On Obama's Plate in Moscow: Iran and Breakfast With Putin

The philosophical underpinning of President Obama's arms-control agenda in Russia next week is that -- by allowing Moscow to preen on-stage, reviving its former role as a superpower state, ostensibly regulating peace in the world -- Russia will be more amenable to persuasion on other topics.

But does this reasoning hold? Will Moscow see things Washington's way on the Caspian, on Georgia, and on the balance of petro-power in Europe?

More important at the moment, could Moscow decouple from Iran, with which it has maintained an alliance of poking-fingers-in-the-U.S.-chest? Now that the chances for a game-changing U.S. opening with Iran have been all-but eliminated by the after-election crackdown in Tehran, is there anything to be done before Israel, for instance, decides it can no longer wait for Iran to become a nuclear state?

I've surveyed some old Russia and foreign policy hands from the George W. Bush and Clinton administrations, and the answer comes back that, at least on Iran, Moscow either can't or won't be able to help restrain Tehran. As for petro-power and the Caspian -- Moscow is capitalizing on the global financial crisis to re-assert power in its struggling neighborhood, and will push back on any attempt to deny it regional domination.

Steve Sestanovich, ambassador-at-large for the former Soviet Union under President Clinton and now a senior fellow at the Council on Foreign Relations, told me that Moscow is already effectively cooperating with U.S. aims on Iran -- while it committed to finishing Iran's Bushehr nuclear reactor and providing S-300 missiles, Moscow for years has failed to deliver either. "Their policy is to avoid annoying anybody too much," Sestanovich says. "The middle ground allows them to make a lot of money. And they hold in reserve a role as a possible diplomatic mediator if the U.S. or Iran indicate they are reconsidering their position."

Georgetown Professor Angela Stent, a former State Department and National Intelligence Council expert on the region, just got off the plane from Moscow yesterday. She says that Russian officials and experts have a mixed view of Iran -- the latter say that Russia can live with a nuclear Iran, just as it lives with a nuclear Pakistan and India; and the former say they don't believe that Tehran is anywhere near obtaining nuclear capability.

Whatever the case, seeking Russian help on Iran is misguided, Stent suggests. "Russia doesn't have the power to deliver Iran," she says.

A former Bush administration official who preferred to speak not for attribution said that any stiffer sanctions -- even if the Europeans and Russia were to agree -- "would not work quickly enough." "They are on the threshold" of nuclear capability, this official said, and this again raises the possibility of an attack by Israel on Iran.

Interestingly, Obama administration officials still talk of the possibility of negotiations with Iran. That seems to ignore political reality both in Iran -- Sestanovich notes that Iranian officials themselves seem publicly at least not to welcome further talks -- and the U.S., where Obama could face a buzz-saw of criticism should he be seen as equivocating after the bloody aftermath to the June 12th Iranian presidential election.

Obama will spend some 10 hours with President Dmitry Medvedev while in Moscow. But on Tuesday, Obama is also going to have a private breakfast for an hour or an hour-and-a-half with Russian Prime Minister Vladimir Putin.

Obama told The Associated Press that Putin "has one foot in the old ways," while Medvedev understands "that the old Cold War approaches to U.S.-Russian relations are outdated." This is a nice public relations setup, but not likely to result in any progress -- Medvedev has done nothing so far to indicate any separation from Putin on foreign policy, and there's no reason I can think of to believe that he will.

The former Bush administration official asserted that Obama shouldn't dignify Putin's behind-the-curtain grip on power by spending time with him; technically speaking, only Medvedev is on the same protocol level, this thinking goes. For that reason, this former official told me, Bush didn't meet with Putin once he was no longer president and began serving as prime minister. That's technically correct but disingenuous. In fact, just prior to Putin's stepping down, Bush violated his own rule precluding meetings with other heads of state unless there was a concrete deliverable to be achieved: Bush did so by flying out to Putin's vacation home at Sochi, hence delivering much prestige to the Russian leader but nothing for the U.S.

Stent says rightly that it's not realistic to ignore Putin. "To move the agenda forward, you have to meet with both of them," she told me. "It wouldn't make sense not to meet with Putin."

Indeed, rolling back a few years earlier, when Bush's father went to Moscow as U.S. president, he met with both Soviet leader Mikhail Gorbachev and his antagonist-for-Soviet-power, Boris Yeltsin, who was then the mere president of the component state of Russia.

Putin is not ignorable, any more than Russia, as usual, keeps itself in the diplomatic game by its willingness to play the outsider.

