Grain equal to gas?

MOSCOW. (RIA Novosti economic correspondent Vlad Grinkevich) - The food crisis is compelling many governments to look for ways of curbing soaring food prices. At the same time, they are sensitive to any moves which might increase them. The intention of the Russian Ministry of Agriculture to transform its Agency for the Regulation of Food Markets (AFM) into a major Russian grain trader has caused an inordinately stormy reaction in the West. Analysts have accused Moscow of attempting to manipulate the food market. This change was announced last July. Along with tariff regulation, Russian officials believe that the state's involvement in grain exports will help protect the domestic market against skyrocketing grain prices which are a major cause of "agflation." Rosstat (the Federal State Statistics Service) reports that by the end of the third quarter of this year, food prices will grow faster in Russia than in the European Union (EU) as a whole. Last June, they went up by 1.1% in Russia (by 12.9% since the start of the year), whereas in the EU they increased by a mere 0.3%. Prices on bread and bakery products grew by 2.4% in Russia in June. The ministry wants the government to transfer its controlling interest in 28 of Russia's major grain elevators and export terminals to the AFM. The aggregate sum of the transferred shares may reach $300 million to $400 million. The West has perceived the potential appearance of a new player in Russia as a threat. The Financial Times has accused Russia of an attempt to gain an instrument to pressure the world market. Analysts believe that in four to five years, the new company will establish control over up to half of Russia's grain exports, and will become similar to Gazprom in its influence of the market. The U.S. Department of Agriculture (USDA) has also voiced its concern over the appearance of a major Russian grain trader but it is not clear whether U.S. officials are worried about the world grain market, or about Russian private companies. The USDA complains that the AFM will prejudice the operation of these companies, and described the plan as a giant step back into the Soviet era. Russian experts believe that the West's concern is exaggerated. It is not clear what the new agency will be like, and who will take part in it. Dmitry Rylko, director of the Institute for Agricultural Market Studies (IAMS), told RIA Novosti: "The importance of this agency is overrated. Even if it accumulates all the state-owned shares in the grain companies, it will not be the biggest player in the market. It will dominate the market only if it is joined by some private players. Nobody knows whether this is going to happen." In the IAMS's estimate, more than 60% of the market belongs to six private players: the International Grain Company Agrika, Rosinteragroservis, Yugtranzitservis, Yug Rusi, and Aston. The apprehensions that Moscow may turn food into a diplomatic weapon and use it as Gazprom is using gas may sound flattering, since the Russian government does not conceal its desire to turn Russia into the leading player in the food market, but they are certainly premature. It would be inappropriate to compare the AFM with Gazprom which is the world's largest gas exporter, and the owner of the world's richest gas deposits. In the grain market, Russia ranks fifth after the United States, Canada, the EU and Australia. This does not mean that its role is small. Russia has the lead in a number of regional exports, for instance, in Egypt and in India. Russian officials would like to enhance Moscow's influence on the world food market, primarily the grain market. However, their previous initiatives did not cause such a dramatic response in the West. For example, the Russian agricultural minister has more than once voiced his idea of setting up a grain "OPEC" to coordinate world trade in grain. But Russian experts are not very enthusiastic about this prospect largely because the various grain-producing countries aren't likely to coordinate their actions as OPEC does with oil. The OPEC members have state monopoly on oil production and exports, whereas grain trade remains in private hands in the majority of grain-exporting countries.

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An article from early August that I fail to appreciate in its importance. It confirms the state run drift in Russian economics, saluted by international market protest.
But, according to World Grain :

According to these rumors, the push for a greater government role in both domestic merchandising and exports has not only been supported by major agricultural holding companies, it in fact was actively promoted by them. Certain holding companies, despite enjoying record high prices for grain, reportedly face serious financial difficulties and are looking to the government for what amounts to a partial buyout of their grain handling assets.

Seems that Russia is starting to bank over the newfound liquidities. India and China, aside from being resources-hungry, may one day get simply ... hungry.

Enter Saddamkashvili

A brief blog-roll and reading throughout the web prompt me to some off-the-cuff comments.

