Gas & gangsters

Energy is the key to Europe's new relationship with Russia - and supposedly Moscow's weapon of choic

Scoops and shocks are thin on the ground in Moscow these days. As events of 2 March should confirm, elections are hardly nail-biting affairs, and nobody expects journalists to publish revelations about Vladimir Putin or his anointed successor, Dmitry Medvedev, dallying with a lobbyist. So when police grabbed 61-year-old Sergei Schneider on Moscow's fashionable Arbat Street and bundled him into an awaiting Black Maria on 24 January, they also shook newsrooms across the Russian capital out of their torpor.

They weren't the only ones to register their surprise - eyes popped in law enforcement and intelligence agencies throughout Europe and North America when they learned that "Schneider" was none other than Semyon Mogilevich, one of the FBI's most-wanted on charges of money-laundering and racketeering. In the past few years, Mogilevich is suspected of acting as a pivotal figure in Russia's gas industry.

Getting gas out of the ground in central Asia or Russia to the homes of central and western Europe is an expensive and complicated business. And as capitalism emerged in Russia during the 1990s, it needed people to grease the wheels of mineral commerce. The big industry players needed energetic and persuasive fixers in order to ensure that they were paid their cut away from the prying eyes of any tax authorities or their competitors. Two companies, ETG and RosUkrEnergo, were consecutively given exclusive rights to negotiate transit deals for Russian gas travelling through Ukraine. They were widely considered the most notorious vehicles for this lucrative sideline to Russian organised crime's impressively diverse portfolio.

Details started to emerge in 2005 after the Orange Revolution brought Yulia Tymoshenko to power as Ukraine's prime minister. She ordered her then security minister to open a criminal investigation into these companies and specifically into Mogilevich's involvement with them. Later, the same minister asserted that Moscow connived in the successful movement to bring down Tymoshenko's government in order to prevent details about ETG and Mogilevich from being made public. Tymoshenko herself was threatened with arrest in Moscow on corruption charges.

Three years later, things have changed. Four weeks after Mogilevich's arrest in January, Tymoshenko pitched up in Moscow (charges and arrest threat long since forgotten) and announced that Ukraine had overcome its long-standing problems with Gazprom, Russia's state-backed energy behemoth, and negotiated payment of its outstanding debt to the company. Two days later she was happy to comment on Mogilevich's arrest: "As far as gas transit from Uzbekistan, Tajikistan and other countries is concerned, we don't need any shadowy intermediaries," she said. "There will be transparency in our government and society. It also concerns energy policy."

Winner takes all

The ghostly presence of figures like Mogilevich around the gas industry has reinforced the impression that Gazprom and Putin are playing fast and loose with its energy resources. This has bolstered the thesis, which has become fashionable very quickly, that Russia and the west have returned to the days of a winner-takes-all ideological competition. Indeed, the past few months has seen publication of two books devoted to the subject, most recently The New Cold War, by the Economist correspondent Edward Lucas. The blame for this development is invariably placed firmly on Moscow's shoulders.

Perhaps after the uncertainties of the 1990s and the Twin Towers, there is a hankering to get back to the grand chess game between the White House and the Kremlin, with Europe as the battleground. Nevertheless, the warnings of those who subscribe to the thesis are stark: Putin's Russia is bent on stifling all domestic opposition and restoring the omnipotence of the KGB. But special attention is paid particularly to how Russia intends to use its gas supplies to western Europe as a weapon. A week ago, Matthew Bryza, the US deputy assistant secretary of state, spelled out western concerns, warning against the creation of monopolies in the energy industry. "We especially don't like them when they threaten at least the economic security of our most important allies," he said in an explicit attack on Gazprom, the energy company that symbolises the revival of Russian might.

The cold wind blowing in from Moscow is especially chilly by the time it hits London. The murder of Alexander Litvinenko, with its tit-for-tat expulsions, and the closure of British Council offices in St Petersburg and Ekaterinburg, suggest the Russians are revisiting the sinister romanticism of the Cold War.

