Estonia: Stalemate in Russian Relations

In August 1991, Estonia regained its lost independence after nearly 50 years of soviet occupation. Some 15 years later, Estonia and Russia still lack regulated borders. Last year a border agreement was finally signed, but it did not take long before Russia withdrew from the treaty - something next to unprecedented in international relations. Since then, a stalemate persists between the two countries as relations thus reached a dead end. What will it take for Estonia and Russia to sort out their differences?

In May last year, everything seemed set for a go-ahead on a final Russian-Estonian border treaty. The last hurdles had been cleared, as the two foreign ministers decided to sign the treaty in Moscow on May 18, instead of the infamous 9 May Soviet victory day. The latter was not possible, while 9 May 1945 signified the seal of Estonia's soviet occupation. The treaty was signed and the only thing that remained was to have it ratified by parliaments in the two countries. Both were eager to remove the matter from the agenda once and for all, and hastened to have ratification bills passed by parliaments. Just weeks earlier, president Putin had declared that:

Russia is ready to sign formal border treaties with Estonia, Latvia and Lithuania. I hope this will not be accompanied by some idiotic territorial demands. In today’s Europe, in the 21st century, one country making territorial demands against another, at the same time wanting to ratify a border treaty - this is complete nonsense.

However, this is more or less what happened, at least according to Moscow's version of events. Whereas the Russian parliament - the State Duma - was hesitant to ratify the border treaty, anticipating trouble, Tallinn moved on. Eager to get the question off the agenda before vacations, the Estonian government also put the treaty before parliament - the Riigkogu. Reactions to this were negative from the very outset, as many parliamentarians held that the government thereby tried to force through the treaty without proper discussion and debate. To be passed, the bill had to get a 2/3 majority. Such majority suddenly seemed unable to reach, why the government preferred to enter negotiations instead of facing certain defeat. These negotiations resulted in a separate preamble or declaration to the border treaty, referring to the Tartu Peace Treaty of 1920, by which Soviet Russia recognised Estonia's independence within the pre-WWII borders. However, current borders have been revised during soviet reign, which makes Tartu references unacceptable for Russia. With this preamble, the Estonian parliament passed the ratification.

Moscow's reaction
Moscow's reaction was predictable to say the least. On June 21, Russia's Ministry of Foreign Affairs stated that it would not put the treaty before the Duma for ratification. Then, during a visit to Helsinki at the end of June, foreign minister Lavrov declared that Russia had decided to revoke its signature from the border treaty. This is also what happened, and on 1 September president Putin formally withdrew Russia from the treaty. The move to withdraw from an already ratified treaty is next to unprecedented in international relations, and must be considered a very stern reaction. The scandal, a few years back, when president Bush revoked the US signature from the treaty on the International War Crimes Tribunal has reverberated in the international community ever since. Examples are scarce, because the international outcry for doing so is expected too great, and one has to pay too high a price for it to be worthwhile. Still, this was exactly what Moscow chose to do.

Estonian explanations
Why did the Estonians act in this way, if they clearly understood what the reactions from Moscow were to become? What were they to gain from this? Some suggestions have been made, although they fail to explain for - even in combination - Tallinn's action.

One factor is that Estonia in April 2005 went through a government crisis and that the sacked prime minister and leader of the Res Publica party, Juhan Parts, quickly needed to profile himself with some cause, not least after a failed unification of Estonia's two right-wing parties - Res Publica and the Reform Party. Thus, demands connected to the border treaty seemed as a convenient opportunity for Res Publica.

Another reason is that the foreign minister of Ansip's new Reform Party government - 31-year-old Urmas Paet, simply was too new and unexperienced on his post, why he could not manage to deal with Moscow and domestic political intrigues at once.

A third explanation, is that government coalition partners - not least the Social Democrats with their grey eminence Thomas Hendrik Ilves at a safe distance in Bruxelles - stood to gain from a squabble between the two right-wing parties.

Then, there is Estonian politics' black horse of Edgar Savisaar and his Centre Party. Being the new minister of finance, Savisaar was arguably the one pulling the real strings in cabinet affairs. Savisaar is a political survivor with a murky soviet past, who has been constantly scandalised over the years but always gets away without a stain on his popularity, especially among poor and rural population, including the Russians. Also, Estonian conservatives are usually quick to point out that the Centre Party is in union with president Putin's United Russia, thereby casting suspicion on him for being on Kremlin's leash or even - at times - payroll.

Finally, it must have been hard to put off Russian interests, though not necessarily Russia itself, from the temptation of exploiting Estonia's domestic difficulties in this situation. Whether the Russian factor could hold on to itself in not giving in to such an urge will however remain unclear. The effect was though in Russia's interest. Thus, Estonia stood to gain nothing, but to once again be portrayed by Russia to the great powers of Europe as an amateur in international relations in disrupting the treaty. Still, blaming Moscow is simply too much of going through the motions to be taken seriously. Perhaps, Russia in reality simply had to stand idly by while the Estonians themselves fumbled about in torpedoing the treaty.

So, is there any way out of this mess for Estonia? At an OSCE-meeting earlier this spring, foreign ministers Lavrov and Paet discussed the need for resumed negotiations to settle the border issue once and for all. Some discussions have also been held since, but both parties seem to agree that a ratified treaty will not come into force in the foreseeable future. The issue is simply politically dead at the moment, while so much prestige was put in on both sides to finalise the border settlement. Once this was lost, little room was left for future talks. Estonia thus seems to have little choice but to let the issue at rest for the time being.

Dealing with Russia
In view of the current situation, how should Estonia handle its relations with Russia? Professor Andres Kasekamp, director of the Estonian Foreign Policy Institute, believes that Estonia now will opt for an EU-solution. According to Kasekamp, Estonia should take the CFSP/ESDP more seriously. This is also currently the sentiment among many politicians in Estonia. The country seems intent on playing out the EU-card, despite the Union's demonstrated inability to stand firm on Russia. Such a policy thus seems to have a weak foundation in current realities. That Sweden and Finland were the only other EU-states in support of the Estonian position concerning the border treaty, is a telling example of how little the EU cares about Estonia's relations with Russia. EU politicians are simply fed up with the whole affair of Estonia not being able to conclude a border treaty with Russia for the last 15 years. EU-support thus seems destined to fail, and EU's European Neighbourhood Policy appears to offer little use to Estonia, as it does not comprise relations with Russia.

The alternative of handling relations with Russia through Nato should, in this perspective, seem all the more tempting to Tallinn. Such a method would, in reality, mean using the US and the Transatlantic link to influence NATO-policy. In May 2005, president Bush visited Riga, and among other things discussed subjects such as democracy and freedom in Eastern Europe. This kind of US high-level discussions is in the best interest of Estonia, while statements to this fact facilitate setting the Nato-agenda in Tallinn's favour. US vice president Cheney's speech at the May 2006 Vilnius Conference also signalled a change towards a more critical stance in US policy towards Russia. In November this year, Riga will host the annual Nato Summit, offering an opportunity to further Estonian interests in relations to Russia by proxy of Nato. Estonian chances to bandwagon with the US to deal with Russia through Nato are therefore greater than ever. Still, Tallinn strangely enough seems to prefer the EU option - perhaps reflecting the post 2001 change in Nato's geographical focus. What Estonia fails to recognise is the fact that also within Nato, the tide is changing in relations with Russia. Tallinn should clearly not miss out on this opportunity to use a change in US and Nato policy towards Moscow in its own favour.

Finally, a joint approach in coordinating Estonian interests on Russia to concurrently influence both Nato and the EU in the same direction might be a recipe for success, but this is simply too complex a task for a small country to pull off.

