Putin associate calls Afghan heroin “weapon of mass destruction”

Graham Stack for business new europe (www.businessneweurope.eu)

Putin associate and currently Federal Drug Control Service chief Viktor Ivanov said yesterday February 18 in front of the State Duma that Afghan heroin is a “weapon of mass destruction.”

“Every day 82 people younger than 27 die in Russia [due to Afghan heroin], so yearly losses stand at 30,000. This number twice exceeds Soviet casualties in the entire ten years of the Afghan War,” he said, as quoted by Interfax.

CIS countries commemorated 20 years since the end of the Afghan war this week.

“No less than 12 tonnes of pure heroin are smuggled from Afghanistan to Russia, which is sufficient to make 3 billion doses,” Ivanov said. He proceeded to call Afghan heroin “is a special kind of weapon of mass destruction. This is also a selective weapon targeted at the younger generation,” he said, according to Interfax.

With Obama in the US White House and pushing for a surge in Afghanistan, Russia is positioning itself as transport corridor for NATO in return for concession on other fronts.

The extent to which eradicating heroin cultivation in Afghanistan in the key to defeating the Taliban is a bone of contention between US generals and their NATO allies, especially Germany. US generals have been pushing for NATO military targets to include opium dealers, while the Germans are for emphasizing infrastructure construction.

Viktor Ivanov, a KGB veteran, served in Afghanistan in the 1980s.

Russia and China sign US$25bn loans-for-crude deal

Graham Stack for business new europe (www.businessneweurope.eu)

Rosneft, Transneft, China National Petroleum Corporation (CNPC) and China Development Bank have signed off on a deal for $25bn in loans for the Russian state-owned companies in return for Russian crude oil supplies to China, according to newswires

The agreements were signed in Beijing on Tuesday February 17 at a meeting between Russian Deputy Prime Minister Igor Sechin and Chinese Vice Premier for Energy Wang Qishan.

Following the meeting, Sechin, who is also chairman of the board of Rosneft, said that Russia is expected to export 15 million tonnes per year (301,000 barrels a day) to China over a period of 20 years in exchange for the loans.

“We agreed on supplies of 15 million tonnes of oil every year over a period of 20 years,” Russian Deputy Prime Minister Igor Sechin told state news channel Vesti 24.

The China Development Bank signed the loan agreements with Rosneft and Transneft. Rosneft and CNPC signed documents on Russian oil deliveries to China for a 20-year period.

Transneft Vice-President Mikhail Barkov told Reuters his company would receive $10bn of the loan and Rosneft the other $15 billion.

“The maturity is around 20 years and this credit is linked to supplies,” Barkov told Reuters. “It is a historic event and the start of a big journey.”

China agreed to reduce the annual interest rate by one percentage point to 6 percent, RIA reported. Vedomosti speculates that the interest rate for the loan is 5.5-6% annually.

The deputy premier also signed a second deal on construction of a branch of the Eastern Siberia-Pacific Ocean pipeline (ESPO) to the Chinese border. CNPC and Transneft signed a corresponding contract on construction and operation of the ESPO branch, according to Prime Tass.
Russia will supply 30 million tonnes through the pipeline link to China when it reaches full capacity, a Transneft spokesman told Prime Tass.

VTB Capital’s Lev Snyvkov writes, “Rosneft could resolve its debt repayment issues without the Chinese loan, but it could be more expensive and problematic given the current tight liquidity conditions. We estimate Rosneft’s net debt at the end of 2008 at about USD 24bn, with USD 8.5bn to be repaid in 2009. The company’s 1Q09 repayments (USD 0.9bn) were covered by operating cash flow, while the 2Q09 repayments (USD 4.1bn) have already been agreed with banks (refinancing). In 2H09, Rosneft needs to repay USD 3.5bn.

The pricing parameters of crude supplies (as yet unknown) are important for assessing the true cost of the loan. The news is in line with what was announced earlier but is still marginally positive for Rosneft and Transneft as the agreement is an additional source of liquidity in the tight liquidity conditions on the market.”

