Russian Internet Websites Are Rapidly Being Consumed by Pro-Kremlin Oligarchs - Does the Kremlin Have a Renewed Appetite for Censorship?

http://www.fas.org/irp/dni/osc/runet.pdf

Kremlin Allies' Expanding Control of Runet Provokes Only Limited Opposition

(See "Internet in Russia", Wikipedia, at: http://en.wikipedia.org/wiki/Internet_in_Russia )


























Open Source Center https://www.opensource.gov/







28 February 2010

Pro-Kremlin oligarchs have gradually acquired significant stakes in the most popular websites in Russia, apparently seeking profitable investments, while augmenting other government moves to establish control over the Russian Internet. While specific population segments are intensely alarmed about Internet censorship and take steps to expose or thwart government efforts, the majority of the public is unconcerned about freedom of the press or Internet and is unlikely to oppose censorship of the Internet. With the government closely controlling TV and much of the press, the Internet has been the main venue for expression of opposition views, and social networking sites, which have become extremely popular, have developed outside
government control.

Television remains the leading and most popular source of information in Russia and the Russian Government maintains tight control of it for this reason, with the most popular channels being owned by the state or progovernment oligarchs. However, social networking sites have grown dramatically in popularity in recent years and are now the most popular websites in the Russian Internet. Sites such as VKontakte, a Facebook clone, Odnoklassniki, a Classmates.com clone, and LiveJournal, a blogging platform, now attract a monthly audience of many millions of users each. The Kremlin has taken notice of the increasing significance of the Internet and social media sites in particular and has begun enacting laws and policies aimed at giving it greater control. Kremlin-friendly oligarchs, who may also be motivated by the profitability of these sites, have also begun investing heavily into the top social networking and Internet outlets, potentially creating a situation similar to that of the national television networks. Although some independent bloggers and press sources raised concerns at the growing government involvement in the Internet, it is doubtful that this would create public outcry as most Russians actually support some degree of censorship of the Internet.

Oligarchs' Takeover

Over the last several years, progovernment oligarchs have accumulated significant stakes in the leading portals of the Russian Internet. Between them, they own the majority of the most popular Russian social networking sites and the majority of the most popular Russian websites (see Appendix B for a list of the top 100 sites). While media outlets owned by government companies or allies have not yet shown signs of censorship, the leadership and owners of these Russian investment companies are close to the Kremlin and may be willing to cede their business interests to government priorities.

• Metals magnate Alisher Usmanov, whom experts consider to be close to the Kremlin, purchased half of SUP, the owner of Russia's most popular blogging platform LiveJournal, in June 2008. He recently increased his stake in Digital Sky Technologies -- a Russian Internet investment company that owns controlling interests in top-ranked Russian social media portals VKontakte, Mail.ru and Odnoklassniki -- to 35%, making him the single-largest stakeholder (Russkiy Newsweek, 17 August 2009).
  
  

• Oligarch Mikhail Prokhorov, who is known to cooperate with the Kremlin, owns RosBiznesKonsalting (RBC), which has been quietly gobbling up Russian Internet (Runet) domains, holding 21% of the Runet's sites, according to its last annual report in 2007, including Loveplanet.ru, the second-most popular online dating service in the Runet.

• Pro-Putin Oligarch Vladimir Potanin owns Prof-Media, which owns Rambler.ru, one of Russia's largest Internet portals featuring a search engine, an information portal, an Internet rating service, and other web services (Interfax, 9 February). Together, Rambler and investment firm Finam own Begun, the largest Russian seller of context-based ads in the Russian market. Prof-Media also owns popular Internet news site Lenta.ru.

• Gazprom-Media, which is controlled by Vladimir Putin's close friend Yuriy Kovalchuk,a bought RuTube, a popular Russian clone of YouTube in March 2008 (RIA Novosti, 6 March 2008). Indicating this was part of a wider Gazprom-Media initiative, Director Nikolay Senkevich stated his company had allotted $100 million to acquire various Internet resources (Kommersant.ru, 9 July 2007).b

Limited Public Outcry

Although some independent bloggers and press sources raised concerns at the growing government presence in the Internet, the public is probably unaware of the extent to which the Runet is owned by Kremlin allies. Most buy-outs were not well publicized, appearing only in specialized business dailies that reported only the fact of the deal.

Moreover, most Russians are not overly concerned about censorship in general or censorship of the Internet. Most actually support censoring the Internet, believing official rhetoric stating it would cut down on child pornography, hate speech, or extremism, which may partially explain the lack of public reaction to the various Kremlin attempts at gaining control of the Russian Internet. Those who do react negatively to threats to Internet freedom tend to be opposition members or human rights activists who would be directly affected by censorship.

• Independent print media are often subject to political and economic pressure, and selfcensorship by journalists and editors is common. An Intermedia and Levada Center poll carried out in 2008 found that the vast majority of the population do not express concern about this and do not read these sources.c
  
  
• According to a 2008 poll by the Kremlin-Influenced All-Russia Center for the Study of Public Opinion on Social and Economic Questions (VTsIOM), nearly half of all Russians believe that information on the Internet should be regulated. The main argument given for this view was that the Internet is filled with "dirt" and "trash" and that it is accessible to children and has a bad influence on them. When asked what should be censored, the majority of respondents named child pornography (89%), followed by 83% in favor of blocking terrorist organizations and extremist content. Many (41%) believed that the sites of political opposition movements should be blocked (9 December 2008).
  

• Regardless of their stance on censorship, according to Gazeta.ru, Russians are not likely to change their social networking use over privacy concerns. The director of marketing and sales at Rambler Media, Anton Terkhov, stated that "discussions have come up in the Runet that data from social networks are being used by government structures, but these conversations have not led to users closing their accounts. Quite the opposite, the popularity of the services has continued to grow." The head editor of Yandex, Yelena Kolmanovskaya, had a similar opinion stating: "Talk of the possible decline in popularity of these services is doubtful" (26 March 2009).

Protests Over Buyouts


There have been limited protests over the buyouts, but reaction centered on well-publicized deals involving major Internet outlets and known Kremlin supporters and appeared mainly in opposition publications and politically active bloggers' journals.

• In March 2008, Gazprom-Media purchased the popular Russian clone of YouTube, video-sharing platform RuTube. This prompted Oleg Kozyrev, a well-known opposition blogger, and Oleg Salmanov, a reporter for the online opposition paper The New Times, to protest: "The Russian Internet community is following with alarm the social networks passing under the control of those who are loyal to the authorities and responsive to their requests. Many still remember what the federal media were like before Vladimir Putin arrived in the Kremlin. Yes, the purchase by state corporations (or by businessmen close to the Kremlin) of large media does not always and not necessarily lead to them stopping being objective. But the authorities gain the legitimate opportunity 'to switch off the button' in case of something. The networks only have to be in the necessary hands" (17 March 2008).
  

• Usmanov's June 2008 purchase of 50% of LiveJournal from SUP prompted speculation about censorship, but also criticism of SUP's management of the resource. Cyxymu,d a blogger and professor in Tbilisi, Georgia, expressed fears that this was part of a plan by the authorities to rein in freedom of speech on the Internet: "That means everything will be under the control of the FSB [Federal Security Service]. Or more accurately under greater control than earlier" (22 June 2008).
  

• In September 2009, Yandexe owners gave a "golden share" to government-owned Sberbank, giving the bank the right to veto any sale of more than 25% of Yandex and ensuring this sensitive resource remains in government-friendly hands (Russian Newsweek, 17 August 2009). In response, The Moscow Times, an English-language daily owned by Finnish company International Media, wrote: "While Yandex's concessions have been minor and apparently voluntary, Internet users fear that they could lead to restrictions like those in China, where access to pro-democracy and foreign news websites is severely limited" (26 November 2009).

• In December 2009, various media reported that DST was negotiating to buy ICQ from AOL in a deal that would give DST control of roughly half of the Russian messaging market (Lenta.ru, 15 December 2009).f Blogger response centered on having to pay for the previously free service instead of any risk of monitoring or censorship. Blogg Aleks Eksler (exler) stated: "If DST buys ICQ, we'll have to leave this platform for good because, just like 'Zhadnoklassniki' [greedyclassmates] it's easy to predict what will happen. First they'll forbid any alternative clients so that Internet chatters will have to use the official client where they can put ads everywhere. Then they'll start the onetization of the service." Others responded with alternative chat platforms and ebated whether or not ICQ would cease to be free (15 December 2009).

Protests Over Government Moves


Officials have made numerous attempts to pass laws seeking to regulate the Internet. They have also been accused of using laws covering the mass media or extremism to censor the unet. Such methods have met with significant resistance from the opposition and human ights activists, and the government has scaled back or rejected some provisions of the controversial laws.


