EU-Russia review: Issue 1 by Paul Healy

THE EU-RUSSIA REVIEW

Issue One

A report commissioned by The EU-Russia Centre

May 2006ÂŠ

Contents

Foreword

Introduction

Russia At The Crossroads: Again?

The Use of Energy As A Political Tool

European Values And Russian Society

Managed Democracy In Russia

Judicial Independence In Russia

NGOs In Russia

Contributors

Contact

Foreword It is both an honour and a pleasure to write the foreword to this first EU-Russia Centre Review. I have a long association with Russia, both in a personal and a political capacity. My concern as a politician is that Russia's early moves heralding democracy for almost the first time in her history, are increasingly under threat. I and my colleagues in the Foreign Affairs Committee take our relationship with Russia exceptionally seriously. We dedicate an ever increasing proportion of our debates and missions to Russia, her problems and to our relationship with her. As the European Union continues to widen the zone of freedom, peace, democracy and stability to countries traditionally considered as being within the sphere of Russian influence, the EU-Russia relationship will become ever more important. The EU-Russia Centre has an important role to play at this critical juncture in bringing decision makers and opinion formers together from Europe, Russia and beyond. Such a forum is clearly needed. This timely collection of articles reminds us how important is Russia's place in Europe, as well as internationally, and I commend it to all readers.

Baroness Nicholson of Winterbourne MEP Vice Chairman, Committee on Foreign Affairs European Parliament

Introduction Welcome to this first edition of the EU-Russia Centre Review. The EU-Russia Centre has been established at a critical juncture in relations between the expanding EU and a newly self-confident Russia enjoying considerable wealth as a result of the rise in energy prices. Russia chairs the G8 this year and will host the annual summit in President Putin’s home city, St Petersburg, in July. Many will view the summit as a sign of Russia’s reemergence as a global power. It is certainly an ‘energy superpower’, playing an important role in the Iran nuclear issue. The economy and the stock market are booming. For many Russians, they have never had it so good. Yet there are concerns about the direction Russia is taking and questions are being raised, notably, but not only, in the US, about whether Russia really belongs in the G8 which is supposed to comprise advanced, democratic industrial nations. The concerns centre largely on the state of democracy in Russia and whether Russia is heading back towards a quasi dictatorship. There are also worries about Russia’s attitude towards its neighbours. The EU-Centre is a unique forum to discuss all questions relating to the future of EU-Russia relations. It will regularly publish the Centre’s Review to cover different aspects of EU-Russia relations and to air a cross spectrum of views. The second edition, planned for the autumn, will provide a comprehensive assessment of the prospects for a renewal of the Partnership and Cooperation Agreement (PCA) between the EU and Russia. Future editions will cover a variety of subjects including politics, security, energy and the environment, democracy and civil liberties. ---------------------------------------------------------------------------------In this first edition, a number of distinguished experts offer their views on some of the main issues facing the relationship between the EU and Russia.

Russia At The Crossroads: Again? Sir Roderick Lyne, the former British ambassador to Moscow, offers a masterly overview of the relationship. He notes that Russia has never been so wealthy and free. Given the trials and tribulations of the past 15 years, it is remarkable that Russia has made so much progress. Yet institutions remain weak, the state interferes too much in the economy, corruption is rampant / common high, and there is too little attention to the long-term i.e. beyond 2008. Lyne does not suggest giving up on Russia despite its internal problems and the structural weaknesses apparent in the relationship. Rather, he proposes that we have an honest dialogue, that the EU should accept Russia as a European nation, and that Russia must get over its current paranoia and stop seeing relations with the EU in zero-sum terms.

The Use Of Energy As A Political Tool Vladimir Milov, President of the Institute of Energy Policy, considers how Russia has emerged as a global energy superpower and describes how it has used its oil and gas resources for political purposes. He examines the origins of Russian energy diplomacy, coinciding with the state’s failure to follow through on privatisation assurances. The rise of Gazprom is documented, as is the use of the energy weapon against Ukraine and Belarus. Gas supplies have greater potential for blackmail purposes than oil which is a genuine global commodity. But Russia has not yet passed the point of no return, even though it is unlikely to ratify the Energy Charter and transit protocol. The author suggests that the EU must stand firm and present a united front towards Russia.

European Values and Russian Society Dr Eberhard Schneider, Professor of Political Science at the University of Siegen and Senior Researcher at the German Institute for International and Security Affairs of the “Stiftung Wissenschaft und Politik”, considers to what extent European values are understood and

accepted in Russia. He suggests that one cannot comprehend Russian attitudes without reference to Russian history and its geopolitical situation. His paper also draws on the results of a fascinating study which reveals that Russians have very different views, when compared to Europeans, on what is meant by democracy. For example, only a fifth of respondents recognised the importance of a free media for the democratic process!

Managed Democracy In Russia Alexander Duleba, from the Slovak Foreign Policy Association, provides an interesting assessment of what he describes as ‘managed democracy.’ The manner of the transition from Yeltsin to Putin, as well as the conduct of the several elections that have been held since 1991, begs serious questions about the state of democracy in Russia. The Kremlin has not been afraid to use the vast resources of the state, as well as manipulation of the media, to ensure the ‘right’ result in elections. The powers of the regions, the oligarchs and civil society have all been curbed during Putin’s tenure in office. These developments, as well as Russia’s behaviour towards its neighbours, pose difficult challenges for the EU, and Duleba argues for a stricter conditionality in the EU’s relations with its big neighbour.

Judicial Independence In Russia Professor Bill Bowring, from London’s Metropolitan University, reviews developments in Russia’s legal system. He points to the importance of Russia’s membership of the Council of Europe (it joined in 1996) and the corresponding impact of the European Court of Human Rights. The reform of the criminal and civil codes is described before the author analyses the lack of independence among the judiciary. He highlights a number of scandals involving judges and concludes that the separation of powers in Russia is noticeable by its absence.

NGOs In Russia Christian Neugebauer, editor of The Glocalist, reviews the growth of civil societies worldwide and state attempts to continue erosion of democratic rights. He profiles the huge and active NGO community in Russia, and examines state attempts to dilute their effectiveness through regulation, such as making them liable for tax. The most draconian measure, the NGO Act, is shown to be a very bureaucratic attempt to make NGOs toe the line. Ultimately, he argues that without a strong civil society and committed NGOs, there can be no sustainable social and economic progress.

First Scorecard Survey The EU-Russia Centre has also published a Scorecard covering the views of expert opinion formers on EU-Russia relations. The report reveals that most think the EU member states put their national interests first in dealing with Russia, rather than supporting a consistent EU position. The EU and its institutions, including the Parliament, should seek greater leverage in dealing with Russia in future. The twice-yearly consultations on human rights have not resulted in any significant improvements. And EU citizens should be concerned that, in several regards, Russia is a less democratic country today than five years ago. Where does this leave EU-Russia relations and the strategic partnership? Both sides are committed to achieving the four common spaces agreed at the St. Petersburg Summit in May 2003. These are: a common economic space; a common space of freedom, security and justice; a space of co-operation in the field of external security; and a space of research and education, including cultural aspects. But in what timeframe will this be achieved? And will the EU be able to maintain a united front in dealing with a newly self-assertive Russia? Will the EU’s energy dependence on Russia trump its commitment to democratic values? These are just some of the key questions that the EU-Russia Centre will be following in the coming months. We value your thoughts and contributions, so please visit our website (www.eu-russiacentre.org) and join the debate. Fraser Cameron Acting Director

RUSSIA AT THE CROSSROADS: AGAIN? Sir Roderic Lyne Introduction It is impossible to do justice to the complexities of Russia in a mere half-hour. The 32 word version of my talk would be: “In Russia today, you can meet some of the world’s most bullish businessmen – and most bearish political and economic analysts. The short-term prospects are pretty good; the long term pretty problematic.” The full version is harder. As Russia is such a vast canvas, I can offer no more than a few brushstrokes. Let me suggest seven propositions:

1. Russia has never had it so good Never in its history has Russia been so prosperous. After the dreadful turmoil of the 1990s, the country is booming. $200 billion in the foreign exchange reserves. Debt paid down. Stock market up 83% last year. A queue of 40-60 companies preparing for IPOs. Well over 100,000 dollar millionaires, apart from the billionaires in the Forbes list. A new middle class. A quarter or a third of Muscovites owning cars. Ten million Russians taking foreign holidays – well over a million to Turkey alone. The mobile phone market now saturated. Pensions up 13% in real terms last year, according to President Putin. The boom does not stem from oil alone. Russia rebounded rapidly from the 1998 crash and took advantage of devaluation. Over the past six years, the economy has benefited from political stability and sound macroeconomic management. Genuine entrepreneurs have built good businesses in sectors such as telecoms, IT, retail, brewing, food processing and consumer credit. This trend has emboldened Messrs Goldman Sachs to project that by 2025, Russia could be a 6 trillion dollar economy ($6,000 billion) and no. 5 in the world GDP league table.

2. Russia has never been so free Russians enjoy a degree of personal freedom that they could only dream of before, say, 1988. They are vastly freer than the Chinese. They can live well and have fun. They can choose where and how to work. If they have the means, they can travel inside or outside the country. They can read what they like, watch what they like, say what they like, access the internet. There are no more than a handful of prisoners who might be classified as “political”. The main constraints on their freedom are that they cannot challenge those who hold power; and they lack the channels we have for the expression of political views, whether through a genuine Parliamentary system or on television.

3. The Russian transition was bound to take a very long time and is still at an early stage The transition dates back for 20 years. Under Gorbachev, it progressed and then regressed. The same under Yeltsin. The same under Putin. With Putin, the turning point was the middle of 2003, and had a number of causes – including oil wealth and the irresistible temptation this presented, the approach of elections and the challenge of Khodorkovsky. In Britain, democracy evolved over several hundred years. Russia is still in search mode after 15 years. In 1991/2, the worst case scenarios for Russia were pretty dire. The reality now is vastly better. When one considers the enormity of the task that has faced Russia’s rulers over the past 15-20 years, we should be surprised, not at the country’s imperfections, but that it has come so far.

4. Russia is not well reported. Russians of all stripes constantly complain that their country is only portrayed in a negative light in the Western media. They have a point. Foreign news coverage is much less comprehensive and balanced than it used to be, for reasons which lie outside the scope of this talk. Bad news makes the headlines, rarely good news. But I don’t buy the thesis, heard frequently in Moscow these days, that the Western media are addicted to Russia-bashing. Nor that hiring PR firms will solve the problem. The way to improve the coverage is to improve the product. The combination of easy oil money and intolerance of criticism, verging at times on paranoia and a persecution complex, seems to be leading the authorities in Moscow simply to disregard the negative effects of their behaviour on Russia’s image in the world. I cannot see that this is to the country’s advantage.

5. Russia’s biggest problem is that short-term opportunism risks doing long-term damage Some call this the curse of oil. Some Russian pundits have talked of the Venezuelisation or Nigerianisation of their country; or of “Saudi Arabia with nukes”. This is a bit melodramatic. Nevertheless, the biggest driver in Russia, at all levels from the top downwards is money and materialism. It would be harsh to blame people for enjoying the fruits of new-found wealth after decades of hardship – for those outside the Communist elite – and Russia is far from the first country where this has happened. However, the fact is that the opportunity to invest, to construct solid foundations and to tackle underlying problems is being missed. Too many people are thinking about how they can exploit the current position to maximum personal advantage; too few are considering what might be in the long-term interests of the country and of Russian society. I visited China recently. Several officials talked in precise terms about targets for China’s energy consumption and imports in the year 2020. No Russian has spoken to me about what his country might be doing in 2010, let alone 2020: the horizon stops at 2008. I was told that the new Chinese middle classes were saving, on average, 40% of their incomes. I would be very surprised if the comparable figure for Russia was even 5%. There are four areas which should particularly concern us:

(1)

The weakness of institutions

Russia’s present stability depends solely on the Presidency – which means that stability is intrinsically fragile. The institutions, which in other developed countries provide for separation of power, long-term cohesion, and checks on the executive, are weak and susceptible to control by the Presidency: the legislature, the regional authorities, the judiciary, the media, and civil society. This is not the mark of a healthy society. It allows mistakes and misdeeds by the executive to go unpunished; and corruption to flourish, more or less unchecked. It lacks a mechanism for the orderly transfer of power from one group to another. If all meaningful opposition is treated as disloyal and is harassed, there is an obvious risk of a pressure cooker effect. I am not trying to argue that Russia, in extraordinarily difficult circumstances, could have developed a perfect democratic and law-based constitutional order in 15 years. But what concerns me is the direction of travel. I see no effort being made now to build for the long term, simply to control for the short term.

(2)

State intrusion into the economy

Few of us would defend the manner of Russian privatisation and capitalism in the 1990s. However after the 1998 crash, and especially from 2000 to 2003, there was an improving pattern in the market economy. I am not sure that this is now the case. The intrusion is not a general policy of renationalisation and of State ownership for ideological reasons. It is more the

case that those who presently rule the State have used their position to bring more and more important assets under their control. Following the acquisition of Sibneft, something like 10% of Russian GDP is now vested in the Gazprom monopoly alone. The oil company Rosneft – like Gazprom, State-owned and Kremlin-directed – is also growing in size and power. However, it is the private energy companies which have shown by far the biggest growth in output and exports. Recent analysis by Alfa Bank has shown that the State’s share of quoted companies has gone up from 20% to 30%. The authorities are also indirectly interfering with the market by favouring certain companies, leaning on others and exercising a range of pressures. We are not seeing the advance of fair competition and of the famous level playing field.

(3)

Reform, restructuring and diversification

Some very important steps were taken up to mid-2003 – notably the tax reform and provisions for the freehold ownership of property. Some modest reforms, for example in the banking sector, are still running. But what has happened to the big ticket items? •

The bureaucracy: has acquired renewed strength, and is a bigger impediment than before. Investment in infrastructure: inadequate, despite the healthy state of public finances. Education and science: this is critically important if Russia is to retain its high quality of human capital and develop a modern economy, as well as dealing with social issues such as alcoholism, tuberculosis and HIV/AIDS. But reform is being impeded by vested interests. Healthcare: in a mess Social benefits: the Government retreated after demonstrations. Military reform: not happening Restructuring of Gazprom: taken off the agenda. Restructuring of UES: still promised, still hasn’t happened WTO entry: ditto. Diversification and the promotion of SMEs: happening in some sectors, but Russia is lagging behind where it needs to be. The oil industry accounted for almost half of industrial growth between 2001 and 2004. Distribution of wealth: the gap between the rich and the poor, and between wealthy regions and deprived ones, is still widening.

