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Alexei Kudrin

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I really did think it was getting better there under Joshu Yaffa, certainly it’s not typical of him to write such vitriolic but more importantly factually inaccurate articles. Let’s hope the world’s sleaziest magazine was getting one of their old-timers to file for him that day, instead of representing the start of a new descent into Lucasian raving.

As usual, I will ignore the emotive and hyperbolic language which starts from the get go with the title “Herod’s Law“. Though I would note from the outset that The Economist would never in a million years use similar terms to describe, say, the child victims of the US drone wars. That is because its main function is to serve as a mouthpiece of the Western ruling class.

So here is the list of its lapses in journalistic integrity:

(1) Citing only anti-Kremlin figures: Alexei Venediktov (of Echo of Moscow), an opposition deputy, and an organization headed by Kudrin. No honest attempt is made to question the (57% of) Russians who support the law.

(2) Extremely and almost certainly willfully misleading usage of statistics:

Over the past 20 years American families adopted 60,000 Russian children with 19 recorded deaths among them. Adoption in Russia is relatively rare. Even so, in the same period 1,500 adopted children died in Russian families.

Thanks to Charles Clover, the 1,500 figure very likely originated from a release by the Public Chamber of the RF that argued against the idea that foreign adoption is dangerous. But the Economist did not see it fit to give the full quote (my bold for emphasis):

According to data from Russian experts, in the past 20 years US citizens adopted nearly 60,000 Russian children; during this period, 19 children died by the fault of their adopted parents. In the same period, in the families of Russian citizen adopters, there died nearly 1,500 children.

See what they did there? Needless to say, the numbers of children dying by the “fault of their adopted parents” vs. the numbers who just died (by other murderers; by house fires, traffic accidents, medical complications, etc) are IN NO WAY COMPARABLE! And yet the Economist misleading treats them as the same.

In addition, it is subtly implied that per capita risk may be even greater than the impression generated by the absolute numbers. In reality as I already pointed out adoptions by Russians with the exception of two years have always exceeded foreign adoptions (of which Americans account for one third):

What’s more, the 19 recorded cases mentioned may well be – indeed, are quite likely to be – underestimates, because tracking mechanisms for Russian adoptees in the US are poorly developed (indeed, this was one of the main issues of contention between Russia and the US on adoptions).

(3) Internal contradictions: This is literally one of the most hilarious, keep-your-head-in-a-vise texts I’ve read this week:

Having acquired considerable wealth and freedom of movement, Mr Putin’s elite is growing increasingly tired of his rule. Whereas before he offered wealth and impunity in exchange for loyalty, he now demands that they take sides in the Magnitsky case, a sacrifice that could yet jeopardise their position in the West. Instead of uniting the elite behind him, this could turn more people against him.

So “more people” (57% of whom, BTW, support the Dima Yakovlev Law) are going to turn away from Putin… because his actions threaten the yachts and villas of “Putin’s elite” in the West??

The reaction would be just the opposite because that “elite” is loathed and despised, whereas Putin has overwhelming popular approval. Only a moment’s thought would reveal the absurdity of The Economist’s statement, however I suppose there is no time for reflection when there is a propaganda hit piece to be written.

(4) Edit – this is a new addition. This is the photograph the Economist uses to demonstrate this “Herod’s Law.”

It is captioned “One of the victims of a shameful law.” Thing is, however, that there is a WAITING LIST for adopting children under the age of 3 by Russian citizens. As such using this photo of a toddler to illustrate the piece together with the caption is nothing more than blatant and cynical emotional manipulation.

(Republished from Da Russophile by permission of author or representative)
 
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I’m not a big fan of analyzing Russian politics via “Kremlin clans”. Estimating their relative power seems to involve mostly tea leaf reading, and in any case the entire exercise is of dubious predictive value. Even the exact compositions and identities of the various clans differ from analyst to analyst! Besides, clans are hardly unique to Russia; every US President seems to bring over some of his friends and cronies, but do we spend much time going over their histories and connections? For the most part, no.

That said, the investigative magazine Russian Reporter (which, by and by, happened to be Assange’s Russian partner in Cablegate) has compiled what is easily the most impressive research – at least visually and methodologically – on the Kremlin clans. Their efforts are translated below.