The Joint Commission on National Policy and Cooperation of Governments and Religious Unions of the Federation Council announced a bill with planned amendments to the law on mass media on 11 February 2008. If passed in its original form, the amendments would have given any electronic media which has more than 1,000 hits per day the status of mass media, thus making them subject to laws on mass media such as the law on extremism. Amid controversy and outcry provoked by news of the draft, supporters of the bill attempted to assuage fears that it would lead to censorship, promising that the law would not affect sites that are "not information sources."

• Bloggers expressed varying degrees of alarm over the potential danger the law would pose to their community, because so many of their blogs receive more than 1,000 hits per day. Blogger may-antiwar wrote: "As soon as a site becomes mass media, we will be threatened not only with immediate shutdown but also unpleasant personal sanctions under the law 'On extremism' and we will become political prisoners. They have declared war on our resource" ( 27 February 2008). Blogger Viking_nord called the initiative "extremely stupid" and claimed that "over the last five years there were 20 such initiatives and no one ever passed one of them" (11 February 2008).

• Independent Internet sites, like bloggers, expressed their concern that the law would lead to the closure of Internet resources and ridiculed the 1,000 hits-per-day figure (Newsru.com, 12 February 2008; Strana.ru, 11 February 2008).
  

• On 11 February, Vladimir Slutsker, the deputy chairperson of the commission, gave a very broad definition of sites to be covered: "Any regularly updated Internet site can be included in the understanding of mass media, including personal diaries, various forums, and chats including, for example, dating sites" (Gzt.ru, 11 February). However on 12 February, he backed off, stating: "The amendments to the law 'On the Mass Media,' which were discussed today by the Internet community, only concern sites which are, in fact, Internet mass media although they are not registered at the moment...The blogosphere, dating sites, and search engines will not fall under that law because they are not mass media" (SMI.ru).

Protest Over Court Case


A 7 July 2008 trial convicting Savva Terentyev on charges of extremism, the first criminal prosecution in Russia for comments posted in a blog, prompted warnings that the legal system would be used to target bloggers critical of local or federal authorities. Terentyev, who admitted authorship of the comment but pleaded not guilty to charges of extremism, received a suspended one-year prison sentence under Article 282 of the Criminal Code of the Russian Federation -- inciting hatred or enmity (ITAR-TASS, 7 July 2008; Interfax, 14 July 2008). In his comment, he railed against the police, describing them as "filth" and saying that a "corrupt cop should be ceremonially burnt daily" in the central square of every city.

• Political columnist Valeriy Vyzhutovich claimed that the Terentyev "show trial" was a "test run" to gauge how Russian society would react to the future imposition of restrictions on freedom of speech on the Internet (Politkom.ru, 25 April 2008).

• Terentyev's lawyer, Vladislav Kosnyrev, warned that now under Article 282 "practically any statement can, if desired, be a pretext for criminal prosecution." Suranov added that "LiveJournal users need to know: The more you show interest in public life, then the greater the interest the law enforcement agencies will have in you" (The New Times, 14 July 2008).
  

• Terentyev was not pardoned, but in a subsequent trial a 29-year-old senior teacher at the Kuzbass State Technical University, Dmitriy Solovyev, who was accused of inciting hatred and hostility against a social group for his negative statements against FSB and MVD [Interior Ministry] employees in entries on his LiveJournal page was not found guilty (Forum.msk, 13 January).

Criticism of Outsourcing of Attacks


The Kremlin is known to use its youth groups and other methods to carry out "information confrontation" in the Runet.g h Opposition Internet users are aware of this practice and take action to expose, criticize, and thwart them.


Oleg Kozyrev noted the trend toward more frequent and organized attacks on opposition videos on YouTube, stating: "It is interesting that over the last several days, a ton of identical comments [from users] with accounts created at suspiciously similar times have appeared on YouTube. They usually surf opposition videos and post various types of negative messages. Obviously brigades that sometimes work in the blogs and sometimes on forums have now started working on the video service" (Oleg-kozyrev.livejournal.com, 30 November 2007).

During recent protests in Kaliningrad, participants used Internet media to publicize the protest and smaller preceding events. In several forums, and on YouTube videos, users called out the activities of progovernment "trolls"i who ridiculed the protest and attempted to counter the protesters' criticisms of the authorities. User Legis80 struck at all several users he called "Mister trolls" who were spamming the comments section of the Novyy Kaliningrad paper's article on the protests, telling them to "stick their tongues in deeper and stop yapping." On Rugrad.eu, two of the organizers of the 30 January protest, Konstantin Doroshok and Aleksandr Agiyevich, were forced to debate two users, Ivanka and Valter 100_lyt, who alleged that Doroshok was staging the protests in Kaliningrad to further his own business interests and that people were being offered financial inducements to attend protest rallies. Agiyevich's response to the "trolls" was to tell other users to ignore them, but Doroshok decided to do some detective work and said that Ivanka and Valter 100_lyt, who claimed he was a student who had been given R100 to attend the rally on 12 December, were operating from the same IP address. Doroshok concluded that they were, in fact, one and the same person (BBC Monitoring, 9 February).j

Internet users have taken to creating lists of bots that spam their blogs. Orly74 recommended banning a list of 40 users from opposition journals in connection with attacks on other opposition journals (16 October 2009). Out of frustration with what he said was LiveJournal's lack of will to stop bots, Andrey Malgin (avmalgin), writer and Kremlin critic and well-known blogger, started a list of bots and gave users instructions on how to ban them. Readers added to the list in comments and sympathized with his frustrations (30 January 2008). Oleg Kozyrev started a list of bots to ban on 9 October 2008. User Botolov's entire blog is devoted to stopping bots. He maintains a list of bots updated nearly daily by other users and helps to ban them.k l m Opposition users are also savvy at circumventing the Kremlin's monitoring and censorship efforts.

In an interview with Global Voices Online, a project of the Berkman Center that translates blogs from around the world, Roman Dobrokhotov, the leader of a democratic Russian youth movement "We" (My), stated: "All our activities are conducted via the Internet. The main mechanism that creates and maintains our movement is a Google group. We consider it relatively secure. We use an encrypted connection. We only add people that we know…. In addition to Google groups, we use Twitter. But we do it during our real-life actions, not before. When you deal with an opposition movement it is important that your friends can always follow you in case something bad happens." He continued: "The authorities have a legal right to ask for any information from Internet providers. They have access to everything we send through SORM 2 system.n But our information is encrypted and it will take a lot of time for them to decode it. The authorities can also create Internet filters or just shut down blogging services like LiveJournal. But we can always work through other platforms. We can also use anonymizers and other tools like proxy services" (Globalvoicesonline.org, 20 December 2009).

Suspicions Over New Domain


Although the .__ domain (Cyrillic language domain) is touted as being aimed at making the Internet more accessible to more Russians, some bloggers and press sources have pointed out that it may serve to isolate Russian Internet users from the rest of the World Wide Web, forming a kind of "cyber ghetto."

• In an interview with Rosbalt news agency, Ilya Ponomarev, an avid blogger and member of the Duma Committee on Information Technology and Communications, called the new domain "a step towards the isolation of the Russian segment of the Internet from the international Internet space" and stated that it was "a harmful and wrong course" (ilya-ponomarev; Rosbalt, 25 November 2009). One commentator to Ponomarev's Rosbalt interview debated Ponomarev, stating that the new domain was a positive step because it would make the Internet accessible to people who do not know Latin characters and that people who wanted to speak with foreigners would still have Latin domains to use, according to blogger dilesoft (ilya-ponomarev, 25 November).
  
  
• User illka worried that sites on the Cyrillic domain would be subject to a great deal of pressure and unable to change their registrar to another provider and that once people became used to domain names in Russian, they would not be willing to go to "that [Latin character domain] Internet" because there would be "nothing comprehensible written there" (ilya-ponomarev, 25 November).
  
  
• Another blogger, di09en, researched the newly registered ____.__ (blog.rf) domain and claimed that it was registered in the name of the "Special Communications and Information Service of the Federal Guard Service of the Russian Federation." Commentators stated that it was actually the Federal Protective Service of Russia, a department of the Federal Agency of Government Communications and Information (FAPSI) (ilya-ponomarev, 25 November).
  

Implications

The Russian Government does not need to own the Runet in order to monitor or control it. It has numerous laws and policies in place that allow it to limit or threaten open discussion on the Internet. Portals owned by Kremlin allies do not yet exhibit signs of censorship, but their acquisitions provide officials an additional lever to control the content of the Runet if the Kremlin feels threatened. The Kremlin is also developing the ability to shape the online discourse using such organizations as the Kremlin School of Bloggers and its various youth groups.


Moreover, many Russians actually favor some degree of censorship of the Runet and any public protest against government control would therefore most likely come from the largely distrusted and marginalized opposition. The lack of public concern over the loss of yet another independent source of information could lead to even greater state control of information and its citizens' beliefs.


Still, information may seep through any Kremlin efforts to censor the Internet as non-Russian portals such as Google, YouTube and Wikipedia are gaining popularity,o and opposition users are very savvy in regard to circumventing censorship efforts.

