Eurasia Daily Monitor -- The Jamestown Foundation
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January 14, 2009 - Volume 6, Issue 8
IN THIS ISSUE:
*Gas crisis worsens as Kremlin demands privatization of Ukrainian gas
network
*Ergenekon probe widens with new series of arrests
*EDM commentary by Evgeniy Gontmakher: "Russia's economic crisis"
_____
Russia Suspected of Trying to Take over Ukraine's Gas Transit Network
Russia was supposed to resume pumping gas to the EU through Ukraine on
January 13 following trilateral Moscow-Kyiv-Brussels talks, but the
Russia-Ukraine gas row is far from over. Neither the issue of Kyiv's debts,
the very existence of which Ukraine denies, nor the conditions of gas supply
to Ukraine in 2009 have been clarified. There are fears in Kyiv that Moscow
wants to take control of Ukraine's gas transport network. Meanwhile,
Ukrainian industry, heavily reliant on gas, is grinding to a halt; and
people are freezing in their homes in subzero temperatures.
Russia stopped delivering gas to Ukraine on January 1 in the absence of
contracts for 2009; and it stopped gas transit through Ukraine on January 7,
accusing Ukraine of siphoning off gas bound for Europe. Ukraine's gas
monopoly Naftohaz Ukrainy admitted that it had been withdrawing 20 to 25
million square meters of gas from the pipelines a day in order to keep up
pressure in the pipe needed to pump gas to the EU. Gazprom agreed to resume
gas transit only if inspectors representing the European Union, Russia, and
Ukraine could verify that no gas was being siphoned off (Kommersant Ukraine,
January 12).
A protocol stipulating the conditions of checking the pipelines in Ukraine
was signed by the three parties from January 10 to 12 with the mediation of
Czech Prime Minister Mirek Topolanek, who traveled between Moscow, Kyiv, and
Brussels (Interfax, January 10-12). Ukrainian Prime Minister Yulia
Tymoshenko tried to attach to the protocol a declaration that essentially
shifted all the blame for gas transit disruptions on Russia saying that
Ukraine did not steal Russian gas and that it had been a reliable partner in
gas trade. This angered Moscow. It accepted the protocol only when
Tymoshenko backtracked, saying that the declaration was unrelated to the
protocol (UNIAN, January 12).
Although gas deliveries to the EU are about to resume, it is too early for
the EU consumers of Russian gas to sigh with relief. Russian President
Dmitry Medvedev warned that transit through Ukraine might be halted again if
Ukraine resumed "stealing" gas (Interfax, January 11). Ukraine has never
admitted to "stealing," and it is still not clear which side will pay for
the "technological" gas that Ukraine uses to maintain pressure in the
pipelines. In the absence of contracts between Ukraine and Russia, new
disruptions to the gas transit cannot be ruled out.
Russia insists that Ukraine owes $600 million for gas delivered in 2008, and
Gazprom wants Ukraine to reimburse $800 million that it lost because of the
transit halt (Ekho Moskvy, January 12). But the issue of the gas price for
2009 remains the thorniest. According to Kommersant, Ukraine has agreed to
pay $250 per 1,000 square meters of gas, a price Gazprom offered at the end
of December and Naftohaz rejected; but Moscow now wants "the market price"
of $450, something that Kyiv simply cannot afford (Kommersant Ukraine,
January 13).
It is also not clear from whom Ukraine will be buying gas. Tymoshenko
insists on dropping RosUkrEnergo, a joint venture between Gazprom and
Ukrainian businessman Dmytro Firtash, as middleman, a role it has been
playing since early 2006. Both Ukrainian President Viktor Yushchenko and
Russian Prime Minister Vladimir Putin reportedly share this position.
Firtash said in a recent interview that RosUkrEnergo's removal from the
Russia-Ukraine trade would be no tragedy for him as RosUkrEnergo's
mediation, according to him, amounted to subsidizing Ukraine (Vedomosti,
January 11). Russia stated on earlier occasions that Ukraine would have to
pay much more than the $179.50 that it was paying in 2008, if RosUkrEnergo's
mediation is dropped.
