Resurgent Russia

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Cool not cold - Russia's new foreign policy
As the US and Russian presidents prepare for a difficult summit in Maine, BBC News website world affairs correspondent Paul Reynolds assesses Moscow's tough and independent foreign policy.

Western governments were taken by surprise when Russia under President Vladimir Putin started to harden up its foreign and domestic policy, but this is something they will have to learn to live with for the foreseeable future.

A common way of describing this relationship (I have done so myself) is to say it has "echoes of the Cold War" or is even "a new Cold War".

However, this is no longer a useful way of explaining what is going on.


There is a certain hysteria in the West about Russia
Sir Rodric Braithwaite
former British ambassador to Moscow


We are in a new situation for which the Cold War is not a good example. That was a multi-generational, philosophical, epoch-making struggle in which one side won and the other lost.

This is a situation in which Russia is not an enemy but cannot be described as a close friend. It is a competitor, playing by some international rules and by some it has made up itself.

It is a change from the complacent years of Boris Yeltsin, who seemed to roll over and do more or less anything the West suggested, especially over economic reform.

That did lead to economic change in Russia, but it also led to the era of the oligarchs, and to a shattering of Russian national nerve.

A bracing mix

President Putin has put an end to those days.


Russia has decided to take control of the natural resources it feels it gave away too cheaply in what Mr Putin has called "colonialist" deals. So Shell and BP, for example, have been taken out of or bought out of major oil and gas interests.

According to the Economist, Russian GDP has increased nearly three times since 2002 and has grown at 6 or 7% each year since 2003. Inflation fell to under 10% last year and its trade balance has increased threefold in four years.

Abroad, President Putin has criticised the US in extremely harsh terms, even comparing its foreign policy to that of Nazi Germany.

He has rejected Western complaints about the curtailment of rights in Russia (it has a less free press now and protests are regularly broken up).

He has differed with the West over a number of key policies - independence for Kosovo and the US missile defence installations proposed for Poland and the Czech Republic being two leading examples.

He has even threatened targeting nuclear missiles on Europe again in retaliation for the latter. That threat, it has to be said, does have echoes of the Cold War, though it was only a threat.






The Litvinenko affair has raised fears that elements in Russia's secret services have not learned that the bad old days are supposed to be over. Russia in turn objects to the asylum granted by Britain to exiles it wants to put on trial. The episode is an example of the difficult relationship.
On the other hand, as a permanent member of the Security Council, Russia has cooperated over sanctions on Iran for its nuclear activities (while warning against a military attack) and on Sudan over Darfur.

Russia has blown hot and cold and the mix can be a rather bracing one for its opposite numbers.

Western 'hysteria'

Sir Rodric Braithwaite was British ambassador in Moscow from 1988 to 1992; his latest book is on the failed Soviet engagement in Afghanistan.


"The US is disappointed in Putin," he said, "but the Russians like what he is doing because he is making them feel good again.

"After 1991, Russia fell flat on its back. We took it for granted and felt that what was good for us was good for them.

"Russia now has to be taken into account. It has a lot of levers after years of weakness. It has come back quickly from the depth of humiliation and this makes Russians feel better.

"The most sensible way to look at Russia is not as an appendage of the West but, as someone put it recently, as a substantial non-aligned country like China or India.

"We do not worry when those countries define their interests differently from ours. And of course Russia was right to be different over Iraq.


"On the other hand, its domestic policies are not what liberals hoped for and Russia has adopted a noisy, bullying tone towards its near neighbours and they are right to be concerned.

"Talk of a new Cold War, though, is wrong. We are going through a period of bad relations, not the threat of war.

"Russia now has huge interests in the West and wants to invest more. That is, after all, what we told it to do. And it needs our money as much as we need its oil and gas.

"There is a certain hysteria in the West about Russia."

At a recent seminar at the Nixon Center in Washington, Dmitri Trenin, Senior Associate at the Carnegie Endowment for International Peace and Deputy Director of the Carnegie Moscow Center, referred to "Russia's sense of global friendlessness, which its focus on its own interests reflects.

Oil wealth has helped bring Russia back from the depths of its impotence. A $200bn military modernisation project over the next eight years indicates a sense of heightened power."

He summed up: "The Russian leadership is not seeking confrontation with the West but is seeking a basis for remaking the relationship. That new paradigm has yet to be found."

Paul.Reynolds-INTERNET@bbc.co.uk

Story from BBC NEWS:
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Published: 2007/06/28 09:07:16 GMT

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Russia's economic might: spooky or soothing?
By Jorn Madslien
Business reporter, BBC News




The Russians are displaying their wealth with pride, whether on the streets of Moscow or on the global geopolitical arena.

Retail sales in the country soared 13% last year, well ahead of the rest of Europe.

And almost half the Russian people believe it important to be fashionably dressed, according to a recent Wall Street Journal survey.

But unlike many fashion victims in the West, Russia's elite can really afford to strut.

Last year, the number of so-called "high net worth individuals" - people whose spending power exceeds $1bn (£500m) - in Russia rose 15.5% - compared with an 8% swelling in their number globally, according to the Merrill Lynch and CapGemini World Wealth Report.