Domestic difficulties
In the meantime, the Russian question in Estonia continues to drag on as an annually recurrent tradition. The drama has been played out by more or less the same actors over the last 15 years with little variation. This year's incident was the 20 May desecration of the Bronze Soldier Monument (Pronkssõdur) by Estonian nationalists. For Russians, it is a memorial to Soviet soldiers who died fighting in World War II. For Estonians, it is a symbol of the Soviet occupation.

Therefore, in connection to Russia's victory day each year, soviet veteran ceremonies at the monument are ritually followed by protests from Estonian nationalists. This year, events have been especially serious with a string of demonstrations. Among Estonian nationalist demonstrators were crackpot professional dissidents such as Holocaust-denier Tiit Madisson, but also more respected people such as former commander-in-chief Aleksander Einseln. Their objective is the removal of the Bronze Soldier from central Tallinn, and little consideration is taken to reasoning in view of their unwavering demands.

The situation has been exploited by extremists on both sides. Last week, the headline of the leading Russian newspaper in Estonia, Vesti Dnia (fmr. Sovetskaya Estonia), read: "On the Brink of Civil War." Also, rumours about Russian vandalisation of Estonian monuments, e.g. in Tartu, are spreading, and the resurfacing of old Interfront activists has been quite unexpected. Probably, protests will peter out in a few weeks, but it is worrisome that extremists repeatedly are allowed to set the political agenda for almost a month each year. This is simply not a sound political tradition for a small country like Estonia. Protests and demonstrations may well be overlooked by the majority of Estonians as an annual freak event, but each year extremists are allowed to set the public agenda through media.

Narva and the Russian-speaking population
When one refers to the situation of Russians in Estonia or Latvia, one should be aware of the fact that this does not necessarily mean Russians as such. Migration to Estonia in the post-war era came from all over the Soviet Union, why it might be as natural to come across a Tajik, a Ukrainian or a Lithuanian in Tallinn as it is with a Russian. Today, they all meet the same conditions and requirements for residence permit and citizenship no matter what their place of origin might once have been. That Russians are in a majority should not serve to hide this fact.

Estonia's Russian-speaking population is concentrated partly to Tallinn and neighbouring cities, and partly to Eastern Estonia. However, it is in the East that the Russian dominance is especially compact - in cities like Narva and Kohtlajärvi. For long, crisis has coincided with ethnicity in this part of the country, which incidentally also neighbours on the disputed border areas with Russia. Unemployment and social malaise have been a constant feature in Eastern Estonia during the last 15 years. A destitute population with little hope for the future has presented a great problem for Estonian authorities. The city of Narva, right on the border to Russia, facing Russian Ivangorod on the other side of the river, is a telling example.

In reality, the few Estonians living in Narva are state representatives in some capacity, and they associate little with the local Russian-speaking population. In Narva, it is perhaps no coincidence that the well-held offices of the Russian Consulate are located only a few hundred metres from the headquarters of KaPo - the Estonian security service.

However, things are now looking brighter for Narva. The situation is still such that everyone who knows how to, tries to move away from the city. Many of the top students at Estonian universities originate from Eastern Estonia, strongly motivated from knowing that the alternative is poverty. This may not be the case in the future though. In recent years, things have begun to turn around for Narva. Unemployment has decreased and many industries are moving production to this area due to dramatically rising costs and a deficit of qualified labour in Tallinn and the densely populated areas of Western Estonia. The opposite to high costs and unskilled labour is exactly what Narva has to offer. Adding to this, the lower wages in this region attract a rising number of investors. Whereas activities still are far from bustling, the tendency towards a rather rapid development within the next decade is clear.

Until now, Narva's economy has largely depended on border trade with Russia. With much lower prices on petrol, alcohol, and tobacco in Russia, shuttle traders cross the border back and forth on a daily basis, bringing merchandise for illegal distribution and sale on Estonian and Western markets. There are few figures on the full extent of this trade, but Russian customs' estimates say, that it accounts to some 20-30% of Northwestern Russia's foreign trade. There is no wonder then that transit-trade is Estonia's most profitable business, the proceeds of which have made great fortunes for the people who control it. Today, a majority of Estonia's richest businessmen are ethnic Russians. The paradox is that the population of Narva and Eastern Estonia has had little to gain from the shuttle-trade. Most of the money has ended up in the pockets of a few fellow compatriots that could not care less about the situation of their Russian kin. Therefore, the future of Narva rests on the opportunities to enter other economic areas.

That a rising number of businesses in Estonia are now moving production to Narva is thus very promising. Too long, the level of costs has not been sufficiently geographically diversified to make it profitable moving industry to the East. Now, this has changed, why companies will seek to increase their dividends by lowering costs by relocation. In the meantime, however, a generation of workers has been lost to Eastern Estonia due to unemployment destitution. The old generation may be lost, but the new generation faces a much more promising future, which might allow them to stay on in their hometowns in the East.

The Choice of a New Generation
Things are changing in Estonia with 15 years passed since regained independence. A second new generation is entering the public and business spheres. This generation has little to remember from soviet times. The situation applies to Estonians and Russians alike. The arguments from nationalists and pro-Russia groups are increasingly perceived as artificial constructs with little relation to everyday reality. Both groups are themselves becoming as antiquated as oblivious. With economic development, also social and economic differences between Estonians and Russians will narrow, and so will consequently also the potential for extremists to exploit such friction. The focus of a new generation in Estonia is set on Europe and not on Russia. Relations with Russia are increasingly becoming irrelevant for most people in Estonia. Once this is realised, Moscow will have difficulties to exploit the situation of the "Russian minority" in Estonia in relations with Tallinn. It will also become harder for Russia to raise support in Estonia per se by appealing to fellow Russians. Perhaps then, Moscow will definitely let go of its lost empire and plainly put borders and other issues at rest with Tallinn without further ado. However, also in Estonia it will take a new generation to sort out the country's differences with Russia, but in the end, Tallinn and Moscow will budge to the new realities.

Politkovskaya Podcast

On Tuesday evening, Open Source radio broadcasted a show on "The death of Anna Politkovskaya", with myself, Masha Gessen - Deupty Editor of Bolshoy Gorod, Raffi Aftandelian - maaskva: nashimi glazami, and Edward Lucas, The Economist Central and East European Correspondent. The programme in full will, in due course, be available for download at OpenSource, but in the meanwhile, it will have to suffice with their presentation of the show:

What did she know about Putin’s Russia that we don’t? Politkovskaya was murdered in Moscow this week, shot on the street. A journalist, she spent the last seven years as a columnist for Novaya Gazeta, covering Chechnya and the oligarchs and the list of official sins that continues to grow in Putin’s Russia. She titled collections of her columns Putin’s Russia, A Dirty War and A Small Corner of Hell; it’s not hard to figure out why she made a lot of people uncomfortable.

She had a lot of enemies, they all had motives, and the threat isn’t limited to her. Russian journalist Masha Gessen revealed on the phone this afternoon that, given the choice between a lighthearted piece for a Russian paper on the economy or a more sober look at Putin for an American paper, she’d take the economy. Safer that way.

Several guests we spoke to this afternoon described Politkovskaya as “passionate”; she opened her 2004 book Putin’s Russia with the words “These are my emotional reactions, jotted down in the margins of life as it is lived in Russia today.” She established her own credibility; she was asked to help negotiate the hostage crisis in Beslan and then — she believed — poisoned on the plane on the way down. After the crisis, when it became illegal to sell a newspaper within a hundred meters of a subway entrance or bus stop, she was one of the few fearless journalists left; The Economist described her in an obit on Sunday as brave beyond belief.