UralSib’s Viktor Mishnyakov writes, “we believe the loans received might provide an impetus to massive development of Eastern Siberia. Assuming the government will exempt the East Siberian fields from export duty, the biggest winners will be Rosneft (which has the most projects in Eastern Siberia), TNKBP, Surgutneftegas, Slavneft and Gazprom Neft. Regional development would also likely trigger the extensive use of independent oil field services in the region, with Integra benefiting the most.” We think China might receive certain benefits in return. We believe that two options are possible: greater access to the East Siberian fields (currently two upstream projects via a JV with Rosneft) and the potential transformation of ESPO into a joint stock company, with China getting 49% or 50% control in it.”

Sting in Serpent Island tale leads to political strife in Romania

Graham Stack in Kyiv for business new europe (www.businessneweurope.eu)

When the International Court in the Hague awarded the lion’s share of the hydrocarbon rich northwestern Black Sea to Romania over Ukraine, many in the Latin county saw this as poetic justice for disrupted gas supplies in January. But Romania’s politicians have again showed their mastery of snatching defeat from the jaws of victory

Maritime border disputes are usually mind-bogglingly arcane affairs. So it was with the decade old dispute between Romania and Ukraine over maritime border delimitation in the North-Western Black Sea. The main bone of contention was an ‘insular feature’ known poetically as Serpent’s Island, the size of a few football pitches, and located not far off Romania’s Danube delta. Ukraine is the proud sovereign of what it claimed was a fully fledged island, replete with a Potemkin village of settlers – and entitled to a zone of exclusion giving Ukraine control over resource-rich seabed.

Romania was intent on calling a rock a rock, denying Serpent Island was an island, and thus arguing it had no implications for the maritime boundary.

However arcane the arguments, at stake was sovereignty over an estimated potential 70bn cubic meters of natural gas – enough to supply Romania’s entire gas needs for five years – and 12m tonnes of oil.

The significance of these reputed riches was greatly heightened by January’s gas dispute between Russia and Ukraine, which saw supplies to Europe, including Romania, severely disrupted. Both sides claimed the resources could limit dependency on imported gas.

After years of deliberations, the International Court of Justice in the Hague reached a decision February 3 – and awarded the four fifths of the disputed area question to Romania. 9,730 square kilometres of the continental shelf of the Black Sea.

Ironically the entire rock / island issue turned out to be a red herring. “The ICJ decided that it was not necessary to determine whether Serpent’s Island is a rock or an island in order to delimit the maritime boundary,” says Martin Pratt of Durham University’s International Boundary Research Unit.

Ukraine put a brave face on yet another international setback, while Romania celebrated, with President Traian Basescu calling it a “big success for Romanian foreign policy”. Prime Minister Emil Boc immediately promoted Romanian representative at the ICJ, Bogdan Aurescu, to a senior post in Romania’s Ministry of Foreign affairs. And commentators pointed to the poetic justice of the award after Ukraine’s spat with Russia had cut off gas supplies to Romania in January. And the even more enthusiastic called it a victory for Western civilization, with the NATO and EU border shifting to its easternmost point.

A sting in the tale

But the Serpent Island tale quickly proved to have a sting to it.

On the day after the celebrations, the hangover set in. It transpired that two weeks before the November 30 2008 elections that voted out the government led by Calin Tariceanu of the National Liberal Party (PNL), a cabinet resolution had granted a production-sharing concession for blocks in the Serpent Island area to Sterling Resources Ltd, a little-known Canadian firm. The agreement, some annexes of which were classified secret, had apparently awarded Sterling Resources production rights in addition to existing exploration rights, in the event that ICJ ruled in Romania’s favour.

The government’s reactions was immediate, with new Democratic Liberal PM Emil Boc dismissing the head of the National Agency for Mineral Resources (ANRM), Bogdan Gabudeanu, Romania’s natural resource regulator, on the same day.

Romanian investigative reporters quickly claimed murky ties existed between ueber-oligarch Dinu Patriciu, head of Romania’s largest energy company Rompetrol, and regarded as sponsor of Tariceanu’s PNL, Sterling Petroleum, other foreign concession holders, and sundry officials.

Apart from Gabudeanu, attention is focusing on current Environment Secretary, former head of the prime minister’s chancellery, Doru Badulescu. It was Badulescu and Gabudeanu who signed off on the concession agreement. Question marks also hang over the role of former justice minister Catalin Predoiu.

Of course, with the economic situation for Romania in 2009 looking increasingly grim, PM Emil Boc is keen on blackening the name of his predecessor, adding fuel to the fire. For his part, former PM Tariceanu has said he will sue Boc over publicly-made corruption allegations.

