Europe, Backed By U.S., Give Russia Deadline On Ukraine

BRUSSELS, Belgium -- Europe, backed by the U.S., on Friday gave Russia 72 hours to take concrete steps to calm tensions in Ukraine or face further sanctions, as Ukraine's president extended a shaky cease-fire that was about to expire. The moves came after the European Union signed broad trade-and-political agreements with Ukraine, Moldova and Georgia, pushing the bloc's influence eastward but potentially deepening strains with Russian President Vladimir Putin. The pacts, which lower trade barriers and aim to promote democratic reforms, were years in the making but faced doubts recently as Moscow sought to reassert its influence in the former Soviet republics. It was former Ukrainian President Viktor Yanukovych's decision not to sign the EU agreement in November that sparked the huge pro-Western protests that eventually led to his ouster. That in turn sparked unrest in parts of eastern Ukraine including the Crimean peninsula, which Russia quickly annexed. Ukraine's new President Petro Poroshenko announced a weeklong cease-fire on June 20, a step that was to lead to talks on his plan to end the insurrection. After signing the trade pact Friday in Brussels, he said it would be impossible for Ukraine to maintain the cease-fire much longer if the pro-Russia separatists, as well as Moscow, continued to ignore his peace push and launch attacks. Early Saturday, after conferring with his security advisers back in Kiev, Mr. Poroshenko announced that he had decided to extend the cease-fire by 72 hours, to Monday night. By then, Mr. Poroshenko said on the presidential website that he expected the four steps spelled out earlier in Brussels by European leaders for avoiding new sanctions would be met. They include establishing "effective control of the border" with independent monitors, the release of hostages and the launch of peace talks. "Ukraine reserves the right to suspend the cease-fire early if there is any use of force or a failure to follow these conditions," the presidential statement said. The White House later endorsed the four steps. "Failing to take them only increases the likelihood that additional economic costs will be imposed" on Russia, press secretary Josh Earnest told reporters traveling with President Barack Obama on Air Force One. The EU leaders said they would assess the situation next week and would impose fresh sanctions "should it be required." That is likely to include adding names to the current list of individual Russian or separatist officials slapped with asset freezes and visa bans, EU officials said. Russian firms could also be targeted, on top of the two Crimea-based companies already listed. The leaders warned they were prepared to come back "at any time" and impose broader sanctions on Russia if the situation doesn't improve. Mr. Earnest said the U.S. wasn't prepared to draw a "clear line" between meeting the four demands and imposing new sanctions, but added that the U.S. has shown "a clear willingness to act in concert with our partners and allies to further isolate Russia." Several officials said the Ukrainian leader's arguments played a key role in shaping the EU sanctions threat, which was much tougher than had been expected. "Until now Russia [is] doing nothing" to help the cease-fire, Mr. Poroshenko said in Brussels. "Can you imagine? We declare a cease-fire and they send tanks." Ukraine and the West have accused Russia of sending heavy weaponry and fighters across the porous border to join the rebels—a charge Moscow has denied. Earlier Friday, Mr. Putin called for a "long term cease-fire as a necessary condition for holding in-depth talks." Rebel leader Alexander Borodai, after meeting with government representatives Friday, said his group was ready to extend the cease-fire, but wouldn't agree to cede control of border posts they have seized. He also said that the talks with Kiev would be possible only if Ukraine withdraws all security forces from the Donetsk and Luhansk regions, where the fighting has been concentrated. Friday's talks followed another night of clashes in the Donetsk region, with the government saying militants killed five soldiers and wounded several more. Each side has accused the other of instigating violence. However, the separatists did free four observers from the Organization for Security and Cooperation in Europe on Friday after holding them for more than a month. A second team of observers captured on May 29 in eastern Ukraine hasn't been released, although Mr. Borodai promised the observers would be soon. Meanwhile, the United Nations refugee agency said that 110,000 Ukrainians have fled to Russia to escape the fighting, with tens of thousands more having been internally displaced. In Brussels, Mr. Poroshenko said he had "a full understanding that this war is impossible to win just by military means." "We should fight for the hearts and the brains of the people" in the east, he said. He accused the separatists of being under Moscow's "direct control." By signing the agreements with Georgia, Ukraine and Moldova, EU leaders hoped to show they won't let a newly aggressive Russia deter them from welcoming countries into the European orbit. The leaders of the three countries said the agreements are a pivotal step in aligning their countries permanently with Europe. But the Kremlin has made it clear it sees the deals as a threat to its rightful sphere of influence. Russia's Foreign Ministry reiterated Friday that the signing of the pacts will have serious consequences for those countries' relations with Russia, although it didn't say what. The deals are part of an eastward-looking EU strategy launched in 2009, with an EU-Ukraine agreement always the centerpiece. Azerbaijan, Belarus and Armenia turned down similar bilateral pacts. EU leaders have insisted that efforts to strengthen ties with their eastern neighbors weren't intended to isolate Moscow. "There is nothing in these agreements, nor in the European Union's approach, that might harm Russia in any way," European Council President Herman Van Rompuy said Friday. Russia fought a war against Georgia in 2008, and still occupies the Georgian regions of Abkhazia and South Ossetia. In Moldova, Russia has significant influence over the separatist region of Transnistria, where it has stationed thousands of troops. In Washington, the State Department offered congratulations to Georgia, Moldova and Ukraine for signing the agreements, saying that they mark "a major step toward integrating these Eastern Partnership countries more closely with the European Union and realizing a Europe whole, free, and at peace."

