Guest columnist: Lawrence Sheets on Uranium Smuggling

Apologies to O and G readers for the long absence. I've been trying to finish up the Russia book. That's no excuse, so here we go.

We have as a guest Lawrence Scott Sheets, who will be taking any questions on a piece he's got on uranium smuggling in next month's Atlantic magazine, called "A Smuggler's Story." The story isn't posted yet, but Atlantic has put up an interview with Sheets on its web site. The theme is the back story to a scoop that Sheets broke in The New York Times a few months back about a hair-raising scheme to sell weapons-grade uranium from former Soviet Georgia. This is a story of the highest order.

I've known Sheets for some fifteen years, since both of us were Tbilisi-based correspondents covering the Georgian-Abkhazian civil war, he for Reuters, and I for Newsweek and The Washington Post. At a time and place when there simply was no infrastructure -- everything in the Caucasus seemed to have fallen apart -- Sheets demonstrated a superlative ability to make his bureau work. He went on to become NPR's Moscow correspondent, and is now working on what appears likely to be a classic, book-length account of his couple of decades in the former Soviet Union.

Here is how The Atlantic leads into the interview with Sheets:

Uranium on the Loose

When the Soviet Union finally collapsed in December 1991, the United States could claim victory in the Cold War, Francis Fukuyama could declare the end of history, and some 280 million people could look forward to a liberated future. But in fact the Soviet Union left its 15 successor states to navigate their own way to democracy and a market economy. And with some 22,000 tactical nuclear weapons—along with perhaps 1,200 tons of bomb-grade uranium—scattered under uncertain ownership and questionable supervision, the securing of the world’s largest arsenal of nuclear materials became a matter of pressing concern.

Over the past decade and half, with extensive help from the United States, Russia has tried to lock down this atomic detritus, at great expense. But the task is a massive one, and as of 2008, the two nations face nuclear concerns that scarcely registered during the upheaval of the 1990s. Seven years after 9/11, Russia has become something of a terrorists’ nirvana—with 12,500 miles of borders, a military so corrupt its members have sold weapons to their battlefield enemies, and vast networks of poorly safeguarded nuclear facilities.

Russia is likely the only place in the world where a man like Oleg Khintsagov, an ordinary, destitute, and dimwitted hustler, can pick up weapons-grade uranium and try to hawk it from his pockets. Khintsagov, along with two other smugglers of similar means and aptitude—Garik Dadayan and Tamaz Dimitradze—are the subject of “A Smuggler’s Story,” Lawrence Scott Sheets’ piece in the April issue of The Atlantic. To a man, the couriers Sheets describes are poorly prepared for their missions, yet they have their hands on potentially catastrophic atomic ingredients. The story Sheets tells is of a society in collapse in the face of separatist anxieties, ethnic animosities, and ambiguous borders—and of impoverished people seeking to feed their families in a radioactive land.

Read interview

Guest Column: Khanna Explains The Second World

Today we have the pleasure of helping to launch a terrific new book. It's The Second World: Empires and Influence in the New Global Order, by Parag Khanna, director of the Global Governance Initiative at the New America Foundation. I asked Parag to write for the blog today not only because of the quality of his book, but because his travels took him through our turf, and he came away with a different take from my own in some cases, in particular about Gazprom. Without further ado, here is Parag's posting:

Thanks very much to Steve (with whom I share a terrific editor at Random House) for allowing me to post an introductory note on this esteemed blog about my book, which has been released today.

The book covers my travels through about 40 countries to look at their changing and increasingly multi-directional leanings, and focuses on societies that are increasingly divided socially, politically, and economically between haves and have-nots, winners and losers, first- and third-worlders -- hence the "second world." It's a happy coincidence that the countries of interest to O&G readers used to be called the "second world" until the term fell out of use. I spent quite some time in Ukraine, Turkey, Georgia, Azerbaijan, Kazakhstan, Uzbekistan and the like for my research.

I want to jump into two ongoing debates: Gazprom/Europe and the Shanghai Cooperation Organization/Afghanistan.

Very often Gazprom diplomacy and Russian diplomacy are taken as synonymous, and recently the two have appeared as well-coordinated as Chinese synchronized divers. But we should not forget last year's tiffs with Belarus, and the current bickering in Ukraine, both of which serve as examples of corporate logic undermining diplomatic logic.

Gazprom's demand that Belarus -- Russia's only major ally in the former Soviet Union (alongside perhaps Armenia and Tajikistan) -- pay market prices didn't win it friends other than those who saw bankruptcy and incorporation into a State Union with Russia as desirable. It also woke up EU members to the need to diversify fast.

And in Ukraine, the creation of RusUkrEnergo to continue Gazprom's bullying for constant pay-outs on amounting arrears has only alienated wider segments of Ukraine's leadership. One can only imagine that the population is as well, meaning that future election outcomes may not be as close a split between Russian and Western -leaning sides as has been the case to date. Gazprom logic would care little for such an outcome. But an increasingly Russia-skeptical Ukraine could abandon caution and welcome overtures from NATO more than it has to date -- making Putin's worst fear a reality. Diplomacy is about making friends, while corporations exist to make money. Unless Russia balances the two, oil and glory may not be forever connected.

