Putin's Wealth

The FT's Catherine Belton and Neil Buckley weigh in with an impressive story that attempts to penetrate the question of Vladimir Putin's personal fortune. This enterprise -- the documentation of what Putin is worth -- will require a long, ongoing and determined effort. But Belton and Buckley try to peal away a layer.

The piece involves Gunvor, the Swiss-based oil trading company that has miraculously (Hey, we're just really good businessmen) grabbed control of a third of Russia's oil exports. One public owner of Gunvor is Gennady Timchenko, a reclusive and long-time buddy of Putin's. The FT links Timchenko to Surgutneftegas, which Russian polical analyst Stanislav Belkovsky has asserted to many of us for over a year partly belongs to Putin. As the FT reports, when Bill Browder -- until a couple years ago Russia's biggest foreign cheerleader as the head of Hermitage Capital Management -- sought to find out who really owned Surgutneftegas, he suddenly could no longer get a visa.

Putin swats away suggestions regarding his personal share of Russia's economic boom. But those who have hung around the former Soviet Union for awhile know that his dismissals are not exceedingly convincing. Personal wealth is a prerequisite to rule in this rough neighborhood; one simply is not taken seriously among former Soviet power brokers unless one has one's own, enormous cash stash. But the hard evidence is almost impossible to obtain; I think the only case of such proof has involved Kazakhstan's Nursultan Nazarbayev, and that emerged only after a perfect storm of bungling.

The trouble at BP: For some time, it has appeared that BP could lose control of its main asset in Russia, its share of TNK-BP. The thinking has been that Gazprom is intent on grabbing control of TNK-BP, by either forcing out BP or its Russian partners. The arrival of tax inspectors at TNK-BP's offices in recent months seemed to buttress this view, given that that's precisely what signaled trouble for Shell before it was forced to hand over control of the gigantic Sakhalin-II natural gas field to Gazprom.

But my former colleagues Guy Chazan and Greg White at The Wall Street Journal have a piece that embraces a contrarian view: that Gazprom isn't the villain; the partners themselves are in a catfight. Igor Yurgens, the adviser to President Dmitri Medvedev, told me the same thing in a phone chat a couple of weeks ago.

Robert Amsterdam does a good job of explaining the probable bigger picture -- perhaps there is infighting; but Gazprom is likely still pulling the strings behind the scenes. This Reuters piece about a phantom company suddenly suing TNK-BP is more evidence of this.

Gazprom's goal -- as expressed by Putin himself -- is to obtain energy assets overseas. In order to land a traditional oil deal in Russia today -- one that involves ownership of actual oil or natural gas reserves -- one has to give up similar assets abroad. BP is trying to work such a deal with Gazprom, and the trouble at TNK-BP seems a piece of that negotiation.

Photo: Eclectic Al

Rights: Creative Commons

Meet the New Boss

Much ink has been spilled in recent months parsing the statements of Russia's new president, Dmitri Medvedev, with the aim of deciphering whether he will be more democratic than Vladimir Putin.

The result has been in the eye of the beholder -- those wishing for greater political participation from below have seen a suppressed democrat; others have said that, regardless of Medvedev's own preferences, he will be strait-jacketed by the presence of his predecessor in the prime minister's suite. No one, as far as I can tell, has predicted a traditional, strong Russian leader in the making.

History is replete with examples of seemingly meek gentlemen morphing into full-throated autocrats (among them Pakistan's Zia ul-Haq, Egypt's Hosni Mubarak, and further back, Kaiser Wilhelm II). So such a future cannot be ruled out in Medvedev's case.

But, at risk of reading someone else's mind, I think that Putin did not select his protege with that history bothering him; rather it was precisely because of that precedence that he passed over Medvedev's chief rival, Sergei Ivanov, who as a former spy himself has many friends in Russia's powerful security services. Putin selected Medvedev, a former law professor, for his loyalty, and his belief that Medvedev would be the least troubled by Putin's continued strong role in political affairs.

For fans of Robert Caro's magisterial The Power Broker, Putin wants to be Russia's Robert Moses. He wants to have long service, calling the shots regardless of who sits in the Kremlin.

Do not look for Russia to democratize in any western sense, not for some time in any case. Rather, Medvedev's role will be largely economic -- attempting to broaden the boom away from energy.