Similarly, President Vladimir Putin's confident swagger on the international stage is that of a man who has delivered what his people want: stability, prosperity and national pride.

Regional growth

"There's been a fantastic transfer of wealth to Russia," observes Accenture energy analyst, Mark Spelman.

In just four years, Russia's GDP has almost trebled, from $345bn in 2002 to $984bn in 2006, and the economy is now growing at almost 7% per year - up from less than 5% four years ago.

Inflation, meanwhile, has slipped from almost 16% in 2002 to single-digit figures.

Exports have trebled - largely thanks to metals, oil and gas - to about $300bn, by far outpacing import growth. This has enabled Russia to pump up its foreign cash reserves.

In 2002, the reserves stood at $44bn. By 2006, they had ballooned to more than $295bn.

Hence, as far as the Russian people is concerned, it seems President Putin can do nothing wrong. "Putin has the highest [voter] approval rating of anyone in the world," says Mr Spelman.

"Everyone's focussing on the fact that there are more billionaires in Moscow than there are in London, but what we're actually also seeing is that the disposable income of skilled people in Russia is going up.

"You see a lot of infrastructure, a lot of housing, shopping malls. The commodity boom is now percolating beyond Moscow."

Agrees Global Insight Russia analyst Natalia Leshchenko: "Living standards are slowly beginning to improve, also for the poorest, and that's why Putin is popular."

International image problem

Internationally, though, the Russians' confident demeanour is often met with a mixture of suspicion and fear, as well as perhaps a dash of envy, and at times even a desire to join the party.


At the grassroots level, big-spending Russians are often scoffed at. One particularly stark example was seen in Austria last winter, when luxury hotels in the alpine resort Kitzbuhel agreed to limit the number of Russian visitors to one in ten.

On a loftier scale, Russia has come under fire for employing an aggressive energy policy as a lever to aid its political power beyond Russia's own borders.

"It's done some very clever things and some very clumsy things," observes Ms Leshchenko.

In particular, concerns remain in the West about Russia's apparent ruthlessness after it cut supplies to neighbouring countries that refused to switch from paying subsidised prices to paying international market prices for their gas.

This "backfired", according to Ms Leshchenko. "It's an image problem for Russia, which is partly unfair and partly well deserved."

Indeed, agrees Mr Spelman, "it is much more nuanced than it has been presented. Why should Russia subsidise gas deliveries to former Soviet nations?"

Strategic control

However, Mr Spelman acknowledges that Russia is quite prepared to use its energy reserves strategically.


There is no doubt about Russia becoming more powerful economically
Global Insight Russia analyst Natalia Leshchenko

Back in the 19th century, Russia used its army as a weapon of foreign policy. Then, during the Cold War in the 20th century, it applied its nuclear and rocket science to influence its friends and enemies.

These days, its main leaver is natural gas, observes Mr Spelman, adding that 56% of the world's proven gas reserves are in Russia.

"But whereas the West is concerned about the security of supply, Russia is genuinely concerned about security of demand," he says. In other words, Russia needs both the West's custom and foreign investment.

And as long as Western investors play along with the Kremlin's desire for control of national assets through majority ownership there is plenty of scope for profits to be made for foreign partners - despite the impressions created by, say, the ousting of Shell from the Sakhalin-II project.

Moreover, when Russia's state controlled gas monopoly goes on the acquisition trail abroad, it is not merely motivated by the Kremlin's desire for power. Commercial concerns also range high.

Ownership of downstream assets gives Gazprom better control of the demand for its gas, which is crucial to secure proper investment in exploration, extraction and transport - the upstream parts of the business.


Sensible approach

Gazprom's at times haphazard behaviour could be seen as symptomatic of the Russian government's own ability to manage the economy.


Indeed, though Russia's economy has grown at breakneck speed in recent years, much of this has been more on the back of luck than skill.

Strong global demand for commodities, with the subsequent boom in energy and metals markets, has accounted for much of Russia's wealth creation in recent years.

However, it is quite possible to be both lucky and smart, points out Ms Leshchenko.

"Russia remains very much a resource-based economy," she says, acknowledging that Russia has "undoubtedly benefited" a great deal from this.

"But at least they did not squander the money."

"There is no doubt about Russia becoming more powerful economically," she adds, while stressing that its policies have been "rather sound" and not nearly as aggressive as some of the Kremlin's pronouncements in other areas.


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Published: 2007/07/04 23:05:03 GMT

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Moscow Diary: Shopping spree
The BBC's James Rodgers explores the bewildering array of shops and salons open through the night in modern Moscow. His diary is published fortnightly.
SLAVIC HAIR EXTENSIONS

Why would you need to buy a printer at midnight or a flat-screen TV at 4am?

That's what I wanted to find out.

Not so long ago, you could struggle to find anything in Moscow's shops. If your search started outside normal shopping hours, you could pretty much forget it.


Life in the Russian capital continues to speed up. Retailers are making sure they're not left behind.

M-Video is a chain of electronics stores. A branch in the east of the city centre was one of the stops on my tour of night-time Moscow.

