Russia fails to bury its dead; Red Army soldiers stored in a garage

It can be tough to fight for a just memory of the Red Army's fallen soldiers in Estonia, Poland and other countries when you cannot assure an appropriate burial for the soldiers in your own country. In Russia's western-most region of Kaliningrad 45 bodies of Red Army soldiers are being stored in a garage of a volunteer digger for two years now, as the regional government continuously puts off their burial.

As local web-portal Kalinirgrad.ru reports, the head of the digger group "Consciousness" Andrei Klimenko is one of many who are voluntarily searching for the millions of Soviet and German soldiers buried in the forests, rivers and lakes of Russia. According to Mr. Klimenko appropriate laws exist and even financing is plenty, but for some strange reason the local bureaucracy does not get its hands to the job.

But even when they do, like on June 22 of this year (the anniversary of Nazi attack on the Soviet Union) they do it carelessly. On June 22, 95 Red Army soldiers were buried with all appropriate honors, yet according to Mr. Klimenko some of them were Italian soldiers found near Strelna; they were in Italian military uniforms who ended up being buried as Red Army soldiers. But complaining was useless.

Recently nine bodies of Red Army soldiers were found by the diggers during a reconstruction of a theater in Kaliningrad; they were exhumed and buried appropriately, but the three bodies lying underneath a nearby statue of German poet Schiller were left alone. The diggers had no opportunity to identify them and feared that those bodies would follow the fate of the 45 bodies lying in Mr. Klimenko's garage, completely unwanted by local authorities. In the relatively small Kaliningrad region alone 150,000 soldiers fell, of those only 120,000 have been found.

If a war is indeed not over until the last victim is buried, the war for Russia will spread out over decades. But time is running out; Russia's newer generation is not far from placing the Great Patriotic War into the history books as just another event with little significance for the future; a truly saddening perspective.

Test yourself in "new" Russian history

There have been many comments about the recent initiative of Russian president Vladimir Putin to "rewrite" Russian history. If you ever were curious of what would be written in the newly adopted (or as they are referred to "recommended") history texts (one of them is pictured), Kommersant's Vlast weekly magazine offers a test to check your knowledge (in Russian). Having taken the test, I am proud to have gotten 2 out of 8 answers correct, which hopefully implies I have some objectivity remaining in my knowledge. Below are some of the questions and the surprising answers:

1) Complete the phrase: the Soviet Union was ______:

Answer: an example and a guide of a just state for millions of people all over the world

(My answer was the SU was a social state, and etc. etc. - I was wrong)

2) Complete the phrase: The result of Stalin's repressions was _______:

Answer: the formation of a new administrative class that was adequate for the goal of modernization at a time of limited resources

(My answer was that the repressions shattered the ability of the SU to defend itself resulting in devastating losses in 1941 - wrong yet again)

3) Complete the phrase: The YUKOS trial buried all hopes of _______:

Answer: oligarchs to maintain their control over Russia's natural resources

(No surprise here)

4) Multiple choice: A sovereign state requires:

Answer: the ability to independently produce military armament

(My answer: the ability to carry out internal and external foreign policy independently - Wrong again)

In the end this "new" history is probably better than studying the History of Marxism or the History of the Communist party, but it is getting closer every year.

Russian military throws a giant open-air party for draftees

Perhaps the Russian military personnel in charge of the dreaded draft are getting their act together. The military commissioner of Bashkortostan together with the city of Ufa's popular club Pravda for the second time now organized a giant open-air Ibiza-style clubbing event with a slight military touch.

As reported on Russian NTV television channel (video available here in Russian) the event included very cute dancers doing what they do best on Russian tanks and other military vehicles. One of Russia's most popular dj-s DJ Groove was in charge of music. Fireworks and massive foam-making machines were also major attractions of the event.

As the military commissioner Timofey Azarov said in an interview "we must communicate with the younger generation in their language. This is why we are hosting the event for the second time. The area in front of the draft station will be turned into a giant dancefloor for the whole night. Hyped dj-s will be hosting the event and the highlight of the night will be 1500 cubic meters of foam which will cover the guests. Patriotic songs will also be played, and guests will see a demonstration of military skills as well as new military equipment on the big screen."

The draftsmen claim the event has had a very positive effect on the attitude of young men toward military service. Last year in the city of Ufa eight thousand men were drafted and only 300 were avoiding service (for various reasons); this is the opposite of what usually happens. Even avoiding statistics this is probably the smartest idea to date coming from the Russian military draft unit, which is in dire shape (Sean's Russia Blog goes deeper on this topic); at least some of them appear to be doing their job effectively. More pics are below.

Berezovsky's lawyer says he "does not give a damn" about client

The lawyer appointed to Russian business tycoon Boris Berezovsky (pictured), after the latter decided to boycott his trial, has said in an interview with Russian daily Izvestia that he "does not give a damn" about the trial.