On foreign policy, to the degree he has any latitude, he seems likely to speak more softly. But the Gazprom-led economic march into Europe will continue. More worryingly at the moment, do not expect any precipitate withdrawal of the chin-out Russian activities in Georgia.

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Rights: Creative Commons

Georgia: An Exercise in Image-Building

Six days before Dmitri Medvedev takes over the helm of Russia, Vladimir Putin has put the country on a war-footing with its favorite punching bag, the neighboring nation of Georgia. Putin has shifted troops to the seaside Georgian region of Abkhazia -- just in case, Moscow says, Georgia mounts a military attack against the separatist region.

As readers recall, Georgia and Abkhazia fought a brutal war during the early 1990s that left the two divided.

Igor Yurgens, a brainy and urbane Medvedev adviser who is making the rounds in Washington, London and Paris, told me in a phone chat yesterday that Moscow "will not use military force" in order to absorb Abkhazia, whose citizens already have been given Russian citizenship.

Yet Putin is still in a lather over the West's decision to recognize Kosovo's independence from Serbia, and this most recent flareup of tensions with Georgia seems to me of a different order from the countless previous flareups between the two over the last seventeen years. Putin is sticking his chin out.

NATO ambassadors said yesterday that the move "risks undermining stability." But Yurgens doesn't seem swayed. "We are not going to be pushed and bullied on this question after Kosovo, that's for sure," he told me.

What is Russia's move really all about? Surely it's not concern over Abkhaz security -- a Georgian military attack in order to bring the region back into the Georgian fold verges on ludicrous, mainly since Georgian President Mikheil Saakashvili knows he would lose, either to the Abkhaz themselves or a predictable Russian counter-offensive.

Is Putin simply demonstrating yet again that Russia won't be pushed around? Is he bestowing an image-building conflict on his successor, in the way that Chechnya built up Putin's own nationalist credentials when he took power in 1999 with a popularity rating of 2%? Perhaps Putin simply couldn't resist lest anyone forget what he has done for Russia's feeling of well-being? According to Itar-Tass, he is leaving office with an almost 85% approval rating.

When pressed on its general foreign policy, Russia says the West is mired in Cold War thinking, and that its strategy is straightforward and not political. If that's true, one wonders why Putin been unable to strike win-win deals with Georgia, Ukraine and the Baltics.

The prevailing wisdom is that nothing will change under Medvedev, whom experts think will keep the wheel straight and hope that things turn out as well for him as they did for Putin. Nothing Medvedev has said seems to argue otherwise.

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Rights: Creative Commons

Book Note

The cover is out of the design shop for the new book, due out this fall.

Presidential Candidates on Russia

With Iraq sucking much of the air out of the room, the former Soviet Union and Russia in particular have gotten little attention from the U.S. presidential candidates. The notable exception has been GOP nominee John McCain, who threatened with Bush-like chest-thumping to expel Russia from the G-8, and sophomorically described Vladimir Putin's eyes as containing a "K a G and a B."

Matt Siegel at The Moscow Times weighs in today with a piece in which he interviews McCain's Russia expert, Stephen Biegun, a vice president at Ford Motor and a veteran of the current President Bush's foreign policy team; and Michael McFaul, who is Barack Obama's Russia specialist and acting director of the Institute for International Studies at Stanford University. It's worth reading, in addition to this discussion by a panel of specialists gathered together by Johnson's List a couple of weeks ago.

Both of the Democratic candidates make the point that it's unnecessary to rile Russia at the moment by insisting on a missile-defense shield in Poland and the Czech Republic, when there is no evidence that the technology works. McCain supports installation of the shield regardless.

Much also is made of Putin's crackdown on rival voices.

None of the candidates has said a word as far as I can tell about a serious, omnibus approach to Eurasian energy security stretching from Central Asia into western Europe. As readers of this blog know, Putin -- and by extension Dmitri Medvedev -- have treated this as a paramount issue, while Washington has been looking the other way to Iraq.