- Georgia conduct was dishonest in granting a ceasefire and suddenly strike in South Ossetia. I find the calculation of blur the attack with the Olympiads opening particularly disturbing, as the Olympiads were meant since their beginnings as a ceasefire and temprary peace between the polis of the greek world, from Sicily to the Colchis (present day Georgia-Abkhazia). It was considered an act of Impiety to wage a war in those times.

- The media talk incessantly of asymmetric war between Georgia (4.5 Mio People) and Russia (142 Mio). I shall rectify: Georgia (4 Mio people) and South Ossetia (70.000).


- Georgia´s president, Mr. Saakashvili, reportedly made a priority of his mandate to re-consolidate Georgian borders and sovereignty, ahead of any other plan to better off the country. My opinion: this re-consolidation is aimed at assuring a safe passage through Georgia of the BTC (Baku, Tbilisi, Ceyhan pipeline). It is a clearing of hurdles rather than a pacification, with absolutely no carrot attitude towards South-Ossetia, perhaps because there is simply any...

- Quoting Winthrop360 post: "The famous Baku-Tbilisi-Ceyhan was blown up in Turkey earlier this week and its operator, BP, shut it down for repairs. Coincidentally, the Georgian section of the pipeline is filled with oil - oil which basically has nowhere to go (how convenient). I think, with a good deal of certainty, that Georgia will tap BTC oil in Georgian territory, citing an "emergency."" I quite agree, Georgia is basically segmenting itself from all the region, defying irresponsably Azerbaijan, Russia and allies (SCO, CSTO, CIS) with its pro-US stance.

- Which leads me to the conclusion: given the strong Georgian opposition rallies (and the subsequent crackdown) the whole responsability is of Mr. Saakashvili behaviour. A quick screening of the European press show the dissociation of EU states from such a war-mongering interlocutor. Saakashvili in this turn seems to me very much the early Saddam, drummed up to a war to Iran no matter what, under his US patron´s distrustful and half-hearted glance.

I would try to explore better the US tactic of proxy wars in contests of scarce operativity and rescue capability. The extent of US proclivity to such war mongering instead of diplomacy and negotiation needs some intelligence.

Scenarios for Georgia's South Ossetia crisis

(Image source: Wikipedia)

(Reuters) - Fighting raged in and around the capital of Georgia's breakaway South Ossetia region on Friday as Georgian troops, backed by tanks and warplanes, pounded separatist forces in a bid to re-take control of the territory.

The following are possible scenarios:

* Georgia, whose army and reservists total around 18,000 soldiers, swiftly completes its assault on breakaway South Ossetia before Russia can mobilize a major military response.

A Georgian victory could spark an exodus of non-Georgians to Russia. The majority of the breakaway region's roughly 70,000 population feel close to Russia and are ethnically distinct from Georgians.

Should Georgian troops quickly establish control over the territory it could prove more difficult for the Russians, diplomatically, to seize back control of the province by sending in its own forces.

* Failure by Georgia to quickly establish full control over South Ossetia could allow Russia, which has a peacekeeping mandate in the region, time to launch a counter-offensive, arguing that it needs to protect its own peacekeeping forces as well as civilians, most of whom have Russian passports.

Georgian officials say Russian armor is already pouring into the region from across the border. Hundreds of volunteers from Russia and another Georgia's breakaway region of Abkhazia, were reported to be making their way to South Ossetia.

* If Georgian troops fail to retake South Ossetia, Tbilisi could be vulnerable to political and diplomatic pressure from the United States and Europe to halt its offensive. The European Union is wary of antagonizing Russia, one of its main sources of energy. Some European members of NATO, also wary of President Mikheil Saakashvili's record in clamping down on opponents, have resisted moves to put Georgia on a fast track to membership. Russia fiercely opposes NATO membership for its former Soviet satellite.

* Outright defeat for Georgian forces, with a retreat to pre-conflict positions, would be a humiliation for Saakashvili. He has made it a priority to win back control of South Ossetia and Abkhazia, another rebel region on the Black Sea. Defeat could also boost his domestic opponents and raise doubts about Georgia's pro-market reforms and drive to align itself more closely with the West.

14 hours of Conflict - How is Georgian blitzkrieg faring?