Boris Berezovsky is being charged in absentia with embezzling 214 million rubles from Russian air carrier Aeroflot at some point in the 1990-s and could face up to 10 years in prison. Mr. Berezovsky told his personal lawyers not to defend him and not to have anything to do with the trial which he terms as politicized.

The Russian government thus appointed Mr. Dudkov, 62 years of age, as a free lawyer for Mr. Berezovsky, who was granted political asylum in London a few years back. In his interview, Mr. Dudkov stated that the court appoints a lawyer closest to the proceedings, and Mr. Dudkov just happened to be nearby. He was surprised that a free lawyer was appointed for economic proceedings, as usually such an appointment is made for poor people and even "bums".

When asked about the likelihood of winning the trial, Mr. Dudkov referring to it as a Soviet-style proceeding laughed and said it "was impossible", although he quickly said he had not even read the trial material.

So yet another comical page is added to the history book of the Russian rule of law. It is strange then when Russian officials complain about Britain's recent remarks of a flawed Russian legal system.

Britain and Russia drift further apart over Lugovoi

The row over the Litvinenko poisoning between Russia and the UK seems to be escalating very rapidly this week. Such haste is rather strange since no real developments have happened in the case since Andrei Lugovoi's (pictures) notorious press-conference (the main suspect in the case according to UK authorities) in Moscow more than a month ago. The Guardian reports:

The Foreign Office and Downing Street are preparing to send a strong signal to the Kremlin following its refusal to extradite Andrei Lugovoi, the former KGB agent suspected of murdering Alexander Litvinenko last November.

The government was last night considering counter-measures to show Britain's extreme displeasure at the Kremlin's decision, and the seriousness with which it takes the "terrible" murder of Mr Litvinenko - a British citizen and fierce critic of the Russian president, Vladimir Putin. The options include the possible expulsion of Russian diplomats from the London embassy, and the withdrawal of cooperation in several areas, including education, trade, social affairs and counter-terrorism.

Although the Russian government officially announced the refusal to extradite Mr. Lugovoi last Monday, Moscow's stance was not new, and no real doubts existed about it since Britain asked for the extradition a few months ago. The Russian side has three motivations behind its actions.

First, extradition of its citizens is barred by its constitution. Second, it has so far seen no evidence in British documents that make Mr. Lugovoi a suspect in the case; if it does, it promises to try him at home. But third, and most important, is Russia's counter-action to Britain's refusal to extradite Boris Berezovsky (the notorious Russian tycoon, who is plotting to set up a coup in the Kremlin) and Ahmed Zakaev (a spokesman for the Chechen terrorists); both were friends of Alexander Litvinenko, and Russia has deep suspicion of their involvement in the affair.

Many analysts have pointed out to Russia's obligation to extradite Mr. Lugovoi, thus overriding the Russian constitutional ban, based on its signing of the 1957 European convention on extraditions, which according to some overrides domestic laws. Yet Kommersant has interviewed a number of experts in the field with differing opinion. One of these experts, a law professor at Russian RUDN university claims that the suspect must be deemed guilty in both countries for the extradition to occur. Another expert, senator Mikhail Margelov says that Russia has already faced criticism for ignoring its constitution from the European Human Rights court for extraditing its citizen to Turkmenistan several years ago.

Britain is fully aware that Russia will never extradite Mr. Lugovoi, just like Russia has come to terms with the fact that Mr. Berezovsky and Mr. Zakaev will never leave the UK. British authorities are in a difficult position. The new government is forced to take action to prove its tough stance with Russia and its commitment to solving the Hollywood-like riddle in which many Londoners were affected.

Britain's actions are limited; Russian energy companies toward which economic sanctions may be applied will always find alternative markets in Europe or Asia. BP and Royal Dutch Shell on the other hand are having trouble holding on to their assets in Russia, and are grateful for anything that is left to them by the Russian regulatory agencies. The only real threat is a full blockade for Russian companies into the UK financial market, which will also impact London as a financial center, where Russian IPOs account for a quarter of new equity raised.

The situation will only get worse. Talk of a break in diplomatic relations is too unrealistic and even excessive. But it is obvious that any future cooperation will be chilly. If the affair over Litvinenko was a provocation of some sort (it is hard to explain any other scenario) it has worked perfectly. Both sides now have little area for maneuver, and Russia's reputation on the international arena has been dealt a very powerful blow.

Finding holes in the US Missile Defense Shield

In an interesting commentary in Le Monde, French historian Alexandre Adler calls out some obvious inconsistencies in the US plans to deploy its missile defense shield in Poland and the Czech Republic. The bottom line in his article is something that has been discussed and concluded numerous times and claims that Russia's position is justified as it sees no basis for the system, it sees no threats, it sees no justification for such rapid action.

But Mr. Adler brings into point the fact that although NATO countries have agreed with the US regarding the need for the system, the missile defense system will be under US management.

