IN THIS ISSUE

* Moscow examines strategic implications of the rise of China
* Putin and Kasimov attempt to boost economic cooperation
* Turkish parliament ratifies the Nabucco inter-governmental agreement
** Visit the Jamestown blog on Russia and Eurasia (http://www.jamestown.org/blog):
- A New Russian Invasion of Georgia: is it so Unrealistic?

Russian Strategic Interests Shifting Eastward

Roger McDermott

On March 8, an open letter by a group of German politicians and military officers, including the former German Defense Minister, Volker Ruehe, recommending that NATO should offer membership to Russia stimulated speculation that such approaches might be reflected in the Alliance’s new strategic concept (http://www.spiegel.de/international/world/0,1518,682287,00.html).

It also coincided with renewed Russian diplomatic activity, within the Collective Security Treaty Organization (CSTO) and at a bilateral level in Europe, aimed at promoting President Dmitry Medvedev’s European Security initiative (RIA Novosti, March 8). The underlying argument advanced in the German letter is that a fully-fledged security system in Europe and the capacity of the Alliance to preserve European stability are impossible without Russian participation. Both propositions, either achieving a new European security treaty or Russia joining NATO appear equally implausible. Nevertheless, they inadvertently highlight underestimated strategic changes in Russian security thinking influencing Moscow’s defense planning and foreign policy.

Fedor Lukyanov, the Chief Editor of Russia in Global Affairs, recently argued that NATO’s global role has failed to materialize, forcing a reconsideration of its core mission. He connected this to the Russia-Georgia war in August 2008, the security situation in Afghanistan, and the “abrupt shift in US interests toward China and the Pacific Rim.” Yet, he suggested that a future alliance between Moscow and Washington might yield more confidence in the face of the growing power of China. In both capitals the “China factor” is regarded differently: for Washington, the rise of China is seen as a potential global issue, challenging US power, while in Moscow, the concern is that the country may become directly economically dependent on its powerful neighbor. These contradictory perspectives, suggest that in the long term, Moscow has a vested interest in the emergence of Beijing as a global player, rather than it consolidating contiguous territories (www.gazeta.ru, March 12).

The significance of these geopolitical trends were elaborated in an extensive recent interview in Krasnaya Zvezda by Army-General (retired) Makhmut Gareev, the President of the Russian Academy of Military Sciences, and widely regarded as one of the country’s leading strategists. Gareev noted that the US and other western countries’ commercial interests are increasingly transferring production toward the Asia-Pacific region, and in particular China. He alluded to the manner in which these economic drivers are naturally followed by shifts in political-military interests, as he underscored the global role of NATO (Krasnaya Zvezda, March 5).

Moscow, in his view, must pay closer attention to the role played by transnational companies, rather than examining individual countries or blocs. Moreover, the existence of nuclear weapons, enhanced potential of conventional munitions and harnessing non-military methods (such as information technology), demands additional planning to counteract such activities. In this context, Gareev mentioned the Russian National Security Strategy signed in May 2009, which stresses non-military mechanisms for protecting the state. However, in his view, this was being implemented in a fragmented way, lacking coordination and adequate state funding.

Gareev, referring to the potential for external threats in any region to be exacerbated by domestic instability, noted a report prepared by the former Chief of the General Staff, Army-General Anatoliy Kvashnin, observing the demographic transformation of Siberia: with its population, according to the study, shrinking by as much as 100,000 annually. Consequently, within the next few years 20,000 to 25,000 small and medium population centers will disappear in this region. Already, its economic impact is becoming visible, with many major enterprises ceasing to operate. The road network is decaying, while high road and railroad tariffs are “gradually cutting the population of the Far East and Siberia off from the central areas of the country.” As Medvedev promotes his ambitious plans to modernize the country, Gareev argues that greater priority must be given to the development of the Urals, Siberia, and the Far East. “If the entire world is turning its face towards the Asia-Pacific region, the Eurasian area needs to be a priority for us too,” he asserted (Krasnaya Zvezda, March 5).

