THE ALROSA CHALLENGE TO DE BEERS

In the most famous words ever addressed to a gemstone ring, the Princess Elizabeth greeted news of the death of her rival, Queen Mary, with the words: “This is the Lord’s doing. It is marvellous in our eyes.” Alrosa officials said almost as much last week — without the hyperbole, but increasingly conscious of the rivalry with De Beers.

Alrosa is now well on the way to becoming the dominant state-controlled multi-mineral mining company in Russia, according to its board chairman, federal Finance Minister Alexei Kudrin. He and chief executive Alexander Nichiporuk presented reports to a meeting of the company’s workforce last week. Their speeches have been released on the company website.
According to Nichiporuk, sales by Alrosa of domestically mined diamonds, including polished goods, hit a record last year of $2.86 billion, up 15% on 2004. Adding the results of sales of Alrosa’s share of the Catoca mine in Angola, total revenues reached over $3.1 billion. Aggregate profit was RM5.1 billion, or about $540 million, Nichiporuk noted.

In what was evidently a challenge to the global position of De Beers — soon to lose purchase of Alrosa’s rough exports, as well as access to new mining projects in Russia — Nichiporuk noted that “the share of ALROSA in the world market has grown from 18 % up to 25 %.”

For comparison, De Beers’s financial results for last year included $6.54 billion in revenues for rough diamond sales, more than double Alrosa’s total; after-tax earnings for De Beers were $824 million. At $2.4 billion, De Beers’s debt appears to be rising, and to be greater than Alrosa’s, which is about $1.6 billion, and shrinking.

Nichiporuk conceded that there had been substantial increases in the cost of mine production last year. “The most serious influence on the end results of our common work,” he said, was the growth of costs at the ore-processing combines. What Nichiporuk described as “general production charges” grew more than twofold. This year, he added, the company hopes to cut costs by 5% overall.

Alrosa does not release carat volume data for its mines, or in the aggregate. Nichiporuk claimed that mine production overall grew by 4.2% to $2.3 billion in 2005. He broke this total down into a value of output for each of Alrosa’s mines: Udachny, $861 million (38%); Nyurba, $529 million (23%); Mirny, $481 million (21% of total);Aikhal, $348 million (15%); and Anabar, $41 million (2%).

Both Nichiporuk and Kudrin emphasized Alrosa’s growing reach, from diamonds into oil, gas, possibly coal, and gold; out of the Sakha region of eastern Russia into northwestern Arkhangelsk region, and in Angola.”Alrosa is a company of strategic importance,” Kudrin said, “not only because the major decisions concerning it are accepted by the President of Russia. Long-term plans of the state for the accelerated natural resource development of Siberia and the Far East provide direct involvement of the Company.” Alrosa’s reach for new diamond and other mineable resources in both Sakha and Arkhangelsk leaves next to no room in Russia for De Beers. In southern Africa, Alrosa is already decidedly better positioned in Angola than De Beers to garner a growing stream of rough.

Kudrin and Nichiporuk also announced that they expect the transfer of capital from Sakha to the federal government will be completed by year’s end, giving Moscow 50% plus one share; the Sakha administration 40%. Corporate restructuring of De Beers by Anglo American is anticipated, but has yet to begin.

RUSSIA TEACHES LITHUANIA A WELL OILED LESSON

Lithuania, the little state on the shore of the Baltic Sea, has a proud, and under Adolf Hitler, an unpleasant history of hostility towards Russia.

If its accession to the European Union was an understandable attempt to conserve, and build on its post-Soviet independence, Lithuania’s application to join the North Atlantic Treaty Organization (NATO) sharpened the military edge to the relationship with Moscow. But as the great British strategist, Basil Liddell Hart, spelled out a long time ago -without fuel waging war is a losing business. Lithuania’s Mazheikiu refinery can produce fuel, but it lacks crude oil for the purpose. The decade-long history of oil supplies to the refinery keeps repeating Liddell Hart’s lesson several times over.

The Lithuanians apparently haven’t read Liddell Hart.

Instead, they tried putting Williams, a Kansas-based oil company, in charge of the refinery in the belief that Washington would assure the imports of crude oil. Perhaps it promised to do so; but at a price Williams could not afford. It defaulted on the investment, tax and other obligations it had signed with the Lithuanian government. Mazheikiu was then put up for sale again, and this time it was acquired by Yukos, the Russian oil company owned by Mikhail Khodorkovsky. Perhaps Washington told Vilnius it could trust Khodorkovsky. But even Khodorkovsky at the peak of his power didn’t have the means to deliver oil to Mazheikiu himself. For that, as for much more than Khodorkovsky realized at the time, Yukos depended on the Kremlin. Since the Transneft pipeline system is state-owned, access can be controlled by a directive from the Kremlin to Semyon Vainshtok, Transneft’s chief executive. When Khodorkovsky was convicted by a Moscow court and imprisoned on fraud charges, and Yukos’s principal assets sold to pay tax evasion claims, Mazheikiu was once more a problem for Lithuania. It could have decided to negotiate with Yukos’s heir, the state oil company Rosneft. It might have tried exciting a contest for the Yukos stake between Transneft, Rosneft, and Russia’s ambitious commercial oil producers, including BP-controlled TNK and LUKoil. But last November Vilnius decided against all Russians. This month, the Russians decided what to do about it.

