This is one in a series of post cards from Reuters reporters across Europe, Middle East and Africa.

Who rules the world’s biggest energy producer? That’s the question that is bugging many people in Russia as the country’s two leaders – PM Vladimir Putin and President Dmitry Medvedev — try to cope with the worst economic crisis since the 1998 domestic debt default.

Many believe Putin, a former KGB spy, is still the boss despite handing over power to Medvedev last year. But boss of what? The economy forecast to contract this year and Moscow is facing tumbling budget revenues as the income from oil, gas and metals exports dries up.

The Kremlin says it is concentrating on avoiding social tensions but the country’s richest men – the oligarchs – also say they need state bailouts. Russia’s richest man has been forced to open restructuring talks with Western creditors and more are likely to follow.

Russian debt and equity markets have rallied this year as bottom feeders snap up what they say are bargains of the decade. Sovereign yield spreads have narrowed. But friends in major companies report tumbling demand across the board – from shampoo to cars. The banking system has stopped giving out credit, job losses are soaring and the property market is paralysed with fear.

The smartest people in Moscow expect this to be a deep, long Russian crisis that will send prices down far further. The question is how the ruling duo of Putin and Medvedev handle the crisis; or rather, what happens if they fail to.

(Communists line up at Vladimir Lenin’s mausoleum to pay their respects to the Soviet state founder on his birthday in the Red Square in Moscow April 22, 2009. REUTERS/Denis Sinyakov (RUSSIA POLITICS))

When thousands in the streets of the Ukrainian capital Kiev and the Georgian capital Tbilisi overthrew Soviet-style rulers, many felt warm in the embrace of the West.

Western support for the opposition — open and behind the scenes –  helped many people overcome fear of Soviet-style reprisals to stand for days outside Georgia’s parliament in 2003 or to pitch orange tents on Kiev’s main thoroughfare in late 2004, providing a lasting image of “people power” overthrowing a stale leadership.

Washington, or at least organisations with close political ties with the Bush administration, had courted opposition parties in both countries, coaching in the methods of democracy or securing “regime-change” as they sought to end the rules of President Leonid Kuchma and Georgian leader Eduard Shevardnadze. 

But the new leaders, and their teams, soon found that the attentions of an adoring West didn’t last for long. Ukraine’s team of President Viktor Yushchenko and Prime Minister Yulia Tymoshenko soon fell apart.                                                                                                                                                                             The West grew tired of the constant bickering of the Ukrainian leaders, unable to agree on almost any policy, while a resurgent pro-Russian Viktor Yanukovich, who lost a rerun of the presidential election, encouraged unity in his own party and rose in popularity.

In Georgia, Saakashvili cracked down on post-election protests last year and now some blame him for taking Tbilisi into a war it could never win.  

The war in South Ossetia has frightened Ukraine. Yushchenko was quick to turn to the United States, saying he considered “U.S. support for Ukraine to be very important”.

But has the West given up? Ukraine and Georgia have been promised membership of NATO one day but the alliance decided at a summit in April not to give them a road map to membership.

Tomas Valasek, director of foreign policy and defence at the Centre for European Reform, said Georgia could be ruled out of NATO membership for the time being. ”There will be allies who will say that this government is not creating stability, if anything it has done the exact opposite … you don’t want an ally in NATO that has a propensity to act the way that Saakashvili did.”

 But it could go either way for Ukraine.

“You could argue that no one will go to war over Ukraine, and then it will be difficult to invite Ukraine into NATO,” Valasek said. “Or the allies might decide this — that it is important that we prevent Russia acting irresponsibly in the neighbourhood, and it is important to send a message to say we will not be discouraged by what happened in Georgia.”

Did Italy unwittingly trigger the crisis in South Ossetia and then play a central role in stopping it? It may not be the view in most of the world but you could come to that conclusion from reading some Italian papers.

First, Georgian President Mikheil Saakashvili was quoted in a report by French intellectual Bernard-Henri Levy on Wednesday, which was reproduced in full on the front page and pages 2 and 3 of Corriere della Sera, as saying that he was first alerted to the situation in South Ossetia by reports in the Italian press that he saw while on a dieting holiday in Italy.

“I am in Italy, for a slimming cure, and I am about to leave for Beijing. Then, in the Italian papers, I read: ‘Preparations for war in Georgia.’ You understand? There I am, relaxing, in Italy, and I read that my country is preparing for war! Realising something is wrong, I quickly return to Tbilisi,” Saakashvili told his French interviewer.

Besides the intriguing idea of anyone trying to lose weight in Italy, the piece suggests the Italian press had a central role in the Georgian president’s decision to try to retake the breakaway region of South Ossetia.

