin, be as active and energetic as Yukos
was in exploration and marketing? They do not seem to be so far.

More problematic, though, is Putin’s assumption that the state-directed
approach can be used to create Russian corporations that can compete with
Western multinationals outside the raw materials sector. Because of their
need for them, foreigners are going to buy Russian oil, gas, and other raw
materials whether the Russian raw materials industry is controlled by the
Kremlin or not.

For Russia to sell manufactured goods or services to the rest of the world,
though, these will have to be competitive with those being sold by private
producers elsewhere. It is true that Russia has been successful at exporting
high tech products in the armaments and atomic energy sectors. The
customers for these, however, have usually been governments which the
West has been unwilling to sell these products too.

In other words, Moscow has been able to sell these products in these
markets because for the most part it has not faced Western competition in
them.

The real test for Russia is whether it can produce goods and services that
appeal to consumers and businesses both abroad and at home in competition
with those produced by foreign multinationals. To do this successfully,
Russian firms will have to constantly innovate in order to keep ahead of
competitors. But will the apparatchiks from the security services whom
Putin likes to put in charge of enterprises be imaginative enough to do
this? And will a Kremlin that increasingly feels threatened by anything it
does not control be willing to allow this? The answer to both questions is:
probably not.

Putin foresaw the development of Russia’s raw material sector leading to
overall Russian economic development. His distrust of private enterprise
and insistence on Kremlin control, however, is resulting in a rich
government living off of Russia’s raw materials wealth while much of the
rest of Russian society languishes. The sad thing, of course, is that it
does not have to be this way. Unless Putin revises the faulty thinking that
he displayed in his 1999 article, however, it will remain so. -30-
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21. RUSSIA UNDER PRESSURE TO GUARANTEE GAS SUPPLIES
AFTER TURNING OFF GAS TAPS TO UKRAINE
G7 ministers urge Moscow to ratify energy charter: Agreement could
open up country to foreign oil firms

By Ashley Seager, Moscow, The Guardian
United Kingdom, Monday, February 13, 2006

MOSCOW – The Group of Seven leading industrial countries put pressure on
Russia at the weekend to ratify an energy supply charter in the wake of the
supply scare last month when it briefly turned off the gas taps to Ukraine
and western Europe.

After a sometimes fractious meeting, Russian finance minister Alexei Kudrin
said his country, the world’s biggest gas producer, was keen to be a stable
supplier and help develop a world market for gas but refused to comment on
the framework charter, which Russia has already signed but not yet ratified.

Several countries, especially France, think that getting Russia to ratify
the charter would help ensure security of energy supplies, greater
transparency of markets and clearer rules over transit pipelines. The
charter, drawn up by European countries and Russia in the early 1990s, has
been signed by over 50 countries, although not the United States or Canada.

Russia is now the world’s second-biggest oil exporter and holds the world’s
biggest gas reserves. It supplies a quarter of the European Union’s gas and
its actions in early January, just as it assumed the presidency of the Group
of Eight (G7 plus Russia), sent shockwaves throughout the EU and the US,
both of which are heavily dependent on imported energy.

Russian gas giant Gazprom also caused jitters in Britain recently when it
suggested it could buy British power companies such as Centrica or Scottish
Power.

The ministers released a communique after their meeting saying that energy
security had now moved to the top of the agenda for their next meeting and
pledged to work on improving the dialogue between oil producers and
consumers and private sector companies.

Mr Kudrin said Saturday’s talks had been tense. “Each minister represents
his own country’s interests. But our aim is to be one of the most stable
suppliers,” he said. If Russia were to ratify the charter, Gazprom may have
to allow smaller local producers access to its huge pipeline network and the
country would have to open up its energy business to foreign oil and gas
companies.

French finance minister Thierry Breton said all countries needed greater
visibility in energy markets, better rules over pipeline transit and
reliability of supply. All of these were covered by the energy charter, he
said. “The recent Ukraine affair showed that the dialogue between Europe and
Russia could function better. Russia has signed the charter, now it must
ratify it.”

Russian president Vladimir Putin struck a conciliatory tone, telling
ministers: “We need to develop a civilised strategy which will reliably
secure the world with energy at reasonable prices and with minimal damage to
the environment.”

The chancellor, Gordon Brown, who has long called for greater dialogue
between the Opec oil cartel and oil consuming countries, said gas should now
be brought into the same discussion. “I believe we should now enhance the
dialogue with Opec and other energy producers, extend transparency, agree to
bring gas as well as oil into the initiative to improve data and move
forward with incentives for investment in new sources of energy and energy
efficiency,” he said.

The ministers also discussed a Russian offer to repay a further $11bn-$12bn
(pounds 6.3bn-pounds 6.9bn) of its debt to so-called Paris Club creditor
nations this year, on top of the $15bn repaid last year after surging oil
and gas prices brought it a revenue windfall.