Transneft is now diverting an estimated 163,000 barrels per day (bd) of additional Russian crude oil exports to Ukrainian ports on the Black Sea. This diversion started after Transneft cut off the flow of crude through a spur of the main Druzhba (that’s Russian for ‘friendship’) pipeline that has been supplying the Mazheikiu refinery, and Lithuania’s oil port on the Baltic, Butinge.

First reports of the cutoff appeared to be in response to a leak and falling pressures reported in the Lithuanian spur of the pipeline on the weekend of July 30-31.

Last November, in what it announced as a fresh bid to break free of Russian crude oil supply constraints, the Lithuanian government proposed to sell the Yukos stake to either a Kazakh or Polish company. Transneft then responded it would not deliver the oil required to fill the bid by the first of the non-Russian bidders, Kazmunaigaz (KMG). In addition to KMG, the other contenders for the refinery were PKN Orlen of Poland, and TNK-BP and LUKoil of Russia.

At the time, Transneft was piping 3 to 4 million tons per annum of KMG crude to Lithuania, a Transneft source told RJ. But to operate profitably, the refinery needs between 7 to 12 million tons. According to Sergei Grigoriev, Transneft’s spokesman, his company could deliver to market up to 17 million tons of KMG oil annually. It was not doing so, he claimed, because KMG had failed to “fulfill its obligations in the intergovernmental agreement between Russia and Kazakhstan. Kazakh officials claimed this was camouflage for an attempt to pressure the Lithuanians to select a Russian supplier, and was “not in line with open market principles”. KMG claimed that, if selected, it would despatch its crude by tanker to Mazeikiu, if Transneft persisted with its cutoff threat.

In what then appeared to be further retaliation against Moscow, the President of Ukraine, Victor Yushchenko, announced a scheme of his own to induce KazMunaiGaz to ship oil across the Caspian and Black Seas to the Ukrainian terminal at Yuzhny, near Odessa. This oil would then be pumped northwards, Yushchenko claimed, to Poland, and onwards from there to Mazeikiu, if KMG’s bid for the refinery won acceptance.Yushchenko’s move returned to earlier Ukrainian proposals to pipe non-Russian crude northwards through the Odessa-Brody pipeline, rather than Russian crude southwards. It is the latter direction which is currently operational, supplied by Russian oil producers. Yushchenko’s scheme didn’t survive the collapse of his political support; the raising of Russian gas prices; and new parliamentary elections which have returned to power the pro-Russian prime minister, Victor Yanukovych.

The situation today is that Lithuania has lost its crude oil supply, and Ukraine is gaining transit fees and tanker revenues from the Lithuanian loss. Boris Biryukov, a spokesman for Yuzhniy port, in Ukraine, told The Russia Journal last Thursday that for the month of August he has been promised, and is getting “additional oil from Transneft”; but he refused to identify the additional volumes. Industry sources claim Yuzhniy is receiving an additional 300,000 tons this month (68,000 bd). Odessa port confirmed that it will receive 970,000 tons of crude from Transneft, piped southward from the Druzhba; this is 420,000 tons (95,000 bd) more than previously planned. Alexey Bezborodov, a Russian maritime analyst, told The Russia Journal “this is a likely reorientation of flows from Transneft, as they have to put the Druzhba oil somewhere.”

Pipeline deliveries to Belarus, another neighbour, have been unaffected by the Lithuanian cutoff.

Lithuanian industry sources say that, although it will raise the cost of production, for as long as the Russian shutoff lasts, the refinery will be supplied by tanker deliveries to Butinge. Tanker deliveries were what made Mazheikiu a losing business for Williams a decade ago.

THE ALUMINIUM PIMPERNEL

Hardly anyone can remember the Baroness Emmuska Orczy these days, and were it not for a Broadway musical, her best-selling novel would have been forgotten, too. It was called The Scarlet Pimpernel, and it concerned the adventures of an apparently witless, secretly intrepid English knight, who defied the French Revolution to save aristocrats, who may have been pretty, but whose heads deserved the guillotine.

