US bases powerful radar in Israel

 

The US military deploys long-range radar in Israel to give early warning of any missile strike by Iran, officials say.

US bases powerful radar in Israel
Mon, 29 Sep 2008 10:01:51 GMT

“Understanding the Georgia invasion” – Jerusalem Post

“Moscow’s military intervention in Georgia must be understood through the prism of global strategy and energy politics. Moscow seeks to intimidate energy producing countries once part of the Soviet Union, such as Azerbaijan and Turkmenistan, and to develop a grand anti-American energy coalition that spans from Iran to Venezuela. This poses a significant challenge to the West, and may yet require muscular Western counteraction. The small state of Georgia is a fledgling pro-Western democracy that seeks to join NATO and other Western political structures. Georgia, located next to powerful Russia, committed a grave mistake in its foreign policy this August. Tbilisi ignored the main virtue advocated by the great practitioners of international relations from Niccolo Machiavelli to Henry Kissinger – prudence – by attempting to regain military control of a seceding region which was supported by Moscow. Russia exploited the Georgian miscalculation to strike back and to remind everybody that Russia will flex its military muscles in areas considered to be its backyard. Moscow views with trepidation the expansion of NATO, of which it is not a member, toward its borders. Georgian accession to NATO is simply unbearable from a Russian perspective. Russia is threatened by the Western security architecture and will oppose encroachment on areas once Russian-controlled. Yet this understandable aspect of Russian behavior hides a more ambitious foreign policy goal of controlling the global energy sector, and using such leverage to challenge America in world affairs. The immediate goal of Moscow’s military intervention in Georgia was to intimidate the energy-producing countries once part of the Soviet Union, such as Azerbaijan and Turkmenistan, to return to the Russian sphere of influence. The Finlandization of the Caucasus and Central Asia will allow Russia, a great oil producer itself, greater influence over the world’s energy. Oil and gas constitute a strategic commodity that is different from coffee or refrigerators. Control of this commodity bestows considerable political influence. The Russians understand that such leverage can be effective against the energy-hungry European states who are already dependent to various degrees on Russian energy. By its actions in August, Russia decided to challenge America. Vladimir Putin seeks to create a wedge between the US and Europe by further increasing the European dependency upon Russian-controlled oil. GEORGIA IN itself does not produce oil, but hosts several pipelines transferring oil from Azerbaijan in the Caspian Basin. The Georgian territory helps bypass Russian land and prevents Russia from having a greater handle on moving oil from the Caspian to the West. Therefore, following the invasion, Russian troops took control of the Baku-Supsa pipeline (ending on the Black Sea), which runs close to present Russian military lines. The Russians also threatened control of the Baku-Tbilisi-Ceyhan pipeline (ending on the Turkish Mediterranean shore) by attacking its vicinity from the air. If the Russians remain in Georgia, they maintain control over great amounts of oil slated for the West that hitherto were unaffected by Russian preferences. Russia aims to strengthen key alliances with countries such as Iran and Venezuela in its quest for energy supremacy. Russia’s refusal to cooperate with the West in isolating Iran in order to curb its nuclear ambitions has remained an enigma to realpolitik observers, who expect it to prefer non-proliferation. Yet, if Russia’s grand strategy is to challenge the US, then one of its main tools is the political economy of energy. With a much greater nuclear arsenal, Russia is ready to tolerate a nuclear Iran. It believes it is strong enough to deter the ayatollahs if they can be harnessed under Russian grand strategy.

Moscow nourishes hopes of coordinating anti-Western policies with oil-rich Iran. A nuclear Iran may serve the Russian interest in detaching Gulf oil from American influence. This had been a long-standing goal of the Soviet Union. Facing an Iran armed with nuclear weapons, most oil producing countries in the Gulf will slither into the Iranian orbit. The Shi’ite areas are most vulnerable to Iranian influence. Noteworthy, the southern portion of Iraq as well as the northern province of Saudi Arabia, where significant amounts of oil are located, are heavily populated by Shi’ites (as is Iran).

