Ukraine and Russia Both Desperate In Gas Struggle

The last time Russia cut off gas to Ukraine, in 2006, energy prices were soaring, and with them the Kremlin's ambitions. The then President Vladimir Putin vowed to use the country's vast gas reserves to make it into an "energy superpower." Now the tables have turned. Gazprom once again shut off gas to Ukraine, and to European customers too, in a dispute over Kiev's unpaid bills. But this time, it acted out of desperation. Gas prices are expected to fall from a current high of $460 to as low as $280 per 1,000 cubic meters by the middle of 2009. Six months ago, it looked as though Gazprom might become the world's largest company by market cap. Now the company, whose revenues provide more than 20 percent of the national budget, looks like proof of Russia's overdependence on gas and oil.Kiev recognized Gazprom's weakness (every day of the shut-off cost Moscow close to $200 million) and was holding out for a price of $205, well under market rates. But Kiev was in deep trouble too, thanks...

Recession Hits Russia As Economic Protests Loom

Russia's ruble and its stock market have been sliding since June—down 30 and 70 percent, respectively. Still, the state-controlled media have stuck to the Kremlin line that the economy is doing just fine (the word "crisis" was even banned by producers at one television channel). But the official state of denial is cracking—Prime Minister Vladimir Putin admitted that the nation would be affected by a "global crisis," and Russia's deputy economic development minister recently said, "A recession has started."Estimates vary, but economists predict that GDP growth will drop from an annual 7 percent rise over the last eight years to close to zero in 2009. Such a steep fall would dent the Kremlin's popularity, and could spark unrest in a population that suffered in the last crisis (the 1998 ruble devaluation) but has since become used to rising fortunes.That prospect has clearly unnerved authorities, who are arming themselves with ever more repressive means to subdue dissent. On Dec. 15,...

The Kremlin Looks to Rebuild Bridges With the West

Is the Kremlin turning dovish in its most recent confrontation with the West? After two months of high tensions following Russia's invasion of Georgia, there are signs that President Dmitry Medvedev is finally trying to rebuild diplomatic bridges.Russia's already agreed to pull back from self-declared "buffer zones" around the breakaway regions of Abkhazia and South Ossetia, and last week it allowed 200 EU observers to start supervising that withdrawal. An informal working group, led by Medvedev's deputy chief of staff, has also been discussing measures to repair damaged relations. One olive branch under consideration, according to Kremlin-connected commentator Konstantin Remchukov, is to allow more Western participation in Russian gas- and oil-exploration projects like the Shtokman gas field under the Arctic Sea. Another possibility would be to fire some of the more-hawkish ministers, notably the abrasive Foreign Minister Sergei Lavrov.Moscow's retreat has been spurred by a lack of...

Investors Losing Confidence in Russian Markets

Under Vladimir Putin, it seemed, no Kremlin ploy could shake world confidence in Russian markets. The 2004 jailing of tycoon Mikhail Khodorkovsky on politically motivated charges sent the market into a swoon, but recovery was swift as oil prices rose. In 2005 Russia's top foreign-portfolio investor, Hermitage Capital's Bill Browder, had his visa revoked after criticizing the secretive books of Kremlin-controlled companies. The market barely flinched. Last year, after the Kremlin pressured Royal Dutch Shell into selling offshore-gas operations to state-owned Gazprom at a below-market price, the capital kept rolling in. But has the well of confidence finally run dry?The flight of Robert Dudley may have drained the last drop. The CEO of a joint venture between BP and Russia's TNK oil company, Dudley left Moscow on July 24 after months of harassment aimed at pushing the British partners out. Federal agents raided TNK-BP headquarters, a "technicality" left most BP staffers without visas...

Moscow Journal: The Flaw in the Boom

Russia's new president, Dmitry Medvedev, inherited a rising power with an Achilles' heel: galloping inflation, which threatens to undercut seven years of healthy economic growth, buoyed by ever-rising energy and commodity prices. In the first quarter of 2008, consumer prices rose 5.3 percent (compared with 3 percent in the same quarter last year), and inflation has toppled alcoholism as Russians' No. 1 worry, according to a March poll by the All-Russia Center for the Study of Public Opinion. Earlier this month, protests erupted in Moscow against high food prices and low state wages.Vladimir Putin, who went from the presidency to the prime minister's office last week, presides over a cabinet divided as to how to handle the crisis. The veteran Finance minister, Alexei Kudrin, wants to cut state spending—some economists warn that current levels of government spending could push inflation up to 14 percent by the year-end. But the new Economic Development and Trade minister, Elvira...

Dumbing Russia Down

The Kremlin has largely marginalized Russia's intelligentsia. But 'Girls of the Military' is a hit.

The Biggest Bully

Vladimir Putin's bellicose language and aggressive style has cost Russia friends in the neighborhood.

From A Mouse To A Tsar

Dmitry Medvedev has toiled under Vladimir Putin's shadow. But the heir to the presidency will soon have to show his true colors.

Russia’s Mighty Mouse

Vladimir Putin's handpicked successor seems like a loyal nobody. But he could turn out to be a welcome surprise.

A Turkey Europe Can't Deny

Turkey's Prime Minister Recep Tayyip Erdogan just won't take no for an answer. In 2002 he and his Islamist-rooted Justice and Development Party (AKP) came to power promising to get Turkey into the European Union. Under the banner of the EU's "Copenhagen criteria" for new members, the AKP made an impressive start: it abolished the death penalty, curbed the backroom political power of the military and eased restrictions on Kurdish language and culture. But instead of recognizing just how far Turkey had come, European leaders recoiled, rebuffing Erdogan and his country at virtually every turn. French President Nicolas Sarkozy says he opposes Turkish membership in the EU because it's "an Asian country," suggesting instead that maybe one day it could be part of a proposed Mediterranean Union. German Chancellor Angela Merkel warns that "Turkey's membership is going to constrain the EU." She offers "privileged partnership" instead of full membership.Erdogan is undeterred. Instead of...

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