Putin, Sakhalin, and The Lion's Purr

A narrative familiar to all oilmen with long exposure to Russia is under way: With cash reserves running down and insufficient economic relief in sight, Prime Minister Vladimir Putin, his growl turned into a purr, is welcoming back Western oil companies to work Russia's natural gas fields.

So how should Shell and Total -- both of them the recipients of Putin's renewed niceness -- respond? Are Putin's past revocations of deals, expulsions from fields at knock-down rates, and ho-hum attitude toward shakedowns reason not to do business with him now that Russia is trouble?

Specifically, Shell is being offered an unspecified role in the highly complex, offshore Sakhalin 3 and Sakhalin 4 natural gas projects (BP walked away from the latter last month after drilling dry holes). Total signed a smallish, $900 million deal to work with Russia's independent Novatek on the Termokarstovoye natural gas field, and Putin says it's "entirely possible" that the French company will be permitted to work on future stages of the supergiant Shtokman natural gas field.

The subtext is a World Bank projection last week that Russia's economy won't recover to pre-crisis growth until at least 2012; and an International Energy Agency forecast this week that any global oil supply shortage -- and thus a possible return to $100-plus-a-barrel prices -- isn't likely before 2013.

The necessity for the involvement of foreigners who still have access to credit -- such as Big Oil -- seems plain: Shtokman's developers said in December that the global credit crisis may delay field development.

In other words, for Russia there's little noticeable light at the end of the tunnel. And Moscow needs to be sure that Gazprom can remain the country's most powerful economic driver.

More subtext: O&G readers recall that in 2006, Russia unleashed environmental regulators onto Shell in order to persuade it to relinquish its majority stake in Sakhalin-2 to Gazprom for what many analysts at the time regarded as a comparative firesale price of $7.6 billion. The same year, Total had a similar experience when Rosneft canceled a $3 billion partnership in the Vankor oilfield. Exxon Mobil has been forced to sell the natural gas from its Sakhalin I project at cut-rate prices within Russia rather than as it had planned in higher-paying China, as Paul Ausick reports at 24/7 Wall Street. And then there's long-suffering BP, which, in a series of fresh indignities this year while the Kremlin has stood by, has been powerless as its Russian partners in TNK-BP have steadily swallowed control of the oil-rich venture.

David Lee Smith at Motley Fool suggests that Shell's apparent agreement to let bygones be bygones and embrace the extended hand is "goofy." But Tim Newman, a Briton who lives on Sakhalin and blogs at White Sun of the Desert, writes that Shell will be wise to demand international bank guarantees in exchange for fresh investment. Short of that, Newman says, expect "another round of blubbering and hurt feelings in five years time." Over at TPRR, Tim Pendry argues that the totality of events reflects Russia's "complex gamble on events."

Pendry and Newman are both right. While seeking foreign investment at home, and failing to arrest serious depletion of its domestic fields, Gazprom still hasn't abandoned its geopolitically driven global dealmaking. In addition to continuing to promise to build new multi-billion-dollar gas pipelines into Europe, it signed a deal with Nigeria last week promising $2.5 billion in exploration investment there.

Meanwhile, another natural gas row is on the near horizon between Russia and Ukraine. Ukraine has a $4.2 billion bill coming due to Gazprom on July 7th, and lacks the money to pay. As Carl Mortished at The Times of London reports, the European Union is attempting to get some emergency money for the Ukrainians from the International Monetary Fund or the European Bank for Reconstruction and Development. The good news is that the latest dust-up is not occurring in the dead of winter.



Whether or not another jump in the deep end is wise, in the end Russia is a prime example of Big Oil's history of returning for more to the scene of its greatest debacles. The reason is the usual one: These behemoths need to book fresh reserves, and they are hard to come by.

In Total's case, for instance, the French company capitalized on an alliance not only with Gazprom, which owns 19% of Novatek, its local partner, but with oil-trading king Gennady Timchenko, a favored old KGB friend of Putin's, who owns 18% of the company.

In perhaps a touch of irony, Total CEO Christophe de Margerie said after the signing, "I don't think it's difficult to work in Russia. One only needs to learn to work efficiently with Gazprom, Novatek and Rosneft."

Satellite-Streaming Into Iran

Over at Mother Jones, David Corn posed the question the other day on whether the U.S. could frustrate Tehran's Internet jamming by beaming broad-band service into the country by satellite. He reported that the question was asked of White House spokesman Robert Gibbs, who did not know the answer.

O&G's own Sasha Meyer answered this question in a post last month. There does not appear to be a currently available, off-the-shelf technology. But Meyer describes a satellite system being put in orbit by Google-backed o3b whose target is to beam high-speed Internet service from space starting the end of next year. Alcatel-Lucent is developing a similar system with SkyTerra.