One amusing aspect of the foreign policy debate that has taken place is hoopla among some in the expert community over Obama's reliance on Zbigniew Brzezinski, the Carter-era national security adviser, as a chief foreign policy expert. These experts see Brzezinski as a relic of the Cold War. Perhaps such younger specialists see themselves as more authoritative. But a reading of his writing over the last decade and a half shows Brzezinski proving himself again and again as one of the most realistic and wise hands on the former Soviet Union. He does so again here in the current issue of The Washington Quarterly.

At core is a subjective issue that will not be settled to anyone's satisfaction -- is Russia a normal country, meaning should it be treated the way one would approach, say, France? Brzezinski would be on the reasonable side of those who reply 'no,' at least at the moment. Those for whom the answer seems to be yes seem to include Stephen Kotkin of Princeton and Anatol Lieven of King's College in London.

Let’s be friends, Guys

Vladimir Putin's remark just about sums up the NATO Summit that ended today in Bucharest. "Let’s be friends, guys, and be frank and open,” he told reporters on the topic of whether a new cold war was in the making. The sentiment will carry over into Sunday's meeting between Putin and President Bush in the Black Sea resort of Sochi, where the two leaders will sign an affable "Strategic Framework" agreement.

As those familiar with the ways of Moscow know, such empty, toothless pacts -- known as the "protocol" in that part of the world -- are what companies and countries sign when they can't agree to anything conclusive.

In short, the NATO gathering ended with the U.S. attempting to dress up a setback against Putin as by and large a show of unity by Europe.

Bush put much on the line by announcing that he would seek to push forward Ukraine's and Georgia's bids to join NATO. But what did he walk away with? European agreement to a missile defense system that doesn't work. European agreement to add troops to a conflict -- Afghanistan -- about whose merits there's almost no disagreement anywhere in the world.

On the question of Ukraine and Georgia, Europe buckled, at least for now, to Putin's objections to their obtaining so-called MAP -- or Membership Action Plan -- status.

So Putin closed out another week of diplomatic triumphs. There will be no advance for now in NATO's expansion to the Russian border. And, with Bush's appointment of a harmless old family friend this week as Eurasian energy czar, there will be no serious challenge to Putin's policy of dominating European energy.

As for the Strategic Framework agreement to be signed Sunday, it's Putin's stated sentiment on paper -- gosh, can't we be friends?

I personally think that Georgia and probably Ukraine will eventually join NATO as full members. But it could be going more smoothly.

For a solid commentary on the spectacle from the perspective of Germany, this piece by Ulrich Speck at RFE-RL is highly recommended reading.

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Rights: Creative Commons

Baku oil legend Nikolai Baibakov Dies at 98

As readers of O and G know, many historians think the second half of the 20^th century would have been dramatically different had Hitler’s troops reached Baku. Hitler needed Baku’s oil to fuel his war machine, and when his army failed to penetrate the Caucasus after its 1941 invasion of the Soviet Union, it was the beginning of the end for Nazi-era Germany.

Just in case Hitler’s troops were not stopped before they reached Baku, Stalin entrusted one man with making sure that the Nazis could not avail of the city’s legendary oil. This man, who ordered the fields plugged up with cement, was Nikolai Baibakov, who died yesterday in Moscow at the age of 98.

Baibakov – Stalin’s oil commissar and for two decades the director of Soviet economic planning – was born in the Baku oilfield of Sabunchi; his father had worked in the Baku oilfields before him. So he knew intuitively what Stalin was so worked up about. A superlatively colorful actor in the biggest events of recent history, Baibakov recalled with black humor some of his encounters with the murderous Stalin.

In a 1998 interview with The Petroleum Economist, Baibakov said Stalin pointed two fingers at his head and said, “If you fail to stop the Germans getting our oil, you will be shot. And when we have thrown the invader out, if we cannot restart production, we will shoot you again.”

Those were the tenor of the times. Oil engineers from Baku, accused of crimes such as being the relative of the Czarist-era oil barons, were loaded into railcars with their families like cattle and shipped to Siberia to start new oilfields.

A New York Times obituary quotes Baibakov's reply as to whether his fellow oil officials were shot during those days: “Yes, several.”

Then, as now, Russia’s entire economy was dependent on oil and the revenue from oil exports

C. Boyden Gray: Ho-hum on the Caspian

The Bush administration has finally named a senior diplomat to challenge Russia in the pipeline war in Europe. He is C. Boyden Gray, the Bush family friend and GOP partisan lawyer.