Russia is seemingly in a strong position in the price talks. Tymoshenko
maintains that Ukraine's gas storage and its own extraction will suffice for
more than just surviving the winter without new contracts. This appears to
be mere bluffing. Disruptions to hot water and the heating supply to
households have been reported from eastern and southern Ukraine and Kyiv
(Ukrainska Pravda, January 9, 11). Naftohaz Deputy CEO Volodymyr Trikolych
admitted that Ukraine's chemical industry had halved its gas consumption
(UNIAN, January 8). The Sievierodonetsk-based Azot, one of Ukraine's biggest
chemical factories, stopped production (UNIAN, January 9).
It is feared in the Yushchenko administration that the gas row may result in
Ukraine losing the gas transit network, which is probably the country's most
lucrative asset. Putin said in a recent interview that Russia was not
against taking part in the network's privatization (Interfax, January 11).
The head of Yushchenko's office, Viktor Baloha, accused Russia of
"blackmailing" Ukraine in order to grab the network. According to Baloha, if
Kyiv did not agree to Moscow's conditions, Moscow expected an uprising
against Yushchenko in the industrial east prompted by a stoppage of the
local industry and freezing cold in homes as a result of the absence of gas
(Ukrainska Pravda, January 10). Ukrainian laws forbid the network's
privatization.
-Pavel Korduban
Investigation Deepens Divisions Within Turkey
As Turkish police have been uncovering arms and ammunition buried deep
beneath the ground in various places in Ankara, divisions within the Turkish
political scene, the judiciary, and the intelligence services, as well as
the politically powerful Turkish Armed Forces (TSK), have widened. The
caches were discovered by examining sketches found in the houses of some
suspects arrested in simultaneous raids in six cities on January 7 as part
of the investigation of the Ergenekon network.
This has expanded a 19-month old probe into an alleged plot by staunch
secularists to overthrow the pro-Islamic government. Three senior former
generals detained for their alleged role in the coup plans were released on
the weekend, while four active officers were arrested. This was the first
time that active officers had been arrested in connection with the coup
plot. Two former generals were also arrested in early July last year as part
of the Ergenekon probe.
Last October in Istanbul the trial began of 86 people, 46 of whom (including
a retired general) were under arrest on charges of setting up the Ergenekon
terrorist network to overthrow the government by force. Prosecutors had
prepared an indictment of more than 2,500 pages. The defendants are also
accused of attempting to stage the assassination of such important figures
as Prime Minister Recep Tayyip Erdogan and former Turkish Chief of the
General Staff General Yasar Buyukanit.
They are also charged with possessing explosives and firearms as well as
obtaining classified documents, provoking military disobedience, inciting
hatred, and the abuse of power.
Meanwhile, a raid on the house of Lieutenant Colonel Mustafa Donmez, who
surrendered to the military prosecutors on January 12, yielded 22 hand
grenades, over 100 bullets, a Kalashnikov assault rifle, and four pistols.
The police widened the investigation when they found a sketch in Donmez's
house, which led to the discovery of 30 hand grenades and ammunition on
January 12 in an historic site in Sincan, an Ankara suburb (all dailies,
January 13). Minister of National Defense Vecdi Gonul said that it was
possible that the hand grenades belonged to the military-owned Machines and
Chemical Industries Board (MKEK) (NTV news channel, January 13).
Turkish police, acting upon a sketch found during a search in the house of
Ibrahim Sahin, former acting chief of the Police Special Operations Unit,
discovered 28 different types of bombs, arms, and ammunition hidden under
the ground in an empty plot in Ankara's Golbasi suburb (all dailies, January
12). It is not clear yet why the arms and ammunition were hidden under the
ground or in the houses, but police experts told Jamestown that the
unearthed arms caches might shed light on the unresolved murders from the
late 1980s and early 1990s of people ranging from Kurds to high-profile
Turkish figures including Professor Ahmet Taner Kislali and senior columnist
Ugur Mumcu.
Ibrahim Sahin, who was arrested under the Ergenekon investigation, served
six years in jail when a court found him guilty of forming a gang to commit
crimes under the trial of Susurluk gang, discovered in 1996 following a
traffic accident that has taken place in Turkey's Surusluk township. For
medical reasons former Turkish President Ahmet Necdet Sezer later pardoned
him after serving only 185 days in prison (Hurriyet, June 26, 2003).
"Ergenekon is the continuation of the unfinished Susurluk gang scandal,"
said Mehmet Elkatmis, a former parliamentary deputy and the head of the
parliamentary commission investigating the Susurluk case at the time (NTV
news channel, January 7).