The Anti-Clan Revolution

Viktar Dziatlikovich, Kristina Khutsishvili, Philip Chapkovsky

The new Cabinet has been rid of clannishness, but at the same time it no longer has competing centers of influence. These are the main conclusions that can be drawn after studying its composition using a special technique developed by “Russian Reporter”, which takes into account officials’ personal ties before their assumption of one or another post.

A detailed study of the Kremlin clans was published by “Russian Reporter” in Issue 35 of 2011. Back then the study of these “social connections” between Russian bureaucrats allowed us, essentially, to prove that Russia is governed by a more or less wide circle of centered around Vladimir Putin, the so-called St.-Petersburg clan – a close group of people, who have long been close friends with each other. Applying the same method to the Dmitry Medvedev government, we find striking differences. One can now say, that the principles by which the Cabinet is formed have changed cardinally.

The Clan is Compressed

The government of 2011 formed a maximally interconnected network. Generally speaking, even before their appointment, everyone was already linked to each other (studied or worked together, were friends, interacted with each other). On the one hand, this consolidation worked to strengthen the power structure; on the other hand, it blocked the process of elites renewal. An analogous network for the new government would be substantially thinner, in fact it would not be a network at all but its relics. Neutral figures, who were not tied to any of their current colleagues before their work in government, are now in the vast majority. The old schematics are compressed by new forces. There has been a renewal and a rejuvenation (the youngest Minister is 29 years old) of the elites, albeit a shell of the old network still remains. But the size of this shell no longer allowed us to talk of the clannish characteristic of government. Consequently, it is hard to criticize the new government: It is indeed relatively young, there was in fact a rotation of the elites, and that it has “many respectable people” say both politologists, and businessmen.

The Dissipation of Centers of Power

In the past year, in comparing the governments of the years 2011 and 2000, we noted that the Cabinet of the early Noughties had many more centers of power.

In the government of Vladimir Putin, which has now receded into history, there remained only two such centers of power: Putin’s own group, and the “reforming” group of Kudrin and Chubais. After Alexey Kudrin’s firing, there was no point in expecting the formation of an alternative center of power within the new Cabinet. And so it wasn’t.

Now there is only one center of influence – Dmitry Medvedev, and there can be no alternatives by definition. But on our graph Medvedev isn’t in the center. Why? According to our methodology, the person at the center of the graph, is the one with the maximum quantity of connections. And that person remains Putin. He still has more connections than Medvedev, even despite the fact that we didn’t include in our study those people who no longer nominally hold high positions either in government nor in the Presidential Administration, but who will clearly continue to exercise influence over Putin, and thus too over the policies of the Cabinet – e.g., Tatyana Golikova and Andrey Fursenko.

That is, the second center of influence is located outside the government. His strength doesn’t only accrue from those people we named, but also those who are not even formally connected with the Presidential Administration and government. So, Igor Sechin, stepping down as director of Rosneft, will almost certainly retain influence over policy making on the national energy industry.

It is in this kind of sense that the current power schematics make trigger a low-intensity conflict. It may be assumed that the “clan” will try to continue influencing decision making, and the main question consists of the extent to which Medvedev’s government will be able to establish itself as an independent center of decision making.

***

A few of my own observations and opinions.

(1) This network based approach to analyzing Kremlin clans is definitely a lot more “scientific” than the seemingly unsystematic, ad hoc approach favored by Pribylovsky and the others (eXile, Stratfor). Most importantly, it makes sense (face validity). In the early Noughties, there were many jostling clans; a carry-over from the 1990′s, redolent of Ukraine; patently clientelistic, and no doubt fostering a lot of corruption. 2011 then could be seen as the peak of the so-called Power Vertical, in which all the clans got centered around Putin. 2012 represents a cardinally new phase that is technocratic, an assessment a person with such polarly opposite views to mine such as Anders Aslund can agree with.

(2) Ironically, judging by RR’s model, President Putin in 2012 is nowhere near as clearly dominant as PM Putin in 2011. Is this part of the modernization agenda? A mistake? A compromise with Medvedev for his agreeing not to run for a second term? Or is this “over analysis”? Another interesting thing of note is that whereas Kudrin was second dog in 2011 (as opposed to Sechin, in Pribylovsky’s version) while Medvedev was nothing special, as of 2012 Medvedev is rather dominantly second. I wonder to what extent this could account for Kudrin’s scandalous spat with Medvedev once Putin endorse the latter for the Presidency. Also interesting to notice that very few of the people tied to Kudrin survived into the 2012 government relative to Putin’s and Medvedev’s.