Appendix A


SUP


SUP is an Internet media investment company founded in the summer of 2006 by Russian billionaire Aleksandr Mamut and US media entrepreneur Andrew Paulson. It expanded aggressively in the new media sector, buying up a sports website and Internet ad agencies before buying LiveJournal in December 2007 in a deal estimated at $30 to $100 million (Russia Today, 4 December 2007). SUP leadership included Anton Nosik, one of the pioneers in Russian website development and a famous blogger.p As of 1 September 2009, SUP owned Gazeta.ru, LiveJournal.ru, and Championat.ru (Kommersant).


Mamut is a longtime prominent Russian banker who developed close ties to the family of President Boris Yeltsin and top officials of his Presidential Administration and also top officials of President Putin's administration. This prompted many expressions of concern among bloggers and other observers that his purchase of LiveJournal would increase Kremlin influence over the blogging platform.q

Digital Sky Technologies (DST)


Yuriy Milner and Grigoriy Finger formed DST in 2005 with their own money and funds from outside investors, which now include Goldman Sachs and Alisher Usmanov. While DST continues to be controlled by the two founders, Usmanov now owns 35% of the company, making him the single-largest shareholder.


DST is a dominant force in the Runet, owning the most popular websites in the CIS, including Russia, Ukraine, Kazakhstan, Georgia, and Armenia, and estimates that over 70% of all page views in the Russian-language Internet are on its companies' websites (Dst-global.com, 2 February). In Russia, DST owns a significant stake in VKontakte, a Facebook clone and the largest social network site in Russia, and a controlling interest in Forticom group, the owner of Odnoklassniki.ru, a very popular Russian clone of Classmates.com and third-most popular social network in Russia. DST owns more than half of the second-most popular site overall, Mail.ru, which offers a variety of services including news, e-mail, a search engine, directories, chats, job services, blogs, role-playing games, and messaging. Mail.ru also controls several other important Internet projects. Because of the prevalence of the Runet in the former Soviet space, these sites are also the most popular sites in Uzbekistan, Kazakhstan, Ukraine, and Moldova. Outside of Russia, DST owns Seznam.cz, a Czech social networking site; a majority share in Nasza-klasa.pl, a Polish clone of Classmates.com, and a significant stake in Estonian jobs portal CV Keksus, the number two site in Estonia, based on a Gemius research report from January 2009. The company's 75% interest in Forticom also gives it control of some of the top portals in Lithuania, Latvia, and Estonia -- One.lt, One.lv, and One.ee.


Usmanov is the single-largest stakeholder of DST (Russkiy Newsweek, 17 August 2009). According to Finam expert Leonid Delitsyn, "Alisher Usmanov is not an investor for whom state interests are an alien concept… When his structures acquire a media asset this is seen as a deal that has been done with the state's approval" (Infox.ru, 3 July, 2009). According to Russkiy Newsweek, the Russian version of international news magazine Newsweek, the Internet community views Usmanov as "an outright government surrogate" (17 August 2009). Usmanov is considered especially close to President Medvedev. For a long time he was a top official of Gazprom where Medvedev was chairman.


Usmanov has been building a media empire since August 2006, buying the respected business daily Kommersant, the antigovernment website Gazeta.ru, and sports channel 7TV in late 2006. He announced on 7 November 2006 in Vedomosti that he intended to create a multimedia holding company of TV channels, newspapers, radio stations, and websites and told Vremya Novostey he aimed to create a media empire like Bloomberg's (28 December 2006). Usmanov has ambitious aims, specifically in the social networking sphere. For example, he launched the NewTube.ru video site in June 2008 to challenge Gazprom-Media's RuTube (Kommersant, 3 June 2008). In addition, in 2008, he attempted to buy 10% of Yandex in a deal that later failed (Lenta.ru, 28 May 2009).


DST Company President Yuriy Milner was also recently appointed to the Presidential Commission for the Modernization and Technological Development of the Russian Economy, whose mission is the "reduction of the Russian economy's dependence on world economic conditions and the development of high technology" (Politkom.ru, 25 May 2009).

RosBiznesKonsalting (RBC)


RosBiznesKonsalting was created in 1992 and is an Internet-holding company. RBC owns, among others, news portals Rbk.ru, Utro.ru, and Cnews.ru. It also owns Loveplanet.ru, the second-largest dating service in Russia, Quiet Internet Pager, a free instant messenger, and Fishki.net, a top humor and entertainment website.


Prokhorov has a history of cooperating or supporting government initiatives. For example, he came out in favor of businesses paying their full taxes, a rarity in Russia, and registered himself as living in Yeruda in the Krasnoyarsk region, where his mining company Polyus Gold is located, in order to support the region with his taxes. A spokesman for Prokhorov's investment vehicle Onexim explained: "Given the difficult economic period, one of the main social responsibilities of a business is to pay its taxes in full, and it would seem proper to pay them where the main sources of income are " (RIA Novosti, 22 May 2009).

Prof-Media


One of Russia's largest media conglomerates, Vladimir Potanin's Prof-Media was created by the oligarch's Oneksimbank in late 1997 to run Russkiy Telegraf, Izvestiya, Komsomolskaya Pravda, and other papers. In March 2003, Prof-Media purchased 35% of the Dutch-owned Independent Media publishing house which owned The Moscow Times and Vedomosti.r Prof-Media later changed its strategy, selling off its print media, especially political newspapers, and buying up entertainment television channels and Internet sites.s

Potanin purchased Rambler.ru in November 2006, which, along with his news websites Lenta.ru and Afisha.ru, figures in the top 100 Runet sites. Prof-Media and investment company Finam own Begun, the leading Russian company in context-based ads. According to numerous sources, advertising is the most important source of revenue to websites, making up, for example, 80% of the revenue of Yandex (Vedomosti, 30 December 2009). Consistent with the government's policy of keeping important companies in Russian hands, the Federal Antimonopoly Service recently blocked an attempt by Google to buy Begun, citing inaccuracies in the paperwork. Some analysts believe the decision was actually motivated by concern at losing control over a Russian market leader (Vedomosti, 24 September 2009). Informative business daily Kommersant's sources in the market said the deal was not approved "because the government came out against the sale of Begun to the American Google Inc" (9 April 2009).


Despite rocky relations with the Kremlin at the start of Vladimir Putin's presidency, Potanin is now believed to have a good relationship with Putin and the government. Rafael Akopov, the president of Prof-Media, supported the government's right to deem Internet portals "strategic"t
and to determine policy on them. He stated: "The Internet is a strategic sector and the government has every right to determine policies in it" (Vedomosti, 9 April 2008).

Gazprom Media


Gazprom-Media was set up by Russia's gas monopoly Gazprom to manage its media holdings, including the popular national TV channel NTV and Ekho Moskvy radio, and has become one of Russia's biggest media conglomerates. Its parent company, Gazprom is partially owned by the Russian Government. Yuriy Kovalchuk, a longtime Putin friend with ties to Medvedev, controls Gazprom-Media.u

Yandex


Yandex is partially owned by Ru-Net Holdings, which was founded by Baring Vostok Capital Partners and the Moscow investment company United Financial Group. Leonid Boguslavsky owns 50% of Ru-Net Holdings and has served as its Chairman and CEO since April 2001. Ru-Net Holdings owns 35% of Yandex, which is currently the top-ranked website in Russia and its dominant search engine. Yandex's director, Arkadiy Volozh, controls 30% of the company and the remainder of Yandex is owned by Yandex's managers and several other investment companies including Baring Vostok Capital Partners and Tiger Global (Bfm.ru, 11 September 2009). Yandex owns popular portals Narod.ru and Moi Krug, a business portal similar to LinkedIn. Ru-Net holdings also owns 50% of largest Internet store, Ozon.ru (Kommersant, 1 September 2009).

In September 2009, Yandex owners gave a "golden share" in the company to Sberbank. This special share, which cannot be sold without the approval of Yandex's board of directors, gives Sberbank the right to veto any sale of more than 25% of Yandex, thus ensuring this sensitive resource remains in government-friendly hands (Russkiy Newsweek, 17 August 2009). An unnamed source of the respected business daily Vedomosti in the federal government stated: "Yandex is an infrastructural company and the government is not indifferent as to who controls it. Sberbank will become the de facto representative of the government and will be able to prevent the transfer of Yandex to the control of foreigners" (24 September).


Arkadiy Volozh, owner and director of Yandex stated: "We cannot fail to take the government's position into account and believe it is necessary to develop a legal mechanism that will consider national interest when making large deals involving Yandex" (Interfax, 24 September 2009).