US Encouraging Ukraine Into Confrontation - Russian Foreign Minister

KIEV, Ukraine -- Russia's foreign minister has accused the United States of encouraging Ukraine to challenge Moscow and heavily weighing in on the European Union. Speaking in televised remarks, Sergey Lavrov said that "our American colleagues still prefer to push the Ukrainian leadership toward a confrontational path." He added that chances for settling the Ukrainian crisis would have been higher if it only depended on Russia and Europe. Lavrov spoke after the European Union summit, which decided not to immediately impose new sanctions on Russia for destabilizing eastern Ukraine, but gave the Russian government and pro-Russian insurgents there until Monday to take steps to improve the situation. Ukraine has signed a free-trade pact with the EU, the very deal that angered Russia and triggered the bloodshed and political convulsions of the past seven months that brought Russia-West relations to their lowest point since the Cold War times. In November, under pressure from Moscow, a former Ukrainian president dumped the EU pact, fueling huge protests that eventually drove him from power. Moscow responded by annexing the mainly Russian-speaking Crimean Peninsula in March, and pro-Russian separatists soon rose up in Ukraine's eastern provinces. The US and the EU slapped travel bans and asset freezes on members of Russian President Vladimir Putin's inner circle and threatened to impose more crippling sanctions against entire sectors of Russia's economy if the Kremlin fails to de-escalate the crisis. The EU leaders on Friday gave Russia and the rebels until Monday local time to take steps to ease the violence, including releasing all captives, retreating from border checkpoints, agreeing on a way to verify the cease-fire and launching "substantial negotiations" on Ukrainian President Petro Poroshenko's peace plan. The weeklong cease-fire, which both sides have been accused of violating, expired at 10 pm local time, but Mr Poroshenko quickly declared its extension until 10 pm local time Monday. Lavrov has acknowledged that Russia has some leverage with the rebels, pointing at their move this week to release four observers from the Organization for Security and Cooperation in Europe after weeks of captivity, but claimed that Moscow's influence is limited.

Ukraine Troops Killed In Fresh Attack In East

KIEV, Ukraine -- Three members of the Ukrainian military have been killed after pro-Russian separatists attacked their post near the eastern flashpoint city of Slavyansk with small arms and mortar fire, a military spokesman said. The reported attack on the post manned by members of the government's "anti-terrorist operation" took place on Saturday despite a government ceasefire, which was extended on Friday until Monday night. "As a result of the fighters shooting at the post near Slavyansk, three members of the Ukrainian forces were killed and a fourth was wounded," a military spokesman, Oleksiy Dmitrashkovsky, told the Interfax news agency. Hours after the attack, the Organisation for Security and Cooperation in Europe said that pro-Russian separatists in Donetsk had released four of the group's monitors held since the end of May. Two groups of unarmed observers from the European security organisation, totalling eight international monitors and a Ukrainian translator, were captured at roadblocks three days apart in late May. But the second team seized on May 29 in the neighbouring Luhansk province appeared to have been abducted by a different group and negotiations for their release are ongoing. The latest violence in Slavyansk came a day after four soldiers were killed and five wounded as Ukraine's military regained control of a checkpoint in the eastern region of Donetsk that had been earlier taken over by separatists. Ukraine's president, Petro Poroshenko, announced the extension on Friday night, partly at the urging of some European leaders, after returning to Kiev from an EU summit in Brussels where he signed an association agreement. The ceasefire extension was announced in line with a deadline set by EU leaders for rebels to agree to disarm, return border checkpoints to Kiev authorities and free hostages, including the OSCE monitors. Poroshenko also called on Russia to close centres being used to recruit separatist volunteers on its side of the border. The one-week truce had been due to expire on Friday at 7pm GMT, and will now expire at 7pm GMT on June 30, according to the presidential website.

