April 14, 2004: Romania has given Afghanistan enough light weapons to outfit a light infantry brigade. The shipment consists of 1,500 Kalashnikov-type automatic rifles and 200 RPK light machine guns.
-Am
Who's a Pirate? Russia Points Back at the U.S. By C. J. CHIVERS
Published: July 26, 2004
ZHEVSK, Russia, July 24 - The bazaar in this industrial city shows why Western companies regard Russia as a land of piracy.
Bootlegged copies of new American movies - "King Arthur,' "Troy' and "Spider-Man 2' - sell for $3. Photoshop 8.0, a $600 program in Western stores, fetches $2.75.
Markets like this, found throughout Russia, have been a longstanding subject of diplomatic complaint. Washington contends Russian intellectual-property pirates cost the United States more than $1 billion a year.
Now Russia is striking back. A Russian industry and product designer are asserting that the United States has been abetting intellectual-property pirates to suit its own needs, by directing copies of Russian merchandise around the world.
The complaint is not about software or music. It makes no mention of movies or video games. It is about the Kalashnikov assault rifle, the most prolific firearm ever made.
"We see a great number of products which are named after Kalashnikov, my name,' said Mikhail T. Kalashnikov, the weapon's original designer. "They are buying Kalashnikovs from other countries,' he added.
Since the collapses of the Taliban in Afghanistan and Saddam Hussein's army in Iraq, the United States has been purchasing or arranging the transfer of thousands of knockoffs of Kalashnikovs commonly referred to as AK-47's, to outfit new military and security forces in Kabul and Baghdad.
These rifles have not been made in Russia, where the arms industry holds patents for the weapon in several nations. Instead they have originated in weapons plants controlled by Eastern European states, each of which was a partner of Moscow's in Soviet days.
So begins an argument at once curious, impassioned and bizarre, involving the legacy of cold war influence jockeying, secretive arms deals, recent efforts to defeat modern Islamic insurgencies, and international business and patent law.
The automatic Kalashnikov, made in a factory here, is in many ways Moscow's Ford. It is a quintessential national product: extraordinarily successful, widespread, a name closely connected to the identity of a state.
It was designed by Mr. Kalashnikov, a former Russian tank sergeant, in classified Soviet weapons trials shortly after World War II, and was promptly embraced by Soviet soldiers for its simplicity and reliability under almost any condition. It is regarded as a weapon that rarely, if ever, fails.
Russian arms officials say that no other nation has a valid license to make the AK-47 and its many derivatives and clones, and that to defeat insurgents and terrorists, Washington has been encouraging violations of intellectual property rights. Russia is suffering losses in income, jobs and damage to the Kalashnikov name, the officials say, and would like the United States to shop for the weapons directly from here.
"We would like to inform everybody in the world that many countries, including the United States, have unfortunately violated recognized norms," said Igor Sevastyanov, who leads a division of Rosoboronexport, Russia's state-controlled arms export company. American officials confirm that non-Russian Kalashnikov rifles have been provided with American assistance to Afghanistan and Iraq. Sometimes the weapons have been transferred via purchases on international arms markets, they say, other times via the solicitation of donations from friendly states as a gesture of cooperation with the Bush administration's war and reconstruction efforts.
The officials also say that they are aware of the Russian complaints, which raise questions of provenance that remain unresolved.
"We have taken the position that there are important issues with respect to the production, intellectual property rights and conditions of export of these weapons, and it is important that we strengthen controls in all of these areas," a State Department official said. Officials from Rosoboronexport and Izhmash, the Russian company holding patents on the rifle, say American-coordinated transfers include Kalashnikov clones made in Romanian, Bulgarian and Hungarian plants that have continued to be sold despite Russian complaints.
Another transfer, arranged by the American-led Coalition Provisional Authority in Iraq last year, involved the purchase of Kalashnikovs from Jordan. The weapons were believed to be excess stock from the Jordanian army, and to have been manufactured years ago by the former East Germany, another State Department official said.
The transfers have been diplomatically delicate; the Jordanian deal drew complaints from across the political spectrum.
American business representatives have said that American-made rifles should be bought to preserve American jobs. Others questioned the wisdom of shipping more automatic rifles to countries already awash in such guns.
Congressman have asked why American forces did not save money by reissuing to friendly forces the thousands of Kalashnikov rifles confiscated in both wars.
(Last spring, journalists from The New York Times watched United States marines collect tens of thousands of mint-condition Kalashnikovs in a cache in a hospital in Tikrit. The weapons were still in their original packing crates.)
