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September 2006 Country Archive



We anticipate and report on the possibilities that one of NORTH KOREA's key secrets may soon be revealed - whether or not this belligerent small nation actually has a nuclear weapon, it having demonstrated last month that indeed it has missiles, albeit of indeterminate reliability. 
"It is the view of the intelligence community that a (nuclear) test is a real possibility." If so demonstrated, this would make IRAN concerns head for the back burner, (intelligence suggesting that IRAN is still years off developing a nuclear device). The outfall in the Koreas would very likely provoke Japan (and perhaps South Korea) to opt for nuclear weaponry and into accelerating their ability to produce their own. To head that off, the oft-tempted US might finally decide to make a pre-emptive strike on the suspected nuclear sites that they currently monitor by satellite. Kim jong-Il, with his million strong army is quite capable then of 'bringing the roof down' with an invasion of the south, turning the clock back over fifty years! 
Could this be contained to the Korean peninsula? Would China stand idly by - what would RUSSIA do? 
This is not idle speculation but reflects the potential cause and effect of threatened events that immediately start to line up, if a test takes place, and a realisation that this prospect has hardly yet penetrated the consciousness of an otherwise pre-occupied west.

The July G8 conference in St Petersburg majored on energy security and RUSSIA pressed by other states gave an undertaking, that it was a fully reliable energy supplier to European Union states. That reassurance within weeks has collapsed, as we describe in our report on EU member LITHUANIA. Supplies have been completely cut off to its largest national economic component, its Mazeikiai oil refinery, the only one in the Baltic states. This had recently been sold to a Polish company PKN Orlen whose offer, despite intensive pressure from the Russians, was found preferable to that from the Russian state-owned Rosneft. The Russian excuse to immediately reroute oil supplies looks feeble in the extreme. It is a clear indication as to what can be expected from RUSSIA as an energy supplier, as well as from its monopoly state-controlled pipeline operator Transneft, there to follow the diktat of the Kremlin. Take this alongside the experience of MOLDOVA let alone UKRAINE, when RUSSIA feels thwarted. Western and Asian customers should take note, as should investors in Russian Oil and Gas!

With 4000 missiles raining down onto their territory, and those who did it undefeated, the lesson may have been learned by some in Israel that having the most formidable military in the region, will not in itself ensure the peace and stability for which their citizens yearn. 
We argue that in the aftermath of the Lebanon shambles, that absent the great multilateral comprehensive middle-east peace deal, which is what is really needed, Israel might see the wisdom of making a political settlement with SYRIA. Unlike theocratic IRAN, Damascus just has political objectives and is primarily interested in recovering the Golan Heights. To be able to extract SYRIA from the forces opposed to them could have massive consequences for stability. 

Important information about the new mini-nation of MONTENEGRO. Our report this month describes how it is rapidly being bought up by Russian money, which has moved in big-time. We describe the action in real-estate and also speculate as to whether this is to become a money haven, the Liechtenstein of the Balkans? There is also an intriguing prospect of off-shore oil which we have heard very little about for some years past. Now that sovereignty of ownership has been cleared up, perhaps we could be looking at a Balkans Kuwait as well as a Liechtenstein. 

We report that the Czechs are likely to host on their territory a US anti-missile site with about ten missiles, complete with radar installations.
Is this to be a re-run of the great Cruise missile pro and anti crusades of the cold war? It is all a long way from NORTH KOREA, even from IRAN. The intriguing question then is in which direction will they be pointing?

Of all European nations, SERBIA is probably the most unhappy, as things just do not seem to go right for them. They have lost their federated state partner of MONTENEGRO and with it their access to the sea. They will probably lose their province of Kosovo whose future must be decided by the end of the year, but where some 100,000 ethnic Serbs are faced with 1.8 million ethnic Albanians who are likely overwhelmingly to vote for secession when, as is likely, a UN brokered referendum is held. SERBIA which might in other circumstances be able to shrug off its numerous reverses by looking to a future in the EU is stymied even here, because the EU will not commence the necessary negotiations until the Serbian war criminal General Mladic the butcher of Sebrenica, is surrendered for trial as a war criminal to the Hague. He is being shielded and hidden by the Serbian army as one of their own, the civilian government is just not strong enough to override them. So this is the remaining legacy of the disastrous Greater Serbia policy of the late unlamented Milosevic, which far from promoting SERBIA to a position of supremacy in the Balkans, has reduced them to possibly last in the queue of all the European nations whose future is bound up with the advantages of the European Union. 

