Transatlantic Politics

Bucharest, Romania:  The final fronteer.

It was the first NATO summit where the US failed to get what it publicly asked for - granting Ukraine and Georgia a next step in the NATO-accession process, the so-called "Membership Action Plan" or MAP.  MAP does not mean automatic NATO membership and can take 5-10 years to complete because the requirements laid out in MAP are dependent on the reformist drive of the respective governments. In the battle over whether to grant MAP to Ukraine & Georgia, French President Sarkozy, whom Bush qualified as "the last reincarnation of Elvis", suddenly switched sides and joined the opposition led by German chancellor Angela Merkel, who was against MAP from the very beginning.

After bitter quarrels at a working dinner hosted by the Romanian president Traian Basescu, the leaders of Old Europe prevailed. Bush and Brown got a measly compromise - a second chance in December, when NATO foreign ministers could decide to give MAP to the two former Soviet countries. But German Foreign Minister Frank Walter Steinmeier already qualified as "unconceivable" the prospects of changing his mind by December, when, in his view, there will only be a "first assessment". Followed by a second, third, etc. until Ukrainians and Georgians give up hope of ever joining NATO.

The real winner of the NATO summit in Bucharest was none other than Vladimir Putin. It was he who delivered the final speech on the last day of the summit, it was he whom Germany and France were thinking of as these two stalwarts of "Old Europe" fought to keep Georgia and Ukraine out of NATO. Self-confident and pleased that "our concerns were heard", Putin gave the audience at the Summit a condescending discourse which seemed as if the West was already at his disposal and he, the "Tsar of the Kremlin" didn’t feel the need to bully his loyal servants.  If the result of the NATO Summit are any indication, Putin was right.

During the closed-door NATO-Russia Council in Bucharest, Putin threatened the statehood of Ukraine in the event that it would become a NATO member.  Putin noted that "there are 17 millions Russians there" and that "Ukraine is a patchwork of territories from other states". But in the following press conference he refrained himself form directly attacking Ukraine or Georgia. The argument against NATO enlargement, in Putin’s public speech, was that "NATO is not a democratizer", but "a powerful military block whose appearance on our borders will be considered by Russia as a direct threat to our country’s security.

He also stressed that no threat - from terrorism to proliferation of WMD, from cyber attacks to energy - can be tackled without Russia. NATO was set up during the Cold War against an "evil empire" - the USSR - "but it remains to be seen who was right then", Putin said. That statement alone should set off alarm bells among military strategists and historians throughout the West. 

Putin also mentioned Iran and that, although Russia opposes a military nuclear program, it is "fully committed to honor its contractual obligations in terms of civilian technology and fuel for the civilian Iranian nuclear program".  No comment.

So what will be the future of NATO after Bucharest, after Russia got a veto right through its advocates in the NATO Alliance, especially Germany?

Hopefully Russia will make another mistake, the way it cut off gas to Ukraine in 2006 and let German consumers shiver. And hopefully we’ll have a strong leader in the White House next year. One who knows Russia from the Cold War and sees the new threat it has become. One who doesn’t look Putin or Medvedev in the eyes and thinks he has "seen into their soul", as George W. Bush famously stated after meeting with Putin. That would be the only hope for the transatlantic community. It cannot rely on a reincarnation of Elvis in France and a jello-like chancellor in Germany, too weak to break the will of her half-socialist, pro-Russian government. 

It is a sad indication of where the power truly lies in Europe when Bush and Sarkozy, both hawkish on foreign policy in general, are not able to secure the nomination of two former Soviet satellites to one of the most important military blocs in the world.  Perhaps, in the end, Putin smiles because he knows the truth:  Putin has also looked into the West’s eyes to see its soul and has found that the West is lacking both a soul and a backbone. 

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Coupled with a non-united Europe and the fading influence of the US State Department in Eastern Europe, Vladimir Putin strikes again today on the energy front by securing a deal on the South Stream gas pipeline with Bulgaria, one of his closest allies and also dubbed "Russia's trojan horse in the EU".

During his final visit as Russia's President to a foreign country, Putin managed to get Bulgaria on board for his pet project: The Nabucco pipeline.  This was accomplished even though the South Eastern European country is also a partner in an US-EU backed project designed to be an alternative to Russian pipelines across Eastern Europe and to Russia itself as a gas supplier.

Despite EU optimism, Russia's move is clear: the Baku-Tbilisi-Ceyhan precedent must not be repeated.  The Baku-Tbilisi-Ceyhan gas project was a U.S.-led pipeline that bypassed Russia and brought oil from Azerbaidjan directly to the Mediterranean via Turkey.  This project single-handedly helped Azerbaidjan and neighboring Georgia gain a degree of autonomy from Russia's sphere of influence.

Having witnessed the power of the pipeline, Russia has set its sights on the oil & gas-rich Caspian countries.  As a result, these same former members of the Soviet Union are also becoming more dependent on Russia's state-controlled Gazprom monopoly in an overt attempt by Russian-controlled Gazprom to bring the "lost countries" of the Warsaw Pact back into the sphere of Russian influence.