And now she’s gone. What does this say about Putin’s Russia? Was an oligarch — or a Chechen, or police sergeant exposed for corruption — angry at what she’d done to his image, or did the Kremlin send a signal? And as we focus our attention on the Middle East, Russia threatens European natural gas supplies and rounds up Georgians as “criminals” for export back to Georgia. Are we completely missing a serious and not-so-new problem?

What is interesting with a discussion like this, is how various perspectives meet: a Russian and a western journalist, an Armenian American in Moscow and a Swedish expert on Russia. The greatest fear participating in a broadcast is not to get one's message through. This time the message is urgent: The significance of Anna Politkovskaya and how her murder reflects current Russia.

In these days, the negative attitudes towards Russia dominate. At the same time, Politkovskaya's murder may prove a turning-point for Russia. Although, there were only familiar faces - old soviet dissidents in their seventies - at her funeral yesterday, her death may actually rejuvenate the civil rights movement in Russia.

In 1966, the trial against Danilov and Sinyavsky set off a spark that ignited the soviet dissident movement of the 1970s - Andrei Sakharov, Yelena Bonner and others. Nobody could then fully grasp the significance of a few "lost souls" in the quagmire of Brezhnevite soviet society. Still, the perseverance of the dissidents inspired others and eventually led to the era of glasnost and perestroika of the 1980s.

Today, the murder of Anna Politkovskaya may inspire a young generation of "new Russians" to gradually look beyond self-interest when confronted by mounting oppression. Regrettably, oppression is the situation for Russian media today, and journalists fear for their lifes and far too many try to avoid sensitive subjects, while they otherwise risk the necks of themselves and their families. Still, perhaps it has to become worse before it becomes better.

Perhaps, Anna Politkovskaya's death will become the start of something new in Russia. That would be a testimony worthy of her bravery and moral standing as an independent journalist and a whistleblower on all the injustices prevailing in Russia of today. Anna Politkovskaya was an inspiration when she lived. Now her legacy may become an even greater inspiration for future Russia. Her mission was to fight injustices. Her vision was a better Russia - a Russia which the people deserves but must fight hard to attain. Her final sacrifice must not be in vain!


Comment: The show in full may be listened to at Open Source Radio.

Russia Between Oligarchs & Tycoons

Who were the oligarchs? The question may seem premature, while Russia's economic élite still exerts disproportionate influence over Russian society. Moscow actually has more dollar billionaires than New York. However, a drastic change has occurred during the Putin presidency. Whereas Boris Yeltsin's second presidential term was dominated by the oligarchs, Putin has largely succeeded in breaking away from their influence. Thus, the heydays of Russian business oligarchy seem to have passed, turning oligarchs into mere tycoons.

As Vladimir Putin seized power in Russia in 1999-2000, it was much thanks to the support of a few influential Russian businessmen. Their relations to the Kremlin, and above all president Yeltsin, were so close that Russians referred to them as the "family" - signifying a merger between the Yeltsin clan and the major Russian business tycoons of the 1990s. At the time, the tycoons wielded such influence and power over Russia that the country stood on the verge of oligarchy.

In contrast to Yeltsin, Putin at an early stage signalled that things were about to change. Such signals were initially incomprehensible for most oligarchs, as they were used to easy access to the president. However, access was soon denied with Putin in power - much to the fault of the oligarchs themselves. People like Berezovsky and Gusinsky had major fallouts with Putin already in early 1999, much because they treated him as a puppet on a chain. Hopes that they could control the new and inexperienced president were soon lost.

Instead, Putin formalised relations with major business by channeling contacts through the Russian Union of Industrialists and Entrepreneurs and by regular and more official meetings with leading businessmen. The message that gradually evolved during Putin's first presidency was becoming increasingly clear: Hands off politics! As long as business did not meddle into politics, the oligarchs were to be left alone in generating profits. However, if business ventured into threatening state interests, there would be hell to pay. So, who were the winners and losers of this transition?

The losers
The first victim of Putin's new policy was Russia's "capo di tutti capi" - Boris Berezovsky. His influence over Russia was so great by the end of the 1990s, that he was often called the "Grey Cardinal" of the Kremlin. With six major bank owners, Berezovsky in 1996 formed the "Big Seven" who were instrumental for the reelection of Boris Yeltsin. Seeing himself as a "kingmaker" Berezovsky was rewarded by Yeltsin in becoming first deputy secretary of the National Security Council, then secretary of the Commonwealth of Independent States (CIS). Winning a parliamentary seat in 1999, Berezovsky's luck started to turn. Having first brought Putin to power and then severely aggravated him, the methods of Berezovsky's business conquests - Aeroflot, Sibneft, aluminium industry, the ORT TV-channel etc - were turned against him. Only six months after the 1999 parliamentary elections, Berezovsky was forced to go into exile, on charges of fraud, money laundering and other financial crimes. After several demands for his extradition to Russia, Berezovsky was finally given political asylum in Great Britain.

Putin's second victim was media tycoon Vladimir Gusinsky - Russia's equivalent to Rupert Murdoch. Through his holding company Media Most, Gusinsky had great influence over Russian media, not least through the TV-channel NTV and the newspaper Segodnya. NTV and Segodnya were long regarded the nucleus of new independent media in Russia, even though it is obvious that Gusinsky at times used his media power for political purposes. The most flagrant example was the massive endorsement for Yeltin's reelection campaign in 1996. However, with Putin in power, Gusinsky's overinflated ego, a flamboyant lifestyle, and a propensity for unsound investment were factors that soon put him at loggerheads with the new master of the Kremlin. This all led to his eventual downfall. After a series of police raids and legal actions against himself and his companies, Gusinsky went into exile in Israel in 2001. In his absence, Gazprom and other companies seized the remainder of his business empire, and it its unlikely that the media tycoon will return to Russia, not least because legal authorities have long sought his extradition on fraud and embezzlement charges from several European countries.

The case that has perhaps been given most attention internationally is that of Mikhail Khodorkovsky. Regarded as a banking genius, Khodorkovsky in 2003 was Russia's wealthiest man. Back in 1990, he formed the Menatep bank, which provided credit to state enterprises, and participated in dealing with privatisation vouchers, thus gaining control of several large companies. He entered into chemical and textile industries, construction, mining and oil enterprises. In 1995, Khodorkovsky gained a controlling share of the oil giant Yukos, which soon became the jewel in the crown of his business empire. In the early 1990s, Khodorkovsky was known for his murky business deals in the privatisation of Russian economy. However, at the turn of the millenium he had transformed his public image to that of a protagonist of economic transparency, publicly crusading for stockholder and investor rights. Thus, Yukos was the first major Russian company to publish reliable quarterly reports. Still, economic influence was not enough for Khodorkovsky. He wanted political power as well. In supporting parties opposing Putin and the Kremlin, Khodorkovsky soon became the target of Kremlin's anti-oligarch crackdown. He not only posed a political threat. He also planned the construction of several strategic pipelines, which - if realised - would have given him a disproportionate influence over Russian business making him independent of political pressure. In addition to a political threat, Khodorkovsky thus also posed an economic threat to major interest groups within business and politics. It should therefore have come as little of a surprise when Khodorkovsky was arrested in October 2003. After a lengthy trial, displaying the Russian legal system as a travesty of justice, Khodorkovsky was sentenced to nine years imprisonment and his financial assets were gradually dismembered by his enemies within state and private business. At the time of his arrest, he was considered the most powerful of the Russian oligarchs. Now he has been passed to the sidelines serving his sentence in a Siberian prison camp.

