IN THIS ISSUE

* Leaked Russian defense ministry document reveals low combat readiness
* Gas supplies and financing are long shots for Nord Stream
* ...while Moscow’s bilateral approach prevails in Scandinavia
* Gas pipeline bombed in Dagestan
** New in the Jamestown blog on Russia and Eurasia (http://www.jamestown.org/blog):
- Political Farce and Fantasy Crippling Ukraine

Low Combat Readiness in the Russian Armed Forces Lowers Nuclear Threshold

Pavel Felgenhauer

This week the Moscow daily Gazeta published extracts of a leaked defense ministry document describing the results of military training this year –providing a rare opportunity to know firsthand the actual battle readiness of the entire Russian armed forces. According to Russian military tradition, the military training year begins on December 1 and ends on October 30, with November –the time to summarize results and hand out marks to all units like in high school: A, B, C and D grades. An A stands for “excellent” battle readiness and D-grade –not ready for action (www.gzt.ru, November 10).

The summarized report, according to Gazeta, shows that the Russian armed forces that are not fully ready for action: 23 divisions (47 percent of divisions in the entire armed forces), 105 brigades (60 percent of all brigades) and 97 separate regiments (50 percent of all regiments) received C grades indicating the limited battle readiness of more than half of the entire armed forces. The Navy, Air Force and the Strategic Rocket Forces (RVSN) demonstrated better results with half of the units, warships and newly formed air bases gaining A and B grades. The army, where this year tank and motorized rifle divisions have been transformed into brigades fared worse, with the majority of the new brigades securing C grades, while a motorized rifle brigade in the North Caucasus and another in Siberia were given D grades. Units that received D grades are required to perform immediate improvements in order to be reexamined to establish they have regained battle readiness (www.gzt.ru, November 10).

Reportedly on November 17, the entire top brass in the military will be gathered in Moscow in the defense ministry for a traditional annual meeting to assess the results of the 2008-2009 training year and receive directives for the coming year of military training. Russia’s rulers –Prime Minister Vladimir Putin and President Dmitry Medvedev– may attend the gathering together with cabinet ministers and top Kremlin officials. It was a year that witnessed the most radical military reform in Russia for more than a century and assessments of its progress will surely be made. There is a lot of resistance to reform at the grassroots level in the garrisons and bases in the vastness of the Russian landmass. There is also opposition in Moscow within the defense ministry and General Staff. The leaking of the report on battle readiness assessments to Gazeta seems to have been carried out by disgruntled officers. Gazeta quotes its sources in the General Staff as predicting that the Chief of the General Staff Army-General Nikolai Makarov may be ousted as a result of the report that indicates “the armed forces are in fact not battle ready,” while the reform effectively destroyed the old Soviet military machine and that its main aim is “to oust officers to economize on their pay.” Last month, Makarov turned 60 and now may continue active service as Chief of the General Staff only under a special presidential order (ukaz). Gazeta quotes its General Staff source as saying that Makarov will be ousted and may be replaced by the present chief of the Moscow Military District Colonel-General Valery Gerasimov (www.gzt.ru, November 10).

The opponents of military reform may be disappointed. Retired military intelligence (GRU) Colonel Vitaly Shlykov, an advisor to the defense ministry, insists that Makarov has been appointed Chief of the General Staff by the Defense Minister Anatoly Serdyukov. Makarov enthusiastically supports Serdyukov’s reform plans and while Serdyukov continues to be Defense Minister and the reform continues, Makarov’s position seems secure. Medvedev will, according to Shlykov, sign a ukaz to continue Makarov’s active service. The assessment of battle readiness leaked to Gazeta, according to Shlykov, is a sober and realistic document that reflects a possible partial improvement in the state of the Russian armed forces that were much worse before the military reform began. While 65 percent of the Russian soldiers are conscripts serving one year armed with old weapons, it is impossible to hope for any drastic improvement in combat readiness. According to Shlykov, it is good that at least some units gained B grade marks (www.gzt.ru, November 10).

Last June, Makarov told journalists that the Russian armed forces were disintegrating and must be radically reformed without hesitation. According to Makarov, Russian arsenals are full of old weapons that were not properly maintained or repaired for years and are mostly unusable. Its officers and personnel are badly trained. While the Russian military is reforming, retraining and rearming with modern weapons, the conventional forces will be extremely weak and this drastically increases Moscow’s reliance on nuclear deterrence. According to Makarov, “We will not cut the RVSN –they are today our only valid defense, while we need at least three years to reform” (EDM, June 11).

