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Tuesday, April 03, 2007

Zaxi on Iran and the Oil Web

The bilingual zaxiblog on Livejournal has invited LR to cross-post the following analysis of the Iran quagmire:

This week zaxi drew a deep breath and read Russia’s first foreign policy review ever written for a president. It comically came on the eighth and – seemingly – final year of Vladimir Putin’s reign and added up to more than 100 pages.

zaxi was moved to such altruistic pursuits by Russia’s eye-catching decision to thumb its nose at Iran and hide the fuel from its first nuclear power plant. So a pity that Iran was not awarded a single full sentence here. Instead zaxi learned what might have driven BP to turn into a public relations arm of Rosneft in the face of being banished from Russia. This document is funny that way.

The modern world according to Sergei Lavrov was formed with the emergence of Russia as a rich power and the shattering of US hegemony against Iraq. The former was greeted with derision in Western quarters where Cold War fogies still roam. The latter spurred radical Islam.

But the crux of the argument made from the seventh floor of Stalin’s skyscraper on Smolenka is that none of this matters much – Russia has “new-gained foreign policy self-dependence” that must be exercised by protecting trade interests rather than trying to be liked.

The European Union is pretty much dismissed outright. It is a relic confused about its new world standing that Russia will treat accordingly. “The point of reference for Russian policy in Europe is made on bilateral relations.” And those will be primarily with France and Germany – “the leading European nations.” This phrase is typed in bold to emphasize that EU members “east of Vienna” are pesky novices trying to split Europe over Russia.

Britain gets its own mention as “an important but uneasy partner.” Its seems remarkable that a broad policy assessment still picks on London for giving refuge to “so-called new political immigrants.” Thus Boris Berezovsky and a former Chechen press secretary get more play here than Iran.

Human rights are useful – when conditions are right. “The artificial, forced democratization thrust upon from abroad” leads to “international anarchy.” The OSCE just avoids being called unprintable names.

Meanwhile the United States must be dealt with primarily because it has fingers stuck in so many sticky places. It has turned more pliable though now that its fake armor of invincibility lies scattered across Iraq. “With the Administration’s more sober views of its capabilities, there is potential for new, expanded cooperation with the US within frameworks of multilateral institutions – first of all, the UN.”

Thus Paris and Berlin get their personal dinner invitations. Washington must attend formal parties to meet Moscow while it sits flanked by friends.

Washington is advised to engage Moscow to resolve “deformed and dangerous” Islamic radicalism borne out of US policies. Yet Russia also doubts the existence of an “Iran-Syria-Hezbollah-Hamas link-up that supposedly threatens to destabilize the Persian Gulf.”

So it would seem unclear how Russia intends to help or where it sees the problem. The ministry’s sole recommendation for Putin on the Middle East is “to stimulate economic and energy diplomacy” there.

And yet… There goes Russia refusing to fuel a Bushehr plant it had spent 10 years building until Iran comes clean on its nuclear arms plans. This after years of reading a script that said clearly that Iran’s nuclear power and weapons were separate matters.

And there it votes with the West for a second round of Iranian sanctions. Moscow’s UN man then speaks of still more sanctions “when… if” they come being the fault of Iranian insubordination.

And there goes Iran calling Russia an “unreliable partner” and muttering about elephants having long memories.

So is this foreign policy review just a scary Russian fairy tale Moscow reads the West before kissing it good night?

Unfortunately – no.

US officials say Russia made the decision to keep fuel away from Bushehr until Iran opened up its weapons program at least two years ago. This was done out of pure self-preservation and reported directly to Washington – and obviously not to Tehran.

In the meantime Moscow desperately tried to convince Tehran to ship the processed fuel back to Russia in a transparent and verifiable manner. That failed along with the broader security talks. By now the 800 million dollar project stands almost completed and all but the last bills have been drawn. So Russia came up with a largely mythical Bushehr non-payment crisis to cover up its tracks and freeze the launch.

But this policy assessment report was released two years after that Bushehr decision. And this week Russia torpedoed a UN resolution demanding that Iran release the 15 British sailors it seized in what most agree were Iraqi waters.

This review in fact reflects the seismic shift in Russia’s relations with the West over that two-year span. And perhaps nowhere has this strategy changed more aggressively than in Moscow’s relations with the foreign energy firms.

BP at the moment sticks out like a sore Western thumb that still clings on to control of its Russian holdings. The Wall Street Journal reports that 29 percent of the giant’s oil reserves and 12 percent of its post-tax profits are in Russia – numbers set to implode with the imminent fall of the outsized Kovykta field into state hands.

The fate of Kovykta now seems sealed but BP still would like to lose it on best terms possible. More importantly it hopes to replace the band of billionaires making up its TNK partners in Russia with Rosneft. Not that the TNK partner necessarily want to go – it is just that the cards seem to be saying that their game will be up before Kovykta goes on line. The state (in the name of Rosneft) would thus give BP long-term security while – and this is the pipedream version of events – still allowing it to oversee operations.

And so BP sort of bid against Rosneft for the latest Yukos inheritance piece in hopes of making the auction look fair in the eyes of the blind and anyone desperately trying to look the other way.

The stake went to Rosneft at 800 million dollars below market value after BP placed a few perfunctory bids and then sneaked out of the room.

“This was 100 million dollars above the start price,” a BP spokesman told the Financial Times in manner of justification. “We would have to sell three billion liters of petrol in the UK to make 100 million dollars.”

To have somebody in the company believe this explanation holds water for FT readers illustrates the depths that BP has plumbed to accommodate its Russian existence – its perception of reality possibly altered after spending so many years in offices overlooking the truly imposing defense ministry.

Which brings zaxi to the public relations portion of Russia’s foreign policy report whose line BP was tracing so closely: “An important resource of this (public relations) work are the international companies that have business interests in Russia and which are suffering from the politicized information about Russia in the world media.”

Perhaps BP now too believes that Kovykta is slipping away because Russia wants to get even for all that unfair Western coverage. In any event – its bid not only lined Rosneft pockets (the auction could have been called off because no second bidder had the cash to take part) but also justified the treatment of Mikhail Khodorkovsky whose jailing BP did at one stage protest.

Yet BP cannot be expected to do Russia’s Western bidding alone.

“(W)e can fully rely on the support of influential circles within the Western community such as, for example, those in the conservative Christian-democratic spectrum,” the foreign ministry tells Putin.

So do not be surprised if Russia soon makes a guest appearance on the 700 Club.


Vova said...

Perhaps I missed something or did not catch the intended sarcastic tenor of the piece but it seems that the writer's view of "Russia" is unfustifiably benign, to wit, «Yet Russia also doubts the existence of an 'Iran-Syria-Hezbollah-Hamas link-up that supposedly threatens to destabilize the Persian Gulf.'» The abovementioned rogues' gallery are former and current soviet clients or client states. One may be unaware of a child conceived after a one-night stand but this does not seem to be the case.
As to the U.N. vote for sanctions, I tend to agree with Latynina who likened the vote--and Iran's subsequent prompt payment--as the Lubyanka-Kremlin gang using the U.N. as an international Basmannyy court.

james24 said...

Interesting article. Regarding BP's cowardly approach, I can't decide if they are kowtowing to the Kremlin only to cover their exposure at Kovykta, or if it is more of a factor of the extreme hunger to invest in energy sources no matter what, that they will even put up with being half-robbed while they do it. Regardless, it's a bad move.