Meyer suggested such systems as a way to bring tamper-free Internet to Central Asia. It's not fail-safe. As Charles Recknagel over at RFE-RL suggests, the Iranians and Central Asians can jam the signal; they also could simply prevent possibly necessary base stations from being installed. But it is technologically possible.

For the West, One Loss, One Gain

Short of a bolt of lightning from Qom, there will be no game-changing opening between the West and Iran. The politics in neither Tehran nor Washington will allow one, not after all the bloodletting, both past and what is still to come. Yet, all is not lost. Kyrgystan's agreement to allow U.S. use of a military base is a reversal for Moscow, and a comparatively less-important but still an unexpected boon for Washington.

In Iran, some reporting -- over at Eurasianet, for instance -- has had it that a highly irritated former President Ali Akbar Hashemi Rafsanjani has been in the holy city of Qom, working to persuade its powerful clerics to turn against paramount leader Ayatollah Ali Khamenei. Unless they do -- and this report frankly appears to reflect wishful thinking by regime critics rather than a credible news leak -- there is no logical reason to anticipate any change in the current crackdown, and thus any thaw of U.S.-Iran relations.

There simply is no political scenario in which either the Obama administration, or Tehran, can be seen locally as making concessions to the other side. That includes talks on Iran's nuclear program. According to a report by Barbara Slavin in The Washington Times, the Obama administration sent a letter last month to Khamenei suggesting "cooperation in regional and bilateral relations." But the events since June 12th put the kabbosh on this notion.

Not incidentally, the Iranian crackdown about shuts off the last ray of hope for the Nabucco pipeline, the leading western option for balancing off Russian petro-power in Europe.

Then there is Kyrgyzstan. Since the Soviet collapse, U.S. influence has been on the ascent in Central Asia and the Caucasus. Kyrgyzstan has no natural resources to speak of, but managed to grab western attention by embracing the free market earlier and more tightly than anyone else; the cliche became that this nation bordering China was the Switzerland of Central Asia. That link to the west was cemented by 9/11/, when the U.S. opened the Manas Air Base to serve troops in Afghanistan.

Yet in February, Kyryz President Kurmanbek Bakiyev went to Moscow and, while standing next to Dimitri Medvedev, announced that the U.S. was out; and Russia would now get the base. Oh, and incidentally Moscow was granting $2 billion in economic assistance to Kyrgyzstan.

The loss of the base was another blow in U.S. influence in the region after the Russian defeat of Georgia in last August's war. There seemed to be no arresting the slide, either.

Knocked back on its heels, the U.S. didn't see much wiggle room. Yesterday, though, both sides confirmed that the U.S. will keep the base. The base's name will change to a "transit center," and the U.S. will pay a lot more ($60 million a year outright, in addition to various other sweeteners, compared with $17 million previously).

Over at RFE-RL, Bruce Pannier quotes Kyrgyz Foreign Minister Kadyrbek Sarbayev as putting down the shift to the turbulence in Afghanistan and Pakistan:

"Unfortunately, it needs to be stated that despite the efforts of forces of the government of Afghanistan and forces of the international coalition, the situation in [Afghanistan], especially in light of the events in the Swat Valley of Pakistan, show a tendency toward becoming worse. And in the event of instability in the future, this could have an effect on the security situation in the states of Central Asia, in particular on Kyrgyzstan."

Is Sarbayev providing the whole, or even any, of the genuine reason for the shift? That's impossible to say. Other elements of the Kyrgyz decision must have been after-the-fact remorse over losing its careful U.S.-Russia balance by lurching to one side. In Moscow itself, the Kremlin is trying to put the best face on the shift, with one official claiming that Russia itself agreed to the quick-switch.

Whatever the case, the bigger picture is how rapidly events can shift in the region. It also underscores that, though most events seem to point to lessening U.S. influence in the region, Washington remains an important player.

Iran: 'I'm Not So Sure I Want to Die Yet'

A simple calibration underlies the diminishing of protests in Tehran: The regime's bet -- correctly -- that those unhappy with the June 12th election results aren't prepared to pay the ultimate price for the right to express their opinion.

As an example, my former Wall Street Journal colleague Farnaz Fassihi quotes a 33-year-old woman who is rethinking her participation in the street demonstrations of the last week: "It's now crossed the line. If you come out it means you are ready to become a martyr. And I'm not so sure I want to die yet," the woman says.

While his dispatch isn't poetry, Sky News correspondent Tim Marshall has it about right: "In the short term it still looks like game over; in the medium term it looks like game on."