Ukrainian President Accuses Russia Of Doing Nothing To End 'Disastrous' War

BRUSSELS, Belgium -- The prospect of further western sanctions against Russia over Ukraine has grown after the Ukrainian president, Petro Poroshenko, accused Moscow of doing nothing to end the "disastrous war" in the east of his country. In an interview with the Guardian and four other European newspapers on Friday, Poroshenko said separatists in Donetsk and Luhansk regions had carried out "more than 150 attacks" against government troops since a ceasefire began on 20 June. Five more Ukrainian soldiers died on Friday, he said. Speaking in fluent English in Brussels, Poroshenko stated bluntly that the rebels were under the control of Vladimir Putin's Kremlin. "I think now Russia has done nothing [to end the violence]," he said. "Russia is the leader of these banned groups. We are talking of Russian citizens, Russian officers, Russian soldiers of fortune." He characterised the Kremlin's strategy in Ukraine as "not very pragmatic" and "very emotional". While Poroshenko signed the outstanding chapters of a historic association agreement with the EU, pro-Russian and pro-Ukrainian sides in Donetsk announced that they had extended a ceasefire for three days to allow talks to continue. The Brussels deal brings Ukraine significantly closer to European markets and the EU – though with no prospect of eventual membership. Russia warned that the move would have "grave consequences". One Putin adviser, Sergei Glazyev, called Poroshenko a "Nazi". Poroshenko told the Guardian that Ukraine had paid "a very high price" for its pro-European choice. "We want to modernise my country. We want to introduce freedom, democracy and European values. Somebody doesn't like that. Someone attacks us for that," he lamented. Last November, Ukraine's then president Viktor Yanukovych refused to sign the EU agreement, instead accepting a bailout from Moscow. This triggered mass street protests, which led to Yanukovych fleeing the country and to Russia's invasion and annexation of Crimea. Asked whether Ukraine would get Crimea back during his presidential term, a smiling Poroshenko said: "Certainly". He did not reveal how this might happen. Poroshenko called Friday's signing ceremony, performed in the cavernous European council building in Brussels, the most important day for his country since independence from the crumbling Soviet Union back in 1991. Symbolically he inked the agreement with the same black pen that Yanukovych was supposed to use at a summit in Vilnius last year. "It is with me!" he said, showing the pen afterwards to the Guardian. Poroshenko said that he had discussed his 15-point peace plan for Ukraine at length with EU leaders, including Angela Merkel, François Hollande and David Cameron. He said the EU was "completely united" in its support for his country, which faced a grave security crisis. "That is why I'm happy. They spoke with one voice," he told the Guardian. The European council – representing EU leaders – will decide on Monday whether to impose new "targeted measures" against the Russian Federation, Poroshenko said. This is likely to mean additional sanctions against the Russian economy, in areas such as energy, finance and defense. EU states are divided as to how far these so-called "level three" sanctions, in preparation since March, should go. Poroshenko said his peace plan envisages a series of concrete steps. They include a ceasefire verified by European monitors, "including a Russian officer"; the return of three border checkpoints to Ukrainian forces; the release of all hostages seized by separatists; and the launch of "substantial" peace talks. Four Organisation for Security and Co-operation in Europe monitors were freed on Friday, but separatists were still holding 180 prisoners, Poroshenko said, including eight captured on Thursday. Poroshenko said it was now up to Russia to decide whether to back his plan. Putin's only positive step so far, he said, had been to withdraw this week a threat to use military force. Poroshenko said it was clear Russia had intended to destabilise Ukraine from the beginning. He said he had done his best to persuade Russia's president to sign up to a peace deal when he met him in Normandy, together with Merkel and Hollande, days before his inauguration. His goal was to make Russia "a predictable partner", he added. Poroshenko admitted that the situation in parts of the east of the country was a "real disaster". He said: "Half of Donetsk province and one third of Luhansk province is a zone of war." "There are no banks open. No pensions are being paid. There is no water, electricity. Lots of people with weapons are on the streets. People are afraid to go outside." He said that in areas controlled by Kiev – some 87% of the country – by contrast, life was entirely calm. "Within 2km from our checkpoints it's normal life. It's peace. It's calm." Poroshenko conceded that it was impossible to win back the east using military force alone. His strategy had other components, he said. It included constitutional changes to decentralise power, guarantees for Russian speakers, and the rebuilding of houses and other infrastructure damaged by fighting from state funds. He also wanted to create jobs and renew traditional industries. All this was impossible to do, he recognised, while "there was a war going on" and with rebels in control of key towns. At one point Kiev lost control of 280km (174mi) of its border with Russia, he said. He said a "significant part" was now back under "our control" but that "many tanks and artillery systems" had already crossed from Russia. These were now in separatist hands, he added. Looking pained, Poroshenko talked of the price his country was paying to try and defend its unity and integrity. "If every day Ukraine pays with several lives of Ukrainian soldiers, with several injured, this is not a peace plan. This is not a ceasefire. We just block the operation of our army and they do what they want."