As O and G readers have read over the previous months, Russia and the West, particularly the U.S., have been in fierce competition to control the natural gas supply to Europe, and ultimately to influence the continent's politics. Under Vladimir Putin's determined, hands-on leadership, Russia has been far in the lead and, unless something changes fast, will win the contest.

Hence a push within some circles, including Senator Richard Lugar specifically and the Senate Foreign Relations Committee in general, for Washington to get serious by naming a prominent senior statesman to spearhead the U.S. effort. The first nominee was Thomas Pickering, but his personal finances turned out to be a conflict of interest. Then, someone suggested Bush family friend Donald Evans, the former Commerce secretary, but that also went nowhere.

Now the administration has settled on Gray, who was counsel to George H.W. Bush, and named as a recess appointment by President Bush as envoy to the European Union when the Senate refused to confirm him.

Gray comes from similar aristocratic stock as the Bushes -- with inherited wealth, his father was secretary of the Army under Harry S. Truman, and his grandfather was chairman of R.J. Reynolds Tobacco. He graduated from Harvard, and clerked under Supreme Court Chief Justice Earl Warren.

I'm perplexed. Is this the man to general the West's battle against one of the world's consummate players of brutal market economics, namely Vladimir Putin?

To find out whether I'm simply out of the loop, I took a sampling of some of the best-connected readers of O and G. As usual, this sampling will be anonymously sourced:

1. "Doesn't sound like the person we need to bring some coherency to our policy in that part of the world."

2. "(The Senate Foreign Relations Committee) pressed Condi hard to DO SOMETHING, so, [this is] more or less her saying ‘Get this off my plate!’ This was the political compromise. Politics, not grand strategy.”

3. "[Gray's] pluses -- close to the White House, maybe gravitas (but he is a pompous ass), smart guy. Minuses -- intensely partisan, loves to hector the EU, does not know energy, [does not speak] Russian. Bottom line -- not great but could be worse."

4. "Really lousy appointment. Can hardly think of anyone worse."

What's obvious is that no one of significance would accept the appointment. Which is why you have Rice simply adding new duties onto an existing envoy's portfolio. Which is also why the announcement was made in a one-paragraph statement issued with no fanfare.

In other words, this is a dull spearhead.

Showdown in Bucharest

After the spectacle and fireworks of recent years, we're about to see the latest picture of the balance of power in Russia-West relations. The venue will be the NATO summit that begins tomorrow in Bucharest. The issue is whether to advance Georgia and Ukraine's applications to join the military alliance.

The two former Soviet countries want to push forward their status to what’s called MAP – a Membership Action Plan. True membership would come down the road, once they meet the various necessary qualifications. France and Germany oppose moving to a MAP for the two. "France will not give its green light to the entry of Ukraine and Georgia," French Prime Minister Francois Fillon told France-Inter radio. "We are opposed to Georgia and Ukraine's entry because we think that it is not the correct response to the balance of power in Europe, and between Europe and Russia."

Stephen Fidler and Stefan Wagstyl of the Financial Times rang up Georgia's Mikheil Saakashvili, who has a reputation as a hothead, but sounds eminently sensible on this issue. "No matter what some Europeans might be thinking, it's basically giving [Russia] direct veto rights, because that's how they'll perceive it," Saakashvili told the FT.

Saakashvili has that right. Russia’s foreign minister, Sergei Lavrov, suggests that Georgia will use NATO membership to force the breakaway regions of Abkhazia and South Ossetia back into the Georgian fold. This is a red herring – it’s absurd to suggest that NATO would commit troops to crushing Abkhazian or South Ossetian politics. It can't even raise sufficient troops for Afghanistan.

Instead, the issue is simple -- Vladimir Putin wishing to demonstrate Russia’s influence now, and to retain its pressure points on its former colonies in the future.

Saakashvili has done smart political spadework. He has offered power-sharing to Abkhazia, and 500 Georgian troops to Afghanistan. The latter move at minimum could quiet France’s objections.

The ultimate decision will indicate whether Putin has at last succeeded in shifting the balance of power more toward Russia's direction.

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Rights: Creative Commons

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.