The least forgettable lines which Orczy wrote were: “We seek him here. We seek him there. Those Frenchies seek him everywhere! Is he in heaven? Is he in hell? That damned, elusive Pimpernel!” Playing in a subsequent BBC serial, Rowan Atkinson, aka Mr. E. Blackadder, abhorred the Baroness’s prejudice for the aristos by killing two London noblemen he suspected of being the Pimpernel. He also ridiculed Orczy’s plot for “filling London with a load of garlic-chewing French toffs… looking for sympathy all the time simply because their fathers had their heads cut off”.

The library at Oleg Deripaska’s expensive residence on Belgrave Square may not have a copy of Orczy’s book, and the backyard isn’t likely to include a planting of the angallis arvenis (scarlet pimpernel). Nonetheless, having established his London domicile as a refuge, in case Russian prejudice should turn against the unusually rich, Deripaska is preparing to persuade the London market to buy the bonds of his aluminium empire, or even better, the shares of an initial public offering of Russian Aluminium (Rusal), now a Jersey-listed listed entity.

In order to do either, Deripaska must remove much of the secrecy surrounding his ownership of the Rusal group. And before that is possible, he must make sure there are no major rivals claiming to own the assets which Deripaska says belong to him. In practice, no sooner does Deripaska settle the asset claims of one rival than another launches a new one, and prepares a lawsuit. They are a little like the aristos the Pimpernel used to rescue from the guillotine. Only in Deripaska’s case, the plot is reversed a little, with the Aluminium Pimpernel doing his best to top his rivals in secret, while appearing in London to be the reticent fellow he would like to be thought of by his English friends.

Although Rusal once claimed that the Zhivilo brothers, former owners of the Novokuznetsk aluminium smelter, had been defeated in the US courts, Deripaska has paid them about $65 million in confidential settlement relating to their smelter, one of Rusal’s four. At a second smelter, Krasnoyarsk, after calling the former chairman and controlling shareholder Antoly Bykov a gangster and murderer, and rejecting a Swiss arbitration award in his favour, Rusal paid Bykov $100,500,000, also in confidential settlement.

A claim in the courts of the British Virgin Islands by the Reuben brothers, relating to diverted cash allegedly taken by Rusal from trade proceeds owed to the Reubens, has also been partially settled. About $100 million of the $300 million bid was agreed for payment in a settlement of June 27, 2005. However, one of Deripaska’s companies – called Bluzwed Metals — recently went into the High Court in London, arguing that Trans World Metals, the Reubens’vehicle, had violated Clause 11.4 of the secret deal with Deripaska. Deripaska then sought High Court enforcement of the Reubens deal. He got his summary judgement last January 26 in a ruling by Justice Sir Andrew Morritt. One secret preserved in the ruling was the identity of a Lebanese arranger called Joseph Karam – “K” in the court text – whose payoff and indemnity from further claims Bluzwed accused the Reubens of threatening.Bluzwed’s venture into the High Court occurred in parallel with an attempt by another smelter company controlled by Deripaska, Tajik Auminium Plant (TadAZ), to seek a High Court award of several hundred million dollars against the former investor in TadAZ, Avaz Nazarov, and trading companies associated with him. Although Deripaska has suggested in a US speech that he controls TadAZ, and testimony in High Court proceedings persuaded the judge that Rusal was backing the TadAZ lawsuit, Deripaska and Rusal claim they have nothing to do with TadAZ. Their lawyers also argue that they are outside UK jurisdiction, and should not be subject to the counter suit against them by Nazarov. An attempt by TadAZ and Rusal to have the court endorse the seizure of Nazarov’s passport, his bank accounts blocked, and his papers and computer records removed has been rejected by the London judge, William Blackburne. A new hearing before Justice Blackbume on whether Deripaska and Rusal have entered the court’s jurisdiction is scheduled in a few weeks’ time.

Potential bond buyers or investors in Rusal won’t trouble to seek Deripaska here, or there, and don’t mind whether he is in heaven or in hell. They will pay attention to the rulings on jurisdiction by the High Court judges, and on the trials Deripaska may then face for his assets. Investors have an understandable curiosity to know whose assets he is pledging or selling, and what financial capacity his Rusal group has to honour its obligations.

When the Moscow newspaper Vedomosti published a front-page article this week, headlined “How Rusal is organized”, it added a second headline by way of explanation: “Deripaska opens the structure of his main asset”. To the uninitiated, the impression was that Deripaska was confirming his ownership of the Rusal group, and through four holding companies, his ownership of four aluminium smelters in Russia; three alumina refineries in Russia and the Ukraine; three companies in the west African republic of Guinea, mining bauxite and refining alumina; a 20% stake in Queensland Alumina Refinery; and some downstream aluminium fabricating plants.