The winners
Among the winners of Russia's business oligarchs, Roman Abramovich must be counted as the one who got away scots free. A disciple of Boris Berezovsky, Abramovich benefitted from his patronage in making his way to the top of Russian business. As the Kremlin moved in on Berezovsky in 1999, Abramovich took over Sibneft - one of Russia's largest oil companies - from his patron along with Russia's largest television network. He then went on to expand his nascent business empire by going into aluminium production by forming Russian Aluminium - the world's second largest aluminium producer. He also went into politics, representing the impoverished Chukotka region of the Russian far east, first as Duma deputy and then as governor, making development of the region his pet project. In 2005, Abramovich sold off 72% of his shares in Sibneft to Gazprom - the Russian state energy company. He has also apparently been able to remain good relations with the Kremlin - both the Yeltsin and Putin administrations. Abramovich has, however, increasingly transferred his assets abroad, buying and investing in western business, most notably the purchase of the English soccer team Chelsea. Today, he spends most of his time in Britain, only occasionally visiting Chukotka, where he remains governor. In March this year, Abramovich was listed by Forbes Magazine as Russia's richest man and the 11th richest in the world.

Vladimir Potanin is the golden boy of the post-soviet establishment. The son of a Ministry of Foreign Trade official, Potanin attended the prestigious Foreign Ministry institute, the MGIMO, before going into business. He started out with trading in nonferrous metals with his Interros company in 1991, to be followed by two banks - Oneximbank and MFK. Being an architect of the loans for shares program, he benefitted greatly from being able to buy Russian companies much beneath market value. In 1996, Potanin was one the "Big Seven" who assured Yeltsin's reelection. As a token of appreciation, he was then appointed first deputy prime minister by Yeltsin. The August 1998 economic crisis took a heavy toll on Potanin's business empire, but he succeeded in securing crucial assets. His financial conglomerate holds major assets in Russian business such as Norilsk Nickel - the world's largest platinum and paladium producer - as well as media holdings such as Izvestiya and Komsomolskaya Pravda.

As many other successful Russian businessmen, Mikhail Fridman has kept a low profile throughout his career. Starting out with a plethora of various businesses in the late 1980s, he subsequently managed to finance the establishment of AlfaBank - now one of Russia's biggest banks. He then went into the lucrative oil business and acquired Tyumen Oil. Cooperating with British Petroleum, Tyumen Oil was transformed into TNK-BP, today the world's tenth largest private oil and gas company. Also Fridman belonged to the "Big Seven" endorsing Yeltsin in 1996. The pinnacle of his business empire is the AlfaGroup holding company.

Oleg Deripaska is one of Russia's youngest billionaires (only Abramovich is younger). As so many others, he started out with trading in metals. Together with Abramovich, he formed the Russian Aluminium (RusAl) - the world's second largest aluminium producer - in 2000, and now owns 75% of company shares. He has also major interests in power and car industries and he also owns Russia's largest insurance company. Although Deripaska has been careful to keep off the political arena, he is considered one of president Putin's major business allies. Along with his business partner - Abramovich - Deripaska is by some currently considered Russia's richest man.

Born in Baku, Vagit Alekperov was fostered into the oil business, landing his first job in the sector at 18 years' age. By his growing expertise, Alekperov in 1991 became first deputy minister of fuel and energy and then acting minister. His main political accomplishment was bringing Russia's three biggest oil companies together to form LukOil. Not surprisingly, Deripaska then became president of Lukoil, a position he has retained ever since. Today, Lukoil is one of the world's mightiest oil companies with energy reserves only equalled by Exxon. He is considered Russia's tenth richest and the 38th worldwide.

From managed democracy to managed oligarchy?
Russia during the 1990s has often been compared to the United States during the early 20th century, when Rockefeller, J.P. Morgan and other business tycoons succeeded in forming next to total monopolies in various areas of business. Thus, the Wild West of this era should be equalled to the Wild East of Russia during its first post-soviet decade. Those who seek similarities may today also compare US President Woodrow Wilson's measures to bring down Standard Oil and other monopolistic companies. Thus, today Putin would allegedly be trying to regulate the market after the necessary turmoil of the liberalisation of the 1990s. The Russian state would consequently be trying to regain its position as a macroecnomic arbitrator in order to regulate the market and set the rules of the game.

However, this argument falls flat as the Putin administration displays such a blatant disregard of basic property rights - the very nucleus of a working market economy. That the oligarchs may have done the same in the early 1990s is no excuse for a state to follow such conduct. Moreover, one may argue that one oligarchy today is replaced by another, while the spoils of state action against the oligarchs partly end up in the hands of Putin's entourage, thus effectively redistributing assets from private to private hands instead of to government control. Consequently, Putin's people enrich themselves by forcing parts of Russian business into their own hands. Of course, such behaviour is but a parallel to Putin's political agenda, gaining control over all relevant areas of society. Seeing similarities between Russia of the 1990s and the US of the 1910s becomes laughable if turning to president Wilson's credo of "making the world safe for democracy." It is quite apparent that Putin neither makes Russia safe for democracy nor makes Russia safe for market economy.

Russia's Nationalisation Trap

Which are the common assets of a nation and who should be allowed to utilise them? This is a question of heated debate for current Russia, as the vital energy sector is gradually being nationalised. It is privatisation in reverse - for everyone to see - no matter what the Kremlin might claim. The question is: Is it good for Russia?

In terms of economics, monopolisation - in this case nationalisation - may be motivated if the sector in question constitutes a natural monopoly. This may mean one out of two things: Either the social costs of monopoly production are lower than under competitive circumstances, or if the fixed costs of entry into a sector are so high as to be predatory, it allows but one viable and effective producer. Areas associated with natural monopolies are e.g. water services, postal services, telecommunications, and so on. However, as examples in global economy show, natural monopolies are not a sine qua non. Private companies may offer such production and services, as are associated with natural monopolies, more efficiently and at a lower price, than a state monopolist may. This is not always the case, and monopoly may in some instances be preferrable to competition. However, one should not automatically rule out competition only on the basis of existing economies of scale appearing to naturally favour a monopoly situation.

So, in view of current nationalisation of the Russian energy sector, could it be argued that it constitutes a natural monopoly? Most probably not. Instead nationalisation may threaten the industry as a whole.

What an industry such as the energy sector needs is long-term engagement and development. It needs large-scale investments over a long period of time in construction and maintenance. It also needs technical skills and know-how along the entire scale from prospecting to sales. Finally, it needs means of development - the capacity to expand and extract new resources and deliver them to costumers under efficient and competitive circumstances. These are qualities that a state actor does not necessarily posses.

So, does the Russian state have the financial resources and the commitment to maintain and develop the energy sector? For obvious reasons, it is a question still to be determined. However, judging from the current situation and the way the Russian state acts, perspectives are bleak for efficient state-owned energy production in Russia. First, Russian state-owned energy companies do not fit the profile depicted above. The situation clearly needs the dynamics only attainable under competive conditions. Secondly, Russian state interests tend to come in conflict with the rational needs of the energy sector.

The 2003 Yukos scandal and its aftermath clearly indicates a conflict of interests between the state and private enterprise in the energy sector. It is often argued that Yukos founder, Mikhail Khodorkovsky, had become too mighty and did not know his place, by meddling into politics. He was considered a political threat to power. However, reviewing the case from an economic perspective is even more disastrous. What really was at stake, were the large investments into energy infrastructure that Yukos planned to make - the various pipelines the company wanted to build. If these plans had been realised, they would have made Khodorkovsky more or less politically independent from Russian state leverage. Still, economically, such investments would potentially have brought profits and prosperity to Russia's economy and, indirectly, to its people. Furthermore, they were exactly the kind of investments that were economically sound and would have developed the energy sector in a positive direction. Thus, by victimising Yukos for political reasons, Russia was rendered an economic loss that the state was unable to compensate for. Consequently, as Khodorkovsky's 2005 nine-year jail sentence serves to show, the interests of the state and private business are far from always compatible.