Reuters summarizes Gazprom's expansion in Central and Eastern Europe. However, Reuters fails to note Russia's recent coup d'etat in Austria, where Putin secured a deal concerning the termination of the previously-mentioned Nabucco pipeline.  The termination point of this pipeline in Austria is at the Baumgarten terminal and is based on the principle that  "if we can't own the pipeline, we should own the faucet". 

Such moves are to be expected from Russia's Gazprom.  Here is a list of Russia's latest energy dealings: 

• BULGARIA
• Gazprom supplies all of the Balkan country's natural gas and transits gas via its territory to Greece and Turkey.
• Russian President Vladimir Putin on Jan. 18 secured Bulgarian participation in the 10 billion euro ($14.66 billion) South Stream gas pipeline.The project, proposed by Italy's Eni  as well as Gazprom, is Moscow's challenge to a rival Nabucco plan to pipe Central Asian gas to the European Union and reduce the bloc's reliance on Russian energy. Gazprom is also interested in buying a stake in Bulgaria's state gas monopoly Bulgargaz if the government goes ahead with plans to list a minority stake on the bourse. Gazprom is also reportedly interested in acquiring the Sofia heating utility plant.
• Bulgaria has picked Atomstroyexport, controlled by Gazprom, to build its new 4 billion euro power plant of Belene.
•  CZECH REPUBLIC
• Czech natural gas firm Vemex has signed a deal with Gazprom unit Gazexport on gas deliveries to the Czech Republic which bypass the former Czech monopoly.
• ESTONIA, LATVIA, LITHUANIA
• Gazprom wants to build gas storage in the former Soviet Union's Baltic states, but it is seeking alternative pipeline routes to avoid dependence on traditional transit states.
• In particular, it wants to build a pipeline under the Baltic Sea from Russia to Germany, which would bypass Estonia, Latvia and Lithuania, as well as Poland and Belarus.
• The planned pipeline is to be built by a consortium, Nord Stream, majority-owned by Gazprom and also Germany's BASF and E.ON
• GREECE
• Putin said last month that Greece wanted to double imports of Russian gas after 2016. He said Greece supported Gazprom's plans to build the controversial South Stream pipeline (a rival to the aforementioned other Russian pipeline: Nabucco).
• HUNGARY
• Under a deal announced on July 13, 2006, Gazprom gained stakes in Hungarian gas and power companies in return for giving Germany's E.ON a share in the Siberian Yuzhno-Russkoye field.
• Gazprom and Hungary's MOL have formed a company to study the proposed extension of the Blue Stream gas pipeline, which takes Russian gas to northern Turkey.
• SERBIA
• In December, Russia proposed to Belgrade a controversial energy pact that would potentially see Serbia included in Gazprom's South Stream gas pipeline.
• In return Gazprom would get a 51 percent stake in Serb oil monopoly NIS for 400 million euros. But the proposal has drawn fire from one faction of Serbia's ruling coalition, which argues the offer undervalues NIS.
• Analysts believe nationalist Prime Minister Vojislav Kostunica wants to accept the offer, to reward Russia for backing Serbia's efforts to block the independence of its breakaway Kosovo province by threatening to use its U.N. veto.
• SLOVAKIA
• Gazprom owns 49 percent of the gas network SPP together with Germany's Ruhrgas (a subsidiary of E.On) and Gaz de France.
• TURKEY
•  Gazprom supplies three quarters of Turkey's gas via southern Europe and by a pipeline under the Black Sea, which it jointly owns with Eni.
• It wants to buy Turkish gas distribution firms is also seeking direct deals with Turkish utilities with an eye towards supplying gas to Israel.

 Putin's Russia understands that energy is the lifeblood of an economy.  Chavez's Venezuela understands that energy is the lifeblood of an economy.  Why do the largest economies in the world, the EU & the US, not do more to secure their own lifebloods? 

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A very interesting debate on the Russian "selection", not "election" due tomorrow (Sunday, Dec.2nd) , as Edward Lucas from the Economist puts it. Watch it here. Relevant that Leonid Gozman, the Deputy President of the oppositional Union of Right Forces Party has a broken arm.. and Evgeni Kiselev, a leading Russian tv moderator has lost his very popular show because of his critical tones toward Putin.

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Gary Kasparov, the man who was a world chess champion for 15 years in a row is trying now to checkmate Vladimir Putin in politics. Wishful thinking? A mirage of the West projected onto Russia? Maybe. Leader of the opposition movement "The Other Russia", Mr. Kasparov admits quite sincerely: "We are not trying to win the elections, we are trying to have elections!"