Sterling Resources says that all relevant ministries signed and approved the resolution. “The Eleventh Amendment took over 20 months to be approved and followed the approving process by the line ministries, as provided by the existing regulations, until final approval by the Government on November 12, 2008,” the Canada-listed company said in a statement denying all allegations. The company admits however that the November 12 agreement “transfers greater control and decision-making to the operator”.

Dinu Patriciu for his part also denied the allegations in a Rompetrol statement, and is dismissive of the Black Sea resources as a whole, adding his voice to that of other experts in saying that the potential reserves are over-stated and the costs prohibitive.

This week is likely to see the scandal continue to roll, as the government has now ordered the disclosure of the secret annexes to the agreements.

Whatever the truth of the affair, it bodes ill for Romania’s corruption-dogged relations with the EU that have led to suspension of billions of euros of structural subsidies.

The EU called on Romania February 12 in its biannual review of corruption and judiciary to “regain momentum on judicial reform and the fight against corruption so as to reverse certain backward movements of recent months.” The EU pointed to parliamentary obstructionism in hindering anti-corruption measures. Victor Alistar, executive director for Romania of corruption watchdogs Transparency International Romania, backed up the EU’s findings, saying that in Romania “the air is thick with corruption.”

Romanians will be worrying lest their courtroom victory over Ukraine, at least in the short term, costs more EU subsidies than it produces gas and oil revenues.

America’s Skewed Foreign Policy Priorities

Graham Stack for Russia Profile

With Cocaine Under Its Nose, America Has Georgia on Its Mind

America’s obsession with “containing Russia” is endangering the United States’ own security, by the country’s turning a blind eye, among other things, to Mexico’s escalating narco-cartel crisis. Within hours of Barack Obama’s world-moving acceptance speech, the news broke that  two Mexican security chiefs had been killed in a plane crash most regard as murder. But in the U.S. electoral race, neither candidate raised the issue of the Mexican crisis.

Among the victims of the plane crash in Mexico City were Juan Camilo Mouriño, the 36-year-old close friend and ally of President Felipe Calderón, and Mexico’s interior minister as of January this year. Calderón had charged Mouriño with heading the fight against Mexico’s insidious drug cartels immediately following his election in 2006. José Luis Santiago Vasconcelos, a presidential advisor on security issues, was also among the thirteen officials killed in a crash  almost everyone regards as organised by  drug cartels.

The crash, coming hours after Obama’s triumph, exposed a major lacuna in U.S. election foreign policy debates, which failed to mention the Mexican crisis. Instead, besides inevitably mulling over the disastrous situation in the Middle East and Afghanistan, the debates focused on “containing Russia.”

Discussion of Russian “aggression” in Georgia thus eclipsed the mention of a major law and order crisis in the United States’ direct neighbor, its second largest trading partner and the largest source of immigrants. It eclipsed mention of the cocaine trade that is behind the violence, and for which the United States is both the major source of demand, and the major supplier of weaponry. All this despite the fact that President George W. Bush, as a former governor of Texas, is well acquainted with Mexico and despite the fact that U.S. Latino voters are a major pro-Obama constituency. And despite the fact that the 43rd U.S. president refuses to deny past use of cocaine, while the 44th president openly admits to having used the drug.

Since Mexico’s President Calderon took office in mid-2006 and declared war on the cartels supplying the $15 billion U.S. market, there have been nearly 5,000 officially registered deaths from drug-related violence. Twenty thousand soldiers have been deployed to contain the violence.

According to Bruce M. Bagley, a professor of international studies at the University of Miami and a leading international expert on the drug cartels, “violence in Mexico is used against other criminal gangs, against government security forces, and, increasingly, against innocent civilian by-standers in the form of indiscriminate narco-terrorism, designed to intimidate both civilians and government authorities.”

Nor is an end to the violence in sight. Following this year’s 50 percent escalation, according to Sam Logan, an independent investigator for the Swiss-based International Relations and Security network, “violence in Mexico will continue to escalate” in the next two years.

Logan refers to a recent UN study which found that up to 60 percent of Mexico’s cities are controlled by organized crime, “with Mexico ranking 6th in the world for organized crime, after Afghanistan, Iraq, Pakistan, Nigeria and Equatorial Guinea.”

