This picture was taken near Okha, the town in the very north of Sakhalin Island, and serves well to show what the roads can be like in Russia when the snow starts to melt.
(Picture via “boichello“)
This picture was taken near Okha, the town in the very north of Sakhalin Island, and serves well to show what the roads can be like in Russia when the snow starts to melt.
(Picture via “boichello“)
With there having recently been the high-profile assasinations of Anna Politkovskaya, Alexander Litvinenko, and Andrei Kozlov and the mysterious death of Ivan Safronov who fell from a window, more than a few people are worried about whether Russia will return to the bad old days of the past when murder seemed almost commonplace. Whilst certainly a serious concern, in discussing these recent deaths it would be sensible to remember just how bad the situation was in Russia just seven years ago.
A list of high-profile personnel murdered in the first part of 2000 alone reads as follows:
January 10, 2000: Ilya Vaysman, 36, director of the St. Petersburg Baltika brewing company, was shot in the head and heart from a fifth-floor ledge a few feet from the kitchen window of his apartment. Suspected motive: a dispute over the disposition of expected investments. (Baltika’s general director of marketing, Aslanbek Chochiyev, was shot to death as he was getting out of his Mercedes on July 1, 1999.)
February 2, 2000: Valeriy Potapov, 36, the general director of the Baltisykaya Zarya timber company, was shot twice in the back of the neck near his house. Suspected motive: Property dispute.
March 11, 2000: Dimitri Varvarin, 40, general director of the Russian-American Orimi company, was shot in the back of the neck at point-blank range as he left his car. Orimi was created in 1990 with the American firms NSTE and International Forest Technology, and controls recently “privatized” businesses in timber, furniture, and fuels, and is one of the biggest sellers of tea in Russia, Kazakhstan, and Ukraine. Varvarin personally owned a large block of shares in shipbuilding and timber businesses in Russia, and had taken part in the “privatization” of dozens of enterprises in St. Petersburg, Leningrad Oblast, Ukraine, Kazakhstan, and Belarus. Suspected motive: a real estate battle.
March 22, 2000: Sergei Krizhan, 44, general director of the Russian Construction and Trading Group joint-stock company, was shot to death while driving in his Jeep, along with his son, 20, an economics and finance student at St. Petersburg University. Krizhan owned and founded about 10 St. Petersburg firms specializing in export and import activity, consumer goods trade and production, repair and construction work, and realty operations. Three of the firms were directly related to Orimi.
April 4, 2000: Gennady Ivanov, 45, director of the Kvarton firm, was killed on his way to work by a round of automatic weapon fire aimed at his Volvo. Eyewitnesses saw the killer slip into the archway of an apartment block where a car was waiting for him. Kvarton, with 4,000 employees, was created in St. Petersburg in 1994 and sells sewing threads, furniture fabric, and hosiery. It holds large blocks of shares in textile enterprises in St. Petersburg, Moscow, and Pskov.
April 10, 2000: Igor Bamburin, 47, head of Shatl and founder and cofounder of several equipment and automobile firms, was shot in the head four times as he arrived at the home of his daughter, a Technical University student. Despite reports that five or six people witnessed the shooting, no arrest was made. Bamburin was previously an officer of the Regional Administration for Combating Organized Crime.
April 26, 2000: Georgy Pozdnyakov, 44, co-owner of the “Hollywood Nights” nightclub, was shot three times in the head and chest at the St. Petersburg Railways University sports complex. Suspected motive: criminal conflict connected with the repartition of property. (Pozdnyakov belonged to the entourage of St. Petersburg oil magnate Pavel Kapysh, killed July 26, 1998 on Vasilyevskiy Island.)
May 22, 2000: Dimitri Ogorodnikov, 36, chief of the Samara Internal Affairs Administration Department for Combating Organized Crime, was shot in the head five times in his automobile in the center of the city of Tolyatti. He was a 10-year veteran of the Special Rapid Reaction Detachment of the Regional Administration for Combating Organized Crime.
June 14, 2000: Alexander Sinayev, 47, the owner of the Leneksbank commercial bank, was found shot twice in an Audi in Krasnodar in what the Territory’s Public Prosecutor’s Office called a contract killing. “Leneksbank was one of the first bankrupts in the Kuban,” TASS reported, “but Sinayev was able to pay back the deposits of over 15,000 depositors. He promised to settle up with all deceived depositors.”