A NUCLEAR Iran will also dominate the Persian Gulf and its energy output. A nuclear Iran may also destabilize Turkey, which serves as an energy corridor for the West. An emboldened Iran will be less reluctant to meddle in Turkish affairs and help the Islamic radical elements to create political turmoil and even an Islamic takeover of Turkey. Secular Turkey has been an anathema to the ayatollahs.

Further evidence for an anti-American grand strategy is the Russian behavior toward Venezuela, another major exporter of oil. Russia capitalized on the extreme anti-Americanism displayed by Venezuela’s leader, Hugo Chavez. We already see a minor Russian military presence in Venezuela and the Caribbean. The Moscow-Teheran-Caracas axis is currently in formation. Moscow is harnessing the oil riches of these two countries to challenge US hegemony in an increasingly energy dependent world. Iran and Venezuela cooperate willingly to see American influence reduced.

THE WEST must recognize the challenge ahead. Pavlovian responses urging engagement, which often is a euphemism for plain appeasement, are to be expected. Yet, it is an illusion to believe that the Russians will change their mind. Expansion of the EU and of NATO already has progressed too far from the Russian point of view. Russia’s security concerns, coupled with its historic imperialism, drive its strategy.

Therefore, if the West does not want to succumb to dependence upon a Russian-led energy coalition, it has to act as soon as possible. Alternatives sources of energy should be explored. Conserving energy is similarly important. At the same time, Western leaders should be aware that what Kissinger called in the mid-1970s "economic strangulation" might also require military responses. Soft power may not be sufficient to prevent the rise of an effective anti-Western energy coalition. “

http://www.jpost.com/servlet/Satellite?cid=1222017359649&pagename=JPost%2FJPArticle%2FShowFull

"Russia targets Halloween, Valentine’s Day"

 

Sept. 18, 2008 04:36 PM
USA Today

MOSCOW – Russia is opening a new front in its battle with the West over last month’s fighting in neighboring Georgia: a move to ban the Western holidays of Halloween and Valentine’s Day as bad influences on the nation’s youth. The State Duma, Russia’s lower house of parliament, will consider a measure this month to guard students from what the government considers destructive Western influences, such as the two festive celebrations that are growing more popular in Russia. Maxim Mishchenko, a Duma member, says he is pushing the bill to guard the “moral and spiritual upbringing” of the nation’s youth and to promote traditional Russian culture and values rather than those imported from the West.

The proposed legislation reflects the rising nationalism here and a sense that Russia is threatened by U.S. and European culture and military powers, analysts and lawmakers say. “All this is part of the mind-set of we need to protect ourselves – and protect ourselves in a conservative way,” says Maria Lipman of the Carnegie Moscow Center, a think tank.

The recent conflict with Georgia, in which Russian troops moved deep into the former Soviet republic, helps push the proposal, says Alexandra Ochirova, social issues commission chairwoman of the Public Chamber, a Kremlin-picked advisory group of prominent citizens. “The events in the Caucasus have direct connections with the policy of our state, because for the first time citizens have witnessed that the state is able to protect every concrete Russian citizen,” she says. The proposal dovetails with a new Russian version of Valentine’s, called the Day of Family, Love and Fidelity. The holiday, held in June, was backed by first lady Svetlana Medvedev and the Russian Orthodox Church. Among its goals: stimulate a sense of family life and to stem Russia’s declining birth rate. Mishchenko says students should celebrate Russian holidays, not those heralded in the United States and Europe. “Why necessarily celebrate St. Valentine’s Day?” he says. “Let them celebrate Russian ones.” “If the state won’t interfere, they (Russia’s youth) will behave like little monkeys, copying what doesn’t fit with the soul of our culture,” Mishchenko says.

Yevgeny Yuryev, another Duma member who is helping write the new policy, admits any outright ban could be counterproductive.

Instead, the Duma could declare that only traditional Russian holidays can be observed in schools, or require students to wear uniforms.

That would have the same result: no spooky costumes and no flowery cards.

http://www.azcentral.com/news/articles/2008/09/18/20080918russia-holidays0918-ON.html

"Why the Casualty Numbers Don’t Jibe" – St Petersburg Times

“By Yulia Latynina

Russia and South Ossetia can’t seem to agree on their casualty numbers. South Ossetian leader Eduard Kokoity claims that 1,600 people died in the five-day war, but Alexander Bastrykin, head of the prosecutor general’s Investigative Committee, puts the figure at 134.

