|Publications By Category|
|Publications By Type|
Russia Reform Monitor - No. 1787
Rights council resigns en masse;
Former finance minister: economic problems on the horizon
Edited by Ilan Berman and Amanda Pitrof
June 29, 2012
The Kremlin has admitted that a cargo ship forced by England to change course last week was attempting to carry combat helicopters to Syria. The Alaed, a cargo ship bound for the Russian naval base of Tartus, was forced to turn around after its London-based insurer withdrew coverage following claims that the ship was carrying weapons. Moscow reacted angrily, with Foreign Minister Sergei Lavrov insisting that the insurance company "had no right" to withdraw. According to Reuters, Lavrov acknowledged that the ship was carrying “air defense systems... and three repaired helicopters,” but maintained that “We are not violating anything, and we will continue to fulfill our contractual obligations.” U.S. officials called the deliveries “reprehensible,” while an Arab League official added that “When you deliver military equipment you are helping to kill people. That should be stopped.”
Vladimir Putin’s return to the presidency has prompted an exodus from Russia’s presidential Civil Society and Human Rights Council. Reuters reports that no fewer than fourteen people have left the council since Putin’s controversial election, under protest that Kremlin intervention “was making its work pointless.” Lyudmila Alexeyeva, the most recent member to resign, told reporters she was leaving because of the recent decision by the Kremlin to select new council members through an online contest. The group, which is normally made up of 40 members, now runs the risk of having to disband if it drops below the quorum of 20 people. The organization has been responsible for highlighting cases involving human rights abuses, including the 2009 death in prison of lawyer Sergei Magnitsky, and objected to the recent law increasing fines for unsanctioned protests.
Despite President Putin’s show of confidence at St. Petersburg’s annual economic forum, former Finance Minister Alexei Kudrin has warned that Russia could be facing a dramatic economic downturn in the near future. According to the New York Times, Kudrin suggested that “the situation is a lot worse than it was presented” at the forum, especially if oil prices continue to slide further below the $117/barrel mark the Kremlin needs to balance this year’s budget. If Putin’s campaign promises of higher wages, improved maternity leave benefits, and increased military spending kick in, the national budget could become even more precarious, Kudrin added, suggesting that “We need to look again at all programs being launched or expanded. Even our current expenditures will be difficult to meet.” The former finance minister predicted that oil prices could drop below $60 per barrel.
A Japanese consortium led by trading house Itochu has made plans to build a liquefied natural gas plant in Russia’s Far East, with the help of Russian state-run gas company Gazprom. Japanese and Russian officials signed a memorandum of understanding in support of the project, the Agence France-Presse reports, which will cost about estimated $12.45 billion. The proposed plant is expected to produce 10 million tons of LNG each year, which will comprise about 13 percent of Japan’s annual imports. Japan, along with fellow top LNG importer South Korea, accounts for nearly half of global shipments totals.
Saudi leaders, staunch supporters of fellow Sunni Syrian rebels, have criticized Russia’s dogged support for the repressive Assad regime, and as oil prices continue to drop, Russia is beginning to feel the bite of their disapproval. Reuters reports that as oil falls below $90 a barrel, Saudi Arabia shows no indication of slowing oil production. While Riyadh’s revenue surplus can weather the slump, Iran and Russia - both Assad supporters - could soon face budget shortfalls. “Russia’s economy is vulnerable to a sharp drop in oil prices,” notes U.S. oil analyst Phil Verleger. “The Saudis may be able to exploit that vulnerability by keeping production at 10 million barrels per day.” Analysts estimate that if OPEC oil output remains at 31.5 bpd, oil prices will fall to $74/barrel by the end of this year, and as low as $59 a barrel in the first quarter of 2013.
Nuclear cooperation between Russia and the United States does not appear to have suffered from recent bilateral diplomatic tensions. The two countries made plans at a recent summit to continue joint efforts to safeguard nuclear materials and to collaborate on designs for nuclear reactors and fuel. A 2005 agreement initiated efforts to recover fuel from Soviet-designed reactors built outside of Russia, in order to prevent highly-enriched uranium from falling into extremist hands. According to the Associated Press, Russia’s state nuclear agency, Rosatom, has so far removed over 4,400 pounds of highly- enriched uranium from the territory of the former Soviet republics. According to the Washington Post, officials from both countries additionally have drafted a bilateral agreement that establishes a framework for cooperation on the design of new nuclear reactors. The text is expected to be ready for signing and ratification by early fall.