RUSSIAN DENVER / HORIZON N05/<strong>834</strong> от 02.05.2016 e-mail: info@gorizont.com Simply the best 4 ‘The Russians are going to have a cow’: The US’s latest message to Putin ‘is a really big deal’ Natasha Bertrand The US will devote a substantial portion of its defense spending to building up its military presence in Eastern Europe in an effort to deter Russian aggression in the region, Obama administration officials told The New York Times. Countries belonging to the NATO alliance in Central and Eastern Europe will apparently receive heavy weaponry, tanks, and other equipment from the US, which quadrupled its budget from $789 million to more than $3.4 billion for military spending in Europe through 2017. «This is a really big deal, and the Russians are going to have a cow,» Evelyn N. Farkas, the Pentagon’s top policy official on Russia and Ukraine until October, told The Times on Tuesday. «It’s a huge sign of commitment to deterring Russia, and to strengthening our alliance and our partnership with countries like Ukraine, Moldova and Georgia.» The move comes four months after Russia launched an air campaign in Syria to prop up embattled Syrian President Bashar al- Assad in a move widely seen as an attempt by Russian President Vladimir Putin to secure and expand Russia’s influence in the Middle East. Russia’s presence in Syria, however, has «undermined» virtually everything the West is trying to accomplish there and beyond, British Foreign Secretary Philip Hammond said in an interview with Reuters from a refugee camp in Jordan on Monday. That includes the US’s attempts to bolster «moderate» Syrian rebel groups, which have been targeted by Russian airstrikes, and the US-led anti-ISIS coalition’s attempts to wipe out the Islamic State in Syria, which has largely been spared the brunt of Russia’s punishing air campaign. As such, the new funding being allocated to fortify Eastern Europe against Russian aggression «is not a response to something that happened last Tuesday,» a senior administration official told The Times. «This is a longer-term response to a changed security environment in Europe. This reflects a new situation, where Russia has become a more difficult actor,» the official added. Russia is unlikely to react kindly to an expanded NATO military presence along its western flank. In an interview with the German daily newspaper Bild in January, Putin asserted that Russia’s tensions with the West largely resulted from NA- TO’s eastward expansion after the collapse of the Soviet Union. Putin said: Of course every state has the right to organize its security the way it deems appropriate. But the states that were already in NATO, the member states, could also have followed their own interests– and abstained from an expansion to the east. He added: «NATO and the USA wanted a complete victory over the Soviet Union. They wanted to sit on the throne in Europe alone.» Incidentally, Russia is now trying to dethrone NATO and position itself as an alternative to US influence in the Middle East, as evidenced by its alliance with Iran, Syria, and Iraq under the guise of fighting ISIS. «Russia is of course trying to leverage the entire intervention [in Syria] as a way to lap up as much real estate in the Middle East as possible,» Tony Badran, a research fellow at the Foundation for the Defense of Democracies, told Business Insider in September. «It’s classic Putin.» In pushing himself to the forefront of an «anti-ISIS coalition» and creating a distraction from Ukraine, Putin has tried to coerce the US into accepting– and potentially embracing– Russia’s role in the conflict. But Obama’s new funding plan to bolster NATO’s presence in Eastern Europe shows that his administration is trying to put a damper on Putin’s plans to dislodge the West from the Middle East entirely by reasserting the US’s role in the region. From The Times: Administration officials said the new investments were not just about deterring Russia. The weapons and equipment could also be deployed along NATO’s southern flank, where they could help in the fight against the Islamic State or in dealing with the influx of migrants from Syria. Another anonymous administration official speaking to The Times put it bluntly: «This is a message that we see what they’re capable of, and what their political leadership is willing to do.» Russia is now China’s biggest oil partner– and it’s a huge problem for Saudi Arabia Elena Holodny Saudi Arabia has long trumped Russia in the Chinese oil market. The Saudi share of Chinese crude imports at the beginning of the decade was about 20 %, while Russia’s was below 7 %, according to data cited by RBC Capital Markets. But now the Russians are creeping in– and the Saudis are getting nervous. «Russia is the biggest rival to the Saudis in the single-largest oil demand growth country in the world,» RBC Capital Markets’ commodity strategist Michael Tran wrote. «The rising tide of Chinese growth has meant that notional volumes for both countries have increased in the years since, but Russia’s gains have been outsized,» he continued. «The Kingdom now finds itself neck and neck with Moscow for the lead in Chinese market share, with both jostling in the 13–14 % range, yet the momentum resides with the latter.» Notably, the Saudis managed to increase exports to China by only about 120 kilobarrels a day over the past five years– a growth rate that was beaten by seven other countries including South Sudan and Colombia, according to figures cited by Tran. Meanwhile, Russia increased exports by 550 kilobarrels a day in the same period. Moreover, Tran continued, Russia even managed to overtake the Saudis as the biggest crude exporter to China in December and three other months in 2015. While this detail may not sound particularly impressive, it’s worth pointing out that the Saudis have lost the top spot only six times in the past five years. Interestingly, part of Russia’s success in China has been attributed to its willingness to accept Chinese yuan denominated currency for its oil. (And not, as others have suggested, because of any sort of allegiance to the Sino-Russo friendship.) RBC Capital Markets On the flip side, «Saudi Arabia is losing its crown as its selling prices in Asia haven’t been attractive enough,» Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, told Bloomberg back in June. «If Saudi Arabia wants to recapture its number one ranking, it needs to accept the renminbi for oil payments instead of just the dollar,» Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., told Bloomberg back in June. There are certainly other things the Saudis could theoretically do to capture market share. «Owning refineries in key demand regions guarantees market captivity,» Tran wrote. «This has historically been part of the Saudi playbook and the recent reported interest in acquiring stakes in Chinese refineries is a strategic move that would guarantee the Kingdom a seat at the table in the preeminent region for demand growth.» Basically, if the Saudis own the refineries, then their oil will be sold there. In any case, the upshot for the overall oil market is that we probably won’t see Russian-Saudi coordination in the oil sector anytime soon, Tran argued. «The recent meeting between the Russian government and its domestic oil company execs introduces a glimmer of promise for potential coordination with the Saudis and other OPEC countries, but the probability of a production cut remains low,» he wrote. In sum, Russia has moved into China– and the Saudis aren’t loving it. «Is there a sense of urgency from the Saudis?» Tran said. «You bet.»
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