Unfortunately, my colleagues and I were a bit late. We'd spent longer than planned at the 24-hour beauty salon.

It didn't matter. The shop wasn't waiting to close.

It was just after midnight, but people were queuing at the checkout - buying irons, fans (summer in the Russian capital can be stiflingly hot), bulbs, and batteries.

The serious shopping was going on upstairs on the second floor.

Alexander was looking at computer printers. He explained that he had had a long day at work. It suited him to be able to go to the shops in the small hours.

Then I think he admitted the real reason he was here in the middle of the night. "If you want to have something right now, you have to go to the shop and get it," he laughed. "It's like going to a nightclub! I want to go there! Let's go!"

My arrival at M-Video had been delayed by the trip to the beauty salon. As the long Moscow summer day came to an end - it stays light here until around 11pm in June - the manicurist's work was just beginning.

Customers who are too busy making money in the frenzy of modern Moscow flock here after hours. A facial or a new hairstyle leaves them ready for another day.

This particular beauty salon also offered "extensions of Slavic hair". It wasn't clear whether the extensions would only work on Slavic hair, or whether they were only made from Slavic hair.

Whatever the case, why couldn't it wait until morning?

Of course, there are some people who really can't get there at any other time.

But I think the real answer is just because people can.

It is hard to describe the scale of the consumer boom in Moscow.

I have lived in my flat, to the south of the city centre, for a little over a year. In that time three new restaurants and a huge shopping centre have all opened within a short distance of my front door.

Many Russians have a better standard of living than ever. There's no sign of that changing.

All the same, in this country's recent history, people have had some very unpleasant surprises.

Many lost their savings twice in the space of half a decade: to inflation in 1992, and again when the rouble plummeted in value in 1998.

Perhaps for that reason, Russians are happy to spend it while they've got it. So if you can buy a new laptop at 3am, you might as well.

You never know what the new day will bring.

SPY SENSATION

Andrei Lugovoi gave a news conference. He said MI6 had tried to get him to become an agent.

A couple of weeks passed. The FSB - the main successor to the KGB - said they had launched an investigation into the activities of British intelligence in Russia.


Their investigation bore fruit, it seems. On Friday night, NTV aired a programme based around an interview with a man who said MI6 had tried to recruit him.

The man - who was named as Alexander Zharko - also suggested that Boris Berezovsky and Alexander Litvinenko had been involved in trying to persuade him to work for MI6.

Mr Berezovsky has always denied any such allegation.

Despite its billing, the programme was hardly sensational. In essence, it told the viewer that MI6 is trying to recruit agents in Russia. No real surprises there. I'm sure it is. Russian intelligence is no doubt on the look out for agents in the UK.

It's strange as a Briton to see dramatic, scary, TV footage of London. Effects were added to make it seem more menacing. It was the exact opposite of the sinister shots of the Kremlin which might appear on a spy documentary in the west.

The programme's real significance was its timing. Just when the spy mania seemed to be subsiding, along came a new "sensation".


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Published: 2007/07/03 04:55:28 GMT

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Russia: Key facts

Transition to capitalism


Russia's economy went into decline with the break-up of the Soviet Union in 1991.

People on fixed incomes faced a sharp drop in their standard of living while state-owned industries were auctioned off to entrepreneurs at rock-bottom prices.

In 1998, an economic crisis led to a big devaluation of the rouble which had a beneficial effect and led to the start of a recovery.

Since 2000, soaring oil and gas revenues have boosted state coffers and helped Russia pay off its international debts.

In 2006, Gross Domestic Product grew by about 6.7%, but overall, Russia's economy is still much smaller than other G8 industrialised nations.

The US and Europe designated Russia a market economy in 2002, but the state still exerts considerable control over business.
Gas and oil revenues helped lift the economy out of crisis

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Oil and gas


Russia has the largest known natural gas reserves in the world and is the world's second largest oil producer after Saudi Arabia. Oil and gas accounted for about 60% of Russia's exports in 2005.

Europe depends on Russia for its energy and almost all existing pipelines head west.
Russia has been accused of using energy to exercise political control over some former Soviet republics such as Ukraine, Georgia, Belarus and Moldova.


In January 2006, Russia's state-owned energy giant Gazprom temporarily restricted its gas supply to Ukraine, demanding a 400% price rise to bring Urkraine in line with the global market.

This led to a 30% reduction in gas to the rest of Europe - and forced the EU to consider how to avoid becoming too dependent on gas from one source.


Russia is building a major new pipeline across the Baltic Sea, which will bypass transit countries such as Belarus, Ukraine and Poland and provide direct access to Western Europe.
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Health of the nation

Since the collapse of the Soviet Union, birth rates and male life expectancy have suffered sharp declines.

Russia's population is expected to decrease further over the next decade as a result of deaths caused by poor health.

Alcoholism is a major problem. Recent research published in the British medical magazine The Lancet reported half of all deaths in working-age men in Russia are caused by excessive drinking.

The rate of infectious diseases, such as TB, has also gone up and there is a growing HIV/Aids crisis.