Judges were able to trace the involvement of the police and the National
Intelligence Organization (MIT) in the Susurluk gang scandal, and Ergenekon
widened the inquiry, including for the first time powerful members of the
military, journalists, academics, and businessmen.
As the Ergenekon probe has become broader, however, serious divisions within
society have again arisen. Kemalists (the defenders of Turkey's staunchly
secular foundation) and ultra nationalists uniting with leftists have formed
a faction opposed to the Ergenekon investigation. A pro-Ergenekon group has
emerged on the other side, consisting of liberals seeking increased
democracy by supporting the ruling Islam-oriented Justice and Development
Party (AKP), as long as it adheres to the European Union's (EU) democratic
criteria.
As a reflection of that division, the latest Ergenekon probe has again
sparked a severe war of words between the pro and anti-Ergenekon groups.
In televised speeches made to their party members, Deniz Baykal, chairman of
the main opposition Republican People's Party (CHP), blamed the AKP
government for politicizing the investigation, while Devlet Bahceli,
chairman of the Nationalist Movement Party (MHP), extended his support for
the probe (CNNTurk news channel, January 13). "For the sake of democracy, it
is right and natural that the political authority should uncover all the
illegal activities and [eliminate them] within the rule of law," Bahceli
said. However, he warned against turning the investigation into a politics
of revenge (CNNTurk, January 13).
Meanwhile, both Baykal and some media outlets blamed the government for
trying to turn Turkey into a police state. A similar criticism was leveled
at the government by Omer Faruk Eminagaoglu, Head of the Judges and
Prosecutors Association (YARSAV). He complained that the police had assumed
the role of prosecutors and judges in the Ergenekon operations (Hurriyet
Daily, January 12).
Justice Minister Mehmet Ali Sahin, in reply, highlighted the importance of
respecting the independence of the judiciary, adding that the police had
been acting on orders from the prosecutors.
Erdogan, in the meantime, strongly criticized Baykal, saying that he had
been intervening for some reason in the judicial process. "He [Baykal]
sometimes urges the investigation of Gladio and the gangs, while sometimes
acting as if he were the lawyer of gangs and mafia," Erdogan said (NTV news
channel, January 13).
In the midst of the fierce ongoing war of words among the politicians and
the judiciary, the Turkish General Staff (TGS) announced that a probe was
being launched into the affairs of Donmez (www.tsk.mil.tr, January 13).
Columnist Alper Gormus questioned the reasons behind the failure of the
Turkish military to launching a probe long ago over alleged links between
its active officers and Ergenekon (Taraf, January 13).
There is an emerging belief in Turkey that the Ergenekon investigation
became possible because of an agreement reached with the United States.
"There might be a consensus between the United States and Turkey over
bringing Turkey's politically powerful military in line with NATO's
democratic standards," asserted lawyer Umit Kardas, a former military
prosecutor (Interview with Jamestown, January 8).
In an interview with Today's Zaman on January 11, Kardas said:
I do not believe that Ergenekon marks the start of a general clean-up
operation within the TSK, because it will resist it. But behind Ergenekon
operations may be a consensus with the United States to bring the TSK into
line with NATO standards, which sees intervention in politics through
military coups unacceptable (www.sundayszaman.com, January 11).
NATO cannot forget that Turkey's military has intervened in the political
system in various ways from direct intervention to memos or post-modern
coups five times since the establishment of the Turkish Republic 85 years
ago.
-Lale Sarýibrahimoglu
**EDM Commentary:
Russian Economist Warns That "Security Net" Must Not Be Abandoned
By Evgeniy Gontmakher
In December 2008, when these lines were written, it was difficult to
understand the prospects of the world and domestic financial-economic
crisis. For Russia, however, the current turbulence may be useful, because
it offers a good pretext for changing many elements of social policy to
which we all have become accustomed until now.
The biggest drawback of the pre-crisis social policy in Russia was the
constantly increasing gap in the level and quality of life between different
social and regional population groups.
In particular, in recent years the steady growth of the stock coefficient of
differentiation of pecuniary gains has been observed in parallel with the
commercialization of public healthcare and education. In practice, all of
this led to the cessation of upward social mobility. According to research
carried out by the Independent Institute of Social Policy from 2000 to 2007,
the already thin middle class practically did not expand at all.