(Republished from Da Russophile by permission of author or representative)
 
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One thing that strikes you, as you wander the shops of any Russian city, is the sheer cheapness of booze and cigs. As little as 3 years ago, one could buy a pint-sized bottle of beer or a pack of cigarettes for just $1, while a 0.5l bottle of vodka cost as little as $3. Prices have since risen, but they remain very low in comparison to incomes.

This happy era was due to come to an end. The Finance Ministry planned to raise excise duties on ethanol products by a factor of 4.3 and by a factor of 15 on tobacco products, in a graduated way through to 2015. The result would have quadrupled the minimum price of lower-range vodkas (105 rules, to 410 rubles) and of the average cigarette pack (24 rubles, to 100 rubles). The practice of selling beer in large, plastic containers is to be forbidden from January 2013. Given that alcohol was found to cause 32% of aggregate mortality amongst middle-aged Russians in 2005, and the high prevalence of smoking among Russian men, these measures are surely long overdue. The plans will help Russia to consolidate the reductions in alcohol-related mortality of recent years.

The main driving force behind this seemed to be Finance Minister Kudrin, if for reasons that have little to do with public health (the taxes are estimated to bring in a further $11 billion in revenues, in addition to the $3 billion garnered through existing ones). Though these sums are very small relative to Russia’s total budget, they will nonetheless help to appreciably narrow the budget deficit. However, these ambitious plans may have received a setback following Putin’s criticism of the plans in late March; namely, that such rapid price rises would encourage more Russians to take to moonshine alternatives. The alcohol and tobacco lobbies also raised objections.

According to a Finance Ministry source who contacted Russian Reuters, the revised plans call for a smaller increase in excise tax on vodka, by a factor of 2.2 instead of the previous 4.3 by 2015. The result will be a mere doubling of lower-end vodka prices (105 rules, to 180 rubles); and, given rising incomes and substantial inflation, only a modest decrease in its relative affordability. Likewise, smokers are in for good news: the former quadrupling is now little more than a doubling by 2014. It is still unclear which plan will ultimately be favored. For instance, the pro-Communist Trud speculates that the revised plan will be adhered to until after the 2012 elections – after which there is a chance that the rate of excise tax increases will be stepped up.

The fear amongst Putin, lobbyists, most Russian regions, and about 50% of Russians as per a VCIOM poll, the main effect of rapid price rises is going to be negative, as many people will supposedly only switch to “dangerous and unregulated homebrews, as well as poisonous surrogates like eau de cologne, shoe polish and even jet fuel”, according to Mark Schrad of the NYT. The Gorbachev experience, in which alcohol laws were made stricter from 1985, is continuously cited as evidence.

I remain to be convinced. First, according to that same VCIOM poll, 30% of Russians say they will continue drinking the same alcohol and another 20% say they will drink less; only 15% say they will start drinking homebrews and 4% will look for bootlegged vodka.

Second, for all that maligned Soviet experience of restricting vodka, life expectancy increased from 67.7 years in 1984 to more than 69 years for the rest of its existence (peaking at 70.0 years in 1986-87); and only fell below the late Soviet-era low in 1993, when the state’s vodka monopoly was dissolved and the country was in the midst of a rapid socio-economic collapse. Now given the differences between the Soviet Union and modern Russia, namely that there are far more alternatives to hard spirits, e.g. beer and wine, increasing prices will probably be even more effective now.

Gorbachev's anti-alcohol campaign: now maligned, but more or less successful while it lasted.

Gorbachev’s anti-alcohol campaign: now maligned, but more or less successful while it lasted.

So while I don’t usually agree with Boris Nemtsov, I can only support him in his condemnation of the regime for reducing the scope of vodka and tobacco excise tax increases.

