Russia 090313 Basic Political Developments

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Basic Political Developments

Kudrin to attend G20 financial meeting

LONDON, March 13 (Itar-Tass) -- Russian Deputy Prime Minister and Finance Minister Alexei Kudrin will attend the G20 ministerial meeting that opens on Friday.

“We have to coordinate the anti-crisis policy and design anti-crisis measures to prevent similar crises in future,” an official in the Russian delegation said.

Russia believes certain provisions in the communiquй of the meeting need to be specified. In particular, the proposal to earmark not less than two percent of the GDP for anti-crisis measures does not correspond to the existing situation in various countries of the group. Therefore, the concrete bailout volumes shall not be fixed.

“Differentiation is necessary by groups of countries. It has to be discussed taking into account the opinion of BRIC countries” (Brazil, Russia, India and China), the official said.

Russia also believes the British proposal to decrease the refinancing rate does not reflect the specifics of developing and oil producing countries. “The economic situation differs and there is no single recipe for all,” he said.

The finance ministers will discuss the reform of the International Monetary Fund, specifically the amount of additional reserves, quotas and decision-making mechanisms.

“Such institutions as the IMF should not just provide urgent aid to certain countries, but also envisage the consequences, which the world economy would face in six-twelve months because of the anti-crisis measures,” the official said.

The ministers will also consider the capitalization of development banks. Thus, the World Bank can provide to all of its members not more than 100 billion dollars in three years, which is clearly insufficient in current conditions. However, developed nations are in no hurry to up its capitalization.

“There should be no group egoism and the task of the G20 is to consider how the world economy would react, to balance the instruments and measures that are taken to confront the challenges faced by various groups of countries. Hypothetically, it can be supposed that growing crisis phenomena can make certain states bankrupt and it is necessary to prevent such areas of social and political instability,” the official said.

Russia opposes minimum fiscal stimulus for G20
Thu Mar 12, 2009 9:54pm EDT

MOSCOW (Reuters) - Russia will oppose UK proposals for all G20 members to set a mandatory minimum fiscal stimulus level at 2 percent of gross domestic product and cut interest rates, a Russian delegation source told reporters on Thursday.

The source said both proposals were included in the draft communique circulated by G20 host Britain ahead of a meeting of G20 finance ministers and central bankers in Horsham, southeast England on Friday.

"We need to differentiate between groups (of countries). We will need to discuss it taking into account opinions of BRIC countries," the source said regarding the minimum fiscal stimulus requirement.

Delegations from Brazil, Russia, India and China will meet ahead of the G20 meeting on Friday. Russia's own fiscal stimulus package currently amounts to 4.5 percent of GDP.

The source said another UK proposal calling for all G20 countries to cut interest rates in line with similar policies in the United States and the euro zone countries did not reflect the realities of commodity-exporting economies.

"The economic situation is different and there is no common recipe for interest rate policy," the source said. Russia has been raising its interest rates to support the rouble's exchange rate and stem capital flight.

UK Foreign Office Minister Mark Malloch-Brown criticized Russia and other emerging nations for not doing enough to stimulate their economies and for keeping high interest rates to support their currencies and stem capital flight.

(Reporting by Gleb Bryanski; Editing by James Dalgleish)

British Minister Praises Russia's G20 Role

13 March 2009

The Moscow Times

British Foreign Office Minister Mark Malloch-Brown said Thursday that Russia was playing a "major role" in the preparations for the G20 summit next month in London.

Malloch-Brown is on a two-day trip to Russia to discuss strategy and agenda topics for the April 2 summit, and he met Thursday with First Deputy Foreign Minister Andrei Denisov.

Malloch-Brown, speaking at a briefing held by the Association of European Businesses, said the Russian government and Britain "shared" four main objectives for the summit: developing a unified strategic vision for tackling the problems in the world's real and financial sectors; discouraging the growth of national protectionism through a recommitment to free-trade; tightening banking and financial regulation; and creating aid packages for poorer countries.

On Friday, he is to meet Foreign Minister Sergei Lavrov and presidential economic adviser Arkady Dvorkovich.