In fact, Russia has what the World Health Organization describes as the biggest Aids epidemic in Europe, mainly from a rise in injected drug use that followed the social and economic upheavals of the 1990s.

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Modest reform
After a rapid decline in the early 1990s - when its weaknesses were exposed by the disastrous first Chechen war and the loss of the Kursk - Russia's military has recovered some of its old prestige at home. But new prosperity has had a modest impact on defence.
National security still largely depends on nuclear forces. A new intercontinental missile, the Topol-M, was deployed in 1997.
There are plans for a contract-based (professional) military, but conscription still accounts for many personnel.
Despite increases in procurement and ambitious designs like the fifth-generation fighter jet project, the defence industry relies heavily on exports.

The conventional military largely has to make do with Cold War-era weapons while new hardware, like the Ka-50 attack helicopter, enters service at a trickle.

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The Russia that Yeltsin left behind
By Andrei Ostalski
BBC Russian Service


For many Russians, it is a huge paradox that the current government has not only given Boris Yeltsin a nearly royal funeral but has even described him as "a man, thanks to whom a whole new era has begun".
These are the words of President Vladimir Putin, who went on to say that thanks to his predecessor "a new democratic Russia was born, a free state open to the world".


Really? Many Russian liberals are flabbergasted. According to them, the country under Mr Putin is moving fast in the opposite direction to the one that Mr Yeltsin envisaged.
Russian conservatives who revere Mr Putin and disdain the Yeltsin legacy must also be surprised.

The two leaders' views of recent Russian history seem to be incompatible: Mr Putin has famously described the demise of the USSR as "the biggest geo-political tragedy of the century" while Mr Yeltsin certainly saw the end of the Communist empire as one of his life's main achievements.

The biggest issue regarding Mr Yeltsin's legacy is exactly this: is Russia now giving up on individual human rights and democracy after a short flirtation with liberalism in the 90s?

And did Mr Yeltsin himself, perhaps inadvertently, make this turn-around inevitable not only by bringing the former KGB secret police, with their particular view of the world, into the heart of the government, but also by allowing the all-permeating system of corruption to take root?

Bravery and panache

Another controversy surrounds Yeltsin's legacy concerning media freedoms. On the one hand, while in power he was their determined defender, on the other, it was on his watch that a mechanism of Machiavellian manipulation of the public opinion was created.


Still, Yeltsin has every chance of going down in history as one of the few politicians of his time who really made a difference.
Nearly single-handedly, on the strength of his personal charisma and popularity he took on the formidable police state, inspiring other Russian liberals to unite around him and, somehow, incredibly, triumphed over the KGB, the Soviet Army and the huge Communist Party apparatus.

There was no depth to this popularity, though.

Opinion polls indicated that the "masses" did not understand what Yeltsin stood for, they just loved his bravery and panache. Many Russians seemed prepared to blindly follow him just because he matched their ideal of a good "muzhik" - a true, distinctively Russian "bloke".

It was this same personal popularity that also allowed radical economic reforms to be introduced.

Shock therapy

These reforms were painful. Very few people in Russia fully realised why the so called "shock therapy" had to be applied to society, destroying their meagre savings in the process.


Nobody seems to remember now that Yeltsin inherited a country that was totally and thoroughly bankrupt. The state debt was so huge that the world was not prepared to go on baling it out.
Only two days' reserves of grain and flour were left. Massive riots and a civil war seemed inevitable. Yeltsin and his young prime-minister, Yegor Gaidar, miraculously pulled the country out of this predicament.

The price for the shock therapy though, was very high: Gaidar became a hate-figure for a generation and Yeltsin's popularity also plunged.

The hurried privatization that followed could only knock his ratings further.

To save the country from the return of the dreaded Communists, Yeltsin turned to oligarchs and cynical spin-doctors (called in Russia "political technologists') who ruthlessly and efficiently manipulated voters via TV to win for him the 1996 elections.

Civil society

But it was easier to play on fears of a return to totalitarianism than to win back Russians' hearts and minds.


By the end of the century very little was left of Yeltsin's popularity. His health severely deteriorated and, in their desperation, his entourage chose a former KGB officer to try and keep the country together while preserving also the wealth of the new elite, created in the process of privatization.
By that time, the public was already hankering for the "good old days".

Nostalgia for everything associated with Soviet times was suddenly all the rage and the prevailing wisdom insisted on the incompatibility between the Russian mentality and Western models of civil society.

The overwhelming majority of the Russians these days agree with Putin's, not Yeltsin's view of their country's place in the world.

The current president is even more popular than his predecessor ever was and polls indicate that the public would like him to govern indefinitely.

Wasted struggle?

There are two opposite conclusions that can be drawn from all of this.

First, that Russia's fling with Western-style freedoms and democracy was a freak short accident and the country is now going back to its normal traditional ways.

If this is true, all Yeltsin's struggles and heroism would have been totally wasted.

The second view is that Boris Yeltsin continued what Mikhail Gorbachev had started before him - that they, in fact, worked for the same goal even if they both would hate to admit it - and that in the long run they have succeeded.

