MOSCOW, August 11 (RIA Novosti)
South Ossetian crisis evidence of all sides' political failure - analyst / NATO involvement in Caucasus ruled out / Shooting in South Ossetia ruining Russian stock market / Russia lacks international support / Moscow and Beijing to trade each other's securities / Korean investment in offshore project jeopardized
Vremya Novostei
South Ossetian crisis evidence of all sides' political failure - analyst
For the first time since the collapse of the Soviet Union, Russia is involved in armed conflict beyond its borders, and against a country with which it is linked by close historic, cultural and humanitarian ties. Whatever the reasons for these actions, they are evidence of the total political failure of all the parties involved, says Fyodor Lukyanov, editor-in-chief of the Moscow-based magazine Russia in Global Affairs.
Russia's policies have been growing ever more controversial since the shaky balance painstakingly preserved in most conflict zones for the past decade was shattered. Its efforts to play two roles at a time in Abkhazia and South Ossetia - of a neutral peace mediator and of a patron and guarantor of security - have clashed, damaging both images.
Moscow even gave up trying to assist the peace process at some point, and opted for a broader cooperation with Tskhinvali and Sukhumi in order to check the growing tensions, the expert said. Russia also tried to stick, formally at least, to the existing legal framework, but that eventually came into contradiction with reality.
Admittedly, this is hardly the time to discuss Russia's relations with the self-proclaimed republics' governments. In any case, it is Moscow's duty to protect them and help guarantee the inviolability of their territories. But once the war is over, we should sit down and think carefully about the extent to which the interests of South Ossetian and Abkhazian governments coincide with Russia's. It would be also advisable to look at how often officials in Tskhinvali and Sukhumi seek to increase tensions to attain their own goals, the expert suggested.
Georgian President Mikheil Saakashvili has his own logic guiding his actions. His end goal is certainly to annex the region and announce the restoration of Georgia's territorial integrity. Had that plan worked, it would have greatly impeded Russia's interference.
In fact Moscow has never formally disputed South Ossetia's status as a Georgian territory. Success is never faulted, as Moscow very well knows from the Chechen experience, and the West wouldn't have insisted on Georgia's pullout. A planned blitzkrieg failed, but a smaller goal has been attained: Moscow has been involved in hostilities and can no longer be a mediator in the conflict.
The South Ossetian events have mirrored a political trap where the United States got caught in the former Soviet republics, the expert said. Washington actively interfered in the CIS, relying heavily on loyal regimes. But it turned out to lack instruments to pressure them into obedience, and it is equally incapable to provide them with full-fledged protection in case of hostilities. Nor can the US withdraw after having pledged so much. Therefore, the US presence has become a destabilizing factor, the expert concluded.
The European Union is predictably incapable of drawing up and adopting a unanimous policy. The political instruments it wields do not seem to be working. Europe's show of activity in the region only encourages Tbilisi to act by giving false hopes of potential support.
The anti-Russian lobby in the EU will certainly try and squeeze maximum advantage from the conflict, as the Baltic nations and Poland have already called for a revision of the EU's relations with Moscow, the expert concluded.
Nezavisimaya Gazeta
Moskovsky Komsomolets
Izvestia
NATO involvement in Caucasus ruled out
Russian analysts are not forecasting the West's support for the Georgian president's ambitious regime. They say that the war will end shortly, and the Caucasian conflict will return to its former political dimensions.
"Saakashvili's attempt to picture this conflict as a Russian-American one has met with no support," Nikolai Zlobin, director of Russian and Asian programs at the U.S. Center for Defense Information, writes in Moskovsky Komsomolets. "Of course, Georgia has a geopolitical significance for America, as for any state seeking a top world role. But the value of this regime lies in its anti-Russian thrust. Saakashvili has failed to gain the support he hoped for and will fail to gain it in the future, including from NATO countries. They do not understand why they should quarrel with Russia on an issue that can be seen from different perspectives. Saakashvili's unruly willfulness is beginning to worry them."
In the view of Nezavisimaya Gazeta, "at a time when Russian planes are bombing the eastern suburbs of Tbilisi in the area of a Su-25 aircraft plant, and the American leadership is taking its time in rendering military aid to Georgia, Saakashvili is beginning to feel uncomfortable."
Citing the views of most American analysts, the paper says: "If Georgia has to be traded for Iran, the United States will agree to that step, because Iran's nuclear ambitions worry the White House more than Tbilisi's political ambitions. That's geopolitics and nothing personal."
