BUDGET PRIORITIES. On Monday Medvedev outlined the budget priorities for 2010-2012 to the government. He listed ten: maintain social spending: reduce budget deficit; cut costs; support the industrial and financial sectors; improve the quality of public services; improve the public procurement system; set an “economically justified tax burden”; make authorities responsible for effective spending; establish a “reliable and balanced pension system”; put in place “a barrier-free environment for people with disabilities”. Nothing on defence.

RUSSIA-EU SUMMIT. The summit was held in Khabarovsk (Moscow wanted to show the Europeans just how big Russia is) last week. As is normal with such meetings, the results will only become clear after time. It seems to me that Europe is more open to Russia – I still maintain that the August war was a reality check for most Europeans about the nature of Saakashvili’s regime and the way events were drifting. Perhaps a first sign is the Italian Foreign Minister’s saying that the EU should “enhance strategic relations” with Russia. The summit discussed security (with at least rhetorical openness to Medvedev’s proposals about a new security structure), energy (see Ukraine entry below – another reality check for Europe that perhaps the gas supply problem does not begin and end in Moscow). Press conference here.

RUSSIA INC. As of 25 May Russia’s international reserves were US$402 billion; this is down from the US$450 billion or so at the start of the year but up from the US$385 billion of about six weeks ago.

ENTREPRENEURS. On Tuesday Medvedev addressed representatives of the business community. He reiterated that a large part of Russia’s economic problems stemmed from the fact that “we have such a one-sided economy” and that “diversifying our economy is an absolute priority”. And “The creation of an economy based on innovation in Russia must be our number one priority [this requires] a strong culture of entrepreneurship… Such an economy cannot be government-owned.” He then proceeded to mention some things the government was doing to help this develop, particularly a new law “banning the unscheduled inspection of small and medium-sized businesses.” Such inspections are a well-known means of pressuring or reiving money from young businesses. But, as Medvedev admitted, “we know that once something in Russia is forbidden, people often find a way of getting around it”.

NORTH KOREA. Does Moscow have any influence there? I doubt it. Does anyone? Certainly the Six-Party talks don’t seem to have done anything.

CAUCASIAN RUMOURS OF WARS. Low level activity continues: in the last week an arms cache was discovered in Chechnya, a bomb at gas pipeline in Dagestan was disarmed, a “gunman” was killed in Ingushetia and four “militants” were killed in the Kabardin-Balkar Republic.

TROUBLE IN PARADISE. The Abkhaz Vice-President has resigned in protest about the President’s policies.

GAS AND UKRAINE. Ukraine has been very hard hit by the financial crisis and concern is increasing that it may not have enough money to buy the gas that is necessary to make the transit system to Europe work. Gazprom has already pre-paid this year’s transit fees and Putin suggested last week, after a meeting with Tymoshenko, that it might pay five years in advance. Meanwhile, Medvedev proposed that Europe lend money to Ukraine.

HISTORY. The Ukrainian security service has opened criminal proceedings in connection with Holodomor. It continues to insist, in defiance of historical reality, that the famine was specially targeted at Ukrainians: “Through its unlawful activities the regime’s objectives were wholly directed towards the wiping out, through famine, of the Ukrainian national entity”. Many of the former communist countries are airbrushing their history to create a picture of blamelessness in the communist catastrophe.

GEORGIA. The protests continue with about 60,000 gathering at a stadium in Tbilisi. The regime has not taken overt steps to move against the protesters but it is reacting: Burjanadze appealed to diplomats in Georgia to pay attention to what was happening under the covers. Certainly the Western MSM has been keeping pretty quiet. The opposition is planning its next moves but there are reports of disagreement on what to do next. The Patriarch has called for compromise and negotiations. Meanwhile, Russian border guards will start patrolling the Abkhazian and South Ossetian borders: at a time when Georgia night fall apart and the “volatile” Saakashvili accuses the opposition of being in Moscow’s pay, this is prudent.

