Russia says NATO has exceeded Libyan mandate, calls for an urgent move towards a political settlement of the conflict; Russia severely criticizes Europe’s new energy policy; Russia and China discuss oil and security;
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  • According to reports, Russia's Foreign Minister Sergei Lavrov has said that NATO was exceeding its UN mandate in Libya and called for an urgent move toward a political settlement to the conflict. Lavrov made the statement after talks with NATO foreign ministers in Berlin. He also cautioned against the use of excessive military force that would lead to further additional casualties among civilians. NATO Secretary-General Anders Mr. Fogh Rasmussen had denied earlier that NATO's air strikes in Libya were beyond the scope of the UN Security Council resolution, which authorized "all necessary measures" to protect Libya's population. Rasmussen had said on April 15 that he had not yet received specific pledges for more aircraft needed for the alliance's Libya mission but that he expected the additional planes soon.1

    Meanwhile, Russia has severely criticized Europe’s new energy policy which is aimed at preventing entrenched energy monopolies from dominating the market. Russian Prime Minster Vladimir Putin voiced his objections to the changes, known as Europe's third energy package, calling them confiscatory and claiming they would lead to higher prices for consumers. Russia is particularly opposed to a provision requiring “unbundling,” which stipulates that energy companies operating in Europe must separate the production side of their business from their distribution networks. The European Commission on its part has said that it has uncovered widespread evidence of anticompetitive behaviour among the continent's integrated energy giants, including denying third parties access to pipelines. The ongoing controversy over the third energy package is part of a long-standing tug-of-war between Russia and the EU over energy policy. With its large oil and gas reserves and extensive pipeline system, Moscow has long been the key energy player on the continent. Russia provides 45 percent of the European Union’s gas imports and has enjoyed close ties with frontline European states like Germany. But newer EU members in Eastern Europe, wary of the outsized influence enjoyed by companies like Russia's state-controlled natural gas giant Gazprom, have long pushed for the establishment of a single energy market with strong regulations. However, Russia has already secured exemptions from the new rules for two offshore stretches of the North Stream pipeline, a joint project with Germany that will carry Russian gas to Western Europe. According to the legislation, member states can use different methods of separating their production and distribution units. The European Commission's preferred option, called "ownership unbundling," would require companies who own both production and distribution to sell off one or the other. This option is also favoured by some new member states, such as Lithuania, who hope to limit Russia's influence.2

    Russian President Medvedev and his Chinese counterpart Hu Jintao have pledged to expand cooperation in oil and energy, and discussed global security issues. They met in the southern Chinese resort of Sanya, where the leaders of the five emerging economies comprising the BRICS bloc had assembled to discuss global issues. The proposal of expanding energy cooperation by developing a second oil pipeline from Russia to China was also mooted Medvedev called for expanding trade volume on both sides, and promoting cooperation in key fields such as oil, gas, water and nuclear energy. The two leaders also discussed Libya, Afghanistan, the Korean Peninsula and other regional issues.3

    However, the Armenian parliament has ratified a key agreement to prolong Russia's military presence in Armenia and deepen broader defence links between the two countries. The agreement, signed during Russian President Dmitry Medvedev's August visit to Yerevan, extended Russia's lease on a military base in Gyumri by 24 years, until 2044. It also upgraded the base's role in contributing to Armenia's security and committed Moscow to supplying the Armenian military with modern weaponry. The Armenian Constitutional Court upheld the legality of the defence pact and paved the way for its parliamentary ratification in a ruling announced on February 15.4

    Almost half a century ago, the Soviet Union shocked and awed the world with Yuri Gagarin's historic 108-minute flight. But as Russia marks that historic milestone with gala celebrations, the country's space program appears to be a shadow of its storied predecessor. Many observers believe that Russia’s space programme has stagnated, has been marked by a series of mishaps and delays and is in dire need of fresh investments.5

    Russia's planned $10 billion private equity fund will be mostly funded by foreign capital, lured by targeted returns of up to 20 percent from investing in industries such as technology and pharmaceuticals. Russia hopes the fund will help diversify its $1.3 trillion economy away from the hydrocarbon sector, which contributes more than a fifth of the country's gross domestic product. Russia hopes the fund will also improve foreign capital inflows, held back by a poor view of the country among some investors. It aims to attract cash-rich sovereign wealth funds and international private equity funds. Foreign investors are expected to contribute the lion's share of the capital into the fund, which will seek to make investments of between $100 million and $150 million. In recent weeks, Russian government officials have been conducting an unofficial road show for the fund, to be called The Direct Investment Fund, in Europe and the United States. The fund will be launched in June, with Russia committing $2 billion every year over the next five years. It hopes to attract some $60 billion. Oil and gas projects would be "categorically" excluded from the fund, unless they clearly were connected to the development of new technologies.6

    Meanwhile, President Medvedev has stated that Russia is halfway past its efforts to create an international financial center in Moscow. At a meeting with the director of the Hong Kong Stock Exchange, Medvedev spoke about Russia's plans to turn Moscow into an international financial hub. He said that “Russia is at an organizational stage of creating an international financial center, adopting laws and seeking to improve the investment climate and create the infrastructure". Medvedev first announced the project at the 12th St. Petersburg International Economic Forum in 2008, stressing that it was aimed at turning Russia's national currency, the ruble, into a leading regional currency. Today, there are two major global financial centers - London and New York. As of October 2010, Moscow ranked 68 of 75 on the list of international financial centers. The financial center in Moocow will become not only the core of Russia's financial system, but also the impetus for the development of financial markets in the entire post-Soviet region.7

    Reports noted that Russia wants to expand its sale of weapons in Latin America, especially in Brazil. More than 300 types of weaponry were showcased by Russia at the Latin America Aero and Defense 2011 (LAAD-2011) arms show in Rio de Janeiro. In addition to the wide array of combat aircraft and helicopters, including the Sukhoi Su-35 and Su-30MK2 multirole fighters and Ka-52Hokum B attack helicopters, Russia will focus on marketing its highly-acclaimed air defense systems, such as S-400, Tor-M2E, Buk-M2E, Tunguska-M1, Pantsyr-S1, and Igla-S. Russia, the world's second largest arms exporter after the United States, sold $8.6 billion worth of weaponry last year and is looking to increase its arms sales to almost $10 billion in 2011. Rosoboronexport has established mutually beneficial arms trade ties with Argentina, Brazil, Venezuela, Colombia, Uruguay, and Ecuador through active marketing efforts. These countries express their interest in Russian air defense systems, radars, combat aircraft and helicopters, naval equipment, and small arms.8

    In other developments, the easing of visa restrictions for Russian citizens traveling to the United States will be a focus during talks between Russian President Dmitry Medvedev and his U.S. counterpart Barack Obama in France's Deauville in May.9 Meanwhile, Russia and Poland have said that they would agree on the text for a new memorial for the plane crash that killed president Lech Kaczynski after a bitter row over the replacement of a previous plaque. Russia has angered Poland by replacing a Polish-language memorial at the site of the crash in Smolensk, Russia, which referred to the "genocide" of Polish officers by Soviet secret police at the nearby Katyn forest at the start of World War II.10