GAS WARS. On Saturday, Prime Ministers Tymoshenko and Putin met in Moscow and fairly quickly came to agreement. For this year, Naftohaz will pay European prices less 20% with the transit fees remaining as previously agreed. For next and subsequent years it will be full European prices and full European transit fees. In short, an agreement not hugely different from what President Yushchenko walked out on last month and fully in line with the Tymoshenko-Putin agreement of three months ago. There is one significant difference – but always implied by Gazprom – which is that the “European price” is linked to the price of oil. Previously the contracts had been for a fixed price (attractive to Ukraine at a time when oil prices were rising). No doubt Belarus will be given the same deal when its contract comes up. So what took so long and why did all those customers have to get cold? It looks to me very much as if the whole thing was connected to the bitter political struggle in Ukraine and Tymoshenko is now able to position herself as the person who can solve the problems Yushchenko causes. Certainly she is blaming “corruption at the highest political level [in Ukraine]”. This should stand her in good stead in the presidential elections in a year. (Or sooner, maybe: both Yanukovych and Tymoshenko say he should resign and between them they control about 70% of the seats in parliament. But they don’t like each other either.) Stay tuned.

BUT. Ukraine has continually been in arrears: how will it, with a failing economy, pay the higher price? And what happens when it fails behind? Will Kiev, locked in its political war, keep the agreement?

SIGNS OF THE TIMES. I am interested that The Economist, which I regard as only useful on Russia because it gives the “mean sea level” of conventional opinion at the moment of publishing, doesn’t seem to be quite able to make up its mind whom to blame for the gas cutoff. (JRL/2008/11/22). August and January have been learning experiences for many in the West and coverage has been much more balanced.

MARKELOV. On Tuesday Stanislav Markelov was murdered in central Moscow in an obvious mob hit. Given that he had been acting for the family of Elsa Kungayeva, murdered in 2000 by Yuriy Budanov, given that Budanov had just been granted parole and that Markelov had just finished a press conference protesting the parole, almost everyone decided that the two were connected. I’m not convinced: after all Budanov had won his parole, after several earlier refusals, and it is unlikely that Markelov’s activities would have put him back in jail. So I suspect that the cause is something else. In November the editor of a newspaper in Khimki was almost beaten to death: he had been running a campaign to prevent developers from destroying a forest and Markelov had begun an investigation into that case. And he had other dangerous enemies. Yesterday the case was passed over the Investigative Committee of the PGO which is supposed to be Russia’s top investigation group.

COURTS. Russian courts have just reversed two tax claims against foreign companies: Lufthansa on the 14th and PricewaterhouseCoopers on the 20th. And, it is reported that a judge has ruled the raid on Memorial’s offices last month to be “unlawful”. As always in Russia, one never knows whether this was the result of “telephone justice” with a new phone, or a sign of genuinely impartial legal procedures.

LENIN. Yesterday was the anniversary of Lenin’s death and time for the usual poll. According to VTsIOM, two-thirds now think the body should be taken out of the Mausoleum. Some people appeared on Red Square dressed as mummies. The police, lacking a sense of humour, but also prudently fearing a riot while communists were making their annual pilgrimage to their Holy of Holies, detained them.

GEORGIA OPPOSITION. Readers will know that I expected Saakashvili to be long gone. But I have come to the conclusion that three things have kept him in power so far: his near-total control of news outlets; the understandable desire to avoid the third extra-legal departure of a president in a row and the disunion of the opposition. The third is being repaired: almost all opposition parties have agreed on a three-point program. Salome Zurabishvili (yet another of Saakashvili’s former colleagues) appears to have taken a leading role; according to her the three are: Saakashvili’s resignation, electoral system reform and early presidential and parliamentary elections. Not all opposition parties agree on the first and consultations on tactics continue. The Europeans are starting to clue in: a €500 million aid package over 3 years is in the works. But there are conditions: there must be political improvements (media freedom and freedom of assembly were emphasised) and “We do not want to see any Euro spent on any military and I think that is the most important”.

