The Wall: 1989-2009

In November 1989 I slurped pink penicillin for the first time. Just days before, I turned 10 and was celebrating my birthday fighting a nasty case of some kind of bacterial infection. I remember waking up in the middle of the night stricken by fever dreams of angry ninja turtles in my room.

Fortunately, I had a mini black and white television with dials that clicked into a few UHF and VHF channels, most of which was white noise. A real luxury at the time. On that Saturday night, I clicked to Peter Jennings standing in front of a crowd of ecstatic Berliners tearing down the Berlin Wall. Even as a kid, I got a sense of this paradigm shift. I belong to the last generation to grow up with the Cold War. It wasn't duck and cover and bomb shelters – it was Rush N' Attack, it was Rocky IV, it was "American Soviets," it was good guys versus bad guys. From what I was told, the bad guys were finally losing and we had won.

The June elections in Poland, the exodus of Hungarians and Czechs westward on sealed trains, and Gorbachev's glasnost and perestroika -- an ill-fated attempt to revive Leninism -- really helped spark the 1989 revolutions. But as far as tangible symbols go, the Wall was it. Chipping down the concrete in Berlin was followed by the televised execution of Ceausescu in Bucharest, on Christmas Day and later the tearing down of Felix Dzerzhinsky's statue in Moscow. Tangible signs broadcast on television.

In December 1991, one of my chores was recycling the newspapers. I remembered seeing the headline that the Soviet Union was done, then tossing the newspaper into the bin with blackened fingerprints. Soon, us kids were sending in for znachki and patches in plastic cases -- unwanted Soviet symbols -- with 50 cents and 1 proof of purchase of Barq's root beer.

There are still walls dividing Cyprus and Korea. A Wall has just been strengthened between Mexico and the U.S. – the Crystal Frontier, the Tortilla Curtain. The Schengen expansion last year has created another dividing line in a Europe of four different classes – between fourth-tier Ukrainians, third-tier Romanians, second-tier Poles and first-tier Germans. Sadly we haven't learned much.

Russians remain bitter, longing for their defeated superpower status. Vasily Likhachev in an op-ed last month bitterly warned of constructing new Berlin Walls in Europe. But instead of calling for greater recognition of global divisions, he instead blamed Poland, Georgia and Baltic states as the "main instigators of this division and antagonism," countries that "under the patronage of the United States" are "actively cultivating Russophobia to give the United States the upper edge in the game." He goes on to describe Russophobia has the "political AIDS of the 21st century."

As president of a resurgent Russia, Vladimir Putin said that the fall of the Soviet Union was the “greatest catastrophe of the 20th century,” a fall that began with the Wall's demise. In a documentary released this week, Putin revealed his feelings as the Wall came down as he served as a KGB officer in Dresden. Putin said, "I was told that nothing could be done without orders from Moscow. And Moscow is silent." While in the film Putin admits that the end of East Germany was inevitable, he acknowledged that his own country was disappearing.

For myself, it is a cause of celebration. I've been to Fulton, Missouri in my home state where the Wall stands as a memorial. I've paid homage at the chunks in DC and New York. On one cold November weekend two years ago, I took the tour of the remaining wall slabs in Berlin. I can remember standing by the Wall, but there were no guards shooting above our heads at the Death Strip. The old Stasi headquarters was silent. The memorials remain, but the Berliners do not live entirely in the past. Walking near Alexanderplatz and Rosa Luxemburg Straße in the former Soviet sector, it was getting colder, so I had to warm up by going into a brewery to enjoy some of the best dunkelweiß I've ever had.

Water Cannons on Babushki

On October 27, Prime Minister Vladimir Putin ordered Kaliningrad governor Georgy Boos to pay wage arrears of 480 million rubles ($17 million) to employees of the bankrupt airline KD Avia after angry workers staged a protest. During the strike, one banner held up by a protestor read: "KD Avia is another Pikalyovo."

Their protest, unlike the many unknown and unreported demonstrations across Russia, is like Pikalyovo only in one way -- Putin decided to meet their demands publicly. It seems that the government is keeping a tenuous balance -- projecting the image that the government (Putin himself) is helping workers stunted by the economic crisis, while keeping a tight lid on future outbursts.

The Moscow Times reports that "Interior Ministry officers tested out their newest techniques for dispersing rallies yesterday, in exercises that news agencies said were focused on dealing with angry pensioners. According to the ministry’s scenario for the drill, a group of pensioners gathered for an unsanctioned demonstration and blocked an important highway to seek social support, Interfax reported. Within several minutes, the crowd was dispersed with water, tear gas and stun grenades, while some of the elderly demonstrators were arrested." The Interior Ministry later said that that special equipment was not “used and is not generally used in practice, except for psychological influence.”

Brandishing water cannons at babushki? It appears they are the real enemy, not "foreign-backed" color revolutionaries.

Biden in Warsaw: Life After the Shield

Vice President Biden's visit to Poland, Czech Republic and Romania was a make-up tour following the recent reevaluation of the BMD system in Central Europe after subsequent fears were raised that relations would be damaged. While the trip certainly proved to be a case of "Joe playing damage control," in the long run not too much damage was done.

While the September 17 decision to change course on the BMD program was absolutely ill-timed, the U.S. Vice President's fence-mending visit one month later attempted to quell fears, some real and some irrational, that the U.S. was abandoning its partner in Europe's east. Biden paid respects at the Warsaw Ghetto Monument. He met with Polish troops who have served in Afghanistan and Iraq. He confirmed U.S. support for Ukraine and Georgia's NATO entry, pointing out that the alliance itself plays a role in this decision, as well as the countries themselves.

As a result of the meetings, Poland will be equipped with SM-3 interceptor missiles by 2018. The ship-based anti-ballistic missiles are designed to counter a smaller threat, but by the time they are deployed in Poland, the SM-3s would be advanced enough to shoot down ICBMs.

The overall mission drift of the BMD program was apparent during the visit. The shield, designed to protect Europe from Iranian long-range ICBMs, officially has become a symbol of bilateral ties and a trump card for politicians to exploit in the U.S.-Russia Great Game. Tony Blinken, Biden's national security adviser, stated “What really created an initial problem were headlines that fundamentally misunderstood, or misrepresented, what we were doing.”

Biden made reassurances to Tusk, stating "this strategic assurance is absolute, absolute, Mr. Prime Minister,” adding “make no mistake about it: Our commitment to Poland is unwavering” (NYT, 20 October). From the Polish perspective, these statements helped to calm fears and it appears to have helped. President Kaczyński admitted that Biden's visit "filled him with optimism" after the September 17th let down. The Polish president stated that "We needed confirmation, and I got this confirmation, about the Polish-American alliance within NATO and within the framework of bilateral relations" (Gazeta Wyborcza, 21 October).

From the U.S. perspective, however, much of the back-patting seemed like overkill. In an interview with Rzeczpospolita, Biden stated: "I want to say clearly and distinctly: our commitment to our common security is treated with the utmost seriousness. Pursuant to Article 5 attack on one member country is the same as an attack on all members. As for our determination and commitment, it should not be in any doubt." On Afghanistan, Poland and the U.S. are walking lock-step and Poland is a contributor to the ISAF mission, not a reluctant member of the "coalition of the unwilling." Both the U.S. and Poland, in principle, support Ukraine and Georgia's NATO succession, provided all requirements are fulfilled.

Meanwhile, this week it was reported that Gen. Rick Hillier, former head of Canada's armed services, has written a scathing criticism on NATO in a book, saying the alliance was "dominated by jealousies and small, vicious political battles" and a "lack of cohesion, clarity and professionalism" at the start of the Afghan mission. He added:

"Afghanistan has revealed that NATO has reached the stage where it is a corpse decomposing and somebody's going to have to perform a Frankenstein-like life-giving act by breathing some lifesaving air through those rotten lips into those putrescent lungs or the alliance will be done."