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This is not a comprehensive list. Of course, similar “needs doing” lists could be drawn up for any country. But, as I said earlier, it is the direction of travel – or the lack of one – which causes concern.

(4)

Demography, mortality and the labour market

To quote some figures from the Institute of Demography of the Russian Academy of Sciences, Russia has a working age population of about 87 million, of whom about 67 million are officially registered as employed. On current trends, the able-bodied population will decline by 18 million over the next 20 years; but economic growth at the current 6-7% will create demand for an additional 7 million in the workforce by 2015 alone. The labour market is already getting tight in Moscow and St Petersburg, especially in certain sectors. Russia’s fertility rate is low, but is somewhere near the European average, and marginally above Spain and Italy. The big problem is male mortality, which peaked at 65 in the early 60s and early 80s but has fallen to 58. HIV/AIDS threatens to exacerbate the situation, with over a million Russians, mostly in the 1630 age group, now estimated to be infected. The Russian Government is seeking to boost inward migration, but this can be, at best, no more than a partial solution. Unless something can be done to move male mortality nearer to the Western average (upper 70s) or to produce a sharp rise in productivity – which requires investment, restructuring, education and training – a labour deficit will become a serious

constraint on economic growth, and could be an acute problem in the resource-rich areas east of the Urals.

6. Russia’s foreign policy is essentially defensive Russia is strutting on the world stage again – Chairman of the G8, proclaiming herself an energy superpower, cutting off Ukrainian gas supplies and hiking the price as a punishment for bad behaviour, forming new alliances in Central Asia and encouraging the Uzbeks to kick out US forces, holding joint military exercises with the Chinese, acting as the key intermediary with Iran, and seeking to do the same with Hamas. The Russian view of this is: “We are strong again. The West doesn’t like this, but it will just have to get used to it. We don’t have to do what the West tells us any more, and we don’t care what the West thinks about us.” This is all terribly old-fashioned. Paranoia about encirclement, special services, NATO and the assertion of a Russian “zone of influence” – even the recent revelation that Russia has a new magic weapon to penetrate a US defensive shield, which was greeted abroad with telling indifference – is all very 1970s. Some commentators have interpreted the new assertiveness as neo-imperialism or a Soviet revival. I see it much more as a post-imperial hang-over not wholly unlike the British experience for a generation and more after the Second World War. The British know better than most how hard it is to adjust to decline, and our decline was not nearly as sudden as the Soviet collapse. Russia has fallen from being a global power to barely a regional power; the former satraps thumb their noses; and it is now being overshadowed by China and India. Behind the bombast, Russian policy-makers are well aware of this. They are trying to use such leverage as they still have internationally. In what they call the “post-Soviet space”, which is now the focus of Russian foreign policy, an awful lot of water has spilled over the dyke in the past 15 years. Moscow is trying to pump some of it out and to shore up the defences where it can; but this is a defensive operation, not expansionist neo-imperialism. However, that still poses plenty of problems: one need look no further than the relationships between Russia and Georgia, and Russia and Ukraine, or the election in Belarus. We are in for a long period of adjustment and potential instability while the states of the former Soviet Union resolve their internal systems and external relationships, not least the relationship with the former metropolitan power.

7. Russia is part of the European family – and should be treated as such What should we in the Western part of Europe do about Russia? We cannot have the luxury of taking a detached view or of simply forgetting about Russia. It is too big, too close, and too important to our interests. We could, of course, decide to treat Russia much as we treat China or Saudi Arabia – countries where we pursue very active cooperation, based on national and European interests, with few illusions about our ability to influence internal development, relatively little conditionality, and recognition that a move towards democracy is not about to happen and could, in any case, be acutely destabilising. This leads the Russians to accuse us of double standards, and they have a point. There are plenty of people in Russia who argue – especially in the current mood of greater selfassertiveness – that Russia’s future is as a strong and separate power; that Russia is a Eurasian country; that there can be no question of any pooling of sovereignty with Western European partners; and that European standards and values cannot be imposed on Russia. Or, as a Russian Minister put it to me recently, that “we share European values, but we can’t accept that there is only one way of translating them”; and “we don’t just have to accept the policies of the West”.

Likewise, there are people in Western Europe who demand that the world should be “multipolar”, with Russia as one of the poles and the EU as another. Since the world is selfevidently multipolar, this assertion is not only a coded way of venting hostility towards the United States, but also a way of telling the Russians that they don’t belong in our club. But, while saying this, we nevertheless demand that the Russians should obey the rules of the club they cannot join. And the Russian authorities are our co-conspirators, by proclaiming their adherence to “European values” which they have no present intention of implementing. The first principle in the Partnership and Cooperation Agreement between the EU and Russia declares that “Respect for democratic principles and human rights . . . . underpins the internal and external policies of the Parties”. Last year’s EU/Russian “Road Map for the Common Space of Freedom, Security and Justice” commits the parties “to further strengthen their strategic partnership on the basis of common values, which they pledged to respect”. It cited “adherence to common values, notably to democracy and the rule of law, as well as to their transparent and effective application by independent judicial systems”. I think we need to be honest with ourselves about this. Until the middle of 2003, one could credibly argue that we were moving towards a strategic partnership based on common values. But that is not the case at present, and we should not pretend otherwise. We do not have a genuine “partnership” at inter-State and inter-Governmental level. At this moment, our value systems are diverging rather than converging. What we have is cooperation on specific issues – whether it be Iran or the supply of energy – where Russia and the EU have decided that it is in their interests to cooperate. Do I conclude that we should freeze projects like the Partnership and Cooperation Agreement, and all that stems from it, or consign Russia to the extra-European darkness? No. I think that we should have a franker and more open dialogue about values, which is something that European leaders tend to shy away from. In this respect, Mrs Merkel’s first visit to Moscow was a breath of fresh air after the – how can I put it politely? – kitchen table diplomacy of her unlamented predecessor. She recognised that Germany has very large interests in and with Russia; but she did not trade only in bromide and saccharine, and she made a point of having an encounter, covered by the media, with independent politicians. But we must not exclude Russia, as some wish to do, by seeking to fix an eternal ring-fence around what they call “Europe”. Nor should we exclude Ukraine, Belarus and Moldova. If Turkey, whose accession I personally support, were to join the EU, and if Ukraine, Belarus and Moldova were, at some far distant point, to meet the Copenhagen criteria, could the EU seriously tell them that they were less European than Turkey – or, for that matter, Albania ? But would it be wise, at that far distant point, to entrench the eternal dividing line along the Russo/Ukrainian or Russo/Belarussian border? These are not issues to be decided in the current, or probably the next, decade. But the language we use is important, because it gives a signal. My argument is that we should recognise that Russia is a European nation, indeed Europe’s most populous nation, and shares in Europe’s heritage; and that there is plenty of evidence that Russians aspire to be treated as, and respected by, what many of them would call “normal, civilised Europeans”. We need to show that the door is open to them. At the same time, we need to be patient and realistic about the rate of convergence. After the sudden collapse of Empire and a decade of humiliation and being addressed de haut en bas by the Europeans and Americans, it is hardly surprising that the newly-wealthy Russians are luxuriating in the idea of being an energy superpower, and enjoying telling outsiders with their clipboards and rulebooks to get stuffed. This is a phase. While it lasts, there are limits to what we can achieve, though in some areas, in business especially, the process of engagement and interdependence continues to advance.

Look at the queue of Russian companies considering IPOs on the London Stock Exchange, and think what this means in terms of corporate standards. At some point in the next decade, we shall find ourselves in a different phase. It will not necessarily be easier or better. As I have argued, the end of the oil boom, when it happens, will bring to the surface some formidable problems. Renewed instability and extreme nationalism cannot be ruled out. But there are positive forces at work, too: • • • • •

The intertwining of Russian and Western businesses is one. Generational change – the ascent of the first post-Soviet generation to the top positions, which will gather pace 10-15 years hence, is another. The beneficial effects of travel and the spread of information: Russia now has saturation coverage of mobile phones, but internet access is only at about 20%. The sobering effect of having to face the facts: as one industrialist puts it, the formula to solve Russia’s problem is “$20/barrel x 3 years”. Above all, the fact that Russia will not be able to sustain its power and position in the world by raw materials alone, but only by tapping the huge latent skills of its people and becoming a modern, competitive State and economy.

This is a copy of a public lecture given by Sir Roderic Lyne at the Royal Institute of International Affairs, Chatham House, on Thursday 2 March 2006.

THE USE OF ENERGY AS A POLITICAL TOOL Vladimir Milov Introduction There is mounting evidence that Russia is seeking to use its massive energy resources for political purposes. President Putin makes no secret that he wants Russia to become a global energy superpower. These moves affect western and eastern Europe as many countries are completely, or very largely, dependent on Russian energy supplies. The ability to diversify energy imports for Europe is limited because there are few secure alternative supplies. Energy is likely to remain a key component of EU-Russia relations.

Origins of the Russian ‘Energy Diplomacy’ The discussions on the possibility of Russian use of energy as a tool in international politics began with the move towards greater state interference in the energy sector in 2003-4. Before that period, the Russian authorities, at least officially, had been promoting different types of policies with regard to the energy sector, including further privatization, liberalization, and international integration of the Russian energy sector. In 2000-2001, plans were announced to liberalize prices and privatize large assets in power generation, oil and gas companies. Between 2000 and 2002, several of the major oil stocks were privatized, including ONACO, VNK, and Slavneft. Further privatization plans in the energy sector were announced, and the government had developed promising partnerships with private energy companies with regard to development of new infrastructure projects (e.g. a new oil pipeline from East Siberian city of Angarsk to Chinese Daqing, promoted by oil company Yukos). The change in attitude began in early 2003 when the state refused to privatize the last major state-owned oil company, Rosneft, which was the initial intention of the reformers in the Kremlin. If Rosneft was privatized, the share of state-linked oil companies in oil production would have fallen from just below 15% in 2002 to well below 10%, leading to nearly full private ownership of the oil production sector. But others in the Kremlin were keen to see Rosneft develop as a national oil company. To achieve this goal, it needed to expand as its assets were limited. Such expansion began with the controversial acquisition by Rosneft of the oil company Severnaya Neft. Through this takeover, Rosneft gained support from important decision-makers in the Kremlin. The takeover also led to an escalation of relations between the management of Rosneft and Yukos. At the same time, the political wing of the Yukos attack had been escalating, Rosneft had pursued further attempts to acquire certain oil assets in Eastern Siberia, which had included certain legal disputes with Yukos. A certain momentum had started to develop around Rosneft that had a lot to do with establishment of a more powerful state-linked oil company through a new wave of mergers and acquisitions of private businesses. But the expansion of the state-owned Russian energy sector did not end here. In early 2003, Russian authorities had clearly denied the possibility of constructing a privately owned 1-2.5 million barrels per day (mbd) export oil pipeline from Western Siberia to Murmansk, as suggested by four Russian private oil companies (Lukoil, Yukos, TNK and Sibneft) which were searching for ways to resolve the problem of limited Russian oil pipeline export capacities in order to support oil production and exports growth. The market restructuring of vertically integrated monopoly Gazprom, which was on the reformers’ agenda during the first years of Putin’s presidency, was officially banned by President Putin himself. It was replaced with quite the opposite intention to formally buy back state control in Gazprom. Power sector reform that had included liberalization and privatization plans had clearly slowed down. At the same time, in June-October 2003, the active developments of the Yukos case had shown that more than an individual conflict between Vladimir Putin and Mikhail Khodorkovsky is involved. The economic underbelly of the issue had become evident with the state leading an aggressive campaign on tax evasion claims that led to the seizure of Yukos assets. This occurred in late 2004, when the key oil production asset of Yukos, Yuganskneftegaz, was taken

out of the company through court decision and, after a controversial ‘auction’ in December 2004, ended up under the control of Rosneft. At the same time, the merger of Gazprom and Rosneft had been announced. Although it had never turned into reality, the state had formally bought back the controlling equity stake in Gazprom in December 2005 and now effectively controls over 50% of the company. Since 2004, the state had been officially prohibiting the construction of private trunk oil and gas pipelines, and had openly announced its intention to prohibit foreign ownership of 50% and more in companies developing ‘strategic’ oil and gas fields. During the period 2003-2005, power sector reform and the privatization of power generation assets did not effectively move forward; on the other hand, the state power monopoly, RAO UES, had started to acquire and consolidate new strategically important assets, both internationally (in Georgia, Armenia, etc.) and domestically (power machine building company Silovye Maschiny [Power Machines], 80% of which previously was earmarked to be sold to Siemens Corp., but then the Russian authorities had prohibited this sale under ‘strategic’ considerations, with Siemens being allowed to buy only a 25% stake). In late 2005, Gazprom had bought back the 95% stake in Sibneft. In early 2006, Yukos bankruptcy procedures had started, before which Rosneft apparently bought a large part of Yukos’ debt. Now, during the bankruptcy procedures, it acts as the key creditor of the company – which means that the company is set for more new acquisitions. Some experts believe that individuals linked to Kremlin had consolidated a significant (beyond majority) stake in another oil company, Surgutneftegaz. More opportunities for further oil sector asset consolidation and new asset acquisitions by statelinked companies are being discussed by the markets. State-controlled companies (primarily RAO UES and Gazprom) had more actively started to discuss possible foreign acquisitions worldwide. At the same time, privatization, reforms and engagement of foreign investors on a massive scale, which were the highlights of the economic policy during the first presidential term of Vladimir Putin, had been reversed with the new policy in the energy sector clearly led by the state’s hand. The state had accumulated potential control in the energy sector and had started to demonstrate a willingness to use it for political purposes, both in the domestic and the international arenas

What is Russian ‘Energy Diplomacy’ About? The conservative part of the Russian academic community had started to suggest that energy should become a key factor in Russian foreign policy in 2001-2, when it became evident that high global oil prices were likely to stay for some time. The concept was never precisely formulated, however. It suggested that Russia should use its energy potential in various forms to provide the country with the opportunity to increase its general international status, so that the ‘Russian national interest’, as some put it, ‘would be taken into consideration’. Such a concept is quite vague in itself, since it does not involve a clear definition of what are Russian national interests: is it about development, global integration and competitiveness, or just maintaining some influence or dominance in geopolitics? So far, there have been only a limited number of examples of how specifically energy may be used for international politics, and for what purposes. These examples are too few to judge the real impact of energy on Russian foreign policy, and the real abilities of Russian authorities are too limited to start a broad global geopolitical game. Such limitations include: • certain upstream production constraints, particularly in the gas sector; export infrastructure limitations (traditionally, Russian oil and gas export infrastructure is targeted solely at the European market, and to diversify export direction, massive capital investments are needed), which make Russia still very much a regional, European supplier of energy, rather than a global supplier;

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Russia features heavy and very inefficient domestic energy consumption, which makes the country predominantly a consumer of energy, much more than an energy exporter (Russia annually consumes a volume of hydrocarbons – oil and gas – larger than oil volume that Saudi Arabia is producing); structural and investment constraints: despite high energy potential accumulated under their control, Russian authorities still lack a lot of specific mechanisms of influence over the actions of the energy companies due to corruption and the lack of discipline. Therefore, one can hardly expect such well-coordinated actions on the international oil and gas markets as, for instance, Saudi Arabia is capable of. future investment challenge is also very important, as in both gas and oil, Russia is reaching the period of expiring the potential of matured oil and gas fields, and new massive investments are required to introduce new green fields in remote areas (the same applies to the issue of new oil and gas pipeline construction). Neither state-linked corporations, nor the Russian financial system, which is still very much under-reformed and weak, are ready to finance such projects.