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http://www.fas.org/irp/dni/osc/russian-media.pdf
Russia -- Source Descriptors of Key Russian Media

Open Source Center

December 6, 2007

The following are source descriptors of key Russian media, including news agencies (page 1), publications (page 3), radio (page 8), television (page 9), and websites (page 11). Television dominates the media environment in Russia, with most Russians getting their news from the two state-owned channels. There is greater variety of ownership and content in publications and websites, but these have smaller audiences than television.1

Russian Natural Gas Python Seeks to Squeeze the Economic Life Out of Europe

http://www.rusnet.nl/news/2009/07/03/businesseconomics01.shtml/businesseconomics01.shtml Gazprom Seeks Global Deals to Build Gas Grid Encircling Europe


By Stephen Bierman


Bloomberg


RUSNET


July 3, 2009

OAO Gazprom, the Russian company that ships a quarter of Europe’s gas, is seeking supply deals in the Caspian, Africa and around the world to anchor its lead in areas where European buyers may turn to rival producers.

“We would like to make the company global in terms of upstream presence,” Boris Ivanov, head of Gazprom EP International BV, said at the Gas Exporting Countries Forum in Doha, Qatar. “We are trying to position Gazprom in the areas where we think we need to be strategically present, like North Africa, West Africa, Latin America and Asia.”

Gazprom, the world’s largest gas exporter, is facing moves from European Union countries to diversify supplies as nations seek to cut reliance on Russia. By forging partnerships and snapping up production assets in gas-pumping nations, the company can add alternative sources of fuel while stamping out competition for customers in Europe, its biggest export market.

“The criteria are very simple: the availability of hydrocarbon reserves, proximity to the markets where we can bring it and, since our projects are time-consuming and capital- intensive, a friendly relationship with the host governments,” Ivanov said June 30.

Gazprom held talks in Algeria last month on developing the trans-Saharan pipeline from Nigeria, where it has agreed to bid for gas fields through a new joint venture and build a link to the north of the country. In the Caspian region, Gazprom signed a “milestone” deal to buy gas from Azerbaijan, threatening European plans to add the country as a source of supply.

Global Gazprom Grid

“Russia/Gazprom is now involved in all of the major gas- producing countries that can supply Europe,” Chris Weafer, chief strategist at Uralsib, said by e-mail. “In political terms the Iron Curtain is gone. In energy terms, it is being replaced with a Gazprom gas grid that may stretch unbroken from Nigeria via North Africa, the Gulf and Central Asia all the way to the Arctic Circle.”

[See Reticulated Python Fact File, accessible at: http://www.snakes-uncovered.com/Reticulated_Python.html "The name "Python" can be traced back to Greek mythology. 'Python' often depicted as a "serpent" was the earth-dragon of Delphi which was consequently slain by Appollo. "Reticulatus" refers to the complex "netlike" geometric patterns that extended dorsally along the snake's body...These snakes are powerful constrictors and possess no venom... "; See also Terry Judd, Aggressive Python Killed by Trooper, Muskegon Chronicle (Aug. 19, 2008) accessible at: http://www.mlive.com/news/chronicle/index.ssf?/base/news-7/1219157109111170.xml&coll=8 ].

Russia, holder of the world’s largest gas reserves and a recent entrant to the market for liquefied natural gas, met fellow members of the Gas Exporting Countries Forum this week in Doha to discuss a joint budget and appoint senior officials. Consuming countries have voiced concern that the forum’s members will club together to decide investment and output, modeling the group on the Organization of Petroleum Exporting Countries.

A “gas OPEC” would be the “final part of that jigsaw,” Weafer said, referring to state-owned Gazprom’s plan to have a role in all the biggest gas-producing nations. Russia has said the aim of the gas exporters group isn’t to fix prices.

Reciprocal Deals

Russia has been able to use access to its own ample hydrocarbon resources as a negotiating tool in talks with governments and energy producers overseas. Deputy Prime Minister Igor Sechin said June 19 that foreign oil producers seeking to operate in Russia should offer Russian companies participation in projects abroad in exchange.

The following week, the government invited Royal Dutch Shell Plc, the European oil producer that operates from Canada to West Africa, to cooperate in developing Gazprom’s Sakhalin-3 and Sakhalin-4 offshore deposits in the Russian Far East.

“Russia is bartering with Shell to get into its existing Nigeria business and ramp up Africa quickly,” Weafer said. “Sakhalin-3 and 4 are signs of goodwill.”

Gazprom is also contending with competition from producers of liquefied natural gas, a business untapped by the Moscow- based company until this year, as a gas surplus in the U.S. forces LNG exporters to seek EU markets for their fuel.

Divert LNG

Trinidad & Tobago has said it reduced its proportion of LNG shipments to the U.S. to 39 percent this year from 69 percent in 2008 as a result of falling prices there. Exports to Europe from the Caribbean nation grew 50 percent in the first quarter from a year earlier, according to International Energy Agency data.

The increase in Europe-bound cargoes followed a payment dispute between Russia and Ukraine in January that cut supplies through that country for two weeks and prompted calls in the EU for swifter diversification of energy routes.

The growth in U.S. gas supply has been led by so-called unconventional resources, fuel that’s difficult and costly to extract. Rising production of gas from shale, for example, has reduced U.S. dependence on LNG imports, leaving Trinidad & Tobago looking for alternative markets, Energy Minister Conrad Enill told reporters at the Gas Exporting Countries Forum.

Qatari Expansion

Qatar, the world’s biggest producer of LNG, is also encroaching on Gazprom’s traditional markets. The Persian Gulf state, poised to more than double LNG output to 77 million tons by 2011, has signed its first accord to ship the fuel to eastern Europe, which depends on Gazprom for most of its gas supply.

Qatar signed a contract this week to send 1 million tons of LNG to Poland, which gets more than two-thirds of its gas from the former Soviet Union. Qatar will deliver the LNG, or gas that’s been cooled to a liquid for shipment by tanker, by 2014.

Gazprom’s Ivanov dismissed suggestions that an increase of suppliers may threaten the company’s position in Europe.

“In terms of the European market, the more real suppliers that are present on the market - not the brokers, not the mediators - companies and countries with equity gas, the more stable the market is,” he said. “LNG, of which Qatar has plenty and is planning to increase production, is an important part of the energy balance in Europe. We don’t think of it as a threat or hostile.”

Gazprom in February entered the increasingly global market for LNG by opening Russia’s first liquefaction plant on Sakhalin Island, in partnership with Shell. Prime Minister Vladimir Putin on June 27 invited The Hague-based Shell to participate in the Sakhalin-3 oil and gas venture and also plans LNG projects in the Arctic Yamal peninsula with the Anglo-Dutch company.

Putin-Obama-Medvedev Menage a Trois

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/04/AR2009070402115.html?wprss=rss_world

Russia Presents Test for Obama

By Michael A. Fletcher and Philip P. Pan

Washington Post


July 5, 2009

President Obama is scheduled to leave Washington tonight on a week-long trip that will help determine whether his personal popularity and fresh policy approaches can yield concrete results on difficult issues including arms control, missile defense and nuclear nonproliferation.

After seeking support for U.S. policies from allies in Europe and appealing for a new relationship with the Muslim world in Cairo on previous trips, Obama arrives in Moscow tomorrow for his first foray into high-profile, nuts-and-bolts negotiations with the leader of a nation that might be deemed an unfriendly rival.

On Wednesday, Obama will travel to L'Aquila, Italy, where he will meet with leaders of the world's major industrial powers. Climate change and the continued shaky global economy

are expected to dominate the agenda. He is also to meet with Pope Benedict XVI.

On Friday, Obama will go to Ghana, where he is expected to highlight that nation's burgeoning democratic tradition and to deliver a speech on his administration's goals for the developing world.

Shortly after taking office, the Obama administration made clear that it wants to "reset" relations between the United States and Russia, which had deteriorated under President George W. Bush. During Obama's first meeting with Russian President

Dmitry Medvedev, in London in April, the two agreed to a broad statement of cooperation on numerous issues.

Both the White House and the Kremlin hope to build on that with a summit in Moscow, and agreements on subjects including Afghanistan and nuclear proliferation are expected to be unveiled. But fundamental differences remain on key issues that have strained U.S.-Russian relations.

Medvedev wants U.S. pledges to scrap a missile defense system in Eastern Europe and to rule out military alliances with the former Soviet republics of Georgia and Ukraine. Obama wants Russia to back tough sanctions against Iran if diplomatic efforts to curb its nuclear program fail. Neither president has indicated any willingnes

s to yield.

"We're not going to reassure or give or trade anything with the Russians regarding NATO expansion or missile defense," said Michael McFaul, special assistant to the president and senior director for Russian and Eurasian affairs. "We're going to define our national interests, and by that I also mean the interests of our allies in Europe with reference to these two particular questions."

Sergei Prikhodko, Medvedev's c

hief foreign policy adviser, struck a similar tone. "Saying that it will be easy to move forward would mean deluding ourselves," he told reporters. "The domestic agendas of both leaders and their agendas in dealings with allies do not always coincide. Sometimes, they contradict each other directly or indirectly. But the question is . . . whether we want to expand mutual understanding or focus on defending our own positions on sensitive issues."

Obama is scheduled to meet on Tuesday with Prime Minister Vladimir Putin, whom analysts called the preeminent power in Russian politics. Obama told the Associated Press last

week that the former Russian president must move beyond a Cold War approach to relations with the United States.