EDIT 5/18/2011: Synopsis of final FinMin plans from Kommersant. The growth in excise taxes will be minimal until after the 2012 elections. From July 1st, 2012, they will start increasing at a faster rate, reaching 500 rubles per 0.5l of spirits (prev. 901 rubles) and 1040 rubles per 1000 cigarettes (prev. 874 rubles) – with the possibility of going higher if the action is coordinated with neighboring Belarus and Kazakhstan. The result is that the typical price of a lower-range 0.5l vodka bottle will rise from 125 rubles now, to 175 rubles in H2 2012, 220 rubles in 2013, and 260 rubles in 2014. The minimal price of a pack of cigarettes will rise from 16 rubles now, to 22 rubles in 2012, 29 rubles in 2013, and up to 38 rubles rubles in 2014.

As expected, this is a substantially watered down version, under which the price of vodka and tobacco will remain well under Western norms through to 2015. Cynical electoral populism, and the influence of the alcohol and tobacco lobbies, are working to limit the potential public health gains that could have resulted from a more aggressive plan for raising excise taxes on spirits and tobacco.

(Republished from Sublime Oblivion by permission of author or representative)
 
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In the post with A Good Treaty’s interview, the commentator peter recommended this book, ВЛАСТЬ-2010: 60 биографий (Power in 2010: 60 biographies) by Vladimir Pribylovsky, as a “useful primer on who’s who in the Kremlin”. I happen to agree – with many qualifications, which are discussed below – which is why I translated its introductory summary “Phantom Tandem, Real Triumvirate and the Kremlin Clan Wars“.

The Triumvirate and the First Ten

According to the official version, Russia is a democratic country, consensually governed by the “tandem” of lawfully elected President Medvedev and Prime Minister Putin. The semi-official version says that the two halves of the “tandem” are in fact equal: since Putin is older and more experienced, he is also more “equal” and more important than his protégé in the Presidency.

The second account is closer to the real state of affairs, but it’s inaccurate even so. The pinnacle of power isn’t occupied by a “tandem” or duumvirate, but by a triumvirate composed of Putin, Sechin and Medvedev. The President isn’t even the second man in the hierarchy, but only the third. Although some politogists rank Medvedev fourth (after Viktor Ivanov) or even fifth (after Sergey Naryshkin, or Aleksandr Bortnikov, or Vladislav Surkov, or even Roman Abramovich), these are sensationalist exaggerations.

The real hierarchy and functions of Russia’s highest bureaucrats have no relation to their nominal positions. Vladimir Putin is called Prime Minister, but in reality he’s the Sovereign, our Tsar-Batyushka – while not a sole autocrat or absolute monarch, his power is unconstitutional; and though constrained, it is not by the constitution or the laws, but by corporate-clique traditions (not dissimilar from mafia “understandings”), backstage agreements with shadowy lobbies, and family, friend and administrative connections. Furthermore, not only is Putin a Tsar, he is also his own Minister of Foreign Affairs (the nominal minister, Sergey Lavrov, is nothing more than an advisor on foreign policy).

Though Igor Sechin is called the Deputy Prime Minister, it is he who is in fact the “First Minister”. He’s not quite the head of government (as not all Ministers are subject to him – several answer directly to the Sovereign), but he’s a first amongst equals nonetheless. He holds sway over vast swathes of the Russian economy (with the exception of finance) and the security organs answer to him.

On paper, Dmitry Medvedev is the President and head of stat, but in reality he’s sooner a sort of Deputy Prime Minister on a wide range of issues. Though preeminent in his domain, the legislative sector, he is but an advisor to the Sovereign on cadre questions, and not even the most influential – that honor goes to Viktor Ivanov, and maybe even Sergey Sobyanin has more influence on the appointments of governors than the President who signs to confirm them.

The responsibilities of FSB director Aleksandr Bortnikov are similar to his job description. Though he is formally subordinated to President Medvedev, his real managers are Putin and Sechin.

Although Viktor Ivanov is officially the director of the Federal Anti-Narcotics Agency, no matter the name of his official position in the last 15 years, he was and remains Putin’s main advisor on cadre selection. Furthermore, the Federal Anti-Narcotics Agency is really the “second KGB” (the “first KGB” is Bortnikov’s FSB). This “second KGB” became necessary after the Ministry of Internal Affairs (MVD), which had balanced the KGB during the Soviet era, fell under FSB control during Putin’s reign. Control of the MVD is exercised by the Petersburg – Karelia clan of Patrushev and Nurgaliev.