Warsaw's engagement is essential to reviving this corpse and its proven commitment is needed more than ever as NATO buckles under the internal pressures of the Afghanistan war. While U.S. reevaluation of the BMD system caused shockwaves in both Washington and Central Europe, the Euro-Atlantic alliance's problems in Afghanistan run much deeper. Hillier's statements show that NATO's internal cohesion is now the gravest threat to the alliance itself, far greater than the rhetoric of Dmitry Rogozin, missiles in Kaliningrad, or Obama's ill-fated attempt to press the "reset button."

At this stage, the U.S.-Poland honeymoon is over, but the marriage is intact. It comes not a moment too soon -- romance is not enough to move forward on bigger issues. In an op-ed in Rzeczpospolita, Piotr Gillert discusses life after the shield:

The the Polish administration's violent reaction to Barack Obama's decision to change the concept of the shield worried the Americans, who concluded that they must take care of the emotional needs must of friends. Hence the mission of Biden. 'Poland is a model for the world,' said the U.S. vice president in Warsaw.

In response, the Polish authorities yesterday declared a loud "yes" to the new American proposals despite the associated uncertainties. And rightly so. Contrary to reports in the dramatic end of the Polish-American alliance, it is pretty good. We should cooperate with an ally in the name of friendship and common interests. They are valid only when we look after our own.

Establishing SM-3 missiles may ultimately be beneficial for the Poles than the implementation of previous plans, but the problem is that this is still a distant issue. Until the implementation of this plan a lot can happen both in American politics and internationally.

By talking to the Americans, frankly and honestly, we are ready to welcome its missile defense system; therefore, we should also look for other paths of development of our cooperation with the U.S. so that the shield doesn't eclipse everything else ...

Concerning the Polish Visa Waiver Program Biden stated that "Poland has not yet, unfortunately, subject to visa-free program, because it does not meet all legal requirements imposed by the U.S. Congress." The visa issue, one of the roadblock on the bilateral agenda, will likely move to the forefront. While most Poles would rather be happy to go to the U.S. visa free than host a BMD shield, Congress still takes the position that it will not grant Poland visa waiver status until the number of Poles living in the U.S. illegally decrease. If Obama is accused of appeasement, there may be no better of a concession for an ally such as Poland.

Gillert's point is well taken -- Poland is not just a shield. After the BMD shield, perhaps we can be less fixated on this issue and tap into economic ties. Last week, ExxonMobil announced that it acquired an acreage in Poland to exploit shale gas reserves, a step that will help diversify Poland's energy mix from coal, reduce dependency on Russian energy imports, promote the U.S.-EU energy security agenda, and bilateral economic ties.

But it is still yet to be seen if life after the shield means arguements about "snubs," "traitors," and "appeasement."

Sibling Rivalry

Kyiv Post compiled data on recent polls concerning attitudes of Russians and Ukrainians toward each other. While Russians are "starting to warm up to their Slavic brothers ever so slightly" based on previous data, the Lavada Center found that 46% of Russians have a "good or very good" attitude towards Ukraine, while 44% see Ukrainians with a "bad or very bad" attitude. In contrast, despite all of the stereotypes about "nationalist Ukraine" and its "Russophobic policies" attacked by President Medvedev in August, Kyiv’s International Institute of Sociology shows that 88-93% of Ukrainians have consistently held a positive view of Russia.

I would make several conclusions to why this is the case, but the pollsters already does so. The Levada pollster concludes that Russians' attitudes toward Ukraine is the "result of state propaganda ... established by the state power, and is eventually followed by the majority." Levada Center polls also indicate that Russians’ attitude to Ukraine worsened every time officials have ratcheted up their rhetoric against Ukraine.

The Kyiv IIS pollster explains the Ukrainian results due to the fact that "there is no state anti-Russia propaganda in Ukraine," a statement that would be immediately contradicted by most Russians, as evidenced by the aforementioned poll.

Gati on BMD

CEPA publishes an interview with Charles Gati that present some key insights after the release of the Transatlantic Trends report. It my view, it was spot on and he provides a good antidote to the doom and gloom about the future of US-CEE relations:

"In other words, we have displayed, particularly during the Bush years, the characteristics of the 'ugly American' in our efforts in that part of the world. This is also the case with the kinds of ambassadors we send to Central Europe who know nothing about the region. At best, they do no harm. But seldom do they do some good. I can’t understand why ambassadorships are exempted from the Federal Government’s rule on professional qualifications. Would anyone go to a dentist because that dentist supports his or her favorite political party?"

"...This is a part of the world where being abandoned or betrayed is constantly on the minds of the people and their leaders. But to bring up analogies with Yalta – or Malta – is an absurdity. There was no deal here. Obama might have said to the Russians that he was thinking about moving missile defense elsewhere, and the Russians replied: 'Well, removing missile defense will make it unnecessary for us to put our own missiles in Kaliningrad.' If that’s a deal, it might have happened. But we didn’t do this to appease Russia."

Many critics of Obama keep saying that he is "selling out US interests," "appeasing," "apologizing," etc. The fact is that the US must acknowledge its mistakes in the region and make up for its own actions, which is neither unpatriotic, nor unrealistic. Gati's point is that while Obama told the Poles no to BMD on the 17th of September, installing an ambassador in Poland for the sole purpose of pushing for BMD who knew little about the region before taking the post similarly damages our credibility.

The Russians have taken note of the rhetorical games and mission drift. I was struck by an op-ed in the Russia Now paid advertorial published last week in the Post: "So why are so many experts fuming about 'capitulation to Russian pressure,' as one Washington Post author recently claimed? If the plan '[was] never a threat to Russia,' how does its abandonment constitute a victory for Medvedev, or even Putin?"

Gati also brings up an excellent point -- the debate on U.S. "treason" of Poland for reevaluating BMD really boils down to two camps -- those who believe that Russia is a weak power, and those who believe it is a threat and a bully:

"But the Cold War is over. Russia is a weak country. It is gradually loosing Central Asia to China. It is losing the Far East to China. Even Belarus is looking to the West. Russia has an economy that has strength only in resources. I’d like to know, what are we so worried about? Let’s stand by Ukraine and let’s build the Nabucco pipeline. Let’s penalize [the Russians] for belligerence and reward them for good behavior. The wisest thing to do would be to put Russia on the back burner and wait until it’s ready to do what it will eventually do – maybe in my lifetime: Turn West."

While Russia seems to be both weak and a threat to the West, support for BMD became part of a existential argument that may not be necessarily true -- Russian tanks will roll down Marszałkowska because they did so in Georgia. While many believe this is true in Poland, it hardly represents the common Polish view. Stability, economic prosperity and EU membership are the culprits. Perhaps the latter point is what needed more reevaluation than just the BMD in CEE.

Enemy Number Two

The Moscow Times reports on a recent Levada poll highlighting Russians' overwhelmingly negative attitudes toward America:

The poll revealed that only 2.1% of all Russians consider the United States a friend, compared to 17.6% who see China as one. While most Russians believe that Georgia is Russia's number one enemy, 45% believe that the U.S. is Russia's enemy. Half of the Russians surveyed had either a “basically bad” or “very bad” attitude toward the United States and 34% feeling “basically good” toward the U.S. America was more to blame for problems in the Middle East than the actors in the region themselves, according to the poll.

In the MT article, the author Vladimir Ryzhkov points to another poll conducted in June that revealed that only 5% of respondents said they had either never had any form of contact with an American, only a brief encounter. In the same poll, 35% said that Russia is the United States’ greatest rival, 22% believed that America is trying to undermine Russia’s international influence and 15% think the United States would like to destroy Russia. He goes on to say:

What is most surprising to me is that Russians’ attitudes toward the United States have actually worsened during Obama’s first year in office compared with what they were during the administration of former U.S. President George W. Bush, Russia’s heretofore-favorite whipping boy. Only 24.7 percent of respondents felt Russia should respond to Obama’s call for both sides to reduce the number of nuclear warheads and delivery vehicles in their arsenals, while 56 percent were opposed.