The willingness of Obama and Medvedev to compromise will be tested when they discuss a treaty to replace the landmark START I nuclear arms control pact, which expires in December.

The United States and Russia control more than 90 percent of the world's nuclear weapons. After three months of talks, negotiators have agreed to modest reductions below the limits of 1,700 to 2,200 warheads established by the 2002 Treaty of Mosc

ow. But they remain deadlocked on how to count and limit the number of "delivery systems," or missiles and heavy bombers, that each nation can keep.

Medvedev publicly declared two weeks ago that no treaty is possible unless "the United States lifts Russia's concerns" about its plans to build a missile defense system in Poland and the Czech Republic.

Obama has not decided what to do about the system, said a senior administration official, speaking on the condition of anonymity because he did not want to discuss internal deliberations publicly.

The United States is reviewing other options for missile defense and has tried unsuccessfully to engage the Kremlin on the issue, he said. "We're serious about cooperation on missile defense with the Russians," he said. "But the sense is the Russians are still nervous and don't trust us."

Russian officials have publicly endorsed the idea of cooperation on missile defense, but have called on Obama to abandon the Polish-Czech plan first and emphasized they want to be included from the ground up, beginning with joint assessment of threats. The two sides have discussed opening a Moscow-based joint data exchange center.

Obama hopes to gain Russian cooperation on other topics, including energy efficiency and climate change. Russia is one of the world's largest energy producers, but it is also a leading emitter of greenhouse gases, behind the United States and China, according to the Center for American Progress.

The summit is expected to produce a deal allowing the United States to ship weapons to Afghanistan through Russia. The two sides may also agree to share intelligence and fight Afghanistan drug trafficking. Officials said the sides are also working to revive a pact on civilian nuclear energy cooperation that the Bush administration suspended after Russia's war last year with Georgia, and to strengthen military ties, also downgraded after the war.

Some business deals, including one involving Boeing, are also expected, analysts said, but they could be overshadowed by disappointment over Putin's decision to withdraw Russia's application for World Trade Organization membership last month.

Obama also is scheduled to deliver a speech in Moscow in which aides say he will try to dispel the feeling in Russia that America's self-interest lies in a weak Russia.

"This is not 1974. This is not just where we go do an arms control agreement with the Soviets, but that we have a multidimensional relationship with the Russian government and with the Russian people," McFaul said.

Russia Reconsiders WTO Accession at National Level; Favors Customs Union Approach Instead

http://english.people.com.cn/90001/90777/90853/6688448.html

CIS remains key priority of Russia, says Putin

China's People Daily Online


Xinhua


June 29, 2009


Countries of the Commonwealth of Independent States (CIS) are pivotal political and economic priority of Russia, said Russian Prime Minister Vladimir Putin on Sunday.


"Cooperation is profound. We have common transportation and energy networks and speak Russian," Putin was quoted by the Itar-Tass news agency as telling leaders of political groups in Russia's State Duma, the lower house of parliament.


The CIS, an alliance of 11 former Soviet Republics, groups Russia, Belarus, Kazakhstan, Kyrgyzstan, Azerbaijan, Armenia, Moldova, Tajikistan, Uzbekistan, Ukraine and Turkmenistan. Georgia withdrew from the bloc due to the South Ossetia conflict last year.


Putin also said that entering the World Trade Organization (WTO) remains on Russia's agenda, but "the customs union of Belarus and Kazakhstan has come to the forefront."


Russia, Belarus and Kazakhstan agreed on June 9 to start new talks on WTO accession as a single customs union, and thus suspend individual talks.


Russia, which has been seeking WTO membership for more than 15 years, is the largest economy remaining outside the global trade watchdog.


Putin also recalled the recent Yekaterinburg summits of the Shanghai Cooperation Organization (SCO) and BRICs (Brazil, Russia, India and China).


"We will build up cooperation in these formats," he said.

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http://www.unian.net/eng/news/news-320697.html

Georgia's parliament formally puts end to CIS membership

Yhiah News Agency

RIA Novosti


June 12, 2009

The parliament of Georgia unanimously passed on Friday decrees on the formal withdrawal of the former Soviet republic from the Commonwealth of Independent States (CIS), RIA Novosti reported.

Georgia notified the CIS executive committee of its desire to quit the Russian-dominated organization on August 18, 2008. The move came after a five-day war with Russia over the Georgian breakaway republic of South Ossetia.

"Georgia has already withdrawn from the organization... Therefore, today we are wrapping up this process by the proper decree formally and legally," parliament Speaker David Bakradze said after the first parliamentary session in two months amid mass opposition protests in Tbilisi.

The CIS currently comprises Russia, Georgia, Belarus, Kazakhstan, Kyrgyzstan, Azerbaijan, Armenia, Moldova, Tajikistan and Uzbekistan. Ukraine is a founding and participating country but technically not a member state. Turkmenistan holds associate status.

Following a CIS foreign ministers` meeting in Kyrgyzstan last October, Russian Foreign Minister Sergei Lavrov said Georgia`s withdrawal would change nothing and Tbilisi`s participation in the post-Soviet alliance had been malign in recent years.

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http://www.upi.com/Energy_Resources/2009/06/09/Analysis-Implications-of-Georgia-leaving-CIS/UPI-90981244588248

Analysis: Implications of Georgia leaving C.I.S.

JOHN C.K. DALY


United Press International (UPI).com


June 9, 2009



WASHINGTON, June 9 (UPI) -- Georgia hopes to continue its free-trade arrangements with members of the Commonwealth of Independent States after its withdrawal from the organization takes place on Aug. 18. Given the aftereffects of its ill-advised five-day military clash with Russia last August, that may prove to be a forlorn hope, as the confrontation reminded the other Caucasian former Soviet republics of Azerbaijan and Armenia that Moscow is determined to protect what Russian President Dmitry Medvedev has labeled its "privileged interests" in the former Soviet space.

Georgian President Mikheil Saakashvili's determined attempts to bring his country into NATO have increasingly soured relations between Washington, Brussels and Moscow for the last several years, as the Kremlin has repeatedly stated that neither Georgia nor Ukraine should be admitted to the alliance. Heightening Moscow's fears of being outflanked in the Caucasus, from May 21 to June 1 NATO staged its Cooperative Lancer 2009 exercise at Georgia's Vaziani military base, with about 700 soldiers from 13 NATO member nations participating alongside Georgian troops.

The West can hardly feign disinterest, as the crown jewel of Western efforts to bring Caspian oil westwards for export, the $3.6 billion, 1,092-mile, 1 million-barrel-per-day Baku-Tbilisi-Ceyhan pipeline, opened in May 2006, carries Azeri crude from Azerbaijan's Caspian offshore Azeri-Chirag-Guneshli fields to Turkey's deepwater Mediterranean terminus at Ceyhan, crosses 155 miles of Georgian territory and contains two of the line's eight pumping stations.

On June 8 Interfax news agency reported that Georgia's Economic Development Ministry's Department for Foreign Trade Policy head Marina Machavariani told reporters that Georgia hoped that its current free-trade arrangements with C.I.S. member states would remain intact following Georgia's withdrawal from commonwealth. Attempting to soften the prospect of significant damage in its relationships with the C.I.S. after that date, Machavariani observed that there are international regulations allowing use of mechanisms of free movement of goods between Georgia and certain countries, commenting, "To date, Georgia has already signed bilateral free trade agreements with eight C.I.S. countries. With Azerbaijan and Ukraine, which are GUAM (Georgia, Ukraine, Azerbaijan, Moldova) member states, Georgia also has free economic zone agreements." Machavariani concluded by noting that the GUAM nations account for up to 65 percent of all Georgian exports.

What Machavariani's optimism glosses over is that Ukraine has significant issues with Russia that dwarf its commitments to Georgia. Kiev suffered a brief "gas pipeline" war with Moscow in early January, which forced Ukrainian President Viktor Yushchenko's government into a humiliating climb-down on pricing.

Another prickly issue irritating Russian-Ukrainian relations is the status of Sevastopol, the finest natural harbor on the northern shore of the Black Sea and currently jointly shared by both the Ukrainian navy and Russia's Black Sea Fleet. Last but not least, Yushchenko's government is embroiled in a bitter fight for political survival, with some recent political polls giving Yushchenko a dismal 5 percent approval rating. In sum, the above issues hardly incline Ukraine further to antagonize Russia by broadening its contacts with Georgia following its withdrawal from the C.I.S., an organization in which Ukraine remains a member.

Azerbaijan also has less than perfect relations with Tbilisi, despite being conjoined by the BTC oil umbilical cord. The Russian-Georgian military confrontation inflicted significant fiscal "collateral damage" on Azeri oil exports, as all its westward export routes were closed.