If this is the case then it would mean - the current backlash notwithstanding - that the true significance of Yeltsin's achievement will be finally recognised by future generations.

The majority of Russians will probably vote for the first notion. But, as Russian history shows, being in majority does not always mean being right.

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Published: 2007/04/26 16:41:30 GMT

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The Putin era

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In pictures: Moscow's new face

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Russia's levers of power
By James Rodgers
BBC News, Moscow


Who rules Russia?


It is a question which has always preoccupied Kremlin-watchers across the globe.

In Soviet times, they puzzled over photographs in Pravda to try to work out the Politburo's winners and losers.

In the years after the Soviet Union cracked and crumbled, they wondered whether Boris Yeltsin was actually running the country.

The real power, it was said, lay with the "family" - a clique made up of Mr Yeltsin's relatives and trusted Kremlin insiders.

Mr Yeltsin fought, and won, a battle with the parliament he had inherited from Communist times.

It began with a war of words and ended with tanks, troops and death on the streets of the Russian capital.

Leaving a gap

Vladimir Putin's time in office has been different.


Chechen separatists often quoted [Yeltsin's words] back at him as they fought the army he sent to crush them


"Stability" is spoken of with almost religious reverence. Mr Putin, who has presided over substantial economic growth, gets the credit.

Now Russia is wondering what comes next.

Despite petitions and pleas for him to stay on, Mr Putin has consistently said he will leave office when his second term comes to an end in March.

The Russian constitution does not permit a president to serve more than two terms of four years. If that changes, it is unlikely to be before March.

Many close to the centre of power here are currently stressing that "two terms" means "two consecutive terms". In other words, Mr Putin might still return.

Mr Putin's Russia is rooted in Yeltsin's in the sense that the country has striven not to repeat the mistakes of the 1990s.


Boris Yeltsin famously said to Russia's regions "Take as much sovereignty as you want!"

It was a phrase which later haunted him. Chechen separatists often quoted it back at him as they fought the army he sent to crush them.

Breakaway areas have been brought to heel.

As a precaution, there are no longer elections for regional governors. They are nominated by the Kremlin. Then the regional legislature has to decide whether to approve the candidate.

Brought to heel

They almost invariably do. That is another big change from the Yeltsin era. Where parliamentarians used to defy the president, they now trip over each other in the race to show their loyalty.


The opposition demonstrations in April... ended under the truncheons of the riot police...


A new opposition party was recently established.

"A Just Russia" says it will speak up for those who are not getting their share of the country's oil wealth but they have no plans to put up a candidate for the presidential election.

This is an "opposition" party which supports the president.

Mr Putin's critics accuse him of stifling democracy and the press.


During the Yeltsin years, there was a media explosion in Russia. The picture today is very different. Television remains by far the most influential news medium. All the major channels are either controlled by the state or businesses loyal to the Kremlin.

The main evening news bulletin has regained its Soviet era title, Vremya, and signature tune. Some would argue it has returned to Soviet-style editorial values, too.

Opposition to President Putin is small and poorly organised. It is also stifled. Demonstrations in April which ended under the truncheons of the riot police were the most recent example.

Garry Kasparov, the former world chess champion, organised one march.

He ended up being summoned for questioning by the FSB, Russia's secret police.

With Mr Putin - himself an ex-KGB officer - in the Kremlin, their power has grown.

Washington was swift to criticise the authorities' reaction. The State Department saw their response as "selective use of the law", in other words, political control of a judicial system which is nominally independent.

Whatever the West says, Mr Putin is genuinely popular.

Opinion polls suggest that he would easily win a third term if he were somehow able to stand.

Bowing to business

That is the true nature of the challenge which Russia's next president will face.


Mr Putin can claim support among ordinary Russians, the country's political and business elite, and foreign investors.

The two men most frequently spoken of as likely successors can enjoy influence in some of those areas.

Dmitry Medvedev holds the rank of first deputy prime minister. He is also chairman of the Russian energy giant, Gazprom.

In Russia today, business and politics are hard to set apart.

Sergei Ivanov holds the same cabinet rank as Mr Medvedev. Like Mr Putin, he is a former KGB officer.

Russia has not developed in the direction many in the West expected when the Soviet Union collapsed.

But there are business ties worth billions of dollars. That would simply have been inconceivable in Cold War times. Europe is likely to rely increasingly on Russia for energy supplies.

So the question now is not simply "Who rules Russia?" but how they rule it.

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Published: 2007/06/28 09:25:35 GMT

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The changing nature of Russia's Gazprom
By Emma Simpson
BBC News, Yugorsk, Western Siberia


Geographically, Yugorsk is in the middle of nowhere, yet it is at the heart of Gazprom's pipeline network.


Not only does the Russian energy giant produce most of the country's vast reserves of natural gas, it also controls the pipeline infrastructure and gas exports.

In this corner of Russia, there are 17 underground pipelines pumping gas across the country and to Europe, some 5,000 kilometres away.

This part of the Gazprom empire is run by Tyumenstransgaz.