Sergey Naryshkin, the head of the Presidential Administration, should theoretically work to fulfill the President’s will. However, Naryshkin, Putin’s classmate in the KGB Higher School, is actually Medvedev’s “supervisor” on behalf of the Sovereign, Putin.

Vladislav Surkov is officially the First Deputy Chief of Staff of the Presidential Administration, but is also informally responsible for the regime’s ideology. He holds an unofficial position that is impossible in a democratic state – Minister of Parliament and Political Parties.

The Minister of Finance Aleksey Kudrin, Deputy Prime Minister Igor Shuvalov (answers on foreign economic policy) and Deputy Prime Minister Sergey Sobyanin (head of the Administration of the Russian President) also figure in the first ten of the administrative-economic oligarchy that rules Russia.

A Note on Oligarchy

An oligarchy is the collective authoritarianism of the propertied class. The single most propertied class in Russia is the higher bureaucracy, the nomenklatura. Directly (through management of state property) or indirectly (through front men, wives, children, cousins, nephews, etc) the oligarchic nomenklatura controls virtually the entire Russian economy. Their leading members are magnates of global stature – Putin in oil/gas and finance, Medvedev in paper and pulp, Sechin in oil, Sobyanin in natural gas, Shuvalov in finance, Surkov in food products, etc. This pattern is reproduced amidst the wider ranks of the regional oligarchies.

Clans, Clienteles and Coalitions

An oligarchy is never united – it is always fragmented into clans, groupings and clienteles waging civil war, as parts of temporary or more-or-less continuous coalitions. Today the main struggle is between two coalitions of administrative-economic clans, Sechin’s and Medvedev’s. The coalition centered around Sechin wants to remove Medvedev and his supporters from power and supports a third term for Putin after the 2012 elections.

In direct opposition, the Medvedev coalition aims to displace Sechin and his allies, reelect Medvedev in 2012, and transform the triumvirate into a duumvirate with Medvedev playing a more equal role in it. However, they are not much interested in Putin’s dismissal, though it is possible that for some of them it is a distant goal.

The foundation of the Sechin coalition is the union of two groups of St.-Petersburg Chekists: Sechin’s own clan and the group of Viktor Ivanov and Nikolay Patrushev (secretary of the Security Council and former head of the FSB), reinforced by a smattering of smaller clans and clienteles. Prominent figures in the Sechin clan include his protégé in the FSB Aleksandr Bortnikov, the Presidential Envoy to the Southern Federal District Vladimir Ustinov (Sechin’s son-in-law), former Prime Minister Viktor Zubkov (current First Deputy Prime Minister) and Mikhail Fradkov (current head of the Foreign Intelligence Service, the SVR), Minister of Defense Anatoly Serdyukov, the President of Rosneft Sergey Bogdanchikov and the CEO of Vneshtorgbank Andrey Kostin.

The Ivanov – Patrushev group includes Speaker of the State Duma Boris Gryzlov, deputy head of the Federal Anti-Narcotics Agency Oleg Safonov and Minister of Internal Affairs Rashid Nurgaliev. This group splits further into several sub-groups and clienteles, the more noticeable of which include the Petersburg – Karelia Chekists (Patrushev – Nurgaliev) and the Petersburg – Afghan Chekists of Viktor Ivanov (his fellow servicemen on Afghanistan). The Sechin coalition also draws in the clienteles of Sergey Naryshkin and Aleksandr Bastrykin (Chairman of the Investigative Committee of the Prosecutor General and Putin’s classmate from the Law Department of Leningrad State University). Another of Putin’s friends, Sergey Chemezov, is also part of Sechin’s coalition, with his extensive clientele of enterprise directors within the state corporation Russian Technologies, and several governors.

Medvedev’s coalition is composed of the so-called “Petersburg lawyers” (mostly Medvedev’s classmates from the Law Faculty of Leningrad State University), the “Petersburg economists”, the “Petersburg communicationists”, as well as Viktor Cherkesov’s group. The most influential of the “Petersburg lawyers” is Medvedev’s friend and former classmate, head of the Control Department of the Presidential Administration Konstantin Chuychenko. This group also includes the chairman of the Supreme Court of Arbitration and Medvedev’s lifelong friend Anton Ivanov, the Presidential Envoy to the Urals Federal District Nikolai Vinichenko, a few other lower-ranked classmates, Deputy Prime Minister and head of preparations for the Sochi Olympics Dmitry Kozak, Minister of Justice Aleksandr Konovalov, and Prosecutor General Yury Chaika (also a lawyer, though of Siberian origins).