Sources are Regnum.ru and RIAN

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01:07 08/08/2008

Direct military action is taking place near the capital of South Ossetia between Georgian and Ossetian troops.

President of South Ossetia Eduard Kokoity announced that South Ossetian troops had been built up to contain Georgian units. “A violent fighting is taking place."

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01:47 08/08/2008

The storm of the South Ossetian caputal is taking place in all directions, reports the website of the South Ossetian Information Committee. [...]

Georgian artillery troops are firing at governmental and residential buildings in central Tskhinvali. [...]

Earlier, Georgia confirmed its intention to solve the Georgian-Ossetian conflict by force. In particular, Commander of Peacekeeping Operation of the Georgian Armed Forces Mamuka Kurashvili announced that the Georgian side “launched an operation to bring constitutional order to Tskhinvali area.” At the present moment, Georgian troops continue firing from howitzers, mortars, Grad multiple launch rocket systems and large-calibre artillery.


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02:02 08/08/2008

A block of governmental offices in central Tskhinvali has been completely destroyed. The city is on fire, reports a REGNUM correspondent from the site. Artillery shelling of the South Ossetian capital by Georgian troops has continued.

As Assistant Commander of the Joint Peacekeeping Forces Vladimir Ivanov said, positions of Russian peacekeeprs in the Georgian-Ossetian conflict zone has not been subjected to fire yet. “There has been no direct firing at peacekeepers' posts from the Georgian side. The peacekeepers continue fulfilling their task of monitoring the developments in the conflict zone,” he noted

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11.55

MOSCOW, August 8 (RIA Novosti) - Russian President Dmitry Medvedev will chair an emergency meeting of the national Security Council in the next few hours to discuss the situation in Georgia's breakaway region of South Ossetia, the president's spokesperson said on Friday.

Georgia launched a full-scale attack on its breakaway republic of S. Ossetia overnight, using tanks, combat aircraft, heavy artillery and infantry. Georgia said it had captured most of its breakaway republic and called on the separatist authorities to surrender.

"The Security Council will consider as soon as possible proposals to settle the situation in the region," Natalia Timakova said.

South Ossetia said at least 15 civilians had been killed so far and Russian peacekeepers said Georgia had shelled their positions, wounding several Russian servicemen.

Russian Prime Minister Vladimir Putin, who is currently in Beijing, warned that Georgian aggression against its breakaway region will provoke a "response".

"The situation is very sad. It raises concerns and will certainly incur a response," Putin said.

Russia's UN Ambassador Vitaly Churkin called on the UN Security Council to intervene to stop violence in the region, but the council failed on Friday to reach an agreement on a Russian-drafted statement.

Several Russian lawmakers on Friday called for military action against Tbilisi in response to Georgia's aggression.

"Russia must interfere in the conflict to stop the violence," influential MP Konstantin Zatulin said. "Russia must consider a military operation because our peacekeeping contingent will not be enough to ensure peace in the region."

State Duma speaker Boris Gryzlov said Russia would protect its citizens in South Ossetia. Many residents of the self-proclaimed republic hold Russian citizenship.

South Ossetia and another Georgian breakaway republic, Abkhazia, broke away from Georgia following the collapse of the Soviet Union in 1991, gaining de facto independence after bloody conflicts with Tbilisi.

Georgia has pledged to bring the two tiny republics back under central control and has accused Russia of trying to annex the regions.

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14:35 08/08/2008

"The Georgian authorities have unleashed a dirty war," the ministry said on its website, echoing statements from Russian officials and lawmakers who have condemned the ongoing Georgian ground and air offensive, which has killed several people including Russian peacekeepers.

"Bloodshed in South Ossetia will be on their conscience. We will protect our peacekeepers and citizens of the Russian Federation," the ministry said.

Georgia launched a major offensive overnight in its breakaway republic, where many people hold Russian passports, using tanks, combat aircraft, heavy artillery and infantry. Georgia says it has captured most of the region, and has called on the separatist authorities to surrender.

South Ossetia earlier said at least 15 civilians had been killed, and Russian peacekeepers said Georgia had shelled their positions, killing and wounding several Russian servicemen in the regional capital, Tskhinvali.