"We transport 80% of all the gas Gazprom produces today," says the company's deputy boss, Oleg Vasin, as he looks across the world's largest compressor station, surrounded by fir trees in the Siberian countryside, where they monitor the flow of gas.

"The gas comes from the fields in the North and it's sent as far as Germany, Holland and Italy," he says.

"You can hear the sound of it now. We have 210 of these compressor stations all along the route maintaining the flow of gas so our customers get a clean supply."

Central power

It is not an easy job to supply gas 24 hours a day, 365 days a year without a hitch when the temperatures can drop to as low as minus 40 degrees Celsius.

"We're certainly proud of what we do," says Mr Vasin.

"It's a special feeling to be part of this work. The responsibility is too enormous to think about."

Gazprom is more than just a business.


It is Russia's most important company, with more than 300,000 employees, and it provides the state with half the energy it needs to run the country.

It also accounts for at least 15% of Russia's hard currency earnings.

"It's a very unusual company," says Jonathan Stern from the Oxford Institute for Energy Studies.

"As of 2005, it became majority owned by the Russian state and therefore de facto, and by law, controlled by the Russian government, particularly by the Russian president.

"Because gas is so tremendously important to the Russian economy, Gazprom has a tremendously important position, and I think President Vladimir Putin views it as too important a company for foreign or even private Russian interests to get control of."

Benefits for workers

Gazprom is often referred to as a state within a state.

Here in Yugorsk you can see why.

There are more than 31,000 people living here and almost every worker is employed by Gazprom.

The company has a string of places like this all along the pipeline network.

Karl Ott helped to build those first pipelines more than 40 years ago.

Back then, it was the Soviet Ministry for the Gas Industry that employed him.

After the collapse of the Soviet Union, the gas industry was partially privatised and turned into a company called Gazprom.

But even today, it's still expected to provide the kind of benefits that hark back to the past.

Over a meal at his apartment, Mr Ott tells of how Gazprom provides workers with cheap housing, utilities and free flights.

"Gazprom not only preserved the best features of socialism, they've actually doubled them," he says.

"Every month I'm subsidised. I get an extra Gazprom pension as well. I'm paid like an Olympic champion.

"That said, I've given away not only my health, but also that of my wife through 40 years of work, so that has to be compensated."

Global giant

Gazprom certainly knows how to take care of its own.


It has to in order to attract skilled workers here.

At the local sanatorium there is room after room full of hi-tech equipment and staff offering a multitude of treatments from colonic irrigation and laser therapy to oxygen cocktails to revive weary workers - and all of it virtually free for Gazprom workers.

The company itself has also undergone something of a transformation, explains Chris Weafer, chief strategist of Alfa Bank in Moscow.

"From a technical point of view, the company has completely changed," he says.

"The share price has almost tripled in the last two years as the Kremlin removed previous restrictions on foreign investors buying the 49% of shares not owned by the Russian state.

"As a result, Gazprom is now one of the largest companies in the world."

But even more important than that, he says, is how the state is now using Gazprom as it capitalises on its energy resources.

In the last few years, Gazprom has bought an oil company from the Russian oligarch Roman Abramovich.

It is getting into the coal business and it is buying up electricity power generating companies.

Gazprom also controversially secured a controlling stake in Shell's Sakhalin 2 project in Russia's far east.

Corporate governance

President Putin has turned Gazprom into a national energy champion, a company that has become an important political tool as the Kremlin pursues its global energy ambitions.

But the question that is now increasingly being asked is whether Gazprom is now more about politics than profit.

At Gazprom's grand headquarters on the outskirts of Moscow, President Putin ally Alexei Miller is in charge.

Another of President Putin's old colleagues, Dmitry Medvedev, Russia's Deputy First Minister and possible successor to Mr Putin, is the chairman.

Yet Alexander Medvedev, Gazprom's head of exports, rejects any assertion that Gazprom is an arm of the Russian state.

"I think that's a very primitive view," he says.

"We are obviously a company with the state owning 50% plus one share.

"The majority of the seats on the board of directors are occupied by representatives of the state, but it's not the only example in the world.

"The state is executing its rights through the rules of corporate governance, not through telephone calls from the Kremlin.

"The management committee of Gazprom is responsible for the day-to-day running of the company but the strategic decisions are made by the board of directors. We are following a policy of transparency."

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6485065.stm

Published: 2007/03/25 15:50:17 GMT

© BBC MMVII

 

[genmirajborgza786]

Gazprom export sales rise by 43%
Russia's controversial state-owned gas monopoly Gazprom has said that its export revenues soared 43% last year to a record $37.2bn (£19bn).
The firm, which supplies a quarter of Europe's gas needs, benefited from higher gas wholesale prices in 2006.

Looking ahead, Gazprom said it expects fresh record revenues in 2007.

The firm hit the headlines recently after it threatened to cut supplies to Belarus and Georgia. It made a similar threat to Ukraine in 2005.

'Trust fears'

The disputes led to accusations that the Russian government is using Gazprom as a foreign policy tool to control its neighbours.

Although Moscow has strongly denied the accusations, it has led to concern in western Europe over the reliability of Gazprom's supplies.