June 16, 2000: Alexei Kachkov, 40, who owned several flower shops on Leninskiy Prospect in Moscow, was shot six times at point-blank range in northeastern Moscow.
July 10, 2000: Oleg Belonenko, 51, managing director of the huge Uralmash machine tool company, was shot twice in the head, days before he was to meet with President Putin, an example of how contract killings have reached high up into the business world. Belonenko’s driver was also killed.
July 26, 2000: Sergei Novikov, 37, head of the only independent radio station in the Smolensk region, was shot dead outside his apartment block, 300 miles outside of Moscow, reportedly the 120th journalist killed in Russia since December 1991.
July 31, 2000: Sergei Isayev, 49, the rector of the Russian Academy of Theatrical Art, was murdered in a contract killing in the settlement of Valentinovka, near the town of Korolev. “Never before in Russia have contract killings of leaders of cultural establishments and higher educational establishments taken place,” said Russian Culture Minister Mikhail Shvydkoy in an Itar-TASS interview following the murder.
None of the above listed murders was solved.
A crucial difference between the recent murders and those of 2000 were that the latter were almost all business related, whereas the recent cases appear to be purely political. This is of serious concern, and one thing is for sure: Russia was a rough place before, and it’s a rough place now. And don’t hold out much hope for an eventual prosecution.
Despite us still getting some fluffy snow falling in the evenings, the spingtime thaw is rapidly taking hold in Yuzhno-Sakhalinsk. The mountains of snow which lined the streets are slowly receding, and in many places the tarmac surface of a road or pavement can be seen for the first time in months.
Like the winter, the thaw period is a time which most Russians want to be over quickly. Bereft of any kind of drainage system, the melting snow first forms a brown slush which lies ankle-deep on every pavement, and later turns to lakes of dirty water which straddle entire roads and covers a car in filth within minutes. Drivers care little for pedestrians and don’t make any efforts to avoid soaking them with a puddle, meaning those on foot have to walk the pavements alongside the buildings, thus risking a large chunk of melting ice falling on their heads an killing them, as happened to an unfortunate man in Yuzhno-Sakhalinsk a week or two back.
The roads, although not as slippery, get much worse once the snow and ice melts. The snow serves to fill in the potholes and smooth the uneveness of the roads in the winter months, making the driving a lot less bumpy. As of last week, enormous craters large enough to swallow a hippo have started to appear in the roadways, many filled with thick, brown mud, and you once again have to weave back and forth across the carriageways trying to find the smoothest route through. In Yuzhno-Sakhalinsk, simply driving to work can result in you winning the Camel Trophy.
Few Sakhalin islanders outside of the ski-resort owners can be hoping this thaw gets drawn out by more snow. Most of us are hoping the sun comes up and gets rid of the brown filth in record time, leaving the city engulfed in clouds of dust and gigantic mutant mosquitos.
Last weekend my wife and I went with four other couples to spend the weekend in Okhotskoe, where there is a little place which rents a couple of chalets and has barbecue facilities along with a banya.
The chalets were beside a frozen lake covered in snow, and beyond the lake were some woods, which we all went into to admire the beautiful scenery, savour the peace and tranquility, and be at one with mother nature…
These things are damned good fun! We were able to rent them there for $50 an hour, big two seater things capable of 50mph which we drove through the forest in convoy for two and a half hours. But the one I’m sitting on above belongs to a mate of mine, and is a much smaller, lighter, sports model capable of 100mph. Beyond the lake beside which we were staying was a much larger lake, probably three or four miles across, and frozen perfectly flat: perfect for thrashing a snowmobile. I managed to get it up to 70mph before my face started to freeze (it was seriously cold out there), whereas the machine’s owner, who had a fully enclosed helmet (as opposed to my woolly hat) got it up to 90mph.
They are bloody noisy things, two-stroke, high-pitched engines puffing out exhaust fumes everywhere, depleting the planet’s precious resources – all the things which would enrage the holier-than-thou environmental campaigners, which of course made riding them about all the more fun.
The view from the chalet was rather nice too.
A couple of years ago I bought a book called Black Earth: A Journey Through Russia After The Fall by Andrew Meier, and American journalist who spent 1996 to 2001 as Time magazine’s Moscow correspondent. For one reason or another I never got round to reading it until now, and it appears I have been missing out on what is an excellent book. But in one way I am glad I left it on the shelf so long, because one of the places Meier travels on his journey is Sakhalin Island, and obviously the chapter which he devotes to the place is a lot more meaningful to me now than a year ago.