In the long term, Gareev suggests, Russia’s geopolitical position in Central Asia and the South Caucasus can only be secured through closer cooperation with these states. In light of these major shifts in economic, geopolitical, and strategic global trends, and given that the center of gravity in global commerce will relocate toward the Asia-Pacific region, the “priorities must be major comprehensive projects linked to economic development and the strengthening of security in the South Caucasus, Central Asia, and also the Urals-Siberia and Far East regions, which are closely interlinked” (Krasnaya Zvezda, March 5). Moscow’s most pressing challenge will be integrating Siberia and the Far East into wider regional processes. That will compel promoting an inflow of population, constructing roads, airfields, and other infrastructure, addressing unemployment levels, overcoming the aspirations of separatists, strengthening internal security, and avoiding foreign intervention. This vision for the country’s development, places the Urals and Siberia as a transit link between Europe and Asia, while in parallel exploiting northern sea routes across the Arctic Ocean.

“Because of the shifting center of gravity of world processes to the Asia-Pacific region and the relocation of NATO’s principal efforts to the South Caucasus and Central Asia, there is a need for adjustments to the configuration of our entire defense infrastructure and corresponding planning. When the entire world is turning toward the Asia-Pacific region, Russia, while remaining in principle a European country, cannot be fixated on Europe” Gareev explained (Krasnaya Zvezda, March 5).

These background traces of an eastward emphasis within Russian strategic thinking imply that Moscow is actively seeking to secure some type of understanding with Europe and the US which, from its perspective, departs from Cold War structures, as it refocuses its own long term interests toward meeting challenges presented by the rise of China. Ambitious Russian diplomatic overtures may lay the groundwork for more concrete developments in 2012-2024 (the next two presidential terms combined). Curiously, faced with these trends, should Vladimir Putin choose to return as president, he may pursue a foreign policy line currently being prepared by Medvedev.

Russia and Kazakhstan Consider Reviving Bilateral Trade

Sergei Blagov

Moscow and Astana have reiterated their earlier pledges to boost bilateral economic and energy partnership. However, the two former Soviet states have proved slow to complete existing energy projects, while bilateral trade has also declined. During a meeting in Moscow, between Russian Prime Minister, Vladimir Putin, and his Kazakh counterpart, Karim Masimov, Putin argued that bilateral trade was down at around $13 billion in 2009 due to the global economic crisis.

In 2008, trade between Russia and Kazakhstan amounted to $20 billion. Nonetheless, Putin urged the further development of bilateral trade and noted that Kazakhstan remained Russia's third largest post Soviet trade partner. In 2009, Russian exports to Kazakhstan amounted to $9.15 billion, according to Russian customs statistics. Therefore, Russia continued to enjoy a healthy trade surplus as Kazakhstan’s exports to Russia only reached $3.68 billion.

In response, Kasimov pledged to develop bilateral energy cooperation, notably Kazakh electricity sales to Russia. He also suggested boosting ties in the nuclear industry and space sectors (Interfax, ITAR-TASS, RIA Novosti, March 3). However, no agreement was announced on earlier plans to create a joint nuclear power company.

Meanwhile, in the immediate aftermath of the talks between Putin and Masimov, Russian and Kazakh utility entities moved to intensify cooperation. On March 5, the Russian energy ministry said that Russian and Kazakh energy companies including Inter RAO UES, FSK UES and KEGOC, had agreed to finalize and sign by March 15, an agreement on electricity sales until 2013 (Interfax, ITAR-TASS, March 5).

In September 2009, Russian President, Dmitry Medvedev, and his Kazakh counterpart, Nursultan Nazarbayev, pledged to develop the bilateral energy partnership, and agreed to create a joint company to implement civilian nuclear power projects. Medvedev suggested integrating the power supply systems of both countries, while Nazarbayev promised to increase electricity supplies from Kazakhstan to Russia's Siberian regions to help tackle power shortages in the aftermath of the Sayano-Shushenskaya hydropower plant disaster in August 2009.

