RUSSIA-US SUMMIT. To my mind, Obama said a number of things that deserve being said, particularly: “America wants a strong, peaceful, and prosperous Russia… we also recognize the future benefit that will come from a strong and vibrant Russia.” For too long, the prevailing impression has been that Washington would prefer a weak, turbulent and poverty-stricken Russia. He also intimated that the end of the Cold War was not simply a result of US action. On the two burning concerns for Moscow, he showed openness. He hinted at the possibility of Russian involvement in missile defence and, on NATO expansion, rather than the usual wooden language, listed the things Ukraine and Georgia must do to qualify for membership (one of them, “a majority of its people must choose to”, effectively rules out Ukraine); he also stated: “NATO should be seeking collaboration with Russia, not confrontation”. The only jarring note, probably understandably, I saw was “I reiterated my firm belief that Georgia’s sovereignty and territorial integrity must be respected”. If only it were that simple: but Tbilisi ought not to have done things in the late 1980s and 1990s that persuaded Ossetians and Abkhazians they had no future in an independent Georgia. The two roughed out a nuclear weapons agreement and US transit through Russia to Afghanistan was extended. Overall, the “reset” seems to be off to a good start. But we’ve been here before: Clinton-Yeltsin and Bush-Putin also started well. Things happen and each government has long-entrenched interests that work against these beginnings.

RUSSIA INC. The Central Bank says net capital inflow was US$7.2 billion in the second quarter (first net inflow since second quarter 2008). But net outflow in the first quarter was US$34.8 billion. Meanwhile, Russia’s total foreign debt is down US$8.4 billion to US$475.1 billion in the first half of the year. In this number the government’s debt is down US$1.8 billion to US$27.7 billion. International reserves are US$409.1 billion.

OIL AND GAS. Russia’s energy exports have suffered with the world-wide economic difficulties. We are told that the average price of Russian oil was $US105.31 per barrel in the first half of last year but only $50.82 per barrel in the first half of this year. Natural gas exports to Western countries are about half over the same periods. As for Russia’s immediate neighbours, Ukraine has bought about a third of the gas that it contracted to buy but Gazprom’s CEO says that it will be forgiven the penalties the contract requires. It has paid in full for June’s deliveries but there is concern that it’s having problems doing so (gas has to be bought to fill storage tanks so as to prepare for winter’s higher demands). The EU may lend Ukraine the money. (Parenthetically, the EU seems to now understand that the gas delivery problem is more than just Russia’s “energy weapon” as conventional wisdom had it the first time around). Putin stated that Russia will continue to sell gas to Belarus at reduced prices (Ukraine is not paying the full European rate either).

KHODORKOVSKIY. Like some others, I thought it possible that Medvedev might pardon him. He has just issued his first (I think) statement on the subject: “Concerning the possibility of a pardon for someone, Khodorkovsky or anyone else, the procedure has to be carried out in accordance with our country’s rules. In other words, a person must appeal to the President, plead guilty to having committed a crime and seek the appropriate resolution. So at this point there is nothing to discuss”.

GOVERNORS. A recent Levada poll finds majority of Russians supporting direct election for governors. Russia has run through a number of variations: from direct appointment in Yeltsin’s time, to direct elections, to nominations by the President with agreement by the legislatures. There may be more changes to come.

CAUCASIAN RUMOURS OF WARS. Another two weeks of violence in the North Caucasus. But it’s not one-sided: for example, a police convoy was ambushed in Chechnya on the 4th but the authorities ran the attackers to ground quickly with some success. Last week security forces killed an “emir” and, it is claimed, prevented an assassination attempt on Kadyrov. While there are resemblances to the situation before the first Chechen war of 1994, there are very important differences. Then the central and local governments were helpless and ineffective; today the authorities are altogether stronger and better organised. They have much more support from the populations as well: all the suffering, and the terrible result of the death or glory rhetoric so common then, has inoculated many against such romanticism. (I’ve heard that the movie Braveheart was a huge hit all over the Caucasus at the time – after a short struggle the heroic little guys win their freedom: see.)

© Patrick Armstrong Analysis, Ottawa, Canada (see