The Rise of the Russian Empire: Russo-Armenian Relations

[Armanen]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

Armanen, there's talk of that??? Are there any articles about it that you know of? I guess it would make sense because they all share similar culture, language and economic interests.

No, I was just curious. I think it would be a good idea for all three to join one federation or even a confederation, as they are all culturally the same, and one could argue ethnically the same as well.

[Armanen]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

Russia is determined to bring NATO’s Expansion Eastward to a Halt

The ghost of Stalingrad


By Eric Walberg

Global Research, September 16, 2008
Al Ahram Weekly


NATO’s metamorphosis from Cold War Euro-policeman into the unabashed global military arm of the United States over the past 18 years has left a trail of debris from the Balkans to Afghanistan that will take decades to clear. It is a flagrant violation of the agreement James Baker III made with Soviet president Mikhail Gorbachev that the US would not extend the borders of NATO eastwards in return for Moscow allowing a united Germany to be a member of NATO. Russia was still in disarray and in no position to protest when the Eastern European countries and the Baltics joined, but as this policy of expansion turned into a blatant encirclement of Russia and a conquest of the Middle East, a furious, now self-confident Russia has finally drawn the line, at least in its immediate neighbourhood, with Georgia and Ukraine the last straws.



In a provocative analogy, Russian President Dmitri Medvedev called Georgia’s 8 August attack on Ossetia Russia ’s 9/11, and said Russia would react the same even if Georgia is accepted as a prospective member of NATO. He announced to the Russian Information Agency 31 August “Five Points of Russian foreign policy” already dubbed the Medvedev Doctrine, as a response to what we might call the Bush I/ Clinton / Bush II Doctrine, i.e., the dismemberment of the USSR / Russia to ensure a US-dominated unipolar world. They include:


-a commitment to the principles of international law,

-a statement that “the world should be multipolar”,

-the wish to have peaceful friendly relations with all nations,

-the intent to protect its citizens “wherever they may be”, and

-the decisive fifth point: “as is the case of other countries, there are regions in which Russia has privileged interests. These regions are home to countries with which we share special historical relations and are bound together as friends and good neighbours. We will pay particular attention to our work in these regions and build friendly ties with these countries, our close neighbours.”



The crisis in Georgia will be seen by future historians as the beginning of the end for the grandiose plans of the US to bring its version of a New World Order in Eurasia to fruition, if not “Russia’s 9/11”. Instead of a seemingly inexorable march towards the Volga and the dismantling of the Russian Federation — recall this was Hitler’s goal — we are now witnessing war preparations at full tilt across the globe, with little Georgia as the catalyst.



The spider’s web of intrigue surrounding Georgia is thick indeed. It even reaches as far as Iran , which Israel appeared to be preparing to attack using nearby Georgian bases as a launching pad. This plan has been thwarted for the moment, though Iran proceeded last week with its war games to test its defences in anticipation of a US/Israeli attack from farther afield.

As Georgia welcomes a permanent US military presence to help restore its battered army, Russia is expanding its military presence at Tajikstan’s Gissar Airport. As the US positions missiles in Russia’s neighbours Poland and the Czech Republic, Russia is preparing to hold joint naval drills with US neighbour Venezuela (10-14 November) and station long-range anti-submarine patrol aircraft there “temporarily”.

The Russian navy has resumed its (or rather its predecessor’s) presence in different regions of the world’s oceans. A naval task force from Russia’s Northern Fleet conducted a two-month tour of duty in the Mediterranean Sea and North Atlantic from December 2007 to February 2008.