This month's RUSSIA looks at a teenage nation, fifteen years old with all the spots and blemishes and awkwardness that are typical of that time. RUSSIA has them all but has already, as we trace, overcome several of the hazards associated with the insecurity and lack of judgement inevitable in such a young polity. Forget the imperial RUSSIA of the autocrats. Forget the Soviet Union. After 1991 there was no choice but to go forward to build something never before attempted in that country, of course with the baggage of history, both good and bad, but most importantly with new rules. We observe that Putin has had the greatest thing a new leader could have wished for - good luck, in the fact that his economy which was on the floor, has taken off with the world's oil prices and which with the instability of the middle- east, looks set to continue. We observe that his foreign policy is generally mature and subtle, quite unlike his approach to Russia's near-abroad, which is crude and brutal, displaying the contempt of a former imperial power for its uppity ex-colonies. Nevertheless, we see signs that Russia's greatness is not just a thing of the past and that the awkward adolescent may yet come to mature into a great nation, judged by the new set of rules to which they say that they subscribe, those of democracy and the rule of law. 

If President Musharraf can out-last his opponents, we see a prospect that he could become in time, the Kemal Ataturk of PAKISTAN, dragging his country into somewhere approximating the 21st century - a primary function of the leaders of his neighbours INDIA, to the south. The key to this is to diminish the power of the religious fundamentalists in his country, citing the ever present example of IRAN to his west, where after some thirty years of rule by the Moslem clerics under Sharia law, people are substantially poorer than they were under the Shah - and often as now, the hapless citizens have been placed unnecessarily in harms way. 

AFGHANISTAN to the north remains a nightmare - our report this month reflects concerns about President Karzai and the lack of confidence in him engendered amongst other things, by his inability to impact on reducing corruption, in which he is inevitably suspected of being involved. Also the fact that this summer, Taleban military were reported a mere 20 to 30kms from Kabul. Karzai has re-established a 'Vice and Virtue Police' which was last operational under the Taleban government. There has been an attempt to limit the freedom of the press and he has noticeably ignored the advice and requests of his foreign backers. The unemployed official figures are 33% of the work force, which figures are not helped by the increasing number of returnees. He has let it be known that he may not make himself available for re-election in the next presidential contest in 2009. This must be one of the toughest jobs on earth, with arguably the world's least governable nation to rule democratically, that probably can only be done as he does it, by balancing and playing-off various factions, tribal and religious leaders, warlords etc; giving each of them something - enough to keep them on-side. 

Meanwhile General Musharraf in PAKISTAN, which, whatever else, is a more seasoned quasi-democracy, is preparing for the knock-down drag-out political struggle with two of PAKISTAN's former leaders, Benazir Bhutto and Nawaz Khan who have joined forces to seek to topple him in the next elections. We describe Musharraf's difficult navigation between uneasy friends and increasingly angry enemies. 

His role in our estimation, is the pivotal one in all of the various problem nations of Western Asia, given that PAKISTAN has the only 'Islamic bomb,' safe in his hands, but in the case of a successful coup? At 9/11 he threw in his lot with the west and the forces of reason and democracy, to fight the Islamic extremists well entrenched in his nation, from whom he has so far survived no less than three assassination attempts. He has appeared genuine and statesmanlike in seeking a permanent rapprochement with his giant neighbour INDIA to the south; and compared with the governments of IRAQ and AFGHANISTAN, also candidates for democracy, he is indubitably in charge, even if he cannot do everything that needs to be done (neither could Kemal), in the space of just a few years. 