Of course, Russia has a very different perspective on this. It suddenly has very powerful American radar systems being placed close to its border (and also hosted by Britain) under Washington's missile defence system; and it awaits in vain the extradition of Boris Berezovsky. Moscow first requested the extradition of this Russian billionaire and prominent Putin opponent on charges of corruption, money-laundering and racketeering in 2003. At first the Home Office refused Berezovsky's application for asylum but several months later Whitehall changed its mind. The only reason that a number of senior sources in Washington and London can give for this turnabout is that Berezovsky has enjoyed a close relationship with British intelligence. That angers the Russians, and goes a long way to explaining why Andrei Lugovoi, Scotland Yard's number-one suspect in the Litvinenko murder, continues to enjoy the full protection of the Russian state. However, the arrest of Mogilevich in order to smooth the path of the Ukrainian gas deal suggests a pragmatism on Russia's part that is often overlooked in Britain. In important respects, the fate of Mogilevich is much more significant than Lugovoi's.

Co-operation, not confrontation

Elsewhere in the European Union, a different picture is emerging where the emphasis in relations with Moscow is placed on co-operation, not confrontation. Germany's economic links with Russia are expanding with the explicit backing of Chancellor Angela Merkel. Nicolas Sarkozy started his presidency by securing a huge deal for Total to develop the Shtokman gas field in the Barents Sea in a deal with Gazprom that Putin personally approved.

Energy is the key to the new relationship with Russia and supposedly Moscow's weapon of choice in its plan for European domination. Yet this assumption ignores a more fundamental reality: the European Union currently consumes 480 billion cubic meters (bcm) of gas a year and that is set to rise to about 600bcm by 2020; Russia can provide most of that need either with its own gas or by transporting Turkmen and Kazakh gas. There is no better customer for Russia than the European Union. Gazprom is also developing its markets in Japan and China but the EU remains by far the most lucrative and reliable consumer. Why would the Russians seek to promote a conflict with its best revenue stream? The converse is true - given that the alternative supplies to the EU come from Iran or elsewhere in the Middle East, there is no better supplier for the EU than Russia.

Such is the fear of Russia's dominance of the EU gas market that, for several years, a European consortium has been attempting to diversify its gas suppliers. To lessen the dependency on Russian gas, and with American support, the EU came up with Nabucco, a gas pipeline that would bring supplies from Kazakhstan, Turkmenistan, Azerbaijan and Iran across Turkey and into the Balkans. But last summer President Putin managed to scupper this by persuading the Kazakhs and Turkmens, without difficulty, to sell their gas to Gaz prom instead, knocking the stuffing out of the Nabucco plan overnight. American sanctions on Iran did the rest.

Already signed up

More recently, Bulgaria and Serbia have signed up to Gaz prom's alternative to Nabucco called South Stream which will bring 30bcm of gas from Russia under the Black Sea. But before the new cold warriors raise the alarm, it is worth remembering that this is not a Russian monopoly - ENI, the Italian energy giant, owns 50 per cent of South Stream while Austria's OMV and Hungary's MOL have recently signed deals with Gazprom despite their involvement in Nabucco.

Ironically, Nabucco looks as though it might be saved by the intervention of Gazprom. The Russian firm has said it will consider diverting some of its gas away from South Stream and into Nabucco - after all it all makes money.

To the north, Germany and its former chancellor, Gerhard Schröder, are enthusiastic participants in the Nord Stream project that will bring gas to Germany direct from Russia across the Baltic Sea. Schröder, who actually chairs the consortium building the pipeline, dismissed the objections of Poland and Ukraine who detected a Russo-German plot (familiar from their histories) to squeeze the two countries out of the lucrative transit market. Brussels is trying desperately to fashion a coherent pan-EU policy on gas supply to head off disputes within the Union over access to Russian gas. But so far the needs of individual countries, whether large like Germany and Italy or small like Bulgaria and Hungary, have been decisive in determining the course of pipeline politics.