Russia’s Foreign Ministry spokesman Andrei Nesterenko insisted that Russia’s decision to send its armed forces to Venezuela was made before Russia’s war with Georgia. “This deployment had been planned in advance, and it’s unrelated to the current political situation and the developments in the Caucasus.” But the announcement was made just a week after Prime Minister Vladimir Putin warned that Russia would mount an unspecified response to recent US aid shipments to Georgia.
Thankfully, the war is still at the level of hot air. “Go ahead and squeal, Yankees,” Venezuelan President Hugo Chavez said in a national broadcast in which he announced the exercises. The US mocked the announcement. State Department spokesman Sean McCormack poked fun at Russia’s navy, expressing surprise that “they found a few ships that can make it that far.” Just in case Venezuela is too far from US shores for the outmoded Russian vessels, Russia has signaled it is keen to restore military and intelligence ties with Cuba. There are rumours it is seeking a naval base in Vietnam. Not to be left out of the increasingly complex maritime equation, in June the US Navy announced it was re-establishing the Fourth Fleet, disbanded in 1950, which would direct naval operations in the Caribbean and Latin America. It is also negotiating with Georgia and Turkey to establish a naval base at the Georgian port of Poti. One of the responsibilities of US Special Forces in the region is to ensure the security of an oil pipeline passing through Georgia.
As US “aid” flows to the Black Sea in US warships, Russian military hardware flows to the Caribbean, as Venezuela recently bought 24 Russian Sukhoi fighter jets, as well as submarines and missiles. Chavez has said that he would allow Venezuela to be a strategic base for Russian bombers should it be required. “In Venezuela they will always have a green light, they will be welcome, because Russia is an ally of Venezuela,” said Chavez. He proceeded to expel the US ambassador last week until after the November presidential elections.
Sergei Markov, a United Russia Duma member, sees this as posturing rather than the prelude to setting up a permanent base in the Americas. “We need bases on the territory of Iran and Syria where our strategic interests lie.” While it indeed looks like Russia will re-establish a permanent presence in the Mediterranean using a Soviet-era base in Tartus, Syria, this talk of bases in Iran is a new development. It is rumoured that Russia may set up bases there and supply Tehran with the cutting edge S-300 missile system to help protect its nuclear facilities from airstrikes. But apart from Venezuela, the main posturing is going on in Tbilisi, where President Mikhail Saakashvili insisted the West would help his country regain control of South Ossetia and Abkhazia, the separatist regions of Georgia recognised as independent nations by Russia and a trickle of other countries, including Nicaragua and Belarus. “Our territorial integrity will be restored, I am more convinced of this than ever,” Saakashvili said in a televised appearance. “This will not be an easy process, but now this is a process between an irate Russia and the rest of the world.”
The hot air and military strutting by this collection of antagonists is beginning to look like the calm before the storm. If it is true that US military were part of the invasion of South Ossetia, if only as advisors, this could mean that Russian soldiers might have been killed by Americans, something that never happened even during the height of the Cold War. During the Cold War, “the sides were very careful of each other. They were careful not to come too close,” said Alexander Pikayev. “The risk of direct military clashes is much higher. This situation is much riskier than the Cold War.” Both US presidential candidates are talking tough, and vice presidential hopeful Sarah Palin said, “We will not repeat a Cold War”, presumably meaning she preferred a hot one.

In such a hair-trigger atmosphere, Ukraine and Georgia can kiss any dream of joining the ersatz Western “defence” alliance do svidania.

Nevertheless, last week Vice President xxxx Cheney toured ex-Soviet countries the US considers threatened by Russia, including Ukraine, Georgia and Azerbaijan, promising Georgia $1 billion (where do these nice round sums come from?), vowing the US will continue to back the country’s NATO application and saying that Moscow’s intervention “cast grave doubt on Russia’s intentions and on its reliability as an international partner.” In Ukraine, he spoke of the “threat of tyranny, economic blackmail and military invasion or intimidation” from Russia . That is an interesting slant on the Medvedev Doctrine. The reader can easily conjure up appropriate words that Medvedev might use to describe the Bush I/ Clinton/ Bush II Doctrine.