Like Russia, Uzbekistan and other dictatorship-based governments, this regime has learned from the mistakes of brethren in Ukraine, Georgia and Kyrgyzstan, and is seeking as a priority to knock out the pillars of any resistance before they are set in place.

Indeed, in his long public speech last Friday denouncing the protesters and their alleged foreign supporters, supreme leader Ayatollah Ali Khamenei explicitly cited the 2003 uprising that ousted Georgian leader Eduard Shevardnadze. Foreigners backing the Iranian demonstrators “thought Iran is Georgia," Khamenei said. "Their problem is that they don’t know this great nation yet.”

So, the regime has threatened to execute and try alleged offenders of public order; it has interfered with communications between would-be protesters by blocking Internet, telephone and television; and it has blocked mourning of those killed. The regime understands the last item most profoundly since the actions leading to the 1979 revolution were in part sustained by 40-day mourning periods for victims of the Shah.

Karin Laub of The Associated Press reports that on the possible show trials. Quoting state-run radio, she writes that Ebrahim Raisi, a top judicial official, said, "Elements of riots must be dealt with to set an example. The judiciary will do that."

Yet small demonstrations of defiance continue. "Protesters came up with new techniques, such as turning on the lights in their cars at certain hours of the day and honking their horns or holding up posters," Laub writes. She quotes an unidentified Tehran resident whom the AP staff got on the phone saying, "People are calmly protesting, more symbolically than with their voices."

The most frequent report in terms of next steps that one hears involve a general strike -- the shutting down of industries, public transportation, shops in the bazaars, for instance. Reports say that Mousavi's own Facebook page calls for a general strike, though I don't see this notice there. Such strikes could be effective since they would be far harder to stop than protests.

One notable aspect of these events is that, contrary to reporting leading up to the elections, President Mahmoud Ahmadinejad is no rogue or loose cannon. The remarks by Khamenei last Friday, along with subsequent comments by the Revolutionary Guards, eerily resemble the president's.

So that when Ahmadinejad trails off on yet another incoherent diatribe on foreign conspiracies and perfidy -- the outbursts that many, including at O&G, regarded as the main impediment to a diplomatic breakthrough with the West -- he has simply been parroting his bosses.

The Second Victim in Iran

As we look for a picture of how long it will take for a resolution of Iran's brittle- and tension-filled politics, President Mahmoud Ahmadinejad's legitimacy is just one victim of the week-long events in Tehran.

The second victim is the already long-shot chance of a U.S.-Iran rapprochement.

Short of a remotely possible, far-reaching concession by supreme leader Ayatollah Ali Khamenei, there is now no near- or medium-term chance of a new day in Middle East and European politics and economics -- both of which seemed possible before the current bloody crackdown.

At O&G, it had specifically seemed possible to foresee a change in the balance of petro-power in Europe. If Russian dominance of Europe's energy picture is to be tempered, there needs to be a fresh, new supply of natural gas from somewhere. Iran seemed to be the best candidate. But for the last couple of years, Ahmadinejad's voluble belligerence has ruled out a lowering of the temperature with the U.S.: Diplomatic traction requires domestic political consent in both countries, and that's not possible when one or both sides is provoking jingoism.

A Mir Hosain Mousavi-led government would not have brought a qualitatively different policy, which was too much to expect given Iranian politics. But that also wasn't necessary. All diplomacy really needed was the leadership of both countries to shift to quiet diplomacy, which would have opened the door to finding areas of agreement.

Now that Khamenei has shed blood -- at least 12 are said to have been killed yesterday alone -- President Barack Obama cannot possibly enter into serious talks. Even if he were so inclined -- a considerable improbability -- U.S. domestic politics would not allow him to.

Iran: Out From Behind the Screen

The news from Tehran is that the confrontation no longer involves President Mahmoud Ahmadinejad, who it's clear is a pawn in events. The brinksmanship is squarely between the supporters of opposition leader Mir Hosain Mousavi and supreme leader Ayatollah Ali Khamenei, who has stepped boldly from behind the screen in an attempt to assert control. This is clear in the outbreak of violence today (thanks to those who continue to post raw videos -- see below -- from the scene).

Yesterday, Khamenei finally made his position clear -- he will not compromise with Iranians who claim the June 12 presidential election was rigged. He ordered Iranians to stop street protests. Today the opposition replied by doing so anyway; this included a suicide bombing near a shrine to the leader of the 1979 Iranian revolution, Ayatollah Ruhollah Khomeini.

By pushing events this way, Khamenei has lost the battle of perceptions. By cracking down, and doing so without at least a facade of legitimacy -- meaning a stamp of approval by the Guardian Council -- he sacrifices the mantle of leading by popular consent. Indeed, there may be no one in control now.