Thanks to O and G Readers

The Oil and the Glory is No. 15 on Foreign Affairs magazine's Best-Seller List of books on American foreign policy and international affairs. The ranking is based on sales at Barnes & Noble. Thanks for your support.

The Western Side of the Pipeline War: On the Brink of Failure?

Readers: apologies for the week-long absence. I am back from vacation. Now, on to the latest in the pipeline war.

Another domino has fallen in Russia's relentless advance in the European natural gas pipeline war. After Monday's visit to Budapest by Russia's probable new president, Dmitri Medvedev, Hungary's prime minister is expected to sign the deal in Moscow tomorrow.

That's after an astutely run offensive in which Medvedev and his mentor, Vladimir Putin, have already recently signed on Bulgaria, Austria and Serbia, not to mention the prize in the contest -- Turkmenistan. These countries are now Russia's partners in the construction of a huge new natural gas pipeline system, Moscow's aim being to project power into Europe through dominance of the continent's gas market. Mathematically, Moscow's aim would be represented as: Economic power = Political power.

After all this, is there any reasonable case favoring a rival pipeline plan championed by Washington and the European Union? Generally, my own rule of thumb in pipeline politics is that no deal is a deal until Sumitomo's lengths of steel cylinders actually arrive on the spot, and welding begins. And they haven't.

Consider the first battle of this East-West pipeline war -- over the Baku-Ceyhan oil pipeline, connecting the Caspian and Mediterranean seas.

On Oct. 11, 1998, The New York Times committed a stupendous blunder. As readers of The Oil and the Glory know, the newspaper's lead story that Sunday, written by my former colleague Steve Kinzer, declared White House-backed Baku-Ceyhan to be "on the brink of failure." Less than a year later, a deal for the line was a reality.

Kinzer's mistake was in focusing on the big picture and armchair analysts in Washington and London, all of which indeed did make the strategic pipeline look to be dead. What he and these pundits missed were the facts on the ground -- from Central Asia and the Caucasus, it was clear that the pipeline was going to happen. Principally, Azerbaijan President Heydar Aliyev -- who had his hands on 5.4 billion barrels of oil that floundering Big Oil was desperate to develop and sell -- wanted that pipeline. It helped that essential NATO member Turkey wanted the line, too, as did the 800-pound gorilla, the White House. But the main thing was the insistence of Aliyev -- the essential man on the Caspian. Big Oil had to build it, and today, it's mightily glad it did so, since it's delivering about 1 million barrels a day of oil onto the tight world market, entirely free of interference by Moscow.

Yet today Heydar Aliyev is dead, and the Caspian is surrounded by presidents with, to put it kindly, shorter geopolitical stature. Big Oil seems to be absent the big corporate personalities who in the 1990s got in the sauna with one or more of the Caspian presidents, downed some vodka shots, and emerged with rights to huge reservoirs. And the White House lacks the vision to assign a political heavyweight -- in the 1990s, it was Clinton and Al Gore themselves, in addition to National Security Adviser Sandy Berger -- to spearhead a deal.

As for the future, there's no sign of the Bush administration suddenly changing course. The word is that Condi Rice will appoint Bush family friend Donald Evans to general the western battle. But Evans lacks the star power for instant success, and the longevity -- he will be out once the next administration takes power next year -- to manage through sheer effort.

Big Oil has been slow to snag a natural gas deal in Turkmenistan that would jump-start the western-backed Nabucco pipeline. And, short of a trip to Camp David, Turkmen President Gurbanguly Berdymukhamedov isn't suddenly going to grow a spine.

Meanwhile, Putin and his protege Medevedev are running Moscow's battle plan personally.

So, at the risk of repeating the Kinzer Blunder, Nabucco does appear to be on the brink of failure.

Of course, lightning could always strike.

Photo: Axel Rouvin
Rights: Creative Commons

The Life of the Oligarchs

When it comes to oligarchs, Vladimir Putin is a choosy ruler. He likes some, he hates some, and sometimes an oligarch can move from one to the other category with some dispatch. So was the fate of Mikhail Gutseriev, who until recently was head of a Russian oil company called Russneft. Putin decided that he wanted one of his favored oligarchs, Oleg Deripaska, to take over the company. Gutseriev resisted. He accused Putin of forcing him to sell. Then, in a story told previously with other Russian billionaires, Russian prosecutors went after him with criminal charges. He's now wanted in Russia for alleged fraud and money laundering, and is seeking asylum in Great Britain, the home of many such Russian outcasts.