Ukraine is now embroiled in a mud-slinging match, with the collapse of the coalition government 3 September, when President Viktor Yushchenko withdrew his support over the refusal of Prime Minister Yulia Tymoshenko to back the president in his support for Georgia and condemnation of Russia. Yushchenko accused Tymoshenko of “treason and political corruption”, over her failure to back a pro-US stand, and of seeking Moscow ’s support of her likely presidential bid. Ukraine ’s pro-Russian former prime minister Viktor Yanukovich, who heads the Party of Regions, did not rule out the possibility of forming a parliamentary majority with the Yulia Tymoshenko bloc. Such a move would remove from the discussion the entire issue of a Ukrainian application to join NATO. Tymoshenko could well pull off a metaphorical coup by campaigning in the upcoming presidential elections on a sober platform of peace with Russia , which would very likely hand her the presidency with the support of the large Russian population of Ukraine as well as astute Ukrainians.

Another such scandal is brewing in Georgia itself, with the arrest of former president Zviad Gamsakhurdia’s son Tsotne as a Russian spy smack in the middle of Cheney’s visit to Georgia . He was charged in late 2007 with an attempted coup and links with Russian security services after opposition protests against Saakashvili. The voices of sensible Georgians, fed up with President Mikheil Saakashvili’s reckless chauvinism, are clearly being cut in the bud, as he consolidates a very nasty dictatorship backed by the Americans and Israelis. Of course, all Western media coverage of Georgia slavishly supports this loose cannon, but Medvedev’s description of him as “a political corpse” probably is closer to the truth.

It is hard not to sympathise with the Russians. The Black Sea, once the domain of the Soviet navy, now is the home of three NATO members — Turkey, Bulgaria and Romania — and two applicants, Georgia and Ukraine . If the two applicants join the alliance, Russia ’s Black Sea coastline would be surrounded by NATO. The volatile Caucasus would then be the playground of the US .

“Now it looks like there is a certain red line that exists in the heads of Russian leadership and they are willing to do anything to stop it from being crossed,” said Nikolai Petrov, at the Carnegie Endowment for International Peace. “And this red line is Ukraine and Georgia joining NATO.”

Russia ’s success in thwarting the Georgian attempt to wrest back Ossetia has shown its resolution. Russian warships have been sent to the coast of nearby Abkhazia. In the relatively close proximity in which the Russian and American ships operate there and elsewhere in the Black Sea , one misunderstanding could create an international incident. “We remember very well the Tonkin Gulf incident” in which untrue reports of North Vietnamese ships firing on US ships started the Vietnam War, said Markov. This was seconded by Republican California Congressman Dana Rohrabacher in a sharp criticism of US support for the Georgian attack.

Aleksandr Dugin, whose ideas about America’s weakening geopolitical standing are popular with many Russian leaders, said Russia was challenging US dominance and that confrontation may be unavoidable. Russia’s move into Georgia was “an irreversible decision that will mean in the future a serious, profound, irreversible confrontation with the United States. The stakes are so high that Moscow has placed all its chips on the table.”

It is not surprising that the Shanghai Cooperation Organisation, which includes Russia, China and the former Soviet Asian republics Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan , are supporting Moscow for “assisting peace and cooperation in this region.” Nor that Armenia and Belarus also support Russia, and the non-Yushchenko forces in the Ukraine are backing away from the flirtation with NATO. It is clear now that the US has insufficient power to cope with the occupations of Iraq and Afghanistan. Both were to have been an essential part of a US policy to militarily control Eurasian rivals, especially Russia and China.

If the Russians hold firm, and it is worth remembering their spectacular defeat of the Nazis at Stalingrad in this regard, this crisis will defuse with or without fireworks, US hawks will find their feathers clipped, and the world will adjust to a “post-America” multilateral sanity.

The tide has already turned. The latter-day Dr Strangelove was pointedly ignored on his cheerleading tour of countries supposedly threatened by Russia, except by his pal Saakashvili, and the European Union disregarded the US veepee’s bluster, hammering out an agreement with Russia to replace Russian troops with EU observers in undisputed Georgian territory by 1 October.

The bottom line here is a very mundane one: the EU is Russia’s neighbour and dependent on it for gas, whether her politicians like it or not. It is one thing for the US to wage wars far from its shores, as it is doing in Afghanistan and Iraq, or to play war games in other people’s backyards, as it is doing in Poland and Georgia, but it is quite another thing to expect a war-weary Europe to sign up and prepare to freeze in the dark.

http://globalresearch.ca/index.php?context=va&aid=10237

[yerazhishda]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

No, I was just curious. I think it would be a good idea for all three to join one federation or even a confederation, as they are all culturally the same, and one could argue ethnically the same as well.

