Meet the New Boss

Much ink has been spilled in recent months parsing the statements of Russia's new president, Dmitri Medvedev, with the aim of deciphering whether he will be more democratic than Vladimir Putin.

The result has been in the eye of the beholder -- those wishing for greater political participation from below have seen a suppressed democrat; others have said that, regardless of Medvedev's own preferences, he will be strait-jacketed by the presence of his predecessor in the prime minister's suite. No one, as far as I can tell, has predicted a traditional, strong Russian leader in the making.

History is replete with examples of seemingly meek gentlemen morphing into full-throated autocrats (among them Pakistan's Zia ul-Haq, Egypt's Hosni Mubarak, and further back, Kaiser Wilhelm II). So such a future cannot be ruled out in Medvedev's case.

But, at risk of reading someone else's mind, I think that Putin did not select his protege with that history bothering him; rather it was precisely because of that precedence that he passed over Medvedev's chief rival, Sergei Ivanov, who as a former spy himself has many friends in Russia's powerful security services. Putin selected Medvedev, a former law professor, for his loyalty, and his belief that Medvedev would be the least troubled by Putin's continued strong role in political affairs.

For fans of Robert Caro's magisterial The Power Broker, Putin wants to be Russia's Robert Moses. He wants to have long service, calling the shots regardless of who sits in the Kremlin.

Do not look for Russia to democratize in any western sense, not for some time in any case. Rather, Medvedev's role will be largely economic -- attempting to broaden the boom away from energy.

On foreign policy, to the degree he has any latitude, he seems likely to speak more softly. But the Gazprom-led economic march into Europe will continue. More worryingly at the moment, do not expect any precipitate withdrawal of the chin-out Russian activities in Georgia.

Photo: World Economic Forum
Rights: Creative Commons

Green's Moment of Truth?

Today's breathtaking surge of oil prices through $120 a barrel and on toward $121 underscores a possible shift in the U.S. -- Americans may be finally recovering from their seduction with the road.

An insightful piece by my Business Week colleague Christopher Palmeri details how America's demand for oil appears to be dropping. They are traveling less, and when they do, doing so in smaller vehicles -- they are buying more compact cars, and fewer SUVs.

Caution is in order, since the country is in recession, and these statistics are for a single quarter. Yet the tightness in global oil supplies isn't likely to lift -- Russian production is stuck at about 10 million barrels a day and dropping, and the Saudis are probably at or near their own production peak, according to a piece today by my former Wall Street Journal colleague Neil King. The only big unknown is whether Iraq and Iran come on the market with large new supplies. But even if they do, what are we talking about -- another collective 4 million barrels a day? Five million barrels tops? That's not much of a global cushion, and not sufficient to relieve the tightness as Asian demand continues to grow. Arjun Murti over at Goldman Sachs says that oil may soar to $150 to $200 a barrel in the next couple of years, according to a piece by Bloomberg's Nesa Subrahmaniyan.

Goldman has been prescient on oil prices. And the stars do seem lined up for high commodity prices of all types. But if demand truly is dropping in the biggest gas-guzzling country on the planet, there is reason to give some credence to the opposite outcome -- that the price will stabilize, and even drop. Not too much. Perhaps a bargain $100 a barrel? A firesale $90?

Yet that could be sufficient to trigger an era of proving time for the conviction of investors and innovators in renewable fuels. In an excellent contrarian piece, my Business Week colleague John Carey says that corn ethanol has wrongly suffered a black eye over its impact on the food supply. Corn ethanol isn't as much a villain as it's made out to be.

But that's irrelevant to the current environment. What's driven billions of dollars into venture capital has been the runup in oil prices. As long as prices keep rising, that money will probably keep flowing (although probably not into corn ethanol). But if the price surge slows, or reverses, look for an impact in the constellation of renewable companies.