Meier opens the chapter with a quote, from an American who spent years on the island trying unsuccessfully to run its largest timber concern, which made me guffaw loudly.
I arrived on Sakhalin thinking Russia would be like Germany or Japan after the war. But it turned out to be more like Germany or Japan during the war.
Yup. That’s Sakhalin.
It is a well known fact that Russian salaries are very poor, with the average monthly wage in many Russian towns being little more than a few hundred dollars, which is often barely enough to live on. In Yuzhno-Sakhalinsk, the wages are much higher than the Russian average because of the presence of the oil companies and their dozens of suppliers and subcontractors, but the absolute salary paints a false picture because the cost of living in Yuzhno-Sakhalinsk is higher than any other city outside of Moscow, and many times higher than towns of similar size.
There are probably several good reasons as to why salaries in Russia are so low, but one of them revealed itself in all its splendour as I was preparing an annual budget this morning.
Under Russian law, employees are entitled to 28 days paid holiday a year. In addition to this they also get 11 days paid public holiday per year, making a total of 39 days. If the employee works in the Russian “Extreme North” region, which includes Sakhalin Island, they get an additional 16 days paid holiday per year, making a total of 55 days.
By Russian law, the working week is 5 days; 40 hours long for men and 36 hours for women. 55 days per year on a 5 day week equates to 11 weeks paid holiday per year, which is over a fifth of the working year. Spread evenly over the entire year, an employee in Yuzhno-Sakhalinsk could get away with a 4-day week with a man working 32 hours, and a woman putting in just under 29 hours to justify her salary.
Furthermore, overtime must be paid at a rate of x1.5 for the first two hours per day, and x2 for any hours worked over that.
It’s a small wonder that salaries in Russia – especially those of women – are shockingly bad. Who is going to pay anyone a high salary for putting in an average of 30 hours per week?
Since I moved to Sakhalin 6 months ago, a fair number of people have contacted me after reading this blog to ask questions on what life is like here, what kind of accommodation is on offer, etc., usually with a view to take a job here or even having already signed up to come.
Considering the number of expats here and the size of the oil and gas projects both present and future, it always surprised me how little information is available to anyone coming here, or indeed for anyone who is already here. Whereas most oil towns have a multitude of websites where people can read about the place, Sakhalin doesn’t really have any, and my blog seemed to be providing information that people obviously couldn’t get elsewhere.
So I’ve taken it upon myself to set up a web forum which can bring Sakhalin’s expats together with the aim of generating an online community here, and also to provide a place where people can come and have their questions answered before they get to the island and find some support once they arrive.
So, to all my Sakhalin-based readers, please head on over to SakhalinExpats.com, register, and start talking! Registration is quick, easy, and free. No LOI is required, nor a hefty fee for a shady “facilitator”, and you do not need to renew your registration every six months by taking an expensive three-day trip to Seoul.
This story has been all over the Russian news for the last week or two, along with grisly TV pictures:
THE bodies of two young Russian women, apparently shot by the Thai mafia, were found slumped in deckchairs on the beach at Pattaya, one of Thailand’s most popular resorts, early yesterday.
Police said the corpses were discovered by a hotel security guard, who saw a Thai man run from the scene, jump onto a motorcycle and roar off into the night. Purses and mobile phones were left on the bodies, suggesting that robbery was not a motive.
I took an interest in this story because the murders took place days after we left Pattaya, and on Jomtien Beach which is where our hotel was located. According to the Russian news, they have caught the chap responsible and he has spilled the beans as to the motive. Apparently, a Russian chap living in Pattaya but married to a Thai woman had been taking the unfortunate Russian women out to a few clubs and bars in the days before they were shot. The Thai woman then got jealous and paid a local hitman to kill the two Russian women.
This is an unusual story in some ways, first and foremost for the fact that a Russian man has married a Thai woman. Russian men, in contrast to Europeans, generally aren’t that interested in foreign women, and very rarely dark-skinned Oriental women. A Russian man with a Thai wife must have been unusual in Pattaya. Secondly, shooting a couple of tourists who’d been stepping out with her husband seems a bit of an overreaction on the part of the wife. Maybe there was something more going on. Either way, she’d have been better off shooting her husband or boiling his daughter’s bunny rabbit rather than arranging the murder of a couple of unsuspecting tourists.