As sort of like "European Union" member-states or Soviet-style republics?

[Armanen]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

As sort of like "European Union" member-states or Soviet-style republics?

Nah, the eu is too loose. Something along the lines of the soviet union but probably more like the confederate states of america or even the polish-lithuanian commonwealth of the 16th century.

[yerazhishda]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

Armenian, thanks for your analysis; it was very insightful. I don't understand how Al-Qaeda (funded by Saudi Arabia) attacks America, but then we decide to go into Iraq and topple the regime? Based on false reports of "WMD's"? Sure it created a "militiary industrial complex", but the benefits from that are only temporary - we are certainly far worse off after the war than before although I don't know if I can say the same for the special interest oil companies involved...

The Federal Reserve Bank is the best scheme anyone has ever thought of. They charge interest on the money they print so it devalues the dollar every day. Run by J'ews of course.

I think this economic "downturn" is going to last a lot longer and become a lot worse than was initially expected. Maybe we'll start seeing a mass exodus of Americans into socialist Canada. Who knows. America is certainly not "paved with gold" as many immigrants used to think. Every day the government spends our money and we see no benefit. Not good.

[jgk3]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

If America goes down, Canada goes down.

[Armenian]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

Russia Seeks Fellowship

Moscow tries to restore its peacekeeping reputation in the region
Russian President Dmitry Medvedev will hold talks today with Azerbaijani President Ilham Aliyev in the Meindorf residence outside Moscow. Moscow was the initiator of this summit meeting. Kommersant has learned that Russia will propose a package of peace initiatives for a settlement of the Nagorny Karabakh conflict to Aliyev and try at the same time to guarantee that Baku will steer clear of Western political and energy games.

Divide and Conquer

The meeting between the presidents had been discussed since the beginning of the month. On September 3, they spoke by telephone, also at Russia’s initiative. Natalia Timakova, the Russian president’s press secretary, told Kommersant then that the two leaders had reached an agreement in principle on high-level negotiations. Last week, Azerbaijani Foreign Minister Elmar Mamedyarov visited Moscow and Medvedev and Aliyev spoke again on Sunday to agree on the agenda for today’s meeting. A Kremlin source called the close contact between the countries logical, considering Azerbaijan’s role in the region. Sources in the presidential administration say that the time for negotiations between Medvedev and Aliyev had come even earlier. Medvedev has met with Armenian President Serge Sargsyan twice this month, on September 2 at presidential residence in Sochi and three days later at the Moscow summit of the Collective Security Treaty Organization, which Azerbaijan is not a member of.

Relations between Baku and Erevan will receive particular attention in today’s Russian-Azerbaijani talks, and specifically within the context of a settlement in the Nagorny Karabakh conflict. In the final declaration of the CSTO summit, it is noted that the allies are “concerned with the growing military potential and escalation of tensions in the Caucasus region.” Many observers, including those in Baku, think that phrase should be interpreted as a warning to Azerbaijan, where the need to retake “territories occupied by Armenia” is voiced from time to time. Source in the Russian Foreign Ministry close to today’s negotiations say openly that Moscow would like a firm guarantee from Baku that it will not consider military means to solve the Karabakh problem either before or after the October presidential elections there.

Moscow, which, along with France and the United States, took part in searching for a settlement to the Karabakh conflict as part of the OSCE Minsk group, plans to propose its own plan to Azerbaijan and Armenia. The first point of that plan is the organization of a meeting between Aliyev and Sargsyan in Russia with the participation of Medvedev. Kommersant has learned from sources near the Armenian president that Sargsyan has already approved that idea. Today Medvedev has to obtain Aliyev’s consent. To interest the Azerbaijani president in a meeting with the other two presidents, Moscow will propose a discussion of a sensitive question for Baku, that is, jurisdiction over the Lacha corridor, which connects Nagorny Karabakh with Armenia. Specifically, they are to conciliate a operation along the route to allow the safe movement of people and cargo along it without transferring it to the jurisdiction of Erevan or Stepanakert.

