Russian Roulette Part 7

The Russian command acknowledges 3000 fatalities and 8000 wounded but the numbers are probably way higher. The Committee of Soldiers' Mothers pegs the number of casualties at 12-13,000. Unpaid, disgruntled, and under-supplied troops exert pressure on their headquarters to air-strafe Chechnya, to withdraw, or to multiply the money budgeted to support the ill-fated operation.

Russia maintains c. 100,000 troops in Chechnya, including 40,000 active soldiers and 60,000 support and logistics personnel. The price tag is sizable though not unsustainable. As early as October 1999, the IMF told Radio Free Europe/Radio Liberty: "Yes, we're concerned that it could undermine the progress in improving (Russia's) public finances."

As they did in the first Chechen conflict in 1994-6, both the IMF and the World Bank reluctantly kept lending billions to Russia throughout the current round of devastation. A $4.5 billion arrangement was signed with Russia in July 1999. Though earmarked, funds are fungible. The IMF has been accused by senior economists, such as Jeffrey Sachs and Marshall Goldman, of financing the Russian war effort against the tiny republic and its 1.5 million dest.i.tute or internally displaced citizens. Even the staid Jane's World Armies concurred.

No one knows how much the war has cost Russia hitherto. It is mostly financed from off-budget clandestine bank accounts owned and managed by the Kremlin, the military, and the security services. Miriam Lanskoy, Program Manager at the Inst.i.tute for the Study of Conflict, Ideology and Policy at Boston University, estimated for "NIS Observed" and "The a.n.a.lyst" that Russia has spent, by November 2001, c. $8 billion on the war, money sorely needed to modernize its army and maintain its presence overseas.

Russia was forced to close, post haste, bases in Vietnam and Cuba, two erstwhile pillars of its geopolitical and geostrategic presence. It was too feeble to capitalize on its ma.s.sive, multi-annual a.s.sistance to the Afghan Northern Alliance in both arms and manpower. The USA effortlessly reaped the fruits of this continuous Russian support and established a presence in central Asia which Russia will find impossible to dislodge.

The Christian Science Monitor has pegged the cost of each month in the first three months of offensive against the separatists at $500 million. This guesstimate is supported by the Russians but not by Digby Waller, an economist at the International Inst.i.tute for Strategic Studies (IISS), a London-based military think tank. He put the real, out-of-pocket expense at $110 million a month. Other experts offer comparable figures - $100-150 a month.

Similarly, Jane's Defense Weekly put the outlay at $40-50 million a day - but most of it in cost-free munitions produced during Soviet times. A leading Soviet military a.n.a.lyst, Pavel Felgengauer, itemized the expenditures. The largest articles are transport, fuel, reconstruction of areas shattered by warfare, and active duty bonuses to soldiers.

The expense of this brawl exceed the previous scuffle's. The first Chechen war is estimated to have cost at most $5.5 billion and probably between $1.3 and $2.6 billion. Russia allocated c. $1 billion to the war in its 2000 budget. Another $263 million were funded partly by Russia's behemoth electricity utility, UES. Still, these figures are misleading underestimates.

According too the Rosbalt News Agency, last year, for instance, Russia was slated to spend c. $516 million on rebuilding Chechnya - but only $158 million of these resources made it to the budget.

Russia has been lucky to enjoy a serendipitous confluence of an export-enhancing and import-depressing depreciated currency, tax-augmenting inflation, soaring oil prices, and Western largesse. It is also a major producer and exporter of weapons. Chechnya serves as testing grounds where proud designers and trigger-craving generals can demonstrate the advantages and capabilities of their latest materiel.

Some - like the Inst.i.tute of Global Issues - say that the war in Chechnya has fully self-financed by reviving the military-industrial complex and adding billions to Russia's exports of armaments. This surely is a wild hyperbole. Chechnya - a potentially oil-rich territory - is razed to dust.

Russia is ensnared in an ever-escalating cycle of violence and futile retaliation. Its society is gradually militarized and desensitized to human rights abuses. Corruption is rampant. Russia's Accounting Board disclosed that a whopping 12 percent of the money earmarked to fight the war two years ago has vanished without a trace.

About $45 million dollars in salaries never reached their intended recipients - the soldiers in the field. Top bra.s.s set up oil drilling operations in the ravaged territory.

They are said by Rosbalt and "The Economist" to be extracting up to 2000 tons daily - double the amount the state hauls.