There is an article in yesterday’s Asia Times by a Pepe Escobar, which has been seized on by a number of left-wing blogs as evidence that the war in Iraq is all about securing reserves for US oil companies. Mr Escobar vents his anger at the Iraq government’s decision to set up Product Sharing Agreements (PSAs) with foreign oil companies, and being a resident of Sakhalin Island – where it is nigh on impossible to hold a business conversation without reference to a PSA agreement, hence you quickly learn about them – I have come to the conclusion that Mr Escobar has no idea what he is talking about.
On Monday, Prime Minister Nuri al-Maliki’s cabinet in Baghdad approved the draft of the new Iraqi oil law. The government regards it as “a major national project”. The key point of the law is that Iraq’s immense oil wealth (115 billion barrels of proven reserves, third in the world after Saudi Arabia and Iran) will be under the iron rule of a fuzzy “Federal Oil and Gas Council” boasting “a panel of oil experts from inside and outside Iraq”.
So far, this seems entirely sensible. It is not unsual for a country rich in natural resources, as is the case with Iraq, to appoint a governmental body to oversee the management of those resources. The United Arab Emirates has one, called the Supreme Petroleum Council, and Russia has one, called the Ministry of Natural Resources. I don’t know why Mr Escobar calls Iraq’s version “fuzzy”, because its title and implied job description is crystal clear. It is also not surprising that Iraq’s Oil and Gas Council should seek outside help in the first few years of managing their resources.
That is, nothing less than predominantly US Big Oil executives.
I have no idea where Mr Escobar has got his information from, but having searched Google for “Federal Oil and Gas Council” iraq members I have not been able to identify a single member of the council, let alone confirm that its advisory board is dominated by “US Big Oil executives”.
The law represents no less than institutionalized raping and pillaging of Iraq’s oil wealth. It represents the death knell of nationalized (from 1972 to 1975) Iraqi resources, now replaced by production sharing agreements (PSAs) – which translate into savage privatization and monster profit rates of up to 75% for (basically US) Big Oil.
Where to begin?
Firstly, PSAs do not represent institutionalised raping and pillaging of a country’s oil wealth, and this is evidenced by the fact that the agreement is between the government of the country in question and an oil company, i.e. it is an unforced contract from which both parties expect to gain benefits. Unless raping and pillaging involves prior discussion and signed agreement on the part of the one being raped and pillaged, I rather think Mr Escobar has chosen his verbs poorly in this case.
Secondly, PSAs do not represent privatisation, savage or otherwise. Under the terms of a PSA, all extracted products are the property of the state (as this rather useful document clearly explains). I have no doubt that those oil companies party to such agreements with the Iraqi government are seeking profits, as that is generally what companies do; and whether these companies will be “basically” American remains to be seen, but unless the law prevents non-American companies from participating I suspect not.
As if this were not enough, the law reduces in practice the role of Baghdad to a minimum. Oil wealth, in theory, will be distributed directly to Kurds in the north, Shi’ites in the south and Sunnis in the center. For all practical purposes, Iraq will be partitioned into three statelets. Most of the country’s reserves are in the Shi’ite-dominated south, while the Kurdish north holds the best prospects for future drilling.
I have no idea why Mr Escobar considers distributing the oil wealth amongst the three main ethnic groups rather than centralising the whole lot in the Sunni-dominated capital to be a bad thing, as he doesn’t say. But consider it a bad thing he does. Personally, I think it is an inherently sensible idea.
Scandalously, Iraqi public opinion had absolute no knowledge of it – not to mention the overwhelming majority of Parliament members. Were this to be a truly representative Iraqi government, any change to the legislation concerning the highly sensitive question of oil wealth would have to be approved by a popular referendum.
Sorry? In what other country is the management of the nation’s natural resources decided by popular referendum? Answer: none. In a truly representative government, the elected representatives of the people are entrusted to form a government which then makes decisions on behalf of its population regarding such issues as monetary policy, defence, foreign policy, and resource management. This is what is happening in Iraq.
In real life, Iraq’s vital national interests are in the hands of a small bunch of highly impressionable (or downright corrupt) technocrats. Ministries are no more than political party feuds; the national interest is never considered, only private, ethnic and sectarian interests. Corruption and theft are endemic.