Taking all these limitations into consideration, it is very hard to believe that Russia will be able to play a well-coordinated global energy game targeted to achieve specific strategic goals on the international arena. However, there are clear signs that energy is being considered as a tool for international politics. For instance, on 25 December 2005, Vladimir Putin stated that Russia wanted to become a ‘global energy superpower’. There are very severe doubts that representatives of the Kremlin, including Vladimir Putin, have a clear picture of what exactly they mean by ‘energy superpower’, and, moreover, of what kind of methods they consider are required to achieve this status, and how much resources would be needed for it or what constraints Russia will face in so doing. On the contrary, while using this term (‘energy superpower’), Russian policy makers seem more to be following an intuitive concept of maintaining overall influence or even dominance, in an international arena through the only global asset that they possess, rather than a clear vision of Russia’s future role as an ‘energy superpower’ or how to achieve this. Some recent actions of the Russian authorities (the Yukos takeover, the Gazprom-Rosneft merger, and the treatment of Ukraine) show that they were not particularly well thought out and executed, and were rather driven by instinct and short-sighted calculations. As a result, some of the publicly announced plans have faded in just months (the Gazprom-Rosneft merger), some have evolved into a terribly long affair with no clear ending in sight (the takeover of Yukos assets), and some had resulted in surprising changes of the initial action plan into something completely new (the Ukrainian situation). Generally, there are four basic scenarios for the possible use of Russian ‘energy diplomacy’ in various cases: • using the fact of energy dependence/energy supplies from Russia in order to achieve certain political goals in relations with countries that are purchasing Russian energy; • using the potential opportunity of future supply expansion, primarily through new oil and gas pipeline projects (‘pipeline diplomacy’) to promote certain Russian interests in various countries; • engaging certain investors of the energy importing nations to participate in upstream oil and gas production projects in Russia (i.e. partial access to development of Russian oil and gas reserves) to promote a certain bilateral relations agenda with these energy importing nations; • getting control over the downstream energy assets (distribution and retail sales) in the energy importing nations in order to pursue both commercial and, presumably, political goals. The first scenario tends to be practiced primarily in policy with regard to the post-Soviet nations. But recent threats by Gazprom, to show Europe certain ‘bad results’ in the event European nations did not allow Gazprom’s interest in the European gas market, suggest that the

possibility of political pressure through energy supply may be used more widely than just in the post-Soviet space. It is important that energy supply pressures can primarily be used in the gas sector, since the oil market is much more globalised and Russia appears to be more dependent on Europe as an importer of oil than Europe is dependent on Russia as an oil supplier (Europe has more alternatives for oil imports than Russia has for diversifying the destination of its oil exports). The second and third scenarios appear to be focused on relations between Russia and certain European nations that tend to bypass a more general European context (Germany, Italy, France, to some extent The Netherlands, Austria etc.). These nations have a pre-EU history of energy relations with Russia, and often prefer a more pragmatic bilateral approach to building their relations in Russia than that of the European Union, which often refers to more general ideological concepts and principles (which do not seem to be welcomed by the Kremlin). Such bilateral relations give Moscow more room to manoeuvre in its relations with Europe, seeking advantage from certain disagreements between Brussels and certain European countries. Scenario Three is particularly important in relations with Norway, Russia’s most important competitor in the European gas market. The fourth scenario has been announced as a tool to establish long-lasting political influence in certain post-Soviet countries of ‘strategic interest’ (a clearly political goal somewhat carelessly disclosed in Anatoly Chubais’s ‘Liberal Empire’ program manifesto in 2003, but, in reality, having more deep political roots). But the most recent intentions of the Russian state-owned companies to acquire more downstream assets in Eastern and Western Europe raise concerns as to whether those acquisitions will have certain political consequences. The various possible goals of Russian ‘energy diplomacy’, which may be relevant to particular geographic areas, are considered in more detail below.

The post-Soviet Space and Eastern Europe At present, the post-Soviet space appears to be the key focus of the Russian ‘energy diplomacy’, both in terms of the post-imperial syndrome of the elite and the natural economic causes, such as critical dependence on Russian energy supplies. Recently, Western post-Soviet countries like the Baltic states, Ukraine, Belarus, Moldova, and Georgia had become the most visible target for the new Russian ‘energy diplomacy’. Energy had been considered both as a tool for restoring general Russian economic dominance in the post-Soviet countries (through acquisition of downstream assets), encouraging pro-Russian policies through subsidized prices, and as a tool for political pressure. In fact, Russia does not seem to have any clear long-term strategy on the use of energy for political purposes. Its behaviour is indeed highly unpredictable. The best illustrative cases were the energy conflicts with Ukraine in 2005-2006, and with Belarus in 2003-2004 as well as more recently. Initially, these conflicts had started with continuous attempts by Moscow to get control over Ukrainian and Belarussian gas transit pipelines, which together account for 95% of total capacity of Russian export transportation corridors, and will account for over 65% even if new projects (like the Baltic pipeline and the second line of Blue Stream pipeline) become fully operational. This was the key idea of the Kremlin during 2001-2006, and although it is still presented purely as a matter of economic interest to Gazprom, it is clear that getting control of vital national infrastructure may only increase Russia’s ability to use energy as a political tool. Resistance to these attempts was and still remains quite high. Ukraine had refused to transfer control of its gas transmission system to Gazprom, even under President Leonid Kuchma who had been considered much more loyal to Moscow than the current Ukrainian leaders. So did Belarus, despite remarkably stronger political ties between President Lukashenko and Moscow. After attempts failed to get control over Ukrainian and Belarus pipelines, Moscow took much tougher action.

In January 2004, after failing to reach agreement with Belarus leaders on control of Belarus gas pipeline company Beltransgas, Gazprom switched off gas supplies at the start of the calendar year, arguing that the old contract had expired and Belarus had not accepted new price conditions for Russian gas supply to Belarus. The price issue was always used as a key public explanation; however, during negotiations, Moscow had clearly indicated that increasing gas supply prices would be held back if Belarus became more flexible over the pipeline control issue. The supply disruption brought an immediate response from the Belarus government that had began redirecting gas supply to the wider European market to its domestic (Belarus) market, so disrupting supply to gas consumers in Lithuania, Poland and even Germany. The important lesson from this story is the obvious evidence of the mutual interdependence of Russia and the transit countries: there are no mechanisms for protecting the transit stability of Russian gas to Europe should there be major disagreements between Russia and transit countries. In the Belarus case, Gazprom was forced to switch the gas back on because it had no counter to Belarus government actions to redirect Russian transit gas to Belarus consumers. Legally, Gazprom’s position had been always very weak, since it has been basing all its energy relations on the post-Soviet space on bilateral government-to-government agreements, rather than on a clear international legal regime with a fair system for dispute resolution. From a pure legal point of view, it is very hard to prove that Belarus’ actions violated any legal terms. In January 2006, Russia repeated the gas supply cut-off scenario with supplies to Ukraine. Again, European consumers suffered, but this time on a much larger scale: shortages of gas were felt in a dozen countries, including Germany and Italy. Again, after a few days, Moscow was forced to switch the gas back on as, again, there no mechanisms for protecting transit security in the event of soured relations with the transit country, and Europeans quickly showed their negative reaction to Gazprom’s action. Both cases seem to prove that, first. Russia is quite ready to use supply disruption as an instrument for achieving certain political goals, and, second, that knowing of the difficulty of resolving the long-term problem (reliability of transit), Russia is ready to ignore the long-term consequences of short-term demonstrative use of force. References to the desire to ‘transfer to market pricing’ in relations with the post-Soviet countries seem irrelevant. First, there is no transparent international market price of gas, and the conditions of the long-term wholesale gas supply contracts between Gazprom and Western European countries are so confidential that they cannot be referred to as ‘market prices’ since information on prices under these contracts is not publicly available and cannot be independently verified. Second, by no means can one call a firm price (not the market-linked price formula, but the specific firm price) as stated in a contract between two government-owned companies a ‘market’ price. Third, the ‘weight’ of the importance of transit conditions seem, in reality, to matter much more to Gazprom, particularly in the Ukrainian case: while gas supply volumes make up just about 20 bcm (billion cubic metres) of Russian gas, the transit volume makes up to 130 bcm of Russian gas, nearly all European exports. In this case, transit topics and fees should matter much more to Gazprom than the price of gas supply to Ukraine. This was even officially recognized by one of Gazprom’s deputy CEOs, A.Ryazanov, at a briefing on 7 June 2005 in Moscow, when he described previous agreements with Ukraine as ‘very advantageous’, despite low supply prices, because Gazprom had been provided with one of the lowest gas transit fares in Europe. So, if the issue was about prices, the best approach should have been negotiation and legal dispute resolution. But Moscow had demonstrably ignored the opportunity for negotiations, insisting on tripling gas supply prices to Ukraine. When Kiev showed some signs of being willing to negotiate price increases, Russia then lifted the previous price by 4½ times. The Kremlin clearly wanted to flex its muscles. The crisis was temporarily settled on 4 January 2006 when a

controversial agreement was signed between Russia and Ukraine, under which both parties agreed to transfer certain rights to a mysterious intermediary, Rosukrenergo. Gazprom had given Rosukrenergo the opportunity for re-export of 15 bcm of gas imported from Kazakhstan and Uzbekistan, and which was completely owned by Gazprom beforehand. Rosukrenergo, under a new agreement, had also received very advantageous conditions for transit and use of underground storage facilities on Ukrainian territory. There were also prospects for access to Ukrainian end-user supplies. The ownership structure is unclear, but it appears that, one way or another, certain top policy makers in both Russia and Ukraine are somehow involved as beneficiaries of the company. This is another form of ‘political engagement’ which is probably part of broader tactics about the post-Soviet space. Through such individually beneficial agreements, the Kremlin can ensure that some top politicians in neighbouring countries are under some control by Moscow. The agreement did not settle the fundamental problem as the level of prices that has been set expires on 1st July 2006, and there is pressure from various Ukraine politicians calling for review of the agreement. Rosukrenergo’s access to Ukrainian gas end-users proceeds slowly, many important issues in Russia-Ukraine gas relations have not actually been touched by the agreement, and, in general, the lack of mutual trust between the two countries cannot create a sustainable agreement based on individual interest. So, one can expect further turbulence in gas relations between Russia and Ukraine, particularly anticipated political developments such as Ukraine’s expected membership of NATO this autumn. The Belarus situation also appears to be approaching a second crisis points. When Russia pressed Ukraine, Moldova, Georgia, the Baltic states and Armenia to accept increased gas export prices (to above $100 per bcm at the end of 2005), Belarus was seemingly treated differently. Gazprom had agreed to retain a gas price of about $47 per bcm, considered by many as a sort of ‘political loyalty reward’. But, after the presidential elections of March 2006 which re-elected Alexandr Lukashenko, Gazprom demanded that the gas supply price for Belarus should rise to above $200 per bcm from 1st January, 2007, and that control of Beltransgas should be transferred to Gazprom. It is difficult to believe that Lukashenko would accept such conditions, and Gazprom again lacks any mechanism for protecting European gas transit in the event supplies to Belarus are cut. Therefore it is reasonable to expect another gas supply crisis in the winter of 2006-2007, possibly with supply disruptions to European gas consumers.

Lessons There are several important lessons from the Ukraine and Belarus cases. -

Russian ‘energy diplomacy’ can have a wide range of targets, depending on the opportunity for influence/dominance in each case. In the cases of Ukraine and Belarus, the ultimate goal seemed to have been gaining control of vital national infrastructure such as pipelines, and capturing certain influential local politicians by involving them in certain affiliated businesses and using them as lobbyists for Russian interests. However, if the ultimate goal turns out to be unachievable, a switch to more tactical goals (such as increasing prices) is possible; the negotiations with Ukraine reveal that there was something more involved than just a desire to increase prices. Moscow had avoided all the steps needed to increase prices from a purely commercial point of view; the political agenda is always in the background, but, as appears from the Belarus case, cannot always be clearly identified. It appears that in and of itself, influence probably matters more than achieving certain political goals; Russian authorities appear ready to use ‘energy muscle’ (supply cutbacks, in the first place) to demonstrate its capabilities, and, through that, achieve political influence, ignoring some more fundamental and long-term consequences of such actions.

