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A Good Deal
Thu, 2010-04-22 23:30 — admin
A gas supply agreement signed yesterday by the presidents of Russia and Ukraine dramatically changes the prospects for both oil and gas shipment across and under the Black Sea; extends Russia’s Black Sea Fleet lease of the Sevastopol base by another 25 years; and costs Gazprom nothing.
The terms of the deal promise to change the future investment prospects for the Ukrainian ports of Odessa and Yuzhny at the expense of Burgas, Bulgaria. Constanta , Romania, will also gain at Burgas’s expense if the new agreement changes the routing for Gazprom’s South Stream gas pipeline across the Turkish and Bulgarian seabeds, to permit the shorter seabed route via Ukraine and Romania.
According to the press announcements so far, Presidents Dmitry Medvedev and Victor Yanukovych have agreed to a 30% discount price for 30 billion cubic metres of Russian gas to be delivered to Ukraine this year, and 40 bcm to be delivered annually from next year to 2019. The effective purchase price for Kiev will be about $230 per thousand cm, well below the $334 asking price from Gazprom, which has been on the table since the start of this year. The export volumes to Ukraine for this year have been lifted from 33.75 bcm, agreed with Naftogaz-Ukraine last November, to 36.5 bcm; the discount will cover the first 30 bcm sent to Ukraine, and the first 40 bcm thereafter.
The savings, estimated at $40 billion ($4 billion per annum) over the term of the agreement, will be applied to the extension of the Sevastopol naval facility lease. But Gazprom will not lose this amount from its revenue stream. Instead, a zero export duty for Gazprom deliveries to Ukraine will be introduced, which is equivalent to the 30% discount in pricing. As a result, the Russian government will receive less tax – about $3 billion less per annum, according to one bank estimate.
By removing the risk of Ukraine-related disruptions of gas flows and Gazprom’s sales revenues to Europe, the agreement relaxes a costly drag on Gazprom’s share price and market value. The company’s current market capitalization is $141 billion, down 6% in the year to date, trailing well behind Russia’s other oil and gas companies, and behind the RTS stock market index as a whole.
A Ukrainian offer is also on the table for Gazprom to take equity in Ukraine’s gas distribution and pipeline system to further reduce the likelihood of supply cutoffs for European consumers in future.
Putin And The Hand of God
Tue, 2010-04-13 13:12 — adminPrime Minister Vladimir Putin reacted in a most admirable, humane and graceful manner to the death of Polish President Lech Kaczinski and 96 leading Polish citizens in a plane crash in Smolensk, Russia. The crash robbed Poland of a whole generation of political, intellectual and military leaders. As Poland and Europe stood silent and stunned, Putin led Russians in grief.
It was yet another display of natural leadership by the man who has established himself as the "strongman" of Russia and cast himself as an iron-man. Such emotional display has been missing throughout his political career. Whether it was the Kursk Submarine disaster or Nord-Ost theater seize, Moscow terror attacks or the Beslan school massacre by Chechen terrorists - Putin has always been been a combative and steely leader.
Poles and Russians seem not indifferent to this new side of Putin. Putin moved beyond display of personal grief. Russian state television showed a Polish film on the World War II era Katyn massacre in which Stalin ordered killing of over 15,000 Polish troops. It was a rare admission of historic guilt and a fitting tribute to the Polish leadership that perished on a trip to the site of Katyn massacre.
But just as a new and more personable facet of Vladimir Putin emerged from the tragedy, the personality of Russian President Dmitry Medvedev also came under spotlight. Russians could not but help notice the shell shocked Russian President in contrast with able and emotive Vladimir Putin.
While Putin appeared sad and shaken by the tragedy, Medevedev seemed lost and clueless. He seemed eminently unsuited as the mourner-in-chief of Russia. He conveyed neither comfort nor grace in the aftermath of the accident. His stiff demeanor after Moscow Metro blasts was also too scripted. He seemed too well heeled and buttoned up. It is to be wondered whether Putin has been holding Medvedev back from revealing himself so as not to overshadow him or if the man really is a cipher.
Poland might have been robbed of its leadership by fate but it is not politically bankrupt. Democratic societies can rise through and beyond tragedies. No matter how well man scripts political dramas, God always gets the last word on stage. Looking at the smoldering remains of Smolensk plane crash Putin might well have been pondering if he has factored in fate and mortality when planning political succession in Kremlin. Perhaps he has left Russia too vulnerable by placing a young and artificially constructed leader in charge.
Putin – Medevedev Hold On Power Slips
Mon, 2010-04-12 07:52 — adminPrime Minister Vladimir Putin has used terror attacks in the last decade to push sweeping legislative changes, curtail media and personal freedoms, and to settle political scores. Recent Moscow metro blasts have shown how the duopoly of Vladimir Putin and his prodigy Dmitry Medvedev is running out of such measures to keep an absolute hold on power by playing to Russian fears against terror and foreign enemies. Just as President George W. Bush and the Republican–controlled congress pushed through a bevy for laws under the “Patriot Act” that violated many fundamental constitutional principles of United States after the September 11, 2001 terror attacks; Russian leaders lose no opportunity to shrink personal freedoms and human rights when terror raises its head.
Now, after the Moscow metro blasts that killed 39, President Dmitry Medvedev has stated that “brutal” measures will be taken against terrorists and their networks. To convey the message of toughness, he even dressed like his mentor Vladimir Putin in a black suit, dark glasses and round neck shirt on a visit to Southern Russia. These measures against Chechen terrorists and their international network are unavoidable and perhaps even necessary, but the bluster by Medvedev and Putin, who oversee a highly centralized state ruled by a powerful siloviki or “strongmen” coterie, is now looking more like a toothless yawn.
In 1999, Vladimir Putin’s ascent to power coincided with a series of deadly blasts in Moscow and two regional cities, in which over 293 died. Putin lost no time in establishing his ”strong man” image and started the second war in Chechnya to deal with the Islamo-fascists that had taken control of the mountainous state. Nearly 25,000 died in this war and many thousands went missing. There was untold suffering for the civilians of Chechnya who suffered both at the hands of local warlords and advancing Russian soldiers. Faced with defeat in war, Chechen terrorists struck back with primeval barbarity. With each attack, Putin tightened his hold on power in Russia. The ghastly attack by Chechen terrorists on a school in Beslan in 2004 led to direct rule on Russian regions from the Kremlin on the sprawling country with its 11 time zones and 83 regions. Since then, all regional Governors are no longer elected by free choice–they are essentially appointed by Vladimir Putin.
The stated purpose of the changes Putin brought in was to protect Russia from a host of enemies of the Russian state–oligarchs that were undermining the Russian economy, foreign powers that were subverting Russian security with the help of former Soviet satellite states like Georgia, and the Chechen terrorists that established a defacto Islamic khanate and were a bigger threat to the world than Afghanistan ever was or could be. There was some truth to all these threat perceptions: Russia was facing many existential crises and vultures were circling. But much like his soulmate George W. Bush, Vladimir Putin took to curtailing human rights and democratic freedoms internally to fight these various enemies. He promised to strengthen the state by bringing in a “dictatorship of the law,” and ended up weakening the nascent democracy. His appeal lay in the promise that his siloviki would deliver security and a tamed oligarchy would mean wider economic growth and prosperity.
Russian economy has been in tatters since the global financial meltdown. Now the Moscow Metro blasts show that the promise has failed on both counts. What remains to be seen now is how Russian people react in the next poll to the duopoly and its attempts to hold on to power.
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