What is the reason for the discrepancy? One possibility is that Bastrykin named the figure of 134 precisely because this was the correct figure. Don’t forget that before the war, Kokoity was all geared up for a military conflict. “We retain the right to strike Georgian cities, and we have the means to do this,” he said in an interview published in Nezavisimaya Gazeta. What “means” Kokoity had in mind became clear soon after his interview. On Aug. 6 — three days before the war — journalists who had been sent to report on the struggle the South Ossetian people were waging against Georgia, reported seeing Russia’s 58th Army positioned on the Russian side of the Roki Tunnel, the only entry point into South Ossetia. If, on the night of Aug. 8, South Ossetian and Abkhaz separatists, armed with Russian tanks, fighter aircraft and Tochka-U missiles, had fought against the Georgians without the help of Russian forces, Moscow’s position as an innocent bystander in the conflict would have been unassailable, and there would have been no talk of international sanctions against Moscow. If this were the case, on Aug. 8 during the Olympic Games in Beijing, Prime Minister Vladimir Putin could have looked into the eyes of not only U.S. President George W. Bush, but also Georgian President Mikheil Saakashvili who was supposed to attend the games, and tell both of them that Kokoity had lost his mind by unilaterally initiating this attack against Georgia. Furthermore, Putin could have played stupid by claiming not only that he knew nothing about Kokoity’s plans, but also that he couldn’t clarify the situation with the South Ossetian president because he was unable to reach the Kokoity by cell phone from Beijing. Russia very much wanted to lay low in the conflict by quietly and covertly aiding South Ossetia’s forces. But when Saakashvili launched a preemptive attack against South Ossetia’s beleaguered and outnumbered army and when it became clear that South Ossetian forces were unable to resist, Moscow was forced to fight Georgia directly in open warfare. The result was a war fought mainly with artillery and aerial bombings. From that point on, it became clear to the world that it was Russia’s massive 58th Army — and not South Ossetian fighters — that was shelling South Ossetia and parts of Georgia. It was also clear that Moscow carried full responsibility for the aggression.  In the end, the Kremlin failed to achieve the main goals of the war that it had been planning for many years: toppling Saakashvili and gaining control of the oil pipeline running through its territory. The only winners in this fiasco turned out to be the South Ossetian leadership. Behind the cover of Russia’s forces in the region, they were able to finally resolve the “Georgian problem” in their republic. “We have leveled them all,” said Kokoity, referring to the destruction of Georgian villages located in South Ossetia. Russia is probably not too happy about having to bear the entire political burden of fighting the war against Georgia. Moreover, the victory cost Russia an incredible amount of money when considering all of the armaments, bomb shelters and other military aid Moscow poured into South Ossetia in the months and years leading up to the war. Indeed, the Kremlin is upset that it has been stuck with a huge bill for the war in both financial and political terms. Maybe this explains why Russia’s Investigative Committee figure for war casualties is 12 times lower than what Kokoity claims.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.”

http://www.sptimesrussia.com/index.php?action_id=2&story_id=27169

"A red light for Putin" – Boston Globe

“RUSSIA’S MILITARY success against tiny Georgia is having repercussions that Prime Minister Vladimir Putin and his stand-in president, Dmitry Medvedev, probably did not anticipate and surely do not welcome. Simply put, Putin has alienated China and other countries that share his interest in countering American power.