It seems that these sentiments have less to do with Obama's reset and more to do with the gravitational forces of the Russian media. For example, would most Russians have named Georgia as their country's number one enemy before the tit-for-tat leading up to the August War?

It is true that Americans hate to be hated by foreigners more than they love to be loved by them. Indeed, these feelings are ingrained in our national mentality -- as "rugged individuals" we feel that we are too diverse to be lumped together into a collective or judged by our leaders' actions. By and large, Americans are far from being experts on global affairs. But as a land of immigrants, we are puzzled that any country could harbor negative feelings toward the U.S. when virtually no one in that country has even spoken to an American.

While the average American may be completely ignorant on Russia, the likelihood of naming Russia as an enemy long subsided with the end of the Cold War. The Levada poll indicates just how asymmetrical bilateral relations are, even on the basic level.

RT "Asks" ...

According to a straw poll on Russia Today, 64% of readers think that Yushchenko's dioxin poisoning "was falsified as a pretext to blame Russia." Not surprisingly, an article link right next to it announces "Ukrainian president's poisoning was falsified." The article was also tagged with "USA."

It is clear that this is Russia's attempt to wage revenge against old grievances by kicking Yushchenko while he's down in the presidential polls. But would someone disfigure his own face with the hopes of being able to blame it on another country when his own political rivals tried to run him down with a KAMAz just months earlier?

BMD: What the Polish Papers Say

Reading the flurry of op-eds in the English-language press, it suggests that the U.S. and Central Europe is about to enter a dangerous phase in unfriendly relations. I recalled a quote from Adam Michnik last year, when he said "there is no typical Pole. He doesn’t exist. We have different points of view on Russia." Looking at today's Polish press, the same may be said about the Obama administration's decision to reassess the BMD program in Central Europe.

Zbigniew Brzeziński in Rzeczpospolita commented on Polish disappointment:

I would have described it differently: it has rather busted some illusions. In the past few years in Poland there has been a tendency to rethink the meaning of certain words used courteously in international relations. Especially friendly terms that exist in the case of Americans and Poles. I mean such phrases as,"Poland is a partner of America" or "Poland is an important ally of the United States," and the like. These are words used consciously and deliberately, which are, of course, important, but if one takes them literally, can easily be overestimated ...

[U.S.-Polish relations] are robust, substantial, but uneven, taking into account differences in potential. From the perspective of Washington, Poland is an integral part of Europe and there is no reason to treat it, as indeed all of Central Europe, in a special way, or to extract it from the rest of Europe.

Bartosz Węglarczyk writes in a Gazeta Wyborcza titled "Life after the Shield":

After yesterday's decision from the White House to abandon plans to build the missile shield in Poland and the Czech Republic, Warsaw's relations with Washington will have to change. The year 2009 turns out to be the end of a close alliance lasting long enough, as many as nine years ... Today, we fall victim to our own success. Central Europe is stable, belongs to NATO and the European Union, it threatens to be nothing terrible, but developed and rich. Washington does not have to look at us as it must at much greater problems in Afghanistan and Iran, China and Israel ...

MD could be a good basis for a new phase in alliance with the United States; for the first time in history, we become part of the defense system much greater than our ally. But without the shield, we must now find a different plane of common interests with the U.S. ... Americans for years have been trying to force Europe to get more involved, and Obama will soon tell western European allies that they are doing far too little. Poland should support the U.S. position ... We and America understand each other well, but many of our allies in Western Europe do not.

Warsaw should squeeze as much as possible from the 2008 U.S.-Poland strategic declaration. Americans can and should take part in the reorganization of the Polish army. Polish soldiers should be better than today, much use of American military institutions. In return we can offer further support to the Americans in NATO and assistance in Ukraine, which many American experts is seen as a potential source of serious international crisis in the coming years. Warsaw should also work in the EU as much as possible rapprochement with America. In the face of global economic crisis such cooperation, especially economic, is at a premium.

Poland never had a problem of choosing between its loyalty to allies overseas and its allies in Brussels. Putting the matter as a conflict was and is wrong. Poland should play the role of a country that pushes toward the two colossi by himself. Such an approximation is in the interest and the U.S. and Europe.

The Fakt tabloid was blunt with its assessment with its article titled "Treason!":

Strategic ally? Mainstay of our security? End of illusions. The United States of America has turned his back to us. The U.S. president lightly tossed into the trash the anti-missile shield project in Poland and the Czech Republic. The massive military installation was to give special meaning to us in NATO and to strengthen our position towards Russia. But America prefers to work something out with Moscow instead of Warsaw. Yesterday the whole world went on about Barack Obama's decision. There will be no shield! The Kremlin triumphs, and the Poles have been exposed to the wind.

The AP is running with the Fakt article and going with the headline "Poles, Czechs: US missile defense shift a betrayal." It's too bad that most readers of this wire story weren't informed that Fakt also covered breaking news items such as the world's tallest man and topless girls.

R.I.P. Missile Defense

The front page of the WSJ today announced that the Obama administration will scrap the missile defense shield to be located in Poland and Czech Republic in favor of a "reorganization" of the project. The Polish headlines were simple: "Tarczy nie będzie."

(For the record, I am neither a supporter or an opponent of the MD shield. I am certainly against Moscow's hysterical reaction to the plan. I do not believe that any NATO policy should be determined by non-members. I also get perturbed when journalists describe Poland and Czech Republic as "Russia's backyard" when in fact Ukraine and Georgia are to a larger extent really in the EU's "backyard.")

While the U.S. side remained firm on its convictions that the MD shield served as no threat to Russia from a technical standpoint, the MD nevertheless became a U.S.-Russia issue. This was largely due to Moscow's obstinance and Rogozin's diatribes.

In reaction, U.S. supporters of the shield made the mistake after the Georgia War by framing the project as contingency plan to deal with a resurgent Russia. The MD project began to suffer from mission drift. Commenting last year during tough negotiations with Poland, Republican adviser and historian Edward Lutwak, said "the government of the Republic of Poland by rejecting the US offer forfeited a valuable partner that would protect it against Russia. It is an elementary mistake." A think tank in Washington last week held an event last week entitled "No Grand Bargain with Russia: Why Missile Defenses in Poland and the Czech Republic Are Vital to the Security of Europe and the United States."

Such approaches were absolutely counterproductive. Both the Bush and Obama administrations stood firm that the shield was intended to protect against North Korea and Iran. U.S. officials spoke often about how the technical aspects of the MD shield could not harm Russia's security. But it was hard to escape Cold War geopolitical thinking after Russia's adventures in the North Caucasus.

Although political and security experts acknowledged the strategic component of the MD shield, such rhetoric eroded the U.S. position in CEE. The original message had been lost on the public. According to a Gazeta Wyborcza poll taken after the U.S. and Poland worked out a deal amidst the August war in Georgia, only 28% of Poles were worried about loose nukes from Iran or North Korea. For Central Europeans, the MD shield would protect them, but from altogether a different threat.

Military and security policy should not be dictated by opinion polls. The best example of this is in Ukraine, where anti-NATO activists constantly point to low support of NATO entry as a reason for scrapping integration. However, polls reveal that Poles, who live an an overwhelmingly pro-American country, do not share monolithic views on the MD issue. Last year, a poll in Dziennik revealed that 46% of Poles were against the shield. More importantly, the majority polled were afraid that the Americans would install the shield but not actually modernize the military, which would both threaten Poland and deteriorate relations with Russia (in the meantime, I will search for more recent polls).

One completely irritating aspect was the U.S. vs Russia debate that ignored the concerns of Poland and Czech Republic while taking their support for granted. Our allies in CEE have for a while now started to shed the romantic idea that the U.S. is ready to protect them at any minute. Lech Wałęsa reacted to the news by saying "We should reconsider our approach to the U.S." Former Czech PM Topolánek said the end of the deal " puts us in a position that we in Central Europe have known for the last 100 years: we're not anchored by a strong security partner, a strong ally.