Building a Tower of Babel at the G20 Summit

12 March 2009

By Martin Gilman

By now almost everyone on the planet has felt to one degree or another the most virulent global economic crisis since the Great Depression. Its largely unanticipated destructive force has humiliated once-mighty financial institutions and companies, humbled economists, devastated investors, scared consumers and challenged public authorities around the world.

It is natural that at a time of such confusion and even desperation many people look to their leaders for solutions. This is the context in which the much-hyped expectations of many are focused on the second summit of the Group of 20 countries in London on April 2. But more likely than not, President Dmitry Medvedev will return from the summit in three weeks with little to show for the G20's anti-crisis efforts.

The G20 "sherpas" will meet on Thursday in London to prepare the summit agenda. Undoubtedly, they will once again produce empty pledges to avoid protectionism, coordinate policies, strengthen regulatory oversight and -reform international financial institutions.

Regarding the threat of protectionism, the G20 pledge in November to forego any protectionist actions and promote the Doha Round of trade talks was ignored, but nonetheless, it is likely to be repeated this time along with a promise to monitor such measures. Much effort will be expended on the search for scapegoats or secondary issues like tax havens. There will be more calls to coordinate regulatory regimes, but U.S. authorities have already insisted that they will continue to conduct their own regulation of financial institutions and markets.

In any case, it is hard to conceive that this heterogeneous group could ever agree on much. Its membership reflects geographical and social factors as much as economic size. It excludes some of the world's 20 largest economies, such as Iran and Taiwan, while smaller economies, such as Saudi Arabia, Argentina and South Africa, are included.

The preponderance of European countries in the G20 is reflected in the stalemate on reform of the International Monetary Fund. Other than calls for surplus countries to place more of their money for use in its lending operations, there is unlikely to be any real steps to improve governance by shifting control of the IMF from overrepresented European countries to China, Russia and South Korea. Despite some hypocrisy, none of the existing shareholders seems willing to cede its share or, more sensibly, to consolidate the European representation into a single vote.

Thus, Russia, China and other major emerging economies, the new creditor class of the 21st century, have been largely disenfranchised by the "debtors" who control the international financial and economic institutions. The only way that the G20 can really make a difference is by recognizing this new reality and having the political courage to start a realignment of power and control to reflect the tectonic shift in relative global economic forces. Unlikely as it may seem, this is a chance for Medvedev to display real leadership.

The United States is also underrepresented -- at least relative to its share of global gross domestic product -- but it could still try to make common cause with the new creditors. It is hard to imagine that President Barack Obama would be willing to offend his host and allies on one of his first forays into foreign affairs.

Ironically, if the IMF's shareholders had taken Russia's proposal in 2006 to appoint the experienced Czech Josef Tisovsky as head of the fund rather than French politician Dominique Strauss-Kahn, perhaps it would now be in a better leadership position in the current crisis. But Russia's views are not taken seriously, not least because they could upset the long-standing predominance that the Europeans enjoy. And no matter how concerned the United States is about the crisis, a real reform of the IMF and other institutions is just politically too costly.

In London, the heads of government will also discuss their numerous proposals to revive their economies through tax cuts and spending. But any proposal that binds stimulus packages to a percentage of GDP is likely to meet resistance.

This is because the crisis manifests itself in different ways in different countries. There is little need to dwell on the adverse impact of the crisis on Russia. The collapse of oil prices, bank credit, government revenues and the ruble together underscore the country's economic predicament. But unlike all the other G20 economies where stagnation is the primary concern, Russia is the only one trying to contend with stagflation -- that lethal combination of economic stagnation and inflation.

In the context of any coordinated effort to stimulate the global economy, as White House economic adviser Larry Summers called for earlier this week, Russia's hands are tied. Unlike many countries where a major expansion of public spending is constrained by large debt burdens, Russia -- which has not forgotten the lessons from its 1998 default on domestic ruble-denominated bonds -- has little sovereign debt (4 percent of GDP at the end of 2008).

Instead, a Russian effort to expand government spending, as its contribution to boost to the global economy, is restricted by inflation. Russia's inflation rate rose to a four-month high in February as the weaker ruble drove up the price of imports. The annualized rate jumped to 13.9 percent from 13.4 percent in January. February's increase in inflation reflects the ruble's sharp but controlled depreciation of about 35 percent between Nov. 11 and Jan. 22.