Aleksey Kudrin leads the “Petersburg economists”, which also include Central Bank chairman Sergey Ignatyev, his first deputy Aleksey Ulyukaev, Minister of State Property Elvira Nabiullina, Director General of the state corporation Rosnano Anatoly Chubais, and advisor to the President Arkadiy Dvorkovich.

The “Petersburg communicationists” are led by Presidential advisor Leonid Reiman and his clientele (in contrast to a clan or group, which have some relatively equal personages, a clientele exhibits a more “vertical” nature: a master and his servants, the manager and his subordinates). Cherkesov’s group is also a clientele, though less so than Reiman’s because it includes the head of the President’s personal security service Viktor Zolotov and, perhaps, Deputy Prime Minister Sergey Ivanov.

Deputy Prime Minister Igor Shuvalov (“Igor Ivanovich Not Really” – as opposed to Sechin, who’s “Igor Ivanovich The Real Deal”) and head of Medvedev’s Press Service Natalia Timakova are also part of Medvedev’s coalition. Its other supporters include the moneybags Roman Abramovich and Alisher Usmanov, as well as former Chief of Staff of the Presidential Administration and Chairman of the Board of Directors of Norilsk Nickel Aleksandr Voloshin. It is possible to consider these figures as another grouping in Medvedev’s coalition, “Voloshin’s group”. Of the newly appointed regional leaders, Nikita Belykh and Dmitry Mezentsev are supporters of Medvedev and his modernization initiative.

In addition to the two main coalitions there exist individuals and groups which haven’t chosen sides, support a neutral position, or prefer to deal with Putin directly. These include the group of “Petersburg physicists” (the Kovalchuk family and the brothers Fursenko) and the “Petersburg Orthodox Chekists” (President of Russian Railways Vladimir Yakunin, the Presidential Envoy to the Central Federal District Georgiy Poltavchenko, and the Head of the Presidential Property Management Department Vladimir Kozhin). These groups are historically closely tied both with each other (through the St.-Petersburg Association of Joint Ventures and “Russia” Bank) and with Putin (through the “Ozero” dacha co-op).

Vladislav Surkov and his clientele also orientate themselves directly to Putin, feeding off the management of the Presidential Administration’s internal policy. Most governors – both old hands and new appointees (e.g., the new Governor of Pskov Oblast Andrey Turchak and the new President of Tatarstan Rustam Minnikhanov) – prefer to simultaneously show fealty to Putin, loyalty to Medvedev and boundless respect for Sechin.

Though there undoubtedly exist ideological differences between the Kremlin clans, they are not the building blocks of their coalitions. It is usually considered that Medvedev’s people (especially Kudrin’s group) profess economic liberalism, whereas Sechin’s clan are proponents of dirigisme. However, the disagreement seems more theoretical than anything. In practice, and regardless of their economic views, bureaucrats support “liberalism” towards companies under their thumb, while arguing for “dirigisme” towards enterprises connected to their opponents within the apparatus.

The majority of Medvedev’s clan are relative Westernizers and moderate imperialists. In contrast, Sechin favors an alliance with China against the West, and the majority of his supporters are hawkish imperialists in their attitudes towards the former Soviet republics. That said, the views of Cherkesov, especially in foreign policy, are little different from those of his bitter enemies amongst the Sechin clan (e.g., the news group Rosbalt, which they control, beat the war drum for a march on Tbilisi in August 2008).

Though he is a relative Westernizer and fairly liberal in his internal convictions, Surkov is adamantly opposed to even the minimal modernizing reforms in the sphere of ideology and politics suggested by Medvedev’s liberal advisors from the Institute of Contemporary Development, INSOR, patronized by Timakova and financed by Reiman. Though the “Orthodox Chekists” Yakunin and Poltavchenko might sing the Cross and Russian power to the skies, and advocate a strategic blockade of America in conjunction with the Arabs-Muslims, this does not stop them from maintaining a close alliance with the Kovalchuks (moderate Westernizers, and rather indifferent to both Orthodoxy and the Arabs-Muslims) in the interests of remaining competitive in economic and internal political intrigues.