According to another Italian media outlook, the weekly magazine Tempi (on their website only, since the print version has been suspended for summer holidays), Italy also played a central role in stopping the five-day conflict that it may have contributed to starting.

Tempi quoted Prime Minister Silvio Berlusconi as saying that it was he who persuaded Vladimir Putin not to let his tanks go all the way to Tbilisi, thus avoiding what Berlusconi said would have been a “useless bloodbath”.

When Reuters took the precaution of checking the quotes with Berlusconi’s press office, we were first told: “If that’s what they write, go ahead and pick it up.” We also passed on the quotes to Moscow to get a response from Putin’s office, to clarify whether Berlusconi really has such influence on the Russian premier and former president.

Very soon, Berlusconi’s office told us it was putting out a statement to deny the juiciest quotes in the Tempi interview, where Berlusconi was quoted as saying: “Thank God my friend Putin listened to me. Otherwise there is no bloody way the Russian tanks would have stopped 15 km from Tbilisi. We have avoided a useless bloodbath.”

The quote seemed to echo Berlusconi’s election jingle “Meno male che Silvio c’e” (”thank goodness for Silvio”). But it was too good to be true, according to his press office at Palazzo Chigi. They said these quotes were not legitimate, were not the kind of language Berlusconi would have used anyway, and were the fruit of a misunderstanding at best, at worst pure invention.

The Italian prime minister, now in his third term in power, does have the ear of the Russian leader, who was the first foreign leader to visit him after the Italian conservative leader’s election victory in April, at his villa in Sardinia (see picture). The newspaper owned by Berlusconi’s brother, Il Giornale, reported on Aug. 12 — the day Russia ordered a halt to the fighting — that the Italian leader was mediating and “exercising moral-suasion” on Putin. The same paper later quoted Berlusconi as saying: “Putin told me ‘Talk to Bush’. And Bush told me ‘Talk to Putin’. In the end we achieved a major result.”

He tried to build relationships with other world leaders but where did it get him?

In 2001 President George W. Bush famously declared that he had looked into Russian President Vladimir Putin’s eyes and got a sense of his soul. He invited the Russian leader to his parents’ seaside estate
in Kennebunkport, Maine, where the former Texas oilman and ex-KGB spy went fishing and ate lobster. Bush then visited the Russian leader at his vacation villa in the Black Sea resort in Sochi, all to repair a friendship that had developed cracks.

In another land far, far away Bush was trying to build ties with Pakistani President Pervez Musharraf who decided after the Sept. 11 attacks that he was going to be “with,” rather than “against,” the United States in helping fight terrorism. Bush traveled to Islamabad and stood side-by-side with the Pakistani leader, who had taken control of the government through a coup years ago, and pledged U.S. support for the ally who was helping fight al Qaeda.

As Bush prepares to leave office in January, those friendships have taken a turn. Musharraf just resigned rather than face impeachment. Russia, now with Putin as prime minister and his protege as president, has sent forces into Georgia, a staunch U.S. ally in the region.

Asked whether he trusted Putin any more, U.S. Defense Secretary Robert Gates replied: “Any more is an interesting add. I have never believed that one should make national security policy on the basis of trust. I think you make national security policy based on interests and on realities.”

A poster at the entrance to the World War One exhibition at London’s Imperial War Museum depicts the heir to the Austro-Hungarian Empire, the Archduke Franz Ferdinand and his wife, minutes before they were shot dead as they toured the streets of Sarajevo in an open topped car. The two bullets triggered World War One. Alliances quickly came into play and an argument between Austria and Serbia drew in Russia, Germany, France, Belgium and Britain.

Europe was at war.

On August 8 this year Russia sent its forces into Georgia to repel Tbilisi’s attempt to wrest control of the pro-Russian, breakaway region South Ossetia. Georgia, like Ukraine, has been pressing to join NATO but has only been promised membership of the alliance at an unspecified future date. What would have happened if Georgia had already secured NATO membership, as it wished, at the alliance’s meeting in Bucharest back in April?

Would the conflict have dragged in fellow NATO members including the United States, Britain and Germany? By invoking NATO’s Article V mutual defence clause, the Georgians could have required other nations to come to their assistance.

Could this have led to another European war at a time when the West’s guard was down and the Cold War years seemed consigned to history?

In the days after the conflict began, a senior envoy from a European state opposed to Georgian NATO entry told Reuters: “Thank heavens we didn’t take them in… No one in NATO wants to be dragged into a war in the Caucasus because of (President Mikheil) Saakashvili’s miscalculations.”

What do you think? 

The Caucasus tinderbox is alight again. How far will the flames spread this time and what can the outside world - the United States, the European Union, NATO - do to extinguish them?