The Secretary of the Russian Security Council Nikolai Patrushev announced last month that a new military doctrine will be approved before the New Year and that it will allow the first use of nuclear weapons, including “preventive nuclear strikes” to defend against “conventional aggression” not only in possible large scale, but also regional and “even local wars” (Izvestiya, October 14). Patrushev’s remarks concur with Makarov’s earlier statement. In local armed conflicts on its periphery, in its so called “sphere of special interests,” like the August 2008 war with Georgia, Russia is ready to use nuclear deterrence to avert any possible intervention by better armed and trained Western (U.S.) forces. Of course, the Russian military is not actually planning to use nuclear weapons –only the threat to deter any Western incursion into what Moscow believes to be its backyard. Foreign Minister Sergei Lavrov has recently described President Barack Obama’s call for full nuclear disarmament as “a wonderful slogan,” but did not show any appetite to seriously discuss it (Interfax, November 5). What is really important in the Gazeta report is that the RVSN ICBM divisions received B-grades (www.gazeta.ru, November 10).

Nord Stream Pipeline Project Still Short of Resources

Vladimir Socor

Four years after Germans and Russians signed the founding agreement (October 2005), the Nord Stream pipeline project has received the Scandinavian countries’ approval for construction on the Baltic seabed, from Russia to Germany. The Gazprom-led project, however, has not yet lined up the gas and investment resources. Moreover, the pipeline construction schedule through 2015 seems only loosely correlated with the availability of Russian gas resources.

Nord Stream’s construction schedule envisages completing the first stage in late 2011 with an annual capacity of 27.5 billion cubic meters (bcm); completing the second stage by late 2014 with the same capacity; and reaching the full annual capacity of 55 bcm by 2015.

The Russian gas field dedicated to Nord Stream is Yuzhno-Russkoye, in western Siberia’s Tyumen oblast. The earmark dates back to 2005 when the Nord Stream project agreement was signed. The field’s commercially viable reserves are estimated at 600 million cubic meters (www.wintershall.de, www.eon-ruhrgas.com.de, www.nord-stream.com/de). That volume is going to be shared by German users –Wintershall and Ruhrgas– with Gazprom during the life of the Nord Stream project. Yuzhno-Russkoye’s reserves would probably not suffice to fill even the first of Nord Stream’s two lines. Thus, the issue of ensuring full supplies for Nord Stream remains unresolved.

Russian authorities are undoubtedly aware of this situation. In 2006, then President Vladimir Putin publicly offered to export a large share of the Shtokman field’s future production to Germany, including a portion through the Nord Stream pipeline. Shtokman, the supergiant Arctic field located far offshore in the Barents Sea, holds reserves estimated at nearly 4 trillion bcm, with discouragingly high costs of development. There is no known feasibility study and no investment decision in sight. Gazprom has enlisted Norway’s StatoilHydro and Total of France as partners to develop Shtokman; but the conditions –including transfers of advanced technologies to Russia– are far from agreed thus far. A start to commercial production is generally deemed unlikely before 2020.

Meanwhile, Gazprom speaks of using Shtokman’s future production mainly for liquefaction and export to North America, as part of Gazprom’s strategy to break into the global LNG (liquefied natural gas) trade (Vedomosti, October 22). Such statements need not be taken at face value. They are often meant to play off Western partners against each other; and are also subject to change in response to market trends. What does seem likely, however, is that Shtokman gas will not be available in time to fill Nord Stream to the declared capacity of the pipeline within the declared schedule of its completion.

Apparently reflecting pessimism about Shtokman’s outlook, Prime Minister Vladimir Putin avoided discussing that project when he invited top foreign companies to consider an equally vast plan for Northern Yamal gas development. The companies’ response was notably reserved (EDM, September 25). Thus far, Moscow is not linking the issue of developing Northern Yamal with the issue of sourcing Nord Stream. Geological conditions at Northern Yamal, with unfathomable development costs and duration, would seem to rule out gas inputs from there long after Nord Stream’s desired completion date.

Meanwhile, Moscow is hinting that it might prioritize Gazprom’s South Stream project –the pipeline on the seabed of the Black Sea to southern and central Europe– rather than Nord Stream (see below). This would seem deliberately to imply a zero-sum game between the two projects, vying for Russia’s finite gas and investment resources. Given Russia’s stagnant gas production and the declining potential of its main fields currently in operation (except for Siberia’s east and far east), the goal of filling Nord Stream by 2015 as planned seems out of reach.

The financing of Nord Stream’s construction also seems far from lined up at this juncture. Cost estimates range from 7.5 billion Euros (the project consortium’s official figure) to $11 billion (European analysts’ often-quoted estimate). According to the project’s general manager Matthias Warnig, the consortium has spent approximately 2 billion Euros on steel pipes for the first of Nord Stream’s two lines; and it needs another 4 billion Euros for both lines’ steel pipes. Warnig hopes to raise 70 percent of the total project financing from banks, presuming German government guarantees for 1.5 billion Euros and Italian government guarantees for much of the remainder (Handelsblatt, October 9).