Putin is Above the Fray

Putin remains above the struggle between the two oligarchic-nomenklatura coalitions (the rivalry between which he partly organized himself) and exploits all the political advantages of this state of affairs. Historically, he is closer to the Sechin clan, especially since one of the leaders of this coalition, Viktor Ivanov, is one of his closest friends. However, on economic questions (and personally) Putin completely trusts in Kudrin, and maintains friendly relations with him; furthermore, the appointment of Medvedev as a successor would have been impossible without a certain degree of trust – greater, in any case, than towards any of his former colleagues in the KGB. No doubt Putin was afraid of bestowing the Presidential mantle onto any of them even for a short time – regardless of all the vaunted “friendship” and “brotherhood” in the intelligence services.

In his cultural and civilizational views, Putin is a Westernizer (like Kudrin or Medvedev), but has only distaste for Western-style democracy (like Sechin, Patrushev, Viktor Ivanov). In matters of foreign policy he usually occupies a middle line between Kremlin Westernizers and anti-Westernizers, hawks and moderates, but it remains unclear whether his middle of the road attitude comes from listening to opposing sides of the foreign policy debate or is a product of his own quirks and oscillations.

The Sacred Cow

There are several reasons preventing the Medvedev clan from moving against Putin (and its anti-Putin minority from speaking out against Putin openly). First, it’s simply dangerous – for the future, for business, even life and limb. Second, many members of Medvedev’s coalition feel themselves quite comfortable with Putin – some of them are even closer to Putin, than they are to Medvedev (e.g. Kudrin): it is Sechin who makes their lives hard, not Putin. Third, they aren’t sure that they would be able to keep the Chekists and other assorted siloviks in check without Putin (as of now the Army is quiet and the generals don’t stick their noses into politics, but this will not necessarily be the case forever). Fourth, they are all either unknown to ordinary Russians (from Chuychenko to Shuvalov), or unpopular (Chubais, to a lesser extent Kudrin), and they fear that without Putin, not only would they be unable to control the Chekists, but also the Russian people.

Fifth, and finally, some of them (e.g., Chubais, Kudrin, Shuvalov) understand, that they have no long-term interests binding them to Medvedev, and rightly fear that if there were neither Sechin nor Putin, nothing would stop Medvedev from scapegoating them should the need arise. Nonetheless, in Medvedev’s circle – and especially in that “circle’s circles” – there does exist a dissatisfaction with Putin and a hidden desire to deprive him of power. This dissatisfaction is more or less evidenced in the writings of Medvedev’s experts in INSOR, the speeches of official human rights activists from the Presidential Council on Developing Civil Society, and in the publications of paper and electronic media under the control of Voloshin and Usmanov.

That said, however, it isn’t clear what Medvedev himself wants: to defeat Sechin and ascend to second place in a duumvirate, or to one day become the first and only Tsar himself. It’s possible that Medvedev himself doesn’t quite know yet; in any case, he is still far from successful in his struggle for second place in the real Kremlin hierarchy.

End of translation.

Comments on “Clan War” Kremlinology

1. A bit of history. Unless I’m mistaken, this clan-based view of Russian politics gained prominence around the time Mark Ames published The Kremlin’s Clan Warfare: The Putin Era Ends in the eXile in October 2007 (at any rate its pattern was widely reproduced). According to his view, the main clans were centered around Putin, Sechin and Cherkesov.

The main differences with Pribylovsky’s (2010) version is that Putin’s guys are now Sechin’s. The “civiliki” clan around Medvedev isn’t even mentioned yet.

Then earlier this year STRATFOR came out with its own interpretation in The Kremlin Wars series.

STRATFOR is more focused around which individual is aligned with the interests of which security agency (GRU vs FSB) clan.

Now one question we need to ask is: how much of the popular commentary on the Kremlin clans is based on Pribylovsky’s work (his site anticompromat.org has painstakingly detailed biographies on Russia’s major political figures)?