November 5’s deaths thus seem to confirm what Guillermo Valdés, head of Cisen, Mexico’s secret service, told the Financial Times in July: “Drug traffickers have become our principal threat because they are trying to take over the power of the state.” According to Logan, “As organized crime gains increasing control over the country, the possible formation of a mega-cartel could precipitate the slow, steady failure of the government.”

The narco-violence thus threatens to undermine the much-hailed democratic breakthrough of 2000, when in fair elections Vicente Fox became the first president in post-revolutionary Mexican history not from the ruling Institutional Revolutionary Party, (PRI).

But U.S. foreign policy, for all its pro-democracy rhetoric, looks the other way in the case of Mexico. “Yes, narco-violence poses a threat to democracy, it attacks government institutions, erodes their legitimacy and effectiveness and undermines citizen’s beliefs in government authority and efficacy,” said Bagley. “It also leads to widespread corruption in key state institutions like the police, military, judiciary and government officials at all levels of Mexico’s federal system.”

On the local level, the source of much of Mexico’s democratic vibrancy, the cartels are also smothering freedoms. According to a local democracy researcher Trevor Stack of the University of Aberdeen, “Narco-cartels are impacting more and more on local politics even in small localities, rural towns and villages. People are whispering now ‘x or y’ is connected with the cartels, and this was not the case before. There is fear in the air.”

Besides the danger to democracy in Mexico undermining the United States’ pro-democracy foreign policy, Bagley sees a very direct threefold threat to U.S. national security. “Spillover of Mexican violence into U.S. territory, already underway, growing instability of governing institutions in Mexico and growing potential for corruption to spread in Mexico’s armed forces could render the country almost ungovernable,” he said.

Mexican narco-terrorism reached the United States in 2008, according to Bagley. In August, the bodies of five Mexicans were found in Alabama. They had been tortured before their throats were slashed. And, incredibly, in Phoenix, Arizona, Mexican traffickers dressed in police SWAT uniforms attacked the home of a renegade drug dealer with high caliber weapons and killed him. Most U.S. narco-violence still takes place within cartel structures, but it is only a matter of time before it spills onto the streets.

Despite the direct threat to U.S. security arising from the narco-cartels, the Bush administration has paid little attention to the escalating crisis. “At a U.S. national security level, Mexico ranks very low. The violence has been on the rise since the middle of former president Fox’s administration, but only a couple weeks ago did Bush send Condoleezza Rice down to have a chat,” said Logan.

Rice’s visit marked this year’s U.S.-Mexican “Merida Initiative,” signed into U.S. law in June. The Merida Initiative is a U.S. aid package, providing $400 million of anti-narcotics assistance to Mexico in the form of helicopters, training and surveillance equipment, among other things.

Four hundred million dollars might sound like an impressive figure, until compared with the estimated $4 billion the United States has poured into Georgia since 2004 – a country with two percent of Mexico’s population, located on a different continent. Meanwhile, according to Bagley, “Most Mexicans continue to blame the United States” for the crisis. The Merida Initiative has at least symbolic importance, as “a sign of U.S. acceptance of co-responsibility.”

But, judging by the U.S. presidential campaign, U.S. foreign policy is not likely to pay closer attention to Mexico and to its security crisis anytime soon. This glaring evidence of skewed U.S. foreign policy priorities is all too reminiscent of the 2000 election campaign – and the complete failure to anticipate the devastating September 11 terrorist attacks just one year later.

In the George Bush-Al Gore debates of 2000, just as in the Barack Obama-John McCain ones in 2008, foreign policy discussion waxed lyrical about containing Russia – with Serbia and Kosovo in 2000 taking the place of this year’s Georgia and Ossetia.

Bizarre as it may seem in hindsight, such was the concern with Russia in the 2000 presidential debates that neither candidate once mentioned Al Qaida, Osama bin Laden, Afghanistan or international terrorism.

Russia forms ‘Gas Opec’ with Iran and Qatar

Graham Stack for business new europe (www.businessneweurope.eu)

Russia, Iran and Qatar, the world’s top three countries by gas reserves, who together control 60% of global gas resources, yesterday agreed to start forming a “Gas OPEC” or “Gas Troika” in Moscow.