On Aug. 5, 2008, two days before the outbreak of hostilities between Georgia and Russia, there was an as yet unexplained explosion on the BTC segment at Yurtbasi village in eastern Turkey. The cause of the explosion remains unclear, although Ankara initially suspected that it might have been a terrorist attack by the Kurdish separatist Partiya Karkeren Kurdistan, or Kurdistan Workers' Party. BTC operator BP declared force majeure, and the pipeline only resumed operations on Aug. 25.

Seeking an alternative route, BP switched to the recently reopened 550-mile, 140,000-bpd Western Route Export Pipeline, better known as the Baku-Supsa line, which opened in 1999 and was running at about 90,000 bpd. Because of the worsening military conflict, on Aug. 12 BP announced that it was suspending shipments through Baku-Supsa, as well as the South Caucasus Pipeline, which transports natural gas from Baku to Turkey via Tbilisi. Completing the lock-in of Azeri oil exports, the fighting caused authorities to suspend seaborne shipments from Georgia's Black Sea ports of Batumi (200,000 bpd) and Poti (100,000 bpd), both supplied by rail. Poti was closed Aug. 8 following reported Russian airstrikes. Adding to the grim picture, authorities also ceased exports from Kulevi, Georgia's third Black Sea oil terminus, which opened in 2007 and is capable of shipping 200,000 bpd.

For Azerbaijan the conflict was an unmitigated financial disaster, as the country's oil sector receipts account for almost half of all government revenues, with oil exports generating around 90 percent of total export revenues. Between the BTC explosion and the military clash, Azerbaijan had been blocked from shipping approximately 17 million barrels of crude, while the U.S. Department of Energy estimated that Azerbaijan's final cost for the lost shipments surpassed $1 billion.

Georgia suffered lost revenue from the confrontation as well: In 2007 BTC fees generated $25.4 million in transit revenues, and before hostilities erupted Saakashvili's government had estimated BTC transit payments for 2008 at about $45 million.

For the remaining members of the C.I.S. then, the choices are stark -- continue relations with Georgia after Aug. 18 as before, thereby tacitly approving Tbilisi's confrontational posture vis-a-vis Moscow and risking Russia's wrath, or pay heed to Medvedev's "privileged interests" in the Caucasus. While little is clear in that part of the world, last year's military clash has given former Soviet states significant food for thought about what happens to former Soviet republics that ignore Moscow's concerns and stray too far westwards. Accordingly, it would seem unlikely that C.I.S. nations are likely to follow Saakashvili's lead or conduct "business as usual," unless Tbilisi somehow repairs its unraveled relationship with the Kremlin first.

Vlad's Bad Gas Economically Asphyxiates, Silences and Chills Europeans, But They Continue to Tolerate It!

Europe’s dependence on Russian natural gas is considerable. Countries in Central Europe, such as Slovakia, the Czech Republic, Hungary, Germany and Austria, are extremely dependent on Russian natural gas imports, as is Turkey. Germany receives 43 percent of all the natural gas it consumes from Russia; Turkey receives 66 percent of its natural gas from Russia. At the moment, the Soviet infrastructure links the Russian Tyumen, Timan-Pechora and Ob Basin fields with European consumers, as well as the natural gas fields in Turkmenistan, Uzbekistan and Kazakhstan.

[See: Global Market Brief: Skyrocketing Natural Gas Prices and Europe's Economy, Stratfor.com at: http://www.stratfor.com/analysis/global_market_brief_skyrocketing_natural_gas_prices_and_europes_economy ].

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http://www.moscowtimes.ru/articles/detail.php?ID=373835

Both Sides Lose in the Gas War


January 23, 2009


By Yevgeny Kiselyov


It is too early to tell if the gas wars between Russian and Ukraine have ended for good. Although it would seem at first glance that the conflict was put to rest when Prime Minister Vladimir Putin and Ukrainian Prime Minister Yulia Tymoshenko signed a 10-year gas delivery agreement on Monday in Moscow, it didn't take long for Ukrainian President Viktor Yushchenko's camp to protest the pact.

Yushchenko supporters claim that Tymoshenko didn't have the authority in the first place to negotiate gas prices and sign an agreement with Putin. They accuse Tymoshenko of trading away Ukraine's national interests, including the claim that she supports Gazprom's purported plans for taking ownership of Ukraine's entire gas transport grid. Andrei Kislinsky, the deputy chief of staff in Yushchenko's administration, announced that Tymoshenko and the Kremlin have already created a working group to work out the details of this project. Tymoshenko's main objective in meeting Putin, they assert, was to demonstrate her unconditional loyalty to the Kremlin in exchange for the Kremlin's unconditional support for her in the Ukrainian presidential election in late 2009 or early 2010 (the exact date hasn't been set yet).

It is even possible that on Friday, Ukraine's National Security Council, with Yushchenko as chairman, will declare the gas agreement Tymoshenko signed with Moscow null and void.

It is well known that deliveries of Russian gas were conducted through RosUkrEnergo, a highly controversial intermediary, for the last three years. The company is registered in Switzerland, with a 50 percent stake held by Gazprom and 50 percent owned by private Ukrainian businessmen [!!!] who purportedly profited by manipulating gas supplies and paid big kickbacks to high-ranking officials in Kiev and possibly elsewhere.

RosUkrEnergo has been a major point of contention among feuding political groups for a while; in fact, Tymoshenko made the issue a theme in her 2007 parliamentary election campaign, vowing to eliminate RosUkrEnergo from the transaction. In addition, allegations are occasionally made that Yushchenko has financial ties to RosUkrEnergo.

During the three-week conflict, Gazprom CEO Alexei Miller made a statement implying that Yushchenko had lobbied for RosUkrEnergo's interests and initiated the gas conflict with Moscow when he understood that Tymoshenko was serious about liquidating RosUkrEnergo. Now, as a result of Monday's agreement, RosUkrEnergo has been definitively removed as the middleman. It is difficult to imagine that Yushchenko will simply forgive Tymoshenko for her aggressive moves.


It might seem that Russia came out on the losing end of the gas war.

First, Russia lost because it suffered a huge blow to its reputation as a reliable gas supplier to Europe.

Second, Europeans are seriously looking for other suppliers and routes to import gas. For example, an increasing number of German officials are beginning to question if the heretofore celebrated Nord Stream pipeline project, which would pump gas directly from Russia to Germany across the floor of the Baltic Sea, would make Germany too dependent on Russia. [YA THINK??]

The gas war even damaged relations with Russia's traditionally strong European allies such as Serbia, which were without gas for three weeks. Serbs were burning Russian flags, something that just a couple of weeks ago nobody could imagine would ever happen. Even Austria, which has been a loyal buyer of Russian gas since 1968 when it became the first West European country to sign an agreement with Moscow, has started looking for alternative suppliers.


On the other hand, Moscow achieved at least part of what it hoped to accomplish in its conflict with Kiev. Although the Kremlin wasn't able to drive a complete wedge between Ukraine and Europe, the political elite in Kiev, who set their sights high on becoming integrated with Europe politically and economically, suffered a serious blow when Ukraine earned a reputation as an unreliable partner. But Moscow's largest battle gain was destabilizing Ukraine's internal political situation. Kiev's opposing political groups have again locked horns and are bogged down in another serious confrontation.


The Ukrainian media are already discussing the question: Did Moscow offer to support Tymoshenko in her presidential bid? If so, what did she offer the Kremlin in return? Perhaps a rejection of Ukraine's aspiration to join NATO or an extension of the contract for Russia's Black Sea Fleet that is set to expire in 2017?


In reality, these theories should be treated with skepticism. After all, Tymoshenko has no intention of committing political suicide by risking the alienation of the roughly half of Ukraine's voters located in the western part of the country, for whom a pro-Russia policy is absolutely unacceptable. Moreover, she is a quintessential politician -- which is to say an opportunist above all. She might have made various promises to Putin and President Dmitry Medvedev, but it would be naive to think that she would necessarily make good on all of them.


As is often the case, the Kremlin does not have a backup plan if things go wrong. What if the majority of European countries take Kiev's side in its ongoing battle with Moscow? What if Yushchenko follows through and annuls the gas agreement Tymoshenko signed with Putin?


Beyond the gas conflict, what if the global economic crisis cripples Russia worse than it ever expected? What if oil prices fall to $10 per barrel in 2009? What if the ruble exchange rate reaches 50 to the dollar? What if Putin's and Medvedev's ratings fall? If any one of these events were to happen, the Kremlin would have a lot more to worry about than Yushchenko and Tymoshenko. In this case, the Kremlin would quickly forget about its obsession to punish Yushchenko for all of his sins, including his 2004 Orange Revolution, NATO aspirations and arms shipments to Georgia in the August war.


Yevgeny Kiselyov hosts a political talk show on Ekho Moskvy radio and is chief editor of TVi, a new television channel in Ukraine.

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http://www.google.com/hostednews/ap/article/ALeqM5ime-eB29lh2E2m_LwNapeBBPHMBAD95QLUP81

Russia, Ukraine sign gas deal, end standoff


By Nataliya Vasilyeva, with contributions from Yuras Karmanau and Maria Danilova in Kiev, Ukraine.


