Since the fall of the Soviet Union in 1991 and the beginning of democracy, Gazprom has pretty much been the sole source provider of natural gas and petro products to Russia and a major supplier to Western Europe. But since the global economy has been tanking for a while now, what used to be one of Russia's main economic engines has now become a dead weight dragging the russian economy down even further.

Andrew Kramer does a good job in his article pointing out how the Russians (Putin) had banked on a rising petroleum market to sustain the Russian economy and how this strategy is now failing. Russia had basically become a rentier state, depending on Gazprom and other similar industries to fuel its growth through the sale of its commodities to other countries. Where Russia went wrong with it's strategy is the contract it went into with several central asian states that provided the natural gas to Gazprom. According to the article, Gazprom negotiated a fixed price of $340 per 1k cubic meters of natural gas from the central asian states through 2028. The demand for natural gas has fallen so far that the Ukranians are expected to pay on average $230 per 1k cubic meters and Europe $280 per 1k cubic meter for the remainder of this year. That's anywhere between a $60 to $110 loss per 1k cubic meter. And with the global economy still in the doldrums for the next year or so, this does not bode well for Gazprom and Russia as long as gas prices remain depressed.

Now, I'm not an economics guy, but I would figure 3-4 years of sagging gas prices will really put Russia in a bind. They would have to see a significant boost in prices to make up for lost ground, but still not do it too fast that they cause a spike followed by another down turn in prices. They'll have to handle this one with kid gloves.

Maybe they can find a T. Boone Pickenovich?

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CFE, maybe?

Yahoo news is reporting today that the Russians maybe willing to re-ratify the stalled Convential Forces Europe treaty. But Russia has apparently imposed some of its own conditions before it is willing to sign on. One is the lifting of the restrictions that limit its ability to move forces within Russia itself without notifying NATO.

So why would Russia now want to ratify the treaty with new conditions lifted by itself. It might be due to some of the results from the latest NATO exercise in Georgia. Amongst the participants were several former Russian Republics who later pulled out of the exercise. If I had to speculate as to why they pulled out, I would guess Russian pressure. If Russia now gains the ability to move its forces in Russia with little say from the west, they now gain the ability to use that lever of national power more freely against countries of the near abroad that may be taking what they thought was sovereign activity, but frustrates or upsets Moscow. I would guess having a Russian Armor Brigade show up at your border one morning becuase Moscow was upset with you might be considered a game changer.
Thanks to the Perry Castaneda online map collection! Sphere: Related Content

Picking at Misha's scabs

A Georgian Army tank battalion apparently mutinied earlier today. The exact reason is not known but the Georgian government has said it was due to Russian meddling and was an attempt to assassinate Prez Saakashvili. The Russians deny this, of course.

I think the truth is somewhere in between the two sides. It's pretty much an open secret with Vladimir Putin that he wants Saakashvili gone and someone more amenable to Moscow in his place. Saakashvili, has been less than helpful in his own cause with a less than level headed approach to Russia this past year. Add in the past relationship between Russia and Georgia dating back to Stalin and you can see how this love fest unfolds.

The tank battalion commander was quoted as saying:

"One cannot calmly look at the process of destroying the country calmly, at the ongoing [political] confrontation," the battalion commander, Mamuka Gorgishvili, said in a statement carried by local news agencies. "However, there will be no aggressive actions on behalf of our tank unit. We are in barracks and we are not going to leave them."

In the end, I think there was some Russian provocation in this, but I would love to see some third party reporting in the media looking into the tank battalion's state of mind amongst it's soldiers. That would really help to bring some clarity to the whole situation. But I think this won't be the last and we've got keep a close eye on Saakashvili and how he intends of spinning the NATO exercise next week. Will he keep his mouth shut and bob his head up and down or use it poke the Bear again.

An interesting aside on the NATO exercise comes at the end of this NPR article on the coup. Five former Warsaw Pact or USSR countries that were originally scheduled to participate have now backed out. It might seem that Russia's message of not playing well with NATO might be getting through. Sphere: Related Content

Me and Dmitry, blogging buddies!

Yeah, not so much. Some of you more hard core Russophiles have probably already bookmarked this one, but in case you haven't here is the official blog of Pres Dmitry Medvedev. Enjoy. Sphere: Related Content

Russian Helicopters For The Iraqi Air Force!! ehhh... not so much

Sharon Weinberg over at Danger Room! has been doing a bang up job detailing the arms sale that never really happened. This is one of a few cases here in DC where a contractor who has no previous experience in a certain area suddenly jumps in with the lowest bid and proceeds to screw the whole process up. A few years back everybody kind of scratched their head with the awarding of a contract to the L3 corp to build a replacement for the venerable Sherpa cargo aircraft flown by the Army. If you had worked with L3 in the past, they were mainly known for developing computer systems for the department of defense. The company that Sharon writes about in this article is ARINC, who mainly advertise their IT and communications solutions here in the beltway. I really didn't see too much on their website about military helicopter fleet purchases. But bottom line, the USG paid an S***load of money for the helicopters to a Russian firm and still really has nothing to show so far. I'm curious to see how this one plays out. Sphere: Related Content