The strategic significance of this mountainous region stretches back through history.

To the west lies the Black Sea, to the east the Caspian, to the south the Mediterranean, Iran and Turkey.

In the past Alexander the Great, Genghis Khan and the Russian tsars struggled to control its trade routes. Today Russia and the West are competing for influence over its energy pipelines carrying Caspian oil to world markets.

The Caucasus’ blue mountains and fiercely independent people have caught the imagination of Russian writers, Lermontov and Tolstoy. It has created only headaches for political leaders.

Georgia’s pro-Russian breakaway region South Ossetia is the latest battle ground in a long-running conflict.

Will the fighting, involving Russian and Georgian troops end there, or will another of Georgia’s breakaway regions Abkhazia seize the opportunity to press its claim for autonomy?

And what of Chechnya, a thorn in Russia’s side for nearly two centuries. Moscow sent in the troops to bring Chechnya to heel in 1994 and again in 1999. Will it try again to free itself of Moscow’s influence?

And what can the international community do to end the fighting. Dependent on Russian oil and gas, Europe has little or no room for manouevre. The United States has provided vocal backing of Georgian President Mikheil Saakashvili, but he would be misguided to expect more. So who can put out the flames?

The temperature at the United Nations Security Council hasn’t been this high in years — and it’s not because the U.N. management raised the thermostat slightly to cut electricity costs. It’s due to the heated exchange of insults and accusations between Russia and the United States, which has reached a fever pitch reminiscent of the Cold War years.

U.S. Ambassador Zalmay Khalilzad accused Russia on Sunday of using the Georgian incursion into Georgia’s breakaway enclave of South Ossetia as an excuse for a massive military assault against its tiny pro-Western neighbor whose ultimate goal is “regime change” in Tbilisi. He also assailed Moscow for waging a “campaign of terror” against the civilian population of Georgia, a former Soviet republic.

Russia’s U.N. Ambassador Vitaly Churkin shot back that regime change is an “American invention” and suggested it was hypocritical of Washington to talk about attacks on civilians in light of what it has done in Iraq, Afghanistan and Serbia. Churkin said Russia is only trying to defend its peacekeepers and protect civilians from Georgian “ethnic cleansing” and “genocide” in South Ossetia, a small pro-Moscow province that threw off Tbilisi’s rule in the 1990s and has been managed by Russian troops since.

There’s a subtext to this dispute and it isn’t just the U.S. and European support for the declaration of independence of Kosovo, a former breakaway region of Serbia that seceded in February. Serbia and its ally Russia were both enraged by what they saw as an unjustified tearing away of a large chunk of Serbian territory in violation of international law. (Of course, the Georgian separatists in South Ossetia and Abkhazia — another Georgian breakaway region — took notice.)

Tensions between Russia and the United States have been simmering for a while.

When the United States announced it was planning to build a missile shield in Poland and the Czech Republic several years ago, then President Vladimir Putin was outraged. He dismissed U.S. statements that the shield was to guard against Iran, not Russia. In February 2007 at a security conference in Munich, Germany, Putin accused the United States of trying to create a “unipolar” world with Washington as its “one single master”. He made clear that Russia would not stand idly by while Washington tried to subjugate the planet. U.S. officials were taken aback at the force of Putin’s speech, which some said sounded like a declaration of a new Cold War.

Russia, richer than ever thanks to its massive oil and gas revenues, has made no attempt to hide its irritation at Washington’s staunch support for Georgia’s NATO aspirations. It views the expansion of NATO towards its borders as an encroachment on its sphere of influence.

Is it possible that when Georgian President Mikheil Saakashvili decided to go into South Ossetia and try to put it back under Tbilisi’s control, he gave Russian leaders a golden opportunity to severely punish Georgia’s pro-Western leadership and show the world that Russia is no longer the weak, economically devastated nation it was in the 1990s?

Perhaps the message is — Russia is back, it’s powerful and it won’t tolerate anyone messing around in its backyard.

Or is there another message here?

Is Kosovo to blame for the fighting in South Ossetia?

When the Serbian province seceded from Belgrade in February, South Ossetia was quick to reassert its own claim to international recognition.

As a spokeswoman for separatist leader Eduard Kokoity told Reuters at the time: “The Kosovo precedent has driven us to more actively seek our rights.”

Those remarks will not have gone unheard in Tblisi and could well have added some urgency to Georgia’s desire to impose its rule over breakaway South Ossetia.

With widespread Western backing, Kosovo was able to achieve a fairly clean break with its former ruler, despite Russian objections.

Now Moscow is backing the separatists and it’s far from clear how things will play out this time.
 