A Weak Link

Besides peacekeeping initiatives, Medvedev has other important topics that demand urgent discussion with Aliyev. After Russia’s military operations against Georgia, Azerbaijan has been the subject of increased attention from the West. High-ranking guests from Washington are becoming common in Baku, and Aliyev even received U.S. Vice President xxxx Cheney this month. Baku was the energy capital of the region last week when it hosted the international business forum “The Gas and Oil Potential of Turkmenistan and Azerbaijan: Energy, Economy, Ecology. Partnership Strategy.” First Deputy Prime Minister of Azerbaijan Yagub Eyubov assured attendees there that his country is prepared to offer its infrastructure for deliveries of Central Asian hydrocarbons to the West. Bypassing Russia, of course. Immediately after Aliyev’s Moscow talks, U.S. Assistant Deputy Secretary of State Matthew Bryza, who is cochairman of the OSCE Minsk group, will visit the Azerbaijani capital.

The West’s intensive attention to Azerbaijan does not make Russia happy, and even more so since Azerbaijan is allied with Georgia, which has severed diplomatic relations with Russia, through the GUAM (Georgia, Ukraine, Azerbaijan, Moldova) organization. Therefore, Russia is extremely interested in seeing to it that Azerbaijan follow through on any impulses to strengthen military ties with the West. The U.S. already offered last year to create a training camp on the Caspian like the ones in Georgia. A Kommersant source who manages Azerbaijani affairs at the Russian Foreign Ministry said that one of the key topics in today’s talks between the two presidents will be a written ban on the presence in the Caspian region of outside armed forces. Ideally, Moscow would like principles for activities in the Caspian to be outlined in a convention. That convention is already being drafted. Russia is prepared to expand its military partnership with Azerbaijan as compensation and to fulfill its obligations to deliver armored military equipment, parts for it and firearms.

Energy partnership is a traditional topic of talks between the Russian and Azerbaijani presidents. A source in the Kremlin mentioned with satisfaction that, after operational lapses in the Baku-Tbilisi-Ceyhan pipeline during the conflict in Georgia, Azerbaijan has applied to increase the transport of its oil through the Baku-Novorossiisk pipeline. An unsettled question is the volume of Gazprom’s maximum gas purchases during the development of the second line at the Shah Deniz gas field. That is sure to be a difficult conversation, considering that Baku quite willingly responded to the West’s proposal that it participate in the Nabucco project, the implementation of which has taken on new impetus since the Russian-Georgian war.

Source: http://www.kommersant.com/p1026605/r...jan_relations/

[zeytuntsi]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

http://www.ft.com/cms/s/0/884c7b1a-845f-11dd-adc7-0000779fd18c.html

Russian equities tumble 20%
By Catherine Belton and Charles Clover in Moscow and,Rachel Morarjee in London

Published: September 17 2008 03:00 | Last updated: September 17 2008 03:00

Russian shares suffered their steepest one-day fall in more than a decade yesterday, tumbling as much as 20 per cent as a sharp slide in oil prices and difficult conditions in money markets triggered a rush to sell equities.

The heads of the Russian central bank, the finance ministry and the financial market regulator met last night for an emergency discussion on ways to halt the crisis.

Earlier trading was suspended temporarily on both the Micex and RTS stock exchanges as investors ignored assurances by Russian officials and a cycle of distrust set in amid liquidity fears.

Margin calls forced domestic traders to liquidate positions and brokers pulled credit lines. At least one Moscow bank failed to meet payments.

The rouble-denominated Micex index closed 17.75 per cent down, the sharpest one-day drop since the August 1998 financial crisis, while the dollar-denominated RTS index closed down 11.47 per cent, its lowest level since January 2006.

Interbank money market rates climbed to 11 per cent, their highest since a mini-banking crisis in summer 2004.

"We're in completely uncharted territory where the prevailing emotion is of fear and numbness," said Chris Weafer, chief strategist at Uralsib investment bank. "No one knows where this could stop."

