Day: August 31, 2008

Putin’s 40 billion plus

Writing in the Jerusalem Post, Caroline Glick has some clear-headed insights into the nature of Russia’s unstable and venal power structure, which is now analogous to those of North Korea and Iran: Excerpt:

…as Pavel Felgenhauer noted on the Jamestown Foundation’s Eurasia Daily Monitor Web publication, Russia’s government-controlled media is engaged in Soviet-like frenzied demonization of US leaders. In one prominent example this week, the government-mouthpiece Izvestia launched an obscene broadside against US Secretary of State Condoleezza Rice. The newspaper referred to her as “insane,” and then crudely demeaned her as “a skinny old single lady who likes to display her underwear during talks with Russian Foreign Minister Sergei Ivanov.”

As the West scrambles to build a strategy for contending with Russia, many writers and policy-makers have pointed out that Russia is fundamentally weak. As my former Jerusalem Post colleague Bret Stephens noted Tuesday in The Wall Street Journal, Russia’s demographic projection, like its oil and gas production, forecasts, is dim. The CIA has pointed out through demographic attrition, Russia’s population will decline more than 20 percent over the next 40 years. And due to “underinvestment, incompetence, corruption, political interference and crude profiteering,” Russia’s oil production will decline this year for the first time. Its production rates are expected to drop precipitously next year and in the coming years as well.

Cognizant of these negative trends, US and European leaders are hoping that Russia’s bleak prospects will convince its leaders to step back from the precipice of war with the West to which they are now hurtling. On Wednesday, US Assistant Secretary of State for European and Eurasian Affairs Daniel Fried warned, “Russia is going to have to come to terms with the reality that it can either integrate with the world or it can be a self-isolated bully. But it can’t have both.”

WHILE IT remains to be seen if the West will agree to isolate the Russian bully, it is certainly the case that Russia’s leaders are not blind to their country’s weaknesses. This is so because to a large degree, Russia’s dim long-term prognosis has been caused by the domestic policies of Prime Minister Vladimir Putin and his cronies. And in light of this, it can be safely assumed that far from causing them to avoid confrontation with the West, their cognizance of Russia’s problems is what caused them to adopt their belligerent posture.

In December, Russian political insider Stanislav Belkovsky told the German media that during his two terms as Russia’s president, Putin amassed a fortune in excess of $40 billion, making him the wealthiest man in Europe. Putin’s wealth has been built through his ownership of vast holdings in three Russian oil and gas companies.

Were Putin invested in the long-term prosperity and strength of his country, he would have invested that money in Russia. Instead he has squirreled it away in bank accounts in Switzerland and Liechtenstein. And of course, Putin is not alone in betting his wealth against his country’s future. Like him, his cronies in the Kremlin and the FSB (Federal Security Service) have accrued their wealth through their ownership in Russian companies that Putin has nationalized. And like him, they have taken their loot out of the country.

The behavior of Russia’s rulers makes clear that they do not concern themselves with the long-term health of their country as they construct their policies. And their concentration on short-term gains makes their decision to confront the US and Europe inevitable. It is now, when Russia’s oil wealth is at its peak, that they are most powerful. And with their current power they seek to maximize their personal gains while justifying their actions in the name of Russian glory.

The Five Principles

The first two are:

1) Russia recognizes the priority of the fundamental provisions of international law, is opposed to a unipolar world order, and avoids confrontation with other states.

2) Russia will protect its citizens wherever they are, and will defend their interests in regions where there are countries friendly to Russia. These are not only states which have a common border with Russia.

Yevloyev assassinated reports that Magomed Yevloyev, owner of the web site, which is critical of Moscow-backed President Zyazikov, has been shot and killed in Nazran.

According to the web site’s staff, Yevloyev arrived on the same plane as Ingushetian President Murat Zyazikov. After the president left, men from the bodyguard of the Ingushetian interior ministry surrounded¬†Yevloyev, made him get into a car and drove him away.

According to the editors of the site, on the way from the airport Yevloyev was shot in the head, and then thrown out of the car. The seriously wounded man was found by his relatives, who had come to meet him. They took Yevloyev to hospital, where he later died. 

Reuters has a report here.

RFE/RL has another Reuters report here.

Life or sausage

There are signs that the Kremlin’s current obduracy in the face of the international reaction to its invasion, occupation and partial annexation of Georgian territory has roots in something other than a desire to show the world how big its muscles are. On Friday, Vladimir Putin gave another interview to German television, in which he speculated on the likely economic consequences of Russia’s recognition of South Ossetia and Abkhazia, and its military presence on the ground.

“What, can we not protect the lives of our citizens there? And if we defend our lives, will they take away our sausage (kolbasa – the word also has the connotation of “bread and butter”). What is our choice – between life and sausage? We shall choose life,” Putin exploded.

This response appears to indicate that Putin inclines towards the anti-modernizing Kremlin trend recently alluded to by Pavel Felgenhauer:

…presidentlal adviser Gleb Pavlovsky has said in a radio interview (on Ekho Moskvy) that there is a “party of war” inside the Kremlin – a group of high officials that are pressing for a direct attack on Tbilisi to overthrow the Georgian government. Pavlovsky states the alleged “party of war” wants to use the conflict with Georgia to undermine President Dmitry Medvedev’s plans of modernize Russia, that “they say we must go further than Tbilisi,” apparently indicating possible plans of further military action to subdue other pro-Western Russian neighboring nations like Ukraine.

If Russia continues along the path of international isolation, the economic consequences for the country are likely be catastrophic. In a recently-published article in Grani, former Russian prime minister Mikhail Kasyanov outlines some of the probable results:

In all likelihood, we can expect a decline in the volume of purchases of imports, our dependence on which has grown strongly. in recent years. The risks are growing. Once again, as in the 1990s, there is a flight of capital from Russia. The banking sector will not be able to supply our industry and middle class with the credit they need.

Meanwhile the rate of inflation will not grow less because of these actions. Moreover, I am certan that from January 1 next year, the tariffs for gas, electricity, and transport will once again be increased. The increase in tariffs will automatically affect all other goods in production. As soon as the authorities feel the worsening of economic situation, as it will be necessary to maintain the profits of the state corporations, we will all be told to tighten their belts, and come together, because we now live in a state of cold war. And then we will all be summoned to the trenches.

It is probably safe to assume that the tightening of the belts will apply first and foremost to Russia’s enormous, hard-pressed civilian population, and last of all to its small, affluent political and financial elite.