Russian energy ‘diplomacy’ towards Eastern European nations also remains tense, influenced by a background of uneasy political relationships, but so far, they have experienced relative stability. Most Eastern European nations are not critically dependent on Russian energy supplies

(for instance, Poland and the Czech Republic have high indigenous coal production); they have not been subsidized with prices to the extent comparable with the post-Soviet states. And Russian oil producers have not resorted to political pressure. For instance, purchases of downstream oil assets by private Russian companies (the Petrotel refinery in Rumania and Burgas refinery in Bulgaria by Lukoil, and Slovakian Transpetrol and Lithuanian Mazeikiu Nafta by Yukos) had not led to any examples of politically motivated use of them. Similarly in Ukraine and Belarus, where private Russian oil companies (Lukoil, TNK and Slavneft) had established control over certain downstream assets, including refineries - but such control was never used for political purposes. It is possible that instances of exerting control over energy assets for political purposes might occur if some Russian state-linked oil companies would acquire some of these or other assets (for instance, Slovakian Transpetrol and Lithuanian Mazeikiu Nafta can be transferred to some Russian state-linked companies in the course of Yukos’ bankruptcy). But relations with Eastern European nations did not completely escape ‘energy diplomacy’. For instance, worsening relationships with Poland led to abandoning construction of the second line of the Yamal-Europe gas pipeline through Belarus and Poland (the first line started in 2005 with about 30 bcm capacity). Reportedly, Gazprom was not able to negotiate increasing its stake from 48% to 50% in pipeline operator Europolgas, as well as achieving the desired level of gas transit tariffs through Poland. So the Kremlin picked a new favourite, the Baltic gas pipeline that will bypass Poland, Belarus and other transit countries. The economic and environmental importance of the Baltic gas pipeline, and the fact that it should bypass Polish territory, has added a certain negative tone to Russian-Polish relations. It looks like more asset acquisitions in Eastern Europe are planned by Russian state-linked companies, such as Gazprom in the first instance, in countries like Hungary and Bulgaria. If these acquisitions take place, there could be opportunities for political pressure to be applied.

Western Europe Western Europe traditionally consumes large volumes of Russian energy resources and there is little prospect of oil being used as a political weapon. Oil is a globally tradable commodity and the Russian oil sector is still dominated by private companies; even the state companies have a vital interest in supplies of Russian oil. It is difficult to imagine that they would use their limited capabilities for any type of blackmail. With gas, the situation is different. Pipeline gas supplies, which still dominate in the European market and will continue to do so in the foreseeable future, give much less flexibility to the market, and to control over gas reserves, Russian positions are much stronger and there are not many alternatives. Russia accounts for about 30% of global gas reserves, with approximately another 30% controlled by Iran and Qatar. Other major non-European current and potential pipeline gas suppliers are Algeria and Turkmenistan. That is basically not a great spectrum of alternatives for diversifying gas supply, and indeed, all these countries represent regions of instability and risk. There is, of course, an opportunity to develop imports of liquefied natural gas (LNG) from overseas. However, it takes construction of costly infrastructure to regasify LNG in Europe, and there are certain limitations to development of the LNG market itself. It cannot therefore be considered as a potentially full substitute for pipeline gas. For several decades, Russia (and its predecessor, the Soviet Union) was a reliable supplier of pipeline gas, with pipeline supplies being de-politicized and regarded as a vital part of ensuring the country’s export revenues. However, as the ‘energy diplomacy’ concept started to emerge, there were worrying signs that Russia might use gas as a political weapon. The Ukrainian gas crisis described above raised serious concerns; so too did the statement by Gazprom’s CEO Alexei Miller before EU ambassadors in Russia on 18 April 2006 when he said that ‘the attempts to limit Gazprom’s activity in the European market may lead to no good results’. Miller underlined that Russia has plenty of new market options for exporting its gas (including

deliveries to the U.S. and Asia Pacific markets), and it might turn to these options in the case of Europe not ensuring that conditions in its gas market were favourable enough for Gazprom. It is not clear what exactly drove Miller’s comments: some experts believe that they were fuelled by rumours that the British authorities might impose restrictive legislation to prohibit Gazprom from acquiring major equity stakes in British gas market operators like Centrica; some (including the semi-official explanations by Gazprom officials) felt that the reason was the intention of the European Commission to impose gas trade restrictions on monopoly gas suppliers in the European market. However, the message was clear and has been taken very seriously. It is indeed important to note that Miller uttered those words at a meeting with a group of senior EU political representatives who were summoned to Gazprom’s headquarters to listen to this - but not in a commercial meeting. In reality, these threats appear to be too distant (it takes time, money and favourable market conditions for Russian gas to reach the U.S. and Asia Pacific markets, even in minor volumes). But who knows what may be on Gazprom’s mind in the future. This situation is a particular matter of concern as major Russian gas fields are depleted and rapidly declining in production. There has been so little done in the last 15 years to introduce new major gas fields (like those of the Yamal Peninsula) that a serious gap between Russian gas production and domestic and international demand is to start around 2007-2008. What are the implications of the Russian ‘energy diplomacy’ on Russian-European relations and what can be possibly done about it? Is Russian ‘energy diplomacy’ a matter of concern? The short answer is yes, although the situation has not passed the point of no return. On the EU side, it has not been very successful in developing and implementing a viable energy policy towards Russia. First, there has been insufficient unity among European nations and the EU on that issue. Russia has been busy establishing separate energy relations with European countries (like Germany, Italy and France) and their energy companies. This is an intentional approach, one of whose goals is to divide European views on policy towards Russia and to strengthen Russia’s positions. It is important to understand that sustainable energy relations between Russia and Europe, based on solid principles and agreements rather than on separate bilateral contacts, would strategically benefit the interests of both Europe and Russia. Therefore, united European actions, when it comes to energy relations with Russia, are very important. Another issue concerns the messages to Russia on energy, both their substance and how they are delivered. Previously, the EU had concentrated on a straightforward approach to imposing certain narrow-focused demands on Russian behaviour, instead of engaging Russia into a broader energy market integration (the best-known example of such a demand-led approach is the ‘Lamy package’, a set of requirements for Russian WTO accession imposed in autumn 2003). The language used in the ‘Lamy package’, and the lack of recognition of a broader set of mutual energy issues, did much to complicate the positions of the pro-European part of the Russian energy establishment. At the same time, no proper efforts had been made in terms of both explaining to Russia the meaning of European energy policy (e.g. ‘diversification of imports’ and gas market liberalization) and somehow engaging Russia in joint energy policy. Europe preferred to speak in the language of demands. However, it only weakened the positions of those in the Russian society who had been promoting a broader coordination of energy policy with Europe (the proEuropean part of the Russian decision-making community) and strengthened the positions of those who insisted that the European approach was hostile to Russia, that the goal of ‘diversification of energy imports’ was to reduce Russia’s energy export potential, and that gas market liberalization was harmful to the interests of Gazprom. The only international legal act involving both Europe and Russia has been the Energy Charter Treaty (ECT) that was ratified by most countries in the Eurasian community - except Russia and

Belarus. Many European officials and experts still call for Russian ratification of the treaty as one way of engaging Russia in an international commitment in the energy area. However, at this stage, ECT appears to have lost all its attractiveness in terms of being the universal energy statute on the Eurasian space: it was signed in 1994, long before the subsequent waves of EU enlargement, and its initial interim framework no longer matches reality. It was intended to be a document ensuring energy stability and involving a large number of countries in political and economic transition that had not yet identified their political future. Now it mostly regulates relationships between the enlarged EU, a small number of countries whose EU membership is being discussed, and Russia. Severe harm to the ECT ratification process was inflicted by Europeans when the EU introduced a ‘regional integration clause’ to the draft Transit Protocol to the ECT (it should be said that the ECT norms, for most part, are parallel to those of the GATT-WTO agreements, and only the Transit Protocol, which regulates issues of energy transit, is a unique international legal document, since neither GATT-WTO agreements, nor any other international legal acts govern the transit issues which are vital to the international energy trade) Article 20 of the proposed draft Transit Protocol stated that, in the EU member countries, the Transit Protocol norms are not valid because internal EU regulations are applicable. Article 20 had promised that the regime provided by the internal EU rules on transit were to be ‘at least equal or more favourable’ than those of the Protocol. However, such an approach was considered by many in Russia as a double-standard approach, which gave the whole ECT the status of a secondary document, valid only for the non-EU countries. Russia refused to sign the Transit Protocol in December 2003, and, since then, basically all the ECT process has largely lost any meaning for Russia. It should be said that the EU and Russia definitely need a new international legal framework to address the issues of energy supplies and transit, particularly regulating the reliability of vital energy supply volumes on a long-term basis. But such a framework should be developed on a totally new basis as the ECT no longer presents a suitable format. A new legal framework between Russia and the EU is also needed to promote a mutually favourable regime for direct investment in the energy area. Cross-ownership schemes and direct investment by European companies in Russian energy production assets may lead to better energy security in Europe. But it is important to ensure that Russian companies applying for direct investment in the European downstream energy market would preferably be from the private sector and not the state-dominated part of the Russian energy sector as this would reduce the risk of interference between energy and politics. However, worrying signs should not be ignored. The scenarios of European action towards Russian ‘energy diplomacy’ should vary, depending on the behaviour of the Russian authorities themselves. A general approach should be based on international legal solutions and promotion of broader market integration and mutual investment. But if the Russian authorities were have a more aggressive approach to energy and politics, the clear message should be that opportunities for Russian state-led energy companies in the European market may be limited. It is also important to note that development of the Russian ‘energy diplomacy’ tool would not have been possible had Russia continued to develop as a market economy, with private businesses expanding their share in the Russian energy sector and leading the way to new projects and strategic decisions. Therefore, if domestic energy reforms do not proceed but are substituted by more state domination in the energy sector, the risk of politically-motivated use of energy supplies will remain high.

Conclusion Despite definition problems and the lack of clear goals, Russian ‘energy diplomacy’ is here to stay as part of the new political landscape. Recent developments in the Russian energy sector, with broader state control, abandonment of reforms and closing doors to international

investment, provide Russian authorities with a wide range of tools to implement such ‘diplomacy’. Although a potential threat for Europe, this trend has not yet passed the ‘point of no return’, and Russia still has a chance to choose responsible behaviour in the international energy markets. It would be a very fortunate turn of events if, at this point, Europeans were able to convince Russia to join some mutually respectful international legal framework regulating energy supply and transit, with a particular stress on the long term reliability of vital energy supply volumes. There should also be a legal framework between Russia and the EU on a mutually favourable regime for direct investment in the energy area. Such a framework could also involve transit countries like Belarus, Ukraine and Moldova, the Caucasus and Central Asian states, which would help establish a much more sustainable legal framework between Russia and these countries than the existing bilateral government-togovernment relations. A transfer from a bilateral to a multilateral approach to relations between Russia and those nations is critical for a stable energy environment in the Eurasian space. In this regard, turning to the ECT as a document regulating all those issues would probably be counter-productive, taking into account its history. It is no longer useful to promote its ratification by Russia, since ratification would not be possible, and attempts to convince Russia to ratify the ECT may weaken the positions of those representatives of the Russian elite that insist on a more pro-European approach in Russian policies. Europe should also concentrate on explaining to Russian authorities the meaning of the European energy policy and the advantages that it gives to Russia. In this respect, the question of direct Russian investment in European energy downstream assets should be studied more carefully, analyzing the different impacts that might result from downstream energy asset acquisitions by private and state-linked companies. A unified European position in any energy dialogue with Russia that would minimize Russia’s opportunity to ‘divide and rule’ is vital. Finally, the EU should make clear to Russia that it expects it to act responsibly as a supplier and that any attempts to use blackmail will be counter-productive.

European Values and Russian Society Eberhard Schneider Introduction This year Russia takes the chair of the European Council in addition to that of the G8. Hence it is appropriate to question what Russia's position is concerning European values which it professes to share in with the European Union (EU). In the "Road map for the common space of freedom, security and justice", which the EU and Russia agreed at their summit in Moscow on 10 May 2005, the common values are defined as democracy, the rule of law and independent judicial systems. Russia already undertook to respect these values, and especially human rights, when it joined the Council of Europe in 1996. In his most recent message to the Federal Assembly on 25 April 2005, President Putin affirmed that relations between the EU and Russia were based on common values, including respect for human rights and democracy, the rule of law and a free market economy. The problem that we are now experiencing with Russia is not that Russia does not acknowledge these common values, or that it has renounced them or does not, in truth, want to respect them, but that it evidently has a different grasp of them. The gap between the EU and Russian interpretations of these common values is so huge that it gives the impression that Russia has indeed renounced these European values.

Western Criticism What is the essence of Western criticism of Russia’s lack of respect for European values? Various actions by the Kremlin, which when considered individually can partially be explained by Russia’s background, give the impression that democracy is being systematically dismantled. For example: •

• • • • • • • • • •

In the Russian State Duma, there is no longer any real opposition because the government party has a comfortable two-third majority. This is the result of the parliamentary election held on 7 December 7 2003, which was described by the OSCE as free but not fair as far as the election campaign was concerned. The hurdle that that has been set for entry into the next parliament has been set higher at 7%, making it highly unlikely that a truly liberal party will be elected into the State Duma again. The direct mandates have been abolished. Now only candidates on party lists may run for parliament and they do not even have to be members of their respective party. Voters’ associations are not eligible for parliamentary elections. By raising the requirements for the registration of parties with regard to member numbers and national coverage, the formation of regional parties has been made impossible. The direct election of the regional governors as introduced by Yeltsin has been abolished in favor of candidates proposed by the President and elected by the regional parliaments. Under the control of the Kremlin, the main medium, television, has been neutered as all three national stations are no longer permitted to broadcast opposing views. The trials of Michael Khodorkovsky and his co-partners, and the break-up of the Yukos Group, show that in Russia, we must speak in terms of "managed justice". In Chechnya, human rights are being violated in the guise of federal political responsibility. The new law pertaining to non governmental organizations is seen as an attempt to control and steer the development of civil society to prevent an “orange” or any other kind of revolution in Russia. In an imperial manner, Moscow interfered in the internal politics of the Ukraine.