Those Italian credit guarantees –if they materialize– stand to be rewarded with business contracts for the Nord Stream project. Italian firms have been designated to manufacture some of the steel pipes, build the compressor station at Portovaya near St. Petersburg, and lay pipes on the Baltic seabed (IL Sole-24 Ore, October 30; Sueddeutsche Zeitung, November 10).

Italy’s involvement with Nord Stream underscores the emergence of a tripartite, Russo-German-Italian pipeline alliance to outflank Europe through the Nord Stream and South Stream projects. In this grouping, Russia alone operates as a state actor with integrated economic and political strategies. The German actors are interest groups driven by compartmentalized business strategies, though capable of influencing the government; while the Italian participants are companies linked with Moscow-friendly Silvio Berlusconi’s government.

Meeting with Berlusconi recently to promote the South Stream project, Russian Prime Minister Vladimir Putin predicted that “South Stream has every chance to be completed before Nord Stream” (Interfax, October 23; Vedomosti, November 6). The Kremlin uses those shifting signals to play off various consumer countries against each other while Russia’s gas export potential stagnates and Gazprom clearly lacks investment resources proportionate to its declared commitments and projects.

Russia Gains a Political Victory in Scandinavia with Nord Stream Approval

Vladimir Socor

Three Scandinavian governments have allowed Gazprom’s Nord Stream pipeline, from Russia to Germany, to be built on the Baltic seabed (EDM, November 10). The Finnish, Swedish, and Danish governments had procrastinated or resisted for three years and their public opinion does not welcome the Nord Stream project. Government agencies and public organizations in the three countries were conducting detailed analyses of the project’s economic, security, and environmental implications. On the environmental account, the Scandinavian governments and publics are uniquely sensitive.

The sudden approval marks a significant success for Russian policy in Northern Europe. It shows Moscow’s ability to influence decisions in individual countries, outside the framework of the European Union, of which the three countries are members. Their neighbors on the opposite Baltic shore –the E.U. members Estonia, Latvia, Lithuania, and Poland– had resisted the Nord Stream project. They continue objecting to it on the basis of energy security, ecological risk, and maritime safety considerations.

The go-ahead to a bilateral Russo-German project of such magnitude marks a setback to the E.U.’s common energy policy and political solidarity. The project reflects –and, if implemented, would reinforce– the self-described Russo-German “strategic partnership,” eroding Germany’s relationships with its allies. Berlin also lobbied the Scandinavian governments for a go-ahead to Nord Stream; but Moscow proved more effective in swaying the Scandinavian governments by introducing linkages that affected their interests.

This outcome also means a setback to Nordic regional solidarity, as individual governments ultimately made their own trade-off with Russia, on issues of interest to each. They only seemed to synchronize the timing of giving in. The situation also shows the limitations of the Council of Baltic Sea States, a consensus-based, inclusive organization that was all along unable to take a position on the Russo-German Nord Stream.

Denmark had first given its consent on October 20, ahead of Prime Minister Lars Lokke Rasmussen’s November 2 maiden visit to Moscow. Meanwhile, the Danish energy conglomerate DONG, 73 percent state-owned, has contracted with Gazprom to import gas through the Nord Stream pipeline, in small volumes initially. From Denmark’s standpoint (unlike Germany’s), this is a diversification move, to compensate for the anticipated decline in North Sea gas production. Apart from this, Russian Prime Minister Vladimir Putin agreed to cooperate with Rasmussen’s initiative on a “binding political declaration” for the post-Kyoto period, at the U.N.’s climate-change conference next month in Copenhagen (Interfax, November 2; Kommersant, November 6).

Finland gave its consent as part of a tacit quid-pro-quo whereby Russia delays the imposition of high export duties on round timber. The Russian government had announced two years ago (at first confidentially, then publicly) its intention to introduce that measure, threatening Finland’s wood-processing industry, which is a key sector of that country’s economy. High export duties on Russian round timber would either drive up production costs in Finland or compel Finnish companies to transfer production and technologies to Russian territory. Moscow has now postponed the imposition of those duties by two years (BNS, November 5).

In Sweden, the conservative government gave its approval although many on the conservative side, as well as the Social-Democrats and left-leaning groups, continue to oppose Nord Stream. According to Social-Democrat leader Mona Sahlin, citing a joint statement of opposition parties, new investments in Russian gas imports correspondingly delay investments in other forms of energy while “strengthening European dependence on Russian gas” and “giving Russia new possibilities to use its energy resources for leverage against the E.U.” (Handelsblatt, November 6; Le Monde, November 7).

Military considerations had played an important role in the Swedish debate. The Nord Stream pipeline route skirts Gotland Island, the site of top-secret military installations. Ultimately, however, the Swedish government was influenced by the Danish and Finnish positions, German lobbying, and concern for the E.U.-Russia summit, which Sweden is scheduled to host next month. As current holder of the E.U.’s presidency, the Swedish government apparently felt that it could not take a partisan side in the Nord Stream controversy. The Russian government, moreover, had hinted in October that Sweden might not be an appropriate host for a successful E.U.-Russia summit.