In practice, Russia split into two main sectors: approximately 30 percent of
the population are involved in the export sector (oil, gas, metals, and the
industries that service these sectors, including banking and finance,
educational institutions, and public healthcare facilities) and the
remaining 70 percent, who improved their financial position slightly by
receiving the "crumbs from the noble's table" but who are still without
comfortable housing, quality education, and effective public healthcare.
This is reflected in the extremely low average life expectancy and
international comparisons of quality of general and professional education.
Despite the abundance of budgetary resources, the portion of the GDP
directed for the development of human capital is as low as half the share
allocated in the developed countries.
Such negative social trends indicate that the Russian redistribution
mechanism-which guarantees the balance between two fundamental social
institutions, the social safety net and the market- is inadequate.
The crisis, which has been manifested, in particular, in the decrease in
opportunities for resolving social questions, does not leave chances for
maintaining the status quo. The only choice left is between "mobilization"
and "modernization" and apparently it will be taken in 2009. Judging by the
already existing forecasts, the economic situation next year will be
different from that in previous years. In particular, zero or even negative
GDP growth rates are expected, which will predetermine a significant
(possibly two-fold) increase in unemployment and a 5 to 10 percent decrease
in real income for the population. At the same time the situation may become
worse in a number of regions and cities, which could lead to isolated
demonstrations of open social unrest.
In this context the leadership of the country is facing the choice between
the strategy and tactics of its behavior.
The "mobilization" might be declared through the massive indoctrination of
the public with reference to the necessity of survival under conditions of
foreign infection, which was brought to us from abroad and which affected
the financial institutions and the real sector of the economy. That is, the
existence of domestic problems in Russia-such as the preponderance of raw
materials and the Russian economy's dependence on them; its tendency to
become more primitive; universal monopolism, which extends to the political
sphere; systemic corruption; and the aforementioned absence of an adequate
social redistribution institution-will be flatly denied.
The propaganda efforts will be directed toward justifying such unpleasant
social phenomena as cutbacks in state funding of social programs,
unemployment, and a lowering of living standards for the overwhelming
majority of the population. Considering the extremely low level of
government management, however, it would be hopeless to expect other
solutions (for instance, reform of the retirement system and the adoption of
alternative policies in the labor market and the sphere of social
protection) from the authorities, because they are constantly lagging behind
and are at the tail end of events. All of this could end up in a large-scale
and open political crisis that would resemble the events at the end of the
USSR.
Nonetheless, even the "modernization" scenario is fraught with risk. First,
it is necessary to note that its implementation would only be possible if
equitable negotiations were held from "above" with all major political and
social forces in the country. There are two inherent dangers here, however.
The upper strata may not be willing to do this, because they lack the skill
and ability to negotiate with real domestic partners and because they still
expect a miracle that will somehow melt away the crisis and return
everything to so-called "stability." The lower strata may not (or cannot) do
this because real-not fictional-political and social institutions have not
been created but have constantly been delayed by the authorities.
Be that as it may, the chance for implementing the "modernization" has not
been lost yet. One of its results would be the creation of a balance between
the aforementioned "social safety net" and the "market."
What is the essence of the first?
In Russian it is called the "net of social security." This means that any
member of society can rely on some form of support in case he finds himself
in severe social difficulties. Here the array of services ranges from a free
bowl of soup and a place to sleep for a homeless person to free and
accessible nationwide quality medical care. In practice, the existence of a
full-fledged "net of social security" is the most important characteristic
of a well-functioning "social state."
If we look objectively at the social situation in Russia, it becomes evident
that this "net" has many gaping holes. Some of them are:
-a lack of even the most basic medical care (half the working people do not
go to doctors because of queues or the inability to pay);
-the degree of satisfaction of those needing high-tech medical care is not
more than 20 percent;
-2 million children do not go to school;
-a similar number of children are considered to be neglected;
-there is no unemployment insurance;
-mandatory retirement insurance has been practically ruined;
- in practice, there is still no system of medical and social rehabilitation
for invalids.
It would seem that patching up these holes would be incompatible with the
market principles and would have to be carried out within the boundaries of
purely budgetary approaches. That is not the case, however. Many of the
social problems could be resolved with the skillful use of insurance. Even
the purely budgetary approaches should be combined with contemporary
mechanisms for guaranteeing the effectiveness of state expenditures, which
fully corresponds to market principles.
**Evgeniy Gontmakher is a professor with a Ph.D. in Economics and is a
member of the board of trustees of the Institute of Contemporary
Development, a Moscow-based think tank.
_____
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