In Moscow newspaper practice, it is customary that newspaper reports about business are placed at a price, and like advertising, there is a scale of prices governing editorial position, length and prominence. This custom is so well entrenched, it is also usual for Russian readers of such newspapers to infer from the published text who might have paid to place it there. This isn’t to say that Vedomosti, owned by the Wall Street Journal, the Financial Times, and a Finnish media group – or its affiliated English-language newspaper, The Moscow Times – received financial reward for running what appears to be a news report of Deripaska’s disclosures. Russian customs being what they are, however, the speculation is that the prime mover behind the prominent article wasn’t Deripaska at all. Instead, it appears to be one of the biggest claimants in Rusal’s litigation history, Mikhail Chernoy. He is currently living in Israel, where his freedom of movement is restricted. He has been saying for years that he put Deripaska in the aluminium business, and that Deripaska is bound to pay him for a 20% stake in Rusal he retained from those early days. Deripaska claims he bought Chernoy out years ago.

Sources close to both men have confirmed how fond they once were of each other. This week, Chernoy is quoted as telling Vedomosti that he received $250 million from Deripaska five years ago, but that he is still owed a balance of about $2 billion. Chernoy is quoted in the newspaper as saying: “The validity of the agreement [with Deripaska] has expired, and now my lawyers are preparing a letter to Deripaska in which he will be reminded that he has not carried out his obligations to me.” If Deripaska had arranged the Vedomosti publication to disclose how much he owns in Rusal, Chernoy would not have appeared.

According to the Vedomosti report, the Rusal spokeswoman Vera Kurochkina is quoted as explaining that the Jersey-listed Rusal Ltd. was created in 2005 to absorb Rusal Holding Ltd., a British Virgin Islands company. This had been created by Deripaska and Roman Abramovich, along with Abramovich’s shareholding partners in Millhouse Capital, a UK holding company, to hold the smelter, refinery, mining, and other factory assets. Deripaska bought out Abramovich’s 25% stake in the group for $1,578 billion, and later acquired the Millhouse stake of 25% for an undisclosed sum. These numbers are about equal to the fraction they represent of the official revenue figures for Rusal sales in the years the transactions were negotiated. But they are substantially less than the valuations Moscow investment bankers assumed Abramovich had placed on, and Deripaska agreed to pay for Rusal. According to Rusal releases, in 2003 sales revenues worldwide were $4.5 billion; in 2004 $5.4 billion; and in 2005 $6.1 billion. Abramovich and Millhouse apparently believed their shares were not worth the large multiples Moscow investment bankers currently attribute to these revenue figures.

One of the few additional figures Rusal has released that bears on the asset valuation is the group’s debt. After financial reports Rusal had provided potential lenders disclosed heavy related-party lending between Rusal and Deripaska’s asset holding, Basic Element, leaving little cash in Rusal’s coffers, Rusal’s indebtedness has been a sensitive point on which the company has been reticent. The most recent disclosure by the company indicates that debt has been rising sharply, and was at $2.8 billion at the end of 2005. According to the Vedomosti report, Rusal documents valued its own assets at $2.8 billion last June. Subtracting the debt, perhaps Rusal believes itself to have a net value of zero. This is hardly Deripaska’s estimation of his net worth.

Kurochkina was asked if she would verify that the information attributed to her in the Vedomosti publication was accurate. She refused to respond to written and telephone requests. Were there any suspicion that Deripaska initiated the disclosures in Vedomosti, Kurochkina’s silence dispels it.

There is one further reason forjudging that the Vedomosti report isn’t a pimpernel which Deripaska intended to leave behind. For there is no reference in either the report, or the accompanying asset chart, of the trading firms through which Rusal’s production plants sell their products. As The Russia Journal has reported in great detail in the past, Rusal’s trading is largely done through tolling contracts, which leave the Russian assets with much less than the market value of the sales revenues. This value has been flowing for years to the trading companies offshore. It is these trading schemes that have already exposed Deripaska’s vulnerability to much of the litigation issued to date. The evidence of how these schemes operated to pauperize the plants and enrich the proprietors of the trading companies has not yet been tried in court.

However, if Rusal will not, or cannot consolidate on to its balance-sheet the proceeds of the dozens, if not hundreds of trading companies which Deripaska operates, then it will be difficult for investors to calculate what would give Rusal a net value of better than zero.

DIAMONDS ARE FOREVER, SANCTIONS ARE SOONER — HOW ALROSA AND THE BELGIANS ARE LEARNING TO FIGHT AND TO FEINT

By John Helmer, Moscow
  @bears_with

The Belgians like to speak of themselves as the victims when the great powers of Europe go to war. They were when the Germans invaded in 1914 and 1940.

But since 2014 when the Belgian government has been repeating it is gung-ho for the war with Russia, there has been no Russian attack, no occupation.  Instead, there has been the amicable Russia-Belgium diamond trade worth more than $30 billion in annual exports and imports, supplied by the Russian state diamond company Alrosa.