For the next several weeks, we will be bombarded with more op-eds and analysis warning that the U.S. has "surrendered to Russia," and that Obama is "weak" in face of Russia's demands. The first one from the Weekly Standard wrote "the consequences of this action in Eastern Europe, especially in Ukraine and in other countries that feel vulnerable to Russian power, will be disastrous. It is a major American retreat in the face of Russian bullying. And we will get absolutely nothing for it." Such commentators will forget to leave out why the American taxpayer should pay for a $20+ billion shield for the purposes of saving face and stand up against "Russian bullying." We won't get absolutely nothing for abandoning the BMD project because there was never a quid pro quo to begin with.

In the near-term, the announcement marks a big shift for U.S. foreign policy, but not in the long run:

1) Russia will chalk up the end of MD as a victory. Undoubtedly, Rogozin, Putin, Medvedev, et al. will once again have evidence that the U.S. will cave under their demands as pressure is intensified. On the other hand, the Kremlin is watching the Fed like a hawk. It fears that our deficits will erode the value of the dollar -- a large chunk of their $400 billion in currency reserves. The Kremlin follows the U.S. economy and recognizes the fact that the MD decision was not based solely on an attempt to accommodate Russia, but on cost factors.

2) This move will not make the U.S. look weak because Russia views the U.S. as too strong. Russia views the United States as the number one threat in the world and its greatest strategic adversary. Going ahead with BMD would certainly re-enforce this concept, but scrapping BMD won't reduce it.

3) The argument that the U.S. is "surrendering to Russia" implies that it is backing off of missile defense to get something in return. We must assume that the Obama administration made this decision based on its interests, rather than some part of a grand bargain. I cannot imagine Michael McFaul, Obama's Russia advisor at the White House, arguing that backing down from missile defense would be a viable quid pro quo. Perhaps I am naive, or perhaps this point is just too obvious to miss.

4) The death of missile defense may cause our relations with the CEE to worsen, but our relationship is not, and should not, hinge on this project. To reinvigorate our alliances with both Poland and the Czech Republic, the United States needs to highlight mutually beneficial objectives beyond the missile defense shield. It would behoove the U.S. to graduate Poland to visa-waiver status as a token gesture as a start. We must bolster Poland's eastern policy objectives both in the EU and NATO as a way for Warsaw to raise its voice inside in the EU. In particular, this means working with Warsaw and Prague to enhance our ties with Kyiv.

5) Despite the pessimistic mood in Warsaw and Prague, the end of the MD shield is not the end of our security relationship with Central Europe. If anything, all parties are now forced to find more creative ways of strengthening the security of NATO. Gazeta Wyborcza reports that last night Obama and Tusk discussed that the U.S. "wants to change plans, accompanied by an increase to the security of Poland." This is yet to be seen.

Honeymoon is Over, but the Romance Faded Long Ago

Several articles have reported on the disillusionment of Central-East Europe with the United States seemingly more "realist" stance and tone. The Economist covered it last week on the back of this year's Transatlantic Trends report that tracks attitudes of NATO allies. An AP article makes the case that the Obama administration is neglecting Central-East Europe:

Czechs feel betrayed, Poles irked, Romanians slighted. Ask them who's to blame, and the answer may come as a surprise: President Barack Obama. George W. Bush fawned over Eastern Europe, and its leaders rushed to join his post-9/11 "coalition of the willing." Now many—officials and ordinary citizens alike—are grumbling over what they perceive as the Obama administration's neglect. It's a startling shift in a region long accustomed to cozy ties with the United States.

It certainly seems that Obama has gotten off to a bad start in relations with CEE. There was Czech PM Topolánek's famous "road to hell" comment. There was the "snub" by sending former Defense Secretary William Perry to the 70th anniversary of the start of WWII. There is the reset button with Russia.

While the Central Europeans may feel rightfully dissed, these patterns are hardly a "startling shift in the region." Anyone looking at U.S.-CEE relations for the past two years can note that the romance with the U.S. had faded long before Barack Obama entered the presidential race.

1) Bush may have "fawned" over CEE, but it was under his watch that Poland was denied the visa-waiver status multiple times. And what did Poland get in return? They got to be in charge of Ghazni province in Afghanistan. Those soldiers still need a visa to visit the U.S. The idea that "we are now paying for our blind love for America" (i.e. the F-16 deal) is not new. It is simply more fashionable to say it out in the open under Obama. In sum, Poland expected a quid pro quo, America did not.

2) Last August, Marek Ostrowski in TOL published some thoughts that was on everybody's mind in the region -- that Poland had completed its second return to Europe. Nearly three-quarters surveyed by PBS believe that Poland should improve its relations with the European Union above America. Janusz Bugajski in the AP article mentioned above states that the CEE countries are victims of their own success. After becoming the poster children for pro-market economic reform based on the U.S. model, it seems that for now countries like Poland can teach us a thing or two about how to conduct fiscal policies.

3) In the past several years the issue of missile defense, unfortunately, has become the only item on the bilateral agenda. Indeed, the bilateral issue involves Russia whether Warsaw or Washington likes it or not. Where are the investment deals? "Clean coal" partnerships? With a one-track foreign policy of "missile defense: to be or not to be?", both the Czechs and Poles have little else to discuss and little much to look forward to.

Tymoshenko Waves Magic Wand, Gas Problem Goes "Poof"!

While Tusk and Putin met in Sopot to commemorate the start of WWII, a sideline meeting between Tymoshenko and Putin yielded what seems to be unexpected results. Kyiv won consent to buy less natural gas than it is supposed to under the existing contracts. In a turn of events, Putin promised to take into account the ongoing economic crisis and not to impose fines (around $600 million) on Ukraine for buying less gas than it previously contracted -- a previous roadblock that threatened to ignite yet another gas war.

"The Ukrainian economy is consuming as much energy as it needs today. We will proceed from this," Putin said. Gazprom spokesman Sergei Kupriyanov said the gas monopoly is already taking into account the crisis. "There is no talk about amending the contract," he said.

Tymoshenko, for her part, claims much more: "We have removed all of the gas problems ... We feel that all the crisis-like occurrences in this sphere have gone."

All of the gas problems? Sounds too good to be true. There is only one explanation -- she has charmed Putin enough and convinced him to bless her candidacy.

If she is right, the lack of a gas war around the New Year's tree will seem a bit uncanny.

History's Unending March

70 years ago today, World War II began when Nazi Germany invaded Poland. It may seem that western Europe has moved on but in Europe's east, the event seems like it happened yesterday given the fierce and emotional debate surrounding the anniversary in the media.

Russia's message to domestic audience and former dominion was harsh. Yesterday, President Medvedev called for the introduction of a single history textbook to "prevent schoolchildren’s minds from being turned into kasha" as a presidential commission to counter attempts to falsify Russian history met for the first time. All the while, certain officials in Ukraine and the Baltic states were once again branded as Nazi sympathizers. For further reading, I highly recommend an overview titled "The New Politics of History" by Igor Khrestin published by the Center for European Policy Analysis.

On the other hand, the message to Poland was a bit more conciliatory. While Putin seemed to compromise Russia's staunch historical position over the past few weeks by admitting that the Molotov-Ribbentrop pact was "immoral," but Putin's visit to the memorial site today only upset Polish politicians and historians who demanded that Russia apologize for the Katyń massacre.

The commentariat gave their impressions (a roundup is available courtesy of the Beeb). Outside of Putin's hotel in Gdańsk, a handful of "anarchists" staged an, er, unique protest while chanting "Putin is a murderer."

