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Posted on Sustainabilitank.info on June 1st, 2014
by Pincas Jawetz (pj@sustainabilitank.info)

 

In the Ukraine — the Crimea, the Eastern and Southern Oblasts (States) – the locus of the kerfuffle – seem to give birth to a growing butterfly effect that has landed on the Russian Dynosaurus Rex back, and finally got it to act in ways it was not prepared  to act originally.

This is an analysis inspired by a programmed  presentation at the Concordia Press Club in Vienna – that seemed to focus merely on a Freudian analysis of the Putin mind, but turned eventually into a very good  wide conversation about the topic as originally advertised. We recognized fully the change in the discussion having had to do something with this redirection of the event as it proceeded.

We found the Press conference exciting, but decided to write up what was NOT said originally and what we thought was going to be said, but came out only later. So, was my original expectation just wrong? My topic here is rather the second part of that Press Conference that was originally unsaid by the speaker.

So, let us start with the title of the original ICEUR Class of May 23, 2014, with Sergei Medvedev of the Higher School of Economics, Faculty of Political Science, of the Moscow State University with the title: “THE BUTTERFLY EFFECT: HOW CRIMEA WILL TRANSFORM RUSSIAN DOMESTIC POLITICS” – held at the Concordia Press Club in Vienna, Austria. 

The Class chaired by Hans Georg Heinrich who with Ludmilla Lobova are since the 201 beginnings the Responsible Editors of the ICEUR “Strategic & Business Intelligence” product.

Prof. Hans-Georg HEINRICH is professor emeritus for Political Sciences at the University of Vienna, Vice-President and manager of ICEUR-Vienna. Dr. Lubmilla Lobova is the Scientific Director of ICEUR-Vienna.

ICEUR-Vienna – the International Center for Advanced EU-Russia Research – is an independent brain trust providing analysis, intelligence and customized services for clients in business, economic decision making and the academia.

I did not write this up earlier – but left more then a week go by to make sure I do not just shoot from the hip. Since then we had the results of the Presidential elections in the Ukraine and it seems that the team – of President Petro Poroschenko, a western style businessman, and Boxing Champ Vitali Klitschko, Mayor of Kiev (Kyiv), are holding in solid hands all areas west of Kyiv, with strong backing in most of the rest of the Ukraine – except the Krim (Crimea) which the Russian will never return to the Ukraine.

What seems very interesting is that seemingly Mr. Putin has indeed drawn for his use a chart of plus and minus for further action in the Ukraine – this after it sunk in that there were some enormous losses in economic terms and in goodwill – mainly in the US and in some other OECD countries – and what is worse – among his own oligarchs. After all, it was not nice to hear of further acquisitions in the west made with money that flew out of Russia – be it even such things as buying part of Pirelli by Roseneft albeit – Pirelli’s chief Marco Tronchetti-Provera came to St. Petersburg to sign the agreement with Rosneft’s chief Igor Sechin in Putin’s presence – thus honoring Putin – but the money left Russia and went to banks in the west the likes of Bank-Austria-Mutter, UniCredit and Banca Intessa Sampaio.

Putin is also aware of the results in the May 25, 2014, elections for the European Parliament. Mme. Le Pen in France, some Anti-Unionists in the UK – and others that will not even be able to form an internal united opposition in the EU, but infuriate whoever will lead the EU seemed to like Putin’s Russia. But this is only a foot-note. The EU will worry about the Ukraine rather then about Russia.