The three countries agreed to set up a ‘technical committee’ as a prelude to creating a natural gas equivalent to oil cartel OPEC. The committee will be responsible for drafting the organisation’s charter to be presented at the next meeting of the Gas Exporters Countries’ Forum (GECF), to date a largely informal structure.

The goals of the new organisation are not  clear yet, with cooperation expected in the areas of gas production, processing and marketing, according to Rencap analysts. The new body will hold regular meetings three to four times a year, with the first meeting to take place within weeks.

According to UralSib analyst Victor Mishnyakov, Russia views the gas OPEC as a platform to discuss logistic and pricing mechanisms, not as a political instrument.

Mishnyakov says forming a price cartel similar to the oil OPEC would mean “that Gazprom would have to shift away from signing long-term “take-or-pay” gas contracts, which provide for less volatile export prices and guaranteed gas deliveries.” Gazprom is thus highly unlikely to support such a move.

When then President, now Prime Minister Vladimir  Putin first backed the idea of a Gas Opec at a press conference in January 2007,  he also emphasised it would not be a price cartel like oil Opec, but a forum for cooperation.

Indeed, according to analysts, an effective unified pricing mechanism is unfeasible because Gazprom exports natural gas via pipeline and there is no tradable exchange instrument for natural gas (like Brent for crude oil). The Persian Gulf countries export LNG, for which prices are volatile and set differently than under Gazprom’s natural gas contract prices.

There is currently therefore no such thing as a world gas market such as there is for oil. Shortages in one part of the globe have little or no impact on the supply/demand balance in another part of it.

This will change over time, believe analysts from Alfa bank, as liquefied natural gas (LNG) becomes a larger part of the gas supply chain. However, LNG will not have a material effect on international pricing for at least a decade.

Centrifugal forces

There is also considerable scepticism about whether the three countries have enough shared interests for the new organisation to be coherent.

Russia usually competes with OPEC gas producers such as Qatar and Iran for the European market. A topical example is the current rivalry between the planned  Nabucco and South Stream gas pipelines. The Nabucco project is intended to supply gas from Iran as an alternative to Russian gas due to be supplied through South Stream.

Consequently, Alfa’s Ronald Smith believes that “while this story captures headlines, in reality it should have little impact on the fundamentals of Gazprom for at least a decade, even should the proposed cartel hold together.”

UralSib’s Mishnyakov argues that the powerful centrifugal forces in the cartel will be exacerbated by Russia’s close cooperation with non-cartel members in Central Asia. “The creation of a gas OPEC must not neglect the interests of the CIS gas producers – Turkmenistan, Uzbekistan and Kazakhstan – or of Belarus, the main transit country for European deliveries. In our view the gas OPEC may create additional difficulties for Russia as it will now have to balance the interests of the Persian Gulf producers and its historical partners in the CIS,” says Mishnyakov.

Russia gets a head start in the Arctic race

Graham Stack for Russia Profile

Despite media hysteria about alleged conflicts looming over Arctic resources, most experts say Russia is playing a constructive role.

Russia’s planting of a titanium flag on the seabed at the North Pole last summer was one of the media eventsof 2007. In combination with soaring energy prices and melting Arctic ice, the images sparked sometimes wildly speculative panic-mongering about the “coming Arctic war.”

In fact, the hype around the flagplanting was little more than an election campaign gag for the pro-Putin United Russia party – the United Russia flag was one of the items deposited on the seabed in a time capsule, and expedition leader, famous explorer Artur Chilingarov is a United Russia deputy.

But there was a scientific purpose to the expedition as well: to gather seabed samples. They were required to support of Russia’s claim that the submarine Lomonosov ridge running through the Central Arctic is an extension of Russia’s continental shelf.

Russia is filing its claim in the framework of the United Nations Convention on the Law of the Sea (UNCLOS). UNCLOS allows countries to expand their maritime Exclusive Economic Zones (EEZ) beyond the current 200 nautical miles from the coastline up to a maximum of 350nm, in the case that their continental shelf extends so far out to sea. A country has sole rights to exploit mineral deposits located in its EEZ.

And for a country like Russia that positions itself globally as an all-round energy supplier to Europe and beyond, the Arctic’s oil and gas resources constitute not just a source of extra income, but crucial to the Kremlin’s plan of building Russian energy companies into global majors.