Alexei Kudrin, finance minister, said the financial system was not in a systemic crisis but the central bank injected a record $14.16bn (£7.88bn) in one-day funds into the money market.

The finance ministry also placed an additional R150bn (£3.27bn) in one-month deposits into the banking system. Konstantin Korishchenko, central bank deputy governor, told Russian news agencies that the bank and the finance ministry could provide $117.6bn in liquidity to the banking sector.

But market players said banks were ceasing to lend to second and third-tier companies and brokers were pulling credit lines. One big Moscow investment house, KIT Finance, last night confirmed rumours that it had been unable to make payment on a series of short-term loans.

"In connection with the fact that a series of our clients did not meet their obligations to our bank, we have not met our obligations to our counterparties," KIT Finance said.

"This is a vicious circle," said Andrei Sharonov, managing director of Troika Dialog, the Moscow investment bank, and a former deputy economic minister. "It is a situation of total mistrust. The liquidity crisis is being caused by a crisis of confidence in which people are frightened to borrow and frightened to lend."

Shares in Russia's biggest state-controlled banks led the slide with Sberbank, the state-controlled savings bank, closing 21.72 per cent down and VTB plunging 29.26 per cent.

[zeytuntsi]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

http://www.forbes.com/afxnewslimited/feeds/afx/2008/09/16/afx5429573.html

TREASURIES-Safe-haven bid lifts bonds to 6-mth highs
09.16.08, 8:02 AM ET



LONDON, Sept 16 (Reuters) - U.S. Treasuries rose to their highest in six months on Tuesday, lifted by renewed waves of safe-haven buying from investors spooked by the stability of the U.S. banking system ahead of the Federal Reserve's decision on interest rates later in the day.

Futures markets attach a near 100 percent certainty to the Fed cutting its overnight fed funds target rate by a quarter of a percentage point to 1.75 percent, as the fallout from their collapse of Lehman Brothers (nyse: LEH - news - people ) continues to rock financial markets.

These nerves were laid bare Tuesday by the dramatic surge in overnight interbank dollar rates to more than five times the Fed's 2 percent target rate as European banks scrambled for scarce dollar funds to meet short-term dollar liabilities and exposures.

The market's shift toward almost fully discounting a Fed rate cut and the fall in 10-year Treasury yields to their lowest in six months on Tuesday came a day after insurer American International Group (nyse: AIG - news - people ) had its credit ratings downgraded.

European equities fell further on Tuesday but U.S. futures pointed to a more stable open on Wall Street after the three main U.S. indices posted their biggest daily fall on Monday for years.

In this climate, economic indicators due later in the day such as August consumer price inflation, could hold less sway over the market than usual.

'The Fed would like to scale down cheap funding for banks going into 2009 ... but they might have to cut rates once again,' said Philip Marey, fixed income strategist at Rabobank.

'Not cutting rates would be cause for additional market turmoil. It's a game of chicken between the Fed and the markets.'

At 1015 GMT the December 10-year Treasury future was up 16/32 at 118-17/32. On a rolling contract basis, Treasuries futures rose to 120.00 for the first time since the demise of Bear Stearns in March.

The cash yield on two-year notes was a basis point down from late New York levels on Monday at around 1.72 percent, having earlier traded as low as 1.67 percent, its lowest since late March.

The 10-year note yield also fell to a near six-month low just above 3.36 percent.

The 2s-10s yield curve steadied at around 168 basis points, in from Monday's wides but still more than 30 basis points wider than levels seen as recently as Friday.

Fed funds futures showed the market pricing in a more than 90 percent chance of a 25 basis point Fed rate cut later Tuesday. The Fed's decision and statement will be released around 1815 GMT.

Marey and others point out, however, that the Fed might want to hold off cutting rates so soon, instead opting to keep their ammunition if in the coming months unemployment rises and the economy deteriorates.

Data at 1230 GMT on Tuesday are expected to show an easing in monthly CPI in August, an early indication of how the collapse in oil prices and strengthening of the dollar might be helping to cool price pressures. See [ECONUS].