If Belgian officials cut that trade off by agreeing to the European Union (EU) sanctions banning Russian diamond imports, as proposed by other EU states, that would  liquidate ten thousand diamond polishing and related jobs concentrated in Antwerp, and destroy the country’s fifth largest export business forever. Alrosa would move its diamonds to Dubai, killing Antwerp as a diamond trading and cutting centre, just as Amsterdam as a diamond centre was killed by the German occupation of 1940.  Antwerp took advantage of Amsterdam’s misfortune in 1946.   Dubai will now do the same.

This is what Belgian government and diamond industry officials mean when they say they favour the toughest possible sanctions on Russian gas exports to Europe  – but no sanctions on Russian diamonds. This is what Prime Minister Alexander De Croo meant when he told an Antwerp conference of diamantaires on September 14: “Sanctions should focus more on the aggressor than ourselves.”   

Earlier, reacting to an attack on the diamond trade with Russia by Ukrainian President Vladimir Zelensky in a speech to the Belgian parliament, the spokesman for the Antwerp World Diamond Centre (AWDC) said: “Not only are thousands of jobs in Antwerp at stake in the short term, but this decision will inevitably lead to a worldwide shift in the diamond trade in the long term. As long as international policy-makers worldwide do not adopt a unanimous position to sanction Russian diamonds in their entirety, Antwerp will be the only place that will bear the consequences of an EU sanction.”  

By “worldwide shift” he meant Dubai.

De Croo has camouflaged Belgium’s resistance by repeating he will not veto a Russian diamond ban if there is “overwhelming support” for it in the EU. So a majority of the EU states have continued pressing; they are led by Poland. In March of this year, De Croo announced: “I would like to officially state that our country has never hindered any measures regarding diamonds. Our country did not interfere in this issue.”  In private, however, De Croo has been casting Belgium’s veto.  

The Poles have been attacking De Croo,  pressing the case for an EU  ban on Russian diamond imports as payback for De Croo’s insistence on imposing EU budget sanctions against the Warsaw government last year.  De Croo is also refusing to accept Ukraine’s demand for accelerated membership of the EU and of NATO, and for fresh EU funding to pay Kiev’s war-fighting bills.   

Instead, he has just announced €8 million in non-lethal aid to Kiev. “Ukraine can keep on counting on Belgium,” De Croo declared. “More than words, there are actions. Once again, Belgium is responding to concrete needs and will be providing essential equipment to Ukraine in the coming weeks.”  The equipment is first-aid kits and pharmaceuticals produced by Belgian companies.

This week the secret Belgian veto campaign appears to have succeeded. The new draft of the eighth round of EU sanctions includes dental floss and deodorants; it leaves out diamonds.    This omission is expected to be confirmed publicly on Friday of this week at the EU summit meeting in Prague.    

 “At the moment, diamonds are not included on the agenda for the next round of sanctions,” announced Tom Neys, the AWDC spokesman. “But things change quickly. [On] Friday [October 7] they will finalize discussions, and the EU [leaders decide] on October 6 and 7. The fact that sanctions also create other ethical problems, and that these sanctions will have no effect in Russia, are probably important elements in these debates. Now is the time to focus on international solutions.”  

By “international solutions” the Belgians mean keeping Dubai from taking over Antwerp’s diamond business.

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WAITING FOR NUCLEAR WAR IN WASHINGTON, COCKAHOOP IN WARSAW, THE GERMANS RUN FOR THE BUNKER, AGAIN — GORILLA RADIO REVEALS WHAT HAPPENS NEXT

By John Helmer, Moscow
  @bears_with

Timing is everything when you are telling jokes on stage; summing up for the jury in a murder trial; or when you are a general preparing to send your army over the top. Knock the comedian, lawyer, or general off his timing, and the laugh, the verdict, and the casualties will go against him.

John Mortimer, a London barrister and author of the Rumpole of the Bailey television show,  once told the story of a friend who was coming to the end of his final jury address when he saw the judge writing a note and handing it to the usher. When it was passed to the lawyer as he was speaking, he glanced down to read: “Dear Jim, I thought you’d like to know that your flies are open and I can see your cock.”

Cocks which show or crow – like boys crying wolf – don’t comprehend the risks they create for themselves, and others. This is how it is in Berlin for Olaf Scholz and in Washington for Joseph Biden right now. They can afford to be impervious to the derision they are drawing in Warsaw; not so to the reaction to their antics in Moscow.

In this broadcast by Chris Cook, Gorilla Radio blows the final whistle before we all go over the top (Germans first, then the Poles). Even former Secretary of State John Kerry, career liar that he’s been, is revealed to be blowing on the same whistle this time round.

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THE OCTOBER SURPRISE — ASK NOT WHAT THE KREMLIN WILL DO, BUT WHAT THE US WILL DO NEXT

By John Helmer, Moscow
  @bears_with

The official Russian reaction to the Nord Stream attack is to identify it as a US military operation, and to wait for an investigation to produce the evidence. That means wait, delay. No retaliation.