Ukrainian Move Against Putin Easier Said Than Done

KIEV, Ukraine -- The Ukrainian Energy Forum is ongoing in Kiev, and it could not have come at a more interesting time for a country that some experts say is at the center of an impending global gas war. Ukraine Prime Minister Arseniy Yatsenyuk submitted a draft law to parliament last week suggesting that the country drastically change its gas storage and transportation system. Specifically, the Ukrainian government wants to keep at least 51 percent ownership of pipelines and other domestic energy facilities, but begin selling the rest to companies from the United States and European Union. The proposed move is seen as a measure designed to buttress Ukraine's position against Gazprom, the energy giant that's controlled by the Russian government. Gazprom claims that Ukraine owes it $2 billion for natural gas that it used domestically. But sources who spoke with CNBC cast doubt on the success of such an effort, saying that Russian President Vladimir Putin will continue to play his hand in the region until a deal is made that gives him control of the pipeline, which transports Russian natural gas to markets in Europe. Robert Bensh, managing director of Pelicourt, an energy firm that holds assets in Ukraine, told CNBC that Putin will do everything he can to prevent such a law from going through. "Putin will not stop until he gets that pipeline," Bensh said, adding that Ukrainian President Petro Poroshenko "will be forced by Putin to sell the pipeline in order to resolve all gas debts and to remove all opposition forces within Ukraine, at the very least." Ian Brzezinski, senior fellow at the Atlantic Council who focuses on trans-Atlantic security, told CNBC that Putin's goal is to reassert Russian hegemony, if not control over Ukraine. "Acquiring control of a pipeline is one step toward and one benefit of achieving his overall objective," Brzezinski said. Bensh said, however, that he believes the United States will not idly stand by while Russia attempts to take control of Ukraine's gas transportation system. The U.S. ambassador to Ukraine, Geoffrey Pyatt, did not immediately respond to CNBC's request for comment on the matter. Timothy Ash, head of emerging markets at Standard Bank in London, characterized the draft law as a political move by Ukraine, which faces serious financial difficulties that Russia could help relieve if it felt pressure to do so. He does not see such a move succeeding, however, because Russia's influence over Ukraine is too great. "Russia comes in and takes Crimea, so they could get what they want with the pipeline as well," Ash said. Bensh told CNBC that Russian involvement in dividing up or acquiring the pipeline could cause a global gas war which would see Russia more strongly playing its hand as Ukraine and Europe's energy supplier. Russia recently inked a deal with China to provide more gas to the world's second-largest economy, an agreement that gives Putin more market leverage in his dealings with Ukraine and the West. Brzezinski, however, disagreed. "I do not see a global gas war, but I do see gas serving as a tool in a regional conflict, and that is already the case," he said. A spokesman from Chevron, which has operations in Ukraine, told CNBC that the company is not in a position to comment on the pipeline ownership proposal.