Policy easing of up to 40 basis points is now expected by January, futures show.

Evidence of the flight-to-quality move was also seen in swap spreads, with the two-year swap spread edging back above 100 basis points. On Monday, that spread reached 106 basis points, Reuters charts show, the widest since Bear Stearns was taken over in a Fed-orchestrated buyout in March. Keywords: MARKETS BONDS TREASURIES

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[zeytuntsi]

Re: The Rise of the Russian Empire: Russo-Armenian Relations

http://in.reuters.com/article/oilRpt/idINLG43584420080916

ANALYSIS-Russian market tumble may settle tax cut argument
Tue Sep 16, 2008 5:51pm IST
By Gleb Bryanski

MOSCOW, Sept 16 (Reuters) - The plunge in Russian asset prices may force the government to decide in favour of tax cuts, despite fierce opposition from fiscal hardliners, after other measures to prop up stocks have failed.

President Dmitry Medvedev said at a meeting with the country's richest businessmen this week it was time to "put an end" to the protracted tax debate that has split the Russian government into two rival camps.

Russian stocks have lost 52 percent of their value since mid-May .IRTS as military action in Georgia and Cold War-style confrontation with the West have finally brought the world's economic gloom to its second biggest oil exporter.

The government sought to calm investors by pledging to stick to economic reform, support banking liquidity and possibly even tap the sovereign wealth fund to prop up the market, but analysts said a tax cut could be a quicker fix.

"This would be the action that will help create support for the market and stop it from falling further and this is pretty much all the government can do," said Uralsib's analyst Chris Weafer.

The pro-growth camp, backed by influential business lobbies, argues that a cut in value added tax to 12 percent from the current 18 percent, coupled with further tax cuts in the energy sector, will boost the economy and increase oil output.

The hawks, led by Finance Minister Alexei Kudrin, say that such a move will fuel inflation and make the budget even more dependent on the oil and gas sectors, which already account for over a third of all fiscal revenues.


FAST DECISION

The government will review two rival draft papers on Sept. 29 -- one from the Finance Ministry, and another from the growth-focused, tax cut favouring Economy Ministry.

But a decision could even come sooner, with President Medvedev due to hold a meeting on taxes on Sept. 18.

"We would welcome a fast decision by the government, as this would remove the uncertainty and could boost investor sentiment," Troika Dialog analysts said in a research note.

Alexander Shokhin, head of the Union of Industrialists and Entrepreneurs, Russia's most influential business lobby, hinted that Prime Minister Vladimir Putin may announce the decision during a speech in the resort town of Sochi on Friday.

"We will not give up on the value added tax cut until the end," said Shokhin, a former Economy Minister, adding that the businessmen were ready to discuss alternative tax cut proposals but there were none on the table.


NOT ENOUGH

Russia, only two months ago a darling of emerging market investors, last saw a major market rally this spring when Kudrin announced a $4 billion tax cut package for the stagnating oil sector, to go into force from 2009.

The oil lobby led by state-controlled Rosneft (ROSN.MM: Quote, Profile, Research), which lacks funds to finance its ambitious capital investment programme, is pushing for further tax breaks from 2010, which would amount to another $15.5 billion.

Kudrin, a long-term ally of Putin, has drafted the budget strategy which rules out any tax breaks and instead envisages a rise in social security tax to support the pension system which would cost Russian firms $39 billion.

The proposal took the business community by surprise with Shokhin saying that Kudrin had proposed the hikes to enforce the status quo. Kudrin indicated he was ready to discuss breaks for the oil sector if other taxes stay the same.

Analysts say the outcome of the debate may be Kudrin's reluctant nod to tax breaks in the oil sector coupled with a broader promise of an overhaul of the existing tax system aimed at boosting non-oil sectors of the economy.

"The immediate market reaction will be a jump in the oil shares but nothing like the 20 percent rally we saw in May. It would not be enough to lift the market by more than a few percentage points," Uralsib's Weafer said. (Editing by Ruth Pitchford)


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