This week, the newsletter Nefte Compass has a scoop that Gutseriev has meanwhile become an Azerbaijani oil baron. With $340 million, he has purchased the Azeri holdings of Nations Energy, the Canadian company that last year sold its Kazakh oilfields to China's Citic Resources for $1.9 billion, and made a group of Westerners very rich men.

Azerbaijan, which isn't very close to Moscow these days, is apparently safe ground for Putin's enemies. The suspicion that accompanies such prosecutions is fueled by Putin's custom of pursuing them after a powerful person refuses to bend to his will.

Arctic Counter-Claims; Musharraf's Defeat

Exploring the Arctic: William Broad weighs in today with the fascinating back story to Russia’s pioneering dive to the bottom of the Arctic last summer. Russia claimed the right to half the Arctic seabed, which is probably the largest remaining untapped repository of oil and natural gas on the planet. But in Broad’s New York Times piece, the Russians are depicted as not entirely responsible for the feat.

It turns out that the plan for the dive, including how to return safely, originated with a retired American Navy submariner named Alfred McLaren. The result is a bitterly worded tit-for-tat between McLaren and the Russians. One of McLaren’s defenders, a deep sea diver named Don Walsh who worked with the Russians, calls the Russian dive an “example of how to steal your way to fame [that] will become a legend in the history of exploration.”

But Mike McDowell, an Australian who organized polar voyages that inspired the idea, sides with the Russian credited with the dive, Anatoly Sagalevitch, the expedition’s chief scientist. McLaren, he said, is afflicted with a severe case of sour grapes. “He wanted to be first to the pole. Well, it just didn’t work out that way,” McDowell says.

Pakistan's fresh challenge: Pervez Musharraf seems a lot less nefarious today than his detractors have claimed. Previously, this blog has argued that Pakistan’s leader is far more genuine and certainly no worse politically than those who would unseat him, including the since-assassinated Benazir Bhutto and her rival Nawaz Sharif. After the resounding defeat of his political allies in yesterday’s parliamentary elections, Musharraf has accepted the result, and said he's prepared to work with his opponents.

Reporting by my friend Carlotta Gall out of the country’s west – North West Frontier Province and the tribal territories – has seemed to show that many Pakistanis themselves are fed up with the violent militancy in their midst. That – and finally building up a secular education system – may be the main focus of the new government.

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What's the Book About?

Shawn Miller of Critical Compendium had a slew of questions about The Oil and the Glory. Here is his interview.

Putin: Still in Pursuit of Respect

How far will Vladimir Putin push his rejection of Kosovo independence? My own feeling is not very. And even if he does go through with his implicit threat -- to recognize breakaway regions of his favorite punching bag, Western ally Georgia -- Russia and perhaps Belarus will probably be the only nations to do so.

President Bush has announced U.S. recognition of Kosovo, which unilaterally declared independence yesterday. The largest European countries are likely to follow. Why? Because of Serbia's murderous rampage through Yugoslavia in the 1990s.

Putin asserts that territorial integrity is supreme and that, in order to create a separate nation, the country from which it is separating must approve. As an example, he cites the two Georgian regions of Abkhazia and South Ossetia, both of which pulled away during the early 1990s when nationalism was sweeping through the former Soviet Union.

There are only academic and polemical links between these Georgian regions and Kosovo.

I covered the Abkhaz fighting from both sides. While there was brutality, the scale nowhere approached Serbia's pathological violence against its neighbors. And in the end, in 1993, it was the Abkhaz -- backed by Moscow -- who applied ethnic cleansing after vowing not to. They simply put the Georgians in their midst on foot out of the seaside region, and occupied their homes.

One thing I learned from my time in the former Soviet Union is that pride is king when it comes to nationalities. No one wants to feel he or she are under anyone's thumb. In the case of the Abkhaz and the Ossets, the Georgians stirred the pot with their own nationalism. Then the Russians came in with military backing, which continues to this day.