While history remains alive in this part of the world, the reality is that Polish-Russian relations are largely asymmetrical and overshadowed by historical complexes. While the February 2008 visit of Polish Prime Minister Donald Tusk with Putin in Moscow marked a thaw in relations and the first visit of a Polish premier to Moscow in six years, the Putin-Merkel-Tusk joint commemoration at Westerplatte only reinforces that Warsaw and Moscow “agree to disagree” on practically every issue. Working level visits have been tense, sandwiched in between bouts of sharp rhetoric at home.

Thanks to EU membership, Poland’s per capita GDP is double Russia’s and Poland has completely reoriented its economy towards EU markets. But every time the Polish side begins to approach Moscow as an equal partner rather than a disgruntled former ally, history rears its head and the two countries return to the old historical baggage. It is no wonder that economic relations have not followed and trade is performing below potential and focuses on energy issues. In fact around 90% of Russian imports are oil and gas while only three Russian companies operate in Poland – the largest of which is Lukoil.

So it seems that all that Poland and Russia have in common is history -- and that is more divisive than ever.

Karpaty: the Summer of '69

Here is a fascinating story from the annals of Lviv history: when Karpaty soccer team beat Rostov-on-Don in the 1969 Soviet Cup.

A Dog-Eared Letter

President Medvedev agreed that he was not ready to send Mikhail Zurabov to replace Viktor Chyrnomyrdin as the new Russian ambassador to Kyiv, sparking a diplomatic tiff. Last Tuesday, Medvedev wrote Yushchenko an open gripe letter highlighting everything from alleged Ukrainian weapons in Georgia and NATO to Russian language and historical grievances.

At first glance, the letter looked like just another incident of the ongoing informational battle between Ukraine and Russia (although Medvedev framed the note as more of an attack on Yushchenko rather than suggesting any tension between "eternal brotherly peoples").

Upon deconstructing the note, there seems to be a new stage of development. Not even during the "gas wars" was everything laid out in the open. According to Viktoria Syumar, the letter marks the beginning of a new, more rigorous strategy -- a stronger Russia is ready to defend its natural interests with greater international recognition and attention. "In Kyiv, the reality of war between Ukraine and Russia is an unspeakable taboo, uncivilized, and unneighborly. But in Moscow this is possible. You can even write about Ukrainians in the context of a [Russian] Great Empire."

Naturally, Yushchenko seethed over this attack and "carefully examined the letter" to draft a response. The rebuttal pointed to the fact that Ukraine will "never deviate from the principles of friendship and partnership" but that Ukraine has a "maximum potential for fruitful and mutually beneficial development of bilateral relations adhering to international norms unlike Russia." Yushchenko's response to Medvedev the Lawyer repeated Ukraine's criticism of a Russia lacking adherence to international norms. Notably, Yushchenko selected the lack of international recognition for South Ossetia and Abkhazia, failure of broad sanctions against Georgia (unlike U.S. sanctions on Rosoboroneksport), and issues surrounding the Black Sea Fleet lease without Russia's reciprocation.

NATO continues to be the main conflict point, despite the fact that it is becoming an issue now fully detached from security issues and relevant only to civilizational and political discourse. Yushchenko fired back by mentioning that even Party of Regions signed on the 2003 national security strategy allowing, in principle, Ukraine's direct entry to NATO. Ukrainians are also well informed enough to know that the Partnership for Peace Agreement signed with NATO in 1994 was inked earlier than the 1997 Friendship Agreement with Russia.

According to Vadim Karasev, the letter marks the essence of the Putin-Medvedev political system, according to which its entire legitimacy is built upon the fact that the democratization, privatization, liberalization and deimperialization of the 1990s were "evil." In his words, "the task for 2010 for Russia and all post-Soviet countries is completed -- to forget the deimperialization of the past 90 years, to cancel the 20th anniversary of imperial retreat, disintegration and decomposition of post-Soviet space."

The letter suggested a few interesting points:

1) It was written not to peoples living in a "brotherly republic" (Sovspeak) but to a leader of a West-leaning regime. Such language is reserved for countries that are enemies of Russian interests, i.e. the "West". Medvedev is sending the message that the authorities in Georgia, Ukraine, and probably in Belarus are bad but the people there are as "good as we are." While not directly intervening with the 2010 elections (as in 2004) we will voice our opinions loudly to change the game (2010 will be one of viscious informational war).
2) The message was addressed to Yushchenko but aimed at Yanukovych and Tymoshenko as an opening shot for the January presidential elections. Russia has always overestimated the "pro-Russian" candidate Yanukovych, who will carefully balance his views as an opposition candidate while not fully siding with the Russian administration.
3) The terms "anti-Russian" and "Russophobic" are simply codeword for "not openly pro-Russian." Medvedev labeled Ukraine's stance on South Ossetia as anti-Russian -- alleged weapons trading aside, the real issue is the recognition of the republic. The Kremlin realizes that such a statement would in fact contridicts Ukraine's own sovereignty and make the Crimea problem more difficult.
4) Russia completely underestimates Ukraine's perception of security. From the view of Moscow, Ukrainians "all speak Russian" therefore any security concerns are the wild fantasies of a minority of western Ukrainian nationalists. As Medvedev stated, "a so-called argument you hint at a 'Russian threat' to Ukrainian security, something which, as you are well aware, does not and cannot exist" certainly became more existential after August 2008, even to Russophone Ukrainians.
5) A "return to Russia" is officially now a part of the upcoming campaign rhetoric. "If the parliamentary elections in 2006 were conducted under the slogan of whether Ukraine should go towards Europe, the presidential elections in 2010 will pass under the slogan of whether Ukraine should go back to Russia," says Oleh Rybachuk. For domestic politics, this is a game changer.

Russian Guns, American Pickups

Forget cash for clunkers. Here is Kalashnikovs for Pickem-ups. CNN reports that Max Motor in Butler, Missouri (in my home state, but in a far-away corner I've never been to) is giving away a free AK-47 voucher with the purchase of a pickup truck. While the CNN reporter attempted to attack the seemingly paradoxical “God, guns, guts and American pick-up trucks” motto of the dealership, a bigger question looms -- why not give away an American gun?

While guns a natural par of America, it is ironic that a dealership that exudes patriotism is giving away the Russian-made AK-47 as a sweetener to try to sell American cars that no-one really wants to buy these days.

Unwittingly, Max Motors is helping Rosoboroneksport -- the Russian state-owned monopoly on supplying the international market with Russian arms -- chalk up handsome returns. Last year, volume of shipments reached $8.35 billion. Rosoboroneksport forms the core of Rostekhnologii, a state-owned behemoth of 180 unitary enterprises and state stakes in 249 joint-stock companies controlling assets in VSMPO-Avisma, AvtoVAZ, KamAZ, Russpetzstal and a host of lucrative firms in the military-industrial complex.

Never mind that the AK is now the choice weapon of Pakistani militants, the State Department renewed three-year-old sanctions against Rosoboroneksport in October for its alleged supply of WMD and missile-related technology or destabilizing conventional weapons systems in accordance with the provisions of the Iran, North Korea and Syria Nonproliferation Act (P.L. 109-353).

In any event, Max Motors may be helping to press the reset button. It seems that the factory that
produces the AK needs help with its electricity bill.

(Thanks, Igor!)

Propaganda Roundup, Poland Ambassador Pick

To anyone who reads this blog, I've not posted in a while. To paraphrase my Ukrainian colleague, I must have "developed complexes related to collective representations in virtual space and would like to reduce the quantity of technical informational channels in use." Certainly given all the talk of or about the Obama-Medvedev Summit, I can't really add much on this front that will influence anything. I really have had no heart in blogging about all the nonsense and propaganda I digest on a daily basis, but here it goes for posterity's sake:

It was actually entertaining to read Liz Cheney's partisan smackdown of Obama last week in yet another op-ed where she posited "There are two different versions of the story of the end of the Cold War: the Russian version, and the truth."

Before the summit, Obama told Fox News that this sort of historical viewpoint "cut out Lech Walesa and the Poles ... Havel and the Czechs." President 44 rightly pointed out that "There were a whole bunch of people throughout Eastern Europe who showed enormous courage" and that wrapping up the Cold War was a bipartisan effort.