In spite of complaints, the transfers continued, American officials say, in part because the automatic Kalashnikov is inexpensive and requires less training to master than modern American rifles. Several officials noted that many young Iraqi and Afghan men already know how to use it.
Izhmash and Rosoboronexport agree with this position; their officials are even proud that the Pentagon prefers the Kalashnikov for its new allies.
But they say Washington's deals have come at the expense of Izhmash and Izhevsk, where mass production of the rifles began in 1949, and where orders and the work force have shrunk since the Soviet Union broke up in 1991.
More than 12,000 people worked on the gun lines then; roughly 7,000 work there today, and at fewer shifts, said Andrei Vishnyakov, an Izhmash official.
The officials noted that the low price of Kalashnikov knockoffs can make it impossible to sell the genuine item, a phenomenon resembling the underselling of software and DVD's, albeit on a different scale.
For example, the Jordanian rifles sold for about $60 each - less than one-fourth of the price of a new Kalashnikov from the Izhmash plant, according to Rosoboronexport data.
"They are selling these rifles at dump prices," said Alexander G. Likhachev, a former Izhmash director who is now an official with the state arms agency.
He added that Russia wants that business. "We are prepared to manufacture the genuine weapons, in big quantities, because we know there is a demand," he said.
The legal standing of Rosoboronexport's complaint is uncertain. American officials, analysts and trade representatives said issues surrounding each transfer would require intensive legal research to resolve.
The task would be daunting. In the 1950's, in a mix of collaborative revolutionary spirit and jockeying against the West, the Soviet Union began exporting the rifles and the technology to manufacture them to states in its sphere of influence. Ultimately, Moscow entered licensing agreements with 18 states, according to Rosoboronexport.
"We transferred and gave them all the technical documentation, all the know-how about the design," Mr. Kalashnikov, now 84, said in an interview at his dacha in the Russian woods. "Representatives of these countries came here. They studied our production line."
Moreover, once the rifle's utility became well known, another 11 countries began making derivatives and clones without Moscow's approval, the state agency said.
Russia says that all former licenses have expired. But to make this case, the old licenses would have to be studied, as would Izhmash's more recently acquired patents as well as intellectual property laws in each Kalashnikov-manufacturing state.
A third American official said several former Soviet-bloc countries that formerly made Kalashnikovs with Moscow's approval contend they retain rights to the weapon today. "There is a dispute among all the parties involved," the official said.
Still, whatever the legal merits, analysts agree: the complaint's symbolic power is great.
"I'm not a big fan of guns, but that said, if the creators of this intellectual property have rights to enforce, I really do hope they can get them enforced in every country," Eric Schwartz, a vice president of the International Intellectual Property Alliance, said in a telephone interview. "And I hope that the United States government would comply and set a good example."
The alliance represents American companies with products protected by copyright laws.
The complaint also faces the unrelenting realities of the market. After decades in production in plants in Asia, Africa, the Middle East and Europe, the automatic Kalashnikov has spread far beyond Izhevsk's reach.
Analysts estimate that 70 million to 105 million of the weapons have been made.
It has been used not only by more than 55 state armies, but also by the Viet Cong, militias in Beirut, Palestinian insurgents in Gaza City, guerrillas in Iraq and child soldiers in Asian and African states. A Kalashnikov is on the seal of Hezbollah and the flag of Mozambique. It features prominently in the symbolism of jihad.
Even the United States long ago entered in the Kalashnikov business, in the 1980's, when it surreptitiously bought Chinese and Egyptian Kalashnikovs for Islamic guerrillas battling the Red Army in Afghanistan.
American purchases of Kalashnikovs have continued intermittently since then. A few years ago, according to officials at the State Department and the Pentagon, Washington purchased Kalashnikovs for a Nigerian peacekeeping force in Sierra Leone.
With so many of the weapons in circulation, one analyst said Russia's complaint could prove to be an almost impossible fight.
Rosoboronexport's position is like "the Chinese saying they have a royalty right on every firearm, because that's where it all started with the invention of gunpowder 700 years ago," said Dr. Aaron Karp, a professor at Old Dominion University in Virginia who specializes in weapon proliferation issues.
Mr. Kalashnikov, who said the Russian versions of his rifle are superior, and who expressed deep fondness to Russian workers who have long made them, recognized the difficulties in the state agency's complaint.
He remembered that years ago President Boris N. Yeltsin vowed to defend the weapon from market infringement, to no avail. "President Yeltsin said he would do everything," Mr. Kalashnikov said. "But it's not so easy."
Bulgaria's Regional Development Minister Valentin Tserovski secured Russia’s support for the construction of the Burgas-Alexandroupolis pipeline, a three-way venture involving also Greece. Photo by Novinite.com archive
Business: 26 July 2004, Monday.