The new Russia knows how to exploit internal European squabbles to its advantage. In the old days, the Soviet Union was run by a gerontocracy clinging to the ideology of communist state power. These days the young energy advisers around Putin have Harvard MBAs and perfect English - they are not driven by ideology, but by money and market share.

The resurgent Russian state and its repressive mechanisms are distasteful and a matter of real concern. It is important to remember that while we in the west made hay in the 1990s, the Russians faced chaos and economic misery. Their introduction to capitalism, inspired by oligarchs like Berezovsky, was deeply unhappy, and it is essential to take this into account when assessing Putin's growing authoritarianism. This may not yet amount to the rule of law but for most Russians it is an improvement on the rule of gangsters that preceded it.

Clearly the deployment of missile defence and the recog nition of Kosovo confer a sense of Cold War panic on proceedings, but that should not obscure the fact that gas and oil are the substances underpinning Europe's relationship with Moscow. If this mutual dependency were handled properly (a big if), both sides should benefit in equal measure. The relationship between Russia and the west is driven not by the old Cold War ideologies but by the carving up of profits. If, however, we start guiding our policies by the new Cold War thesis, this may become a self-fulfilling prophecy. Present circumstances would look benign by comparison.

This article first appeared in the 03 March 2008 issue of the New Statesman, Gas gangsters

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The humbling of Theresa May

The Prime Minister has lost all authority. The Tories will remove her as soon as they feel the time is right.

Being politicians of unsentimental, ruthless realism, the Conservatives did not linger in the grief stage of their collective disaster after the general election. Disbelief, too, was commendably brief.

Currently, their priority is to impose some sort of order on themselves. This is the necessary prelude to the wholesale change that most see as the next phase in their attempt at recovery, which they all know is essential to their career prospects – and believe is vital to a country whose alternative prime minister is Jeremy Corbyn.

For that reason, talk of Theresa May enduring as Prime Minister until the end of the Brexit negotiations in two years’ time is the preserve of just a few wishful thinkers. Some sort of calm is being established but the party is far from settled or united; there is a widespread conviction that it cannot be so under the present leader.

Elements of the great change have been executed, as Nick Timothy and Fiona Hill, May’s former advisers, will testify.

However, this is only beginning, as shown by the debate in the media about how long May can survive in Downing Street. There is dissatisfaction about elements of her recent reshuffle, but it is quieted because few believe that some of the more contentious appointments or reappointments will last more than a matter of months. Her colleagues are also alarmed by the meal she has made of doing what was supposed to be a straightforward deal with the DUP.

The climate in the party at the moment is one in which everything – jobs, policies and, of course, the leadership – will soon be up for grabs. Debate over “hard” and “soft” Brexits is illusory: anyone who wants to be Conservative leader will need to respect the view of the party in the country, which is that Britain must leave the single market and the customs union to regain control of trade policy and borders. That is one reason why the prospects of David Davis, the Brexit Secretary, are being talked up.

Some of May’s MPs, for all their hard-mindedness about the future, speak of feeling “poleaxed” since the general election. Even before the result changed everything, there was dismay about the bad national campaign; but that, it was felt, could be discussed in a leisurely post-mortem.

Now, instead, it has undermined faith in May’s leadership and credibility. “The social care disaster was key to our defeat,” an MP told me. “It wasn’t just that the policy damaged our core vote, it was the amateurishness of the U-turn.” A more seasoned colleague noted that “it was the first election I’ve fought where we succeeded in pissing off every section of our core vote”.

The limited ministerial reshuffle was inevitable given May’s lack of authority, and summed up her untenability beyond the short term. Most of her few important changes were deeply ill judged: notably the sacking of the skills and apprenticeships minister Robert Halfon, the MP for Harlow in Essex, and a rare Tory with a direct line to the working class; and the Brexit minister David Jones, whose job had hardly begun and whose boss, Davis, was not consulted.

George Bridges, another Brexit minister, who resigned, apparently did so because he felt May had undermined the government’s position in the negotiations so badly, by failing to win the election comprehensively, that he could not face going on.