Russia urged the rest of the G8, the key Paris Club creditors, to use the
money to bolster the balance sheets of the World Bank and African
Development Bank, allowing them to make good on a pledge made at last year’s
Gleneagles summit to write off $37bn of debts owed by the world’s poorest
countries. Not all countries were keen on Russia establishing that link,
however.
FIRMS SUFFER
Britain’s smaller manufacturers are seeing their costs increase because of
higher fuel prices but are unable to pass them on to customers because of
weak consumer demand, according to a CBI survey. Thirty-nine per cent of
those questioned said costs rose in the final three quarters of 2005
compared to the previous three months. Small and medium-sized businesses
appear to be harder hit by rising energy prices than their larger rivals.

“The relative weakness of the domestic economy is undermining demand so
business cannot pass on the increased costs, in the form of higher prices,
to their customers,” said the CBI’s Steve Sharratt. -30-
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22. WORLD BANK PRESIDENT PAUL WOLFOWITZ SAYS RUSSIA
SHOULD BE INTERESTED IN UKRAINE’S DEVELOPMENT

Intelnews, Moscow, Russia, Monday, February 13, 2006

MOSCOW – World Bank President Paul Wolfowitz said that Russia should
be interested in Ukraine’s development. Commenting on the recent natural gas
price dispute between Russia and Ukraine, Wolfowitz said that the world
needs an efficient and smoothly operating energy resources market, which is
particularly important for relationships between Russia and Europe.

The period when significant subsidies for energy existed in relations
between certain countries are gradually becoming a thing of the past should
facilitate development in these countries, he said. He suggested that
successful development of the countries neighboring Russia meets with
Russia’s own interests. Wolfowitz also urged the leading industrial nations
to realize that their prosperity might be endangered if many countries
remain poor.

Should Russia understand this, it should be interested in Ukraine’s
development just as the U.S. and the European Union are interested in the
development of other countries, he said. Wolfowitz praised Russia’s
decision to write off $688 million of debt owed to it by the 16 poorest
African nations. Rich nations should view helping poorer nations as their
moral obligation rather than as charity and, by doing this, they act in
their own interests, he said.
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23. RUSSIA IN THE G8 CHAIR
Putin’s policies mean it is no longer a club of democracies

EDITORIAL: Financial Times (UK)
London, United Kingdom, Saturday, February 11, 2006

From the day the exclusive Group of Seven wealthy industrialised
democracies opened the doors of their club to Russia in 1998, and became
the Group of Eight, there has been an accident waiting to happen. Russia
qualified neither on the grounds of its wealth, nor its democracy. The
gesture to welcome Moscow was made more to encourage the democratic
process. The sad reality today is that although Russia is a little
wealthier, thanks to the high oil price, it is less democratic than when it
joined. Can the rest do anything about it now Vladimir Putin is in the
chair?

The answer is: not a lot. First, the Russian president is popular at home
for putting the democratic process in Russia into reverse, creating
artificial political parties to bolster his rule, reimposing effective
state control over most television stations and now passing legislation to
clamp down on non-governmental organisations.

He has shown little respect for the independence of the former Soviet
republics that are now his neighbours, such as Ukraine and Georgia. He
has alarmed the Europeans by exploiting his control of gas and oil supplies
to maintain his regional influence. Yet they, and the US, also need his help:
most urgently to persuade Iran to abandon its nuclear ambitions.

It is ironic that Mr Putin should have chosen energy security as the
principal theme of his G8 presidency, and then celebrated the event by
turning off the gas to Ukraine at the New Year. Now the European Union sees
Russia as a source of energy insecurity, and is accelerating efforts – long
overdue – to forge a common energy policy, including new cross-border links
and storage facilities, and finding other sources to balance excessive
reliance on Gazprom, the Kremlin-controlled supplier.

Yet as energy consumers the Europeans have little influence on Russia as
their principal supplier, and Mr Putin knows it. They can only put their
own house in order. They can urge him to ratify the long outstanding energy
charter that would allow free access to Gazprom’s pipelines for independent
(and central Asian) suppliers – but Gazprom will still control the taps.

The one tool that the other G8 members have is the power to grant or deny
Mr Putin the international prestige he craves in the chair of the club. It
is too late to expel him, or to refuse to attend the June summit in St
Petersburg. It would just make him sour, and not force him to change his
policies. But all the other seven can use the same platform to spell out
very publicly why they are worried about the retreat of democracy in Russia
– as much in sorrow as in anger. The same goes for Moscow’s treatment of
its neighbours.

As for the G8, with Moscow at the table, it is no longer a democratic club.
It underlines the nonsense of excluding China, and indeed democratic India.
The sooner they are admitted, the better. With Mr Putin in the chair, the
G8 is anything but exclusive.
-30-
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24. ‘IVAN’S WAR’, IN THE RED ARMY: CALLED, TRAINED, KILLED
Soldiers feelings toward the regime ranged from sullen acquiescence
to outright hostility, especially in Ukraine.

BOOK REVIEW: By William Grimes
RE: “Ivan’s War, Life and Death in the Red Army, 1939-1945”
By Catherine Merridale, Illustrated. 462 pages. Metropolitan Books. $30.
The New York Times, NY, NY, Wednesday, February 15, 2006

Like the United States, the Soviet Union has its greatest generation.
Between 1941 and 1945, 30 million men and women served in the Soviet
military, facing almost certain defeat at the outset but eventually rolling
on to victory in Berlin.