© Patrick Armstrong Analysis, Ottawa, Canada (see http://www.russiaotherpointsofview.com/)

DEMOGRAPHICS. Medvedev gave an interview the other day in which he spoke about what the government was doing about Russia’s demographic problems. The problem has two “ends”: too few births and too many early deaths and the government has put effort into both ends. A number of specialist cardiovascular centres (he visited one today) are being created around Russia “we know that cardiovascular disease is the biggest cause of death here” and the program to encourage births is having its effect as well: “The number of childbirths has increased by almost 7 percent over the last year… At the same time, there has been a decrease in infant mortality….” RosStat’s figures show that these programs are starting to bite. While Russia is still losing population, the net loss has been reduced by about 300,000 since 2006 (2006 – 637,200 net loss; 2007 – 442,700; 2008 – 337,300). 2009’s figures show continuing progress. 2006-2008 saw births up by about 200,000 and deaths down by about 90,000. In short, alarmist pieces about Russia’s demographic collapse are starting to look outdated. Added to which, Russia is not the only country with a shrinking population.

CONSTITUTIONAL COURT. Earlier this month Medvedev proposed a change to the way the Chair of the Court is appointed. Today the President nominates judges and the Federation Council approves them and they choose their own Chair. His proposal is that the President nominate the Chair and the Federation Council approve. In short, something similar to the way that US Supreme Court judges are chosen. The big difference however is that in Russia the President has a powerful influence on determining the membership of the Federation Council. So, under present circumstances this is an increase in Presidential power (although all members were nominated by the President before); if Russia ever has real political parties, it will be different. (Discussion).

CORRUPTION. Medvedev has signed an executive order creating a list of senior civil servants and managers of state owned corporations and funds who will be required to file public annual declarations of property and income (see his for the example). In principal, this could be an effective attack on corruption given that most corruption is about acquiring money. If enforced, that is. One of the major enforcers will be Sergey Stepashin, head of the State Audit Commission. In an interview (JRL/2009/93/12) he is talking tough: FSB involvement, undercover operations etc. We will see: an earlier attempt in the Yeltsin years fizzled out. I still say that we will know that Medvedev is really attacking the problem when someone in an office near his or Putin’s is arrested.

HISTORY. Medvedev has set up a commission to guard against “falsification of historical facts and events aimed at damaging Russia’s international prestige”. This will no doubt be excoriated as an attempt at thought control but, given Ukrainian attempts to paint the great famine as a Russian attack on Ukraine, or Latvian attempts to gain compensation from Russia for the cost of communism or the long-term refusal to regard Russia as a “captive nation”, there may be something to be said of reminding people of the Kuban famine, the Lettish Rifle Regiment and the cost of communism to Russia. But those who know these things know them, and those who want to airbrush them out of the historical picture will do so anyway.

NUCLEAR WEAPONS TALKS. Russians say they are “satisfied” so far. Related (maybe) to better Washington-Moscow relations is the report that Moscow has put a hold on a contract to supply fighter aircraft to Syria.

PIPELINES. Russia, Italy, Serbia, Bulgaria and Greece signed an agreement on South Stream gas pipeline (Russia-Black Sea-Bulgaria and north) on the 15th bringing it a step closer to construction.

CHECHNYA. For some years I have been arguing that the war in Chechnya is over: that is to say the jihadist attempt to create a secure base in Chechnya from which they could spread elsewhere has been defeated. But jihadists are still there (as elsewhere in the world). A bomb attack in Groznyy – said to be a suicide attack – has impelled Kadyrov to cancel the amnesty. The next day the police reported having killed 3 connected with the attack. This, if true, suggests informers led them to it.

GAS WARS. Today Gazprom announced it had pre-paid for this year’s gas transit, somewhat helping out Ukraine’s economy; meanwhile Yushchenko still wants to re-negotiate the deal.

GEORGIA. Government repression continues, quietly, with little coverage. Meanwhile the protests have spread to other towns in Georgia.