“How will we respond?”  Foreign Ministry spokesman Maria Zakharova said on Thursday in the most detailed briefing so far from Moscow.    “We will respond with an investigation. This is a must, and our law-enforcement bodies have already launched it. This [the gas pipelines] is our property, resources, and infrastructure.”

“I would like to believe that the international investigation of what happened on the gas pipelines in the Baltic Sea will be objective… We will seek to conduct an honest and objective investigation… I hope that someone in the United States, or maybe someone in Europe — although, unfortunately, Europe in this case can no longer be counted on — someone from the independent investigators will have the desire to clarify the involvement of the United States, the special services and all other bodies in what happened on 25-27 September of this year in the Baltic Sea.”

This means that the Russian Government is waiting, delaying. There will be no retaliation for the time being.  

The reason is that Russian officials suspect the Biden Administration of preparing an October Surprise just ahead of Election Day, November 8: an attack on domestic US infrastructure – the electricity grids, for example – which will be reported as the Russian retaliation that won’t be.

The Nord Stream attacks were a military operation of the US, Poland, Denmark, and Sweden, with additional NATO air surveillance support from bases in Italy.  Politically, they were an attack on Germany, but the German Chancellor Olaf Scholz has yet to say publicly what he knew in advance, what he knows now.

Who then knows what will come next except that there is now war in Europe, outside the Ukraine. Will the October Surprise begin war inside the United States?

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AFTERSHOCK OF NORD STREAM EXPLOSIONS RUMBLES WARSAW — POLISH POLITICIANS GO “NUTTERS”

By John Helmer, Moscow
  @bears_with

The Polish government in Warsaw, facing re-election in less than a year, wants all the credit from Washington for their joint operation to sabotage the Nord Stream gas pipelines on the Baltic seabed.

It also wants to intimidate the German chancellor in Berlin, and deter both American and German officials from plotting a takeover by the Polish opposition party, Civic Platform, next year.

Blaming the Russians for the attack is their cover story. Attacking anyone who doesn’t believe it, including Poles and Germans, Warsaw officials and their supporting media claim they are dupes or agents of Russian disinformation.

Their rivals, Civic Platform (PO) politicians trailing the PiS in the polls by seven percentage points,   want Polish voters to think that no credit for the Nord Stream attack should be earned by the ruling Law and Justice (PiS) party. They also want to divert  the Russian counter-attack from Warsaw to Washington.

“Thank you USA” was the first Polish political declaration tweeted hours after the blasts by Radoslaw Sikorski (lead image, left), the PO’s former defence and foreign minister, now a European Parliament deputy. In support and justification,  his old friend and PO ministerial colleague, Roman Giertych, warned Sikorski’s critics: “Would you nutters prefer that the Russians find us guilty?”

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THE BORNHOLM BLOW-UP REPEATS THE BORNHOLM BASH — POLAND ATTACKS GERMANY AND BLAMES RUSSIA

By John Helmer, Moscow
  @bears_with

The military operation on Monday night which fired munitions to blow holes in the Nord Stream I and Nord Stream II pipelines on the Baltic Sea floor, near Bornholm Island,  was executed by the Polish Navy and special forces.

It was aided by the Danish and Swedish military; planned and coordinated with US intelligence and technical support; and approved by the Polish Prime Minister Mateusz Morawiecki.

The operation is a repeat of the Bornholm Bash operation of April 2021, which attempted to sabotage Russian vessels laying the gas pipes, but ended in ignominious retreat by the Polish forces. That was a direct attack on Russia. This time the attack is targeting the Germans, especially the business and union lobby and the East German voters, with a scheme to blame Moscow for the troubles they already have — and their troubles to come with winter.

Morawiecki is bluffing. “It is a very strange coincidence,” he has announced, “that on the same day that the Baltic Gas Pipeline  opens, someone is most likely committing an act of sabotage. This shows what means the Russians can resort to in order to destabilize Europe. They are to blame for the very high gas prices”.   The truth bubbling up from the seabed at Bornholm is the opposite of what Morawiecki says.

But the political value to Morawiecki, already running for the Polish election in eleven months’ time, is his government’s claim to have solved all of Poland’s needs for gas and electricity through the winter — when he knows that won’t come true.  

Inaugurating the 21-year old Baltic Pipe project from the Norwegian and Danish gas networks, Morawiecki announced: “This gas pipeline is the end of the era of dependence on Russian gas. It is also a gas pipeline of security, sovereignty and freedom not only for Polish, but in the future, also for others…[Opposition Civic Platform leader Donald] Tusk’s government preferred Russian gas. They wanted to conclude a deal with the Russians even by 2045…thanks to the Baltic Pipe, extraction from Polish deposits,  LNG supply from the USA and Qatar, as well as interconnection with its neighbours, Poland is now secured in terms of gas supplies.”

