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Thursday, December 11, 2014

Russia, a pipeline against the Islamist threat

     



Is it possible that Russian President Vladimir Putin is a closet Zionist? We know in the past he has taken a strong stand against antisemitism. In his Presidential address in the Hall of the Kremlin on December 4, 2014 Putin called the Crimean Peninsula, where the Russian Orthodox Church was established, and where Grand Prince Vladimir was baptized, sacred to Russia.

In his own words, he referred to Christianity as a powerful spiritual unifying force, the basis of a united Russian nation.  Therefore, Crimea and Sevastopol have invaluable sacral importance for Russia as the Temple Mount in Jerusalem has for Jews.

Of course, Putin has other non-spiritual reasons for annexing, or engaging in the “historical reunification” of Crimea and Sevastopol with Russia after the referendum in Crimea in March 2014 expressed a desire to join Russia. In his Presidential address, Putin reminded his listeners of the crucial role that Russia, the former Soviet Union, had played in defeating Nazi Germany in World War II or what the Russians call the Great Patriotic War. 

He also criticized any policy of containment and the imposition of sanctions by the US and the West that he believed was restraining Russia. For Putin, the annexation of Crimea was only an excuse for Western sanctions in order to curb Russian progress.

Putin’s present argument, expressed on December 6, 2014 to French President François Hollande, who was greeted by Putin at the Moscow Vnukovo-2 airport, is that he wants to resolve the conflict with Ukraine, to help observe the September 5 cease fire arrangements between Ukraine and the pro-Russian separatists, and to maintain a distance from those separatists in eastern Ukraine.

Russia remains an enigma. To believe Dostoevsky, Russians are a people engaged in shared suffering. Perhaps this is so, but it is not self-evident even though Russia is troubled by economic problems: the drop in oil, the fall in the value of the ruble, inflation, and the lack of credit from the West; and terrorists in Chechnya.

Yet, entering Moscow, as this visitor did recently, is an astonishing experience. Moscow, an immense city with at least a 12 million population, is not a particularly beautiful place, but it is not a grim, forbidding one.


     

The American mass media is full of the dire effect of sanctions on Russia. It is true that Moscow is not typical of the country. Nevertheless, it is startling to confront streams of many of the 4 million cars in this city of gridlock and monumental traffic jams in the wide boulevards.

To avoid this hassle one can take the Moscow metro with its 195 stations, and trains coming every few minutes, usually crowded. It is a city of entrepreneurs, 11,00 registered restaurants of all kinds, American style coffee with 70 branches of Starbucks, and with shops, boutiques from Gucci to Cartier and Louis Vuitton.

Nevertheless, it is clear that Russia faces a double problem: the rapid decline in the world price of oil: and the effect that sanctions imposed by the US and the European Union in response to the Russian invasion of Ukraine.

Russia is still producing crude oil at about record level, 10.6 million barrels a day: by comparison Saudi Arabia produces 9.6 million barrels a day. But Saudi Arabia persuaded its OPEC fellow members on November 27, 2014 to maintain production targets of 30 million barrels a day in spite of the drop in oil prices.

This is in fact a direct challenge to higher cost producers: not only to Russia but also to Iran which depends on oil exports for more than 40 per cent of its revenue, and to US shale oil producers, using horizontal dripping and hydraulic fracturing, to which Saudi Arabia might lose part of its market share.

The problem for Russia is that an average price of $105 a barrel of oil is necessary for Russia to have a balanced budget, and the present price is below $70. Nearly half of the Russian government budget comes from taxes on the energy sector.

Because of present tension, Russia plans to give up its planned natural gas pipeline through Europe. Putin said the South Stream pipeline under the Black Sea to Bulgaria would be cancelled, and an alternative route through Turkey substituted. He blamed the EU for the decision to drop South Stream, but the EU rejected the charge, arguing that pipelines must be built in line with EU legislation.

The EU has wanted to reduce its dependence on Russian oil, but countries in South-East  Europe are vulnerable. In any case, a recent study by the Oxford Institute for Energy Studies suggests that it will not be possible for European countries to reduce significantly their dependence on Russian gas.

Russia is handicapped because sanctions have restricted access to international financing and capital markets for energy businesses. Therefore, it seeks closer relations with China. The ruble has dropped to a new low, as have crude oil prices.

Putin is trying to move away from the market in US dollars, and so is boosting the ruble and the yuan. Much of the Russian economy depends on loans from Western banks. The total external debt of Russian banks and companies is about $660 billion, mostly in short term loans which need refinancing.


    


Sanctions are affecting the granting of credit. Putin has called for spending cuts and control over expenditures of state companies to support economic growth.

After the Deal in May 2014 worth $400 billion, Russia made another deal to supply China with natural gas for 30 years. This involves an additional 30 billion cubic meters of gas a year, in addition to the 38 billion bcm a year agreed in May. Putin’s objective is to increase the percentage of trade with Asia-Pacific countries to 40 per cent of the total.

Sanctions are having an impact because, among other things, they restrict access to international financing for Russian energy companies, especially new resources such as shale oil and offshore artic crude. As a consequence, Russia will lack the advanced form of oil recovery known as hydrofracking, a technique used primarily in the US.

Sanctions has also meant that American companies are withdrawing from joint endeavors. Exxon Mobil has ended 9 of its 10 production projects with Rosneft in the Artic, western Siberia, and the Black Sea shelf. Shell no longer is involved in exploring the Bazhenov shale formation, and so Gazprom Neft goes it alone.

The immediate question arises: is the US and EU using the Ukraine situation to limit and weaken Russia? Whether Putin is right or wrong on this issue Russia should be more closely associated with the West for an important reason. The Islamist threat to the world is more important than the issue of Ukraine.


     


Putin had ended the war in Chechnya after taking power in 2000, and now faces violence from Islamist militants in Grozny, the capital of Chechnya. Russia also faces threats from Chechen fighters in Syria because of its support for Syrian President Assad.

Putin is aware that Muslims both from Chechnya and Dagestan, another republic, have gone to Syria to fight against Assad.

Putin and other Russian political authorities have been more consistently understanding of the Islamist threat than has the Obama Administration and certainly some of the mainstream Western Christian churches.

Russia has made known its concern about the persecution of religious minorities in northern Iraq by the Islamic State of Iraq and Syria. The Duma of the Russian Federation on November 14, 2014 adopted a document indicating the terrorist activity in those two countries.

It called on the international community to act against that terrorism.

The lending by the British Museum of one of the Elgin Marbles, the headless statue of a Greek river god, to be unveiled in the Hermitage in St. Petersburg on December 12, 2014 is perhaps only a symbolic gesture.

But it is a sign that Russia and the West are equally interested in the preservation of Western civilization.



Michael Curtis, author of "Jews, Antisemitism, and the Middle East", is Distinguished Professor Emeritus in political science at Rutgers University. Curtis is the author of 30 books and this year was awarded the French Legion d'honneur.

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