Kremlin Response The Kremlin responded to this Western criticism of Russian “managed democracy” by stating that in view of its historical, geopolitical and other peculiarities, Russia alone decides how freedom and democracy can be implemented, and under which conditions this process will take place and how long it will last. Western reproaches about the lack of respect for European values are felt to be a restriction of Russia’s sovereignty and possibly even viewed as a threat. When it is stressed that the adoption of European values is not possible in Russia, this overlooks the fact that these values also take different forms in European countries. Second, the above statement indirectly implies that the Russian people are not capable of democracy. Those in power in the Kremlin evidently have no trust in the unimpeded course of democratic development, a free mass media or a vibrant civil society. They do not want to prevent all these developments because they do comprehend that they are part of a modern political system. But they do wish to control and steer them as a “managed democracy.” They fail to understand that a genuine democracy must be able to evolve freely and that this is to the advantage not only of the people, but also the entire political system. Putin has never experienced a democratic system from the inside. He appears rather to consider democracy and market economy as instruments and is not genuinely convinced of their values. After the years of chaos under Yeltsin, the Kremlin seeks to create a strong state and cannot understand that this is inevitably contradictory to democracy. The Kremlin has no experience of how democratic processes work in Western countries and fails to see they do not jeopardize the stability and security of the state. On the contrary, they lend it inner strength. During the wide debate in Germany last year about Russia and its values, some voices demanded an end to the policy of self-interest vis-à-vis Russia and urged that Germany should insist on European values being upheld. Their non-observance should be publicly admonished, even if it were at the cost of good economic relations. The problem of values culminated in the question: “Keeping silent for gas?” Others voiced the opposite view: the value issue should no longer be given such emphasis because it makes practical cooperation more difficult. They claim that it is much better to concentrate on common interests and to ignore the values issue. However, if a policy of self interest is pursued, it will be impossible to go beyond a certain level of cooperation.

A European Power Russia wishes to be accepted as a European power. On 5 February 2006, in his speech at the Security Conference in Munich, deputy head of government and Minister of Defence Sergei Ivanov, whom some regard as the successor to Putin in March 2008, stressed that irrespective of its Euro-Asian geographical position, Russia was a European power and that its economic and political interests focused on Europe. Europe is the partner for the modernization of Russia. For various reasons, neither the United States, nor Japan nor China can fill this role. Hence the only solution is Modernization by Europeanization. Therefore, even if only for economic reasons, Russia cannot ultimately avoid practicing the European values. If Russia is pressed to implement European values, it will not go down well in Russia. Russia should not respect European values just in order to do the West a favour, but because it is good for Russia and for its people.

Russian Attitudes on Values What is the position of Russian society regarding European values? A 2004 study by the central Russian consulting centre in Vladimir, supported by the Friedrich Ebert Foundation, and based on 2359 interviews, produced some interesting findings: 58% of Russians consider democracy the best political system, but only 26% felt that a democratic system has become established in

Russia today. Almost half of all Russians would like to live in a democratic state in the near future. What do Russians think democracy is? 51% believe that equality before the law and social equality are particular characteristics of democracy; for 41%, it is the removal of the harsh divisions between rich and poor; for 32%, it is elections in a multiparty system; and for 29%, it is political rights and liberties. Only 17% of Russians associate independence of the media with democracy. For Russians, democracy is first and foremost a system to assure legal and social equality. The involvement of citizens in the political decision-making process is considered only of secondary importance. As far as they are concerned, the rights that promise social security are more important than civil rights and liberties. In the opinion of almost two thirds of those questioned, it is the President who guarantees the democratic development of the country, followed by the political parties and the government. Only one fifth think that the media can fulfill a ‘guarantee’ function, and only 14% count on the State Duma delegates to do so. On a scale of -0.5 to +0.5, people have greatest faith in the President (+0.44), followed by the Church (+0.21). The people distrust political parties, rating them at -0.33, followed by the media at -0.32 and the members of the State Duma at -0.23. So it is impossible to talk of institutional stability in Russian because rather than trusting institutions, the only trust is in the person of the President who cannot, of course, stay in office forever.

What Model? If the economic relations between the EU and Russia become closer and more varied, the EU will not adopt the Russian legal and economic order; it will be the other way round. Russia will have to and will want to adapt to the European legal and economic order. If European firms invest more in Russia in the longer term, they will need legal certainty and independent courts. The separation of powers will then reinforce a different kind of state power, namely the parliament. For parliament to control the executive branch effectively, it needs to be democratically elected. This, in turn, will require a party system that represents a variety of divergent political, economic and social interests. It will also require an independent media. In Moscow, there are evidently thoughts of decoupling the economic and political aspects of transformation. Pinochet’s Chile, South Korea and China are seen as role models. These examples of successful market economy reform in an authoritarian political system do not come from Europe, but from Latin America and Asia. In these countries, there never was real democracy. This is not true of Russia. Russia is a European country. Even if under Yeltsin, “democracy” appears to have signified “anything goes”, the country certainly did get a taste of it. In the long run, decoupling economic and political reform cannot work as a market economy presupposes a pluralistic democracy and vice versa. Indeed, economic and political reforms are mutually dependent. One can endeavor to ignore these interrelationships for a certain time. However, once the gap between economic and political reform has reached a certain point, either the political system must adjust to the economic system or the economic system will be curbed in its development. Russia cannot, however, afford the latter if it seeks to become a great power again, since today, great powers are largely defined in economic terms. According to the transformation index prepared by the Bertelsmann Foundation, those states with a functioning democratic system have greater success in achieving a market economy than less democratic regimes. Furthermore, the view that the difficult transition to a market economy can only be realized in an authoritarian political system is an arrogant attitude, as it presupposes people are unwilling and/or unable to support market economy reforms. And it is short-sighted to boot. The people are more likely to support reforms that hurt if these are explained, and it is made clear how necessary they are. The people are more likely to support crucial reforms if they are made

aware of their importance and are not forced down their throats as in the old Tsarist and Soviet style. If authoritarian tendencies take root, they can easily develop a dynamic of their own. In the absence of a democratic system, who is then going to be able to curb them? Who would be able to call a halt, and on which criteria, and ensure a return to democracy?

Conclusion The dispute as to whether it is necessary to have a policy of interests or one of values with Russia is ultimately futile because anyone who wants to conduct an intensive policy of interests must ultimately be led by common values.

Managed Democracy in Russia Alexander Duleba Introduction The term “managed democracy” has become a widely accepted characterization of the political regime in Russia, especially under Vladimir Putin’s presidency. It has been frequently used in political discourse since the end of December 1999, when Boris Yeltsin publicly named Vladimir Putin acting president and his successor. President Yeltsin and his narrow circle of leviathans thus “elected” a successor before national elections had taken place. In this way, the state apparatus and those loyal businesses that had control of the electronic media received direction from the Kremlin as to whom they should support during the 2000 presidential elections. The way in which the Kremlin managed both the parliamentary elections in 1999 and the transfer of the presidency from Yeltsin to Putin poses a key question – is there a need for elections at all if their function in Russia is nothing but the legitimization of prior decisions made in the Kremlin? Is Russia still a democratic country or can one speak about the beginning of a new era of dictatorship? In January 2000, Vladimir Tretyakov published his seminal article entitled “Diagnosis: Managed Democracy”.1 He argued that Russia did not enter the period of managed democracy on 31 December 1999, when Yeltsin named Putin as his successor, but a long time previously. In particular, he referred to the way in which the Kremlin managed the presidential elections in 1996. According to Tretyakov’s definition, managed democracy is a democracy (as there are elections, voters have alternative options, there is media freedom, leaders are changing), but it is corrected by the ruling class (or rather that part of it that holds power). Bearing in mind the developments over the last six years, one can conclude that the political system in Russia has

evolved to be even “more managed” than it was on the eve of Putin’s presidency. Managed Elections

In the course of the last 16 years, Russian citizens have been given 12 opportunities to use their democratic right at the polls. They voted three times in nationwide plebiscites (1991, April and December 1993), four times in presidential elections (1991, 1996, 2000, 2004), and five times in parliamentary elections (1990, 1993, 1995, 1999, 2003). Considering the number and frequency of electoral acts, Russia could be regarded as one of the most democratic countries in the world in terms of applying the principle of direct democracy. However, the outcome of all Russia’s elections and plebiscites has never been contrary to the will of the ruling elite. This “democratic mystery” first became possible thanks to the nature of the new electoral system and represents one of the most notable features of political transformation in post communist Russia. Together with natural gas and oil, this form of electoral system became one of Russia’s most marketable export commodities, particularly to the post Soviet countries. The electoral methods applied against Kremlin opposition over the last 16 years to ensure a specific voting outcome comprise the following two basic components – the administration’s resources, and control of the electronic media. If one adds to this weak civil society, a loyal business community and the absence of an independent judiciary (all due to Russia’s difficult political and historical legacy), one has the main features of post-communist Russia’s political system. Since the collapse of the communist regime, none of the Kremlin’s opponents has ever been able to mount an effective political challenge to its power.

Nezavisimaya gazeta, January 13, 2000.

A Turning Point It was the political crisis in the autumn of 1993, followed by adoption of the new constitution of 12th December 1993, that awakened the Kremlin to the idea of managed democracy. The new constitution changed the political system of Russia from one with parliamentary republics to a powerful presidential one. The constitution of 1993 authorizes the Russian president to issue decrees that are legal norms applicable to the whole state. In addition, a presidential veto on a law adopted by the parliament can only be overruled by a qualified majority of MPs. Parliament on the other hand cannot veto presidential decrees. Thus, the Russian president became not only the head of executive power, but also received legislative competencies. The concentration of power in the hands of the president undermined the transformation of post communist Russia from a totalitarian communist regime to a “simple democracy”, requiring the separation of executive, legislative and judiciary powers as a fundamental principle. As a consequence, the role of parliament has been marginalized, and the government has become “independent” of party politics - but is completely dependent on the presidential administration. All together, the constitution of 1993 significantly reduced representative democracy in Russia and resulted in a hybrid semi-democratic regime. Russia has thus taken a different path of post communist transformation to that in the former communist countries of Central and Eastern Europe.

Differences Between Yeltsin and Putin Essentially, there are two significant differences between the ways Yeltsin and Putin have operated on the basis of the 1993 constitution. But these differences have more to do with style, rather than use of constitutional rules. The first concerns the treatment and role of Russian business in politics; the second, the nature of the political actors challenging the regime. Under Yeltsin’s presidency, Russian big business needed Kremlin support because of its political interests. Under Putin’s presidency, it has to support the Kremlin because of its economic interests. The major challengers to the Yeltsin regime were leftists and nationalists led by the Communist party of Russia and its leader Gennadiy Zyuganov. But challengers to Putin include almost all parts of the Russian political spectrum – leftists, liberal democrats and some nationalist groups. When full scale electoral manipulation was applied for the first time against Yeltsin’s opponents during the 1995/1996-elections, “democrats” in the West and Russia shut their eyes as to how the Kremlin prevented a “communist’ come back”. When the same methods, however, were applied against Kremlin opponents during the 1999/2000 election, they evoked “shock” followed by a wave of massive criticism from both Russia and abroad. For the first time since the collapse of communism, a non-communist opposition, led by the Fatherland–All Russia party, challenged the Kremlin’s power during the 1999/2000 elections. The party led by Moscow mayor Yuriy Luzhkov and ex-prime minister Yevgeniy Primakov united the powerful leaders of the Russian regions and became the first real non-communist political force in post communist Russia with enough potential to win a democratic election. For this reason, the party became the major target of Kremlin electoral manipulation. The Kremlin has shown it does not differentiate between communist and noncommunist opponents.

Reducing the Power of the Regions After 2000 Under Putin’s presidency, policies and institutional changes have increased the level of “democracy management” and power concentration in the hands of the president. These “reforms” have been aimed at eliminating the two powerful and “independent of the Kremlin”

political actors that emerged during the Yeltsin’s presidency, namely regional elites and oligarchs. During his first term (2000-2004), Putin introduced a territorial-administration reform that significantly reduced the power of the Russian regions. Governors of regions (oblasts) and counties (krays) had been directly elected since 1996 and therefore enjoyed a political legitimacy independent of the Kremlin. They became powerful actors in Russian politics as they took control of regional state administration and business. In order to weaken them, Putin’s administration created seven federal regions whose heads were appointed by Putin and they take priority over the elected regional leaders. This has affected representation in the upper chamber of parliament (Council of the Federation) as the directly elected heads of the regional governments are no longer automatically members of the upper chamber. Putin’s administration had clearly learned the lesson that the upper chamber was a place where the powerful opposition “Fatherland–All Russia” party had formed prior to the parliamentary elections of 1999. It took two years after the 1999 elections for the Kremlin to fuse its own political party “Unity” and the former “Fatherland – All Russia” opposition party, resulting in the “United Russia” party. The United Russia party won the 2003 parliamentary elections, gaining a majority in the lower chamber of parliament (State Duma). The party then became an important element for Kremlin control of the central and regional parliaments. The outcome of Russia’s 2003 parliamentary elections – under the conditions of managed democracy and still building on its system of electoral manipulation – bore a strong resemblance to the former one-party system of communist times. After the Beslan tragedy of 2004, President Putin initiated other changes to deepen Kremlin control of the regions. There are no longer any direct elections for regional leaders. Instead, the President nominates the candidates for governors and the regional parliaments that are controlled by the Kremlin’s United Russia party have the option of either confirming or rejecting the president’s nominations.

Reducing the Power of the Oligarchs The war against the regional elites was accompanied by a parallel war against the oligarchs. The first targets in this war were media magnates Boris Berezovsky and Vladimir Gusinsky as the Kremlin wanted control of the electronic media before the 2003-2004-elections. Within the first two years of Putin’s presidency, the Kremlin deprived Berezovsky of ORT and TV6, and Gusinsky of NTV. As a result, all nationwide TV stations were under Kremlin control, either directly or indirectly, through businesses loyal to Putin. The outcome of the December 2003 parliamentary elections, followed by the March 2004 presidential elections, prove that control of the electronic media is the key to the whole system of managed democracy in Russia. The flashpoint of the Kremlin’s anti-oligarchic war in Russia was the “showcase” trial of Mikhail Khodorkovsky and the Yukos Company. One of the most successful Russian oil companies was driven to bankruptcy and its owner condemned to nine years in prison for tax fraud. The takeover of private property by the (mis)use of state organs, such as the general prosecutor, police and intelligence services etc., and the decision of an “independent” court, showed a new dimension to the Kremlin’s management functions. In an interview with the New York Times, Putin explained the anti-oligarchic war in the following way: “We have a category of people who have become billionaires, as we say, overnight. The state appointed them as billionaires. It simply gave out a huge amount of property, practically for free… Then as the play developed, they got the impression that the gods themselves slept on

their heads, that everything is permitted to them”.2 In other words, the state must rectify that mistake and enforce justice.