The envisaged system will form part of the US strategic forces, not those of NATO, taking all right of inspection or discussion from the European allies, as well as from the Russians, represented in Brussels by a liaison mission whose importance was once deemed to be considerable.

Despite US promises to give the right of inspection to Russian military officials of the planned missile defense sites, the fact that the system will be out of NATO jurisdiction means Russia will have little say in what happens next to the system as it will not be able to use its position in the Russia-NATO council (Russia fears most the future expansion of the missile defense sites). The military aspects of the system are also briefly analyzed in the Le Monde commentary:

Thanks to the radar system set up on Czech territory, the two main Russian intercontinental missile bases would at last be covered by permanent means of observation; currently, only satellites, whose field of vision remains random, enable the United States to monitor the silos. That means quite simply that the United States would acquire an antiforce first strike capability whose nightmarish threat had, however, disappeared at the end of the eighties.

Mr. Adler suggests the US use the proposal by Vladimir Putin regarding the Gabala station in Azerbaijan; yet we are all aware of the slim chances for that scenario. The military aspect of the US defense shield is still not clear. Some military observers say it will not work in Poland and Azerbaijan or Turkey is a good location, others have a diametrically different position. This concerns both Russian and European observers. The last aspect continues to make the US missile shield issue balancing predominantly in the political sphere of observations.

Can the US take Gabala alone?

With the 10th Annual US-Azerbaijan Security Dialog recently ending in Washington signs are emerging of a troubling position for Russia amid its Gabala radar base proposal. Russia offered the base as a replacement for the planned US radar in the Czech Republic a few months ago and Russia's president confirmed the proposal at a meeting with his US colleague in Kennebunkport in early July.

Although US Secretary of State Rice turned down the offer last week, the Gabala radar base still dominated the discussion between Azeri and US officials. Despite a very neutral statement from the Deputy Foreign Minister of Azerbaijan about the Gabala base being a US-Russia issue that must be discussed with Azerbaijan once the two sides reach a consensus, the US has all reasons to take the Gabala base issue into its own hands.

The Gabala radar, built in 1986 in the USSR to monitor missile launches in the Middle East and the Indian ocean, by chance, ended up in Azeri territory and is now being leased by Russia with the lease term expiring in 2012. Russia's plans to build a similar base in its southern region of Krasnodar underlines its awareness of someone else using the radar after 2012. Azerbaijan and Georgia have for a long time been thinking of closer cooperation with NATO or the United States by itself. Why shouldn't the US then wave goodbye to Russia's offer and wait till 2012 to takeover the radar, finally establishing a solid presence in the Caucasus area and getting the opportunity to monitor its "official" foe Iran?

One reason is the growing role of Azerbaijan in the Caucasus region thanks to the rich oil resources. Unlike Georgia, with its frail economy and little hope for being a completely sovereign state, Azerbaijan has been careful in throwing itself to the mercy of either Russia or NATO/US. The Azeri government is also fearful of threats from Iran, with which it has a number of bilateral peace-aimed security agreements. For Azerbaijan, US-Russian cooperation would be the ideal scenario guaranteeing warm relations with both sides. However, the scenario of the US leasing the radar base does not seem unattractive for the Azeris either given Russia's preparation to copy the radar on its own territory.

The Gabala radar base idea was not that innovative for the Pentagon's plans for a global missile defense system. Lt. Gen. Henry Obering, director of the Missile Defense Agency at the U.S. Department of Defense, made a proposal this spring to deploy elements of a missile system in Europe and the Caucasus. The Bush administration and the Pentagon did not initially rule out locating military facilities in Azerbaijan or Georgia. In the opinion of American military experts, Azerbaijan has a major advantage over Georgia: It has the Gabala radar.

In the end, Russia's position may seem like an utter disaster if the US does establish presence in Azerbaijan and takes over the Gabala radar base, which despite being Azeri property is considered by the Russians as their own. Western presence in the Caucasus without Russian consent is one of the most feared security questions for the Kremlin. Up until now it was assumed that Georgia was on the quickest path toward NATO or US presence on its territory. Now Russia has created a similar scenario for Azerbaijan. As the topic develops talks of Putin's Gabala proposal as being aimed to prolong Russia's presence in Azerbaijan look more and more correct.

Sochi secures the 2014 Winter Games

Such an event I could not miss. Russia securing the 2014 Olympics in Sochi startled me. The entire proposal which two years ago seemed like a ridiculous government initiative (just think: Russia's warmest city hosting the Winter games!) turned into the most polished, hard-lobbied project not only to promote the candidate city but to promote Russia in the world. The 2014 olympics should, if all goes as planned, do just that.

Despite previous comments about Korea's advantages as another route to the booming economies of Asia, Russia's figuring in Ernst & Young's report as the #5 most attractive destination for investment if not beat out Korea's advantage, at least tied it.

