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Tuesday, September 23, 2008

International relations, september, 2008

In this particularly interesting edition:
  1. China as an international investor: in a class of its own
  2. TNK-BP settlement welcomed in Brussels
  3. EU nervous as Russia eyes new energy markets
  4. Interview: Europe and US 'misguided' on Russia
Read on to find out where the money will flow in the next years and why. For once, my comments are probably longer than the articles :)

China as an international investor: in a class of its own

1 September 2008
Markus Jaeger, Deutsche Bank Research

China is in a "class of its own" among the BRIC group of fast-growing economic powers and will "replace the United States as the world's largest economy by 2040," says Markus Jaeger of Deutsche Bank Research in an August paper. BRIC also comprises Brazil, Russia and India.

The author underlines existing divergences between these countries' economic strategies.

These divergences are significant because the BRIC countries are to emerge as major international investors, while "China stands out in terms of size of external asset holdings and asset accumulation," Jaeger explains.

While China has adopted a strategy based on domestic savings, high investment, a competitive exchange rate and a manufacturing sector reliant on exports, Brazil, Russia and India are following different patterns, he explains.

Russia's approach is oriented towards commodity exports, while India and Brazil are both "closed economies" based on the growth of their domestic markets, says Jaeger. The difference between the two is that Brazil goes for a diversified growth strategy, whereas India pursues a strategy based on services.

The paper emphasizes the BRIC countries' strategy of introducing sovereign wealth funds to invest part of their holdings in higher-return assets. This, combined with an increase in external asset holdings, will make them "important international financial players".

China will emerge as a "net capital exporter" in the next ten years due to its large domestic savings and its export development approach," says the paper. Jaeger thus concludes that in net international investment and "many other respects," "China is already in a class of its own". source

My comment: No comment, really. You can't comment facts. I'm only sorry I don't see European countries in the lest. True, the EU countries are not precisely poor, especially the old members, but still, there is no progress in them and that's a sign of stagnation.

TNK-BP settlement welcomed in Brussels

5 September 2008

An agreement between BP and TNK over the governance of their joint Russian undertaking was welcomed in Brussels, where the European Commission is following the situation closely after Shell, the Anglo-Dutch energy giant, was forced to pull out of a lucrative gas project in Siberia.

The agreement came after months of wrangling between BP and Alfa Access-Renova, the owners of TNK, over the joint venture's management structure. Under the agreement, BP will keep its 50 percent stake in the joint company, on an equal footing with TNK.

A memorandum of understanding (MoU) signed between the two sides on Thursday (4 September) aims to re-structure the TNK-BP board "through the appointment of three new directors independent of either side".

Bob Dudley, the current CEO, "will step down before the end of the year," BP said, and will be replaced by "a Russian-speaking candidate with extensive Russian business experience". Details of the agreement still have to be finalised over the coming months, but BP stressed that the company "will continue to operate under English law".

In Brussels, the European Commission welcomed the agreement, saying it "marks the resolution of the conflict inside the Euro-Russian oil consortium".

The power struggle at TNK-BP is being followed closely in Brussels after Shell was forced out of the Sakhalin-2 natural gas project, in a move which Europeans believe was politically motivated.

Shell ceded control of the project to Gazprom in December 2006 after months of regulatory investigations by the Russian state, which included concerns over the conservation of whale breeding grounds.

This might not spell the end of trouble for BP however. The company is currently still subject to investigations by the Russian state over allegations that it tried to circumvent labour laws. source

My comment: It's certainly funny to read how Russia cares of whale's breading ground, but oh, well. Not so funny for those companies. I'm glad the reached some kind of peace, even though, British Petrolium isn't exactly my favorite company, ever. A fight between giants, really.

EU nervous as Russia eyes new energy markets

1 September 2008

As EU leaders prepare to meet in Brussels today (1 September) for an extraordinary summit on Russia, the country's former president Vladimir Putin has indicated that Moscow wants to "diversify" oil and gas export markets.

Russia has "no intention" of limiting oil and gas exports to the EU and the country "will abide strictly" by its contractual obligations, former Russian president Vladimir Putin told the Interfax news agency on Sunday (31 August).

"But we are going to enlarge and diversify our export possibilities for these products which are so essential to the global economy," said Putin, who on the same day reportedly called for the speedier completion of a new pipeline that will carry gas from Siberia to Asian markets.