On Friday, the Asian Development Bank, in which China plays a leading role, extended a $40 million loan at the lowest possible rate to Georgia, weighing in against Russia’s attempt to alter borders by force. Earlier, the Shanghai Cooperation Organization – which includes China, Kyrgyzstan, Kazakhstan, Tajikistan, and Uzbekistan as well as Russia – refused to countenance Russia’s recognition of the independence of two breakaway regions of Georgia that Russian troops now occupy. The rebuff of Putin is all the more striking because – at least from Putin’s perspective – the central purpose of this group was to form an eastern counterweight to NATO. China and the Central Asian states may share the Kremlin’s resentment of American dominance in the world, but they are not so eager to construct a multipolar world that they will act against their national interests. Beijing has marshaled enormous resources to keep other countries from recognizing Taiwan as an independent country. China’s entire propaganda campaign against the Dalai Lama is based on the false claim that he wants to split Tibet off from China. The Chinese leadership has also fiercely repressed any sign of separatism among the Muslim population in the north-western region of Xinjiang. China, in short, opposes all outside interference within its borders and extends the same privilege to other governments, however odious. Putin upheld the same principle when he objected to President Bush’s recognition of Kosovo’s independence from Serbia. But in declaring that South Ossetia and Abkhazia were no longer under the sovereignty of Georgia, Putin forced China to choose between its alliance with Russia and the principle of noninterference and fixed borders. China chose the principle. The other Shanghai group members have their own reasons for refusing to support Russia’s redrawing of the map. As former republics of the vanished Soviet Union, they all have ethnic Russians living within their borders. The last thing they want is to encourage the Kremlin to go about “liberating” these communities. Putin may want to avoid a unipolar world order centered in Washington. But like Bush, Putin is discovering there is a price for resorting to unilateral force to remake a region of the world.

del.icio.us Tags: ossetia, georgia, russia, south ossetia, abkhazia, putin, medvedev, Nato

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2008/09/16/a_red_light_for_putin/

Georg Christoph Lichtenberg

 

“Perhaps in time the so-called Dark Ages will be thought of as including our own.”

Georg Christoph Lichtenberg
rss@quotationspage.com (Quotes of the Day)
Tue, 16 Sep 2008 00:00:00 GMT

"In Wake of Georgian War, Russian Media Feel Heat" – Washington Post

 

“MOSCOW — At the height of the crisis over Russia’s invasion of Georgia last month, Prime Minister Vladimir Putin summoned the top executives of his nation’s most influential newspapers and broadcasters to a private meeting in the Black Sea resort of Sochi.

The Kremlin controls much of the Russian media, and Putin occasionally meets with friendly groups of senior journalists to answer questions and guide news coverage. On Aug. 29, though, for the first time in five years, he also invited the editor in chief of Echo Moskvy, the only national radio station that routinely broadcasts opposition voices.

For several minutes, according to people who attended the session or were briefed about it, Putin berated the editor in front of his peers, criticizing Echo’s coverage of the war with Georgia and reading from a dossier of transcripts to point out what he considered errors.

“I’m not interested in who said these things,” one participant quoted Putin telling the editor, Alexei Venediktov. “You are responsible for everything that goes on at the radio station. I don’t know who they are, but I know who you are.”

The message to the 30 or so media executives at the gathering was clear: With Russia occupying parts of Georgia and locked in perhaps its most serious conflict with the West since the Cold War, they should be especially vigilant against reporting anything that the government might find objectionable.

Four months after Putin handed the presidency to his protégé Dmitry Medvedev, mildly raising expectations that the Kremlin might relax its grip on political life here, the continuing standoff with the West over Georgia has largely ended that talk and brought fears that a turn toward increased repression might be underway instead. Prosecutors have opened a criminal investigation into whether Echo Moskvy has broadcast “extremist” speech. A leading opposition figure in the troubled Ingushetia region has been shot dead by police. And a campaign to undermine the reputations of nongovernmental organizations seems to be picking up. In remarks to a group of foreign academics last week, Putin said Russia needed to act in Georgia because “certain nongovernmental organizations in certain republics” were using the crisis to justify separatism in the Russian part of the Northern Caucasus region. The domestic fallout of the Georgian war can also be seen in the caution and anxiety of journalists, civic activists and others who work near the boundaries of what the Kremlin tolerates — and who little more than a month ago were optimistic those limits might be expanding.