Which venture capitalists have the conviction and stomach to put more into technologies many of whose genuine value won't be known for years and years? And which technology will they decide has the right stuff to succeed in the long term? The air is likely to go out of some of the fledgling companies' perceived value.

Turkmen Subjected to More Sanity: My friend David Stern, the New York Times writer in Central Asia, writes that Turkmenistan leader Gurbanguly Berdymukhamedov is dismantling yet another vestige of the deceased buffoon he succeeded. After having reinstated full schooling for children, and reopened local circuses, libraries and even the ballet, Berdymukhamedov is removing the Arch of Neutrality, a revolving statue of his predecessor, Saparmurat Niyazov, from the center of the capital of Ashkabad. Perhaps next he will start issuing visas to foreigners.

Photo: ndanger
Rights: Creative Commons

Georgia: An Exercise in Image-Building

Six days before Dmitri Medvedev takes over the helm of Russia, Vladimir Putin has put the country on a war-footing with its favorite punching bag, the neighboring nation of Georgia. Putin has shifted troops to the seaside Georgian region of Abkhazia -- just in case, Moscow says, Georgia mounts a military attack against the separatist region.

As readers recall, Georgia and Abkhazia fought a brutal war during the early 1990s that left the two divided.

Igor Yurgens, a brainy and urbane Medvedev adviser who is making the rounds in Washington, London and Paris, told me in a phone chat yesterday that Moscow "will not use military force" in order to absorb Abkhazia, whose citizens already have been given Russian citizenship.

Yet Putin is still in a lather over the West's decision to recognize Kosovo's independence from Serbia, and this most recent flareup of tensions with Georgia seems to me of a different order from the countless previous flareups between the two over the last seventeen years. Putin is sticking his chin out.

NATO ambassadors said yesterday that the move "risks undermining stability." But Yurgens doesn't seem swayed. "We are not going to be pushed and bullied on this question after Kosovo, that's for sure," he told me.

What is Russia's move really all about? Surely it's not concern over Abkhaz security -- a Georgian military attack in order to bring the region back into the Georgian fold verges on ludicrous, mainly since Georgian President Mikheil Saakashvili knows he would lose, either to the Abkhaz themselves or a predictable Russian counter-offensive.

Is Putin simply demonstrating yet again that Russia won't be pushed around? Is he bestowing an image-building conflict on his successor, in the way that Chechnya built up Putin's own nationalist credentials when he took power in 1999 with a popularity rating of 2%? Perhaps Putin simply couldn't resist lest anyone forget what he has done for Russia's feeling of well-being? According to Itar-Tass, he is leaving office with an almost 85% approval rating.

When pressed on its general foreign policy, Russia says the West is mired in Cold War thinking, and that its strategy is straightforward and not political. If that's true, one wonders why Putin been unable to strike win-win deals with Georgia, Ukraine and the Baltics.

The prevailing wisdom is that nothing will change under Medvedev, whom experts think will keep the wheel straight and hope that things turn out as well for him as they did for Putin. Nothing Medvedev has said seems to argue otherwise.

Photo: Argenberg
Rights: Creative Commons

Book Note

The cover is out of the design shop for the new book, due out this fall.

Notice to Tinkerers: X-Prize Throws $100 Million Into the Biofuels Pot

The folks who jolted space travel, human-genome sequencing and high-mileage vehicles are now looking to stir up the transition away from fossil fuels. The X-Prize Foundation is going to offer up to $100 million in a cluster of awards for transformative innovation in biofuels, electricity storage and transmission, and other clean technology.

I spoke both to X-Prize CEO Peter Diamandis and foundation President Tom Vander Ark for a story on the new prizes for a piece in today's BusinessWeek on-line.

One item not in the piece is how Vander Ark -- who worked previously on education in Bill and Melinda Gates' foundation -- is helping to take the X Prize in the same direction, meaning toward the developing world. These new energy prizes are somewhat geared to bringing cheap electricity, water and broadband to small villages in an effort to spur their economies. In the biofuels component, too, there's a requirement that the technology be easily transportable, which would make it useable in the developing world. Next, the X-Prizes are going directly into medicine and education, the Gates Foundation's forte.