Since then, the tendency arising from the Yukos scandal has strengthened. Private companies in the energy sector meet with state or pseudo-state opposition. Deals once made are put into question. Pressure is brought to bear on outside actors, such as when Gazprom recently seized control over the Sakhalin offshore project, ousting a foreign consortium led by Shell. Environmental motives are given for action against foreign investors, whereas Russian companies would never meet with such demands. Also, as the Yukos case shows, expropriation has become a new method for the state to forward its own and associate interests.

The perspective becomes even more horrendous when reviewing the issue from a security point of view. In Putin's opinion, it seems that not having full control over Russia's energy resources would pose a threat to the country. Accordingly, Russia cannot depend on private, and often foreign, companies for its energy production. Furthermore, the country cannot depend on transit of oil and gas by pipelines running through foreign states. Consequently, new state-controlled pipelines are built bypassing intermediate countries, such as the Nordstream pipeline projected to run through the Baltic Sea. From an economic point of view, it is highly questionable whether this and similar pipeline projects are financially viable, especially as the costs for developing and expanding already existing pipelines over foreign territory would be much lower, as would even be the case of building new ones. Therefore, it is obvious that Putin's obsession with control is detrimental to almost any economic rationale.

So, who stands to gain from nationalisation of the Russian energy sector? Who is allowed to utilise the common assets and to what end? The obvious answer would, of course, be the Russian state. However, with lacking long-term commitment to maintenance and development, the overall GDP stands to lose from state ownership. The state will be forced to either carry the burden of investments or see energy incomes dwindle due to neglect and inefficiency. Consequential interruptions of delivery to costumers would not vouch for Russia's role as a reliable producer. So, why should Russia voluntarily assume these great costs, when private companies could freely do it with greater professionalism than the state would ever be able to do?

The other obvious answer would be that the Russian people would gain from nationalisation. However, to what extent are the energy incomes redistributed to the people, and if so, would it be in the true interest of the people? First, the Russians receive little of the energy profits. It is true, there have been some attempts at state social reform and economic support lately, but it is questionable whether this is motivated out of real concern for the people. An example is Russia's population decline, where Putin seems more worried about the decrease in the future number of conscripts for the military and similar issues, than the social malaise of the people itself. Also, if too great a proportion of the incomes would actually be distributed to the people, it might cause economic crisis due to consequential hyperinflation. Finally, a state-run energy sector would probably be less efficient than a private alternative, creating comparatively lower profits. The effect would be an overall lower GDP, negatively affecting the Russian people. Thus, it seems that the Russians have little to gain from nationalisation of the energy sector.

Then, does nationalisation of the state sector strenghten Russia in its foreign relations? Initially, it might seem that control of the energy - as a strategic resource - would strengthen Russia's international power. The threat of "turning the tap" would seem to be a constant leverage for Moscow towards foreign states, mainly the EU, dependent upon Russian energy. However, this is countered by an equal risk that foreign states would turn to other producers or seek alternative energy solutions, such as e.g. nuclear power. Still, as the example of the European Union shows, Russia is more dependent on the EU than the EU is of Russia. Also, the EU is becoming increasingly weary of Russian ambitions and the country's reliability as an energy deliverer. Moscow has declined to ratify the European Energy Charter Treaty. European initiatives to develop the energy contents in a renewed Partnership and Cooperation Agreement (PCA) have met with outright opposition from Russia. Thus, Moscow is sending an increasingly clear message to Bruxelles about its intentions: Russia is not to be trusted as a reliable partner to the European Union. Regretfully, these are exactly the sentiments beginning to grow in Bruxelles and European capitals.

Today, it is obvious that Putinist ideology is the foundation of the current nationalisation of the Russian energy sector. It is the sort of étatism that belongs to the 19th century. It is a statist view that emphasizes control over rationality. It is an antiquated geopolitical outlook that puts the map before the realities of modern society. It is a perspective where the power of a state is measured by the quantity of its population, not of its output. It is a perspective that sees foreign relations as a zero-sum game. That president Putin wants the state to assume control of Russia's energy resources is but another factor in this overall scheme. For him, that the state owns a country's resources is only the natural state of things - how it should be. Reviewing this perspective, the conclusion is apparent: Putinist ideology simply is a notion that lacks understanding of the modern world.

Still, what the modern world is about is cooperation to the common good of those who participate in it. Thus, what Putinist ideology disregards is a fact so obvious that it needs neither stating nor reiterating: Modern power derives from the relative gains of cooperation - not from conflict or absolute capabilities. Making it alone is simply not an option in the modern world, and still this is the absolutist approach that Putinist Russia is opting for. That it is no viable long-term option for any state, seems of no concern to the country's leadership. Sooner or later, Putin's path will, regretfully, come back with a vengeance to Russia and its people.

In the meantime, the common assets of Russia are utilised to the detriment of the country and its people. Nationalisation is not good for Russia, and thus the Russian people may gradually come to understand that Putinism is simply not good enough for them. Until then, Russia is caught in a nationalisation trap.

Monkeys & Tigers of Putin's Foreign Policy

What are the major characteristics of Russia's Putinist foreign policy? What is obvious is that the growth in oil incomes is parallel only to the growth in self-confidence and self-reliance in foreign affairs. Thereby, the "multivector policy" has finally got off the ground. Current Russian foreign policy strategy may, however, turn back with a vengeance on Russia. Solitude is not a succesful recipe for international affairs.

Threats to Russia
The long-term security policy threats to Russia are terrorism, militant Islamism, the spread of weapons of mass destruction, a stronger China, and instability due to the spread of "open society". These are serious problems that demand serious answers. Instead, Russian foreign policy is characterised by increased self-confidence and a walk it alone mentality.

Multivector policy

Since 2003, the drive for co-operation and partnership with the West has been abandoned. Current "multivector policy" avoids stable relations and partnership with other powers. Moscow exploits Western weakness - the EU crisis and US endless engagement in Iraq. Russia tries to be a "monkey on top of a hill, overlooking the tigers fighting on the plain".

The near abroad - a chain of instability

Dominance over the "near abroad" is still the overarching goal of Russian foreign policy. Moscow's increased self-confidence obscures the setbacks in Georgia and the Ukraine. The danger of current policy is that the risk for new crises and revolutions in the Russian sphere of interest is underestimated. The contradiction between personified power and weak systems in post-soviet states constitutes a latent risk of instability in Russia's backyard for the coming 10-15 years. Here, elections counterposes self-perpetuation of personified power and political legitimacy. It is the soft authoritarian hybrid regimes - as previously Ukraine and perhaps Armenia next - that are the weakest links in the chain of instability, which runs through Russia's proximity.

Central Asia - the Great Game revisited?
In Central Asia, there is danger of escalating tension between Moscow and Washington. Russia and China jointly try to act as regional stabilisers, at the same time as increased Chinese influence contributes to growing conflict potential between the two countries. Post-soviet space constitutes an unstable, volatile and fluidous region in the vicinity of the EU.

Making it alone - a recipe for disaster

As Russia is all the more turning into a unilateral and uncooperative actor, one must realise that Putinist foreign policy will face great challenges. Perceived threats to Russia are based on traditional views, which may not be entirely in tune with times. If Moscow continues to pursue the multivector policy, such threats may, however, become a self-fulfilling prophecy. To abandon cooperation with the West is tantamount to losing a potential partner in solving the problems facing Russia in post-soviet space. Moscow's support for weak regimes - undemocratic and illegitimate - will only serve to amplify instability in the "near abroad". As an effect, revolution may turn on Russia as well. Finally, Russia is treading a delicate balance-act in Central Asia, where a new "Great Game" may evolve, if not being careful. In all, Russia is applying a traditional policy on untraditional problems, which cannot possibly succeed in the long run. Therefore, it is likely that the image of monkeys and tigers will prove an act of self-deception. Instead, Russian foreign policy may prove a recipe for disaster if the monkeys were to: "Hear no evil, see no evil, speak no evil". This is, however, the path Russia currently is heading with its multivector policy.