“When Medvedev took office, we hoped for a new thaw,” said Mariana Maximovskaya, deputy editor of Ren-TV, a station that often broadcasts voices critical of the government. “But after the Georgian war, people are now very concerned about a new tightening inside the country.”

click for full article  http://www.washingtonpost.com/wp-dyn/content/article/2008/09/14/AR2008091402249.html

 

del.icio.us Tags: ossetia, abkhazia, georgia, russia, south ossetia

"Georgia offers fresh evidence on war’s start" – International Herald Tribune

Russian tanks drive from Georgia’s breakaway region of South Ossetia towards the Roki tunnel that leads into Russia in August 2008. The exact timing of Russia’s advance through the tunnel at the war’s start is in dispute. (Vasily Fedosenko /Reuters)

“TBILISI, Georgia — A new front has opened between Georgia and Russia, now over which side was the aggressor whose military activities early last month ignited the lopsided five-day war. At issue is new intelligence, inconclusive on its own, that nonetheless paints a more complicated picture of the critical last hours before war broke out.

Georgia has released intercepted telephone calls purporting to show that part of a Russian armored regiment crossed into the separatist enclave of South Ossetia nearly a full day before Georgia’s attack on the capital, Tshkinvali, late on Aug. 7. Georgia is trying to counter accusations that the long-simmering standoff over South Ossetia, which borders Russia, tilted to war only after it attacked Tshkinvali. Georgia regards the enclave as its sovereign territory. The intercepts circulated last week among intelligence agencies in the United States and Europe, part of a Georgian government effort to persuade the West and opposition voices at home that Georgia was under invasion and attacked defensively. Georgia argues that as a tiny and vulnerable nation allied with the West, it deserves extensive military and political support. Georgia also provided audio files of the intercepts along with English translations to The New York Times, which made its own independent translation from the original Ossetian into Russian and then into English. Russia, already facing deep criticism and the coolest audience in European capitals since the cold war, is arguing vigorously against Georgia’s claims. Last week, Prime Minister Vladimir Putin expressed bafflement at what he saw as the West’s propensity to believe Georgia’s version of events.

In an interview arranged by the Kremlin, the Russian military played down the significance of the intercepted conversations, saying troop movements to the enclave before the war erupted were part of the normal rotation and replenishment of longstanding peacekeeping forces there.

But at a minimum, the intercepted calls, which senior American officials have reviewed and described as credible if not conclusive, suggest there were Russian military movements earlier than had previously been acknowledged, whether routine or hostile, into Georgian territory as tensions accelerated toward war. They also suggest the enduring limits — even with high-tech surveillance of critical battlefield locations — of penetrating the war’s thick fogs. The back and forth over who started the war is already an issue in the American presidential race, with Governor Sarah Palin of Alaska, the Republican vice presidential candidate, contending that Russia’s incursion into Georgia was “unprovoked,” while others argue that Georgia’s shelling of Tshkinvali was provocation. Georgia claims that its main evidence — two of several calls secretly recorded by its intelligence service on Aug. 7 and 8 — shows that Russian tanks and fighting vehicles were already passing through the Roki Tunnel linking Russia to South Ossetia before dawn on Aug. 7. By Russian accounts, the war began at 11:30 that night, when President Mikheil Saakashvili of Georgia ordered an attack on Russian positions in Tshkinvali. Russian combat units crossed the border into South Ossetia only later, Russia has said. Russia has not disputed the veracity of the phone calls, which were apparently made by Ossetian border guards on a private Georgian cellphone network. “Listen, has the armor arrived or what?” a supervisor at the South Ossetian border guard headquarters asked a guard at the tunnel with the surname Gassiev, according to a call that Georgia and the cellphone provider said was intercepted at 3:52 a.m. on Aug. 7.

“The armor and people,” the guard replied. Asked if they had gone through, he said, “Yes, 20 minutes ago; when I called you, they had already arrived.”