Much has been made of how Philip Hammond, the Chancellor, was marginalised and briefed against, yet reappointed. Patrick McLoughlin, the party chairman, suffered similarly. Conservative Central Office was largely shut out from the catastrophic campaign, though no one got round to briefing against McLoughlin, who kept his head down – unheard-of conduct by a party chairman in an election.

As a political force, Central Office is for now more or less impotent. It has lost the knack of arguing the case for Conservatism. MPs are increasingly worried that their party is so introspective that it just can’t deal with the way Corbyn is spinning his defeat. “An ugly mood is growing,” one said, “because militant leftism is going unchallenged.” That cannot change until May has gone and the party machine is revived and re-inspired.

***

Nobody in the party wants a general election: but most want a leadership election, and minds are concentrated on how to achieve the latter without precipitating the former. One angry and disillusioned ex-minister told me that “if there were an obvious candidate she’d be shitting herself. But most of us have realised Boris is a wanker, DD isn’t a great communicator and is a bit up himself, Hammond has no charisma, and Amber [Rudd] has a majority of 346.”

On Monday a group of senior ex-ministers met at Westminster to discuss next steps. It was agreed that, with the Brexit talks under way, the most important thing in the interests of restoring order was securing the vote on the Queen’s Speech. Then, May having done her duty and steadied the proverbial ship, the party would manage her dignified and calm evacuation from Downing Street.

Those who agree on this do not always agree on the timing. However, few can make the leap of imagination required to see her addressing the party conference in October, unless to say “Thank you and goodnight” and to initiate a leadership contest. Many would like her out long before then. The only reason they don’t want it this side of securing the Queen’s Speech is that the result, as one put it, would be “chaos”, with a leadership contest resembling “a circular firing squad”.

That metaphor is popular among Tories these days. Others use it to describe the ­apportioning of blame after the election. As well as Timothy and Hill, Lynton Crosby has sustained severe wounds that may prevent the Tories from automatically requesting his services again.

Following the Brexit referendum and Zac Goldsmith’s nasty campaign for the London mayoralty, Crosby has acquired the habit of losing. And then there was Ben Gummer, blamed not only for the social care debacle, but also for upsetting fishermen with a vaguely couched fisheries policy. These failings are becoming ancient history – and the future, not the past, is now the urgent matter – yet some Conservatives still seethe about them despite trying to move on.

“I haven’t heard anyone say she should stay – except Damian Green,” a former minister observed, referring to the new First Secretary of State. Green was at Oxford with May and seems to have earned his job because he is one of her rare friends in high politics. He is regarded as sharing her general lack of conviction.

Older activists recall how the party, in 1974, clung loyally to Ted Heath after he lost one election, and even after he lost a second. Now, deference is over. Most Tory activists, appalled by the handling of the campaign, want change. They would, however, like a contest: annoyed at not having been consulted last time, they intend not to be left silent again.

That view is largely reflected at Westminster, though a few MPs believe a coronation wouldn’t be a problem, “as we don’t want a public examination of the entrails for weeks on end when we need to be shown to be running the country effectively”. Most MPs disagree with that, seeing where a coronation got them last time.

With the summer recess coming up, at least the public’s attention would not be on Westminster if the contest took place mostly during that time: hence the feeling that, once the Queen’s Speech is dealt with, May should announce her intention to leave, in order to have a successor in place before the conference season. It is then up to the party to design a timetable that compresses the hustings between the final two candidates into as short a time as compatible with the democratic process, to get the new leader in place swiftly.

Some letters requesting a contest are said to have reached Graham Brady, the chairman of the 1922 Committee of backbenchers. One MP told me with great authority that there were eight; another, with equal certainty, said 12. Forty-eight are needed to trigger the procedure. However, engineering such a contest is not how most Tories would like to proceed. “She has had an international humiliation,” a former cabinet minister said, “and it is transparently ghastly for her. Then came the [Grenfell Tower] fire. There is no sense our rubbing it in. I suspect she knows she has to go. We admire her for staying around and clearing up the mess in a way Cameron didn’t. But she is a stopgap.”