The toll was catastrophic, the numbers almost impossible to fathom: two
and a half million soldiers captured in the first five months of the war,
more than eight million killed by war’s end. “They called us, they trained
us, they killed us,” one veteran put it succinctly.

What was life like in the armed services for a typical Soviet soldier?

Catherine Merridale, a British historian, set out to find the answer, tape
recorder in hand, interviewing veterans and their relatives, and digging
deep in previously unavailable sources like diaries and field reports.

Her goal was to get beyond the Soviet myth of inevitable victory achieved
in the name of the Communist Party, motherland and Stalin, a myth that
has obscured the harsher realities of the war, the multiple failures of
government officials and the often needless sacrifices of millions who
fought, as the book’s title has it, “Ivan’s War.”

No matter how bad American soldiers had it in World War II, Russians had
it worse, from start to finish. Stalin’s refusal to plan for a defensive war
placed his troops in a disastrous position from the outset. The Soviet
forces that met the Germans in June 1941 were poorly trained, poorly fed
and poorly equipped.

Basic training relied on wooden guns and cardboard tanks. Stalin did not
like the idea of putting live weapons in the hands of ordinary citizens.
“Until the end of 1939, the smart new guns were reserved for military
police, and all the army’s stock was locked away,” Ms. Merridale writes.

The official picture of a people solidly united behind the government and
the party falls apart under scrutiny. Nearly three-quarters of the infantry
started life as peasants, and many had suffered the traumas of forced
collectivization.

Their feelings toward the regime ranged from sullen acquiescence to
outright hostility, especially in Ukraine. In the early months of the war,
as the Germans advanced at will, mass desertions were commonplace.
Troops, seized by “tank fright,” often panicked and fled.

The American experience of tight-knit platoons bound by loyalty and
friendship did not exist in the Soviet armed forces. The extremely high
casualty rates ensured a constant turnover in personnel. Most soldiers
either died or were wounded within three months of reaching the front
lines.

Further, the government assigned political officers to every fighting unit
to reinforce party discipline and to report on conversations. Mutual trust
was impossible.

“Ivan’s War” combines, quite effectively, painstaking historical
reconstruction and sympathetic projection. Ms. Merridale, proceeding from
campaign to campaign, describes from the top down and from the bottom
up.

She provides a coherent picture of the tactical decisions and industrial
adjustments that altered the course of the war, and at the same time focuses
on how such changes were reflected in the day-to-day experiences and
feelings of the troops on the ground.

Something like despair defined the period up to Stalingrad, as the Soviet
Union gave up great swaths of territory and 45 percent of its population to
the Germans. Unlike the Americans or the British, Russians fought on
knowing that their wives and their parents and their children were in the
hands of the enemy.

They were hungry, subsisting on a diet of soup, kasha, bread and tea.
Rampant pilfering of army warehouses and supply trucks diverted more
desirable food, as well as other war material, to the black market.
Soldiers, lacking spades, dug trenches with their helmets, the same helmets
in which they boiled potatoes.

Somehow, they fought on. As the Russians came to understand what was
happening in captured Soviet territory, despair changed to a ferocious
appetite for vengeance and, at Stalingrad, a growing confidence that the
Germans could not only be stopped, but beaten. “Imagine it – the Fritzes are
running away from us!” a Russian soldier wrote to his wife after Stalingrad.

The Germans, for their part, faced the disturbing possibility that the
mongrel Slavic race might actually be able to fight. “The Russians are not
men, but some kind of cast-iron creatures,” a German soldier wrote at
Stalingrad. (An intimate, and chilling, view of the German side can be
glimpsed in “A Stranger to Myself: The Inhumanity of War, Russia,
1941-1944,”, the diaries of Willy Peter Reese, a German soldier who died
on the Eastern front, recently published by Farrar, Straus & Giroux.)

Ms. Merridale’s narrative darkens with the Russian advance into Germany.
She describes an army fueled by rage and vodka, whipped into a frenzy by
its political officers. The Russian soldier’s “rage in battle must be
terrible,” a slogan at the time said, continuing, “He does not merely seek to

fight; he must be the embodiment of the court of his people’s justice.”

In practice, this meant rape, pillage and plunder on a scale that has yet to
be recognized. The Red Army, Ms. Merridale writes, embarked “on an
orgy of war crimes.”

None of this comes out in her interviews with veterans. Their war is the
official Soviet war. Ms. Merridale is understanding about why that might be.

The trauma of the war was simply too much to face unflinchingly for those
who lived through it. She is unsparing in her account of the terror
unleashed on German civilians, but scathing about the world to which the
veterans returned.

For Soviet heroes, who thought they had earned the right to a less
repressive society, there would be no G.I. Bill, no postwar prosperity, no
sunny homecoming. Stalin had other plans. “The motherland was never
conquered,” Ms. Merridale mournfully concludes, “but it had enslaved
itself.” -30-
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