In effect the first result of these elections that has a big impact on Russia is that this last Thursday, May 29, 2014, the EU Commissioner of Energy, Mr. Guenther Oettinger, declared null and void any attempt by the Austrian oil company OEMV and Russia’s Gasprom to build the South Stream pipeline that would have reinforced Europe’s dependence on Russia’s gas supplies.  Oettinger made it clear that a pipeline with its sole reason the bypassing the Ukraine in order to avoid the Russia-Ukraine conflict, is not ethical and not in the EU’s interest. Now, that was a blow Putin had anticipated, and the tactician he is, he used his visit with the Shanghai Cooperation Organization to sign an agreement to sell gas to China – building a new pipeline to China instead. This agreement was being negotiated for the last three years, but it did not reach the signing stage because the Chinese were not ready to pay to the Russians more for the gas then what they pay to Turkmenistan for the gas that gets delivered to them from Central Asia. Finally – now – under conditions of duress – Putin signs the equivalent of a $400 Billion 30 years agreement with China with exact details hidden. Above happened May 21, 2014 and we learned that though he got more then what was offered before, but still much less then what he gets from the EU – the real disaster for him might be in the fact that he will be payed in Yuans rather then US dollars. He is thus forced to move in part away from the World Trade that uses the dollar currency, to the new bloc being created by Brazil and China that will use BRIC currencies for trade. Someone having called this a switch from a Petro-Dollar driven World economy to a Gas-o-Yuan new system. As a new comer to this very successful bloc of upstart industrializing economies, with his underdeveloped, resource-exports State – this in effect makes him dependent of his buyers – now China – while before these Ukraine adventures he was in a long-range friendlier environment of Europe. That is why we think that the Crimea adventure was indeed that BUTTERFLY that landed n the dynosaurus back and started a process that might lead to the unraveling of Russia without a drama of a Cold War and nuclear weapons focused on each other.

But we are not complete pessimists in regard to Russia – and looking at Brussels were we see in the cards a grand coalition that will put in charge of the EU the Black and Red parties in tandem – this like it is done nearly always in Austria, and sometimes in Germany.  These moves in Brussels might  allow eventually Mr. Putin to come back to the negotiations’ table after making sure he forgets about his troika ambition – that meant for him the harnessing of the Ukraine and hitch it together with Belarus and Kazakhstan to his beloved troika. He will then  have to resign himself  to a two horses wagon only.

Regarding South Stream, that was a figment of OEMV’s 31.5% Austrian Government owned Corporation (24.9% owne dby IPIC – the  International Petroleum Investment Company – formed by the Abu Dhabi government in 1984 to invest in the energy and related sectors across the globe. Today it manages a portfolio of investments in more than 18 leading companies across the hydrocarbon value chain, including exploration and production, shipping and pipelines, downstream retail and marketing, petrochemicals, power and utilities as well as industrial services. IPIC is an exponent of international oil and as such can be counted of trying to derail any plans to make a country or the world less dependent on fossil fuels. OEMV is thus against renewable energy and its influence on the Austrian Government weakens the freedom of action by Austria. Austria has thus not contributed fully yet to the EU green efforts. Mr. Oettinger, who himself was backing the European production of fracking gas (shale gas) in order to decrease imports from Russia, has yet to be convinced to move in the direction of Renewable Energy, but then – we do not know yet who will be next European Commissioner on Energy beyond what we can say – Russia will never be allowed to be as influential in the energy supply of European countries  after the Crimea takeover as they were before that.

Professor Medvedev might have been right in his analysis of Putin the man – but the final words were with the “butterfly” nevertheless.

 

 

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ICEUR Mission statement

ICEUR-Vienna is an independent brain trust providing analysis, intelligence and customized services for clients in business, economic decision making and the academia. Drawing on a wide network of experts and partner institutions, it conducts joint projects with the objective to promote business, economic, political and cultural cooperation between partners from the EU and Eastern Europe. ICEUR strives to fill the gap between the declarations of intent resulting from high-level meetings and realities on the ground by identifying problems and proposing smart

solutions. Its geographical core area spans Eastern Europe and, specifically, the entire post-Soviet space. ICEUR´s commitment to non-partisan, issue-oriented applied research and consulting ties in with the Austrian tradition of a neutral go-between which respects the vital interests of the parties as a precondition for conflict resolution and enhanced cooperation.

ICEUR´s approach is comprehensive in that it is based on the insight that neither economic, nor political nor social problems can be resolved independently of each other. Its span of activities ranges from political to market analysis, and the expert meetings organized by the center convene specialists from various fields.