I also asked Diamandis what it takes to be an X-man, or X-woman, as it were -- what is the right stuff to win one of the cachet-filled $10 million prizes?

Brilliance helps, of course, Diamandis said, but "I'm putting my money on tenacity and perseverance. It's asking over and over and over again for capital, refusing to take no for an answer. It's tenacity combined with passion."

Photo: merfam
Rights: Creative Commons

Latest Score in Love versus War

In recent months, Italy’s ENI has seemed to have hit upon the winning formula in Big Oil’s battle for survival against the march of petro-states across the globe. ENI chairman Paolo Scaroni’s approach has been simple – jump in bed with your adversary. So you have had ENI saddling up with Russia’s Gazprom, Hugo Chavez’s PDVZA, and most recently Qatar Petroleum.

Scaroni’s strategy has been the polar opposite and, so far, more successful than ExxonMobil’s confrontational style toward the more assertive petro-states such as Russia and Venezuela.

But a scoop by Guy Chazan in today’s Wall Street Journal shows that co-habitation goes only so far. Turkmenistan, for instance, is so miffed with ENI that it refuses to issue visas to its senior executives. That’s important, because Turkmenistan is one of the world’s only largely untapped petro-states welcoming exploration offers from Big Oil. Chevron, BP and others have put much effort into winning access to fields there.

Based on ENI’s record, don’t be surprised if Scaroni himself tries to swoop into Turkmenistan to smooth over the situation.

Photo: Chrispitality
Rights: Creative Commons

Presidential Candidates on Russia

With Iraq sucking much of the air out of the room, the former Soviet Union and Russia in particular have gotten little attention from the U.S. presidential candidates. The notable exception has been GOP nominee John McCain, who threatened with Bush-like chest-thumping to expel Russia from the G-8, and sophomorically described Vladimir Putin's eyes as containing a "K a G and a B."

Matt Siegel at The Moscow Times weighs in today with a piece in which he interviews McCain's Russia expert, Stephen Biegun, a vice president at Ford Motor and a veteran of the current President Bush's foreign policy team; and Michael McFaul, who is Barack Obama's Russia specialist and acting director of the Institute for International Studies at Stanford University. It's worth reading, in addition to this discussion by a panel of specialists gathered together by Johnson's List a couple of weeks ago.

Both of the Democratic candidates make the point that it's unnecessary to rile Russia at the moment by insisting on a missile-defense shield in Poland and the Czech Republic, when there is no evidence that the technology works. McCain supports installation of the shield regardless.

Much also is made of Putin's crackdown on rival voices.

None of the candidates has said a word as far as I can tell about a serious, omnibus approach to Eurasian energy security stretching from Central Asia into western Europe. As readers of this blog know, Putin -- and by extension Dmitri Medvedev -- have treated this as a paramount issue, while Washington has been looking the other way to Iraq.

One amusing aspect of the foreign policy debate that has taken place is hoopla among some in the expert community over Obama's reliance on Zbigniew Brzezinski, the Carter-era national security adviser, as a chief foreign policy expert. These experts see Brzezinski as a relic of the Cold War. Perhaps such younger specialists see themselves as more authoritative. But a reading of his writing over the last decade and a half shows Brzezinski proving himself again and again as one of the most realistic and wise hands on the former Soviet Union. He does so again here in the current issue of The Washington Quarterly.

At core is a subjective issue that will not be settled to anyone's satisfaction -- is Russia a normal country, meaning should it be treated the way one would approach, say, France? Brzezinski would be on the reasonable side of those who reply 'no,' at least at the moment. Those for whom the answer seems to be yes seem to include Stephen Kotkin of Princeton and Anatol Lieven of King's College in London.