Civil Chamber After the Beslan tragedy of September 2004, the Kremlin applied a completely new system of managed democracy by creating the structures of a civil society from the top. The new institutional improvement was the so-called Civil Chamber that brings together the VIPs of Russian public life e.g. artists, scientists, sportsmen etc. The Chamber is expected to exercise civil control over parliament and state administration, as well as to channel public opinion upwards. The idea is to improve top-down interaction between the state and citizens. It consists of 150 members, of whom the first group of 40 members was appointed directly by the president. The president’s appointees then selected the other members of the Chamber. The leaders of the Federation’s territories (republics, oblasts and krays) have also started to create their own civil chambers at regional level. At the same time, the Russian parliament has amended the law on NGOs in order to strengthen state control over their activities. In this way, the Kremlin has created its own “virtual” and manageable civil society. Under Putin’s second presidential term, the Kremlin’s managerial creativity has reached new heights. The Council on National Projects has become a new establishment with competencies previously exercised by the government. It is responsible for redistributing additional state budget revenues coming from Russia’s energy exports (thanks to high oil prices on the world market). The money goes to public services e.g. education, health etc, but this has created dual directions in the Russian public sector. The constitution says nothing about two governments or a “third civil chamber” of the parliament. These parallel institutions do not have their roots in the constitution, but in the Kremlin.

The European Union and its Eastern Neighbours The post communist transformation of Russia in 1993 took a different path to that in the former communist countries of Central and Eastern Europe. Moreover, the Russia ’93-style of regime has impressed many authoritarian leaders in post communist Europe who have sought to copy it, more or less successfully, in their home countries. Alexander Lukashenko successfully imported it to Belarus in 1994 and Leonid Kuchma to Ukraine in 1995/1996. Vladimir Meciar, however, failed to import it to Slovakia in 1994/1998. Since the political crisis in 1993, Russia not only became an alternative post-communist model for the former Eastern block, but also a foreign policy alternative to NATO and the EU for authoritarian regimes in the region. No one could doubt Russia and the EU have completely different understandings as to what was going on in Ukraine after the 2004 orange revolution, and in Belarus after the 2006 presidential elections. Russia, Ukraine, Belarus and Moldova are geographically European countries and pose a political challenge to the EU on its own doorstep. Neither Russia, the Ukraine, Belarus nor Moldova are distant countries in terms of geography, history or culture. They are European countries and EU policy towards them must be a “European” one, an inclusive policy leading to the unification of the European continent. This does not mean that all European countries must eventually become EU members. A “united Europe” is a Europe of democracies that recognize common political and economic values. This implies a special and privileged place for East European countries in the EU’s foreign and security policy that is not comparable with the EU’ relations with other regions in the world. The EU will never become a real international actor if it fails to be an actor in Europe. One can argue 2

The New York Times, October 4, 2003.

that a new EU Eastern policy is a basic precondition for revitalization of the post 2004enlargement process, and the EU’s relations with Russia are at the heart of this challenge.

Policy Recommendations In order to address this challenge, the EU should consider changes in its existing policies towards Russia. These should include: 1. Common Space of Freedom, Security and Justice (CSFSJ): the EU-Russia dialogue within the CSFSJ does not include a dialogue on democracy. It focuses on the Justice and Home Affairs agenda; however, a common space of freedom is impossible without a common space of democracy. The EU should aim at expanding the CSFSJ agenda to institutionalize its democracy dialogue with Russia. 2. Consultations on Human Rights (CHR): the EU-Russia summit of November 2004 decided to launch consultations on human rights issues. However, the state of human rights in any country depends on its adherence to the rule of law, which further depends upon the nature of the political regime. In order to make the CHR with Russia more effective the EU should address the root of the problem, rather than its consequences. Therefore, it would be reasonable to expand the CHR agenda to include democracy issues and perhaps institutionalize it into a permanent body also open to NGOs from both the EU and Russia. 3. Enhanced Partnership Agreement (EPA): in 2007, the EPA is expected to replace the Partnership and Cooperation Agreement (PCA), which has been the basic framework treaty between the EU and Russia since 1997. In Article 1, the PCA states that its objective is to strengthen political and economic freedoms, to support Russia’s efforts to consolidate its democracy, to develop its economy and to complete the transition into a market economy etc. However, the PCA does not identify mechanisms as to how the “democratization” objectives are to be implemented. If the EPA is to replace the PCA, it should remedy this shortcoming. 4. A Regional Democracy Initiative (RDI): the development of East European countries over the last 16 years has shown that the successful transformation of Russia is one of the prerequisites for democratization and political stability for the whole region. Lukashenko’s regime in Belarus would not have been able to function since 1994 without Russia’s direct political and indirect economic support. The EU-Russia’s growing disagreements on democracy in post Soviet countries requires a regional democracy dialogue between the EU and the region, as developments in the Ukraine after the 2004 orange revolution and in Belarus after the 2006 presidential elections have shown. 5. Democratic conditionality: Russia is a strategic partner for the EU when it comes to energy security, especially natural gas. But this cuts both ways as the EU is the main trading partner for Russia, and its state budget depends on income from energy exports to the EU markets. The EU could apply the principle of conditionality in its relations with Russia if it were convinced that Russia might be helpful in dealing with Lukashenko’s regime (freeing political prisoners etc). 6. European Neighborhood and Partnership Instrument (ENPI): within the ENPI for 20072013, the EU should give priority to promoting the development of civil society in Russia. 7. Redefining the EU’s assistance priorities: In order to strengthen democracy in Russia, the EU should aim at assisting those institutions and actors who are being undermined by a regime of managed democracy. This implies EU assistance to help improve representative democracy e.g. the role of parliament and political parties; support for genuine NGOs and a “non-virtual” civil society; the maintenance of a free and independent media; the creation of an independent judiciary and the rule of law; adequate legal protection of private property against state interference; and finally the promotion of anti-corruption measures and public education to explain that in a democracy, the role of the state and its administration is to serve its citizens and not vice-versa.

Judicial Independence in Russia Professor Bill Bowring Introduction On 19 May 2006, Russia will take over as chair of the Council of Europe, an organisation that it joined 10 years ago. The member states of the Council of Europe will be closely watching developments in Russia relating to democracy, human rights and the independence of the judiciary. Since the collapse of the communist system in 1991, there have been a number of significant judicial reforms, and Russians are making far greater use of the civil courts than during Soviet times. But recent developments in the judicial sphere are worrying and the EU needs to be aware of these concerns.

The First Phase Joining the Council of Europe and ratification of the treaty covering the European Court of Human Rights (ECHR) in 1998 can be seen as pivotal moments in the process of legal and judicial reform in Russia. Two distinct phases can be distinguished. The first phase began with the publication of the Conception of Judicial Reform on 24 October 1991, after several years work, by Sergei Pashin3, Sergei Vitsin4 and others, and the 22 November 1991 enactment of the Declaration of the Rights and Freedoms of the Person and Citizen by the Supreme Soviet of the RSFSR. The Constitutional Court, created as the USSR reached its death-throes, started work in January 1992, followed by the 26 June 1992 enactment of the Law “On the Status of Judges of the Russian Federation”, and the 27 April 1993 enactment of the Law “On Complaining to Court About Activities and Decisions which Violate the Rights and Freedoms of Citizens”. On 16 July 1993, a great experiment, led by Sergei Pashin, began with enactment of the new Part X to the Criminal Procedural Code (UPK), which introduced jury trial, as an experiment, in nine Russian regions.5 The dissolution, by force, of the Supreme Soviet and suspension of the Constitutional Court in October 1993 appeared to throw the whole process of reform into doubt. But the new Constitution of the Russian Federation, adopted by (dubious) referendum on 12 December 1993, contained many human rights provisions taken straight from the ECHR and UN instruments. The Constitutional Court was revived on 24 June 1994, with a new law which the judges themselves had drafted, plus an increased complement of 19 judges. It was a positive omen that continuity was retained, with all the pre-1993 judges keeping their positions, including the controversial former Chairman – and now once again Chairman - Valerii Zorkin. The Constitutional Court has consistently begun to refer to and apply the jurisprudence of the European Court of Human Rights.6

his career is described below now professor, indeed a general, in the University of the Ministry of the Interior, in Moscow 5 For analysis of these developments see F. J. M. Feldbrugge Russian Law: The End of the Soviet System and the Role of Law (Martinus Nijhoff Publishers, Dordrecht, 1993); Gordon Smith Reforming the Russian Legal System (Cambridge University Press, 1996); Peter Solomon (ed) Reforming Justice in Russia, 1864-1996. Power, Culture, and the Limits of Legal Order (M. E. Sharpe, Armonk and London, 1997); Peter Solomon “Courts and Their Reform in Russian History” in Peter Solomon (ed) Reforming Justice in Russia, 1864-1996. Power, Culture, and the Limits of Legal Order (M. E. Sharpe, Armonk and London, 1997) pp.3-20 6 W. B. Simons “Russia's Constitutional Court and a Decade of Hard Cases: A Postscript “ Review of Central and East European Law, 1 September 2003, vol. 28, no. 3-4, pp. 655-678(24) 4

The Second Phase The second wave of reform, which has taken place under President Putin, has been impressive: the three new procedural codes enacted from 2001 to 2003 (Criminal7, Arbitrazh (Commercial)8, and Civil9), as well as radical improvements to Yeltsin’s Criminal Code of 1996, 257 amendments in all, which were enacted on 8 December 200310. These, together with more controversial amendments of 17 December 2002 to the Laws “On the Constitutional Court”, “On the Judicial System of the Russian Federation”, and “On the Status of Judges in the Russian Federation”, and the new Law “On the Advokatura and Advocates’ Activities” of 3 June 2002, are the main products of the 2001-2003 reforms, driven through the Russian Parliament by Dmitrii Kozak of the President’s Administration.11 The Council of Europe had substantial expert input into all of this new legislation. At first glance, it would appear that between them, Presidents Yeltsin and Putin had followed in the footsteps of the great legal reforms carried out by Tsar Aleksandr II in 1864: creating a system of justices of the peace, installation of jury trial throughout Russia with the exception of Chechnya; enhanced judicial status; and a much reduced role for the prosecutor in criminal and civil trials.

Lack of Judicial Independence However, the judiciary, which is the key to the success of these reforms, suffers from a serious lack of independence from the state. Take, for example, the findings of an investigation carried out in 2002, funded by the UK Government's Department for International Development (DFID), under the supervision of the University of Nottingham's Human Rights Law Centre12. The study particularly noted the fact that judges, still miserably paid at that time, were highly susceptible to pressure from the authorities: "A somewhat worse situation is observed when it comes to disputes between administrative structures and individuals. Thus, the Leninsky district court of the city of Yekaterinburg that usually considers grievances against city mayor’s regulatory acts, rules in favour of an individual complainant in less than 30% of cases. Suspicions regarding what lies behind these statistics are regularly expressed. According to human rights activist V.D. Guslyannikov of the Republic of Mordovia, “for our courts, the telephone call by a bigwig is above any law”.

Judicial Corruption Another serious problem is corruption. The Chairman of the Constitutional Court of the Russian Federation, Valerii Zorkin, has highlighted this bluntly. On 24 October 2004, he marked the 13th anniversary of Russia's judicial reform by saying that the country's judicial system was, in many aspects, worse now than it was in the Soviet era, the leading daily newspaper Izvestiya reported on 25 October.13 He said that judges are often corrupt and that professional standards among them are low. "I am convinced that if we do not force through a legal reform in the country, then all the other reforms will almost certainly fail. And soon.” 7

into force on 1 July 2002 into force in September 2002 9 into force in January 2003 10 Federal Law No.162-FZ “On Amendments and Modifications of the Criminal Code of the Russian Federation” 11 For analysis of these more recent developments, see Peter Solomon and Todd Foglesong Courts and Transition in Russia. The Challenge of Judicial Reform (Westview Press, Boulder Colorado, 2000); P. B. Stephan “Review of Peter H. Solomon, Jr. and Todd S. Fogelsong Courts and Transition in Russia: The Challenge of Judicial Reform” Political Science Quarterly, 1 April 2002, vol. 117, no. 1, pp. 165-167(3); Peter H. Solomon “Judicial Power in Russia: Through the Prism of Administrative Justice” Law & Society Review, September 2004, vol. 38, no. 3, pp. 549-582(34) 12 Independence of Judicial Authorities in Russia: Practices and Procedures of Responsibilities (November 2002), in the possession of the author. See also http://www.mhg.ru/english/1B30796 13 see http://www.hri.org/news/balkans/rferl/2004/04-10-25.rferl.html#11 8

He said that loopholes and exceptions in existing laws create opportunities for corruption and must be eliminated as much as possible. This was followed, not surprisingly, by a sharp response by the Supreme Court, to which most of the judges whom Zorkin says are corrupt are subordinated. The Supreme Court said that it intended to compel Judge Zorkin to justify his allegations, the daily Vremya novostei reported on 28 October. The daily reported that a Supreme Court letter to Zorkin obligates him to "submit to the presidium of the Supreme Court studies that he cited during his interview and evidence about any known facts of corruption in specific courts and by specific judges”. The daily commented that the Supreme Court's request is the latest development in a longstanding dispute between the two courts. In a commentary published in Izvestiya on 29 October 2004, Zorkin wrote: "I am defending the public authority of the Russian judicial system. One can only defend that authority by acknowledging the truth and by asking the proper questions about the nature of the phenomenon."14 This problem has also been noted by the President of the Russian Federation. In his Address to the Federal Assembly on 25 April 200515, President Putin said: “Finally, if part of Russian society continues to see the court system as corrupt, there can be no speaking of an effective justice system in our country.” This exchange is symptomatic of a state of affairs in which any politicised trial – and indeed any trial – is likely to be prejudiced by influence and corruption. The problem is structural. The Chairman of any Russian court has extraordinary power, and is often described as a Tsar-Bog (Tsar and God) of the court16. Not only does the chairman decide which cases are heard by which judges, he or she also plays the most important role in deciding whether a new judge is given a permanent post after the initial three year appointment, and whether the judge will be promoted or even keep his or her position. Court chairmen always know whom to trust for the conduct of cases that matter to the authorities. When a judge refuses to cooperate, there may be severe personal consequences. This is especially true of the Chairman of the Moscow City Court, which is the court of appeal for all the district courts of Moscow. Two examples of the power of the Chairman are the cases of the Moscow City Court Judges Sergey Pashin, who was the subject of disqualification proceedings by Yegorova’s predecessor, Zoia Korneeva (known as “Iron Zoia”), on the basis of minor procedural violations that served as a pretext; and Judge Olga Kudeshkina, who refused to heed the advice of her Chairman, Olga Yegorova, to follow the desires of the prosecutor in a particular case.