ICEUR´s institutional and company membership assures a solid presence in industrial and financial circles. Its lean management and flexible operation mode makes it more mobile and capable of rapid reaction than many large companies and institutions. Read more

23.05.2014

Upcoming ICEUR Master Class with Sergei Medvedev
“The butterfly effect: How Crimea will transform Russian domestic politics”
Time: 23 May 2014, 10:00
Venue: Presseclub Concordia, Bankgasse 8, 1010 Vienna
Lecturer: Sergei A. Medvedev, Professor HSE Moscow, Deputy Dean for International Affairs
Language: English
Please register: office@iceur-vienna.at

17.03.2014

“Ukraine-A new departure?”
A Touch of High Politics: The ICEUR Round Table on Ukraine
ICEUR-Vienna´s statutory mission is to support and promote the dialogue between the post-Soviet area and the other European states. The rapidly escalating Ukrainian crisis has clearly evidenced the need for an institution that provides a meeting place for the business-like discussion of relevant issues. For the Ukrainian Round Table, we had deliberately invited panelists with different backgrounds and political convictions. Events in the Crimea loomed large over the agenda, which made diversity management difficult, but feasible. Despite the sharp conflict lines and the emotions generated by the recent tragic events (one speaker was a participant at the Maidan demonstrations, another had, among other things, consulted past presidents), the outlines of a common ground became visible. All panelists agreed on the goal of a future civilized Ukraine, preferably in a federal format. When it comes to issues of state and nation building, opinions diverged: Mr. Pogrebinskyyi came out strongly against presidential elections in May. He argued that such a move would polarize the nation and went with the hazard of re- introducing presidential authoritarianism through the back door. According to him, parliamentary elections should take precedence, and the new constitution should drastically curb the powers of the president. Mr. Vysotskiy supported the views of groups represented by the Maidan. They pursue a different strategy and believe that a strong elected president would guarantee stability. Mr. Fesenko, who is an advisor of the government in power, pleaded for fair elections that would reproduce a representation of the major political forces and reduce the political weight of marginal groups Unsurprisingly, the panelists as well as the discussants (among them members of the Russian Embassy) had widely divergent views about who was to blame for the violence in Kiev and elsewhere. Yet, they agreed that the truth could not be established at this point. It was also pleasant to hear that the discussants felt a follow-up to be held in Vienna would yield even more concrete and tangible results. ICEUR stands ready to act as a focal point for such initiatives. Panelists from Ukraine:
Mikhail B. Pogrebinskiy,
Director, Kiev Center for Political and Conflict Research. Analyst, advisor of all Ukrainian presidents since 1991

Sergey Vysotskiy,
journalist, LIGABusinessinform, participant in the Maidan demonstrations

Vladimir Fesenko,
analyst, director, Center for Applied Political Research “Penta”, advisor of the present Ukrainian government

03.03.2014

Business Seminar in Vienna “The Russian Economy After Sochi”

Summary of findings of the ICEUR Business Seminar, 3 March 2014-03-10
The two speakers, Mikhail Dmitriev and Segey Afontsev, dealt with the dynamic of the Russian economy from different perspectives, but arrived at more or less the same conclusions. They both presented a gloomy outlook for the near future. The period of high growth rates is over and recession may be around the corner. The impact of the Ukrainian crisis can be felt already, particularly in the ballooning exchange rate and the rapid decay of the securities market. Yet, they maintain that the downslide of the Russian economy has structural causes which are merely reinforced by the Ukrainian conflict. Mr. Dmitriev predicts the stalling of growth figures because of the fact that a relatively high level of consumer saturation has been reached and income growth has ground to a halt. In fact, consumption growth has outdistanced income growth during the boom years. The shrinking of the working age populations worldwide is bound to hobble productivity and economic growth. Mr. Afontsev drew the attention to the fact that since 2009, outward FDI has surpassed inward FDI. Almost 40% of the capital leaving Russia is invested in EU countries (as opposed to 9% in Ukraine). Conversely, most investment capital coming to Russia originates in Cyprus and the Netherlands (together, 36% of total FDI). This ties in with the observation that the share of energy carriers in total exports has been growing in recent years (from a low of 37% in 1994 to almost 68% in 2013). The speaker was also skeptical about the economic benefits of megaprojects: As a rule, they drain important reserve funds, stimulate corruption and are not sustainable. Both speakers agreed that in order to preserve and improve the achievements of the boom years and to avoid wide-spread dissatisfaction and protests, the Russian economy must be radically modernized. There is no other option than the dehabituation from the addiction to oil and gas.
M. Dmitriev. The new Russian consumer: Preferences, socio-economic situation, consumption patterns (Power Point)
S. Afontsev. The Russian Economy: Situation and Outlook (Power Point)

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