Furthermore, the argument that Russia has Europe permanently over a barrel on gas supply assumes a long-term Russian stability while ignoring that it is Europe that can invest in diversification over the long term, drawing more oil/gas from North Africa, for example, thus gradually increasing its leverage over Russia.

The other issue is the recent talk of NATO reaching out to China (perhaps via the Shanghai Cooperation Organization, known as SCO, though Russia for obvious historical reasons wants no part in any Afghan operations) to potentially run a Provisional Reconstruction Team (PRT) in Afghanistan, or run one jointly with other nations, even the U.S. Apparently the offer was made, and China was enthusiastic, but their letter to the State Department is said to have gone unanswered for lack of coordination with NATO or a decision on how exactly to respond. So the U.S. may have dropped the ball. (Any updates/insights on this would be appreciated.)

Across the 'Stans, it's only a matter of time before NATO and SCO mingle ever more closely, and friction possibly occur. Rumors from on the ground (yet again) that the Kyrgyz might demand a shutting of America's Manas base have such maneuvering at their root. So concrete outreach between the two "alliances" beyond mundane briefings in Brussels would be where geopolitics and diplomacy intersect today. That could be quite exciting to watch unfold as NATO stands on the brink of failure in Afghanistan while Chinese and Iranian infrastructure projects -- such as in Tajikistan and Afghanistan -- move forward across the region, eventually allowing the two to connect safely overland.

Will it be the new Great Game or new Silk Road? I predict both: America continues to support political liberalization in the region, meaning some opening to greater cross-border flows, while also hoping to maintain lily-pad like bases across the region. From China's view, it too requires open borders to facilitate its exports while importing energy, and through the SCO sees itself ever more as a contributor to regional stability. Throw in Russia and Europe and you have a recipe for all the intrigue and mystery that characterized both the Silk Road and Great Game eras.

The Why's of Pipeline Politics

One thing highly unlikely to change under Dmitri Medvedev is Moscow's hard-line energy policy. Indeed, one sometimes gets the impression that Russia wants the West to build pipelines that go around it.

As evidence, take a look at two disputes: Chevron's long-frustrated efforts to ship more oil through a pipeline that technically was built exclusively for its use; and Gazprom's cutoff of natural gas today to Ukraine.

The California company is nothing if not patient and persistent. It's hard to believe that its travails with Moscow have gone on for almost two decades, but it was 1989 when the California-based company first laid eyes on the Tengiz oilfield. The western Kazakhstan field, right next to the Caspian, contains 10 billion barrels of recoverable oil reserves or more, a considerable volume in an industry that regards a 1-billion-barrel field as a supergiant. The final contract awarding Chevron 50% of the field was signed in 1993.

Since then, it's been one stumbling block after another from Russia, which has seen it in its interest to keep Tengiz bottled up. It took eight years before a long-planned dedicated pipeline from the field -- known as CPC -- finally was running. But, while CPC has been producing 320,000 barrels of oil a day, Chevron has always seen Tengiz as at minimum a 700,000-barrel-a-day field, and more reasonably capable of 1 million barrels a day of exports. As of later this year, Chevron is ready for a mid-range production increase to 540,000 barrels a day.

Only, that would require an expansion of CPC, and Russia has blocked it. As the years have gone by, Transneft, which does the negotiating for the Kremlin, has seemed always to have a new demand. When that's met, there's been another. This time, it seems to want Chevron and its partners to finance another pipeline -- a line connecting the Black and Mediterranean seas overland from Bulgaria to Greece.

This isn't public, but Transneft is currently circulating a compromise. People who have received the Transneft memo tell me that Russia is willing to allow Chevron and its partners to raise exports through a process called "de-bottlenecking," which basically means getting the kinks out. The companies could modernize existing pumping stations, but add no new ones. Exports would rise from the current 28 million tons a year to around 38 million tons; that's far less than the 67 million tons a year that the companies seek.

There's no word on whether Chevron and its partners will accept -- they have 30 days to answer -- but it seems unlikely they'll reject it. But what is the ultimate impact of Russia's intransigence? Well, what happens when water is blocked from one drain? It seeks an outlet elsewhere. So look for a greater push for a trans-Caspian oil pipeline from Central Asia to Baku.

Meanwhile, Russia's Gazprom today cut off some 35% of its natural gas supplies for Ukraine. It says its neighbor owes some $600 million for exports this year. Ukraine Prime Minister Yulia Timoshenko disputes the figures. Given that the accounting books are closed to the public, and are disputed by those to whom they are open, there's no way of knowing for sure.

But, while they talk, both Gazprom and Ukraine say their dispute won't again disrupt supplies to Europe (Europe receives more than 30% of its natural gas from Russia, and most of that flows through Ukraine), as they did in 2006. I wouldn't bet on that. Jitteriness in Europe is Ukraine's best leverage over Gazprom.

That's the point of a current natural gas pipeline competition between Russia and the West. Because of its repeated conflicts with Ukraine and others, Russia wants to build a completely new set of natural gas pipelines to supply Europe. But such deepened reliance on Russia makes Europe and the U.S. nervous. So they have mounted a plan to diversify the European supply by going completely around Russia.

Gazprom's latest cutoff will only redouble the European-U.S. effort.