The comments are fuelling speculation that Moscow will increasingly leverage Europe's dependence on Russia's vast oil and gas reserves for geopolitical purposes, particularly if EU leaders today decide to impose sanctions on Russia for its actions in Georgia.

Russia is trying to downplay these fears. "We have worked for many years to gain not just the image, but the status of a reliable energy supplier to Europe and we would never let it suffer, even in this political situation," Russian Energy Minister Sergei Shmatko said on 29 August.

Despite these assurances, recent cutbacks in supplies to the Czech Republic (EurActiv 31/07/08) as well as cuts in deliveries to Ukraine and Belarus, which left several European countries without supply (EurActiv 11/01/07), remain fresh in EU leaders minds, making them nervous about the bloc's dependence on Russian oil and gas. source

My comment: Continuing the issue of fun. FUUUUN! I mean, seriously. Europe wants to diversify its resources of oil and gas and Russia turns back by saying it wants to diversify its markets! Come on, isn't that irony? Or more likely-with your rocks over your head (it's a Bulgarian sentence). And now, the following interview really fits:

Interview: Europe and US 'misguided' on Russia

3 September 2008

While Georgia and Russia are the first to blame for the conflict, the United States and Europe must also bear some responsibility, according to Thomas Gomart of the French Institute of International Relations (IFRI), who spoke to EurActiv in an interview.

According to IFRI's Russia and Caucasus expert, America's military support to Georgia led President Saakashvili to believe he had "a kind of freehand" over the breakaway regions of South Ossetia and Abkhazia.

When Saakashvili used military force to try and regain control of the pro-Russian region of South Ossetia, Russia replied with overwhelming power, pushing deep into Georgian territory and dealing the Americans a blow - albeit indirectly.

"Here we are touching the limits of NATO's expansion strategy and notably the 'do it strategy' promoted by numerous American and European experts, according to whom NATO could be enlarged without Russia reacting," Gomart says. He also singles out a "general attitude" in the US believing "that one can modify or transform whole regions" by supporting local leaders.

"I believe that here we probably have a significant amount of ideological responsibility from the United States."

According to Gomart, Europeans also need to realise that their strategy of promoting the rule of law in Russia and the Caucasus is insufficient without military power to back it up. "If the EU believes it can get away with only promoting the rule of law, it is misguided," he said. "As long as the EU is not taken seriously on security, it will have lots of difficulties making itself heard in Moscow over norms and values."

As a result, he says a possible "paradoxical effect" of the Georgian conflict could be that it hastens the realisation that Europeans need to take care of their own security without the United States. But he doesn't think this will happen overnight, as only Great Britain and France currently have the necessary military capabilities.

Gomart also believes the EU could have communicated better over its declared intention to diversify energy supplies away from Russia. "In terms of political communication, they have had a tendency - voluntarily or involuntarily - to present this diversification as a will to isolate Russia," Gomart says. "In any case, that's how Moscow interpreted it."

In terms of energy supplies and pipeline routes - one of the driving factors of the war according to some analysts - Gomart says the Kremlin's message is clear: "Nothing will be done in the Caucasus without us". He believes the message is "addressed even more directly to Azerbaijan" which is tempted to follow Georgia in seeking to build closer ties with Europe and the US by forging gas supply deals and building military capability.

Referring to the Karabagh region, a disputed area between Armenia and Azerbaijan, "the message [delivered by Moscow] is extremely explicit," Gomart warns. "The military option should not be discarded."

That said, Gomart believes that the EU's diversification strategy on energy does not necessarily have to irritate Moscow. "Regarding the Nabucco [gas pipeline] project, it could only work to the full with Iranian or Russian gas," Gomart points out. "This is not incompatible with an intensification of [the EU's] energy relations with Russia."

Please click here to read the full interview transcript (in French only). source

My comment:Didn't cut it since this post is quite short by my standards. But the interview shows that not all people are ideology-blinded towards Russia. The only thing that do bothers me, probably because there is a lot of truth in it is that without an army, Russia isn't taking the EU seriously. That migth be true, but I sincerely hope there is a way around it. I mean, ok, let's have an army, a decent one, but let's not repeat US mistakes. We don't need to by military giant to live in peace. We had a very good way of dealing with problems trough money. Why not continuing to do so? I don't understand that desire of people to conquer. I mean, the world has changed, you don't need to conquer London to live there and spend there and earn there. Then why bother killing all those people? It's an absolute nonsense. Let's hope European populists stay out of that field.

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