This might be a source of friction were Arctic resources tantalisingly outside of Russia’s reach. But in fact the lion’s share of Arctic hydrocarbons seem to be located in recognized Russian waters. Making Russia the least likely country to launch aggression to change boundaries.

A tale of two studies

July 23, 2008, saw the prestigious United States Geological Survey (USGS) publish its widely awaited official analysis of the oil and gas riches of the Arctic. The document is destined to become a key reference point for US policy in the area.

The USGS study trumpeted that the Arctic “may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth.” According to the survey, Arctic resources account for about 22 percent of the undiscovered, technically recoverable resources in the world: about 13 percent of the undiscovered oil, 30 percent of the undiscovered natural gas, and 20 percent of the undiscovered natural gas liquids in the world.

The USGS survey, however, ignores the very different findings of a Wood Mackenzie survey published November 2006. Wood MacKenzie’s study found that the Arctic only contained 3% of the world’s recoverable hydrocarbon reserves. “The Wood Mackenzie is proprietary and we haven’t bought it,” laconically explains the leader of the USGS Arctic team, Don Gautier.

In stark contrast to USGS’s enthusiam, Wood Mackenzie’s lead author, Andrew Latham, commented, “our assessment basically calls into question the long-considered view that the Arctic represents one of the last great oil and gas frontiers and a strategic energy supply cache for the US.”

Without entering into details of methodology, the huge discrepancy between these figures shows just how much remains basically guesswork. And memories of the hyperbole about Caspian Sea resources in the 1990s should incline observers to prefer the more conservative estimates.

But just as significant as their contradictions on quantity, are the studies shared findings on the quality of the Arctic’s hydrocarbons.

Firstly, both studies agree that the Arctic’s hydrocarbon resources consist predominantly of natural gas. ‘Arctic resources are gas-prone with around three times more gas than oil,’ according to USGS’s Don Gautier. According to Wood Mackenzie, 85% of the discovered resource and 74% of the exploration potential is gas.

The second shared finding is that, according to Gautier, while 84% of the undiscovered oil and gas is indeed offshore, most of it “lies within national boundaries as currently defined.” This means the UNCLOS rules on extending those boundaries are in fact of secondary importance.

Thirdly, and crucially, most of the gas is in the Russian sector. “The West Siberian basin in outstanding for gas,” is one of USGS’s main conclusions, and the East Barents Sea is also ranked excellent. Around 60% of total Arctic gas lies squarely in the Russian EEZ.

So it seems Russia has already won the ‘coming Arctic war’ without a shot being fired.

UNCLOS is no cause for alarm
But this still leaves around 30% of Arctic resources lying more than 200 nautical miles offshore. UNCLOS, and it’s expert Commission on the Limits of the Continental Shelf (CLCS) will decide who can claim jurisdictions over these areas.

This is where Russia’s controversial claim to the North Pole, i.e. the Lomonosov ridge, comes in.

Russia’s claim to the Lomonosov ridge is indeed disputed by Canada and Denmark – but purely within the legal framework of UNCLOS. All three countries have voluntarily signed up to accept its findings, and no party has ever said they might not do so.

The crucial point is that all signatory states have committed themselves to UNCLOS precisely as a non-conflictual, impartial means of resolving questions of marine jurisdiction. Only the US refuses to sign – because of the impingement of sovereignty this involves.

“Rights to the resources of the continental shelf beyond 200nm have been enshrined in international law since at least 1994, when UNCLOS entered into force and so far all of the Arctic states have followed the procedures established under UNCLOS for claiming those rights,” says Martin Pratt, head of research at Durham University’s International Boundaries Research Unit (IBRU). IBRU published the definitive map of Arctic boundaries August 5, 2008.

According to Pratt, “all the available evidence still points to a peaceful division of the Arctic.”

“The conflict potential is inflated mainly because people find it exciting to talk and write about, and perhaps also to some extent because some people miss the cold war,” argues Indra Øverland, Head of the Energy Program at the Norwegian Institute of International Affairs (NUPI). “There are in fact not more territorial disagreements in the Arctic than in most other parts of the world. Such disagreements are a normal part of inter-state relations.

The perceived ‘race for the Arctic,’ according to Øverland, is merely a reflection of a UN ruling that a country has 10 years to make claims beyond the 200-mile zone.

Since Russia was one of the first to sign up, in 1997, it is compelled to get a move on in filing its claims.