Not unexpectedly, Sean Hannity then cropped and edited the interview to suit his own ideological grandstanding / ratings. Also no wonder that RT did the same with the above-mentioned Cheney rant.

All of this reflects a prevailing fear in partisan circles in Washington that the U.S. has fully embraced realism and is ready to sell out the region in another Yalta moment. In Moscow, Obama hardly give any solid indications that the U.S. will sell out our allies in East-Central Europe. There was no quid pro quo on Iran, no grand bargains on missile defense, and an unwavering support for the sovereignty of Ukraine and Georgia backed up by the visit of VP Biden to the two countries beginning today.

Nonetheless, 22 prominent East-Central Europeans did just that by sending an open letter on Thursday to Obama relaying their fears that Russia remains an existential threat.

Meanwhile, Obama put forth his candidate for Ambassador to Poland today. Lee A. Feinstein, who served as a top Pentagon official under President Clinton and a senior adviser to Secretary Clinton, may be headed for Warsaw replacing Victor Ashe, a close friend of Bush. Feinstein worked as national security director to Hillary's presidential campaign and has been clearly tapped to handle the MD shield issue.

While Feinstein is a seasoned nonproliferation expert, this pick is yet another example of a lack of long-term goals. It is typical that ambassadors don't speak the language or possess regional expertise where they serve, but this is another disappointment in that regard. I am forced to overlook this. While Ashe was installed to push the MD system forward, Feinstein is being installed with a similar purpose -- to gingerly back away from the shield plans and save face, or stay the course without ratcheting up another confrontation with Rogozin, et al.

What about the trade agenda? What about working with the Poles to develop new energy technologies to overcome the larger energy security problem? Aren't we sending the message to Russia that there not other bilateral issues besides the MD shield? Aren't we sending the message to our CEE NATO allies that we have a one-track mind?

On the Spot Guidance

Earlier this month, Putin showed up in Pikalyovo to quell a workers' protest and put Deripaska in his place. Then, he appeared at an art exhibit telling renown painter Ilya Glazunov a unsolicited critique: "The sword is a bit too short, it looks like a pocket knife in his hands ... It looks like it's only good for slicing sausage." Naturally, the artist promised to fix it.

No surprise then that a local trip to an X5 supermarket in Moscow yesterday, Vladimir Vladimirovich gave another round of "on the spot guidance" to Yuri Kobaladze, the MD of corporate relations for X5:

P: "Why do your sausages cost 240 rubles? Is that normal?
K: "But these are high quality sausages. Look, these ones are just 49 rubles."
P: "Too expensive."
K: "No..."
P: "I can show you your mark-up ... Look at this kind of sausage, your mark-up is 52%!"

Then they moved to the meat counter...

P: "This is twice as much. Is this normal? It's very high."
K: "Tomorrow we will cut the price."

At this rate, VVP may begin to overfulfill the international quota on micromanagment.

€$€$€$€$€$

Customs Union, Gazprom in Trouble

The big story this week was the decision of Russia, Kazakhstan and Belarus to unilaterally withdraw from the WTO and form a Customs Union (read analysis here).

Curiously, this big policy initiative -- years in the making -- was thrown into doubt when Russia slapped a milk ban on Belarus. This also comes at a time when Moscow has created a commission to shape its PR image. President Medvedev played the usual bratstvo card: "Talking about these latest events, we were a bit taken aback, of course, by the way our Belarusian friends and partners reacted to what was happening. The situation is really quite simple, after all. What we need is civilized trade, even between such close and brotherly countries as Russia and Belarus."

The other big story was Gazprom's self revelation that it is in big trouble. Gazprom's revenue is expected to shrink to $40 billion from last year's $73 billion, while production is dropping and demand in Europe is shrinking. Investments will reach 400 billion rubles -- half of last year's amount. Not to depress spirits, a mountain in the Urals will be named Mt. Gazprom.

Therefore it is not surprising, that as soon as the Belarusian milk ban was lifted, Minsk got a nasty bill of $230 million for debts incurred over January-April. Fears of yet another gas crisis with Ukraine are dominating talks in Brussels.

Izvestia on the Potomac

I didn't want to hold my breath too long about reports of U.S. intervention in Iran, but here you have it. Izvestia reports:

"Can this revolution a "colored" one to be put on a par with the Serbian, Georgian, Ukrainian, and Kyrgyz? On formal grounds it seems that yes, the reason for people's performances in each of these cases was the outcome of the election, accusations of fraud. But in fact, this is not the case. Iran is too specific a country. There are other factors in this present revolution. Causes of the Iranian Revolt are their own and purely internal. And the infamous "hand of the West" is not visible.

Even the leaders of the CIA have to admit that they have very little leverage on the impact of the situation in Iran. There are no surrogates. Don't think that the Iranian Yushchenko and Saakashvili is the opposition leader, former Prime Minister Mir-Hossein Mousavi. He was once a colleague of Ayatollah Khomeini (another friend of America!). And now his supporters are on a demonstration by shouting "Allah akbar." In general, if one refers to the Iranian revolution's "color," it can be only one color -- Islamic green."

While Izveztia says that the West and CIA hold little leverage in Tehran, the op-ed pages of the Washington Post say that Obama "subtly encouraged" ferment in Iran. Nonetheless, before exhaling, I discovered a straw internet poll in the Russian daily revealing that 46% believe that the situation in Iran is "an 'orange revolution' planned in the West'."



Phew. I thought the world went all topsy-turvy.

Nonetheless, we have the usual arguments trying to debunk the "orange revolution" with the shoots of a "green" one. Unfortunately, many of these commentaries espouse the typical view from Washington and/or the Kremlin that the U.S. had a "hand" in the orange revolution, without doubting the actual effectiveness of technical assistance versus more major factors (i.e. the Constitutional Court annulled the vote on 12/3/04). Iran is not Ukraine -- except in the minds of those who wish to prop up the ideologically-driven, and arrogant, argument that the U.S. must have a hand in everything:

"Over the last couple of decades, the U.S. has actually gotten good at nudging along regime change through elections. In Serbia, Ukraine and Georgia, U.S. advisers harnessed popular rage at the theft of an election and provided a variety of technical assistance to help engineer revolutions."

Considering the impending media blackout in Iran, for now I am comfortable with Izvestia's simplistic analysis that Iran is "too specific" to be compared to Ukraine.

Milk Wars, Breakaway Republics and Loans

Interfax reports that as of in the first four months of 2009, the foreign state debt of Belarus had increased by 33.8% to $4.976 billion. In Belarusian rubles, foreign state debt soared 70.6% to BYR 13.96 trillion.

Last week, Russia offered an additional $500 tranche of loans. Lukashenka scoffed at the deal, which was contingent on the fact it would be dispersed in Russian rubles as opposed to dollars. "It's not working out with Russia. We don't need to beg. We don't need to whine and cry. We need to look for happiness in another part of the planet," said Lukashenka to his PM.

Suddenly on 3 June, Belarus asked for a whopping $9 billion loan. "We could get confronted with the Belarusian government's insolvency as early as in late 2009, or next year," said Deputy Prime Minister and Finance Minister Kudrin in response. This sum was too much for MinFin RF to handle.

"If those who want to help Belarus and want a balanced and stable economy are equated to opponents, then I don't know what Belarus wants," said Kudrin on the difficult loan negotiations. But it is certainly clear what Moscow wants from Belarus. Moscow Times today reported that the original $500 million loan was contingent on Belarus' support for South Ossetian and Abkhazian independence.

Stepping up pressure, Russia slapped a ban on 500 types of Belarusian milk products in response on 6 June. Rospotrebnadzor head Gennady "Swine Flu" Onishchenko said that Russia would be ready for talks on the resumption of imports but "only with those officials who represent manufacturers and are 'competent' enough to solve the problem (Moscow Times, 9 June).