The Russians put an impressive show of strength in Guatemala, by flying in their huge jumbo cargo airplane carrying the equipment needed to sustain an artifical ice rink. Not to mention the multitude of past Russian olympic champions and the "captain" of the team flying on the presidential jet Vladimir Putin himself (the Austrian chancellor took a regional flight to Guatemala). At least the Guatemelis were impressed by Russia's bidding.

Sochi 2014 means first of all a good image for Russia and a solid base for cultural expansion beyond its borders (again if all goes as planned). It also means a promotion of sports in Russia, and a healthy lifestyle, something needed for a population that is dying out fast. Of course, one can imagine the problems that will be associated with government funding, aka property wars, and plain vanilla looting; but I do not think China is much more efficient in its organizing of the summer games in 2008 (the difference is the harsher punishments).

Congratualtions to Sochi. Condolences to Pyongchang and Salzburg; but Korea and Austria have hosted the Winter Olympics before, Russia has not.

Blog Break - Russian Media Blog Carnival Wrapup

I bring my apologies for the lacking of posts in recent days. The exciting process of moving has captured my entire schedule. As a substitute I would like to summarize the Russian Media Blog-Carnival that took place in June, and from what I have read was a success. I bring the links from all the authors (not all in English) below. A big thanks to Jurg Vollmer of the Krusenstern blog for coordinating the event. I will hopefully be back next week, and will miss out on the guessing about what the Bush-Putin summit really meant after all.

Weblog	Location	Lang.	Article	Published
Frankfurter Rundschau, Monika Porrmann	Germany	D	"Russische Blogger schreiben wie die Saporoger Kosaken"	May
Russia's true tales of terra, Nikolay I.	USA	E	"He writes about Putin, and it’s interesting! Andrei Kolesnikov’s Real-Life Putin"	01 June
diVERse, Kalle Kniivilä	Sweden	S	"Är det spegeln det är fel på eller…"	02 June
Russia Blog, Nicolai N. Petro, Professor of political science at the University of Rhode Island	USA	E	"Needed: Better Western Coverage of Russia"	03 June
UPLOAD, das PDF-Magazin	Germany	D	"Die russische Blogosphäre ist ein Who’s Who der Intelligenzija"	04 June
Roger Blum, Director of the Institute of mass communication studies IMW at the University of Berne	Swiss	D	"Medien in Russland und in der Schweiz - ein Vergleich"	05 June
Krusenstern, Jürg Vollmer	Swiss	E	"The Russian newspaper 'Novaya Gazeta' is a paradox!"	06 June
diVERse, Kalle Kniivilä	Sweden	E	"Is something wrong with the mirror?"	07 June
Krusenstern, Jürg Vollmer	Swiss	D	"Die russische Zeitung 'Nowaja Gaseta' ist ein Paradox!"	08 June
Mark MacKinnon, two-time winner of Canada’s top reporting prize and former Moscow bureau chief for "The Globe and Mail"	Russia and Canada	E	"The missing ingredient"	08 June
Sean Guillory, historian from Los Angeles	USA	E	"Old Russian Newspapers"	10 June
Krusenstern, Jürg Vollmer	Swiss	D	"Die 5000. Ausgabe von Ogonjok, der ersten Illustrierten Russlands"	11 June
Gedankenjournal, Andreas Solf	Ukraine and Germany	D	"Erwartungshaltungen russischer Rezipienten gegenüber Medien"	12 June
Ulrich M. Schmid, Professor of Russian Culture and Society at the University of St. Gallen	Swiss	D	"Elena Tregubova: Einblicke in die Gängelung der russischen Medien"	13 June
Joachim Dethlefs, Freelance Journalist and Blogger	Germany	D	"Englischsprachige Russland-Blogs"	14 June
Alexander Günther, Historian and "Readers Edition"-Editor	Germany	D	"Der russische Nationalbolschewismus und seine Medien"	15 June
Eduard Steiner, Russian correspondent of Austrian national daily newspaper “Der Standard”	Russia and Austria	D	"Die Journalistin Jewgenija Albaz: Was soll ich fürchten?"	18 June
Eduard Steiner, Russian correspondent of Austrian national daily newspaper “Der Standard”	Russia and Austria	E	"Yevgenia Albats: What should I be afraid of?"	19 June
Heribert Prantl, head of the national desk of the "Süddeutsche Zeitung" and most cited author of editorial commentaries in German press	Germany	D	"Putin denkt und lenkt"	20 June
Krusenstern, Jürg Vollmer	Swiss	D	"Der Kreml droht Journalisten mit Berufsverbot"	21 June
Simon Sturm, Student of Journalism at the University of Dortmund	Germany	D	"Rheinskaja Gazeta - die erste russischsprachige Tageszeitung Deutschlands"	22 June
Gedankenbörsen-Blog, Rafael Wiedenmeier	Swiss	D	"Die Medienlandschaft von Kasachstan"	25 June
Krusenstern, Jürg Vollmer	Swiss	D	"Ein Jahrhundert Journalismus in Russland an einem Tisch"	25 June
Sarmite Elerte, Editor-in-chief of Latvia’s leading newspaper "Diena"	Latvia	E	"The role of the media in new democracies"	26 June
Russia Blog, Nicolai N. Petro, Professor of political science at the University of Rhode Island	USA	E	"Russia's New Cyberwarriors"	27 June
Nina Schneider, Swiss video-editor and language instructor at the Russian State University for the Humanities RGGU in Moscow	Russia and Swiss	D	"Ausser den Vorzeichen hat sich seit der Sowjetunion nichts verändert"	27 June
Max Schmid, Russian correspondent of Swiss Public broadcasting Radio SR DRS and winner of Swiss-Russian Journalist Award	Russia and Swiss	D	"Mückenstiche oder das Hündchen, das den Elefanten anbellt"	28 June
Nurija Fatychowa from Tscheljabinsk for "fluter.de" - Das Jugendmagazin der Bundeszentrale für politische Bildung	Russia and Germany	D	"Seelen-Striptease oder Netz-Demokratie?"	28 June
Sergej Guk, commentator of "Voice of Russia" * "Голос России"	Russia	D	"Russische Journalisten sind in der Nacht mutiger"	29 June
Krusenstern, Jürg Vollmer	Swiss	D	"Russischer TV-Sender NTW gehört nun zu 100 Prozent Gazprom"	29 June
Natalja Lipowa, journalism student at the Saint Petersburg State University	Russia	D	"Existiert die Pressefreiheit in Russland?"	30 June