Civic Platform’s former defence and foreign minister Radek Sikorski also celebrated the Bornholm Blow-up. “As we say in Polish, a small thing, but so much joy”.  “Thank you USA,” Sikorski added,   diverting the credit for the operation, away from domestic rival Morawiecki to President Joseph Biden; he had publicly threatened to sabotage the line in February.  Biden’s ambassador in Warsaw is also backing Sikorski’s Civic Platform party to replace  Morawiecki next year.  

The attack not only escalates the Polish election campaign. It also continues the Morawiecki government’s plan to attack Germany, first by reviving the reparations claim for the invasion and occupation of 1939-45;  and second, by targeting alleged German complicity, corruption,  and appeasement in the Russian scheme to rule Europe at Poland’s expense. .

“The appeasement policy towards Putin”, announced PISM, the official government think tank in Warsaw in June,  “is part of an American attempt to free itself from its obligations of maintaining peace in Europe. The bargain is that Americans will allow Putin to finish building the Nord Stream 2 pipeline in exchange for Putin’s commitment not use it to blackmail Eastern Europe. Sounds convincing? Sounds like something you heard before? It’s not without reason that Winston Churchill commented on the American decision-making process: ‘Americans can always be trusted to do the right thing, once all other possibilities have been exhausted.’ However, by pursuing such a policy now, the Biden administration takes even more responsibility for the security of Europe, including Ukraine, which is the stake for subsequent American mistakes.”

“Where does this place Poland? Almost 18 years ago the Federal Republic of Germany, our European ally, decided to prioritize its own business interests with Putin’s Russia over solidarity and cooperation with allies in Central Europe. It was a wrong decision to make and all Polish governments – regardless of political differences – communicated this clearly and forcefully to Berlin. But since Putin succeeded in corrupting the German elite and already decided to pay the price of infamy, ignoring the Polish objections was the only strategy Germany was left with.”

The explosions at Bornholm are the new Polish strike for war in Europe against Chancellor Olaf Scholz. So far the Chancellery in Berlin is silent, tellingly.

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LEMONS, MIMOSAS, AND STALIN’S SHOVEL

By John Helmer, Moscow
  @bears_with

The only Russian leader in a thousand years who was a genuine gardener and who allowed himself to be recorded with a shovel in his hand was Joseph Stalin (lead image, mid-1930s). Compared to Stalin, the honouring of the new British king Charles III as a gardener pales into imitativeness and pretension.   

Stalin cultivated lemon trees and flowering mimosas at his Gagra dacha  by the Black Sea in Abkhazia.  Growing mimosas (acacias) is tricky. No plantsman serving the monarchs in London or at Versailles has made a go of it in four hundred years. Even in the most favourable climates, mimosas – there are almost six hundred varieties of them — are short-lived. They can revive after bushfires; they can go into sudden death for no apparent reason. Russians know nothing of this – they love them for their blossom and scent, and give bouquets of them to celebrate the arrival of spring.

Stalin didn’t attempt the near-impossible, to grow lemons and other fruit in the Moscow climate. That was the sort of thing which the Kremlin noblemen did to impress the tsar and compete in conspicuous affluence with each other. At Kuskovo, now in the eastern district of Moscow, Count Pyotr Sheremetyev built a heated orangerie between 1761 and 1762, where he protected his lemons, pomegranates, peaches, olives, and almonds, baskets of which he would present in mid-winter to the Empress Catherine the Great and many others. The spade work was done by serfs. Sheremetyev beat the French king Louis XIV to the punch – his first orangerie at Versailles wasn’t built until 1763.

Stalin also had a dacha at Kuskovo. But he cultivated his lemons and mimosas seventeen hundred  kilometres to the south where they reminded him of home in Georgia. Doing his own spade work wasn’t Stalin showing off, as Charles III does in his gardens, like Louis XIV before him. Stalin’s spade work was what he had done in his youth. It also illustrated his message – “I’m showing you how to work”, he would tell visitors surprised to see him with the shovel.  As to his mimosas, Stalin’s Abkhazian confidante, Akaki Mgeladze, claimed in his memoirs that Stalin intended them as another lesson. “How Muscovites love mimosas, they stand in queues for them” he reportedly told him.  “Think how to grow more to make the Muscovites happy!”

In the new war with the US and its allies in Europe, Stalin’s lessons of the shovel and the mimosas are being re-learned in conditions which Stalin never knew – how to fight the war for survival and at the same time keep everyone happy with flowers on the dining table.

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AND THEN THERE WERE NONE

By John Helmer, Moscow
  @bears_with

Agatha Christie’s whodunit entitled And Then There Were None – the concluding words of the children’s counting rhyme — is reputed to be the world’s best-selling mystery story.    