© Patrick Armstrong Analysis, Ottawa, Canada (see http://www.russiaotherpointsofview.com/)

DECENTRALISING. In April 2001, when Putin had been President for about a year, a piece entitled “Russia is Finished” appeared; it read as one would expect from its title. This piece, which proved to be a poor predictor and was swiftly forgotten, is a reminder of the view of many in the West and not a few in Russia at the time. I saw in Putin’s early speeches a reflection of the fear that Russia was actually heading towards collapse or extinction. In my opinion, this fear plus the shortages of competent managers in Russia (something about which he periodically complained) led him to solve problems by centralising power and decision-making in his office. Then the “colour revolutions” in Ukraine and Georgia, seen by Moscow as outside manipulations (something their unhappy outcomes, which can be directly related to the NATO expansion obsession, make plausible) re-emphasised this tendency. Perhaps that was the right thing to do between 2000 and 2008 but I believe that this over control has become a brake on development and that a large part of Medvedev’s job is to reverse it. In this regard, Medvedev has made another couple of openings in the political system. He has signed a law which will give equal access to state TV to all parties in the Duma and another law that will allow representation to parties receiving between 5% and 7% of the vote. A re-drafting of the NGO law is in the works. Many will spin this as Medvedev vs Putin. But maybe there’s a plan.

NATIONAL SECURITY STRATEGY. Yesterday Medvedev signed off on the latest version. A cursory read doesn’t show anything much different from other versions (Russian text). I have never understood why Russians feel the need to produce these long-winded cliché-ridden documents in which they toil though a laundry list of every thing that could conceivably affect security in its broadest possible definition (“46. Improvement in the quality of life for Russian citizens is guaranteed by ensuring personal safety and the availability of comfortable housing, high-quality and safe goods and services and appropriate payment for work”). They’re gifts to the Russophobes who skim through them to cherry-pick something alarmist.

US-RUSSIA. Nothing specific yet but an apparently good meeting between Obama and Russian Foreign Minister Lavrov the other day. Obama is scheduled to visit Russia 6-8 July. But for negotiations to be successful, both sides must gain something. And from Russia’s perspective, sooner or later, NATO expansion and missile defence locations will have to be discussed

THINGS YOU WON’T HEAR ABOUT. Last December the offices of St Petersburg Memorial were raided by police and data was confiscated. Several court rulings that the raid was unlawful followed and the organisation received its computer disks and other data back last week. They are being checked to see whether anything is missing. As always one wonders whether this is a result of Medvedev’s campaign against “legal nihilism” or merely “telephone justice” with a new phone.

UKRAINE. The war between President and Parliament continues: this time over timing of the Presidential election. At present ratings, Yanukovych is ahead. Far from being the stooge of Moscow, as we were told during the “Orange Revolution”, he remains the most popular politician in Ukraine.

GEORGIA. Saakashvili and members of the opposition met on Sunday although not much happened: they, according to Burjanadze, continue to insist that the only question is the timing and modality of his resignation; he insists he’s not going. In an interview which should be read by those who (still) think Saakashvili is a “democrat”, Salome Zurabishvili (his former Foreign Minister) says he’s “insane” and warns that Georgians “may turn away from Western style democracy out of disappointment. For too long, the Americans have confused support for Georgia with aid for Saakashvili”. Former President Shevardnadze said on Tuesday that the situation in the country was “catastrophic:” and that Saakashvili should resign. The protests continue as they have for a month now with more planned. Most interestingly however, two brigade commanders have been arrested and accused of involvement in the so-called mutiny of last week. Almost certainly this “mutiny” was a decision by the battalion commander that his troops would not become involved in putting down the protests. The new arrests suggest that this view is widespread in the army; thus Saakashvili has lost another prop of his rule. Not surprising, given the catastrophe he led them into last August.

© Patrick Armstrong Analysis, Ottawa, Canada (see http://www.russiaotherpointsofview.com/)

DUUMVIRATE. A poll touches on Russians’ perceptions of the Medvedev-Putin relationship. Probably the most important finding was that 41% believed power to be shared equally between the two. This is the first time in history, as far as I know, that Russia has had two cooperating power centres (there was no cooperation in 1917 or 1993). I believe that the most accurate way to look at this unusual situation is through that perspective rather than barren speculation about who’s in charge and trying to find splits between the two.