Root for Sochi-2014 - Apparently it's close

The race to host the 2014 winter Olympics is predicted to be as tight as the 2005 battle for the 2012 summer games, when London managed to yank out the winning bid at the last moment of voting from Parisian hands.

This time around, the three competitors are South Korea's Pyongchang, Austria's Salzburg, and Russia's Black sea resort town of Sochi. Despite various concerns about Sochi having lower chances to host the Olympics, the New York Times reports that an index compiled by Olympics specialist website Around The Rings concludes that all three contenders are level with 83 points, less than a week before the voting in Guatemala on July 4th.

Salzburg had led through the two-year campaign but concerns raised in an IOC evaluation report had allowed the two others to catch up just in time, ATR said.

ATR said its index was based on multiple visits by its correspondents to the cities over the past two years and coverage of their presentations around the globe.

"Scrutiny of bid documents and interviews with bid officials, IOC members and other sports leaders also influenced the rankings," it said.

In the previous ATR power index, released in April, Salzburg led on 82 points, followed by Pyeongchang on 77 and Sochi on 75.

Although Sochi's funding is very well-outlined and backed by the Russian government's multi-billion Federal Target Program, it lags behind the competitors in the number of Olympic complexes built. Out of 11, it so far has zero. Compare that with a seven out of eleven for Salzburg. But then again Austria's sporting complexes will be older than those of Sochi when built. What remains strong is the public support for the Olympic games in Russia, for which Vladimir Putin has become the leading promoter in the international arena.

Sochi has positioned itself as a unique geographical destination. While the higher reaches of its mountains are covered with snow virtually all year, in the summer it is the top Russian beach resort. In fact it is the warmest Russian major city. The fact that the likes of Roman Abroamovich, Russian billionaire and owner of Chelsea FC, have been making big investments in the area is also a big confidence factor.

Yet as the Guardian reports, South Korea may be extremely attractive especially after the Beijing 2008 games, and will serve a further boost to the expansion of the Olympics movement into Asia and with it corporate sponsors willing to tap the Asian market. The IOC members reviewing Sochi have given it marginally lower reviews than Salzburg and Pyongchang earlier on as well.

However, the IOC is a strange organizations as are many, needless to say, and so the voting will probably yield a big surprise. One would hope the surprise will be in store for Sochi.

Photo of the Day

Vladimir Putin and NATO chief Jaap de Hoop Scheffer (Courtesy of Kommersant)

PwC and Yukos - Additional validity for the Russian prosecutors or not?

In an unprecedented move for worldwide assurance practice PricewaterhoueCoopers (PwC) withdrew 10 years worth of audit opinions regarding the now bankrupt Yukos oil company. PwC said yesterday it suspects that former Yukos management may have provided inaccurate information to its auditors, and thus Yukos's financial reports certified by PwC for the years 1995-2004 should no longer be relied upon.

The reason for the withdrawal of opinion according to PwC was the existence of intercompany and arm's length transactions between Yukos and its subsidiaries which were never properly classified and which were an inseparable component of its money-laundering scheme. As the Financial Times reports:

“Company management many times declared to us that [the companies]… were not related parties,” the letter says, a copy of which was first obtained by Russian newspaper Vedomosti. During a criminal investigation by prosecutors into the company “we received information that showed [these companies] were controlled by the shareholders of Group Menatep Limited and were used to their advantage,”it says. Baltic Petroleum, South Petroleum and Behles traded Yukos oil from 1995 to 1999. Group Menatep is Yukos’s majority shareholder.