Ironic that the whole Arab world believed then, and mostly believes now, that the US invasion of IRAQ was in order to secure the nation's oil for American interests. This month's report points out that the industry after more than four years still runs primarily upon optimism, not unlike the neo-con inspired optimism that was so evident back in 2002 and 2003 in the US congress, about the IRAQI oil industry being able to pay for the costs of the invasion - or liberation as they were then calling it. Sabotage is back with a vengeance - that phrase making complete sense in the context. Only 38% of planned reconstruction projects related to the oil industry have so far been completed. An American official, the head of the Government Accountability Office (GAO) has also denounced the corruption at the oil ministry. He estimated that 10% of refined fuels and 30% of those imported were being stolen. Much of this is re-exported, as heavily subsidised Iraqi prices are about half the average for the region. 

The world's daily news reports describe the continuing cycle of inter-communal murder and mayhem, but patterns are emerging. With the militia of the two main Shia groupings clashing, much of is this to do the present thwarting of the young and ambitious militant Shia cleric, Muqtada as Sadr, who had got less than he wanted in the Parliamentary ministerial line-up. We speculate that he might succeed in bringing this new government down and that he sees the future in due time, as belonging to him. Our forecast is that a Muqtada government might have Iraqis longing for the 'good old days' of Saddam Hussein! 

The world is waiting to see how the latest IRANIAN nuclear brinkmanship will play out, but it has been observed that side-by-side with President Ahmadinejad's customary ranting, IRAN at first seemed to be reacting quite subtly, promising earnest consideration etc; but without actually undertaking to desist from uranium enrichment. This we would guess is on advice from RUSSIA and CHINA, anxious not to have to take sides on this issue in the UNSC. But the timing of so flagrantly opening a heavy-water plant together with various inflammatory speeches, is indeed unsubtle. We cannot discount the possibility that we are witnessing policy being pulled in different directions by those opposed to, as well as by Ahmadinejad, with perhaps the supreme Ayatollah endorsing such rival schools ("let a hundred flowers blossom") - we report on this situation within IRAN. 

We take a look at the effect of Ahmadinejad's populist policies on the Iranian economy. It seems that 100,000 jobs were lost after he recently enforced an increase in minimum wages. The Teheran stock exchange this year is already 12% down in value having lost 25% last year.
The Iranian oil industry meanwhile is another victim of his economic nationalism. Development is just not happening, as he and his circle push for do-it-yourself policies, excluding foreigners. Since he came to power, not a single new contract for foreign investment has been signed. 

Curious but true that TURKEY a nation with little hydrocarbon energy, nor hydroelectric, nor nuclear - it imports three quarters of its energy needs, is nevertheless becoming perhaps the most important energy hub of modern times. Now the Baku-Tbilisi-Ceyhan (BTC) pipeline is open and pumping, oil extracted from the AZERBAIJANI subsea shelf within the Caspian basin, is piped all the way across the rugged Anatolian terrain to the shores of the Mediterranean Sea, there to embark in tankers to the world's oil markets. The triumph of this is that the route evades a sulky Russian capability of turning off the tap (see "FORKED TONGUE" above); it also promises the route west for KAZAKSTAN's enormous new finds, similarly without political interference from the former imperial power in Moscow. The cross-country pipeline now obviates the alternative that had caused the government in Ankara much concern, the perceived prior need to bring additional cargoes of oil through the Bosphorus strait, the only sea route between the Black Sea and the Mediterranean. It is extremely narrow in places where it bisects greater Istanbul, and is already massively overcrowded with shipping and so vulnerable to an ecological disaster from a serious oil spill. Ceyhan on Turkey's SE Mediterranean coast, was before its new Caspian terminal, already a major embarkation terminal for oil from northern IRAQ, which of course has been intermittent over recent years. It has now as a specialised port, greatly increased in importance. 

