Sunday, October 03, 2004

Russia and Kyoto (again)

The Russian cabinet has approved the Kyoto Protocol and sent it to the Duma. Given the Putin party’s complete control of that body, parliamentary approval, after the President’s grudging recommendation, is assumed to be certain.

This has delighted some of the environmenalists and most of the media in the West but there are various problems. The most obvious one is with the Protocol itself, that has been widely criticized by economists and scientists as being economically expensive and environmentally doubtful. Its almost certain political purpose – to control the United States – has failed as that country has refused to sign. Other major “polluters” have also stayed away and developing countries are waiting to see what the developed ones will do. (The member states of the EU, the most vociferous organization in support of it, have not shown any alacrity in abiding by the rules, as we have pointed out before.)

In Russia itself, there has, until recently been an almost unanimous rejection of it at the top. There was no particular infighting, as some western newspapers have described the process, but a general agreement with just a few environmental groups dissenting.

There is no public acceptance of Kyoto even now but a bad-tempered, grudging assent to what is perceived as naked political blackmail on the part of the European Union. Sign this and we shall support your application to the WTO. Otherwise, forget it. You can stay out, even though China is in. The reason is, of course, that Russia with a supposed 17.4 per cent of the world’s emissions was absolutely necessary for the Protocol even to be put nominally into effect.

Andrei Illarionov, Putin’s chief economic adviser, and staunch opponent of the Protocol told the Interfax news agency:
“It’s a political decision, it’s a forced decision. It’s not a decision we are making with pleasure.”
The treaty according to him (and many others) was based on false and, even, deceptive scientific assumptions. It will slow down Russia’s economic growth and will make it impossible to meet the President’s firmly pronounced goal of doubling Russia’s gross domestic product in the next decade.

This is a worrying thought for President Putin, whose standing inside and, to a great extent, outside Russia depends on his economic achievements.

German Gref, the economic development minister was more mealy-mouthed than Illarionov, perhaps because his own political position is less assured. He did not think that it would undermine Russia’s economic growth but neither was it going to be decisive in improving the environmental situation. Anyway, he added, falling back on that well-known Soviet phrase, it will be a “progressive step”.

None of this bodes well. Russians are ultra sensitive to slights from the West and they are not even bothering to hide the fact that they are unhappy at being forced into an agreement that they do not see as being beneficial to themselves by the European Union. The relationship between the two may well enter a slight cooling off period.

One wonders how far the Russians intend to comply with the Protocol’s rules. Past experience tells one that if Russia does not want to fulfil an agreement it will find a million ways of not doing so while sounding extremely self-righteous. (The EU is quite good at that, too, but the Russians are past masters.)

There is another aspect to this story, that has, so far, found its way only into the columns of the International Herald Tribune. Russia has effectively established a monopoly of energy supply to the Baltic and East European states.

Gazprom, a largely state-owned enterprise, whose CEO, Alexei Miller is one of the siloviki, the men from the security services who surround Putin, has invested $2.6 billion into joint ventures in these countries. They now control supply, sale and distribution of natural gas in the region and hope to raise its stake in the West European countries. The company supplies about 25 per cent of Western Europe’s natural gas.

In the new member states the picture is different and rather alarming: sole suppliers in Estonia, Latvial, Lithuania and Slovakia; providers of 91 per cent of Hungary’s gas, 79 per cent of Poland’s and nearly 75 per cent of the Czech Republic’s.

The European Commission has called on these countries to diversify their energy supplies but there are several obstacles. Mostly the countries lack the money to buy in any other gas. Also, by controlling the supply and then the whole chain through the various joint ventures, Gazprom has managed to block all attempts at diversification.

In the circumstances, this is likely to create a tense economic and political situation.

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