Five Ukraine Soldiers Are Killed As Rebels Defy Extended Cease-Fire

KIEV, Ukraine -- Rebels killed five Ukrainian soldiers in violation of a truce extended by the country’s government after the European Union gave Russia three days to quell the insurgency or face deeper sanctions. Twelve soldiers also were wounded in the attacks by pro-Russian separatists in Ukraine’s eastern region, government officials said. The violence occurred as EU leaders in Brussels demanded on June 27 that the separatists, whom Ukraine and its allies say are backed by Russian President Vladimir Putin, abide by a cease-fire that Ukrainian President Petro Poroshenko had extended through tomorrow, release hostages and start talks to implement a peace plan. Rebel leaders agreed to the extension, according to news service Interfax. Still, the defense ministry in Kiev said yesterday’s casualties occurred in two separate incidents. “Despite peace initiatives by Ukraine’s leadership and a unilateral cease-fire, the situation in the Eastern regions continues to escalate,” the ministry said in a statement. “Insurgents are ignoring the peace plan to ease the situation in Ukraine’s east and keep attacking troops.” Rebels in eastern Ukraine did release a total of eight monitors from the Organization for Security and Co-operation in Europe who had been held hostage since late May, according to accounts from the OSCE and Alexander Maltsev, a separatist spokesman for the self-proclaimed Donetsk People’s Republic. Other people not associated with the OSCE are still being held in the region. The EU leaders said that failure to meet their demands will result in “further significant restrictive measures” against Russia, according to a statement issued June 27. “If no visible progress is made on these points, then we are prepared to take further decisions, including drastic measures,” German Chancellor Angela Merkel said after the meeting. “We expect progress to come really in the hours ahead.” The U.S. blames Putin for supporting rebels and stoking violence the United Nations says has killed more than 400 people in the country of more than 40 million. The U.S. is preparing sanctions against Russia on technology aimed at exploiting and producing oil and gas products, a major part of that country’s economy, according to three people briefed on the plans. The U.S. and European allies imposed sanctions about two months ago on a small number of people and companies close to Putin. The U.S. is pushing Ukraine into conflict with Russia, Russian Foreign Minister Sergei Lavrov said yesterday, adding that the government in Kiev must consult with those in the country who are seeking more autonomy. “There are our partners from overseas, our American colleagues who, based on plentiful evidence, still prefer to push the Ukrainian authorities along the confrontational road,” Lavrov said on state-run television. He also said that while separatists in eastern Ukraine’s self-proclaimed republics of Donetsk and Luhansk listen to Moscow, they don’t respond to all requests from the Kremlin. Poroshenko signed a free-trade pact June 27 with the 28-member EU to bolster solidarity with the richer nations to Ukraine’s west. He said the agreement showed Ukraine’s “sovereign choice in favor of future membership of the EU.” “We’re just looking to modernize our country,” Poroshenko said in an interview in the French daily Le Figaro published yesterday. “We introduce freedom, democracy and rule of law, European values, and we’re being attacked because of it.” A previous rejection of the trade accord by the man Poroshenko replaced, Viktor Yanukovych, triggered deadly protests in Kiev last November that this year ousted the pro-Russian administration. Russia responded by annexing Crimea from Ukraine and has voiced support for Russian speakers in Ukraine’s southeast, who it says are under attack by their own government. About 67 percent of Ukrainians would vote to join the EU in a referendum, according to a June 6-11 Razumkov Center poll of 2,012 voters, versus 20 percent who wouldn’t. While the deal doesn’t offer EU membership, it gives Ukrainian companies better access to the world’s biggest trading bloc and will boost exports by 1 billion euros ($1.4 billion) a year, according to an EU estimate. In exchange, Ukraine pledged to use EU funds to meet product, safety and consumer standards, bolster human rights and fight graft Putin, who is trying to establish a Eurasian trading bloc made up of former Soviet states to rival the EU, has said the agreement will damage Russia’s economy. His government has said those who sign agreements with the EU may face repercussions. In yesterday’s violence, insurgents killed three soldiers and wounded four at a checkpoint in the Donetsk rebel stronghold of Slavyansk, military spokesman Oleksiy Dmytrashkovskyi said. Two other soldiers were killed and eight wounded in an attack by insurgents in the Luhansk region, he said. There were no details on rebel casualties. More than 20 Ukrainian soldiers have died in rebel attacks since the cease-fire began, Interior Minister Arsen Avakov said on June 27. The EU has imposed asset freezes and travel bans on 61 people connected with unrest in Ukraine and Russia’s seizure of Crimea in March. It has stopped short of broader curbs on investment and trade that might damage the European economy as it shakes off the effects of the debt crisis. Russia’s economy can withstand sectoral sanctions, though a worst-case scenario would result in an economic contraction, higher inflation, and declining incomes and government reserves, Russian Economy Minister Alexei Ulyukayev said on state-run TV yesterday. The UN estimates that about 54,000 people have fled to other places inside Ukraine, while 110,000 displaced Ukrainians have arrived in Russia this year. Russia’s failure to comply with the EU deadline could lead to additional asset freezes and travel bans after June 30. A move toward more sanctions could come as early as mid-July, when the leaders are scheduled to meet again. EU sanctions require a consensus of the bloc’s 28 governments, making it possible for countries such as Austria, Slovakia or Italy to stand in the way. Austria deepened its economic ties with Russia last week by signing an accord with OAO Gazprom (OGZD) for direct pipeline access to Russian gas. “The important thing is that for the very first time in history we -- the EU and Ukraine -- agreed on a common stance vis-a-vis Russia,” Polish Prime Minister Donald Tusk told reporters in Brussels on June 27.

