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Stanoevich, remained confident but, for Russia, the end re-

sult was bittersweet. The accord was ratified by 214 votes out

of 250 and Serbia will participate in the South Stream proj-

ect. However, the supplemental protocol to cede a stake in

NIS remains suspended. Gazprom will have to re-open nego-

tiations in order to close the transaction by December 31. Ser-

bian officials are expected to ask for an additional 

€150 to 200

million. To date, Gazprom representatives have rejected the

idea of paying more but are open to the hypothesis of increased

investments.

Russia’s progress on the South Stream project offers a sharp

contrast to the bleak prospects of its European competitor,

Nabucco. U.S. vice-president Dick Cheney, visiting Baku on

September 4 in order to bolster, in the southern Caucasus, a

U.S. position somewhat shaken by the Georgian war, was, it

seems, coldly received by the Azerbaijani head of state Ilham

Aliev. The president was reputedly very vague in regard to his

support for Nabucco. Meanwhile, the entourage of the head

of SOCAR, the national gas and oil company, hinted that Baku

had “not said no” to propositions made in the early summer

by Dmitry Medvedev (Russia Intelligence n°81 of 17 July 2008).

At the time, the Russian president put an enticing offer on

the table – Gazprom proposed to buy Azerbaijani gas at mar-

ket prices (about $300/cubic meter, while the Turks and the

Georgians currently pay half as much).

d

The Russian mining sector has just undergone a major transforma-

tion. On September 10, the Rosnedra federal agency announced

that the Udokan copper deposit – the world’s third largest with re-

serves estimated at close to 20 million tonnes – will be attributed to

Alisher Usmanov’s Metalloinvest. Alisher will expend 15 billion

rubles (about 

€400 million) for a 20-year exploitation license. More

importantly, Metalloinvest has commited to investing nearly 

€3 bil-

lion to upgrade Udokan in order to begin production by 2014. As in-

dicated in our 30 May edition, Usmanov formed an alliance with

Sergey Chemezov’s Rostekhnologii holding company which will

contribute its Mongolian mining interests, (notably the Erdenet joint-

venture) to the project.

The Rosnedra announcement came as a surprise because the results

of the tender bid were scheduled to be unveiled a week later, on

September 17. The decision comes as a defeat for Alisher Usmanov’s

competitor, Vladimir Yakunin, head of the Russian Railroads. He’d

formed a consortium composed of Vneshekonombank and Russian

Copper, belonging to  Iskander Makhmudov, his partner in Trans-

mashholding. To add insult to injury, Vladimir Yakunin was in the

Kremlin pleading his case before president Dmitry Medvedev when

Udokan: High Stakes Win for Alisher Usmanov 

the Rosnedra news fell. For his part, Alisher Usmanov had seen the presi-

dent the previous day. It’s a small step to supposing that the speed up in

the attribution process was not entirely fortuitous...

The Russian state has been looking to privatize Udokan for the past fif-

teen years but hesitations over the best way to manage the operation

combined with rivalries between the major groups of oligarchs poten-

tially interested (Roman Abramovich, Suleyman Kerimov, etc…)

brought the operation to a grinding halt. Western mining interests such

as BHP, Rio Tinto, Phelps Dodge or Codelco also sought to wrangle a

piece of the pie but, in these days of “economic patriotism” fervor in

Moscow, their chances of success remained slim. On September 9,

Strikeforce Mining & Resources a subsidiary of Oleg Deripaska’s Base

Element pulled out of the race. In August, two other candidates also

threw in the towel, Mikhail Prokhorov’s  Onexim and especially, mining

giant, Norilsk Nickel. Norilsk had, nonetheless, expressed interest in

teaming up with the successful bidder. Discussions are now expected to

open between Vladimir Potanin, Alisher Usmanov  and Sergey Cheme-

zov. Yet, it’s difficult to imagine that the September 10 victors can do with-

out Vladimir Yakunin since the Udokan site, located in a distant eastern

province, is not currently linked to the rail network.

d

Russia Intelligence N°83 

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September 11 2008

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CAUCASUS

Ingushetia on the Brink

c

The Ossetia situation is far from settled, yet

Moscow may soon face another Caucasus

crisis, this time in Ingushetia. Tensions flared

in this tiny republic, a neighbor to Chech-

nya and North Ossetia, following the death,

on August 31, of journalist Magomed Evloev,

a major opponent of Ingush president Mu-

rat Zyazikov.