German Chancellor, Angela Merkel, said last month the uncertainty made it difficult to build a relationship with Russia based on trust.

Gazprom has also been criticised for its actions within Russia.

Global economist think-tank Organisation for Economic Cooperation and Development (OECD) said in November that it was concerned at the extent to which Gazprom was buying up private domestic energy firms.


Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6273065.stm

Published: 2007/01/17 21:01:48 GMT

© BBC MMVII

 

[genmirajborgza786]

Moscow's suburb for billionaires
By Rupert Wingfield-Hayes
BBC News, Moscow


Most people in Britain are now familiar with the scruffy, boyish and invariably unshaven features of Roman Abramovich, owner of Chelsea football club, and Russia's most famous billionaire.


This week we learned that Mr Abramovich is one of a growing list of hyper-rich Russians.
According to Forbes magazine Russia now has 60 billionaires.

Unlike Mr Abramovich, most of them live in Moscow, which, if I'm not much mistaken, makes the Russian capital home to more billionaires than any other city in the world.

It is quite a change for a place that 15 years ago had no millionaires, let alone billionaires.

How exactly these people have got hold of such vast wealth in such a short time is a very good question, and one many ordinary Russians would like answered.

It is one reason why Russia's richest people like to keep their identities and their lifestyles secret.

Secret city

Ever since I arrived in Russia I've heard tall stories of a secret city deep in the forests outside Moscow where the rich indulge their fantasies in sprawling palaces of marble and gold. It sounded like a good story. I didn't expect it to be true, let alone that I'd get an invite.


It came via a rather circuitous route. The sister of one of my colleagues in the BBC Moscow bureau is in the same class as the 18-year-old daughter of one of Russia's richest men.
For some peculiar reason Svetlana, not her real name, thought it would be fun to invite a BBC television crew to film her parents' country cottage.

That's what they call them in Russia: cottage. If that brings to mind white-washed walls, a thatched roof and climbing roses, then forget it.

We had agreed to meet Svetlana at a shopping mall on the edge of Moscow. Up she swept in a purple Maserati sports car. Out jumped her hulking bodyguard, dashing round to open the door for her. I don't know what I was expecting to emerge, a leggy blonde dripping with diamonds and brimming with self confidence I suppose.

Instead, out stepped a diminutive, dark-haired woman, painfully shy, and dressed like a secretary, albeit one who shops at Prada.

Her crew-cut bodyguard looked me up and down, clearly horrified at the prospect of this grubby journalist scuffing the beautiful cream leather interior of Svetlana's Maserati. There was immediate relief when I suggested I follow in the BBC's beaten up old Peugeot.

Different world

The first signs of the secret city were enormous green fences, at least 20 feet (6 metres) high, and topped off with closed circuit cameras.


Then ahead of us at the end of a long forest flanked road a gap appeared in the fence. As the Maserati approached the gate swung opens and we swept through.
Suddenly we plunged out of the forest, and in to a different world. It was a little like a scene from Doctor Who. One minute we were in Russia, the next in Beverly Hills.

On either side of us huge mansions stood in spacious grounds. Some looked vaguely Georgian, others Victorian, one like a Bavarian castle. Vitaly, the BBC driver, turned to me, his face deadpan. "When did we cross the border?" he asked.

Svetlana's "cottage" was a spectacular 3,000 sq m Art Deco pile. How big is that? Big enough for an indoor swimming pool, a cinema, a bowling alley, a ballroom, and the piece de resistance, its own indoor ice rink!

"This is our newest house," Svetlana told me as we walked past a large bronze sphinx in the gardens. "My father's been building it for five years."

She wasn't sure how much it had cost, "probably 20 million," she guessed.

"So how many other houses do you have?" I asked.

"A couple in Moscow, two in the south of France, and one in Corsica," she said, as if it was the most natural thing in the world.

She shops in Paris and Milan, where she flies on one of her father's private jets.

Gilded cage

All these toys have not made Svetlana a happy girl.

"I live in a gilded cage," she told me. "I have no friends and no freedom."

I did feel sorry for her, but only a little.

A mile down the road, firmly back in Russia, I went to see Mrs Rima. The 75-year-old showed me around the one-room shack she built with her own hands.

She survives on a pension of £60 a month.

I asked her what she thinks of the rich people who live behind the high green walls.

"They're all thieves," she said. "All that money is stolen from the people."

It's a view millions of Russians would agree with. Fifteen years ago everything in Russia was owned by the state. Today a quarter of Russia's economy is owned by 36 men.

From Our Own Correspondent was broadcast on Saturday, 21 April, 2007 at 1130 GMT on BBC Radio 4. Please check the programme schedules for World Service transmission times.

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Story from BBC NEWS:
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Published: 2007/04/21 11:05:33 GMT

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Gazprom's European dilemma
By Emma Simpson
BBC News, Gelsenkirchen, Germany


People in the German town of Gelsenkirchen are football mad.


Their team is FC Schalke and their supporters must be among the most ardent in the country. The atmosphere at the home stadium is electric.

