Philip Sherwell and William Lowther / The Sunday Telegraph & Ambrose Evans-Pritchard / The Telegraph – 2008-09-06 10:10:43
Russia Threatens to Supply Iran with
Top New Missile System as ‘Cold War’ Escalates
Philip Sherwell and William Lowther / The Sunday Telegraph
NEW YORK & WASHINGTON (August 31, 2008) — US intelligence fears the Kremlin will supply the sophisticated S-300 system to Tehran if Washington pushes through NATO membership for its pro-Western neighbours Georgia and Ukraine.
The proposed deal is causing huge alarm in the US and Israel as the S-300 can track 100 targets at once and fire on planes up to 75 miles away. That would make it a “game-changer”, greatly improving Iranian defences against any air strike on its nuclear sites, according to Pentagon adviser Dan Goure. “This is a system that scares every Western air force,” he said.
Senior US intelligence operatives believe that Russia is planning to use a stand-off over the S-300 to create a foreign policy showdown that would test the mettle of a new US president.
Republican candidate John McCain has taken a strongly anti-Kremlin line on a series of international issues and backed Georgia’s desire to join NATO. His Democratic rival Barack Obama has also indicated he supports NATO membership for Georgia.
“The message from Moscow is very clear,” said George Friedman, director of Stratfor, a leading US private intelligence agency. “They are saying if you don’t stop meddling in our sphere of influence, this is what we are going to do.
“Back Georgia and Ukraine for NATO membership and you’ll see the S-300 to Iran. It is a very powerful bargaining chip and a major deterrent to US actions in the region. Moscow is playing very strategically on America’s obsession with Iran.”
Moscow has been infuriated by the steady encroachment of NATO into the former Soviet bloc and the recent granting of independence to the ex-Serbian province of Kosovo against its wishes.
After American condemnation of Russia’s foray into Georgia, Moscow invited Syria’s dictator Bashar al-Assad, a long-time US foe, to discuss military deals in a deliberate signal of how it could cause trouble for Washington.
A senior US intelligence operative who recently returned from the Middle East said Russia is believed to have struck a tentative deal to sell the S-300 to the Islamic regime. There are reports that Russia has already moved some basic components for the system to its close ally Belarus, ready for possible transfer to Iran.
“Moscow cannot simply threaten to strike the deal,” the official told The Sunday Telegraph. “Iran certainly thinks it has a deal. And the Israelis believe that a deal has been reached but that they can still block it.”
The outgoing Israeli prime minister Ehud Olmert is expected to pass that message on to his counterpart Vladimir Putin and President Dmitri Medvedev when he visits Moscow next month. Israel has already ended military assistance to Georgia in an effort to placate Russia.
Russia has denied previous assertions by senior Iranians that a deal has already been finalised on the S-300.
Dan Goure, a long-time Pentagon adviser, said: “If Tehran obtained the S-300, it would be a game-changer in military thinking for tackling Iran. That could be a catalyst for Israeli air attacks before it’s operational.”
Dr Friedman said that if it became operational, it would effectively rule out Israeli air raids and seriously complicate any US aerial bombardment.
The system would take up to a year to become operational. In the meantime, Israel would come under heavy domestic pressure to launch an attack on Iranian nuclear plants, which the West believes are part of a secret atomic weapons programme but which Tehran claims are for civilian energy.
A senior Iranian military commander warned yesterday that any attack on Iran would start a major conflict. “Any aggression against Iran will start a world war,” deputy chief of staff for defence publicity, Brigadier General Masoud Jazayeri, said in a statement. “The unrestrained greed of the US leadership and global Zionism… is gradually leading the world to the edge of a precipice.”
Russia May Cut off Oil Flow to the West
Ambrose Evans-Pritchard / The Telegraph
LONDON (August 29, 2008) — Fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and NATO naval actions in the Black Sea. Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets.
Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.
“They have been told to be ready to cut off supplies as soon as Monday,” claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.
Any evidence that the Kremlin is planning to use the oil weapon to intimidate the West could inflame global energy markets. US crude prices jumped to $119 a barrel yesterday on reports of hurricane warnings in the Gulf of Mexico, before falling back slightly.