Yeltsin: Selling out Russia

Now it is official what everyone in the business has known for the last 15 years. Back in 1991, Boris Yeltsin offered Finland to buy back Karelia - lost to the Soviet Union in WW II. This public secret has now been "revealed" by Finnish paper Kainuun Sanomat, which breaks a silent understanding in Finnish establishment of suppressing public debate on relations with Russia.

In late December 1991, the Soviet Union awaited its final dissolution. Earlier in the month, the Belovezha agreement had effectively torpedoed the USSR, and republic after republic ceded from the Union. On 25 December, president Gorbachev resigned, and by New Year the red flag was lowered from the pinnacles of the Kremlin. In its place, the Russian tricolor was hoisted, signalling a Russia of uncertainty. As a new nation, Russia was in dire need of recognition as a sovereign and successor state of the Soviet Union. Furthermore, its economy was in free fall, with food shortages and an industry in total disarray. In both respects, Russia needed to become a player on the new world stage.

All this is well-known history now, but still serves to contextualise the situation when Yeltsin - allegedly - offered the return of Karelia in exchange for much needed money. On an ideological level, Russia's new leadership needed to part with the past and the injustices of history to build a new nation. Yeltsin had thus previously supported the independence of the Baltic states, partly out of personal conviction, and partly to further undermine Gorbachev's position. There was also a liberalising belief that one way out of the problems was by local and individual initiatives. Thus, in June 1991, Yeltsin had urged Russia's regions to take as much sovereignty as they could digest. Also, a similar offer was made to Japan for the return of the Kurile islands, which the Soviet Union had conquered in 1945. The offer to Japan was still on the table until May 1993, when Yeltsin cancelled a visit to Japan for further talks on the issue, whereafter no mention has been made on it from the Russian side.

According to Kainuun Sanomat, in response to the Russian offer, Finnish president Mauno Koivisto appointed a secret group to analyse the costs for regaining Karelia. An initial cost of reconstruction was estimated to 13 billion euro, but subsequently the price tag increased to 71 billion euro. Obviously, this was too high a price to pay for Karelia, and - even though Russia repeatedly reiterated the offer during spring 1992 - president Koivisto in the end told Yeltsin in July 1992 that "Finland cannot afford Karelia."

Obviously, there were also security policy considerations, as the return of Karelia would bring Finland within sight of St. Petersburg - a problem that Russia historically had taken issue with. Also, Finnish public opinion seemed ambivalent or straightout negative to the idea, so it might have proven politically hazardous to raise the issue publicly. Still, regaining Karelia was publicly discussed in Finland at the time, even though few may actually have realised that there was a concrete offer on the table. Then, the main proponents for the this cause were nationalist Karelian exile organisations, which only served to make the generation having lived through the war increasingly apprehensive. The price in human lives and suffering had been too high to once more risk the chance of having Finland's great neighbour too close at hand. The price once paid by the loss of Karelia - 10% of Finnish territory and 400,000 refugees - was simply too high to risk its reiteration in the future. A final reason why the Russian offer was turned down might have been an impending economic crisis - partly due to the total loss of trade with Russia after soviet demise - bringing mass unemployment to Finland.

So, how has the Finnish establishment reacted to these news? Well, denial seems to be the word of the day in Helsinki. Despite the fact that Koivisto on numerous occasions has both said and written things, strongly supporting that there actually was a Russian offer, he simply states through his secretary that these news "do not feel familiar." Also, most high-ranking politicians and diplomats of those days vehemently deny anything of the sort of a Russian offer to return Karelia. It is more than obvious that official Finland now closes it ranks in face of an alternative to official history.

Why the Karelia affaire is disclosed right now is unclear. Ever since 1991, information about the Russian offer has been covered by media and documentaries, although often more as a footnote than as the main story. The difference this time over though, seems to be that now there may be detailed information exactly about how the entire affaire was handled. Another motive may be that some Finnish interests now want to discredit the last moral justifications for Finland's post-war appeasement policy in relation to the Soviet Union. With an increasingly menacing Russia at its borders, and a debate on Finnish accession to NATO out in the cold, this may prove an opportunity for NATO-adherents to undermine proponents of more accomodating relations with Russia, in contrast to what would be the result of Finnish NATO-membership.

So, why these massive denials. If there was a Russian offer on the table - as much now indicates - it seems the only decent and sound decision would nevertheless have been to turn it down. Opting for status quo instead of staggering costs in a dire and uncertain economic situation in addition to the great uncertainties of how a future Russia would develop, seems the most secure and responsible decision to make. If so, president Koivisto would once more have risen to the task of being a statesman of the best Finnish tradition.

Still, memory is short, and presuming that the public in retrospect would be able to correctly assess the situation in the early 1990s is perhaps too much to ask for. Therefore, what is at stake is the reputation and historical verdict of an entire generation of politicians in Finland, which only serves as a driving-force to making the Karelia affaire into a true scandal. Perhaps, the right thing to do - instead of continued denial - would simply be to proudly confess that this was the only responsible thing to do given the historical circumstances. This would though not be in line with Finnish tradition, which perhaps is the reason why it is good that this affaire now comes out into the open. As Russia is returning to the past it parted with in 1991, Finland may need to part with a past it never totally left behind. As long as this is not the case, Finland will continue to walk a thin line in its relations with Russia.

Finally, as for Yeltsin's part in the Karelia affaire, most Russians would today claim this as further evidence that he sold out Russia. Yeltsin's sense of a historical role and obligation to part with and try to make good for the crimes of communism is something current Russia wants to forget. Paradoxically, exactly this morale and courage of the early Yeltsin, to stand up for his beliefs in a democratic and just Russia, is what he will go down in history for. To this should also be added Yeltsin's attempts to put Finlandisation behind in relations between Moscow and Helsinki.

Georgia's Always On My Mind

Is the current xenophobic campaign against Georgians in Russia run by Putin and the Kremlin? Much indicates that this is actually the case. Since Moscow launched its sanctionist policy towards Georgia earlier this year, living conditions have become next to unbearable for many Georgians living in Russia, making them the new "Jews" of Russia.

Police harassment and controls of Georgians have become commonplace during the last month. Even people with work and residence permits, who have lived for decades in Russia, are now experiencing the repercussions of the current Russian-Georgian crisis. A growing number of Georgians are also forcibly expelled from Russia. Popular sentiments about Georgia unavoidably also reflect upon its nationals living in Russia. So, how does Kremlin's attitude influence the Russian people?

Putin and several leading politicians consistently treat Georgia with great rancour. Recently, Defence and Deputy Prime Minister Sergey Ivanov said: "banditry in Georgia has taken on a nationwide scale." Following up on this statement, the state run All Russian Center for Public Opinion Studies asked Russians whether they agreed with Ivanov.

The result was a devastating 61% positive replies - that "Georgia is a bandit state." Only 29% disagreed. In Moscow and St. Petersburg, attitudes against Georgians were even worse with 78% agreeing with Ivanov. In the rest of Russia, results spanned from 55-61% among respondents. Also, 40% advocated "an economic blockade against Georgia and taking other tough measures in response to the Georgian authorities' unfriendly policy toward Russia." Additionally, 37% backed expulsion of Georgians without residence permit from Russia, 20% advocated a break in transports and postal services, and 20% thought that Russia should severe diplomatic relations with Tbilisi. In contrast, only 30% wanted to normalise bilateral relations and de-escalate the belligerent emotions now running high. A minuscule 5% held that no measures at all should be taken against Georgia.