MPs believe, with some justification, that the last thing most voters want is another general election, so caution is paramount. None doubts that the best outcome for all concerned would be for May to leave without being pushed.

Her tin-eared response to the Grenfell disaster shocked colleagues with its amateurishness and disconnection. “I’m sure she’s very upset by Grenfell,” someone who has known her since Oxford said. “But she is incapable of showing empathy. She has no bridge to the rest of the world other than Philip.” Another, referring to the controversial remark that torpedoed Andrea Leadsom’s leadership ambitions last year, said: “You would get shot for saying it, but not having had children hasn’t helped her when it comes to relating to people. Leadsom was right.”

***

May was quicker off the mark on Monday, issuing a statement condemning the appalling attack at Finsbury Park Mosque swiftly after it occurred, and going there shortly afterwards to meet community leaders. No one could fault her assurance that Muslims must enjoy the same protection under the law as everyone else, or the speed and sincerity with which it was made. She is learning what leadership entails, but too late.

Her administration has become unlucky. This happened to John Major, but, as in his case, the bad luck is partly down to bad decisions; and the bad luck that comes out of the blue simply piles in on top of everything else. Grenfell Tower, lethal and heartbreaking for its victims and their families, was merely more bad luck for the Prime Minister because of her slow-witted response and failure – presumably because shorn of her closest advisers – to do the right thing, and to do it quickly.

But then it turned out that her new chief of staff, Gavin Barwell, had in his previous incarnation as a housing minister received a report on improving fire safety in tower blocks and done nothing about it. That is either more bad luck, or it shows May has dismal judgement in the quality of people she appoints to her close circle. Form suggests the latter.

The idea aired last weekend, that May had “ten days to prove herself”, was a minority view. For most of her colleagues it is too late. It was typical of Boris Johnson’s dwindling band of cheerleaders that they should broadcast a story supporting Davis as an “interim” leader: “interim” until Johnson’s credibility has recovered sufficiently for him to have another pop at the job he covets so much.

They also sought to create the impression that Davis is on manoeuvres, which he resolutely is not. Davis has been around long enough to know that if he wants to succeed May – and his friends believe he does – he cannot be seen to do anything to destabilise her further. It is a lesson lost on Johnson’s camp, whose tactics have damaged their man even more than he was already.

Andrew Mitchell, the former international development secretary and a close ally of Davis, told the Guardian: “. . . it is simply untrue that he is doing anything other
than focusing on his incredibly important brief and giving loyal support to the Prime Minister. Anyone suggesting otherwise is freelancing.” That summed up the contempt Davis’s camp has for Johnson, and it will last long beyond any leadership race.

There is a sense that, in the present febrile climate, whoever is the next leader must be highly experienced. Davis qualifies; so does Hammond, who before his present job was foreign secretary and defence secretary, and who has belatedly displayed a mind of his own since May was hobbled. Hugo Swire, a minister of state under Hammond in the Foreign Office, said of him: “He’s got bottom. He was very good to work for. He is an homme sérieux. I liked him very much and he would calm things down.”

But, as yet, there is no contest. Calls for calm have prevailed, not least thanks to Graham Brady’s steady stewardship of the 1922 Committee, and his success in convincing the more hot-headed of his colleagues to hold their fire. Yet MPs say the 1922 is not what it was 20 years ago: ministers have become used to taking it less seriously.

However, many MPs expect Brady, at a time of their choosing, to go to Downing Street and deliver the poison pill to Theresa May if she is slow to go. Some who know her fear she might take no notice. If she were to play it that way, her end would be unpleasant. As the old saying goes, there is the easy way, and there is the hard way. Remarkably few of her colleagues want to go the hard way but, like everything else in the Tory party at the moment, that could change.

Simon Heffer is a journalist, author and political commentator, who has worked for long stretches at the Daily Telegraph and the Daily Mail. He has written biographies of Thomas Carlyle, Ralph Vaughan Williams and Enoch Powell, and reviews and writes on politics for the New Statesman

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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