What are Putin's and Russia's genuine beef? That their view isn't accepted in the West. Ultimately, that isn't very compelling. Putin will no doubt continue to protest. And, regarding Georgia as the West's soft underbelly because of the energy pipelines running through the republic and the West's backing for President Mikheil Saakashvili, he'll keep punching there.

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Rights: Creative Commons

The End of Big Oil

For those interested in the history and future of Big Oil, I've got a piece in The New Republic this week on how one or two of the companies might survive despite their stubborn resistance to change. TNR is a pay site but if you take a free trial subscription you can read the whole piece, plus a few other items that look interesting this week. Here are the first few paragraphs.


When historians one day dissect the long arc of humankind’s use of fossil fuels, they may very well zero in on October 9, 2006, as a turning point for Big Oil. That’s when it became clear that the major oil companies—the giants that had survived numerous predicted extinctions and gone on to ever-greater profit and influence—were undergoing a tectonic shift and would either reinvent themselves or die. It’s the day Moscow dashed the hopes of five major oil companies from three countries and announced that Russia itself, and not they, would develop the biggest new natural gas field on the planet, an undersea Arctic reservoir called Shtokman.

Shtokman is the oilman’s Angelina Jolie: much-coveted but out of reach. Experts believe it contains the carbon fuel equivalent of 23 billion barrels of oil—that in an industry that considers a field of one billion barrels gigantic. Shtokman alone contains sufficient energy to power all of Europe for several years, and the world’s big oil companies had sought rights to it for years.

In another time, Russia’s declaration that its natural gas behemoth, Gazprom, would develop such a field would have set off peals of laughter among Western oilmen. Gazprom lacked the know-how to keep production at its current fields from declining; how would it manage a technological feat under the deep, icy waters of the Barents Sea? But there was nothing humorous about Russia’s plans. Gazprom knew it wasn’t capable of drilling the field; instead, it planned to hire Big Oil to do so. Big Oil would be its employee.

That notion flew in the face of oil-industry orthodoxy, which says that big potential profits accrue to those who assume big risks. If a company developed an oilfield, it was rewarded with the gold star used by Wall Street to measure oil company value—the rights to “booked reserves,” in industry parlance. Booked reserves consist of how much oil and natural gas a company controls, and thus can sell at some point at, say, $95 per barrel or $260 per 1,000 cubic meters. The Securities and Exchange Commission measures booked reserves, and investors regard them as the main determinant of a company’s fundamental worth. Yet now Gazprom was suggesting stripping the Western oil giants of that incentive—they would be unable to book Shtokman’s natural gas. The industry mood has become even more somber over the last half-year as two European companies—France’s Total and Norway’s StatoilHydro— actually agreed to Russia’s terms.

The truth is that any of the oil majors—with the possible exception of Exxon Mobil—eventually would have. Why? Because oilmen know that, despite recent unprecedented profits—Exxon alone reported a record $11.7 billion in net income for the fourth quarter of 2007—they are on the decline. The combined booked reserves of the world’s biggest five companies have shrunk by almost 20 percent on average since 1999, according to a paper by Rice University’s James A. Baker Institute for Public Policy. Shtokman is a blueprint for how the major oil companies are increasingly being treated around the world. Today, state oil companies and ministries from countries like Venezuela, Saudi Arabia, and Russia control somewhere between 80 percent and 90 percent of the world’s known oil and natural gas reserves. And, over the next two decades and beyond, those countries are going to ask foreign oil companies to serve as their contract employees in the same way that Gazprom brought on Total and Statoil.

Big Oil, then—the indomitable giant symbolized by the pitiless John D. Rockefeller—is dying. At the very least, it will soon have to fundamentally change the way it does business. But the shock of Shtokman is merely a tremor compared with the coming revolutionary transition to a non- carbon energy economy. Big Oil could transcend its current woes and weather that future revolution—perhaps even lead it—if it reinvented itself as Big Energy, striving to develop renewable power sources like wind and solar, or even to deliver the industry’s holy grail: a clean energy mechanism that renders fossil fuels obsolete. True, no one yet knows what the revolution
will look like; but the odd thing is that, for the most part, the oil companies don’t seem to care.