There are, regrettably, no prior figures to compare with, but popular sentiments against Georgians have never seemed very negative in the past. However, over the last half year, Georgia and Georgians have suddenly become the pariah of Russia, almost on the level of Chechens when hearing Putin and other politicians talking on the subject. That an opinion poll thus takes a statement of a vice Premier as its starting-point is probably no coincidence. The Kremlin both wants to demonstrate that it leads the way and that it has the support of the people in this policy. Admittedly, the particular poll is on Georgia and not Georgians. However, it is quite evident, that these negative attitudes are reflected also on Georgian nationals - assumably to almost the same negative levels - when leading politicians practically portray Russia and Georgia on the verge of war.

The development of Moscow's policy towards the "near abroad" over the last 2-3 years - since the coloured revolutions - contrasts to Russia's prior policy. Previous policy was based on the understanding that the costs for an active policy in post-soviet space were too great in comparison to what could be achieved in other areas. It was a policy of droit de regard and not a droit de suite for an empire creating states by oppression. As Russia is again claiming real influence over post-soviet space, one must ask if we are heading back in the USSR. Surprisingly, it is not difficult to imagine Putin telling the 'ignorant peoples' now back in the fold: "Hey, You don't know how lucky you are, boy."

CIS: Halfling Joins While Giants Leave?

Last Thursday 4 May, breakaway Georgian republic of Abkhazia declared its intention to join the Commonwealth of Independent States, Interfax reports. Reactions from Tbilisi and Kiyev were quick. Both Georgia and Ukraine now seriously consider leaving the CIS.

Abkhazi leader Sergei Bagapsh stated that: "Abkhazia's priorities are membership of the Commonwealth of Independent States and further rapprochement with Russia." Last August, Bagapsh openly confirmed his ambition of "Abkhazia's secession from Georgia and de facto merger with Russia." Now he sets the goal to join the CIS by the end of the year, but "Abkhazia's further political and economic rapprochement with Russia is the central issue. We remain adherent to our proposals on Abkhazia's associated membership of Russia," Bagapsh concluded, according to Interfax.

Reactions from Tbilisi and Kiyev
Bagapsh's declaration was immediately met with stern reaction from Georgia and Ukraine. Georgian president Saakashvili ordered his government to assess whether "it is worth remaining in the CIS," Nezavisimaya Gazeta reports. He went on to say that the conflict in Abkhazia back in 1993 had "forced Georgia to sign the declaration of joining the CIS." Now Georgia is seriously contemplating to leave the CIS.

On Friday, Ukraine also for the first time officially declared that the country might leave the CIS. Kiyev has for long been disappointed with how the organisation works. Thus, speaking about a Ukrainian withdrawal from the CIS, Yushchenko's foreign policy advisor, Kostyantyn Tymoshenko, said that "if there are no results, the question arises." During last week's Vilnius Forum, president Yushchenko also characterised integration with the EU and NATO his main foreign policy objective, according to NG. Such ambtions might prove incompatible with remaining a CIS-member.

A future for the CIS?
This puts the future of the CIS even more in question than previously has been the case. Today, few of its members - not even Russia - have any great hope in the organisation. The original split in perceptions of its purpose, viz. political as opposed to economic cooperation, remains. The political aim is epitomised by the CIS Collective Security Treaty, signed by six countries - Russia, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, and Belarus. Turning to CIS economic cooperation, it can only be characterised as a resounding failure. Thus, demands were raised to find alternative to the CIS in lieu of its defunct economic record.

GUUAM instead of CIS?
In 1997, GUUAM was founded by the CIS-members not party to the Collective Security Treaty, with the single exception of Turkmenistan. GUUAM comprises Georgia, Ukraine, Uzbekistan (1999), Azerbaijan, and Moldova. Its aim was to fulfil the original purpose of the CIS by economic cooperation and free trade. Excluding Russia, GUUAM has remained on the second echelon of post-soviet foreign policy, and the organisation has been careful not to portray itself as a counterbalance to members of the Collective Security Treaty, although it seems evident that so is the case. Georgia and Ukraine have also been GUUAM's most eager members in pursuing a regional policy independent from Russian influence.

Borjomi - a way forward?
To take the matter further, Saakashvili and Yushchenko, last August, issued the Borjomi Declaration, calling on their neighbours to unite "efforts to turn the Baltic-Black-Caspian Sea region into a sea of democracy, stability and security, to make it a fully integrated region of Europe and of the Democratic and Atlantic community." In Moscow's eyes, Borjomi's outright western orientation was seen as yet another attempt to insulate Russia and curve its influence over the near abroad. Whereas there may be some truth to Moscow's contentions on this point, one should however not shy away from the paramount fact of the matter: Russia and the CIS have little to offer in comparison to the fruits of western integration. That Georgia and Ukraine are the first to publicly raise their concerns whether to remain CIS-members should therefore come as no surprise, as they have seized the opportunity of western integration offered to them by their coloured revolutions.

The Abkhazi question
All in all, one must conclude that there is more to the issue than simply a statement by a renegade republic leader. As for Abkhazia, the region broke away from Georgia already in 1992. This separatist republic remains unrecognised by the international community, and there is no secret that Abkhazia would not survive long without Russia's backing. For long, Moscow has remained ambivalent on how to deal with the issue. As the UN, the EU and the OSCE insist that Abkhazia is part of Georgia, Russia has been reluctant to recognise its de facto independence. Instead, Abkhazia has oscillated between outright independence and associate membership in the Russian Federation. Today, most Abkhazis hold Russian citizenship, facilitating a potential future incorporation into Russia. This is also what Georgia claims is Moscow's long-term ambition, making the issue an international bilateral conflict instead of an internal secessionist conflict. So, is it a mere coincidence that a statement by some half-wit chieftain of a secessionist region would seem to shake the foundations of the entire CIS? Why should Abkhazia's wholly unrealistic ambitions to join the CIS spark off such stern reactions from both Georgia and Ukraine?

A pretext for divorce?

First, it is beyond doubt that the Abkhazi CIS-ambition is utterly senseless. It would presuppose Abkhazi independence, and even then CIS-members Georgia and Ukraine might still easily bar Abkhazia from membership. Second, one should ask why such a ridiculous statement is made specifically at this point in time, when the dividends of post-soviet space are are about to be paid to either Russia or the West. That Abkhaz leader Bagapsh's statement coincided with US vice president Cheney's critique of Russia at the Vilnius conference last week, shows that there is more to this than first expected. Third, the declared western orientation of Georgia and Ukraine - reiterated in Vilnius - serves only to underline the basic contradiction in clinging on to an imagined union by a post-soviet Commonwealth. From Moscow's point of view, the CIS is to little avail as long as the organisation cannot be used as an instrument for Russia's de facto power and influence over most CIS-countries. So, both parties want out. Georgia and Ukraine want to go west. Russia wants to rid itself of difficult CIS-members to better control the organisation. Fourth, were Ukraine and Georgia to leave the CIS, remaining members would, in the process, be left to the best of their abilities to deal with Russian dominance over the CIS.

To conclude, it is remarkable how willingly Georgia and Ukraine swallowed Russia's bait - hook, line and sinker. Provided that considerations to other CIS-members do not prevail, it appears that Ukraine and Georgia will go west while the rest are left to their own devices. Going separate ways in concord is no loss. What such a split of the CIS may constitute, however, is part of a division of the spoils between Russian and US influence over post-soviet space, at a time when their strategic partnership seems to have come to the end of the road. Then, one might ask how much the sovereign choice of the nations and peoples of Central Asia is worth to the great powers of global politics. Would a halfling state join and make the giants leave, it might also well constitute the moral choice of halflings and not of the great giants. That is perhaps also the lesson of our times, that when power talks morale steps aside: "Erst kommt das Freßen, dann kommt die Moral." It remains to be seen how Great the Game will be played, and with what appetite.

