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Analysis & Opinion
15.09.10 Medvedev’s Win-Win Diplomacy
By Tai Adelaja

President Dmitry Medvedev headed north to Murmansk on Wednesday to witness a milestone in his continued efforts to achieve geo-political gains following a landmark border deal struck between Russia and Norway, which ended a long-running dispute over their maritime border in the Barents Sea. The president was joined by Jens Stoltenberg, the Norwegian prime minister at the signing of the treaty, which analysts say underscores Kremlin’s new policy approach to its neighbors.

The maritime area of 176,000 square kilometers that straddles the Barents Sea and the Arctic Ocean has been a source of diplomatic tantrums between Norway and Russia since 1970. But an agreement was reached in April to divide the area, believed to contain vast oil and gas resources, into clear economic zones extending to the edge of Europe’s northern continental shelf, giving each country roughly half of the contested territory.

"The significance of this event goes beyond a purely bilateral dimension,” the Kremlin said in a statement on Wednesday, RIA Novosti reported. “It is also a practical example of the implementation of the principle that all disputes in the Arctic must be resolved solely by the Arctic states through negotiations and on the basis of existing international laws."

President Medvedev clinched the deal to resolve the 40-year-old dispute during an April 27 visit to Oslo. “I believe this will open the way for many joint projects, especially in the area of energy,” Medvedev said at a joint news conference with the Norwegian prime minister after their April meeting. Stoltenberg also stressed that the agreement was crucial to both countries’ bilateral relations: "Our meeting, which has just finished, resulted in the agreement between our countries concerning the demarcation line in the Barents Sea and the Arctic Ocean," the Norwegian prime minister said. "This is very important."

Analysts said the pact is a sign of the Kremlin's pragmatism as Russia increasingly recognizes the vulnerability of its economy and sets realistic priorities to overcome it. “There are two main implications of the deal - one is geo-political and the other energy related - a familiar combination for Russia,” Chris Weafer, chief strategist at UralSib, wrote in a note to investors on Wednesday. Weafer said the pact is yet another example of Russia resolving long-standing disputes through a new and softer foreign policy. “Moscow is of course very keen to project this new softer and pragmatic approach as it looks to improve Russia’s image and investment credentials internationally,” he said.

Along with corruption, bureaucracy and poor legal enforcement, disputes with neighbors, such as disruptions in gas supplies to Ukraine and the war with Georgia, have been cited as reasons why strategic investors have remained wary of pouring money into Russia. But President Medvedev has consistently said he would project a friendly face of Russia abroad. On his watch, Moscow has improved relations with traditional global leaders such as the United States and the European Union. Both Poland and Ukraine are now on better terms with the Kremlin while the economic downturn has given Moscow the long-sought opportunity to extend its economic influence into the Baltic States.

“The government needs to attract a significantly larger volume of foreign direct investment (FDI) into the economy, especially into industries that will represent economic diversification such as technology and manufacturing,” Weafer said. “FDI, especially outside of extractive industries, has been running at far too low a level both relative to the FDI in other major developing economies and relative to what the country needs to create a more diverse economic base.”

A draft of the Foreign Ministry document released to Russian Newsweek in May said Russia should leverage new geo-political realities to create “alliances for modernization” to promote its own development and strengthen its positions domestically and globally. In addition, the document places high priority on strengthening business interests with the West but also takes a firm stance on Russia’s strategic interest in the Arctic and on “limiting access to the Arctic by players from outside the region, including NATO and the European Union.”

Stoltenberg said in April that the agreement “means the drawing of the border line as well as the development of oil fields and fishing industry." The two states have clashed in the past over fishing rights and practices in the Barents Sea, which contains vast stocks of cod and both Russian and Norwegian ships have been detained in the disputed area on accusations of violating fishing regulations. But in recent years Russia and Norway have worked closely on a shared fisheries management system.

The treaty is also a culmination of the scramble for energy resources in the Barents Sea. In 2007, as the race for perceived natural resources gathered momentum, Russian scientists planted a flag on the seabed at the North Pole, triggering an aggressive scramble by countries like Norway. “Conventional practice elsewhere in the world has been to position maritime boundaries at the midpoint between opposing land masses, and for 40 years that has been Norway’s goal with respect to its Svalbard archipelago to the west and the Russian island groups of Novaya Zemlya and Franz Josef Land to the east,” Walter Gibbs wrote in The New York Times. But Russia argued instead for a “meridian line” boundary running more or less straight north from the mainland, which would have provided it with an additional 67,000 square miles of economic territory - about equal to the entire Norwegian sector of the North Sea, whose oil resources have made Norway a rich country.

Geologists have long said that the Arctic region is the next, if not final, energy frontier and that below the seabed lie untold energy and mineral riches. While it is not known for sure how many recoverable resources lie below the seabed, Moscow is pressing ahead with attempts to persuade the UN to recognize its sovereignty over a much greater section of the Arctic based on the Lomonosov Ridge. With the new pact, analysts say, Norway is now more likely to support Moscow’s claim at the UN.

Though Russian scientists estimate that the recoverable resources in the block that is to be carved up under Wednesday’s agreement may equal the equivalent of 39 billion barrels of oil or 6.6 trillion cubic meters of gas, there had been no way to confirm this until Russia and Norway reached tentative agreement in April. Russia is expected to reap huge benefits from the new pact as it would open the gate for proper exploration work in the maritime area.

Stoltenberg said the line agreed upon in April splits the disputed area nearly in half, which means the line will still run considerably closer to the Norwegian islands than the Russian ones. A number of oil or gas fields identified by Russian seismic surveys in the 1980s are thought to straddle the line. Geologists also say the eastern Barents, under Russian economic stewardship, probably contains far more oil and gas than the Norwegian sector, though the Norwegians have beaten their neighbors to the punch by starting production in a western Barents field called Snow White. Based on expertise gained there, a Norwegian company, Statoil, has signed up to help Russia’s state gas giant, Gazprom, develop a large offshore field called Shtokman far out at sea on the Russian side of the Barents.

“Now it is expected that Norway and Russia will cooperate, probably in a joint venture between Statoil Hydro and Gazprom, on an exploration program to answer that question,” Weafer said. “The results of that exploration will also be very important for what happens elsewhere in the Arctic region. Disappointing results will cool enthusiasm for exploration in the Arctic and give the environmentalist lobby a breathing space. Results that confirm the existence of a large volume of energy riches will trigger an energy race.”
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