Global supplies remain tight despite the economic downturn engulfing North America, Europe and Japan. A supply cut at this delicate juncture could drive crude prices much higher, possibly to record levels of $150 or even $200 a barrel.
With US and European credit spreads already trading at levels of extreme stress, a fresh oil spike would rock financial markets. The Kremlin is undoubtedly aware that it exercises extraordinary leverage, if it strikes right now.
Such action would be seen as economic warfare but Russia has been infuriated by NATO meddling in its “backyard” and threats of punitive measures by the EU. Foreign minister Sergei Lavrov yesterday accused EU diplomats of a “sick imagination”.
Armed with $580bn of foreign reserves (the world’s third largest), Russia appears willing to risk its reputation as a reliable actor on the international stage in order to pursue geo-strategic ambitions.
“We are not afraid of anything, including the prospect of a Cold War,” said President Dmitry Medvedev.
The Polish government said yesterday that Russian deliveries were still arriving smoothly. It was not aware of any move to limit supplies. The European Commission’s energy directorate said it had received no warnings of retaliatory cuts.
Russia has repeatedly restricted oil and gas deliveries over recent years as a means of diplomatic pressure, though Moscow usually explains away the reduction by referring to technical upsets or pipeline maintenance.
Last month, deliveries to the Czech Republic through the Druzhba pipeline were cut after Prague signed an agreement with the US to install an anti-missile shield. Czech officials say supplies fell 40pc for July. The pipeline managers Transneft said the shortfall was due to “technical and commercial reasons”.
Supplies were cut to Estonia in May 2007 following a dispute with Russia over the removal of Red Army memorials. It was blamed on a “repair operation”. Latvia was cut off in 2005 and 2006 in a battle for control over the Ventspils terminals. “There are ways to camouflage it,” said Vincent Sabathier, a senior fellow at the Centre for Strategic and International Studies in Washington.
“They never say, ‘we’re going to cut off your oil because we don’t like your foreign policy’.”
A senior LUKoil official in Moscow said he was unaware of any plans to curtail deliveries. The Kremlin declined to comment.
London-listed LUKoil is run by Russian billionaire Vagit Alekperov, who holds 20pc of the shares. LUKoil produces 2m barrels per day (b/d), or 2.5pc of world supply. It exports one fifth of its output to Germany and Poland.
Although Russia would lose much-needed revenue if it cut deliveries, the Kremlin might hope to recoup some of the money from higher prices. Indeed, it could enhance income for a while if the weapon was calibrated skilfully. Russia exports roughly 6.5m b/d, supplying the EU with 26pc of its total oil needs and 29pc of its gas.
A cut of just 1m b/d in global supply – and a veiled threat of more to come – would cause a major price spike.
It is unclear whether Saudi Arabia, Kuwait or other Opec producers have enough spare capacity to plug the shortfall. “Russia is behaving in a very erratic way,” said James Woolsey, the former director of the CIA. “There is a risk that they might do something like cutting oil to hurt the world’s democracies, if they get angry enough.”
Mr Woolsey said the rapid move towards electric cars and other sources of power in the US and Europe means Russia’s ability to use the oil weapon will soon be a diminishing asset. “Within a decade it will be very hard for Russia to push us around,” he told The Daily Telegraph.
It is widely assumed that Russia would cut gas supplies rather than oil as a means of pressuring Europe. It is very hard to find alternative sources of gas. But gas cuts would not hurt the United States. Oil is a better weapon for striking at the broader Western world.
The price is global. The US economy could suffer serious damage from the immediate knock-on effects.
While the Russian state is rich, the corporate sector is heavily reliant on foreign investors. The internal bond market is tiny, with just $60bn worth of ruble issues.
Russian companies raise their funds on the world capital markets. Foreigners own half of the $1 trillion debt. Michael Ganske, Russia expert at Commerzbank, said the country was now facing a liquidity crunch. “Local investors are scared. They can see the foreigners leaving, so now they won’t touch anything either. The impact on the capital markets is severe,” he said.
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