Nord Stream’s political success, however, ensures neither gas supplies nor financing for the project. Its outlook seems doubtful on both counts at this juncture.

Attacks and Shootouts Reported in Dagestan, Ingushetia and Karachaevo-Cherkessia

The Jamestown Foundation

The Russian Emergency Situations Ministry was quoted today (November 12) as saying that a blast from an “unidentified explosive device” last night had ruptured a section of the natural gas pipeline stretching between Mozdok, North Ossetia and Kazimagomed, Azerbaijan. The affected section of pipeline is located in Dagestan’s Karabudakhkentsky district south of the republican capital Makhachkala. Security guards had reportedly discovered a suspicious item under the pipeline at around 9.00 p.m., local time, and called the Federal Security Service (FSB) bomb disposal experts, but the blast occurred before the FSB unit arrived. The incident cut off gas supplies to villages in Makhachkala’s suburbs and parts of the city itself, affecting an estimated 545,000 people.

Earlier in the day, signs of an explosion were discovered at a section of another natural gas pipeline –this one linking the Baku, Azerbaijan and Novorossiysk, in Russia’s Krasnodar Krai– also in Dagestan’s Karabudakhkentsky district. That blast, which was estimated as having the force of one kilogram of TNT, resulted in the pipeline’s deformation, but apparently did not rupture it (www.rbc.ru, www.regnum.ru, Interfax, November 11-12).

Another apparent terrorist attack took place late yesterday in Dagestan’s Karabudakhkentsky district, when an explosive device detonated inside a car on the Madzhalis-Makhachkala highway. The car was reportedly registered to a 64-year-old Makhachkala resident and a driver’s license of a 21-year-old resident of the city of Derbent was found inside the vehicle along with the ID’s of two other people, three 100-liter plastic barrels, a gas cooker and gas bottle (www.rosbalt.ru, November 12).

In another incident yesterday, two unidentified gunmen traveling in a Zhiguli car on the outskirts of the city of Khasavyurt opened fire on traffic police post, killing one policeman and wounding another. The shooters managed to escape while the driver, apparently a taxi driver, was taken into custody (www.rbc.ru, November 12).

Two militants were reportedly killed in a shootout with police and FSB personnel in the village of Botashyurt in Dagestan’s Khasavyurt district on November 7 (Interfax, November 9).

Meanwhile, Dagestani President Mukhu Aliev told policemen in a speech marking Police Day on November 10 that kidnapping is a shameful phenomenon which is casting a shadow not only on Dagestan’s law enforcement bodies, but the entire republic. Aliev said Dagestan had in recent years managed to sharply curtail kidnappings, but that they had flared up over the last few months. “In various media you hear the idea that members of the law enforcement bodies are involved in the kidnappings,” he said, adding: “Of course, anyone can get hold of a camouflage uniform these days. But while there are cases in which the police located people who went missing, nonetheless the law enforcement bodies will be complicit in those kidnappings as long as they do not solve the crimes. It is the only way to preserve an unsoiled reputation. Protecting the honor not of the uniform, but protecting the honor of each citizen is what guarantees the authority of the law enforcement system.”

Kavkazsky Uzel quoted Aliev as telling the policemen that one of the goals of Dagestan’s Islamic insurgents is to discredit the law enforcement bodies, but that it is necessary to distinguish between “objective criticism of the police” and politically motivated criticism aimed at destabilizing the republic.

According to the Mothers of Dagestan human rights group, 25 people were kidnapped in the republic between February and August of this year, including five young people in August alone. According to the Memorial human rights group, 12 people were kidnapped in Dagestan in 2008 (www.kavkaz-uzel.ru, November 11).

Violent incidents have been reported in other republics of the North Caucasus over the last several days. Unidentified attackers in Ingushetia fired a grenade launcher at a gas station in the city of Nazran yesterday. No one was hurt in the resulting blast. Twenty minutes later, unidentified gunmen fired on the administration building in Nazran’s Altievsky municipal district. No one was hurt in that incident either (www.kavkaz-uzel.ru, November 12).

On the evening of November 10, unidentified attackers opened fire on police in the city of Karachaevsk, Karachaevo-Cherkessia, wounding two officers and a former colleague who had come by to offer them congratulations on Police Day (www.kavkaz-uzel.ru, November 11). The previous day, November 9, four men were killed during a special operation near the village of Indysh in Karachaevo-Cherkessia. The operation was aimed at capturing Ruslan Khubiev, who was suspected of attacking several policemen. Khubiev and three others were killed in a shootout with police, while one policeman was wounded (Interfax, November 9).

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