© Patrick Armstrong Analysis, Ottawa, Canada (See


GAS WARS. The contract with Ukraine ended on 1 January and negotiations were stopped as Gazprom was offering $250tcm (about half what Germany pays). Gazprom shut off gas to Ukraine, Ukraine started siphoning Europe-bound gas and Gazprom then shut down the system altogether saying that no gas was getting through anyway. Negotiations ensued, agreements were made, Gazprom is trying to ship through Sudzha but Naftohaz comes up with new objections; no gas is presently flowing. Gazprom’s point of view here, Naftohaz’s here. At least Western coverage has been more balanced this time around – Gazprom has been using international monitors at all stages to document events. For readers of Russian, here’s Ukrainian PM Tymoshenko confirming that Gazprom offered $250tcm and her speculation that forces on the Ukrainian side are trying to keep the murky RosUkrEnergo alive for their own profit. (Let’s not forget theft as a motive (JRL/2009/8/24)).

JUDICIARY. Medvedev continues his activities against “legal nihilism”. Addressing the National Congress of Judges, he called for court records to be available on the Internet, attacked “telephone justice”, mentioned pilot projects on free legal aid for the poor and called for fewer prison sentences. Legislation to come, no doubt.

CORRUPTION. The Duma passed Medvedev’s anti-corruption bill (with the dates changed back) and he signed it on the 25th. He then signed a bill requiring Cabinet ministers to declare their income and property to tax authorities. Not the first time such a requirement has existed. Meanwhile an aide to the Ground Forces Commander was arrested on suspicion of accepting bribes and abuse of authority. A very uphill task.

RUSSIA INC. On the 25th the Central Bank of Russia said Russia gold and foreign currency reserves were US$450.8 billion; rumours of Russia’s bankruptcy are exaggerated.

ECONOMY. The government’s expectations, according to a Presidential aide, are 2% growth with 10-12% inflation in 2009. If that does come to pass, Russia may be one of the star economies of 2009.

PERISTALSIS. Medvedev has complained about how slowly the government works and Putin issued a directive designed to give deputy PMs more power to approve work. Another uphill task.

NAME OF RUSSIA. An Internet completion on The Name of Russia” had Nevskiy, Stolypin and Stalin close in the popular estimate, while the “experts” placed Nevskiy and Pushkin first followed by Suvorov. There was much flapdoodle in the West about Stalin’s high ranking. But Internet votes are easy to influence and I would argue that Stalin’s placing has much to do with older people resisting the devaluation of their youth. See, for example Putin’s remarks at the Butova Memorial or his description of communism as a “a road to a blind alley”; in short, was their youth wasted and their achievements hollow?

PEOPLE POWER. A court in Ulyanovsk region upheld Yuriy Budanov’s parole request; he is to be released 15 months early after 11 January. There have been several large protest rallies in Groznyy.

NOT COLOUR-FAST. Not a good time for those “democratic” “revolutions”, whether “Orange” “Rose” or “Tulip”. Unrealistic expectations, ignoring essential interests and expecting Washington to bail you out is not a recipe for domestic success.

1. Ukraine. President Yushchenko has abandoned his call for early parliamentary elections; he ordered his people out of the “orange coalition” in parliament so there is now no majority. Tymoshenko says he should resign and accuses him of weakening the economy on purpose. Not surprisingly a poll this week shows 83.7% of respondents thinking Ukraine has taken a wrong turn and over 90% believing the situation “tense” or “explosive”). No doubt the gas war is connected with the political struggle there.

2. Georgia. As expected, the former Ambassador to the UN has gone into opposition and calls for early elections. The Public Defender says he has proof that senior officials deliberately planned to break up the November 2007 demonstrations with excessive force. (REF). Another opposition member accuses Saakashvili’s family of embezzling money designed to provide insurance for poor people. (REF). The opposition says it will launch a series of demonstrations; and reiterated its demand for Saakashvili’s resignation. Meanwhile Freedom House has re-classified it as “a non-electoral democracy” (whatever that is).