To re-cap briefly, Magomed Evloev, who

had been living in France for the past sev-

eral months for security reasons, decided

at the end of August to go to Ingushetia to

visit his parents. After a short layover in

Moscow, he boarded the plane for Manas

around noon on Sunday, August 31. As luck

would have it, Magomed Evloev was on the

same flight as Murat Zyazikov and his escort. The Ingush pres-

ident was the first to disembark at about 1:30pm and his mo-

torcade quickly left the airport. But the family and friends of

Magomed Evloev were astounded when several police cars

(apparently including one belonging to Musa Medov, minis-

ter of internal affairs) rapidly pulled up to the plane. Magomed

Evloev was then forcibly taken away in one of the cars. His

supporters tried to intervene but they were kept at bay by au-

tomatic weapons fired into the ground. They later managed

to catch up with the convoy, to stop it and to pull several po-

lice officers from their vehicles. They failed to release Magomed

Evloev, however, who was in another car. Several minutes

later, Magomed Evloev was found with a head wound near

the central hospital of Nazran. He died on the operating

table. In late afternoon on August 31, the authorities said

that he’d been the victim of an “accidental” shooting. Accord-

ing to the official version, Magomed Evloev was on his way to

the public prosecutor’s office to make a deposition regard-

ing several criminal investigations. On the way, he tried to

take the weapon of one of the police officers in the police es-

cort. The shot was fired in the ensuing struggle. This version

is contested by Magomed Evloev’s family and friends, who

call it a political assassination. Several hundred persons as-

sisted the funeral of  Murat Zyazikov’s opponent on Septem-

ber 1

st

. Calls for a vendetta against interior affairs minister

Musa Medov and his body guards were launched. 

This tragic affair happens at a time when the situation is

already very tense in Ingushetia. Several murders were per-

petrated in the summer of 2007 against the last representa-

tives of the slav community (including a grade school teacher).

Attacks against the police and local authorities have multi-

plied, forcing Moscow to re-deploy nearly 2000 internal af-

fairs ministry troops in Ingushetia. Legislative elections in

December 2007 were a source of further dissent. In early 2008,

opponents to Murat Zyazikov, led by Evloev, attempted to demon-

strate in the streets of Nazran (Russia Intelligence n°70 of

January 31 2008). They denounced what they said was massive

electoral fraud and launched the “I didn’t vote” campaign (in

contrast to the electoral commission’s claim of participation

close to 100%). Local authorities responded in their usual man-

ner – repression. Legal proceedings were launched against

Evloev and his web site Ingushetia.ru (whose editor in chief,

Roza Malgasova, requested political asylum in France this

summer). In early August, the Ingush opposition presented the

Kremlin with 80,000 signatures calling for the removal of Mu-

rat Zyazikov and the return to power of former president, Rus-

lan Aushev (Russia Intelligence n°81 of 17 July 2008). 

The course of events in Ingushetia depends in large part on

the position Moscow will adopt. Over the past few years, de-

spite the continued deterioration of security in the region, the

federal government has blindly supported Murat Zyazikov, a

former FSB general. Last August 26, Dmitry Medvedev met

with the Ingush president in Sochi. But, according to informa-

tion gathered by Russia Intelligence in Moscow the Evloev Af-

fair could be the straw that breaks the camel’s back. This would

be especially true if supporters of the deceased journalist suc-

cessfully mobilize within the republic and if the tension does-

n’t wane. The Kremlin might, after a “decent interval” that

would not suggest that it was giving in to pressure, do as it did

in North Ossetia after Beslan and in Karatchaevo-Tcherkessie

following the sacking of government headquarters in 2005 –

appoint new officials. That they would choose Aushev, how-

ever, seems improbable as federal officials remain wary of his

charisma and strong popular appeal in Ingushetia.

d

3

U.S  Belarus Thaw

As Russia Intelligence indicated in its last edition, relations between

Minsk and Washinton are evolving rapidly. The U.S. Treasury Secre-

tary recently announced an end to sanctions against two sub-

sidiaries of the Belarus chemical firm Belneftekhim. The move

comes after Alexandre Lukashenko agreed to release several po-

litical prisoners at the end of August. The European Union is ex-

pected to follow suit. The Belarus question is on the agenda of the

“Gymnich”, an informal gathering of EU foreign ministers sched-

uled to be held in Avignon on October 5-6. There is even a chance

that Belarus’ foreign minister Sergey Martynov, with whom Javier

Solana had a long phone conversation in early September, will be

invited to join them.

d

A L E R T

Murat

Zyazikov

Ruslan

Aushev