Shota Utiashvili, the director of the intelligence analysis team at Georgia’s Interior Ministry, said the calls pointed to a Russian incursion. “This whole conflict has been overshadowed by the debate over who started this war,” he said. “These intercepted recordings show that Russia moved first and that we were defending ourselves.” The recordings, however, do not explicitly describe the quantity of armor or indicate that Russian forces were engaged in fighting at that time.”

click for full article   http://www.iht.com/articles/2008/09/16/europe/16georgia.php

 

del.icio.us Tags: ossetia, abkhazia, russia, georgia, south ossetia

"Russia shows off the spoils of war in Georgia" – The Telegraph

“By Shaun Walker in Moscow
Tuesday, 16 September 2008

The Russian army has put on display war trophies captured during the Georgia conflict at a museum in Moscow, in an attempt to reinforce its claim that the United States and the West were responsible for encouraging Georgia to attack its breakaway region of South Ossetia. After Moscow officially recognised South Ossetia and Abkhazia as independent 10 days ago, the exhibition is another sign that, far from caving under Western criticism of its actions, Russia is keen to milk the propaganda spoils of the war. The display, at The Central Museum of Armed Forces, displays weapons, uniforms and personal possessions belonging to Georgian soldiers killed or wounded during the fighting along with graphic photographs of the burnt and mutilated bodies of dead Georgian soldiers. A museum guide, who was showing a group of Russians around the exhibit, paused at a display showing the personal photos of a dead Georgian soldier. One of them showed him having dinner with relatives, another had him in a comradely pose with a black man. “Look, here’s one of the Georgian soldiers with a black-skinned man, an African,” said the guide. “We all know that there are a lot of Africans in the US Army, this was probably one of his instructors.” Also on display are a set of textbooks entitled American Language Course, Level IV. The museum claims they were taken from a Georgian soldier in South Ossetia, though it might seem improbable that the soldier would take the bulky books with him to the battleground of Tskhinvali. The museum itself is mostly devoted to the Soviet army, and its labyrinthine set of halls mainly cover the Second World War. A tank from that war stands on a plinth outside, and a 10ft-high bust of Lenin greets visitors as they walk into the main hall. Most of the exhibitions offer a very skewed and unrevised Soviet version of history – the section on the building of the Soviet army in the 1920s does not once mention Leon Trotsky, who was instrumental in organising the early Red Army but later fell out of favour with Stalin and was erased from Soviet history books. The Second World War section glosses over controversial aspects of the war, and Russia’s long and costly conflicts in Afghanistan and Chechnya are hardly mentioned. The same approach seems to have been taken for the Georgia exhibition. In a Soviet-style touch, there are more than a dozen photographs of President Dmitry Medvedev, and an array of his speeches and orders to the military during the conflict. A timetable of the war leaves out several important events. There is also a distinctly anti-Western tone to the exhibition, with several pieces of “Nato” equipment and army clothing on display, and a list of which Western countries had armed Georgia. The graphic nature of some of the exhibits shows the depth of ill-feeling that has developed between Russia and Georgia after last month’s conflict. Both sides have paraded their war gains in public – when the Georgians shot down four Russian pilots at the height of the conflict last month they paraded two bodies on national television, and The Independent was later given access to interview the two surviving pilots. Russia is now taking its turn to display the spoils of the war which it unequivocally won. Moscow has been angry over the coverage that the conflict received in the West, and is insistent that the conflict was provoked by the Georgian President Mikheil Saakashvili, with tacit backing from the West. Last week Mr Medvedev said that Russia would “consistently and meticulously” re-equip its armed forces, which have a reputation of being poorly trained, underpaid and rife with bullying. “There is no doubt that our decision has been influenced by the events in the Caucasus,” he said. “They have made this task one of the top priorities for the next few years.”