These devaluation effects could last through April before we see what impact the decline in real income and shrinking money supply will have on dampening inflation. It is by no means a given that the official inflation forecast of 13 percent for 2009 will be realized. Much will depend upon how the authorities revise the 2009 budget.

Russia is already making too large a contribution in the G20 framework in terms of relative fiscal effort. Its budget balance -- and hence its contribution to real GDP -- could swing from a budget surplus of 4 percent of GDP in 2008 to a budget deficit of as much as 8 percent of GDP in 2009. This 12 percentage-point injection, envisaged by Finance Minister Alexei Kudrin, is almost twice as much as contemplated by the United States. The net result will be sustained inflation and poorer medium-term prospects.

Kudrin should aim for a much smaller deficit, and he would still be able to say that Russia is doing more than most to boost the global economy.

Martin Gilman, a former senior representative of the International Monetary Fund in Russia, is a professor at the Higher School of Economics.

Moscow to host CIS Economic Council meeting
      RBC, 13.03.2009, Moscow 09:53:05.Moscow will host a meeting of the CIS Economic Council. The meeting's agenda includes 19 issues, including a draft action plan to implement the CIS economic development strategy for a period until 2020. The first stage of the strategy has been designed for 2009-2011, and includes steps to alleviate the aftermath of the global financial crisis. For instance, the document provides for a closer industrial cooperation between the governments, and implementation of joint interstate programs, including in energy, transportation and agriculture. The strategy lays a special emphasis on boosting the competitive edge of the output and rollout of innovative technology.

      The Economic Council will consider energy production and consumption forecast until 2020, as well as innovative cooperation and other issues.

Transnistrian, Moldovan leaders to meet in Moscow
      RBC, 13.03.2009, Moscow 09:30:08.Transnistrian leader Igor Smirnov plans to consider signing an agreement on friendship and cooperation between Transnistria and Moldova at the meeting with Moldova's President Vladimir Voronin in Moscow, which is to be attended by President of Russia Dmitry Medvedev. The draft agreement was submitted to Moldova in April 2008, as well as Tiraspol's non-aggression proposals. Smirnov announced the plans at his meeting with Ukraine's special envoy on Transnistrian settlement Viktor Kryzhanovsky yesterday.

      In turn, the Ukranian envoy said Ukraine opposed any separate negotiations without the country taking an active part. Smirnov, however, stressed that such negotiations were out of the question. Russia acting as an intermediary had offered a venue for the talks to give them an impetus, and Transnistria felt it should seize the opportunity. To keep negotiations going it is necessary to prevent Moldova from speculating on guarantees and deceiving the global community, Smirnov noted adding that he was carrying a document to this effect to Russia.


Pirated Chinese weapons worry Russia

Spokespersons for the Russian defense industry have dismissed foreign media reports on Moscow's refusal to sell Sukhoi Su-33 Flanker-D carrier-borne fighters to Beijing over fears of piracy as a "newspaper hoax."

However, this denial will not solve the problem of Chinese piracy with regard to state-of-the-art Russian defense technology.
Although the Russian defense industry has profited from the sale of military airplanes and helicopters to China, Beijing has not assembled Su-27 Flanker fighters from Russian components under a license contract since 2004.
It is also unclear how many Shenyang J-11 (JianJi-11) advanced fourth-generation fighters similar to the Su-27 have been manufactured for the Chinese Air Force to date.
Moreover, China has started copying Russia's S-300 surface-to-air missile (SAM) systems and X-55 cruise missiles. A Chinese version of the Mil Mi-171 Hip helicopter, being assembled in Sichuan province under another license contract since 2008, may appear soon.
In December 2008, Russian Defense Minister Anatoly Serdyukov visited Beijing. However, there are no guarantees that China will honor an intellectual property protection agreement signed during his visit.
Analysts from the Moscow-based Center for Analysis of Strategies and Technologies said, apart from popular tea kettles and steam irons, China was now copying motor vehicles, locomotives and other sophisticated technology, and could also launch weapons production in the near future.
Such weapons will have the same specifications as their Russian equivalents and will be just as reliable and easy to repair, the analysts said. In the next five years, cheap Chinese planes, helicopters, tanks and other military equipment will probably offer tough competition to their Russian equivalents on South Asian, African and Latin American markets.
It is impossible to stop the Chinese arms-export surge because Beijing has enough funding to buy the required prototypes in or through third countries. Consequently, Moscow must develop and manufacture competitive military equipment in order to defeat its rivals who are dumping cheap and substandard weapons on global markets.