Georgia's pro-Western president, Mikheil Saakashvili, announced a full mobilization in the country. He also accused Russia of bombing Georgian villages, a claim Moscow swiftly rejected.

NATO, the European Union and the United States, a key ally of Georgia, all issued statements urging the sides to bring an end to the conflict.

Georgia's Rustavi-2 television said government troops had shot down a Russian military plane over Georgian airspace on Friday. The channel said several Russian planes had earlier dropped bombs on the town of Gori, to the south of South Ossetia.

Russia's Foreign Ministry dismissed the report as "mere ravings, another vile provocation by the Georgian authorities." The Defense Ministry called the report an "information provocation," and said no Russian aircraft had been downed.

South Ossetia - War alright

Goergia and South Ossetia have begun a full scale war.
As to 12.56 of August 8th, here is the status quo.

(RIA Novosti) - Georgia said on Friday it had seized control over almost all towns and villages in its breakaway republic of South Ossetia, following a major ground and air offensive.

The Georgian military attacked South Ossetia's capital of Tskhinvali early in the morning with tanks, heavy artillery and infantry, sparking condemnation from Russia, which has warned of "emergency measures" to end the conflict. South Ossetia earlier said 15 people had been killed in the attacks, several buildings were on fire in the city center, and the local parliament building had burned down

Georgian Reunification Minister Temur Yakobashvili said the military was continuing its offensive in Tskhinvali. However, he denied reports that Georgian planes had been bombing the city.

"There is no bombing of Tskhinvali. Street battles are continuing in the city, involving our soldiers. We do not plan to bomb our own servicemen in Tskhinvali," he told a video linkup hosted by RIA Novosti.

The rebel administration had said Georgian Su-25 Frogfoot attack planes had bombed the South Ossetian village of Kvernet as well as a humanitarian aid convoy.

Georgian President Mikheil Saakashvili gave a starkly contrasting version of events, saying Georgia had "liberated" South Ossetia from separatists, and that Russia was bombing Georgian villages.

"Most of South Ossetia's territory has been liberated and is now controlled by Georgia... I call on Russia to stop bombarding peaceful Georgian towns," he said in a televised address to the nation.

The Georgian offensive came the morning after Georgian President Mikhail Saakashvili declared a unilateral ceasefire, and after the UN Security Council gathered for an emergency meeting.

Georgian PM Lado Gurgenidze said that Georgia had launched the attack on Tskhinvali after South Ossetian separatists had broken the ceasefire and attacked Georgian villages.

Peacekeeping commanders in South Ossetia said the Georgian military had shelled their headquarters in Tskhinvali, killing and injuring several Russian peacekeepers and destroying several barracks.

Georgia's Interior Ministry had earlier claimed that South Ossetian separatists were planning to attack Russian peacekeepers in order to bring Russia into the conflict.

Russian Prime Minister Vladimir Putin, currently on a visit to Beijing for the start of the Olympics, warned that Georgia's actions would meet a "response."

He said he had discussed the issue with U.S. President George W. Bush and top Chinese officials, who had agreed that full-scale war must be prevented.

At the Security Council session, Russia's UN Ambassador Vitaly Churkin called on the council to intervene to stop violence in the region.

The Kremlin also held emergency talks on the conflict, and said it was considering urgent measures to end the attack on South Ossetia.

Russian President Dmitry Medvedev "is heading a meeting to discuss a series of urgent measures to stop the violence in South Ossetia, to protect the civilian population and Russian citizens in the conflict zone," the Kremlin press service said. Many residents of South Ossetia hold Russian citizenship.

Georgian Prime Minister Vladimir Gurgenidze said Georgia would continue its military operation until peace was established.

"The goal of Georgia's actions in the conflict zone is to establish peace in the region. And we will not stop until we have attained this goal," he said. (VIDEO)

He said the country would offer an amnesty to South Ossetia's leaders, and provide over $35 million in reconstruction aid for the province after the establishment of Georgian control.