Another 7000 tons go up in smoke due to incompetence and faulty equipment. There are 60 oil wells in Grozny alone. Hence the predilection to pursue the war as leisurely - and profitably - as possible. Often in cahoots with their ostensible oppressors, dispossessed and dislocated Chechens export crime and mayhem to Russia's main cities.

The war is a colossal misallocation of scarce economic resources and an opportunity squandered. Russia should have used the windfall to reinvent itself - revamp its dilapidated infrastructure and modernize its inst.i.tutions. Oil prices are bound to come down one day and when they do Russia will discover the true and most malign cost of war - the opportunity cost.

Russia's Israeli Oil Bond

By: Dr. Sam Vaknin

Also published by United Press International (UPI)

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Russian Roulette - The Energy Sector

Last week, Russia and Israel - erstwhile bitter Cold War enemies - have agreed to make use of Israel's neglected oil pipeline, known as the Tipline. The conduit, an Iranian-Israeli joint venture completed in 1968 is designed to carry close to a million barrels per day, circ.u.mventing the Suez ca.n.a.l.

It rarely does, though. The Shah was deposed in 1979, Egypt became a pivotal Western ally, the Israeli-developed Sinai oil fields were returned to Egypt in the early 1980's, and, in a glutted market, Israel resorted to importing 99 percent of the 280,000 barrels it consumes daily.

According to Stratfor, the Strategic Forecasting consultancy, "tankers bearing Russian crude from the Black Sea port of Novorossiysk would unload at Israel's Mediterranean port of Ashkelon. After that, the oil would traverse the Tipline to Israel's Red Sea port of Eilat, where it would be reloaded onto tankers for s.h.i.+pment to Asia. The Eilat-Ashkelon Pipeline Co. estimates the pipeline will be ready for Russian crude in mid-2003."

Russia is emerging as a major oil supplier and a serious challenge to the hegemony of Saudi Arabia and OPEC. Even the USA increasingly taps the Russian market for crude and derivatives. With Arab countries - including the hitherto unwaveringly loyal Gulf states - progressively perceived as hostile by American scholars and decision makers, Russia arises as a potent alternative. The newfangled Russian-Israeli commercial alliance probably won applause from Was.h.i.+ngton hardliners, eager to relieve the Saudi stranglehold on energy supplies.

Quoted by the American Foreign Policy Council, Russia's Energy Minister, Igor Yusufov, addressing the Russian-US Energy Forum in Houston, Texas, last month said that "the high degree of economic and political stability that the Russian Federation has achieved makes it a reliable supplier of oil and gas."

He expressed his belief - shared by many a.n.a.lysts - that Russia will become a major exporter of oil to the USA "in the foreseeable future".

According to the Dow Jones Newswires, private Russian oil firms, such as Lukoil, are heavily invested in US gas stations and refineries in antic.i.p.ation of these inevitable developments. As if to underline these, the Financial Times reported, on October 3, a purchase of 300,000 barrels of oil from the Russian Tyumen Oil company.

The deal with Israel will allow Russia to peddle its oil in the Asian market, a major export target and a monopoly of the Gulf producers.

Russia is in the throes of constructing several pipelines to Asia through its eastern territories and Pacific coastline - but completion dates are uncertain.

For its part, according to the Department of Energy, Israel extracts natural gas from offsh.o.r.e fields but has no commercial fossil fuel resources of its own. It imports oil from Mexico, Norway, and the United Kingdom and coal from as far away as Australia, Colombia, and South Africa. Israel buys natural gas and oil from Egypt. The bulk of the energy sector is moribund and state-owned, ostensibly for reasons of national security. The deal with Russia is a G.o.dsend.

Israel is perfectly located to offer an affordable alternative to expensive and often clogged oil s.h.i.+pping lanes through the Suez Ca.n.a.l or the Cape. A revival of the Trans-Arabian pipeline (Tapline) to Haifa can considerably under-price the politically wobbly Iraqi-Turkish and the costly Suez-Mediterranean (Sumed) alternatives.

With one of every five Israelis a Russian ?migr? and confronted with the common enemy of Islamic militancy, Israel and Russia have embarked on a path of close cooperation. Prime Minister Sharon's visit to Russia last month was a resounding success. Faced with these millennial geopolitical developments, anti-Semitic conspiracy theorists are having a field day.