“Russia does play by the rules laid down in UNCLOS, and agrees with the other Arctic nations that this convention is the basis for future developments in the region,” says Alf Håkon Hoel, head of the politics department at the University of Tromsø in the Norwegian Arctic.

“But that doesn’t mean that the Arctic coastal states aren’t keen to secure rights to exploit resources in such areas in the future,” counters Pratt.

“That is the process in which Russia is currently engaged with the Commission on the Limits of the Continental Shelf,” he continues, “and once the outer limit of the Russian continental shelf has been defined, it won’t be able to claim sovereign rights over any other areas of Arctic seabed.”

However, the idea that signatories to a UN convention regulating maritime jurisdiction would then come to blows over its findings, is as absurd as suggesting war could break out between Germany and Poland over voting rights in the European Commission.

Moreover, the timescale of the division and exploitation of the Arctic is likely to stretch decades into the future, with the UN’s Commission on the Limits of the Continental Shelf (CLCS) not due to complete its work till 2020.

And only when all disputes have been solved, will it be possible to commit the massive investment and start the pioneering work needed to get at oil and gas lying far offshore.

“Referring to the extension of the continental shelf beyond 200 miles, I would say that possible resources in this area will only be relevant in a much longer time perspective, for technical and economic reasons,” argues Arild Moe of Norway’s Fridtjof Nansen Institute.

“There is no imminent conflict over resources there, of which we know little and about which the most recent USGS study is not particularly optimistic,” says Moe.

Technology, not territory, is the key to the Arctic

The barrier Russia and other countries face in accessing Arctic resources is not connected with maritime jurisdiction, but with technology.

The most ambitious current Arctic project underway is Gazprom’s giant Shtokman field in the Barents Sea. With 3.8 trillion cubic meter of natural gas and more than 37 million tons of gas condensate, the field contains enough gas to fuel Europe for seven years.

But the question is how to get it. The field is 550km off shore from the port of Teriberka, 4000m beneath the seabed. Further hazards include icebergs, drift ice, sub-zero temperatures polar nights, megawaves and an uneven seabed. Quite simply, nothing like this has ever been attempted.

“Nobody has yet attempted multi-phase gas flow transportation over such a distance, and that’s the main technical and technological problem today,” Alexander Selin,an official at Shtokman license holder Sevmorneftegaz, told Interfax at the end of July.

According to Konstantin Batunin of Moscow’s Alfa Bank, not even Gazprom knows yet what technology will be used. Russia’s gas giant has enlisted the help of Norway’s Statoil and France’s Total as junior technology partners, and this international collaboration to pool expertise is another sign of how the Arctic is likely to produce new partnerships rather than fuel rivalries.

Oil and gas development and the opening of the Arctic to shipping due to global warming – the summer of 2008 showed the lowest icelevel since records began  also mean that new shipping technologies are needed to master the Arctic waters.

And here as well Russia is kitting up.

In 2007, Russia started the merger of all state-owned shipping and ship-building assets into two giant holding companies

Sovkomflot-Novoship, now the world’s fifth largest shipping company, and the United Ship-building corporation. Both of these companies are under orders to focus on energy shipping in general, and ice-class vessels in particular.

And March 25, 2008, a state-linked investment company FLC bought a 70% stake in three German shipyards belonging to Norway’s Aker group – shipyards specialized in building dual-action ice-class ships, the stern of which doubles up as an ice-breaking bow.

Finally, August 27, 2008, Russia’s seven nuclear-powered icebreakers were transferred from the trusteeship of a private shipping company and transformed into a state enterprise – Atomflot, part of the newly-formed nuclear power state corporation.

So regarding Russia’s North Pole flag-planting stunt of 2007, the medium was the message: Russia displayed it had the bathyscape technology to conduct Arctic seabed operations.

But much of the Western media preferred to believe that Russia’s flag planting was an aggressive assertion of rule over the North Pole – and conspiracy theorists even perceived a Kremlin masterplan to seize control of Christmas.

Those conspiracy theorists will see their fears confirmed with Chilingarov s next bathyscape dive: as announced end of July, he intends to dive to the bottom of the Mariana Trench, the deepest part of in the world’s oceans. The Mariana Trench is in the middle of the South Pacific – surely indicating a Kremlin claim to Easter Island.