There’s no mystery now about the war of Europe and North America against Russia; it is the continuation of Germany’s war of 1939-45 and the war aims of the General Staff in Washington since 1943. Defense Minister Sergei Shoigu (left) and President Vladimir Putin (right) both said it plainly enough this week.

There is also no mystery in the decision-making in Moscow of the President and the Defense Minister, the General Staff, and the others; it is the continuation of the Stavka of 1941-45.  

Just because there is no mystery about this, it doesn’t follow that it should be reported publicly, debated in the State Duma, speculated and advertised by bloggers, podcasters, and twitterers.  In war what should not be said cannot be said. When the war ends, then there will be none.  

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RUSSIANS RAISE THEIR GLASSES – THE TOAST IS TO BEATING THE BLOCKADE OF MOSCOW



By John Helmer, Moscow
  @bears_with

Alas and alack for the Berlin Blockade of 1948-49 (Berliner Luftbrücke): those were the days when the Germans waved their salutes against the unification of Germany demilitarised and denazified; and cheered instead for their alliance with the US and British armies to fight another seventy years of war in order to achieve what they and Adolf Hitler hadn’t managed, but which they now hope to achieve under  Olaf Scholtz — the defeat of the Russian Army and the destruction of Russia.

How little the Germans have changed.

But alas and alack — the Blockade now is the one they and the NATO armies aim to enforce against Russia. “We are drawing up a new National Security Strategy,” according to Foreign Minister Annalena Baerbock. “We are taking even the most severe scenarios seriously.”  By severe Baerbock means nuclear. The new German generation — she has also declared “now these grandparents, mothers, fathers and their children sit at the kitchen table and discuss rearmament.”  

So, for Russia to survive the continuation of this war, the Germans and their army must be fought and defeated again. That’s the toast of Russian people as they salute the intrepid flyers who are beating the Moscow Blockade.  

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THE INTERNATIONAL ATOMIC ENERGY AGENCY GOES TO WAR — GORILLA RADIO GOES NUCLEAR

By John Helmer, Moscow
  @bears_with

Last week the International Atomic Energy Agency’s (IAEA) board of governors voted to go to war with Russia by a vote of 26 member countries against 9.

China, Vietnam, India, Pakistan, Egypt, Senegal and South Africa voted against war with Russia.  

The IAEA Secretary-General Rafael Grossi (lead image, left) has refused to tell the press whether a simple majority of votes (18) or a super-majority of two-thirds (23) was required by the agency charter for the vote; he also wouldn’t say which countries voted for or against. The United Nations Secretary-General Antonio Guterres then covered up for what had happened by telling the press: “I believe that [IAEA’s] independence that exists and must be preserved is essential. The IAEA cannot be the instrument of parties against other parties.” The IAEA vote for war made a liar of Guterres.

In the IAEA’s 65-year history, Resolution Number 58, the war vote of September 15, 2022,  is the first time the agency has taken one side in a war between member countries when nuclear reactors have either been attacked or threatened with attack. It is also the first time the IAEA has attacked one of its member states, Russia, when its military were attempting to protect and secure a nuclear reactor from attack by another member state, the Ukraine, and its war allies, the US, NATO and the European Union states. The vote followed the first-ever IAEA inspection of a nuclear reactor while it was under active artillery fire and troop assault.

There is a first time for everything but this is the end of the IAEA. On to the scrap heap of good intentions and international treaties, the IAEA is following the Organisation for the Prohibition of Chemical Weapons (OPCW), and the UN Secretary-General himself.  Listen to this discussion of the past history when the IAEA responded quite differently following the Iranian and Israeli air-bombing attacks on the Iraqi nuclear reactor known as Osirak, and later, the attacks on Pakistan’s nuclear weapons sites.

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INTERNATIONAL ATOMIC ENERGY AGENCY TAKES UKRAINE SIDE IN WAR IN SEPTEMBER 15 VOTE, MAKING UN SECRETARY-GENERAL GUTERRES EITHER A LIAR OR A FOOL

By John Helmer, Moscow
  @bears_with

The International Atomic Energy Agency (IAEA) decided this week to take the side of Ukraine in the current war; blame Russia for the shelling of the Zaporozhye Nuclear Power Plant (ZNPP); and issue a demand for Russia to surrender the plant to the Kiev regime “to regain full control over all nuclear facilities within Ukraine’s internationally recognized borders, including the Zaporizhzhya Nuclear Power Plant.”      

This is the most dramatic shift by the United Nations (UN) nuclear power regulator in the 65-year history of the organisation based in Vienna.

The terms of the IAEA Resolution Number 58, which were proposed early this week by the Polish and Canadian governors on the agency board, were known in advance by UN Secretary-General Antonio Guterres when he spoke by telephone with President Vladimir Putin in the late afternoon of September 14, before the vote was taken. Guterres did not reveal what he already knew would be the IAEA action the next day.  

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