"The involvement of NATO troops in the war is absolutely ruled out," says Alexander Khramchikhin, head of analysis at the Institute of Political and Military Analysis, writing in Izvestia. "European armies have a fear for losses, and for them a war against Russia is impossible. The same applies to the U.S., which besides is bogged down in Iraq and Afghanistan. Only Turkey, which unlike its NATO allies is not afraid of losses, could in theory come to Georgia's assistance. But it is not a fact that Georgia wants that: there is a likelihood that such aid might grow into a form of occupation for the whole of Georgia. Secondly, Turkey could ask too much for an operation that with a high degree of probability will lead to a direct face-off with Russia. It might ask for extensive economic and military aid from the U.S. and EU membership guarantees from Europe. There are suspicions that neither Washington nor Brussels will find Georgia's future as critical for themselves as to pay such a price."
In the analyst's view, "the war is certain to end in the next few days, with the conflict returning to purely political lines. But now we should realize that on our southern borders we will have not an unfriendly country, but a direct enemy more difficult to negotiate with."
Kommersant
Shooting in South Ossetia ruining Russian stock market
The start of military actions in South Ossetia has sent Russian companies' shares plunging on the Russian stock market. Experts say the Russian market will be able to restore its positions only if military operations end soon enough. Georgia has also sustained losses: the international rating agencies Standard & Poor's and Fitch have lowered the country's ratings.
On August 8, 2008, the RTS index lost 6.51%, dropping to its lowest level since the fall of 2006. Share prices have tumbled in all sectors without exception.
Oleg Vyugin, chairman of MDM Bank's board of directors, says that the further development of the Russian stock market depends on whether the conflict ends soon or lasts and on how political leaders manage to resolve it.
"The current situation cannot even be compared with the situation that evolved around Yukos' [bankruptcy]. It is much more serious," warns Sergei Zharov, KIT Finance's director for operations on the capital market. "In 2004, negative events were developing around one company, and now several [negative] factors have combined simultaneously."
"The situation is growing graver with every passing day: first, a conflict around TNK-BP, then another one around Mechel, and now the aggravation of the situation in the Caucasus," says Denis Filippov, the head of the brokerage department at Renaissance online.
Analysts at BrokerCreditService say that if the armed conflict spreads to other territories, this may destabilize the situation in the Black Sea region and discredit Russia's image as a stable supplier of energy resources. Then the Russian companies' shares may continue plunging to 900-1,000 points in the RTS index.
However, Andrei Stoyanov, director of the department for financial markets analysis at Rosbank's managing company, is more optimistic about the current situation. He says that Western investors' flight from the Russian market is due to an overstatement of risks on the U.S. market, not to the growing political risks in Russia or events in Georgia. "Just recall the Yukos story. Non-residents returned to the Russian market several months after Mikhail Khodorkovsky's arrest. This is likely to happen again this time," Stoyanov says.
Meanwhile, on Friday night, Standard & Poor's and Fitch lowered Georgia's ratings. S&P lowered the country's long-term rating from B+ to B. The agency's press release says that Georgia and Russia's statements show that their governments have stubbornly set on a path to war, which will have a negative effect on the inflow of foreign investment to Georgia.
At the same time, the rating agencies do not say that they may reduce Russia's ratings. Experts say that while the conflict is of a local nature for Russia, its ratings are not likely to be lowered.
Vedomosti
Russia lacks international support
Russia will soon be busy burying soldiers and civilians killed in South Ossetia, healing bodily and spiritual injuries among refugees and troops, restoring housing and destroyed infrastructure. But it will also face the no less important challenge of proving its case in a broader sense.
Whatever the real aftermath of the current ground operation, the consequences of the international media interpretations, world leaders' conclusions and public attitudes cannot be overestimated. The Russian government has allowed itself to be flattened by its Tbilisi opponents in a victorious media blitzkrieg.
To win the information war, Moscow should have acted immediately upon receiving the first news of shooting in Tskhinvali. It should have put together a group of important foreign reporters and escorted it to the region. It should have arranged that first of all representatives of the OSCE mission in South Ossetia be given the floor to confirm the damage done and casualties among civilians and peacekeepers.
The Georgian forces' attack on civilians and peacekeeping troops was a flagrant violation of international law, and the perpetrators should have faced international trial. But Russian media only reported [Georgian President Mikheil] Saakashvili's unbalanced reactions and his contacts with the United States, which was obvious anyway.
After making a decision to send additional peacekeeping forces to a neighboring country's territory, officials in Moscow should have announced that decision and explain it publicly from a perspective of international law.
Even if some had found Russia's explanations insufficient or inadequate, its interpretation would have been the first on the air. The very presence in information space is no less important that the information given.
Although much time has been lost, Russia can still reverse the situation in the information war to its advantage. What we should do is go on the media offensive, giving as many interviews as possible and keep laying and relaying Russia's position on all the key points. We should keep pointing tirelessly at the Georgian army's actions in the beginning of the conflict and proving the legitimacy of having more Russian contingents present in the conflict zone, speaking of Russia's right to augment its peacekeeping force, and describing the scale and outrage of the humanitarian catastrophe and Tbilisi's violation of international agreements.