Russia declared its support for the construction of the Burgas-Alexandroupolis pipeline by endorsing provisions through which it will join the project.
The agreement has been reached during the visit of Bulgaria's Regional Development Minister Valentin Tserovski to Russia and will be finalized during the upcoming visit of Russia's Prime Minister Mihail Fradkov.
Tserovski assured that financing and oil for the pipeline has been secured.
Russia's backing of the main provisions makes redundant its endorsement of the trilateral agreement, which it refrained from signing last year.
The Burgas-Alexandroupolis pipeline is a three-way venture involving also Greece. Bulgaria, Greece and Russia have an equal participation in the project. The Bulgarian section is 166 kilometers and will run via seven municipalities in Southeastern Bulgaria.
Last year Bulgaria and Greece signed a memorandum on technical cooperation in the study and design of the Burgas-Alexandroupolis oil pipeline.
The start-up of the Caspian Pipeline Consortium (CPC) pipeline has revived projects to bypass the Turkish straits, which connect the Black Sea and Mediterranean Sea. Investors are pinning their highest hopes on pipelines coming out from the Bulgarian port of Burgas. In the next two or three months Russia, Bulgaria and Greece plan to sign a memorandum of mutual understanding on the Burgas-Alexandroupolis pipeline project. Western companies active in Kazakhstan are reportedly more interested in the Burgas-Vlore pipeline project. The rivalry between both projects could result in a new export route, which would facilitate shipments of Caspian oil to the world's markets, though at a slightly more costly rate.
Outrunning Rivals
As Kazakhstan and Azerbaijan see it, by 2015 foreign customers should be receiving 100-120 million tons of oil annually from the Caspian Basin. These shipments are to supplement the Russian export oil flow through ports on the Black Sea coast, which will amount to no less than 50 million tons. Even under the most optimal arrangements, Bosporus is incapable of letting through more than 70-80 million tons of oil a year. The commissioning of the CPC pipeline has put export shipments in danger of being disrupted. That is why several bypass projects have been immediately reactivated.
At present there are four projects to solve the problem: Baku-Tbilisi-Ceyhan, Burgas-Alexandroupolis, Burgas-Vlore and Odessa-Brody-Gdansk. And simultaneously all of them have become the scene of events, reflecting their initiators' desire to outrun rivals. The fifth project, a pipeline from Romania's Constance to Trieste, faded out five years ago.
The feasibility study of the Baku-Tbilisi-Ceyhan route is expected to be completed in June. In March or April a memorandum on the Burgas-Alexandroupolis project is to be signed by Russia, Bulgaria and Greece. Ukraine maintains that in March it will start pumping oil into the Odessa-Brody pipeline, which should reach Gdansk in the future. And, finally, Burgas-Vlore initiators announced that they managed to draw ExxonMobil and ChevronTexaco corporations into the ranks of their supporters.
It cannot be ruled out that only one out of these four projects will survive under the present conditions of slowing oil demand growth on the world markets. A solid political backing at the intergovernmental level is, of course, needed to win this competition. But what is more important is the decision of oil companies to use a particular route and guarantee its financing on the basis of predetermined pumping volumes.
Spotlight on Burgas
The bitterest rivalry might rage between the two routes from Burgas. Last Friday Edward Ferguson, president and CEO of the Albanian-Macedonian-Bulgarian Oil corporation (AMBO), which initiated the Burgas-Vlore project as far back as 1996, told Reuters in Sofia that ExxonMobil and ChevronTexaco corporations were considering participation in the project.
Spokespersons for these corporations said that Ferguson was over-optimistic but admitted that they had contacted AMBO regarding this issue. Meanwhile, the possibility of their true interest in the project looks real. Both corporations are not only producing oil in Kazakhstan but they are also among the owners of the CPC pipeline, which brings oil to the Black Sea shore for further exporting. The problem of bypassing the Turkish straits is especially acute for them.
As Ferguson insists, talks with these corporations are dealing with the route options. The 898-kilometer pipeline with a design throughput capacity of 35 million tons of oil a year should pass through Bulgaria, Macedonia and Albania. AMBO expects to take upon itself financing $1.13 billion in construction works. The governments of the three countries will provide political support only.
Russian Involvement
Ferguson believes that the AMBO project will in no way interfere with constructing the Burgas-Alexandroupolis pipeline. 'In that case a decision will be made by the governments of Russia, Bulgaria and Greece with the backing of Russian firms. But here all is in the hands of Western companies supported by the U.S. and Europe,' he says.