A guest of honor at the European Ideas Network in Warsaw last week, Mr. Kasparov made some worrying statements:

Putin doesn't run a country, he runs a corporation. He is the ugliest mixture of Karl Marx and Adam Smith. He is not interested in restoring Russia's influence, he's just interested in Gazprom's and Rosneft's influence. Actually, Putin is destroying the Russian state. If we look at the functions of the state, they are gradually transferred to the state companies: Now the Duma voted that Gazprom and Rosneft can have its own armies. These so-called state companies are run by Putin and his KGB-buddies - him being a sort of "capo di tutti capi."  And for those doing business with KGB Inc., I  remind them that the KGB shareholders are very active shareholders.

In Kasparov's view, the main goal of Russian foreign policy is to raise the price of oil, no matter what - that's why the tensions in the Middle East are so important to Putin:

Selling nuclear technology to Iran is good - you get money and create tensions - selling missiles to Hezbollah through Syria serves the same purpose. North Koreea causes trouble? Excellent! In Putin's view, everything that will raise the oil price is good. But oil money is the main sponsor of terrorism. If we look at a map of the world, most of the dictatorships are based on oil.

Although he admits that the current opposition parties stand no chance in even getting registered for the upcoming parliamentary elections, not to mention the presidential ones, Kasparov seems confident that the Putin regime will collapse before 2012.

 If the price of oil falls under 50 dollars a barrel, you don't have to be a rocket scientist to predict that the regime will fall. But even if the price of oil stays high, the regime will collapse. The problem with this regime is that the oil money disappears, you can't find it in Russian banks or investments. You can find it anywhere from Riga til London, but not in Russia. The Russian banking system is shaky, the infrastructure is old and rusty, from Soviet times, pipelines need investments badly, but nothing of this sort is being done. Inevitably, this will lead to a political crisis. Even if Putin puts his man in charge for four or less years, the balance will be disturbed and there will be massive fighting among the different groups. And the fear of the rich and powerful can be transformed into a dynamic energy which could topple the regime.

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How about this for an oil deal: Buy a state oil company for $615 million, get rid of the debts through a shady scheme and then resell it for $2.7 billion. Such a deal is just more proof that the best deals are made with the state: Rompetrol, the private-owned Romanian oil company and its main asset, a refinery at the Black Sea coast, just a few miles from a U.S. military base wasn't sold to Shell, Exxon Mobile or Chevron. Rather, the buyer is the state oil company of Kazakhstan, KazMunayGaz , who bought 75% of Rompetrol on August 24.

"Better the Kazakhs than the Russians" is what US and EU experts are telling the Romanians. But is the Kazakh "president for life", Nursultan Nazarbaev, really an alternative to Putin? 

Dinu Patriciu, the former owner of Rompetrol and now the richest Romanian alive, claims he is building an alternative route to Russian oil.  Such a "Nabucco of oil", as the EU gas pipeline project is referred to that is due to bring Caspian gas through Azerbaijan, Georgia and Turkey to the European markets is what Patriciu is envisioning. The problem with this rosy view is that the Kazakh oil fields at Tengiz & Atyrau are connected to a Russian pipeline that goes straight to the Russian harbor Novorossiisk at the Black Sea, where 90% of all Russian oil exports are shipped from.

More so, the alleged "alternative to Russia" is very committed to the Russian pipeline. When he signed a deal with Vladimir Putin for 17 million tons of oil to be pumped to Novorossiisk for another planned pipeline from Bulgaria to Greece, Nazarbaev said:

"Kazakhstan is absolutely committed to sending the most part, if not all, of its hydrocarbons across the Russian territory."

For the Kazakhs, the acquisition of Rompetrol is finally getting them on European soil, after similar deals with the Czech Republic, Latvia and Lithuania failed. Uzakbay Karablin, the president of KazMunayGaz confirmed this in a statement:

"The deal provides us with a footprint in several important downstream markets in Europe, including France, Romania, Moldova and Bulgaria, as well as the ability to utilize Rompetrol as a platform for future expansion. The company will focus its activities in the high-growth markets of the Black Sea, Balkans and Mediterranean regions. It effectively builds an energy bridge between the oil resources of Kazakhstan and the growing demand for refined products in Central, Eastern and Western Europe."

For the Romanians, especially their increasingly isolated, pro-American president Traian Basescu, the sudden wealth of a local "oligarch", influential party leader and media owner sets the grounds for even more political trouble. The former Rompetrol boss was the very reason for Basescu's disagreements with his Premier, Calin Popescu Tariceanu, a long-time friend and apprentice of Patriciu. 

After he sold the company, Patriciu claimed Gazprom was also interested in purchasing Rompetrol, but the deal couldn't be made because of "political reasons". The Kazakhs seem to be the perfect solution: not quite Russians, but close enough, with pockets deep enough to make them eager to buy at any price.  The Kazakhs even went so far as to allow Patriciu to keep his CEO seat. For Patriciu, on trial for money laundry and insider trading related to the privatizing of the very same Rompetrol he just sold, this might be the ticket to heaven. A prosecutor-free heaven.

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