Space station's close call with junk: More to come

By SETH BORENSTEIN – 7 hours ago

WASHINGTON (AP) — The near-hit of space junk Thursday was a warning shot fired across the bow of the international space station, experts said. There's likely more to come in the future. With less than an hour's notice, the three astronauts were told they'd have to seek shelter in a Russian capsule parked at the space station in case a speeding piece of space junk hit Thursday.

If it hit and they were in the main part of the station, they'd have only 10 minutes of safety, Mission Control told them. A hole in the space station could mean loss of air, loss of pressure and eventual loss of life.

The crew moved so fast that they may have left their instruction manual on the other side of a closed hatch. Inside the Soyuz, they waited for 10 minutes, ready to flee to Earth if the worst happened. On the ground, space debris experts fretted.

"We were watching it with bated breath," NASA space debris scientist Mark Matney said. "We didn't know what was going to happen."

The debris missed. Engineers still don't even know by how much and may never get a good figure. It could have been a few hundred feet or a couple miles.

In space, Commander Mike Fincke said they watched out the Soyuz window.

"We didn't see anything of course. We were wondering how close we were," he radioed Houston.

Matney, who has been with NASA since 1992 called it the closest call he can ever remember.

But it happened a month after two satellites collided in orbit, adding several hundred pieces into the space litter belt. And in the last few years, the problem of debris in space has gotten much worse with satellites destroyed on purpose.

"It's yet another warning shot that we really have to do something about space debris now. We have to do something on an international level," said Harvard astrophysicist Jonathan McDowell, who tracks everything in orbit.

"As we continue to put stuff up there, the predictions are that the rate (of close calls) will increase," added William Ailor, director of the Center for Orbital and Reentry Debris Studies at the Aerospace Corp. in El Segundo, Calif.

The U.S. Space Command tracks 13,943 orbiting objects 4 inches or larger. Only about 900 of those are working satellites, McDowell said. The rest is litter. There are thousands more smaller pieces of junk that can't be tracked as easily.

In space, size doesn't matter too much after about 3 or 4 inches. Speed does. The object that put the scare into the space station was probably 5 inches, Matney said. McDowell figures it was even bigger, maybe a foot: "a long thin thing" with a thread or string attached.

It was traveling 5.5 miles per second — about 20,000 mph, according to NASA spokesman Josh Byerly.

At that speed, something 5 inches "will wreck your whole day," Matney said.

Usually with enough warning, NASA will just move the space station out of harm's way. But NASA didn't learn of the threat until Wednesday night. This piece was in an odd orbit that kept dipping into Earth's atmosphere, making it hard to track, Matney said.

NASA didn't notify the astronauts until a couple hours after they woke on Thursday because they wanted to try to get more information about the debris, said NASA spokesman Kyle Herring

The object likely was a "yo weight" used to stabilize a global positioning satellite placed in orbit in 1993, McDowell and Matney said. It is ejected when the satellite is in its proper position.

NASA spokesman Byerly said station crews have used Soyuz as a precaution five times because of debris. But NASA space junk expert Matney said he couldn't it recall ever being used because of space debris.

The space station and space shuttle have been hit by debris in the past. But so far the only holes have been in the station's solar panels and in the shuttle radiator, neither of them dangerous, McDowell said.

"It just needs to hit at exactly the wrong place and then you have a problem," McDowell said.

The trash is even worse in the orbit of the Hubble Space Telescope. The February satellite crash increased the risk of junk hitting the space shuttle when it repairs Hubble. NASA is still calculating whether it's safe enough to do the repairs later this year.

Smaller space debris often falls into lower orbit and eventually burns up as it returns to Earth. But David Wright, a physicist with the Union of Concerned Scientists, said, "some of the big things will be up there for centuries and those are the ones that can really wreak havoc."

Lately, countries and companies launching satellites design their rockets and satellites to limit debris. But that needs to be made mandatory, McDowell said. And the latest problems may spur that type of action, Ailor said.