This begs the question -- if Russia offered a loan of, say $300 million in rubles, would 300 types of Belarusian milk products have been blocked? In an even more arbitrary move, Rospotrebnadzor blocked an additional 800 dairy products today.

This non-tariff measure will cost Belarus $1 billion comes at a time when Economy Minister Nabiullina and US Trade Representitive Ron Kirk last week optimistically talked about Russia's languid WTO accession process finally drawing to a close. The milk wars, not to mention the meat wars, indicate that the process could drag out even longer than next year.

Even more bizarre, Putin announced today that Russia would join the WTO, not as an individual member but as a part of a joint customs block with Belarus and Kazakhstan.

Business as Usual

[Update: Video of Putin sans necktie in a Members Only jacket dressing down Deripaska].

Putin traveled to Pikalyovo, where workers of the BasEl-owned cement plant blocked a motorway this week in protest over layoffs and unpaid salaries, to rap Deripaska on the knuckles.

"Why was everyone running around like cockroaches before my arrival? Why was no one capable of taking decisions?" Putin said as Deripaska stared blankly. "Has Oleg Vladimirovich [Deripaska] signed? I do not see your signature. Come here and sign it," Putin said, throwing a pen dismissively onto the table (Reuters, June 4).

While the situation looks dire in Pikalyovo and other monogorody, the price of oil continues to climb, rising $1 today:

"The oil price is going up, everything seems to be in order, so why change?" Sergei M. Guriev, dean of the New Economic School in Moscow and a board member of the state-owned Sberbank, said by telephone. "If oil prices go back to where there is no budget deficit, then it will be business as usual (NYT, June 4).

In Pikalyovo, $1.3 million in wage arrears need to be paid out. According to Merrill Lynch's chief economist, for each $1 increase in the price of oil (like in today's trading), the budget earns about $1.7 billion a year.

Far-Flung Euro-Junket to Khabarovsk

Yesterday, Eurocrats arrived in Khabarovsk — nine time zones away from Brussels — for the biannual EU-Russia Summit. The FT hilariously noted that "jet lag topped the agenda," adding that even "President Dmitry Medvedev has recently taken to video conferencing with the far eastern region's bureaucrats as a saner alternative to flying there. 'You lose two whole days when you go out to the far east'..."

"Vaclav Klaus, Czech president - the Czechs hold the revolving EU presidency - had a look at the list of prospective sites before Mr Klaus picked Khabarovsk, because 'he hadn't been there before and wanted to see it', according to a diplomat, who asked not to be named."

Not surprisingly, nothing got accomplished — the usual with most EU-Russia powwows. Both sides failed to agree on concrete measures to prevent another cutoff of gas supplies to Europe. Medvedev also reaffirmed opposition to signing the Energy Charter and once again suggested a Moscow-proposed energy security pact. Meanwhile, Barroso said such proposals could only supplement, but not replace, the Energy Charter. While the EU pressed Russia to ensure reliable gas supplies, Medvedev singularly blamed Ukraine for the two-week gas cutoff in January and warned further disruptions due to Ukraine's insolvency. Kyiv plans to inject 12-19 bcm of Russian gas supplies worth $3-4.8 billion into its underground storage. Medvedev proposed that the EU help Kyiv obtain a syndicated loan to finance the supplies.

I propose that EU-Russia Summits should be like the Olympics or the World Cup — held every four years so that both sides can actually come up with some concrete proposals and try to implement them when the time comes. Or maybe the next EU-Russia Summit can be held in the Falkland Islands (a UK territory), which is only 7 hours from Moscow.

South Stream Signed, but Where's the Gas?

Gazprom has officially signed agreements to realize South Stream with Bulgarian Energy Holding, Greece's DESFA and Serbijagas. According to Kremlin spokesman Dmitry Peskov, Eni and Gazprom will not sign a long waited agreement, but a memorandum of cooperation to map out future steps. Apparently, Eni is not as happy as its Bulgarian, Greek and Serbian counterparts. It wants to market gas from the pipeline in the countries the pipeline will pass through. However, Gazprom only offers the right to bring gas into Italy and a role in managing the pipeline.

According to a Gazprom official, South Stream will be implemented regardless of the situation of Nabucco. He added that "all the activity around the Southern Corridor / Nabucco is often initiated by politicians overseas because it is a political rather than an economic project. It has no influence on the realization of South Stream because from the very beginning companies, rather than politicians thought it is a reasonable commercial project."

Alfa Bank reports that on May 10, Gazprom's production was 0.975 bcm/day, its lowest level since 1983. Domestic demand in December-April was down 8-12% year-on-year, while exports to Europe were down by 21% year-on-year during the first five days in May (USRBC Daily Update, May 13).

Ultimately, the pipeline will have capacity of 30 bcm. Considering the Gazprom is producing gas at Andropov era levels, it is hard to see the commercial viability of this €10+ billion project.

Arctic Heats Up

On May 13, President Medvedev reconfirmed the Strategy of National Security through 2020. The document stresses the implementation of the strategy as "a mobilizing factor for the development of the national economy, improving people's quality of life, political stability in society, strengthening the national defense of national security and the rule of law, improving the competitiveness and the international prestige of the Russian Federation."

Apart from giving a nod to the importance of alternative energy, the document noted that Russia must counter the threats of the depletion of world reserves of mineral, water and biological resources through the "introduction of environmentally sound production, the search of promising energy sources, formation and implementation of state programs to build strategic reserves of mineral resources."

The Times and Guardian picked up on some of the more militaristic points, i.e. "The presence and potential escalation of armed conflicts near Russia’s national borders, pending border agreements between Russia and several neighboring nations, are the major threats to Russia’s interests and border security" and "in a competition for resources, it can't be ruled out that military force could be used for resolving emerging problems."

Noting the "incredible nervousness" and "panic reaction" of these UK press accounts, RIA Novosti commentator Andrei Fedyashin noted:

"As a strategic vision it is not only a statement of national interests and threats to them, but also a warning to many world capitals, where Arctic resources for long looked upon with excitement. The conclusion was made clear -- Moscow will be ready to defend its interests in the Arctic. The type of pranks such as last year's placing of a [Russian] flag at the bottom of the Arctic Ocean are over. Now everything is serious."

Signing the strategy release by Medvedev on May 13 was no coincidence -- it marked just one day before the deadline to clarify its application to the UN Commission on the Limits of the Continental Shelf on territorial claims to the Arctic shelf, submitted by Russia in 2001. This means that those who did not submit such applications (i.e. NATO countries Canada, U.S., Norway, Greenland/Denmark) will not be able to claim its share of the shelf, which is believed to hold vast amounts of hydrocarbons. The UN process, filled out by 48 other countries, refers to territorial claims around the world.

The UN Convention on the Law of the Sea of 1982 governs all parties as well as settlement of all possible territorial issues. The United States has signed, but not ratified, this "maritime constitution," due to a conflict with interest with Canada over rights of passage through the Arctic Sea. As a signatory to the Convention since 1997, Russia claims rights to the continental shelf 350 miles from the territorial waters, and is attempting to claim even more if it proves that its continental shelf beyond the limits of its economic zone.

While NATO allies U.S. and Canada bicker about what is international waters and what isn't, Russia is already making a case to prove that the underwater Lomonosov Ridge is a continuation of the Siberian continental plate, and Russia has all rights to it and any potential energy resources. In addition, it is in Russia's best interest to allow global warming to unlock potential hydrocarbon resources in the region.

Rogozin Strikes Back

Dmitry Rogozin, Russia's Ambassador to NATO, has always pushed the boundaries of diplomatic language. Last year, he threatened to point nukes at Ukraine if it joined NATO -- but this one tops them all (to date):

"If Saakashvili gets diarrhea, it must also be the hand or foot of Moscow ... We’re tired of replying to such provocative stupidity, such drivel put out by the Nazi leader of Georgia," said Rogozin (Bloomberg, 5 May).