Judge Pashin From 1987, Sergei Pashin worked on proposals for judicial reform in Russia, was an author of the Concept of Judicial Reform, as noted above, and in October 1991, was appointed ViceChairman of President Yeltsin's Council on Judicial Reform. He drafted the first law for Russia's new Constitutional Court, as well as a model Criminal Procedural Code for the CIS (Commonwealth of Independent States). He was awarded the distinction of "Distinguished Jurist of the Russian Federation". In early 1994, President Yeltsin proposed Pashin for the post of Head of the Department of Legal Reform in the GPU (General Legal Administration of the President). But instead, Pashin was sacked. In 1996, he was appointed a judge of first instance in the Moscow City Court. His acquittal rate was 8%, as against the 0.8% of his fellow judges. In October 2000, he was removed from his position by the Qualifications Commission of the Moscow City Court, on grounds of procedural irregularity, and appealed to the Qualifications Commission of the Supreme Court. It was widely recognised that the real reason was his outspoken criticism of injustice.17 14

see http://www.hri.org/news/balkans/rferl/2004/04-10-29.rferl.html#09 At http://president.kremlin.ru/eng/speeches/2005/04/25/2031_type70029_87086.shtml 16 This phrase is in very common usage to describe the position of the court chairman 17 See Sarah Karush “Judging the Country's 'One Judge'” Moscow Times July 8, 2000, http://www.cdi.org/russia/johnson/4394.html##9; Sarah Karush “Liberal Judge Pashin Fired from Moscow Court” Moscow Times 13 October 2000 at http://www.themoscowtimes.com/stories/2000/10/13/00915

Judge Olga Yegorova There are good grounds for believing Judge Yegorova to be a judge with close relations to the Kremlin, and regarded as reliable. It has been reported that her candidacy for the post of Chairman was, for undisclosed reasons, refused by the relevant commission for personnel policy of the President (President Putin makes such appointments). Under normal circumstances, Yegorova should only have been able to apply for the post again after a year. But this was overruled in her case, after, it is said, interventions by former FSB (previously known as the KGB) officers now in leading positions around President Putin. The fact that her husband is General Yegorov of the FSB may have helped.18

Judge Olga Kudeshkina A recent scandal involving Judge Yegorova is that of her former colleague Judge Kudeshkina, who had worked as a Federal Judge for 20 years.19 Judge Kudeshkina was allocated the prosecution appeal against the acquittal of the well-known entrepreneur Mr Zaitsev. Before the trial started, she said the prosecutor in the case, Dmitry Shokhin20, had told her she needed to render a guilty verdict. She recalls telling Mr. Shokhin she would listen to the arguments before making a decision. The trial, which began in late May 2003, quickly deteriorated. Four days later, Ms. Kudeshkina was summoned to the office of her boss and Moscow’s chief judge, Olga Yegorova. As they talked about the trial, Ms. Yegorova telephoned a man she identified as Russia's deputy Prosecutor General to discuss the case. Judge Kudeshkina was dismissed in May 2004. This account has been confirmed in a number of Russian newspaper reports21. It has been pointed out that in 2001, eight judges resigned from Moscow City Court, while four were sacked; and in 2002, a further 10 judges resigned. Another four former judges had complained by December 2003 about the fact that Moscow City Court “acts under instructions”, and that Judge Yegorova interferes in the court with the objective of inhibiting the exercise of justice.22 These complainants were retired judge Nataliya Shershova, who served for 12 years at Moscow City Court and supports Judge Kudeshkina’s contention that Moscow judges come under pressure. She described Judge Kudeshkina as a principled person. Judge Alla Kasimova, retired judge of the Presnenskii Inter-Municipal Court in Moscow, told the radio station “Ekho Moskvy” (regarded as the most liberal and critical independent radio station in Moscow, and also highly popular) that she also had been removed through the action of Judge Yegorova. Her dismissal and criminal prosecution followed her own protest against the dismissal of Judge Kupryanova, former acting chairman of that court, again through Judge Yegorova’s actions, without any reasons being given. She pointed out that Judge Yegorova is able to pressurise or dismiss any judge in Moscow. Finally, the former judge of the Solntsevo Inter-Municipal Court of Moscow, Judge Yelena Kureneva, told the same radio station that she had also been summarily removed after she complained that she had come under pressure from, amongst others, Judge Yegorova.

print.html; David Hoffman “Russian Judicial reform is fired” Washington Post 18 October 2000, at http://iskran.iip.net/review/october00/3wp.html 18 Igor Korolkov “Boss of Justice: Scandals, which more and more affect the colleagues of Judge Yegorova, are engulfing the present chairman of the capital’s justice system.” Moscow News No.16 of 2004 (30 April 2004), at www.mn.ru/issue.php?2004-16-29Aleksei Lyutiy makes similar points in an article in the weekly Bolshoi Gorod (Big City) at www.bgorod.ru/print/article.asp?ArticleID=49525 19 Guy Chazan “In Russia's Courts, A Judge Speaks Up - And Gets Fired. Political Pressure, Corruption Taint Post-Soviet Justice; Prosecutors Wield Clout. The Trials of Ms. Kudeshkina” Wall Street Journal 5 August 2004 20 who is also the prosecutor of Khodorkovsky, Lebedev and Krainov 21 Igor Korolkov ibid 22 See www.newsru.com/Russia/03Dec2003/4more_print.html

On Thursday 7 October 2004, the appeal of Judge Kudeshnika against her dismissal came before the civil division of the Moscow City Court, to be chaired by Judge S. E. Kurtsinsh, allocated to the case by Judge Yegorova, who was also a witness in the case. Judge Kudeshkina objected on the grounds that in the circumstances, Judge Kurtsinsh could not be impartial, and applied to the Chairman of the Supreme Court of the Russian Federation for her case to be transferred to any other court. When the case went ahead at Moscow City Court, she asked for an adjournment pending a reply. When this was turned down, she refused to participate further23. The journalist Leonid Nikitinski reminds his readers that “no-one should be the judge in their own case”. Nevertheless, the Moscow City Court rejected her application. On 11 March 2005, she took the brave step of writing an open letter to President Putin, in which she informed him of the situation with the judicial system in Moscow, which was “… connected with grave violations pf the rights and freedoms of the citizen, non-observance not only of Russian legislation, but also the norms of international law, as well as with problems with the independence of the judiciary and judicial power”.24 On 27 April 2006, it was reported that the European Court of Human Rights has given priority to Judge Kudeshkina’s complaint of serious human rights violations in her case.25 The Court has already demanded that the Russian government provide the case documents by 19 June 2006.

Judge Olikhver It is important to distinguish the cases of these and other independent-minded judges with trial judge Natalya Olikhver in the trial of Aleksei Pichugin, a YUKOS employee.26 She was appointed to the case in summer 2004. Only a few years previously, she was a judge in the Zheleznodorozhnaya District Court of the city of Ulyanovsk, far from Moscow. She was known as an extremely stern judge, with an enormous number of guilty verdicts on her account, and astonishing the public with her disproportionality between crime and punishment. It was also said that she did not take bribes, but unhesitatingly followed the instructions of her superiors. In 2001, her career took a sudden turn upwards. She became a judge of the Ulyanovsk Oblast Court (the highest court of Ulyanovsk Oblast), something very rare for a provincial district court judge. Observers said that she owed her rapid rise to her special relationship with the former Chairman of the Ukyanovsk Oblast Court, and, at that time, Chairman of the Higher Qualification Collegium of Judges of Russia (a very senior and influential post in Russia as a whole) Anatolii Zherebtsov. Commentators add that the materials of the cases heard by Judge Olikhver have for some undisclosed reason been hidden away by the present Oblast Court Chairman, Judge Lysakova. It was Judge Zherebtsov, in his capacity as Chairman of the Higher Qualification Collegium and then living in Moscow, who nominated Olga Yegorova for the post of Chairman of the Moscow City Court. As noted above, Judge Yegorova’s appointment caused a scandal, not least because there was no alternative candidate. After her appointment, Judge Yegorova began the search for new candidates for appointment to the Moscow City Court. She turned for advice to Judge Zherebtsov, who recommended Judge Olikhver from Ulyanovsk. On 30 November 2002 by decree No. 1379 of President Putin, Natalya Ivanovna Olikhver was appointed a judge of the Moscow City Court.

See Leonid Nikitinskii “I refuse to participate in the trial. The case in which the Chairman of the Moscow City Court is involved is heard by the very same court” Novaya Gazeta (New Newspaper) no.75, 11 October 2004, http://2004.novayagazeta.ru/nomer/2004/75n/n/5n-s24.shtml 24 See http://www.newsru.com/russia/11mar2005/bezzakon.html 25 See www.newsru.com/russia/27apr2006/kudeshkina.html 26 The information which follows is taken from the article by Sergei Ryabushkin, “The career of a judge. Destiny leads a person through life, but he is not always her boss.” Rossiya newspaper 10 March 2005

One and a half years after her appointment, in the summer of 2003, she received a “vedomstvenniy” (employment-related) apartment in a new brick-built block of flats in Bakuninskii Street in Moscow, the most prestigious type of building in a prestigious area. This was the second such flat she had received in her career; she had already received a flat in Ulyanovsk and “privatised” it to her personal ownership, as permitted by Russian law.

The Poddubniy/Babkov scandal A further scandal surrounds Judge Olikhver’s involvement in another notorious case, that against Igor Poddubniy and Yevgenii Babkov, who were charged with fraud and contraband in cigarettes, and remained in custody since 2001.27 They have more recently, on 13 February 2005, been acquitted by a third jury, and Judge Olikhver presided over the third trial. Mr Poddubniy spent 5 years and 2 months on remand in custody.28 The case started in June 2004. The first jury was discharged three days before it was due to deliver a verdict - and the jurors have stated publicly that their verdict would have been an acquittal. They complained to the press and the prosecutor’s office that one of jurors had been offered money to deliver a guilty verdict. On 2 November 2004, the trial started again with a new judge and new jurors. They were not informed as to what had happened to their predecessors. The Foreman of the second jury, Yevgenii Danilov, later told the press that the prosecution did not appear to know the case and produced no evidence against the accused. The second jury decided unanimously that the accused were not guilty. According to Leonid Nikitinskii, there is strong circumstantial evidence that the jury’s retiring room was “bugged”, since the prosecutor knew their verdict before they pronounced it in court. What happened next was unprecedented: the jurors of both the first and second juries wrote an open letter to President Putin, and the letter was published on the web site of the Moscow Helsinki Group.29 The letter was signed by seven jurors from the first jury and five from the second, half the total number of jurors. Each gives their full names and occupations – a real cross-section of society. They wrote that they fully realised the unpleasantness they could expect as a result of their public stand. The jurors re-stated their belief that there was not a shred of evidence against the accused. They complained that after the acquittals at the end of the second trial, the Prosecutor’s Office started criminal investigations against them and tried to discredit them in the mass media. Moreover, the prosecutor Maria Semenenkova had appeared on television complaining that the jury had acquitted fraudsters, as if the prosecutor, not the jury decided guilt or innocence. The jury’s acquittal was overturned by the Supreme Court on 22 July 2005. On 29 July 2005, as the accused were about to be released, Judge Olikhver, who had been appointed to hear the third trial, held a special session to re-arrest them for the third trial. Mr Babkov had in fact been at liberty since his acquittal. In their open letter to President Putin, the jurors reported this action of Judge Olikhver and stated that they saw this as her “grovelling” (the word chosen by the jurors) to the Prosecutor’s Office, and as an insult to justice and to each of the jurors. They added that they had grounds for not believing Judge Olikhver.30 It is reported that during the

Leonid Nikitinskii “The jurors become undisciplined. In the Moscow City Court already no one knows how to fight them” Novaya Gazeta No.11 14 February 2005; Zoya Svetova “Putting off the verdict: In Moscow City Court the scandalous case of contraband is being heard by yet a third jury.” Moskovskiye Novosti 13 January 2006; Rashid Ismailov “Do we need such an institution?” Moscow News No.2 of 2006, 20 January 2006, at http://www.mn.ru/issue.php?2006-2 – 43; 28 An interview with Mr Poddubniy appears in Novaya Gazeta, No.15, 3 March 2006, at http://2006.novayagazeta.ru/nomer/2006/15n/n15n-s12.shtml 29 See http://www.mhg.ru/news/5FD6831 30 See again http://www.mhg.ru/news/5FD6831, where the letter is set out in full

third trial, Judge Olikhver once again refused every application made by the defence, and moves were made to recuse her from the trial.31

Conclusion Despite the many, often positive, judicial reforms carried out by Presidents Yeltsin and Putin, there are increasing fears that judges are fast losing such independence as they had begun to enjoy. A critical survey of the 13 years of judicial and legal reform in Russia, and 10 years since accession to the Council of Europe, gives rise to the conclusion that everything has changed but, that in many ways, nothing has changed. While the penitentiary system has undoubtedly undergone significant reform for the benefit of detainees since transfer from the Ministry of the Interior to the Ministry of Justice in 1999, the great wave of legislation from 1991 to the present does not seem to have changed the engrained practices of the Russian judiciary, especially deference to the executive. It is true that people in Russia are using the civil courts in far greater numbers than was the case in Soviet times, and this growth in applications increases year on year. There is a high success rate, especially where applications are made against local authorities. But while independence of the judiciary is not guaranteed in practice, it is hard to see how Russia will be able to comply with its primary obligation both to the Council of Europe and to the people within its territory and under its power: to secure for everyone the effective protection of their rights and freedoms.