PwC also said management failed to provide enough information on whether Russian entities later used by Yukos were arm’s length transactions or not, and also failed to disclose enough information on “significant payments” the company paid to entities owned by the shareholders of Menatep Bank, which went bust in the August 1998 financial crisis.

PwC previously said it stood by its audits of Yukos and its internal trading structures, which the letter appears to refer to.

Such an issue has a multitude of repercussions both for the future of the Yukos affair and for the future of PwC. Withdrawing 10 years worth of audit work has not been done in the case of billion dollar corporations. Even the infamous Arthur Andersen did not withdraw its audit work for Enron, despite being indicted then for intentional participation in creating fraudulent schemes for the US energy giant. PwC's actions inadvertently claim that the auditor either knowingly participated in the Yukos schemes or it was too dumb to find out about it (in 10 years worth of audits). Both scenarios are extremely negative for the respected auditor.

Mikhail Khodrokovsky's (the former CEO of Yukos, now in jail for fraud) lawyer Mr. Amsterdam, told the Financial Times that PwC worked with Yukos on constructing most of these trading structures and on making sure they were compliant with both Russian and international accounting standards. If this event is in fact true, it proves that PwC was providing consulting work for Yukos and must have been aware of any and all transactions of the now bankrupt oil company.

Another implication that stems from PwC's actions is the international validity given to the Russian prosecution which has successfully pursued its case against Yukos in Russia, resulting in a $27bln unpaid tax bill, and ultimately leading the company into bankruptcy. The Russian government thus has also cleared itself of any possible lawsuits from international shareholders for intentional and wrongful actions against Yukos. PwC's actions, although suspicious, give assurance that Yukos was indeed a hotbed for fraud schemes. Such was the claim made by Russian daily Kommersant.

All would be fine if not for one fact. The Russian government is pursuing its own investigation into PwC'a involvement in the Yukos affair. The investigation could result in a suspension of its license to do business in Russia, where it has a significant financial interest. PwC is the biggest auditor in Russia and audits the state's two biggest energy companies - Gazprom and Rosneft. PwC has already paid to settle some charges last year, but has lost in court on further charges, which it is set to appeal in July. Some see PwC's statements as a surrender to the forceful actions of the Russian government and an attempt to indirectly settle the dispute through friendly actions.

Such a theory has ample evidence. The fact that Gazprom and Rosneft have reinstated PwC as their auditor is strange. Since the audit teams in a particular industry are closely related, this would mean that the partners that have been involved in auditing Yukos are most likely involved in the Gazprom and Rosneft audits and share employees on those jobs. Gazprom and Rosneft are thus denying potential problems or wrongful actions that PwC may have committed in the Yukos audits and confirming the auditor's best reputation. In other words, they deny that PwC may harm their reputation. Would any US energy company hire Arthur Andersen to perform an audit in 2001 or 2002, shortly after the bankruptcy of Enron? I would guess not.

The issue will see further developments in July, when PwC's appeal will he heard in court. If the Russian government is in fact attempting to give validity to its actions, the proper course to take would be at least to suspend auditing licenses from any and all partners involved in the Yukos audits (if that has not already been done) or ban PwC from auditing the oil and gas sector. In any case Gazprom and Rosneft should reconsider having PwC as an auditor, unless they openly believe that it is being bullied by the Russian government.

Muesum of Soviet Occupation of Ukraine

The initiative to open a museum of Soviet occupation of Ukraine came from the Ukrainian president Viktor Yuschenko, after he saw a similar show of historic distortion in Georgia (where the museum of Soviet occupation of Georgia is located). Yet to avoid a backlash from a strong opposition, the Ukrainian museum is sponsored by an NGO, the "Memorial" group.

The museum had always been there, but its original title "Museum of totalitarianism" did not attract much visitors, its renaming into the "Museum of Soviet occupation" attracted a landslide of protesters, and later actual visitors. The American ambassador together with NATO representatives have been among the visitors. As the reporter of Russia's daily Izvestia strolled through the outskirts of the museum, she observed the following:

"Ukraine under Hitler was much better off than during the Soviet Union", - the museum tries to show. President Yuschenko leaves the issue without comment. "Hitler's troops promoted the Ukrainian theater. They temporarily halted Stalin's repressions. The Soviets destroyed the Ukrainian republic, founded in 1918", - say the museum members. (The Ukrainian republic was shortlived and in the early 1920-s was incorporated into the young Soviet Union, the Western part was "occupied" by Poland - blog author)

The founder of the museum battles Soviet totalitarianism by hunting for archives in Russia. He is helped by the Moscow and St. Petersburg branches of the "Memorial" group. We send our delegates with "Kiev" cakes and Ukrainian "gorilka" (Ukrainian home-made vodka - blog author) to their archives. In return we get documented materials, of which we could not have dreamed of.

