On Wednesday at a London hotel, President Obama meets his Russian counterpart Dmitry Medvedev for a crucial "mini-summit" around the edges of the G-20 talks on righting the global economic crisis.
The agenda for the first-ever meeting between the two presidents will hardly lack for contentious issues, from strategic nuclear arms reduction and missile defense to NATO enlargement and probes for Russian cooperation on Afghanistan — to say nothing of the off-line discussions regarding Russian support for Iran's menacing nuclear program.
With such a crowded plate, one issue that may not make the cut could well prove to have critical consequences for global economic development and geopolitics: Russia's resource war.
Call the scramble to control key strategic resources a case of asymmetrical warfare: Russia plays by commercial enterprise rules in free-market nations to advance its strategic interests, while imposing strict limits on foreign investment in its own resource sector. The result: A "heads I win, tails you lose" policy that allows Russia the best of both worlds as it amasses a global portfolio of resource assets.
The resource war is asymmetrical in another way as well: While Russia wages resource war with strategic intent, it is not at all clear the West realizes it is even going on.
How limited are non-Russian investors in Russia's resource riches?
Metals and minerals dominate the 42 sectors on Russia's designated "strategic list." In the mining sector, a new decree allows Russia to "repo" any truly successful resource exploration by majority-owned foreign companies.
Nominally, the companies are repaid for the exploration costs of any large resource finds, whose control then passes back to Russian authorities; foreign companies can keep the small finds, whose economics will make them largely nonviable. The rules pertain not only to oil and gas, but to gold, copper, uranium, diamonds, quartz, cobalt, nickel, platinum group metals, beryllium and lithium.
Resource companies already operating in Russia may have no choice but to tack with the new rules in hopes that they can maintain a sliver of their sunk investments. New money, of course, may examine the fine print on the new decree and red-line Russia for future exploration.
Russia's onerous home rules may be self-defeating — a measure of how little Moscow understands the laws of the marketplace and the freedom of capital. Its strategy in the rest of the world, however, is bringing more resources within Russian reach.
Take the case of the aluminum sector in Romania, for instance, where court papers filed in a U.K. commercial suit reveal what appears to be a false-flag operation — use of a Russian-controlled American front company — that allowed a Russian oligarch to take possession of key Romanian aluminum operations.
In the words of the British judge hearing the case, the Russian oligarch decided "better to negotiate with the Romanian government through a U.S. or Israeli connection, rather than a Russian company, because of the perceived antipathy of Romanians to Russians."
Nor has the U.S. itself been beyond Russia's reach. Metals conglomerate Norilsk Nickel owns the United States' only producing platinum and palladium mine, purchased in 2002-03 when U.S.-Russian relations were in the realpolitik equivalent of "harmonic convergence": The U.S. reaching out to Russia for post-9/11 cooperation in the then-called global war on terror, and Russia only then beginning to flex its petro-muscles.
While Norilsk trades as a publicly held company, Russia's St. Petersburg Times reported last summer that the newly appointed head of Norilsk served for more than a decade as "a KGB officer with the Leningrad branch of the Soviet security agency," according to the government's own Web site.
As the former KGB man told the Times in an ironic bit of boilerplate: "Any large company should be interested in good relations with the (Russian) government."
In a twist on Clausewitz's classic dictum, it appears Russia today views "economics as the continuation of war by other means." A nation that has seen its rapid resurgence — waggish American political risk analyst Roman Kupchinsky calls Russia "Saudi Arabia with trees" — follow the arc of rising oil and gas prices has learned that the quest for resource dominance need not be confined to the energy sector alone.
Witness the warning shot several weeks ago by Russian Defense Minister Anatoly Serdyukov, who stated in a speech widely reported by Russian news media:
"U.S. aspirations have been aimed at getting access to raw materials, energy and other resources (in former Soviet republics). Active support was given to the processes aimed at pushing Russia out of the sphere of its traditional interests."
For anyone tempted to discount this statement as the isolated position of a Kremlin hard-liner, Russia's top defense official made his speech with President Medvedev standing at his side.
Is Russia really waging an asymmetrical war to lock up a future feed-stock of strategic resources? Maybe it's time to order up an English-language translation of Vladimir Putin's controversial Ph.D. thesis: "Strategic Planning of the Renewal of the Minerals/Raw Materials Base in Conditions of the Formation of Market Relations."
Mr. Putin's alma mater? The St. Petersburg Mining Institute.
Groarty, principal of Carmot Strategic Group, an international business advisory based in Washington, D.C., held senior positions at the White House and the Department of Defense.
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Posted 3/31/2009
On Wednesday at a London hotel, President Obama meets his Russian counterpart Dmitry Medvedev for a crucial "mini-summit" around the edges of the G-20 talks on righting the global economic crisis.
The agenda for the first-ever meeting between the two presidents will hardly lack for contentious issues, from strategic nuclear arms reduction and missile defense to NATO enlargement and probes for Russian cooperation on Afghanistan — to say nothing of the off-line discussions regarding Russian support for Iran's menacing nuclear program.
With such a crowded plate, one issue that may not make the cut could well prove to have critical consequences for global economic development and geopolitics: Russia's resource war.
Call the scramble to control key strategic resources a case of asymmetrical warfare: Russia plays by commercial enterprise rules in free-market nations to advance its strategic interests, while imposing strict limits on foreign investment in its own resource sector. The result: A "heads I win, tails you lose" policy that allows Russia the best of both worlds as it amasses a global portfolio of resource assets.
The resource war is asymmetrical in another way as well: While Russia wages resource war with strategic intent, it is not at all clear the West realizes it is even going on.
How limited are non-Russian investors in Russia's resource riches?
Metals and minerals dominate the 42 sectors on Russia's designated "strategic list." In the mining sector, a new decree allows Russia to "repo" any truly successful resource exploration by majority-owned foreign companies.
Read Full Article »