AP


January 19, 2009


MOSCOW -Russia and Ukraine signed a deal Monday that restores natural gas shipments to Ukraine and paves the way for an end to the nearly two-week cutoff of most Russian gas to a freezing Europe.


The agreement was signed by the heads of Russia's state-run natural gas monopoly Gazprom and the Ukraine's gas company Naftogaz. The signing was witnessed by Russian Prime Minister Vladimir Putin and Ukrainian counterpart Yulia Tymoshenko.


Putin said Gazprom had received orders to resume shipments bound for Europe, which had been cut since Jan. 7 as Moscow and Kiev argued over 2009 gas prices and allegations that Ukraine was stealing gas destined for Europe.


Ukraine disputed this, claiming that Russia was not sending enough "technical gas" to push the rest further west.


Officials say the restored gas shipments could take up to 36 hours to cross Ukraine and reach European customers.


Europe gets about 20 percent of its total gas needs from Russia via Ukrainian pipelines, and the cutoff hit hard at some countries, such as Bulgaria and Slovakia, that rely almost entirely on Russia for gas.


The confrontation has deeply shaken Europeans' trust in both Russia and Ukraine as reliable energy suppliers, as more than 15 nations have been forced to scramble for alternative sources of energy. The dispute was further complicated by geopolitical struggles over Ukraine's future and over lucrative export routes for the energy riches of the former Soviet Union.


Tymoshenko and Putin negotiated a preliminary deal for Ukraine to get gas with a 20 percent discount from this year's average European price, which Russia says is $450 per 1,000 cubic meters. That would double the price Ukraine paid in 2008.


However, natural gas prices for Europe are expected to fall sharply later this year, due to the fall in oil prices. By midsummer, Ukraine could be paying as little as $150 for 1,000 cubic meters, said Ronald Smith, a strategist at Moscow's Alfa Bank.


Ukrainian Parliament Speaker Volodymyr Lytvyn said Monday, citing Naftogaz and Russian officials, that the average price Ukraine will pay this year will be around $240 to $250. He did not elaborate.


Russia won a key principle, however, that Ukraine must pay more for its energy supplies. Russia also won't have to pay higher transit prices to Ukraine to use its pipelines.


Putin said in 2010, Ukraine will have to pay full price for Russian gas, and Russia will pay market prices for transit.


In the long term, it is not clear how Ukraine will pay for the huge amount of Russian gas needed to run its outdated factories and heating systems.


Ukrainian opposition leader Viktor Yanukovych said any gas price higher than $250 would be mean a "collapse" of the economy, which is already coping with a collapse of the national currency, a drastic fall in exports and a shaken banking sector.

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http://news.bbc.co.uk/2/hi/europe/7832481.stm
Germany could hold key to gas deal

BBC New



January 16, 2009

As Germany prepares to welcome Russian Prime Minister Vladimir Putin, the BBC's Berlin correspondent Steven Rosenberg considers how Germany could broker a deal to end the energy dispute between Russia and Ukraine.


Of all the countries in the European Union, it is Germany which has the best relations with Russia. And which, perhaps, is best placed to help negotiate an end to the gas crisis.


The two countries are major trading partners. They are even building a pipeline together - North Stream - which will bring Russian gas to Europe under the Baltic Sea, bypassing Ukraine.


Moscow claims this route will ensure there are no further interruptions to Europe's energy supplies.


Vladimir Putin is best friends with the German chairman of the pipeline consortium - former Chancellor Gerhard Schroeder.


What is more, Mr Putin speaks fluent German from his days as a KGB spy based in Dresden. (Angela Merkel speaks fluent Russian - so no language barrier there.)


But as the energy dispute between Moscow and Kiev drags on, the Germans are growing increasingly frustrated with the Russians.


Prior to Mr Putin's visit to Berlin, Chancellor Merkel warned the Kremlin its credibility as an energy supplier was on the line. She promised to pass that message on personally to Mr Putin during his visit to Germany.


Embarrassed and annoyed by the images of Europeans shivering without Russian gas, the Germans have been threatening to diversify their energy sources.


"Within the European Union, the subject of energy security is now very important," Guenter Gloser, Germany's minister for Europe, said.


"We need to be independent of those supplying our energy - so we need more energy efficiency, we need more renewable energies like solar projects and we need a range of energy partners - not just Russia."


That is easy to say - and it has been said many times before, not only by Germany, but by other EU countries.


History repeating itself


The last time Russia turned off the gas taps to Ukraine in 2006, causing temporary gas shortages further west, European leaders vowed that never again would they allow energy disputes to the east to leave Europe freezing.


The phrase "energy security" became the rallying cry of the EU.


There were calls to boost solar energy, wind power, and make plans to import liquid gas by sea. Anything to ensure that Europe would not be too dependant on the Russians and get caught out twice.


But three years on, it has happened all over the again.


Another dispute between Russia and Ukraine - and once again Europe is freezing. The EU is facing accusations it was too complacent and too divided over European energy policy.


"The usefulness of a crisis is that it forces you to look into the mirror," chief correspondent of Die Welt newspaper Michael Stuermer said.


"That didn't happen. This present crisis could be seen on the radar over the last three months. The signals were coming all the time. I don't think the German government or the EU Commission took note of the seriousness. We didn't learn much from the crisis of 2006."


Micahel Stuermer believes the latest row could nudge the EU to come up with a "coherent energy strategy".


Considering that the European Union currently gets a quarter of its gas from Russia, it is difficult to imagine such a strategy excluding Russia.

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http://www1.whdh.com/news/articles/world/BO101369/

Gas-starved EU nations seek end to energy crisis

Associated Press

January 14, 2009

MOSCOW -- The leaders of several gas-starved European nations traveled to Ukraine and Russia on Wednesday, pressing them to restore supplies as the EU threatened both with legal action for halting energy deliveries in the midst of winter.

But Ukraine's natural gas company said for a second straight day it would not send Russian gas along to Europe. It claimed that Russia's gas monopoly Gazprom was trying to force it to cut service to parts of Ukraine in order to send the gas along.

For his part, Russian Prime Minister Vladimir Putin accused Ukraine of holding European nations hostage and insisted the EU should not accept Ukraine's claims. He spoke as met with the prime ministers of Slovakia, Bulgaria and Moldova at his residence outside Moscow.

[ACTUALLY, WE WOULD ARGUE THAT THE NARROW-MINDED 'GREENIES' OF EUROPE ARE THE ONES HOLDING THE CITIZENS OF THE EUROPEAN UNION ENVIRONMENTAL HOSTAGES, GIVEN THE GREENIES' PREFERENCE FOR NATURAL GAS].

"No matter what papers others provide, I'll burn them in the oven," he told the visitors. "We opened the tap, and are ready to supply gas, but on the other side, the tap is closed.

"Nobody, no transit country, has the right to use its transit location to take other customers hostage," Putin declared.

Slovakian Prime Minister Robert Fico said "Ukraine is losing the trust of European partners because of its behavior."

"The most unpleasant part is that millions of Europeans feel like hostages and are truly suffering," added Bulgaria's Sergei Stanishev.

With no end to the politically charged dispute in sight -- despite a weekend agreement that sent teams of EU monitors out to pumping stations to keep tabs on the gas flows -- the EU was fed up.

European Commission President Jose Manuel Barroso warned Gazprom and Naftogaz, Ukraine's state-run gas company, that he will urge European energy companies to sue them unless they move quickly to restore gas supplies.

"If the agreement is not honored, it means that Russia and Ukraine can no longer be considered reliable partners for the European Union in matters of energy supply," Barroso told the European Parliament.

[WE ALWAYS KNEW THAT BARROSO WAS AN 'EINSTEIN'].

Gazprom stopped sending gas into Ukraine's pipeline system on Jan. 7, alleging that Ukraine was siphoning off supplies destined for Europe. Ukraine has denied the charges, claiming that Russia has not sent enough so-called "technical gas" to pump the rest of the gas west to Europe.

Gazprom cut off all gas supplies to Ukraine itself on Jan. 1, amid a clash over what price Ukraine should pay for gas in 2009.

The dispute has affected millions of people, mostly in eastern Europe and sent at least 15 European nations scrambling for heat. Thousands of businesses have had to shut down or cut production, forcing workers into involuntary layoffs.

Russia opened a tap to Ukraine on Tuesday after the hard-won EU deal to monitor gas flows, raising hopes across Europe.

But Ukraine's gas company Naftogaz did not deliver the gas to Europe, saying Gazprom demanded that it use a technically arduous route which would force Ukraine to halt supplies to a large swath of its own territory. Ukraine uses Russian gas, but also produces natural gas on its own and has large stockpiles of the fuel.

Naftogaz head Oleh Dubina said Gazprom made the same request again Wednesday -- and he would not agree to halt supplies to Ukrainian consumers.

"Unfortunately, we answered the same way: we cannot leave our regions without gas," Dubina told reporters.