The liberal use of Godwin's Law is rife on blogs, but should it be tolerated in modern diplomacy?

After closing, then reopening, and now closing relations again NATO should take the advice of Ronald Asmus and simply stop feeding the trolls:

"[The NATO-Russia Council] has never become what we wanted: a channel for consultation and real cooperation ... [Russia] treats the NATO-Russia Council as yet another platform for its anti-Western strategy. Russian NATO Ambassador Dimitry Rogozin behaves like an old-style propagandist seeking to sow dissension in the ranks of allies. We have lots of channels to talk to Moscow. Let's shut this one down until Moscow gets serious about doing business and not spreading anti-NATO propaganda” (WSJ, 18 August 2008).

Swine Flu: Russia’s WTO Accession May Be First Casualty

"With $476 million in exports last year, Russia is the fifth-largest market for US pork. Yet as the sudden outbreak of swine influenza spreads, the health of Russia’s accession to the World Trade Organization could also take a turn for the worse ... " (read on at PBN CrisisCrunch).

[El Gripe Puerco has even spawned the Cumbia de la Influenza in Mexico.]

On April 27, Russia’s Federal Agency for Veterinary and Phytosanitary Supervision (Rosselkhoznadzor) banned all meat imports - including poultry and beef - from the US states of California, Texas, Kansas, New York and Ohio, and non-thermally treated pork imports from eight other states.

The US Centers for Disease Control and Prevention continue to reiterate to an increasingly unnerved public that pork is safe to eat. “You cannot get swine influenza from eating pork or pork products,” stated US Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack in an e-mailed statement on April 28. The UN Food and Agriculture Organization is even lobbying for a name change to disassociate pork production with the human-human virus.

Rosselkhoznadzor quickly rebuffed US assurances, claiming that eating and handling raw pork meat can transmit swine flu, adding that in denying this US meat exporters are only trying to protect their interests.

Over the past year, Russia has failed to “relist” 34 US pork processing, production and storage facilities - effectively rendering around half of all US pork production ineligible for export to Russia. On April 8, the National Pork Producers Council (NPPC) called on the Obama administration to decelerate Russia’s WTO accession until it began to “play by the rules and stop its blatant actions to restrict US pork.”

Until this week, Russia has not been able to identify any health or sanitary reasons for blocking US meat imports - the requirement for justifying the block as per its 2006 bilateral WTO obligations. The ineptly named swine flu now presents a reason for Russia to approve US meat facilities on a plant-by-plant basis - actions inconsistent with the WTO’s Sanitary and Phytosanitary (SPS) Agreement requiring WTO signatories to recognize equally standards in other countries.

While the US NPPC calls Russia’s ban “protectionism, plain and simple,” the implications of Russia’s meat ban go far beyond the interests of the US pork lobby. In a trade row dubbed the “Meat Wars,” Poland threatened to block Russia’s entry to the WTO based on Russia’s 2005 embargo on Polish imports of agricultural products. Warsaw went even further, blocking talks on a new Partnership and Cooperation Agreement between Russia and the EU. While both sides accused each other of politicizing the situation, the “Meat Wars” provided plenty of excuse for mutual mistrust on a host of outstanding issues.

Pressing the “reset button” on US-Russian relations in early April on the sidelines of the G-20 Summit, both President Medvedev and President Obama cited Russia’s entry into the WTO as a top priority. Speaking in Washington on April 24, Russia’s Minister of Finance Alexei Kudrin emphasized that WTO entry would spur his country’s diversification efforts and help shake off the economic crisis.

Representative Kirk, however, warned that Russia’s meat ban “may result in serious trade disruptions without cause.” If the “Meat Wars” waged in the past repeat themselves, US support for Russia’s WTO entry will falter once again, with wider implications for overall relations.

But for now, anyway, it seems that Virginia ham is strictly off the menu in Voronezh.

So easy, a chimp could do it!

A female chimpanzee named Lucy, a resident of Warsaw Zoo, has been approached to create an investment portfolio for Puls Biznesu daily. The idea is to discover whether trying one’s luck is not the best bet at a time of shaky markets, rapidly changing recommendations and ambiguous advice coming from analysts. Puls Biznesu intends to follow Lucy’s moves over one month to see how she is doing against the blue chip WIG20 index. So far, a week into the experiment, the chimp appears to be losing. Her portfolio shrank by 0.3%. In the same time WIG20 climbed 1.2%.

Track her portfolio here.

Quote of the Week: Dimocracy in Action

Quote of the Week from President Dmitry Medvedev to Novaya Gazeta's Dmitry Muratov:

"А знаете, почему я дал интервью именно «Новой газете»? Вы никогда никому ничего не лизали."

"You know why I gave the interview to Novaya Gazeta? You never have sucked up to anybody."

Feeling the Squeeze

On 1 April Gazprom officially admitted that it expected a sharp $28 billion (45%) revenue decrease from gas exports to Europe for this year compared to last. The average price of gas in Europe will be around $260 per tcm compared to $400 in 2008. As of 1 April, Gazprom limited the volume of gas accepted from independent companies and Central Asian exporters by 40 bcm. Further, Gazprom's purchase of a $4.3 billion 20% stake of Gazpromneft from Eni only adds to its indebtedness, now exceeding past $50 billion. While it's no secret that the monopoly's falling production indicators have been deteriorating for quite some time, the economic crisis has forced Gazprom to suspend its most expensive and least profitable projects, including Yamal and Shtokman. Even if the top priority of Gazprom, Nord Stream, gets built there may not be any gas to fill it.

Not surprisingly, Ukraine is once again feeling the squeeze. RIA Novosti reports that Gazprom has reportedly demanded that Ukraine pay a fine of about $530 million for its failure to import the contracted volume of gas in March. Ukraine had contracted to buy 2 bcm, but bought only 0.9 bcm. Under the contract, the supplier has the right to demand reparations totaling 150% of the value of the shortfall during the October-March period, and 300% during the rest of the year.

This announcement backtracks from Putin's benevolence a month ago. On March 12, Putin announced "We are waiving this fine, based on realities-they can't pay. They are now on the verge of bankruptcy, and you perfectly understand that you cannot finish off your partners."

While there is speculation in Russia that Putin has apparently changed his mind after the deal between Ukraine and the European Union to provide up to $5 billion to modernize Ukraine's gas pipeline system, Gazprom's looming crisis could be the real reason.

Operation Yatsenyuk

Now that early presidential and Rada elections (October 2009) are a reasonable possibility, Ukraine will once again plunge into business-as-usual nasty electoral politics of oranges, checked-mark hearts and blues. A glimmer of hope shines for many in Ukraine who are fed up -- Arseny Yatsenyuk. In a few months, he will meet the age requirement to be president. At the tender age of 34, he has already served as speaker of parliament, foreign minister and economy minister. Not only does he speak derzhavna mova, he speaks fluent English.

His views smack of matter-of-fact realpolitik, the mode du jure in the west that has yet to catch on in the orange vs. blue world of ultra-competitive politics in Ukraine. Speaking at a press conference in Simferopol, Yatsenyuk is quoted in yesterday's Korrespondent.net:

"The issue is part of Ukraine's membership in NATO is not on the agenda. We have no offers to become members of NATO ... Ukraine is not ready to join NATO, moreover, NATO is not ready to accept Ukraine."

"Where is the Ukrainianization? Who are we Ukrainianizing? Switch on the TV -- Russian language. Pick up a book its in Russian."

Despite his reasonable views, Project Yatsenyuk will have a difficult time getting past the perception of that his candidacy will be Yushchenko's very own Operation Successor. After the FT's ridiculous headline on Monday "Fresh Face Wins Reputation of Kiev's Obama," Yatsenyuk will be dismissed as another pro-American "stooge" or as some commentators on Korrespondent put it, "just another project of Pindostan."

Or maybe it's "Change we can believe in"?