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Putin On Stage

Vladimir Putin conducted his valedictory annual news conference today, and it was a bravura performance – more than four and a half hours long (Reuters video). Among the questions posed involved the pipeline war. Putin, a consummate player of market economics whose pipeline strategy – Nord Stream and South Stream – has left the U.S. and the European Union flat-footed, accused Washington of politicizing pipelines. And he’s right – if the issue were purely economic, no one would care much about Russia’s economic inroads in Europe; his critics are apprehensive that, as it has acted in Georgia, Ukraine and elsewhere, Russia will exploit market advantage for political leverage. Putin also pointed out that the west “has no resource base” – no natural gas to put into the alternative pipeline it favors. Again, Putin is correct. That is what makes the West's proposed trans-Caspian and Nabucco lines so far untenable.

Here are Putin’s direct remarks:

"As for what smells of oil or gas, we know how our American partners conduct dialogue in Europe. They come to certain countries, try to convince them not to buy our resources or to try to find different routes to deliver fuels, avoiding Russian territory. They put pressure on these countries and that's already in the political sphere. I think this is a wrong policy, a dumb one. Moreover, it's unprofessional, since behind all this politicization of the question, there are no calculations, there's no resource base."

"On the issue of Gazprom biting into the body of Europe [with its efforts to acquire assets there], why the Americans are so concerned for the European body, I don't know. Maybe because they want a piece of it, they like it, it's a nice body. … Yes, the economic power of Russian companies is growing, of course, but our main consumers, especially in Europe, should only be happy about that. … Gazprom isn't demanding any exclusives, it just requires fair cooperation.

Photo: OpenDemocracy
Rights: Creative Commons

Another Death in England

England is seeming less and less safe for its multitude of political exiles. The latest death is a colorful Georgian businessman named Badri Patarkatsishvili (whom I will call Badri). British authorities say they expect to finish a post-mortem on the 52-year-old Badri today after he was found dead yesterday of a possible heart attack in the county of Surrey. As is their routine in unexpected deaths, they have handed over the case to their major crimes investigation unit. (Photo by Reuters' David Mdzinarishvili)

Badri’s possible enemies list isn’t short. Just a few short weeks ago, he lost in an election for president of Georgia against Mikheil Saakashvili. He has been charged there with plotting a coup and planning a ``terrorist attack'' on a government official. He denied the charges.

But Badri was best known as the main business partner of Russian oligarch Boris Berezovsky, who himself lives in England in political exile. That has put both Badri and Berezovsky on a black list in Russia. Both men have been charged with fraud there for allegedly stealing cars in the mid-1990s from AvtoVAZ, a company they controlled.

If the British deem foul play to have been involved, Badri's business dealings would also be in question. In his 2000 book on Berezovsky, American journalist Paul Klebnikov described Badri as Berezovsky's "primary emissary to the traditional underworld."

In a BBC report, Berezovsky said he had seen Badri yesterday. He said that Badri wasn’t sick but did complain about his heart. "I have lost my closest friend," Berezovsky said.

Pipeline War Watch—Russia’s Vladimir Putin has astutely assembled most of the pieces for a Gazprom triumph in its battle with the West to control Europe’s natural gas market, and win the political leverage that goes with it. By appearances, he’s got the main player on board – Turkmenistan, which has all the natural gas. And he also has the main countries along the route of his proposed South Stream pipeline – Bulgaria, Austria and even Serbia.

Now, Putin seems to be moving in to harden the market victory by tying up the second-tier buyers of Turkmen gas, the objective being to completely submerge the West’s comparatively amateurish, rival pipeline plans. The key second-tier buyers of Turkmen gas are Hungary, Slovakia and Poland.

Readers of The Oil and the Glory know that when middlemen show up, deals get murky. That’s the situation with this latest turn in the pipeline war. I’m told that two middleman companies – a Hungarian firm named Millander International, and a shadowy Ukrainian-Russian company called RosUkrEnergo – are working to seal a long-term contract selling Turkmen natural gas to Hungary. The deal would be signed by these two firms, Gazprom, Turkmenistan and Hungary. I am told that it could happen as early as this week.

Currently, no Western oil company has obtained rights to any Turkmen gas fields, so there’s no guaranteed natural gas to feed into the West’s proposed trans-Caspian and Nabucco pipelines.

Such Gazprom deals mean to keep it that way.

Putin, Utility Bills and Missiles