3. Kyrgyz Republic. The main opposition parties have signed an agreement to form an alliance and demand the resignation of President Bakiyev. Not that anyone remembers this any more.

© Patrick Armstrong Analysis, Ottawa, Canada (See

Ukraine’s troubles

Ukraine has entered its latest gas war in a severely weakened state and with a paralysed government and parliament. What can only be called hatred between the erstwhile “Orange Revolution” allies of President Yushchenko and Prime Minister Tymoshenko is fast destroying the unity that Ukraine needs to face its acute economic crisis. In the meantime, the needless NATO question drives the country further apart.

Governance is poisoned by the war between Ukraine’s two most important politicians. In August Yushchenko virtually called Tymoshenko a traitor and in December she returned the favour by accusing Yushchenko of wrecking the economy for his personal advantage. In October Yushchenko dissolved parliament and abolished the court that ruled he could not do so. He has subsequently dropped the dissolution, claiming that the financial crisis forbade another election. Meanwhile, the fight between the two has broken Parliament. After months of bargaining, the remnants of the “Orange” forces cobbled together a coalition on 16 December but, as Yushchenko forbade his supporters to join, the coalition has no majority. As the year ended, an opinion poll in the country showed, not surprisingly, great displeasure among the victims of this power struggle; three-quarters said they did not support Yushchenko’s policies and only about 3% believed the country was heading in the right direction.

Bubbling in the background, and part of the Yushchenko-Tymoshenko flame wars, is the arms trade scandal. The issue was not made clearer when Somali pirates captured a ship with Ukraine tanks bound for somewhere – no one seems to know – in Africa. The Ossetian war and Ukraine’s arms supplies to Georgia brought the issue to the fore and the chair of the parliamentary investigating committee, Valery Konovalyuk, asserts that Kiev supplied weapons during the war. Naturally, the Ukrainian National Security and Defence Council disagreed, insisting that everything was perfectly legal. In the mean time, no one seems to know who paid for the 12 self-propelled guns, 70-plus APCs, 16 tanks, 8 helicopters and 58 air defence systems that SIPRI says Georgia received from Ukraine between 2004 and 2007; dark rumours of payoffs and secret arrangements abound.

Ukraine has been hit very hard by the world-wide financial crisis: its GDP is falling while inflation and unemployment are rising rapidly. Foreign debt had nearly doubled as of October and is still rising. Every indications is that these problems are getting worse.

Finally there is NATO. Since September I know of three polls taken in Ukraine on the issue; NATO membership was rejected by large majorities in each, as has been the case in every poll of which I am aware. In September 53% of respondents preferred economic integration with Russia and the CIS as against 40% who preferred relations with the EU. Nearly half agreed that NATO accession would be destabilising. Another poll that month showed that, in a referendum, 61% would vote against NATO membership and another poll two months later showed similar numbers. The November poll illuminated the geographical division over the question: NATO accession was supported by 16% in eastern Ukraine, 28% in central Ukraine and 68% in western Ukraine. Once again the two principals differ: Yushchenko strongly supports NATO accession and EU connections while Tymoshenko counsels caution. The population, principally because of the long history of the Ukrainian territory being divided between Polish and Russian rule, is split on many issues and the NATO question reminds all Ukrainians of these differences at a time when they must sink or swim together. One can only surmise that those who want Ukraine in NATO wish to split the country.

Ukraine is entering another gas war with Russia at a time when its two principal leaders are at each other’s throats and people are choosing sides in the power struggle, when its government and parliament are rudderless, when its economy is sinking fast, when the arms scandal is smouldering in the background and the NATO issue reminds all its citizens of the things that they do not have in common. As with its sister “Rose” and “Tulip” “Revolutions”, the day of reckoning for the “Orange Revolution” is approaching.