TURKEY is also receiving Russian gas via a brilliant piece of engineering, the Bluewater pipeline , which crosses the Black Sea overcoming some of the substantial depth and seabed topography problems by sub-sea suspension of the pipeline, at a depth where it will not snag shipping. On its eastern borders it has a major gas pipeline coming up from IRAN, and as we report in that nation, it is to receive supplies from the residual capacity of 5 billion cubic metres of gas, which IRAN has been unable to decide how else to bring to market. A glance at the map confirms TURKEYS strategic position between producers and markets and we can expect further development to continue. 

We include this month a very revealing interview with SERBIA's leading civil rights lawyer Srda Popovic reviewing the first ever trial for genocide (Saddam Hussein is the second such), being the case brought by BOSNIA- HERZEGOVINA against SERBIA before the International Court of Justice, (as distinct from The Hague War-Crimes Tribunal). Apart from many valuable insights it is full of rare information such as how Serbians now see the events of the 1990's, and how the resources of Yugoslavia's Federal army, were used in the interests of the Serbian state and Milosevic's Greater Serbia machinations. 

RUSSIA's 'punishment' of MOLDOVA continues as we report. This is because MOLDOVA finally found the courage, with the help of the new government of UKRAINE, to try to finally conclude the absurdity of the continuing breakaway criminal statelet of Transnistria, primarily known for its illegal international arms dealing (STATELESS STATES). It can only exist because it is protected by RUSSIA, or at least by high-ranking Russians in military or civilian power, as big money from various forms of smuggling is involved, but who and how high up the pecking-order precisely gets it, is a mystery. 

MOLDOVA, the smallest of the FSU republics and the poorest country in Europe, was in Soviet times always the market garden and vineyard for the big Russian cities. So when MOLDOVA did not back down, their gas supply was cut off and then greatly increased in price. But this in news terms was overshadowed by events in UKRAINE. More recently RUSSIA discovered, they said, infringements in health laws and banned 
along with other agricultural products, all imports of their wine, the biggest export of MOLDOVA which is hurting them severely. Their wines are good value and were already being sold in Europe. They are now trying hard, against much international competition, to promote sales to markets other than RUSSIA. 

Our reports on these two FSU nations conclude that we are approaching a serious re-run of the Nagorno Karabakh crisis that was temporarily halted with the ARMENIAN occupation of the disputed enclave. This was after bitter fighting between the armies of the two nations, just as the FSU was unravelling in the early 1990's but that did not prevent RUSSIA from giving critical assistance to the ARMENIANS in terms of modern weaponry and ordnance. In securing Nagorno Karabakh they also created and took control of a land corridor to the enclave and additionally wide swathes of the surrounding area, amounting in all to 20% of AZERBAIJAN's territory and creating over a million refugees. 

AZERBAIJAN is now economically transformed, due to Caspian oil from which ARMENIA has had no gain. The net result is that the dispossessed nation is building up its armed forces and sending clear signals that it will resume the fighting if it does not otherwise recover its territory. At the same time, the OSCE Minsk group appointed by the international community to seek to resolve the dispute, having got nowhere for too long a time, has announced measures that seem advantageous to ARMENIA, but not surprisingly are unacceptable to AZERBAIJAN. Trouble, maybe big trouble looms, because if fighting were to resume, it could involve RUSSIA and TURKEY who respectively see themselves as protecting powers!

A new lease of life is suggested by our report in this month's INDIA, for the much bruited energy corridor, linking TURKMENISTAN with PAKISTAN and INDIA, which inevitably has to run through AFGHANISTAN. It is now firmly back on the international agenda. The Asian Development Bank is working on this project, which if it ever comes off, would have enormous implications for the economies of all the countries involved. But, and it's a BIG 'but', (look at the map), it would have to run through warlord country, Taleban-infested country, in short, lawless country in both AFGHANISTAN and the tribal lands of the northern provinces of PAKISTAN. It means a run-off at every village it passes, some very, very rich local warlords, or inevitably pipelines being used for target practice. Chechnya was like that before its war of independence, and pipeline financiers remember. 

Publisher - Clive Lindley

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