Putin sees the tide turn his way

August 01, 2006|By LYNN BERRY

MOSCOW -- July was a good month for Russian President Vladimir V. Putin.

First, the elusive Chechen separatist leader Shamil Basayev, who claimed responsibility for the most horrific terrorist acts of the past decade in Russia, was killed. His death July 10 allowed Mr. Putin to claim a victory in the global war on terror just ahead of the Group of Eight summit in St. Petersburg.

The July 15-17 summit was another feather in the cap of Mr. Putin, who faced little of the expected criticism as he played proud host to President Bush and other world leaders in his hometown.

Immediately after the summit, the state-controlled Rosneft oil company dodged a legal challenge from the Yukos oil company and made its trading debut on the London Stock Exchange with a $10.4 billion initial public offering.

Rosneft gets 70 percent of the oil it pumps from Yukos' prized production unit, which Rosneft snapped up at a fire-sale price in late 2004 after it was seized by the state. The public trading of Rosneft shares in effect legitimizes the drive by Mr. Putin's Kremlin to wrest back control over the oil sector and create a state oil company with global clout.

Yukos, once Russia's leading oil producer, is on the brink of death after creditors last week asked a court to declare the company bankrupt and agree to the liquidation of its remaining assets. The court was expected to rubber-stamp the request as soon as today.

The creditors' vote ended a three-year Kremlin campaign to cripple Yukos by arresting its executives and slapping the company with more than $33 billion in back tax charges. Former CEO Mikhail Khodorkovsky is now serving an eight-year prison sentence in Siberia. The politically motivated case was harshly criticized in the West, but Mr. Putin has come out on top, suffering little fallout in the process.

If Mr. Putin's luck holds into August, he could hit the jackpot this week if Viktor F. Yanukovych returns as prime minister of Ukraine.

Mr. Putin openly supported Mr. Yanukovych in Ukraine's 2004 presidential election and congratulated him on his declared victory despite mounting evidence of fraud. He then looked on in horror as Mr. Yanukovych, the incumbent prime minister, was swept aside in the Orange Revolution and the president's job went to the pro-West opposition candidate Viktor A. Yushchenko.

Mr. Yushchenko has until tomorrow to decide on parliament's nomination of Mr. Yanukovych as prime minister, a post with newly expanded powers. Mr. Yanukovych favors closer ties with Moscow.

Mr. Putin headed into the G8 summit under a cloud of criticism. Mr. Bush and Vice President Dick Cheney publicly accused him of curbing civil liberties and questioned his commitment to democracy. They were equally harsh in criticizing Russia for using its oil and gas as political weapons.

Mr. Bush promised to bring up his concerns about democracy during their private discussions. At their joint news conference, however, it was Mr. Putin who put Mr. Bush in his place.

Mr. Bush told journalists that during his meetings with Mr. Putin, "I talked about my desire to promote institutional change in parts of the world like Iraq, where there's a free press and free religion, and I told him that a lot of people in our country, you know, would hope that Russia would do the same thing."

President Putin didn't miss a beat. "We certainly would not like to have the same kind of democracy as they have in Iraq," he said, drawing laughter from the room.

Mr. Putin also got a deferential Bush to accept the Kremlin line that Russia would take its own path toward democracy.

Russia had put energy security at the top of the agenda for its G8 presidency this year, an issue of dire importance to Europeans, who are highly dependent on Russia for supplies of natural gas. But Mr. Putin avoided difficult questions from the Europeans at the summit, as all attention shifted to the fighting in the Middle East. Even the Middle East crisis played in Mr. Putin's favor. By brokering a joint statement issued by the G8 leaders on the conflict, he was able to put Russia forward as a major international player. Mr. Putin emerged from the summit emboldened.

One of his first acts was to sign a law enshrining the monopoly of Gazprom over Russia's exports of natural gas. The Europeans have wanted Russia to break Gazprom's monopoly and allow competition in the pipelines supplying Europe, but they have little leverage over a Kremlin that has grown increasingly assertive as energy prices have soared.

A Kremlin drive to restrict nongovernmental organizations also seems to have picked up since the summit.

Mr. Putin's luck shows no sign of running out, but luck, like a sense of stability in Russia, is often fleeting. And August has often proved to be a difficult month for Mr. Putin. It is a month when submarines have sunk, the Moscow television tower has caught fire, and suicide bombers have attacked metro stations and brought down passenger planes.

It is often just when the situation here seems to be getting predictable and the world's attention starts to drift away that something happens to throw Russia into crisis again. All it would take now would be for terrorists to carry out another horrific attack or for oil prices to fall.

Lynn Berry, former editor of The Moscow Times, is a journalist who has lived in Russia for more than 10 years. Her e-mail is berry@imedia.ru.

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