CIS, Georgia, Abkhazia, Ukraine, Russia, GUUAM, Borjomi

Russia: Motives & Misperceptions

As relations between Russia and the West deteriorate, a growing tendency to misperceive Russian motives is discerned. Russia is not a monolithic power, but analysts increasingly tend to give prominence to factors that themselves cannot wholly explain Moscow's actions. A recent example is the Russian-Estonian crisis.

The current crisis between Moscow and Tallinn has its specific origins, and should come as no surprise to most observers. The basic preconditions for crisis were set already in the early 1990s, and both parties are since stuck in a mutually detrimental relationship. The difference this time though is that there currently are no countervailing forces in Moscow to keep the conflict in check, as has previously been the case. This is matched by poor judgement on the Estonian side. Also, the conclusion by western analysts that Russia is using its energy weapon against Estonia by imposing an export blockade seems flawed and an example of mental bandwagoning among people prone to single factor explanations.

Public opinion in Russia about the Baltic states was forged from the disappointment of their determination to abandon the ailing Soviet empire. The Balts were considered part of the liberal and reform oriented forces in soviet society, why Russians felt betrayed by the Balts as Moscow perceivably strived towards the same political goals as the Balts were identified with. The realisation that the Baltics now were abroad took a long time for most Russians to come to terms with. That Russians had become subjects of a non-Slavic state in which they had to seek citizenship to enjoy the full rights of society was incomprehensible. That states like Kazakhstan might treat Russians badly was only to be expected, as they did not share the liberal heritage Russians associated with the Balts. A measure of double standards was thus introduced in comparing the situation of Russians in former soviet republics. As for the Baltics, Russians felt scorned in their identity as imperial civilisation carriers. An inferiority complex was thus the nucleus of the dispute over the situation of Russian "minorities" in the Baltic states.

As things have evolved in Russian-Estonian relations over the last month, the image conjured up by Russian media is that of Russians being wronged and bereft of their rights and heritage. The difference this time is that there are no countervailing forces in Moscow to keep too overt nationalist sentiments in check. Still, most analysts limit themselves to describe the conflict in either bilateral or Estonian terms, whereas Russian domestic factors are left out. This limits reporting to developments of the same Russian-Estonian themes covered over the last 15 years, and old articles might be taken out of the drawer to be rewritten or updated, simply filling in the new facts. In essence, however, they lack the proper contextualisation to explain why the conflict has taken a new turn for the worse. Action is not enough - as the removal of the Bronze Soldier and its consequences. Context must be added to analysis in order for us to understand the full extent of the problem.

Next year, Russia faces presidential elections. By all appearances it seems to be a runoff between Sergei Ivanov and Dmitri Medvedev. The power struggle in the Kremlin is however already underway, and who eventually will get the upper hand sways back and forth between the two main contenders. Half a year ago, Medvedev was in the lead, but now Ivanov has made a comeback and seems to be in the best position to become master of the Kremlin in 2008. In this context, Ivanov has used the Estonian crisis to gather his forces in front of a common foe. Opinions on Estonia are by now so deeply set that they may be used as a vehicle to gather the Russian masses. Previously, Russian leaders have known where to draw the line in using the "Baltic question" but now president Putin cannot put the foot down as too great interests are at stake, in who will rule Russian politics in coming years, to risk anything just to preserve a working relationship with Tallinn. As for relations with the European Union and Nato, Putin walks a thin line in risking a multilateralisation of the Estonian issue.

However, Medvedev is also not left out in gaining the dividends of the Estonian crisis. Last week, Sergei Ivanov, during a meeting with governors in Murmansk, declared that the Russian oil and coal previously exported by transit through Estonia will now instead go through the port of St. Petersburg. Russia annually ships around 25 million tonnes of fuel oil, gas oil and petrol through Estonian ports. Imposing a Russian energy blockade on Estonia is regarded by many analysts as a way for Moscow to use its energy weapon. Such a conclusion, however, seems flawed as Estonia is relatively spared of any major consequences for its energy supply. Instead, it may prove a way for major Russian oil exporters - mainly Rosneft - to curve export competition by other Russian oil companies.

Transferring exports to St. Petersburg will indirectly give Rosneft greater control over who will be able to export Russian oil. St. Petersburg port is already today gravely undersized - not to mention corrupt - and much effort has been made in recent years to construct new harbours in the Gulf of Finland - Primorsk for oil and Ust Luga for bulk. Opting for Petersburg therefore means that companies that previously have exported by way of Estonia now are at the mercy of Rosneft to meet their deliveries to western customers. In essence, the energy blockade against Estonia gives Medvedev's interests a way to hit at remaining independent competitors within the oil industry. Consequently, Ivanov reaps the political and Medvedev the economic rewards of the Estonian crisis.

So, should all explanations based on the actual situation in Estonia and relations with Russia be discarded? Of course not. However, it is equally important to analyse the conflict on its own merits as it is to contextualise it, striking a balance on the domestic-foreign frontier. An obvious example is the risk that the conflict may spread also to Latvia. Most observers would say that situations differ too much for something similar to happen in Riga, but still Latvian authorities are apprehensive. From both a political and economic perspective, Ivanov and Medvedev may gain from sparking a crisis also with Latvia for the very same reasons why they have let the crisis with Estonia get so much out of hand. There simply is too much to gain and too little to lose domestically at the moment, that a Russian-Latvian crisis should not be ruled out just because situations in Estonia and Latvia are not similar enough. Giving the crisis a Russian domestic political contextualisation shows this.

Still, is the Kremlin willing to risk its relations with the West - EU, Nato and the US - over such an insignificant issue as the Baltic question? Actually, such an assumption should not be ruled out. Already, Moscow is at loggerheads with Washington, and the US understands that it now has to be tough on Russia in order to have a working relationship. The European Union, however, takes a much weaker stand when it comes to Russia, and when it does confront Moscow it is on negotiation issues such as the Partnership and Cooperation Agreement (PCA) and the European Energy Charter. Until now, Russia has never had anything to lose in real terms in relations with the EU, and the Union consistently avoids putting its foot down in relations with Moscow. That Poland and other member states, in this context, may hamper EU-Russia negotiations is officially treated with resignation in Bruxelles, while most unofficially sigh with relief. Thus, Russia rationally calculates that the EU will never truly make a stand in their relations, why Moscow really risks nothing by a confrontational policy.

Developments in Russia are met with growing concern in Europe, and there is an understanding that sooner or later the European Union will have to confront the issue, as many of its members are already experiencing the realities of a more assertive Russia on the world stage. Doing so, however, sets out from, on the one hand, foreign relations and, on the other hand, Russia's domestic political situation. The latter is mainly directed at the crisis for democracy and human rights and far too seldom at the factors that Russian rulers themselves would deem of political importance. Foreign and domestic factors are increasingly treated as monolithic and attempts at joint analysis are often superficial or aim at the wrong factors.

The result is that it is becoming all the more of a mystery in the West why Russia acts as it does. The West is once again allowing Russia to become "a riddle wrapped in a mystery inside an enigma" for the evident reason that Europeans are too subsumed by their own values, norms, perceptions, and prejudice to follow the simple logics of current Russian politics and society. Then it is much easier to produce an image of a state that once more might pose a threat to Europe - an alien entity accepted by its mere existence but doomed to remain foreign to Europe. Here, the Russian-Estonian crisis serves as a striking example of how the West fails to account for important factors in its perceptions of Russia. As European public opinion turns increasingly against Russia, the risk of misperceptions may become an even greater danger than a revived Russian threat in the eyes of Europe. Russian motives are not always what they seem.