Can Russia become politically irrelevant state?

Without a shadow of doubt, the recently signed Sino-Russian gas deal was a perfect opportunity to clink glasses for champagne lovers of both delegations. While one side was happy with the price, the other one looked content with its new customer and volume of the order. This gas supply treaty, which on a surface may look like an ordinary business deal, albeit very massive, marks the beginning of closer cooperation between the two eastern heavyweights in almost every aspect. It also will have an impact for the major geopolitical and energy sector players globally. Take the European Union for instance. As paper was still absorbing the fresh ink of the signatures under the treaty text in Shanghai, here in Europe the ragtag collection of bog - standard politicians, who proudly call themselves the European Commission, were left shell-shocked. Those gentlemen saw their much celebrated leverage of a massive buying power slipping away. They realised that China passed the ball to Mr. Putin, who effectively is now in the driving seat when it comes to the EU - Russian relations. European leaders came very close to understanding that from now on any new package of sanctions against Russia may very well backfire, although officially both sides underline the importance of keeping the energy resources out of weaponry list. Despite such bilateral declarations, the European Union is seeking to diversify its energy supply. However, other gas and oil rich nations such as Qatar, Norway, Azerbaijan, Iran or even the United States are not charity organisations, nor are they stupid enough not to exploit the new realities in a global gas market. They are likely to milk out some extra cash from the cornered EU, and the ordinary Europeans will be forced to pick up the bill. Back in Russia, the news of sealing the deal with the Chinese was received as a very positive step, although it is still far too early to celebrate. Yes, Mr. Putin shook away his annoying eternal European critics, who are now busy scratching their own heads, thinking of how to find a way out of their own potentially vulnerable position. But the Russian president also has his own problems to solve. Russia now stands at a crossroads that may lead it either to the direction of development or stagnation. It is vital for the Russian leadership to understand that high price for the energy resources in the future and the 400-billion-dollar deal with China offers a perfect opportunity to modernise the world's largest country. This can be done by funding infrastructure projects, easing business climate and attracting foreign investors. And when we say 'foreign' that does not necessarily mean Western. In fact, money, if used wisely, can even help stabilise Russia's demographic situation especially in its long-neglected Far East region. But is Moscow ready to take concrete steps in order to make all that happen? There are many sceptics who will say that it is not. According to them, Russia is traditionally a hostile country, when it comes to change or adaptation to new realities. However, the last ten years or so illustrate that the will to improve is alive and kicking. Although, we have to admit that the majority of obvious 'technological leaps forward' can be observed almost exclusively within the defence industry. However, the hugely successful Sochi Winter Olympics was a clear sign that Russia has the vast amount of untapped potential to bring itself 'up to date' in other spheres of life too. It is also important for policy makers in the Kremlin and the Duma to comprehend that the most valuable asset of their homeland is not oil, gas, gold or iron ore, it is the Russian people. Future citizens can have by far greater impact on their country's fortunes and prosperity than a mere sale of natural resources. The income that Russia receives from export of fossils must not serve only as a filler of a budget holes or only as a fuel for furnaces of the military industrial complex. Gas or oil revenue also must be more actively reinvested in ordinary people through education and social programs, if the country wants to realise its whole human potential in the future. The potential, which is not absent, but rather suppressed by underfunding, colossal bureaucracy and corruption. If those three issues are not addressed seriously, then Russia may go down the wrong path - the path of stagnation and weakening. Sandwiched between China in the east and the EU (NATO) in the west, Russia could face a dangerous transformation into resource-rich, but politically irrelevant state. This is not a desirable development for humanity, because the world with several centres of political gravity will always remain a better option than unipolar dictate