Moscow sent an economic delegation to Astana ahead of the meeting between Putin and Masimov. On March 2, Masimov met Russian Deputy Prime Minister, Igor Shuvalov, in Astana. During his Central Asian tour, Shuvalov pledged to contribute to energy projects in the region (Interfax, ITAR-TASS, March 2). However, in their official statements, Putin and Masimov made no mention of two major bilateral projects: the Orenburg gas plant and the Caspian Pipeline Consortium (CPC).

In March 2005, Russian gas giant Gazprom first announced its plan to set up a joint venture with Kazakhstan’s state-owned company KazMunaiGas to process at Orenburg gas plant the natural gas from the Karachaganak field, near the Russian border in northwestern Kazakhstan. In December 2007, KazMunaiGaz stated that it expected the creation of the Orenburg joint venture by mid-2008. In September 2009, Russian officials insisted that the Orenburg gas processing plant would process 17.6 billion cubic meters (bcm) of Kazakh gas annually by 2012.

However, also last September, Kazakh officials argued that Gazprom’s joint venture with KazMunaiGas to process natural gas at Orenburg might be further delayed due to the development of the Karachaganak gas field taking longer than expected. The venture’s future was expected to be clarified by the end of 2009, but subsequent bilateral meetings failed to issue any clarification, and five years after the original announcement, the final joint venture deal remains elusive.

During the meeting in Moscow on March 3, both sides also failed to address bilateral cooperation in the CPC which owns the Baku-Novorossiysk pipeline. The CPC has been operating at relatively low rates, partly due to Kazakhstan’s reluctance to commit more crude oil to the pipeline.

In April 2006, Moscow and Astana agreed to more than double crude oil deliveries via the CPC from 28 million tons per year in 2005. In May 2008, they agreed to increase the capacity of the CPC from 32 million tons per year to 67 million tons per year by 2012. Moscow has long urged Nazarbayev to agree to a long-term deal, under which Kazakhstan would commit to exporting more crude oil via Russian pipelines. However, a binding oil transit deal between both countries has also failed to materialize.

Furthermore, Astana has repeated its interest in alternative pipeline routes. On March 2, following talks in the Kazakh capital with the Romanian President, Traian Basescu, Nazarbayev suggested creating a new route through Azerbaijan and Georgia to the Black Sea in order to funnel Kazakh oil from the giant Kashagan field to Romania by tanker, delivered from the Black Sea port of Constanta to Trieste in Italy (Interfax, RIA Novosti, March 2).

The new route would serve as part of the EU-supported international transport program: Transport Corridor Europe-Caucasus-Asia (TRACECA). Therefore, Kazakhstan has apparently sought to limit its dependence on Russian oil pipelines. Subsequently, energy and oil transit deals between Russia and Kazakhstan continue to prove elusive.

Turkey Signals a Shift on French Participation in Nabucco

Saban Kardas

The Turkish parliament ratified the Nabucco inter-governmental agreement (IGA) on March 4, which was signed in July 2009 at a highly-publicized ceremony in Ankara (EDM, July 14, 2009). Consequently, all IGA signatories have concluded the ratification process. The Nabucco consortium welcomed this development, claiming that it is the only project among various competing proposals to have secured the transit rights from all relevant countries (www.nabucco-pipeline.com, March 5).

The project will now move to the next stage in the finalization of the legal framework governing the pipeline. In this stage, the Nabucco consortium, which is composed of the energy companies from the five transit countries and the German RWE, will negotiate separate project support agreements with the transit nations. Turkish Energy Minister, Taner Yildiz, had explained earlier that Turkey has already initiated the process toward the signature of the project support agreement and the establishment of a national company. Ankara expects to conclude these procedures soon (Anadolu Ajansi, February 2).

Although the Turkish parliament approved the agreement by a clear majority, representatives of the opposition parties used the parliamentary session to voice their criticism of the government’s energy policies, especially in the context of the government’s claim to have bolstered the country’s role as an energy corridor. They alleged that the government failed to protect Turkish interests in recent deals, including Nabucco. They highlighted, for example, that although the Turkish government previously insisted on several conditions including a preemptive right to buy 15 percent of the gas flowing through Nabucco at discounted prices, it has failed to achieve those objectives. In response, Yildiz defended Ankara’s policies, arguing instead that Turkey obtained a profitable deal in the IGA, as it would receive a larger share of the tax revenues and charge transportation fees (www.cnnturk.com, March 4).