GAZPROM’S EUROPEAN EXPANSION DILEMMA

Source : Eurasia Daily Monitor

Russian planners have consistently underestimated the rapid growth of gas consumption within Russia and the EU’s newly found ability to find alternative sources. A 2005 study prepared by Gazprom’s Research Institute for the Economics of the Gas Industry, NIIGazekonomika, revealed in a 2005 report that domestic consumption of natural gas was increasing at a faster pace than projected in Russia's Energy Strategy, the official guidelines for the energy sector adopted in May 2003. NIIGazekonomika found that earlier projections of Russian domestic consumption of gas were based on unreliable Soviet era data and were found to be off the mark by tens of billions of cubic meters (bcm). Domestic consumption, they claimed, was rapidly growing due to a number of factors: (1) The low price of gas for domestic consumers, which has been encouraging consumption; (2) The energy intensive nature of Russian industry; (3) Gazprom’s monopoly of the Russian pipeline system; by trying to maintain this monopoly, Gazprom has discriminated against independent producers of gas by limiting their access to the system (this applies mostly to oil companies, which are forced to flair off billions of cubic meters of associated gas); (4) Gazprom’s reluctance to investment in new gas fields that would replace the four currently producing fields, all of which are facing severe depletion rates; and (5) Russia’s pressing need to rely on the sale of relatively small quantities of Central Asian gas to Europe (10 bcm) in order to meet domestic needs and new export commitments. This quantity is bound to increase dramatically in the next few years.

On July 7 the Russian Daily Kommersant reported that Russian Deputy Prime Minister Igor Sechin had ordered Gazprom and the Federal Antimonopoly Service to expedite independent Russian gas producers’ access to Gazprom’s gas pipeline system. Sechin, widely regarded as the head of the siloviki or power clan in Russia, is also the chairman of the board of Rosneft, Russia’s largest oil company. Rosneft produces some 6.6 bcm of associated gas. Other independent gas producers (Novatek produces 15 bcm, Lukoil and Surgutneftegas seven bcm each, and TNK-BP 4.9 bcm) account for a combined total of 14-16 percent of all Russian gas production. All have faced obstacles from Gazprom in selling their gas, and many are flaring it off. These companies are currently being offered $46 per 1,000 cubic meters by Gazprom for their gas, while the price on the Russian market is $71 per 1,000. At the same time, Gazprom sells gas for an average price of $400 per 1,000 cubic meters in Europe. Adding to the current uncertainty, Russian President Dmitry Medvedev’s trip to Central Asian gas producing countries last month did not result in any firm commitments, only vague agreements in principle from the leaders of those countries to come to Russia’s rescue. Those countries have discovered new markets in China and India and are complicating Moscow’s ambitious plans in Europe".

Snub for Iran eases nuclear crisis

By M K Bhadrakumar (excerpts)

The unnamed Russian diplomat said the SCO foreign ministers at a meeting in Dushanbe, Tajikistan, a week later would decide on whether to lift a moratorium on bringing in new states. “The moratorium has lasted for two years. We have now decided to consider the possibility of the SCO’s enlargement,” he said. It appeared that weathering US opposition, Moscow was pushing Iran’s pending request for SCO membership. Founded in 2001, the SCO currently comprises China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Iran has observer status.

However, in the events, following the meeting in Dushanbe on Friday, Russian Foreign Minister Sergei Lavrov revealed that the foreign ministers did not discuss the enlargement of the SCO, while finalizing the agenda of the organization’s summit meeting on August 28, and that Iran wouldn’t be able to get the status of an associate member.

[ . . . ]

Since such issues are invariably decided within the SCO on the basis of a consensus between Russia and China, it stands to reason that either Russia didn’t press Iran’s membership case or China disfavored the idea. On balance, it seems to be a combination of both. Conceivably, Moscow didn’t press after informally ascertaining Beijing’s lukewarm attitude. Tajikistan, which hosts the SCO summit in August, has openly favored Iran’s membership. If the two Big Brothers had given the green signal, Tajikistan would have asked Iran to come in from the cold. No doubt, Tehran, which openly canvassed for SCO membership, has suffered a diplomatic setback.

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The possibility of a moratorium lifting in Dushanbe SCO meeting was not solely meant for the Iranian case. The case is for countries that inevitably fall in the group interests and wish to have a common table to discuss problems. It is the case for Mongolia, that after the regime-change attempt will be all too poised to formalize a SCO membership. It may be also a vested invitation to Turkmenistan, to consider an application as observer.