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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Real Man who wrote (1066)10/4/1999 11:42:00 PM
From: CIMA  Read Replies (1) of 1301
 
CIS Members Look to Each Other for Support

Summary:

Recently, Ukraine created cooperative agreements with two
other CIS members without Russian involvement. These agreements
illustrate a trend we expect to see continue, in which former
Soviet republics learn to depend on each other more and on Russia
less. Russia is busy with war, domestic politics and international
scandal and cannot find the resources to support its smaller
neighbors. While Russia is preoccupied, its dependents are
beginning to look to one another for support. When Russia finally
turns its attention back to the former Soviet states it may be too
late.

Analysis:

Ukrainian President Leonid Kuchma and Georgian President
Eduard Shevardnadze signed a declaration Oct. 2 in Kiev
strengthening their partnership. Most significantly, the agreement
increased cooperation on a Eurasian transportation project to ship
oil and other cargo to the West. By doing so, Ukraine and Georgia
forged another link in a slow chain of events joining the CIS
without Russia's blessing.

Russia does not encourage economic cooperation among member-states,
seeing their interdependence as a step away from its traditional
parental position. However, distracted by fighting in Chechnya, the
upcoming Duma elections, high-level scandals and an economy in
shambles, Russia does not have the resources to rescue the former
Soviet members, nor to prevent their growing cooperation. Without
the weight of a regional hegemon, CIS members are turning to each
other in order to work their way out of economic ruin.

The Ukrainian-Georgian declaration, like the Ukrainian-Kazak oil
deal ( stratfor.com ), is
evidence of a growing trend. Economically strapped nations like
Ukraine simply cannot afford to wait and hope that Russia will
supply them with oil to get through the long, cold winters. Russia
rejected Ukrainian offers of alternative payment for its gas debt
in September. Given Russia's inability or unwillingness to
cooperate, Ukraine turned to Kazakstan to secure its oil supply.
Similarly, Azerbaijan and Georgia have ignored Russia, expressing
their support for the Baku-Ceyhan pipeline in September meetings
with U.S. officials.

Despite this trend, the states can not fully remove themselves from
Russia's reach. Russia has far too many historic and cultural ties
with the states to leave them totally to their own devices. More
importantly, they do not want to be out of reach. They need Russia,
especially for protection and military leadership. Mother Russia
has already demonstrated that it is willing to bring former
satellites back into it orbit in the case of real systemic
problems, as it has shown in Belarus (
stratfor.com ).

We expect Russia that will be preoccupied with its own problems
until at least next summer. For the same reasons, it will be unable
to ensure that the states stay weak and isolated. In the months
ahead we expect to see further examples of other CIS members
developing cooperative projects without Russian approval or
knowledge.

By the time Russia redirects its attention, CIS members will have
developed further cooperation amongst themselves. By then, they
will have no apparent reason to allow Russia its traditional
influence. Russia will then have the arduous task of dissolving
these alignments and reasserting its hegemony.

(c) 1999, Stratfor, Inc.
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