The criticism during the parliamentary discussions raises a broader issue: Turkish efforts to use its critical position in European energy security as a leverage –or trump card– to obtain some political benefits. On this issue, the Turkish government, despite its claims to have accomplished its goal of turning Turkey into a major energy hub, has a mixed track record. On many occasions Ankara tied its leverage in Nabucco to other issues. Its efforts to accelerate the stalled EU accession process through threats of non-cooperation in Nabucco failed to bear any fruit. By contrast, it effectively used its position in Nabucco in other cases.

To boost the credibility of the project in the eyes of potential investors and suppliers, the original consortium, formed by the gas companies from transit countries only, has considered the participation of other major players in the gas industry. In 2007, the transit countries considered the participation of Gaz de France (GDF), which expressed interest in joining. However, Turkey vetoed GDF, because Ankara is imposing an undeclared economic embargo against French business interests due to Paris’s stance on the Armenian “genocide” claims and Turkey’s EU bid. As a result, German RWE became the sixth shareholder of the consortium (EDM, January 23, 2009).

The debate on the participation of the GDF has recently resurfaced, which underscores the consortium members’ concern to reenergize the project through new partnerships. What is interesting in these developments is the evolving position of Ankara. During President Abdullah Gul’s visit to Paris, President Nicolas Sarkozy lobbied for French participation in the project. Although Gul did not comment publicly, this trip provided indications that Turkey might be ready to move away from using punitive economic measures toward Paris, and instead offers positive inducements to foster a closer bilateral relationship (EDM, October 13, 2009).

Ankara, however, did not conceal its willingness to use its position in Nabucco as leverage to change the French position on issues of concern to Turkey. In particular, Turkey has expected France to facilitate Turkish EU accession, by breaking the deadlock on the energy chapter. The Greek Cypriots have been vetoing the opening of this chapter, citing their disputes with Turkey. Turkish Prime Minister, Recep Tayyip Erdogan, has criticized the EU’s position on this issue as discrimination, since Ankara believes that, from a technical point of view, it has fulfilled all the requirements to open the energy chapter. On numerous occasions Turkish officials expressed their desire to see French leaders playing a more active role in convincing the Greek Cypriots to drop this demand, as well as lifting France’s veto on other chapters (Hurriyet Daily News, February 12, March 5).

Thus, Turkey has waited for the French government to take the first step, before lifting its objections toward its participation in Nabucco. In November 2009, in response to Sarkozy’s remarks about French participation in Nabucco, Yildiz argued: “Let me make it crystal clear. Without the opening of the energy chapter, it is not appropriate even to [talk about French participation]. We cannot simply listen to Sarkozy’s statements [to that effect], as though no problems existed [in Turkey’s EU accession process]. We are part of the EU’s efforts to solve its energy problems. Therefore, we cannot accept the fact that the energy chapter is blocked by Greek Cypriots” (Aksam, November 13, 2009).

During French Trade Minister, Anne-Marie Idrac’s, recent visit to Ankara, however, Yildiz told reporters that GDF was interested in participating in the Nabucco consortium. When asked about the earlier disagreements with Paris, Yildiz added that Ankara was open to new offers and opportunities to develop cooperation. Both Yildiz and Idrac vowed to use their partnership in the energy sector to boost bilateral relations. Idrac also expressed French support for the opening of the energy chapter (Anadolu Ajansi, www.trt.net.tr, February 25). Meanwhile, other Nabucco shareholders stated that, though no formal negotiations are currently underway, they would welcome GDF’s participation (Trend Capital, March 2).

It is uncertain if Yildiz’s positive statements on French participation mark a significant change in Turkish policy. Nor is it clear if France will reverse its policy of placing obstacles in the path of Turkey’s membership process. However, how effectively Turkey can use this positive atmosphere with France to remove the Greek Cypriot veto over the energy chapter will be the next major test of the achievements of the Turkish government’s energy diplomacy.

To view other artciles published by Eurasia Daily Monitor, The Jamestown Foundation click here