By CHRISTOPHER DELISO

SKOPJE, Macedonia, Oct. 9 (UPI) — Since last month’s successful American tour, Russian President Vladimir Putin has criticized — without retaliation from Washington — NATO encroachment and America’s Iraqi quagmire, while calling for a strong United Nations role in Iraq. This has boosted Putin’s popularity at home — a boon for the Bush Administration. Putin’s a good partner and they want him retained after elections in March.

The president’s confidence owes partly to Russia’s currently popularity among global investors. According to the “Russia Journal,” it is the world’s eighth most attractive investment destination — up from seventeenth place last year, and only one place behind Britain.

Russia’s economy is growing. Officials expect gross domestic product to double in less than 10 years. Currently, Russia enjoys a large trade surplus, strong foreign reserves ($62 billion), enormous natural resources and a balanced budget. Officials pledge to reduce a steadily declining inflation rate to below 12 percent. And Russia is proving to be a very tough negotiator as it grapples with the European Union over important economic issues related to joining the World Trade Organization.

Late Wednesday, Moody’s upgraded Russian securities to investment quality — for the first time in the country’s history — quickly boosting the Moscow stock market. Top companies like LUKoil, Yukos, GMK Norilsk Nickel, and Surgutneftegaz all jumped by several percentage points, amid exuberance over what is hoped to be the start of a new era for the Russian economy.

While Russia’s strong investment outlook is well-received in the West, the U.S. is wary of recentralization trends. A new “Common Economic Space” between Russia, Kazakhstan, Ukraine and Belarus was announced by Putin on September 19th. If ratified, this zone would abolish tariffs and customs, and coordinate tax, credit and currency policies, as well as develop a single network of oil and gas pipelines across the former CIS states. Yet think-tank naysayers cited by “Radio Free Europe/ Radio Liberty” believe enthusiasm will wane after March’s elections.

The state-owned electricity company (Unified Energy Systems) has “aggressive” expansion plans. In August, UES purchased Georgia’s Telasi — which controls the main power plants and Tbilisi’s energy grid — from the American AES, for $150 million. According to UES shareholders and Moscow financial analysts cited in the “St. Petersburg (Russia) Times,” Kazakh, Armenian and Ukrainian energy-sector deals are now being considered. UES currently has 50 percent of one Kazakh hydro-electric plant and owns two Armenian plants outright. It’s also looking at major hydro-generators in Tajikistan and Kyrgyzstan. According to the “Times,” UES is negotiating with the retreating American company for its remaining assets in Kazakhstan and Ukraine.

Rumors of an AES pullout from Georgia were persistent even last year. The U.S., which opposes all economic deals between Russia and its former possessions, was unhappy to see it go. Eduard Shevardnadze’s government thus stands accused once again of pro-Russian sentiments. U.S. aid to Georgia has been withheld, mysteriously enough just as Georgia’s parliamentary elections loom. Yet the U.S. won’t stop Russia’s resurgence in its own backyard.

Indeed, on October 2nd the “Moscow Times” reported the completion of Russia’s first container terminal in Olya, a link in a new north-south Caspian transport corridor. The project involves the Indian and Iranian governments, and now Belarus and Kazakhstan. The terminal, located near Astrakhan, has an initial cargo capacity of 500,000 metric tons annually. When railway connections are completed, shippers in the Persian Gulf and Indian Ocean regions will save 2 weeks and 40 percent on shipments to Europe over the traditional Suez Canal route.

Completing the $100 million rail connection — across Chechen territory — will make the terminal’s capacity “skyrocket,” from an expected 4 million tons in 2005 to 8 million tons in 2010. The new Russian Railways Company (RZD) is funding much of it — part of next year’s total $4.2 billion infrastructure investment. In all, Russia plans to spend $15 billion on developing similar international transport corridors — many with sea access — by 2010. It is well aware that, in the resources sector especially, profits depend on transport. This is where foreign companies come in.

No doubt, as a budget subsidizer and FDI attractor the energy sector is critical. Russian oil companies are gaining serious international attention. The “Guardian” reports that a recent St. Petersburg conference “…sought to marry US expertise on ports, pipelines and transportation to Russia’s resources.” Now, Exxon-Mobil may offer $25 billion for a large minority share in Yukos. Following last month’s merger with Sibneft, Yukos became the world’s fourth-largest oil company. It’s valued at $45 billion, with daily output expected at over 2 million barrels.

However, it will take years before any partner capitalizes. Profitably moving large quantities of Russian oil will require significant infrastructure development. Vladimir Putin’s stated goal — to supply ten percent of America’s oil by 2010 — seems over-optimistic.

Putin’s approval is key. Would he block a Yukos deal? According to the October 13th edition of “Newsweek,” George Bush Sr. was recently dispatched to Putin’s Black Sea retreat in Sochi, and returned confident that Putin will acquiesce. This week, the “Financial Times” quoted an unnamed Russian official who said the government saw no legal obstacles to a deal. Exxon-Mobil president Lee Raymond met for hours with Prime Minister Mikhail Khasyanov last Friday. Kasyanov allegedly said Russia has only two concerns: to not lose tax revenues, and to preserve social conditions in remote, oil-rich areas of operation.

However, other related factors are also influencing Putin’s strategy. Yukos negotiations continue amidst a government investigation of tax evasion, corrupt privatization and murder. The drama began with July’s arrest of major shareholder Platon Lebedev. A few days ago, a Yukos-owned orphanage and business club were stormed by armed agents who seized computers and documents. Then army officers temporarily surrounded the home of Russia’s richest man, Yukos boss Mikhail Khodorkovsky. Like most of Russia’s nouveau riches, Khodorkovsky made his fortune on shady privatization deals in the 1990′s. He also donates millions to anti-Putin parties, and is said to harbor political ambitions himself.

Khodorkovsky is now damning the Putin regime as “totalitarian.” This self-defense is surprising, reports the “Moscow Times”:”‘…we had all expected Khodorkovsky to back down by now,’ said a Moscow-based fund manager who asked not to be identified. ‘But it seems he has got just too rich and it has gone to his head’”

While Putin will allow a major Yukos deal, it’s unlikely that Exxon-Mobil will win a majority share. According to the “Financial Times,” this was not discussed in Friday’s Raymond-Kasyanov meeting. Russia’s parliament yesterday echoed Putin’s calls for Yukos to consult with it before finalizing any agreement.

Putin’s iron grip worries some Western investors. Yet others, like Frank Graves of Ilim Pulp — Russia’s largest forestry enterprise — are grateful for it. According to “Newsweek,” when a Russian aluminum magnate attempted to take over Ilim Pulp through “sheer force,” Putin called the oligarch and told him to desist, “or I will break you.” The Canadian CEO now gushes, “we love Putin!”

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