Meanwhile, the project of constructing a pipeline to Alexandroupolis, estimated at about $500 -$600 million, has started moving forward as well. As Russia's Deputy Energy Minister Vladimir Stanev told RusEnergy.com, the signing of a memorandum of understanding on this project by the governments of the Russian Federation, Bulgaria and Greece is expected to take place in one and a half or two months. 'This is not an agreement to construct it, as of now, but, at any rate, it is quite an important step forward,' he added.
The Burgas-Alexandroupolis project to construct a 256-320-kilometer pipeline with a throughput capacity of 35 million tons of oil a year is hardly making progress although recently both politicians and businessmen have begun mentioning it again. Last July Russia's president Vladimir Putin expressed his support of the project and a little later a similar position for the Kazakh government was declared by its Foreign Minister Yerlan Idrysov. Then, in December last year LUKOIL head Vagit Alekperov suggested laying a 150-kilometer branch pipe from the planned route to a Greek refinery in Salonika.
Omnipresent Separatists
The extent of Western companies' interest in constructing a pipeline to Vlore still needs to be checked by practical steps. Besides, the attractiveness of the AMBO project is being undermined by political friction between Macedonia and Albania. The route is supposed to cross the area of recent military operations by the Macedonian army against Albanian separatists.
On the contrary, the Greek route is safe and "politically correct." According to media reports, its implementation has been hindered by the outstanding problem of future share allotment. Bulgaria has been pressing for a 50% share but Greece has been ready to give Sofia no more than 20%. However, as Stanev told RusEnergy.com, this and other questions are not being discussed at this stage and all three parties have already agreed in principle on political support for the project.
It is safe to assume that, at a minimum, trans-Balkan pipelines will be built, regardless of the circumstances, by the time the oil flow from the Caspian Region jams the passing capacity of Bosporus. The transit through Burgas, which might be cheaper than the Baku-Tbilisi-Ceyhan pipe, is casting doubt on the commercial value of the American-Turkish project. In any case, Caspian oilmen will be free to make their own choice.
Politics and Business
On the other hand, the Baku-Ceyhan project is enjoying considerable political support from the U.S. and Turkey, whose politicians do not hide their gargantuan aim, which is to remove at least some portion of the Caspian oil flow from Russia's control. Nevertheless, the project's fate is not finally determined yet, although its initiators have already invested over $130 million in preparatory works. They have already been rescheduled several times for later dates. For example, last spring bosses of the Azerbaijan State Oil Company (ASOC) were planning to commission the pipeline at the end of 2004 but today they are already revising the date to mid-2005.
After the detailed feasibility study is finished, then, judging by the latest schedule, no less than 32 months will be needed for practical work in the field. However, before builders can start doing their job the project initiators will have to secure sources of financing. And that means that they will need to provide potential creditors with official guarantees of pumping volumes.
These guarantees are one of the project's most vulnerable spots. Whatever calculation method is applied, by 2005 the Azerbaijani projects of recovering oil along with condensate will be delivering between 15 and 17 million tons of oil a year at the most. It is too little to fill up the pipe, which will have an annual pumping capacity of 50 million tons. Even under the best of circumstances Azerbaijan could not reach this level until 2015. It is obvious that Kazakhstan will also fail to start full-scale production in the north Caspian. No one can rule out the possibility that the U.S. administration will have to pull all available levers to ensure the project's financing with an unusually long payback period.
Vigilant Rivals
So far there are no guarantees of oil pumping for the most advanced project of the four. That is, the already built Odessa-Brody pipeline that Ukraine plans to extend to the Polish cities of Plock and Gdansk. However, the pipeline's readiness still does not mean that it will indeed work. Ukrainian authorities earlier said that filling up the pipe with technological oil will begin February 27, but so far they have no money to purchase oil in the needed volumes and now the date has been moved back to March.
As matters stand now, the Odessa-Brody pipeline has targeted markets where an abundance of supply is exists without it. Up till the present, practically none of its potential clients and suppliers has expressed an officially fixed desire to use the route. Kazakhstan, the owner of the largest oil volumes to pass via the Black Sea, has already refused to work on this transportation option.
The project, which has been implemented by Ukrainians at their own risk, with no pumping guarantees whatsoever, will not be saved even by its extension to Gdansk. (Incidentally, it is too early to talk about its feasibility.) Supertankers do not sail the Baltic Sea because of the meandering Danish straits, which can hardly be used by tankers with a deadweight of 150,000 tons.
Taking all this into account, routes through Burgas look more promising. If oil is shipped to Alexandroupolis on the Greek Aegean coast or to Albania's Vlore on the Adriatic coast, exporters will be able to load supertankers there. And in this respect these ports are as good as the Turkish Yumurtalik terminal near the city of Ceyhan in the Mediterranean. The severer the rivalry, the better the chance that the Caspian oil will not be jammed in the Bosporus.