What's also amazing is the fact that the players wear Gazprom shirts. In fact, the Gazprom logo is everywhere here, because the Russian energy giant is pouring millions of dollars into sponsoring the team in a bid to bolster its image.

Claus Bergschneider, the boss of Gazprom's marketing office in Germany, said it's all part of a wider strategy.

"We have to tell the people the story about Gazprom," he says.

"In marketing, you have a natural sequence of 'Know It, Love It, Buy It'. And actually we are in a situation that Gazprom is known to the public to a certain degree but we have to teach them why they can love Gazprom - and at a later point of time we'll find the way to the end customer."

Suspicions

After the price dispute with Ukraine at the start of last year, which meant Gazprom became known for all the wrong reasons, the Russian group is certainly in need of a makeover.

Germany uses more Russian gas than any other western European country. But the residents of Gelsenkirchen, an old mining town in the Ruhr region, hardly seem very happy about being so reliant on Russia.

Talking to people on the street, it barely takes seconds before the suspicion makes itself heard.


Of course they are using energy as a lever - or more specifically a sledgehammer - to force their way in
Chris Weafer, Alfa Bank

"You don't put all your eggs in one basket," one resident warns. "This basket is very big and this basket is not always pleasant.

"The Russian government, by the leverage which they have over several energy firms, has found it easy to put pressure on Ukraine, on Lithuania and Latvia. Why should they one day not put pressure on Germany?"

Close relationships

The attitude here is a microcosm of the wider European debate on Russian gas. German Chancellor Angela Merkel says her country should diversify supplies, although her coalition Government is divided over how to do it.

Yet, the reality is that Germany will remain reliant on Russian gas for the medium term, at least.

Moroever, its energy relationship with Russia is deepening.

Work is already underway to build the new north European gas pipeline, Nord Stream. The $8bn project - a joint venture between Gazprom and German firms E.On and BASF - will bring gas direct from Siberia to Germany, under the Baltic Sea. The boss: none other than Angela Merkel's predecessor as chancellor, Gerhard Schroeder.

Swapping assets

Around the same time, two years ago, another important part of Gazprom's evolving relationship with Germany was put in place.

Wingas, a joint venture between BASF and Gazprom, is the second-largest gas company in Germany. In an asset swap, Wingas chairman Rainer Seele says, Gazprom increased its stake in the firm - in exchange for giving BASF rights to one of the biggest gas fields in Russia.

"It's a win-win situation," Mr Seele says, adding that he now spends more time in Moscow than at his headquarters in Germany.


Have the recent recent gas disputes had given him second thoughts?

"I have no idea what you're talking about," he says. "They have no interest to run into conflict at all."

Sledgehammer

The kind of direct access to gas customers Wingas offers is a key strategic priority for Russia, says Chris Weafer, Chief Strategist at Alfa Bank in Moscow.

"The Kremlin wants Russia not to pursue the Opec model of being just a raw exporter of material, which leaves you vulnerable to the volatility of commodity prices," he says.

"Russia wants to barter access to Russian gas upstream in return for Russian companies accessing downstream internationally."

In other words, Gazprom wants to cut out the middleman. That will make it more money - and give Russia a stronger hand to play.

"One of the frustrations we see and hear more and more in Russia, and from the Kremlin as well, is the fact that they feel that Russian companies are blocked from growing internationally from accessing international markets," he says,"and of course they are using energy as a lever - or more specifically a sledgehammer - to force their way in."

Gazprom has already done deals in France and Italy, and in the UK with the purchase of a small marketing company in 2006.

Buy or build?

For Gazprom's head of exports, Alexander Medvedev, the logic is clear.

"Our strategy doesn't differ from the strategies of the major industries of the world," he argues. "That's why in order to satisfy the demand of future and current customers we took a strategic decision to develop our activities."


He is reluctant, however, to put much flesh on the strategy - particularly when it comes to talking about whether partnerships, or acquisitions, are the way forward, despite the company's well-known interest in the UK's Centrica.

"I would not mention any particular names as we are carefully screening available opportunities and we would like to be in compliance with regulations," Mr Medvedev says.

"But you are right that we don't exclude any options, including the growth from zero like we have started in the UK or the growth of joint ventures like we have in Germany."

Disunity

Gazprom is big and getting bigger. But Europe's main problem is that it still lacks a common energy policy.

In a way, then, the political situation in Germany reflects a broader disunity in the EU about to how to achieve energy security.

But has Europe really got anything to fear from Gazprom?

"I would say that Europe has more to fear from the lack of Gazprom's expansion plans of production in Russia - from Gazprom being the main investor in the gas sector in Russia and being more efficient in spending its money buying up media groups, hotels, banks and other things rather than concentrating on its core business, " says Marc Franko, the EU's ambassador to Russia.

Back in Gelsenkirchen, Gazprom's sponsorship is producing great results for FC Schalke - they're top of the league for the first time in decades.

But as to whether Gazprom can deliver when it comes to meeting the increasing demand for gas in Europe and Russia - that remains to be seen.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6496555.stm

Published: 2007/03/26 23:25:50 GMT

© BBC MMVII