The Jewish lobby, they say, is coercing America, its long arm, to hijack the Iraqi oil fields in the forthcoming war and thus to counterbalance surging Russian oil exports. Israel, they aver, planned to carry out, in October 2001, an operation - "Mivtza Shekhina" - to secure southern Iraq's oil fields while also mitigating the threat of weapons of ma.s.s destruction aimed at its population centers.

Conspiratorial paranoia notwithstanding, it is unlikely that the USA is motivated by oil interests in its war on Saddam. A battle in Iraq aimed solely at apprehending its crude would be fighting over yesterday's oilfields. Only an easily replaceable one tenth to one eighth of American oil consumption emanates from the Gulf, about a million barrels per day of it from Iraq. Moreover, the war is likely to alienate far more important suppliers, such as Russia - as well as the largest European clients of Gulf oil extracted by American firms.

Strictly in terms of oil, a war in Iraq is counterproductive.

Additionally, such a war is likely to push oil prices up. According to the Council on Foreign Relations, "for every dollar-per-barrel increase in oil prices, about $4 billion a year would leave America's $11 trillion economy, and other importing countries would lose another $16 billion per year."

Israel understandably did discuss with the USA its role in a showdown with Iraq. Russia, unsettled as it is by America's growing presence in central Asia and exercised by its determination to take on Iraq - may be trying to lure Israel away from its automatic support of US goals by dangling the oiled carrot of a joint pipeline.

Russia also hopes to neuter the rapprochement between Israel and the Islamic nations of Turkey and Azerbaijan, traditional adversaries of Moscow. Israel is the second largest buyer of oil from Azerbaijan. It is one of the sponsors of a pipeline from the Baku oilfields to the port of Ceyhan in Turkey. The pipeline stands to compete with a less costly and more hostile to the West Russian-Iranian route.

These are momentous times. Oil is still by far the most strategic commodity and securing its uninterrupted flow is essential to the functioning of both developed and developing countries. There is a discernible tectonic s.h.i.+ft in production and proven reserves from the Persian Gulf, the US except Alaska, the North Sea, and Latin America to northern Europe, Russia, and the Caspian Basin. Yet, oil is still a buyers' market. OPEC has long been denuded of its mythical power and oil prices - even at the current interim peak - are still historically low in real terms.

But Russia stands to gain whichever way. Middle East tensions, in Palestine and Iraq, have ratcheted oil prices up resulting in a much-needed budgetary windfall. Russia's mostly-privatized oil industry has cleverly ploughed back its serendipitous profits into pipelines, drilling, and exploration. When the dust settles in the deserts of Arabia, Russia will emerge victorious with the largest oil market share. Israel is not oblivious to this scenario.

Russia's Idled Spies

By: Dr. Sam Vaknin

Also published by United Press International (UPI)

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The Industrious Spies

Russian Roulette - The Security Apparatus

Sweden expelled yesterday two Russian diplomats for spying on radar and missile guidance technologies for the JAS 39 British-Swedish Gripen fighter jet developed by Telefon AB LM Ericsson, the telecommunications multinational. The Russians threatened to reciprocate. Five current and former employees of the corporate giant are being investigated.

Ironically, the first foreign buyer of the aircraft may well be Poland, a former Soviet satellite state and a current European Union candidate.

Sweden arrested in February last year a worker of the Swiss-Swedish engineering group, ABB, on suspicion of spying for Russia. The man was released after two days for lack of evidence and reinstated. But the weighty Swedish daily, Dagens Nyheter, speculated that the recent Russian indiscretion was in deliberate retaliation for Swedish espionage in Russia. Sweden is rumored to have been in the market for Russian air radar designs and the JAS radar system is said by some observers to uncannily resemble its eastern counterparts.

The same day, a Russian military intelligence (GRU) colonel, Aleksander Sipachev, was sentenced in Moscow to eight years in prison and stripped of his rank. According to Russian news agencies, he was convicted of attempting to sell secret doc.u.ments to the CIA. Russian secret service personnel, idled by the withering of Russia's global presence, resort to private business or are re-deployed by the state to spy on industrial and economic secrets in order to aid budding Russian multinationals.

According to the FBI and the National White-collar Crime Center, Russian former secret agents have teamed with computer hackers to break into corporate networks to steal vital information about product development and marketing strategies. Microsoft has recently admitted to such a compromising intrusion.