Russia's state-run Vesti-24 television reported on a lighter moment in the space station evacuation. Apparently the crew members left an instruction manual on board and Fincke had to be told by Mission Control how to go about getting back onto the station once the threat had passed.

Associated Press Writer Steve Gutterman contributed to this report from Moscow.

South Ossetia becomes stronghold of KGB and Russia’s intelligence services
Russian Border Guards, the part of the Federal Security Service (FSB), have been deployed in South Ossetia. However, they will not only be guarding the South Ossetian border but are also intended to conduct espionage against Georgia, intelligence expert Konstantin Preobrazhensky, a former KGB agent, who now lives in the United States, writes in The Georgian Daily. Preobrazhensky notes that beyond this, South Ossetia has established its own KGB and even its own Foreign Intelligence Service, headed and run by Russian citizens andstaffed also with Russian personnel, but which provide Moscow with deniability.
The Intelligence Directorate of the Border Guards is part of the little-known FSB Intelligence Service. It is the third Russian intelligence service besides the SVR (Foreign Intelligence Service, formerly the First Chief Directorate of the KGB) and the GRU (the Main Intelligence Directorate of the Russian Army). The FSB intelligence Service was organized in the early 1990s on the basis of the First Departments of the provincial directorates of the Soviet KGB. The First Departments were managing foreign intelligence mostly by recruiting foreigners visiting their regions. Nowadays, the FSB Intelligence Service mainly targets the republics of the former Soviet Union.

A number of South Ossetia’s leaders have an explicit KGB background, the expert marks. Its current Prime Minister, Aslanbek Bulantsev, is an ethnic Ossetian and a citizen of Russia. He is a former officer of the KGB Financial Department and a former Ossetian minister. In 1986-2006, Bulantsev served as Head of the Financial Department of the KGB/FSB in Russia’s North Ossetia. South Ossetia’s Defense Minister for many years, Vasily Lunev, used to be a military commissar in Perm Oblast. The Secretary of South Ossetia’s Security Council, Anatoly Barankevich, is a former deputy military commissar of Stavropol area and served as a Deputy Head of the military commissariat in Chechnya during the war there.

The FSB can use military commissariats as a cover, for example when it plans secret home searches without a warrant. During his time in Chechnya, Barankevich’s main occupation was most probably to register all the male population of Chechnya to disclose terrorists and their family members, a task otherwise performed by the FSB. Barankevich could thus well have been covering for FSB searches on behalf of the military commissariat.
The advancement of former KGB financial department officers has received some attention since President Putin’s ascendance to power. The know example is the notoriously corrupt Andrei Belyaminov, the Head of the Russian Federal Customs Service. In the KGB First Chief Directorate (Intelligence), he was only a cashier. In the late 1980s, Belyaminov was posted at the KGB station in East Germany and made friends with Putin there, undoubtedly his path to promotion, Preobrazhensky points out.
But the KGB of South Ossetia is not allowed to manage espionage. In October 2008, following Russia’s recognition, South Ossetia obtained its own Foreign Intelligence Service. Given that there has never been a single professional spy in this tiny provincial republic, it is obvious that this service will be manned by intelligence professionals coming from Russia. But given that the territory of Georgia is already covered by the FSB, the question of this agency’s rationale remains unanswered. It appears likely that the “South Ossetian” foreign intelligence service has been created to spy on the American interests in Georgia. Crucially, the South Ossetian service will remain formally independent, indeed, in Russian parlance the service of an independent state. That will allow Moscow the ability to disclaim responsibility should its activities be uncovered, the analyst stresses.
The promotion of a KGB financial specialist to the post of Prime Minister of South Ossetia in October 2008, in this context, could have two reasons. Firstly, his professional knowledge of the governmental financial system made him an expert in money-laundering. Secondly, his belonging to the privileged KGB elite could provide him with impunity.

Senior policemen Amirkhan Tatiev short dead in Ingushetia

NAZRAN, March 13 (Itar-Tass) -- A senior policeman was shot dead in Ingushetia in North Caucasus late on Thursday.

Police said Major Amirkhan Tatiev was killed after unknown gunmen opened fire at his car in the settlement of Ordzhonikidzevskaya.

Tatiev worked as a detective of the main interior department of the southern federal district.

The gunmen escaped from the scene in a car and are being searched for.

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