Now the museum knows all about three Ukrainian golodomor's (labeled in Ukraine as intentional starvation campaigns - blog author), about the slave-like existence of peasants who were denied internal passports, and how the Russians systematically ate all of Ukraine's produce.

When the Izvestia correspondent asked why the perpetrator behind all the "evil crimes" against the Ukrainian people was labeled as "Moscow" and not the "Communist party", the museum members claimed that that was the way the archives explained it. Perhaps, also the Ukrainian museum fails to show that millions of Russians died of starvation during the golodomor, something that was acknowledged by Ukrainian president Yuschenko. This makes the whole event unlikely to be a planned act of genocide against the Ukrainian people.

The same goes for repressions against the kulaks (wealthy landowners), which hit the fertile lands of Russia as much as Ukraine. The majority of repressions against the party apparatus hit Moscow more than any other city in Russia. The founders of the museum also forget the multitude of benefits their nation received under the so-called "Soviet occupation". The Crimean peninsula given to Ukraine as a gift, an unthinkable act in world practice also does not appear in the museum as an exhibit.

There is nothing wrong in portraying the enormous amount of wrongdoings of the Soviet regime. No one denies them. Yet, it is very different to portray the wrongdoings of the Soviet regime as intentional "crimes" initiated by Russians against Ukrainians, Georgians, and anyone else. Forgetting Nazi Germany's acts of genocide on Ukrainian territory, which together with Belarus saw perhaps the greatest amount of SS activity, including executions, village burning, slave labor, than most Soviet regions at the time, is close to being a crime by itself. Total civilian losses in Ukraine during three years of Nazi occupation are estimated at 5-8 million.

In an online survey hosted by Izvesita, 57% of respondents jokingly said that it is Ukraine who occupied Russia, because the Russia of the ninth and tenth centuries had its capital in Kiev, now the capital of an independent Ukraine.

Diplomacy failed, business will succeed : What next for Russia?

With Russia's diplomatic rockets having not reached their goal of getting Russia's concerns about European rearmament across, the remaining question is "what now?"

On June 15th, the only true remaining obstacle to US ABM deployment in Eastern Europe was overcome, a consensus within NATO over the US "defense" system was reached. Russia lost its only remaining bargaining tool - a split opinion in Europe over the deployment. The same day it became clear that Russia's proposals to redefine the Conventional Armed Forces in Europe treaty (CFE) which so far has only been ratified by Russia, Ukraine and Belarus, went down the drain. Russia's plan to substitute the US ABM deployment in Europe with its Azerbaijan base in Gabala has been de-facto rejected in its proposed version. The marginal hope that remains is President Putin's scheduled meeting with his US counterpart on July 1-2 in Maine. But marginal is too optimistic a word for that meeting.

Russia's diplomatic proposals find little support and Russia's concerns find little compassion. One of the reasons is that the "camp" which Russia is positioning itself against consists of a perpetual number of allies with intertwined defense/political/economic interests. Russia on the other hand is in most cases left by itself. And no matter how much it claims to be a superpower, it must take a major divisive issue such as Iraq to bring together separate European nations into a temporary "diplomatic alliance" with Russia, presumably against the US. And even then, as we saw, the United States has the upper hand.

Russia's only competitive advantage, its natural resources, on the other hand have been giving Russia economic prosperity and influence despite any military or political alliances in the world. And so far the business aspect of Russia will be the only factor that will back its attempts to influence and shape the world around it to ensure the protection of its national interests.

Just the past week highlights this scenario very clearly. The recent St. Petersburg Economic Forum was followed by the long-awaited sale of TNK-BP's stake in the massive Koykta gas field (with reserves on par with natural gas reserves of Canada) to Russian Gazprom. And as with an earlier "forced" sale of Royal Dutch Shell's stake in Sakhalin-2 to Gazprom on claims of "environmental damage", the executives of the British oil giant seemed undeterred by the deal. The worst BP could have faced was a forced sale of its stake in the TNK-BP joint venture which accounts for a fifth of BP's oil reserves.

On Saturday Russia's Gazprom and Italian energy firm Eni signed a memorandum of understanding on the possibility of constructing a pipeline under the Black Sea to supply natural gas from Russia to the EU. The most paradoxical statement made during the signing was that of Italian energy minister Pierluigi Bersani, who claimed the project "strengthened energy security in Europe". This is despite the multitude of talks within Europe aimed to diversify its energy sourcing away from Russia in fear of it cutting off supplies motivated by political tensions.

And yet another side of Western business leniency toward the harsh realities of doing business in Russia came up on Sunday, when PricewaterhouseCoopers (PwC) withdrew ten years worth of auditing opinions on the now bankrupt Yukos oil group, whose ex-chief yuppie oligarch Mikhail Khodorkovsky resides in jail for fraud. Revoking ten years worth of audit work is an unprecedented practice, and has not been repeated even by the auditor of Enron and WorldCom Arthur Andersen, despite the audit team's conviction in intentional wrongdoings in audit procedures. PwC's actions now give international validity to Russia's prosecution for dismantling the oil firm for accusations of fraud.

