Russian influence in near abroad

RIGA - Russia is exploiting U.S. and European inattention to reassert its influence in the former Soviet republics, spending more than 50 billion U.S. dollars (40.3 billion euros) to turn the “near abroad” into an engine of economic and political power, reports Bloomberg. Initiatives include Prime Minister Vladimir Putin’s proposal to unify Ukraine’s state energy company with Moscow-based Gazprom, discussed during talks last week in Kiev.

Russia also cut gas prices to Ukraine to secure a naval base there, formed a customs union with Belarus and Kazakhstan and pledged 75 percent of a 10 billion dollar regional fund to help countries including Kyrgyzstan and Tajikistan.

Russia aims to restore its leadership of a region with about 276 million people that produces 26 percent of the world’s gas and almost 16 percent of its oil, says analyst Sergei Mikheev. That would help Russia keep pace with the other BRIC countries - Brazil, India and China - and blunt EU and NATO expansion in an area it views as its sphere of influence.
“Growth in China, India and other emerging power centers makes it absolutely obvious that the next century will be a multi-polar one,” said Mikheev, vice president of the Center for Political Technologies in Moscow. “We need to form our own center, based on cooperation with the former nucleus of the Soviet empire, mainly Ukraine, Belarus and perhaps Kazakhstan.”

It is unclear whether Russia will gain economically from increased influence in the region, said Vladimir Osakovsky, an economist at UniCredit in Moscow. “In Russia, most foreign policy decisions are made on a politics first, economy second, basis,” he said. “Economic integration is clearly positive for both countries involved, but the cost of these political decisions could offset the economic benefits.”

President Dmitry Medvedev and his Ukrainian counterpart, Viktor Yanukovych last week agreed to cooperate in areas such as gas and aerospace. Talks continue on merging Gazprom and NAK Naftogaz Ukrainy. Gazprom, which buys gas from Turkmenistan and Uzbekistan to counter falling domestic output, agreed two years ago to explore for energy in Tajikistan.

Meanwhile, some Western companies have found it difficult to do business in a region they rushed into after the collapse of the Soviet Union. Kazakhstan last month demanded BG Group of Reading, England, and Rome-based Eni pay 1.3 billion dollars after allegations of embezzlement from an oil venture.

Putin and Medvedev have recently enjoyed greater leeway because of events that drew U.S. and European attention elsewhere, along with a change of administration in Washington. U.S. policy makers have focused on coping with the worst financial crisis since the Great Depression as well as wars in Iraq and Afghanistan.
The Greek crisis has created the biggest challenge to the goal of a united Europe since the Berlin Wall fell. European leaders on May 9 offered as much as 750 billion euros to bolster confidence in the currency.

President Barack Obama took office saying he wanted to “reset” relations with Russia that deteriorated under George W. Bush. That has meant placing less emphasis on the former Soviet republics to “engage Russia on issues that are far more important to U.S. interests,” such as curbing Iran’s nuclear program and defeating the Taliban, said Alexander Kliment, an analyst at Eurasia Group, a New York political risk consultant.

Bush promoted NATO membership for Ukraine and Georgia and joined EU leaders in condemning Russia’s war with Georgia. U.S. and EU leaders “would probably like nothing better than an improvement in the Russia-Georgia relationship, so they wouldn’t have to deal with Georgia’s constant demands,” said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.

The EU, which gets 20 percent of its gas from pipelines running through Ukraine, declined to comment on the Russia-Ukraine proposal. Energy Commissioner Guenther Oettinger said the deal was up to the two companies. Relations with Ukraine warmed after Yanukovych, from Russian-speaking eastern Ukraine, took office in February.

In 2004, the U.S. and EU supported his predecessor, Viktor Yushchenko, in the Orange revolution that followed allegations of fraud in a presidential contest with Yanukovych. Yushchenko won a re-run ordered by the courts.
Six years later, the U.S. and EU refrained from speaking out during April’s Kyrgyz revolution, in which President Kurmanbek Bakiyev was toppled by an interim administration that secured 50 million dollars in aid from Russia. Bakiyev’s collapse was caused by corruption and failure to ensure economic development, Medvedev said April 15.
“Europe and the U.S. can’t deal with everything,” said Nikolai Petrov, an analyst at the Carnegie Moscow Center. “They have to choose their priorities.”