You will find this interesting. Why is Russia planning on expanding Novorossisk which would include adding tankers when they are already hampered by the limitations on tanker passage imposed by Turkey in the Bosphorus Strait?
Russia must be planning on heading across the Black Sea to the Balkans.
Novorossisk has just opened a new oil terminal, linked to the pipeline network of Russian monopoly Transneft, and is considering further expansion.
The trans-Balkan pipeline passes through what is known as corridor 8--traversing very near the borders between Macedonia, Kosovo and the Presevo Valley. (see map) Furthermore, it is to be connected with another series of pipelines, some of them Soviet-era pipelines. A major one of these will pass down the Presevo Valley--known as corridor 10-- connecting with the AMBO pipeline precisely at these same critical borders. This system of pipelines not only is designed to transport petroleum to sea ports for shipping abroad, but extends into the heart of Europe. Two branches of the AMBO line jut into Greece--one to Thessalonika, the other to a terminal on the west coast.
Russia's Main Sea Port In Need Of Major Overhaul AFP: 8/8/2004 by Lucie Godeau
NOVOROSSISK, Russia, Aug 8 (AFP) - Novorossisk, Russia's leading port, located on the Black Sea and until recently the sole maritime outlet for Russian crude oil exports, is in dire need of investment if it wants to maintain its importance.
On a central dock, a crane unloads a cargo of sugar and drops it in rail cars. Rolls of aluminium nearby head overseas.
A few kilometers (miles) away, oil freighters pull up to the Sheskharis terminal. Cargo ships await their turn to be brought to dockside.
Last year 66 million tonnes of merchandise, of which 78 percent was oil and petroleum products, passed through the main commercial port operator NCSC, and volumes are growing an average five million tonnes a year.
Novorossisk has been Russia's main maritime window to the south, on the Black Sea, since the end of the Soviet Union.
"It represents a strategic axis. It's the shortest distance for Russian products toward Europe, the Middle East, Africa and Latin America," said port spokesman Mikhail Volkhin.
Through it transits a quarter of Russian oil exports as well as the crude from the Caspian Sea.
But the port, partially privatized in 1992, has Sovie-era installations ill-suited to its development.
"Rapid changes are needed... The main problem is the rail and road network, which is not up the port's ambitions," said Igor Jarinov, president of the city's chamber of commerce.
Situated deep inside a bay, the port of Novorossisk is squeezed by the Caucasian foothills and must share coastal space with a city of 204,000 residents.
The city lacks electricity, pipes and only has water four hours per day. In 2002, flooding partly caused by lack of water drainage killed dozens.
Neither the holding company Uralsib nor the state, the principal shareholders, "invest enough. There is a distortion between the pace of development of the port and the infrastructures," Jarinov said.
Prospects for further state investment are nil. The government announced recently it plans to sell its remaining stake of 20 percent in the port in 2005.
But nonetheless, Novorossisk is growing. It has just opened a new oil terminal, linked to the pipeline network of Russian monopoly Transneft, and is considering further expansion.
And the Caspian oil pipeline of consortium CPC, built by Kazkh, Russian, and Omani companies and the US giant Chevron-Texaco, is also funneling the black gold from Kazakhstan to Novorossisk. The pipeline currently transports 15 million tonnes of crude but it has a capacity of 68 million tonnes.
But for Transneft vice president Sergei Grigoriev, the transit of oil through Novorossisk, 47.6 millions tonnes in 2003, "has reached a peak".
And the port would be overtaken this year by the Primorsk terminal in the Gulf of Finland that opened on 2001, which was expected to transport more than 50 tonnes of crude, Grigoriev said.
The development of Novorossisk is already hampered by the limitations on tanker passage imposed by Turkey in the Bosphorus Strait between Turkey in Europe and Turkey and Asia.
The Turkish government said the limits are needed because of the risk of an ecological disaster in the strait where some 8,100 ships transit annually, while the traffic of giant tankers packed with hydrocarbons also threatens the security of the 1.5 million residents of Istanbul.
But the Russians see politics behind the decision, suspecting Turkey wants to strenthen its position on the oil market thanks to the Baku-Tbilissi-Ceyhan pipeline being built by a consortium led by British oil giant BP, with the backing of the US government.
Due to be completed in the first quarter 2005, the BTC pipeline is expected to pump up to one million barrels of oil a day from the Caspian Sea, through Azerbaijan, Georgia and Turkey to a tanker terminal at the Mediterranean port of Ceyhan.
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