ECONOMY NUMBERS. Last month unemployment was put at 2.26 million; GDP declined 9.5% in the first quarter but gold and foreign currency reserves increased slightly to US$384.8 billion. The Reserve Fund is down 13.7% to US$106.81 billion (it owned a lot of Fanny Mae and Freddy Mac at one time) and the National Prosperity Fund is down 1.6% to US$86.3 billion.

NATO. Foreign Minister Lavrov gave an interview explaining Russia’s position on NATO: “For us NATO is one of the objective key factors determining the state of security in the North-Atlantic region [but] obviously Russia cannot ignore NATO countries’ military infrastructure moving closer to its borders”. Worth reading for those who want to know what Moscow’s position really is rather than what interested parties tell you that it is.

EXPULSIONS. NATO expelled 2 Russians, perhaps in retaliation for an Estonian convicted of spying. As usual, Moscow has responded reciprocally with the expulsion of 2 Canadians from the NATO office in Moscow.

THINGS YOU WON’T HEAR ABOUT. Moscow has been quietly reducing its forces in Kaliningrad and Medvedev has said that he hopes for a response from NATO.

PIPELINES. On the 21st Moscow and Beijing agreed to build a branch of the East Siberia-Pacific Ocean pipeline toward China with an annual capacity of 15 million tonnes. Beijing is lending RosNeft and TransNeft US$25 billion to finance it. Interesting: China has a lot of assets worth less and less; here’s a use for them.

CHECHNYA. Long-time readers will recall that I have always believed that the former resistance fighters who now run Chechnya still want as much independence as they can get away with (short of actually using the word). Kadyrov has taken another step in that direction with the announcement that no Chechens will be conscripted this year into the Russian Armed Forces

GAS WARS. The international crisis, combined with political paralysis, is hitting Ukraine very hard and it cannot buy all the gas it contracted to. PM Tymoshenko is in Moscow trying to get the amount reduced, Putin’s response is open and some sort of arrangement may be possible – Gazprom may pay transit fees in advance.

MOLDOVA. The election results have been confirmed although with one important difference from the initial results: the dominant Communist Party is now one seat short of the power to name the next President. A Moldovan businessman has been arrested on suspicion of inciting mass riots and attempting a coup.

RE-WRITING HISTORY. Latvia has estimated the cost of the Soviet occupation: this sounds like an attempt to present a bill to Russia. But perhaps, given the role of the Lettish Rifle Regiment in Lenin’s coup in 1917, Latvia should charge itself. Or Georgia from whence Stalin, who ordered the 1940 occupation, came. These countries are airbrushing their home-grown Bolsheviks out of their history.

GEORGIA. The protests continue. The next tactic, to begin on the 8th, will be blocking highways. Which leads us to the “mutiny” story as reported here. One has to read all the way to the bottom of the account (all Georgian news media is controlled by the government), through Saakashvili’s accusations of Russian plots and the now-customary electronic “evidence” showing blurry people saying indistinct things to each other, to get to the real story. It appears that the battalion announced it would stay in its barracks and not get involved in the protests, perhaps after Saakashvili ordered it to prepare to stop the road blockages. In this connection see the report that the Patriarch’s appeal to troops to sit it out was censored from his address on 8 April. Opposition members are facing violence on the edge, out of sight of Western reporters – one example – and violence actually began last night. The Western MSM, still in thrall to the meme that Saakashvili “democratic”, is reporting little. The army unit’s refusal is indicative: people are switching sides and I continue to believe that the police will not turn out for Saakashvili as they did last time. Meanwhile more and more countries, perhaps sensing the trouble coming or re-assessing their views of Saakashvili’s regime, are dropping out of the NATO exercise.

© Patrick Armstrong Analysis, Ottawa, Canada (see http://www.russiaotherpointsofview.com/)