In addition, the Russian government should curb the inflow of volunteers and keep hotheads in check who are ready to turn a forceful peacekeeping operation into a full-fledged war.
Finally, we should do all humanly possible to avoid a repetition of the Georgian campaign of the fall 2006. We should by all means avoid giving Tbilisi a chance to interpret its conflict with Moscow as a standoff between Russia and the civilized world.
Nezavisimaya Gazeta
Moscow and Beijing to trade each other's securities
On the Olympic Game's opening day, Russia's Federal Financial Markets Service (FFMS) and China Securities Regulatory Commission signed in Beijing a memorandum allowing investments in rubles and yuans to be traded on the domestic stock exchanges of both countries.
Experts see no reason to fear a massive buying-up of Russian assets by the Chinese.
Until recently, Chinese companies have been banned from taking currency earnings out of China. As a result, huge financial resources have piled up on the domestic market, threatening to overheat the economy. In June 2008, Chinese foreign currency reserves exceeded $1.8 trillion. Their growth is fueled by a trade surplus and a massive inflow of foreign investments.
Cooperation with Russia will allow Chinese partners to take the edge off the problem, believes Vladimir Milovidov, FFMS head.
China, anxious for its gold and hard currency reserves to be preserved, is interested in purchasing 10% stakes in Russian companies, Milovidov believes. "China will show a mounting interest in Russia and will invest more in it because we will now be a regulator of the Chinese financial market and will be able to exchange information," the FFMS head supposed.
Experts warn against overestimating the importance of the memorandum and see no danger of Russia's stock market being absorbed by the Chinese, although China's economy and stock market are three times as large as Russia's.
Igor Nikolayev, director of strategic analysis at the Financial and Bookkeeping Consultants, said that both stock exchanges are not going through good times. The Russian exchange has been feverish for a month now, chasing away all illusions about its being a "safe heaven."
"There are underlying factors that keep the Russian stock exchange not only from growing, but even maintaining its positions," Nikolayev said. At the same time, he believes that one need not fear the expansion of Chinese capital even if the situation on Russian trading floors changes for the better to make them more attractive for investments. The law on investments in strategic branches rules out growth of the Chinese "10% stake" into controlling interests in leading Russian companies.
The situation in China also appears to be difficult to the analyst. Over the past six months, the Chinese market has lost 40% of its capitalization. In such a situation, Nikolayev said, investors have no reason to risk their money. "The Chinese will be waiting. Russian investors have no particular incentives to invest in the Chinese economy either," the analyst said.
RBC Daily
Korean investment in offshore project jeopardized
Rosnedra, the Federal Subsoil Agency within the Natural Resources Ministry, has refused to extend Rosneft's license for the Far Eastern peninsula of Kamchatka which expired on August 1.
Incidentally, Russian gas giant Gazprom has repeatedly mentioned its intention to develop the area off Kamchatka's western coast. It is quite likely to get what it wanted even without a tender, analysts say. The Russian company's Korean partners will suffer losses, too.
The 15,488,565acre area in question is located in the Sea of Okhotsk and is estimated to contain 13.2 billion bbl of oil and over 70.6 trillion cu f of natural gas. Rosneft obtained the five-year exploration and development license in 2003 and split the project in 2005 by ceding 40% to KKC, a consortium of Korean companies led and 50% owned by Korea National Oil Corporation (KNOC).
The regulator's decision was not quite unexpected. Rosnefts's operation in western Kamchatka area had been earlier criticized by the Natural Resources Ministry.
In mid-December 2007, the ministry said the Kamchatneftegaz project operator was 12 months late in drilling the first exploration well, and seismic prospection was not completed to the deadline either.
In spring, Gazprom sent a letter to the government asking it to refrain from extending Rosneft's license upon the grounds of these violations. Gazprom's deputy CEO Alexander Ananenkov said the monopoly needed Kamchatka resources to fulfill the government's instruction to provide sufficient gas supplies to Kamchatka.
Rosneft's loss of the western Kamchatka license will also hit its Korean partners. Under the contract, KNOC agreed to shoulder all geological and financial risks and will now lose a hundred-million-dollar investment.
A source in Gazprom said the company wouldn't be able to offer the Korean partners more than a share in the managing company if it takes over the license. However, Gazprom provided no official comment whether it's still interested in the license.
Svetlana Savchenko, head of investment planning at 2K Audit-Business Consultating, said Gazprom was likely to get the license without a tender, if at all. That would hardly suit Rosneft, which has made a substantial investment in the project over the past five years. Also, the area is of strategic importance to it, constituting a major part of its development and production plans proudly described to potential investors before its 2006 IPO.
Rosneft head Sergei Bogdanchikov said earlier that the company planned to channel another $300 million into the project this year.
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