Russia’s angry response to an accord between Washington and Prague on building part of a U.S. missile defence shield in the Czech Republic is reminiscent of the rhetoric of the Cold War. Although Russian President Dmitry Medvedev says Moscow still wants talks on the missile shield, his Foreign Ministry has threatened a “military-technical” response if the shield is deployed.

That phrase could have come straight out of the Soviet lexicon and seems more at home in the second half of the last century than now. Russian military analyst Pavel Felgenhauer called it psychological pressure to try to encourage opposition to the missile system among Europeans, and described it as “the same sort that was used in the 1980s by the Soviet Union when the United States deployed cruise missiles in Europe.”

We are, of course, a long way from the tensions of the Cold War. But the dispute is reminiscent of the war of words between the Soviet Union and the United States in the 1980s over another missile defence system — the Strategic Defence Initiative proposed by Ronald Reagan. His dream of a partly space-based missile system, otherwise known as Star Wars after George Lucas’ 1977 film, never became a reality but the row over it plagued Soviet-U.S. relations for years.

The disagreement over the missile defence system that George W. Bush now wants to be partly based in Europe risks having a similar impact on U.S.-Russian relations. Perhaps fittingly, it has been referred to as Son of Star Wars.

I was a correspondent in Moscow in the 1980s when the dispute over Star Wars was at its height. The disagreements were clear. Reagan wanted to deploy a multi-billion-dollar land- and space-based shield to shoot down incoming missiles. Soviet leader Mikhail Gorbachev said the programme would disrupt the nuclear balance and fuel an arms race in space, and expressed  hope that Europe would not become “a testing-ground for the Pentagon’s doctrines of a limited nuclear war”. 

The disagreement led to the collapse of a 1986 superpower summit in Iceland.

When I was back in Moscow in the 1990s, Bill Clinton and Boris Yeltsin were at loggerheads over U.S. plans for a Star Wars-style missile defence umbrella, even though Clinton had pulled the plug on Star Wars in 1993. Moscow said plans to develop the new missile defence system would violate the 1972 Anti-Ballistic Missile Treaty, an agreement Moscow saw as a cornerstone of global security.

Similar issues hung over Vladimir Putin’s presidency and now threaten to strike a severe blow to hopes of an improvement in U.S.-Russian ties at the very start of Medvedev’s presidency.

Washington says it needs a missile defence system based partly in Europe to provide protection against any attack on  European or U.S. targets by rogue states such as Iran, which tested new long- and medium-range missiles on Wednesday. Russia says the missiles could threaten its own defences and might become a bigger threat over time it if the system expanded.

In the 1980s, Moscow was worried about a project that would have based missiles outside the former Soviet-led Warsaw Pact. It is now concerned about a system that would be even closer to home. A radar tracker is to be placed on Czech soil and, if a deal is reached with Warsaw, 10 interceptor missiles could be installed in Poland. Both Poland and what was then Czechoslovakia were members of the Warsaw Pact.

If Poland does not reach an agreement with the United States, Lithuania has been suggested an alternative site for the interceptors. That would be an even less welcome prospect for Moscow because the Baltic state was part of the Soviet Union. Little surprise, then, that Medvedev took a firm line on the issue in comments he made at the group of Eight summit in Japan.

But Moscow could risk shooting itself in the foot by reverting to rhetoric that harks back to the Cold War. Michal Kaminski, an aide to Polish President Lech Kaczynski said on Wednesday Russia’s reaction was unacceptable. He said it showed Poland should “strengthen our alliance with the United States because beyond our eastern border there are politicians who use a language we thought had vanished many years ago, the language of might and imperial ambitions.”
 
   

 What makes Russian President Dmitry Medvedev tick? How independent is he of his predecessor, Vladimir Putin?
Medvedev gave Reuters a chance to find out more about his plans, and get some clues about the questions being asked by Russia watchers, analysts and diplomats, by granting us an interview in the Kremlin.
During a 90-minute question-and-answer session he played down differences with Putin, his long-time ally who is now prime minister, and portrayed himself as a continuity figure but the contrast in style and tone between the two men was striking.
Medvedev made none of the harsh attacks on the West that became Putin’s trademark and used considered, lawyerly phrases that sounded quite unlike Putin’s more direct and earthy language.
Medvedev said Russia’s foreign policy would not be swayed by criticism from abroad, but added that complaints about its policy were normal. He avoided echoing Putin by making charges of Western hypocrisy and double standards.
But he did sound more like Putin when discussing Russia’s media, saying television channels, newspapers and websites were “absolutely free” and dismissing any possibility of special controls on the media in Russia.
Some analysts think Medvedev is a deliberately more liberal choice than Putin who can usher in an era of greater freedom, private property and foreign investment. Others view him with suspicion as little more than a Putin puppet.

 What do you think?