This could adequately describe politics in any country; Iraq is no exception here.
Big Oil will profit handsomely – and long-term, 30 years minimum, with fabulous rates of return – from a former developing-world stalwart methodically devastated into failed-state status.
Pre-war Iraq was hardly a developing world stalwart. Saddam Hussein bankrupted the country by fighting an 8-year war with Iran, and tried to balance the budget by annexing Kuwait. A further 12 years of crippling sanctions rendered Iraq a failed-state long before the Americans had crossed the border.
But the crucial point remains: nobody will sign anything unless the “advisers” at the US-manipulated Federal Oil and Gas Council say so.
Again, Mr Escobar provides no evidence of the veto-wielding powers of these advisers, nor of the Federal Oil and Gas Council being US-manipulated. As far as this article is concerned, it is pure speculation on his part.
Nobody wants to colonial-style PSAs forced down their throat anymore.
PSAs being an agreement by definition, it is hard to understand why he would think they were ever forced down anyone’s throat.
According to the International Energy Agency, PSAs apply to only 12% of global oil reserves, in cases where costs are very high and nobody knows what will be found (certainly not the Iraqi case).
Without trawling through all the IEA’s publications to check this, I will hazard a guess that they are saying PSAs apply in countries where the risks of investment are high, i.e. somewhere where costs are high and reserves are uncertain (I’m sure the IEA did not use the words “nobody knows what will be found”). However, a PSA would equally apply in a country where the risks were high for other reasons, such as high levels of sectarian fighting and risk of civil war, i.e. Iraq.
No big Middle Eastern oil producer works with PSAs.
That is because PSAs are a vehicle to get foreign companies to invest in an undeveloped oil and gas market, namely by paying for the production and processing infrastructure in return for a share of the production. No big Middle Eastern oil producer works with PSAs because they have the infrastructure in place already, the risks of investment are low, and they don’t need to attract enormous amounts of foreign investment to kick-start their oil industry.
Russia and Venezuela are renegotiating all of them.
Which isn’t true: the Sakhalin I project is not being renegotiated, probably because the Russian government – via its company Rosneft – already has a slice of the action. But that’s beside point: Russia and Venezuela are “renegotiating” the PSA contracts because the foreign investments have already been made and they don’t see why a trivial matter like a prior agreement should prevent them from forcing a better deal for themselves halfway through. It is a bit like borrowing some money from your younger brother to buy some sweets, then duffing him up when he later asks for repayment.
Bolivia nationalized its gas.
I think we’d better see how well the Bolivian economy performs over the next few years before we judge that to be a good thing.
Algeria and Indonesia have new rules for future contracts.
As does Iraq, remember?
Big Oil is obviously ecstatic – not only ExxonMobil, but also ConocoPhillips, Chevron, BP and Shell (which have collected invaluable info on two of Iraq’s biggest oilfields), TotalFinaElf, Lukoil from Russia and the Chinese majors.
Hang on! What happened to the Federal Oil and Gas Council being dominated by US Big Oil executives? Didn’t these have veto rights over all agreements a few paragraphs back? So how did the bloody French, Russians, and Chinese get a slice of the action? Didn’t they oppose the war?
Gargantuan profits under the PSA arrangement are in a class by themselves. Iraqi oil costs only US$1 a barrel to extract. With a barrel worth $60 and up, happy days are here again.
Iraqi oil only costs a dollar to extract once you have built a rather large and expensive facility with which to extract and process it. Building this requires a huge up-front capital expenditure, which Iraq can ill-afford. Therefore, the Iraqi government hopes to entice foreign companies to build this infrastructure for them in return for a share of the subsequent production for a limited period of time. Sound sensible? It should: it’s called a PSA. As has already been noted, the oil company does not own the rights to the extracted product, but the state grants it product in return for building and operating the production facilities and infrastructure. Whatever profit the oil companies can make by selling their share, the Iraq government can make a greater profit by selling its own share (which, under the PSA, it spent no money obtaining).
What revenue the regions do get will be distributed to all 18 provinces based on population size – an apparent concession to the Sunnis, whose central areas have relatively few proven reserves.
Again, it is left unexplained as to why Mr Escobar thinks this is a bad thing. But there is one thing which requires no further explanation, and that is the suitability of Mr Escobar to comment on oil and gas affairs.