del.icio.us Tags: russia, georgia, abkhazia, south ossetia, ossetia

"Russia’s Market Plunge May Temper Medvedev’s Georgia Moves" – Bloomberg Repost

“Sept. 15 (Bloomberg) — When it comes to containing Russia, the invisible hand of the markets may be the West’s most potent weapon.
Tightening access to international credit and mounting stock losses are hurting Russian billionaires as well as state- owned corporations, prompting calls by businessmen to heed Western complaints over Kremlin policy in Georgia.
The country’s biggest business association, the Russian Union of Industrialists and Entrepreneurs, will raise the issue today at a meeting with President Dmitry Medvedev, said Igor Yurgens, a board member and adviser to Medvedev.
“This is a natural alarm clock,” Yurgens said in an interview. “It’s a concern to big owners, it’s a concern to the Russian economy. There are limits to what Russia can do alone if it chooses to be isolated.”
After rejecting Western appeals not to recognize breakaway Georgian regions, Medvedev last week signaled compromise for the first time. He agreed to implement a European Union- brokered cease-fire and pull troops back into the disputed territories of South Ossetia and Abkhazia.
Last month’s five-day war, triggered by Georgia’s effort to retake South Ossetia, sent equity, debt and currency markets reeling, reflecting investor worries that commercial ties would fray.
Feeling a `Jolt’
Finance Minister Alexei Kudrin acknowledged the impact Sept. 11, saying Russian companies felt a “jolt” as reaction to the war added to the fallout from turmoil in global financial markets. Medvedev called for officials to do “everything necessary” to attract capital. Central-bank chairman Sergey Ignatiev said the bank was taking “massive measures” to provide extra funds to lenders.
The U.S. dollar-denominated RTS index has plunged more than a quarter since war broke out Aug. 7 — even after a 3.3 percent bounce Sept. 12 — putting its loss since July 1 at 42 percent. The ruble is close to a 13-month-low and investors have pulled $35 billion from Russia since the war, according to BNP Paribas SA. That is the worst capital flight since the 1998 debt default; the cost to insure against default has risen to a four-year high.
That’s making it pricier for the two biggest energy companies, OAO Gazprom, where First Deputy Prime Minister Viktor Zubkov succeeded Medvedev, 43, as chairman, and OAO Rosneft, whose chairman is Deputy Prime Minister Igor Sechin, to borrow abroad.
Sberbank Loan
State-run OAO Sberbank, Russia’s largest bank, was the first Russian company to price a loan since the war. To borrow $1.2 billion, it was forced to pay almost double the interest- rate margin above the London interbank offered rate that it paid in November, or 85 basis points.
Among those feeling the pinch are the owner of steelmaker OAO Severstal, Alexei Mordashov, who was listed as the world’s 18th richest person with $21.2 billion by Forbes magazine in May. The value of his stake in the company is some $2 billion, or 15 percent, lower than it was before Aug. 7, putting it at about $12 billion.
“The government will soften its stance because Gazprom needs to refinance, Rosneft too,” said Irina Yassina, a researcher at the Moscow-based Institute for Economy in Transition. “This isn’t just a question of national security, it’s a matter of personal wealth of top officials.”
While losses have mounted, complaints have been muted. The reluctance of those with the most at stake to criticize the government stems from the fate of Mikhail Khodorkovsky, once Russia’s richest man.
Prison Khodorkovsky is now serving an eight-year prison term for fraud and tax evasion, charges he blames on his political opposition to Vladimir Putin, 55, then Russia’s president, now its prime minister, and still the paramount source of political power in the country.
Alexander Lebedev, a billionaire who owns 30 percent of OAO Aeot, says the government has intimidated even the wealthy into silence. “Businessmen are frightened,” Lebedev, whose stake in the airline is worth some $190 million less than before the conflict, said in an interview.
While he criticized the government’s “stupid, militaristic rhetoric” since the war, he said he had no means to convey his concerns. But the need for action is urgent, Lebedev said: “There is panic on the markets, liquidity has practically dried up.”
Billionaire Vladimir Potanin, the main shareholder in OAO GMK Norilsk Nickel, the biggest mining concern, complained to Medvedev last month about the credit squeeze, state-owned news agency Itar-Tass reported. Sergei Porshakov, an official at Potanin’s holding company Interros, confirmed the meeting with Medvedev, though he declined further comment.
Unyielding Rhetoric from Russia’s leaders has remained unyielding as U.S. and European officials express concern over Russian aims in former Soviet states, particularly Ukraine.
Even with central-bank sales of dollars to prop up the ruble, Russia still has $573.6 billion of foreign reserves, the world’s third-largest stockpile, giving it plenty of financial ammunition to withstand Western condemnation.
Yet investors say Russia, the world’s biggest energy exporter, may have to curtail ambitions to broaden an economy now largely dependent on oil and gas.
“Unless they come to terms with what caused the market to collapse, they won’t build the foundations for sustainable growth,” said James Beadle, chief investment strategist at Pilgrim Asset Management in Moscow.”