Business activity in Russia has defied any political developments and criticism toward Russia in the Western world. Thomson Financial rated Russia number three in the world for the amount of capital raised through IPOs, closely trailing the US and China. Russia's primary trading platform RTS, was ahead of New York's Nasdaq and the NYSE in the amount of capital raised in IPOs. With the price of oil predicted to head only upward due to a now constantly prevailing excess demand for energy resources, and with the world economy able to digest such high energy prices preventing potential drops in demand due to excessively high prices, the macroeconomic situation for Russian energy companies flush with cash resembles heaven or something close to it. For Russian companies outside the oil & gas industry a government flush with cash from oil revenues is a great supporter to have as well.

Business then is the only force Russia has. And classifying it as a force does not mean it must be used to bully. Creating intertwined business interests between Russian, European, American, and Asian conglomerates ensures a consensus based approach to problem solving between those countries where business ties are highly linked. In the medieval times a king would marry his offspring to foreign royalty. Now, the protectionist feelings in many of the world's major economies have translated that principle into cross-border ownership of major corporations.

The recent tie-in of Russia's Basel with Canadian Magna International, Norilsk Nickel's attempts to purchase Canadian LionOre, Aeroflot's desire to expand into the European airline industry through a stake in Alitalia, and finally Gazprom's tentacle-like pipelines sooner or later will integrate the Russian economy fully with that of the West. The prerequisites for such a scenario are the limits to protectionist behavior of the Russian government only to strategic sectors and only if it is warranted for a country's national interests and not for the corporate interests of the Russian company (think Gazprom). Creating a continuously stable environment at home is another. Yet the promotion of Russian business expansion is one of the few routes Russia has left to secure a dominant position for itself in the world.

Gazprom wants all of Sakhalin : Is the monopoly too big to handle?

The Russian government may now have a very big headache to deal with in its oil and gas sector, its own creation - Gazprom. The more you feed the giant, the greedier it gets. After the Russian monopoly was given sizable stakes in most natural gas projects on Russian soil, in some cases the stakes were taken away from foreign companies, as well as being granted the exclusive right to export Russian natural gas, Gazprom remains unsatisfied.

Earlier this week, Gazprom's deputy head Sergei Ananenkov stated that because Gazprom would not be able to fulfill the natural gas supply requirements to Russia's Far East before 2014 with its new Sakhalin-3 project, it should be given the right to buy the natural gas produced on Sakhalin-1 (co-owned by Exxon Mobil and Rosneft, among others) who are already in talks of exporting that gas to China.

Many see such statements as Gazprom's attempts to wrest control over all the major Sakhalin energy projects. After buying out Royal Dutch Shell's 50% + 1 share stake in Sakhalin-2 late last year amid active pressuring from the Kremlin to revoke Shell's license for the project outright, Gazrpom with the help of the Russian government's several ministries is seeking to attain control over the Sakhalin-3 project without a formal auctioning process. And now, Gazprom has been complaining about the violation of its unique natural gas exporting right status while the companies controlling Sakhalin-1 plan to export gas to China.

Kommersant cites experts saying Gazprom's statements of a deficit of energy resources in Russia's Far East are only a pretext. Gazprom's real goal is to negotiate export prices to China out of Sakahlin-1 itself (and presumably decide on further allocations of natural gas) rather than let the consortium members do it. Right now exporting natural gas is a much more lucrative business than selling it within Russia, due to a large disparity in prices and government subsidies.

As Vremya Novostey reports, Gazprom's actions are already seeing criticism from the Russian government. Russian minister of Natural Resources Yuri Trutnev has communicated his discontent with the transfer of Sakhalin-3 to Gazprom without a formal bidding process, calling it a procedure not in compliance with Russia's regulations. Russian finance minister Alexei Kudrin called out Gazprom's aggressive actions aimed at preventing its competitors to have any ability to export gas by blocking possible pipeline construction projects.

Yet another interesting development arises in Gazprom's recent statement. Not only is it attempting to affirm its power over foreign-based energy giants doing business in Russia, now it is also battling another Russian state-owned giant Rosneft, a large stakeholder in Sakhalin-1 and a contender for Sakhalin-3. The Russian governmental ministries now find themselves in a delicate position in the middle of a corporate dispute; some as Alexei Kudrin, have already picked sides.

Many have warned the Russian government of ballooning the size of Gazprom to a point when it would be both hard to control and harder to manage. The former is already a fact. Will Gazprom be able to deny the latter is a matter of time. Upon assuming control of Russia's key natural gas-producing projects Gazprom will have to show that it can work as effectively as its foreign colleagues, who have been moved to the sidelines with the help of the Russian government.