Gazprom has rejected the claim, saying the route was fine.

Earlier in Kiev, Fico urged Ukrainian Prime Minister Yulia Tymoshenko to hold talks with Putin to resolve the dispute as soon as possible.

"We ask for talks between the prime ministers of Russia and Ukraine. This is an issue that is very important for us," Fico said.

Russia and Ukraine are deeply at odds over what Ukraine will pay for Russian gas in 2009. Ukraine last year paid $179.50 per 1,000 cubic meters of gas and its president said Tuesday that Ukraine will pay no more than $210 in 2009.

Russia wants Ukraine to pay market price for gas, about the $450 that European customers pay.

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http://www.themoscowtimes.com/article/1009/42/373535.htm

Gas Woes Threaten Economies [and damage relations that Russia has with certain countries”]

By Gordana Filipovic



Moscow Times


14 January 2009

-- A weeklong cut in gas supplies has prompted concern that some Balkan countries already hit by the world financial crisis could see dimmer economic prospects and lower job numbers as a result.

Supplies to Europe have been cut off for almost a week in freezing temperatures after Russia turned off the tap to Ukraine in a long-running feud. Even though a deal was reached Monday, the second in two days, gas supplies still failed to restart on Tuesday.

The Balkans took Europe's biggest hit, with hundreds of thousands of households initially losing heat and dozens of businesses forced to halt production.

Analysts said it was premature to assess the impact on growth, but lower industrial output for the month of January was possible. The midterm outlook depends on global economic conditions and the impact of falling global demand.

"Given lower demand, many firms have piled stocks in the last few months, and I don't think demand or sales will suffer," said Raiffeisenbank analyst Zdeslav Santic in Zagreb.

"But some producers, like those of construction materials, may be forced to reduce or stop production, which would lead to job losses," he said.

The economic impact could become more visible if the latest deal in restoring gas supplies hits a snag, especially for countries with little or no reserve, said Vladimir Gligorov of the Vienna Institute for International Economic Studies. "Croatia has had its own reserves to rely on at the time of crisis, Bulgaria may not have sufficient gas reserves, but they've got the European Union to turn to for assistance and Serbia has no reserves and no one to turn to," Gligorov said.

With politicians focusing on restoring heat to households, some factories reliant on natural gas have halted production. After a few days, Hungary and Germany agreed to sell some gas to EU-hopeful Serbia, where drugs company Hemofarm, owned by Germany's Stada, and fertilizer manufacturer Azotara suspended production.

The gas disruption has hurt the backbone of Bulgaria's industry, where steelmakers, chemical and fertilizer producers as well as food processors use natural gas. The national employers' organization has estimated daily losses at 500 million levs ($367 million), but direct losses were lower, at around 13 million levs a day, Economy Minister Petar Dimitrov said.

Neighboring Macedonia's main steel exporter halted work.

In Croatia, steel mills, sugar plants, chemical industry and construction material producers have been the most exposed as they rely on gas, the Croatian Chamber of Commerce said.

Incidentally, the gas outage even caused Sarajevo's eternal flame -- a monument to victims of World War II -- to go out last week.


The flame came on again when Hungary started shipping gas to Bosnia.

But a major impact on the Balkans' economic growth is seen as unlikely.


"The gas crisis is likely to have a modest measurable impact on growth in the first quarter, and the impact will be more sizable if the shutoff continues beyond this week," said Richard Segal, a UBA Capital analyst based in London.

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1137645

Rhetoric versus reality. Russian threats to European energy supply


By Andreas Goldthau



Energy Policy (36), 2008

As more than 50 per cent of overall European imports originate from Russia, fears have been expressed that the Kremlin could use energy resources as a foreign policy tool. A thorough assessment of domestic consumption, production and investment volumes however reveals that Russian supply will have difficulties in matching growing domestic and European demand. Hence, as the author argues, the threat to European gas supply does not lie in geopolitics, but rather in a lack of investment in the Russian upstream sector.

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http://www.radionetherlands.nl/currentaffairs/eur070315mc

Europe's dwindling gas reserves



by Wendy Braanker


Radio Netherlands Worldwide

[Netherlands does not import any Russian gas. Not yet. According to the President of the board of Dutch company Gasunie, Marcel Kramer, if it does happen, it will be an extremely small amount. The Netherlands has enough gas reserves for around 30 years in its gas fields near Slochteren in the north of the country.]

15-03-2007

Gas will eventually run out in Europe, not this year, not next year but soon. Delegates to a European gas conference currently being held in Amsterdam have concluded that the only way to solve the gas problem is for Europe to strengthen ties with countries such as Russia and Iran. However, not everybody is happy with that conclusion.

Europe depends on Russia for a quarter of its gas imports. Delegates to the Amsterdam gas conference, called Flame, concluded that the demand for gas will only increase, while European gas reserves are dwindling.

In an address to Flame, Professor Jonathan Stern from the Oxford Institute for Energy Studies said:

"The amount of gas extracted from within Europe will start to diminish around 2015. And that will cause problems... we will have to increase our imports from other countries."

Strengthen ties

European Union countries have to compete with the United States and Asian countries for gas supplies and the demand for gas has sharply risen throughout Asia and in the US. Solar and wind energy can meet some of Europe's energy needs but more time is needed if alternative energy is going to be a substitute for gas.

Professor Stern says the lack of alternative energy sources necessitates stronger European ties with Russia and energy producing countries in the Middle-East, and he comments: "It's irrelevant if we agree or disagree with the Russians, the Iranians or another possible gas exporters".

The professor of energy studies says Europe needs to stop telling other governments how to run their countries:"

That's the reason why dialogue between Europe and those countries is so problematic."

Power politics

In other words: European politicians and companies have to stop trying to force their way of doing things on gas exporting countries. Because of the increased profits generated by gas exports, these countries have increased their political power. And it is precisely the political power wielded by Russian President Vladimir Putin which is causing concern among European politicians and companies.

There is criticism from another corner as well. This week, Italian human rights activists - they are not the first - called on Italian Prime Minister Romano Prodi not to forget human rights in his trade discussions with Russian President Putin. However, energy is sure to play an important role in the talks between Mr Prodi and his Russian counterpart. Italy's energy giant En is on the point of signing a contract with Russia's state energy company Gazprom.

Soothing words

Gazprom, the world's largest gas company, was also at the Flame conference in Amsterdam and it tried to persuade Flame delegates that the Russian state-owned company is a trustworthy partner. [REALLY???] Sergei Korovin, Gazaprom's vice-president of international affairs and head of international projects, says as the world's largest gas producer and exporter, Gazprom will continue to operate in a responsible manner on the national and international gas market. Soothing words from Gazprom, probably aimed at calming fears that many companies have about investing in Russia ever since Gazprom forced Shell Oil to halve its share in a large-scale gas project on the Sachalin peninsular in December 2006. Shell was financially compensated for giving up 50 percent of its stake in the project [EXPROPRIATION OF FOREIGN ASSETS] but oil and gas companies want to build up their own reserves in order to guarantee a secure future. Money is not as important.

However, not dealing with Russia is not an option according to dozens of speakers at the Flame conference. Europe needs Russian gas. There are no alternatives.

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http://cleantechlawandbusiness.com/cleanbeta/index.php/629/europes-worsening-energy-crunch/

Europe’s Worsening Energy Crunch

Clean Beta

July 25, 2008

The European Union produced 9% less energy in 2006 than it did in 1997. Meanwhile, consumption rose by 7% and net imports rose by 29%. In 1997, the energy dependence rate stood at 45%. A decade later, it stands at 54%, according to the Statistical Office of the European Communities.

In 2006, the EU imported 2.4% of its total energy supply (1,010 million tons-of-oil-equivalent, or TOE) than the previous year. Oil and gas accounted for about 60% and 26% respectively of all imports. Russia was the primary supplier of crude oil and natural gas were Russia (33% of oil imports and 40% of gas imports in 2006).

Despite reduced energy consumption in 2006, energy production fell 2.3%, which drove up net imports by 2.4% in 2006 and the energy dependence rate to 54% from 53% in 2005.

Finland consumed roughly 10% more energy in 2006 than the preceding year. For the five largest energy consumers, which accounted for nearly two thirds of total consumption in the EU, consumption moved +0.5% in Germany, -1.2% in France, -1.6% in the United Kingdom, -0.6% in Italy and -0.5% in Spain.

Europe has actually gotten more dependent on energy imports in the past few years, especially in Cyprus, Malta, Luxembourg and Ireland. The countries with the least dependency on energy imports were: Poland (20%), the United Kingdom (20%), the Czech Republic (28%) and Romania (29%). More importantly, Denmark has achieved the unthinkable and become a net exporter of energy.

The lion’s share of Europe’s energy imports are oil and gas, which accounted for 60% and 26% respectively of net imports last year. Russia was the largest supplier of crude oil and natural gas, providing nearly a third of oil imports and more than a third of natural gas imports in 2006.