Zoya Svetova â&#x20AC;&#x153;Putting off the verdict: In Moscow City Court the scandalous case of contraband is being heard by yet a third jury.â&#x20AC;? Moskovskiye Novosti 13 January 2006

NGOs in Russia Christian Neugebauer Introduction It is difficult to write about Russia without writing about the world because when you think about Russia, you are forced to think about the world. It is even more difficult to write about civil society because writing about it means writing about the ancient yearning of mankind for liberty, equality, fraternity! This is a yearning that, for example, found triumphant, self-confident expression in the French Revolution. Civil society represents the cradle and origin of the modern state with its separation of powers, citizens’ and human rights and markets characterized by free enterprise. At present, European civil societies – and civil societies elsewhere – are catching breath because the powers-that-be are rapidly raising levels of repression. Civil society has become global, as those in power in China and Russia have noticed and are now trying to curtail. This may be in the form of compliant help from Google in China or by restricting international networking, as is happening in Russia.

Decline of Civil Society in Russia Putin euphemistically calls his system one of “managed democracy”, a concept with which he likes to curry favour in Europe. Russians are gradually seeing their basic democratic rights being reduced, resulting in growing alienation between rulers and ruled. There is considerable evidence to support this view from NGOs such as Greenpeace, Amnesty International, MEMORIAL, the association of soldiers’ mothers or by Anna Politkovskaja, the journalist. How did this occur? The first phase was the de facto divestment of parliament’s modest parliamentary rights and reinforcement of the power of the premier, hence of Putin, thus virtually voiding the separation of powers. The occasion to do so was (and remains) the war in Chechnya. It is used as grounds for the annulment of democracy and human rights and, by means of a deceitful ideological ploy, this law has been characterized as the "war on terrorism”. The second phase was the reorganization of the economic oligarchy, accompanied by the destruction of the free enterprise that was just beginning to take shape and which has now fallen victim to a process of neo-nationalization; this is being watched with great concern in Europe. The third phase ultimately means the destruction of civil society and democratic public life. The media were bought up or extinguished in 2004 and 2005; they have been threatened with reprisals and many critical journalists have died or had to flee into exile. Now the media have been brought into line and are under firm state control, or rather have become state property via various companies closely associated with the state. A further factor was the new legislation relating to NGOs and civil organizations that was passed in the winter of 2005 and which came into force in April 2006.

NGOs According to surveys, there are currently one million very varied NGOs, associations and civil society organizations in Russia. This immense variety and can be best characterized as being merrily chaotic. You can find anything from debating clubs and youth organizations to all kinds of humanitarian relief organizations, environmental protection groups and, above all, human rights organizations. The latter are without doubt the most active at present and the focus of state attention, expressing almost all social concerns many times over. According to their own assessments, approximately 20 million people are thus “organized" and networked.

However, their economic basis is extremely small because there is virtually no market for donations and almost all active NGOs depend on payments from outside Russia or on discreet assistance from ex-oligarchs. On the one hand, this gives rise to a strong international orientation and global perspective, as is documented in many websites that are published in at least two, and frequently, even three languages. On the other hand, there is a very strong local commitment. This means that instead of funds, often time is invested or rather donated. Another characteristic is the form that the networking assumes: it emerged over decades under the conditions of a repressive dictatorship and as a result, many are trained in the art of survival. Opinions and facts are exchanged so fast and efficiently that it is almost impossible for outsiders to comprehend it, but there are evident weaknesses in the organization of more complex joint forms of action. For such things, a culture of organization is lacking as are, above all, the resources, though this can improve very rapidly. In urban areas, the NGOs are very strongly networked with one another: the best example is the “Narodnaja Assambleja”. Information prevails over action. Since 2000, Putin has made many endeavours to gain control over the NGOs. For example, in 2001, a so-called “Citizens Forum” (Grashdanskij Sjesd) was to be set up, in which, for instance, MEMORIAL was to be represented, but not the Moscow Helsinki Group. Owing to the special networking characteristics described above, this attempt at “Divide et impera” failed and Putin soon found himself facing a unified front. This prompted him to quickly stop this process since it was not going to bring the desired success. There were repeated attempts at new variants, such as the establishment of a chamber for NGOs in 2004/5, on which MEMORIAL commented as follows, stating that these endeavours were hardly likely to meet with the acceptance of the NGOs: “All attempts to concentrate this dialogue in a single organ will merely end in an imitation of this dialogue. A chamber that is integrated into the system of state power will leave the state simply talking to itself”. A further attempt to discipline the NGOs came in 2002 when Putin introduced a general liability for the NGOs to pay taxes by eliminating the distinction between profit and non-profit organizations. This meant that all income – donations and allocations – became taxable. The essential goal was to gain control of the flow of foreign money or to stop it altogether. It is a sword of Damocles which is still hanging menacingly over all NGOs. The third and last blow finally came in 2005 when the NGO Act was passed, which has now been in effect since 18 April 2006. This law introduced a kind of NGO supervisory authority. MEMORIAL managing director Tatjana Kasatkina comments: “This will bring about the destruction of Russian civil society. The planned NGO supervisory authority will not only decide about the approval of the organizations, but also about their closure. To date, it was necessary to have a court order for the latter. Furthermore, the NGOs must inform the authority of its activities and finances.” According to Nina Tagankina, managing director of the Moscow Helsinki Group: “Now we can stop our work towards building up a civil society. All of our time will be eaten up filling out the papers for the Federal Registration Authority.” The International Centre for Not-for-Profit Law analyzes the main weak points as follows: • • •

Establishing a burdensome registration procedure for all non-commercial organizations (NCOs), placing them at a disadvantage compared to for-profit legal entities which benefit from a simple and efficient registration process. Providing unlimited authority to the registration authorities to audit the activities and finances of all NCOs and to request any documents from them. Requiring all informal groups (without the status of legal persons) to inform the government authorities of their existence.

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Prohibiting foreign citizens and persons without citizenship, if not permanently residing on the territory of the Russian Federation, from establishing public associations and noncommercial organizations, or from becoming members or participants in such bodies. Outlawing all existing representative offices and branches of foreign non-governmental organizations (NGOs) and requiring foreign NGOs to register as local public organizations.

In the eyes of many, Putin is using this law to try and curb the NGOs and civil society through bureaucracy and this clearly amounts to an infringement of international standards.

Dilemma Russian NGOs should now move from networking information to networking action, and build up their ability to engage in campaigns. The dilemma is clear: If one does not keep to the unjustified but prescribed statutory framework, ostensibly legal grounds and a basis are created for closing down funding sources as well as rebellious NGOs. Undoubtedly some NGOs will go along with registration, which one can hardly blame them for, but it may cause the NGO world to split long term and Putin would seem to have then achieved his chief objective. One alternative would be to intentionally fill out the forms incorrectly and in excess of the requirements, hence confronting bureaucracy with its own weapons. Another way would be for all NGOs to refuse to fill them out at all. The NGOs in Russia will undoubtedly take the right decision as they have so often in the past under extremely difficult conditions.

Conclusion The ruling class in Russia appears not to have understood that without democracy, without a strong civil society, without self-confident, free enterprise, and without committed NGOs, there will be no sustainable social and economic progress and no viable market. In this situation, Europeans must ask themselves what they can do to help civil society in Russia.

EU-Russia Review Contributors DR FRASER CAMERON Acting Director, EU-Russia Centre Fraser Cameron is a former European Commission advisor and well-known policy analyst and commentator on EU and international affairs. He is Director of EuroFocus-Brussels, an Adjunct Professor at the Hertie School of Governance in Berlin, and Senior Advisor to the European Policy Centre (EPC) in Brussels. Dr Cameron was educated at the Universities of St Andrews (MA) and Cambridge (PhD). He was a Research Fellow at the University of Hamburg (1973-74) and a Lecturer in International Relations at the University of Kent (1974-75). From 1975-89, he was a member of the British Diplomatic Service, serving mainly in Germany, and covering economic, political and press affairs. He joined the European Commission in 1990 as an advisor in external relations, and was closely involved in a range of policies including the common foreign and security policy (CFSP), enlargement, transatlantic relations, the Balkans, Asia and global governance. From 19992001, he was Political Counsellor at the EU delegation in Washington DC. Dr Cameron was seconded to the EPC in 2002 as Director of Studies. Dr Cameron has lectured widely around the world and has been a visiting professor at several universities. He is the author of several books and articles on the EU and external relations: recent books include An Introduction to European Foreign Policy, The Future of Europe and US Foreign Policy after the Cold War (all published by Routledge). SIR RODERIC LYNE Sir Roderic Lyne spent 34 years in the UK’s Diplomatic Service and was Britain’s Ambassador to Russia from January 2000 until August 2004. He now works as a consultant & special advisor to the BP Group and to HSBC Bank. He was the UK’s Permanent Representative to the World Trade Organisation, the UN and other international organisations in Geneva from 1997 until 2000. From 1993 to 1996, Sir Roderic was Private Secretary to Prime Minister John Major, and responsible for foreign and European affairs, defence and security. He continues to visit Russia frequently since retiring from the Diplomatic Service in December 2004. He firmly believes that a closer relationship between Russia and Western Europe would be in the interests of both, and that this will be achieved through honest analysis and realism about the timescale and the difficulty of the transition which Russia is making.

VLADIMIR MILOV Vladimir Milov has been President of the Moscow-based independent Institute of Energy Policy since 2003, following his voluntary resignation from his position as Deputy Minister of Energy of the Russian Federation in late 2002. Mr Milov is one of the most well-known energy, infrastructure development and regulatory policy strategists in Russia, having played a leading role in the development of Russian gas, electricity

and railway sector reforms, Russian energy and transport strategies, electricity sector reform and subsoil regulation legislation. In 2002-2005, Mr Milov was a member of the Strategy and Reform committee under the Board of Directors of Russian power monopoly RAO UES. Mr Milov is the author of numerous concept and analysis papers related to Russian energy and infrastructure problems. He contributes as a regular columnist to the daily Russian business edition Vedomosti, and, as a periodical author, to foreign publications such as The Wall Street Journal and The Financial Times. EBERHARD GEORG SCHNEIDER Professor Schneider has been Senior Researcher at the German Institute for International and Security Affairs of the “Stiftung Wissenschaft und Politik” (Foundation for Science and Politics), a German government and parliament think tank, since 2001. He has also been Supernumerary Professor for Political Science at the University of Siegen since 1995. He was previously Senior Researcher at the Federal Institute for Russian, East European, and International Studies in Cologne, and has held a number academic posts specializing in Soviet and East European studies. He is a member of the International Political Science Association (IPSA), the German Association for Political Science, the German Association for Foreign Policy, and the German Association for Russian and East European Studies

ALEXANDER DULEBA Alexander Duleba has been Director of the Research Centre of the Slovak Foreign Policy Association since May 2000. Prior to this, he held positions as a research fellow at the Research Center of the Slovak Foreign Policy Association (1995–2000), the Slovak Institute for International Studies at the Ministry of Foreign Affairs of the Slovak Republic (1993–1995), and the School of Arts, Department of Social and Political Sciences at the Pavol Jozef Safarik University in Presov (1990–1993). He is a member of the Academic Board of the School of Political Sciences and International Relations, University of Matej Bel in Banska Bystrica, and is a member of the international advisory board for the Journal of International Relations and Development (JIRD), the official journal of the Central and East European International Studies Association. He was previously Honorary Foreign Policy Adviser to Ivan Gasparovic, President of the Slovak Republic, from January 2004 to April 2006, and to Rudolf Schuster, President of the Slovak Republic, from January 2003 to June 2004. Mr Duleba sits on a number of advisory boards of the School of Arts, Comenius University in Bratislava, and International Issues (Medzinarodne otazky), a scientific journal issued by the Slovak Institute for International Studies. WILLIAM S. B. BOWRING Professor Bowring is the founder and Academic Coordinator of the EC/EIDHR (European Initiative for Democracy and Human Rights) funded European Human Rights Advocacy Centre (EHRAC), based in London and Moscow. He is also Senior Criminal Justice Law Expert for the European Commission/British Council project “Reforming the Procuracy in Georgia”.

He has acted as an expert and/or rapporteur for the Council of Europe’s “Education Policy and Minorities” project in six CIS countries; the International Bar Association; the Institute for Human Rights; the European Union Policy Advice Programme project “The Development of a System of Administrative Justice in Russia”; the Human Rights Audit of Serbia and Montenegro; the International Commission of Jurists (ICJ); the Centre for the Independence of Judges and Lawyers; Mission to Moldova; and the ‘PMR’, the UK Government Department for International Development Know How Fund, the EU TACIS Project "Developing Local Democracy and Self-Government in the Russian Federation"; the World Bank; the Council of Europe; and the Russian-European Trust for Welfare Reform, among others. He is a barrister; a member of the Bar of England and Wales; Executive Committee Member, Bar Human Rights Committee; a member of the Society of Legal Scholars; International Law Association (British Branch) Committee on Theory and International Law; International Bar Association, Institute for Human Rights; a Fellow and visiting lecturer at the Human Rights Law Centre, University of Essex; a Member of the Council of “Liberty”; a Trustee of the Redress Trust (Reparation for Torture Survivors); and President, European Association of Lawyers for Democracy and Human Rights (EALDH). He has been an Executive Committee member (of the Bar Human Rights Committee of England and Wales) since 1995 and a Member of the Rule of Law Council of the International Helsinki Federation since 1999. Dr CHRISTIAN NEUGEBAUER Dr Neugebauer is the Editor of Austrian publication, The GLOCALIST Review, an online publication covering politics, economics and culture for the NGO community. He is a member of the Board of the Fundraising Federation of Austria, and a founding member and member of the Board of Österreichisches Netzwerk (Austrian Network), Rat der Zivilgesellschaft (consultancy), and digital media association Verband der Digitalen Medien Austria. He is variously a member of Wirtschaftsethik (National Chapter of European Business Ethics Network), and Gesellschaft für angewandte Philosophie (the society for applied philosophy). Neugebauer was named Social Manager of the Year in 2005. He was previously managing director of the Publicis Networks GmbH (unit of Publicis Group Austria), direct&digital GmbH and board director at direct&more GmbH. He has also been lecturer at the University of Vienna, the University of Innsbruck and the Werbeakademie Vienna.

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