2. A few notes about Pribylovsky from Wikipedia. First, his professional work is in Byzantology – very appropriate for transfering to Kremlinology, though, of course, there’s always the possibility of its special stress on conspiracy, on insiderism and byzantism, overspilling. Second, he is a Soviet era dissident: he certainly doesn’t much like the siloviks, supported Vladimir Bukovsky (who doesn’t even live in Russia) for President in 2007, and signed the (somewhat ridiculous) “Putin Must Go” petition. Third, collaborated with Yuri Felshtinsky on the book Operation Successor; the same guy also collaborated with Litvinenko on the infamous conspiracy book Blowing Up Russia, and got funded by Berezovsky (the Family oligarch who lost out to the gebenishki and really hates Putin). Fourth, the book this translation is from, Power in 2010, was “издано при поддержке National Endowment for Democracy”. This democracy/freedom promoting organization openly admits to continuing work once done by the CIA.

This is not an argument for or against. It’s context. All political analysis is colored by one’s own political biases, and in Pribylovsky’s case it is undeniably very slanted in a particular direction. This has to be taken into account when deconstructing his work.

3. Now on to the article itself:

A) There are recognizable clans, though I very much doubt they are as rigid as Pribylovsky makes them out to be. Furthermore, these internal corporate structures are not specific to the Russian state. While corporatism is certainly very overt in Russia, it’s not as if it doesn’t exist (and in a big way) in the Western democracies (e.g. in the US the elites are mostly drawn from one class and greasy palms propel them from politics to business to thinktanks and academia and back). In general, like most Russian “dissidents”, he appears to have a rather warped and rose-tinged view of how politics really works in so-called “real democracies”.

B) I don’t think Putin (let alone Sechin) is more powerful than Medvedev for the very simple reason that Medvedev can fire Putin any day of the week, while Putin can’t do the same to Medvedev.

Now as the author pointed out, it is not really in Medvedev’s interest to do so. It is believable, if not inevitable or even likely, that doing so would be the political equivalent of nuclear war in the MAD era. But even in that case, it’s a balance of terror at the pinnacle of the power vertical, not Putin as Tsar / Godfather.

Furthermore, I think Pribylovsky over-stresses the competitive element of the clan system, and bellites the capacity for cohesion and effective action that is present in all feudal-type vertical systems. What is perhaps more logical is that Putin and Medvedev do trust and respect each other, and – as they say themselves – make their decisions in concert (even though it is sometimes advantageous for them to be at odds in public, especially their whole good cop / bad cop play on foreign observers).

D) Medvedev is just not that interested in personal glory. This is my impression, but his pose and mannerisms are so overly-”Presidential”, so cringingly imperious, that they appear utterly artificial, unbelonging to the alpha male-type that has Napoleonic complexes in politics. IMO, he will not seriously try to emerge as a Tsar figure – of his own volition.

E) One very good service Pribylovsky does is expose the Medvedev the Liberal vs Putin the Bad narrative so beloved of the Western media for the sham it really is. The people you attract reflect on you. Nobody who has the likes of people like Alisher Usmanov (a rapist and maybe worse) or Viktor Cherkesov (a thuggish secret policeman) in their retinue can be an liberal “angel”, nor can someone whom Chubais supports have impeccable respect for transparency. Likewise, no-one who protects Kudrin could be an economic populist and statist, just as no-one who appointed “Medvedev the Liberal” to the Presidency can entirely be an illiberal autocrat. The game is almost never black and white, just multiple shades of gray.

4. Commentator Lazy Glossophiliac gives us his thoughts on Reading up on Russia. I agree with him that Putin is probably better than Medvedev for Russia.

Addendum: In a joint effort with Kevin Rothrock of A Good Treaty, we have summarized Pribylovsky’s networks into three convenient tables. Check it out!

(Republished from Sublime Oblivion by permission of author or representative)
 
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putmarck Kicking off the Watching the Russia Watchers interview series at S/O is the promising new blogger A Good Treaty. He is a DC-based foreign policy analyst who prefers a “good treaty with Russia” to only treating with a good Russia: as a foreign policy realist, he is averse to neocon (and neoliberal / liberal interventionist) tropes alike. A Good Treaty has a graduate degree in Soviet history and has lived in Moscow several times. His blog references Russian newspapers and makes original translations, and constitutes an excellent resource for any Anglophone seriously interested in Russian politics and Russian-American relations. You can follow Putmarck on Twitter.

A Good Treaty: In His Own Words…

Before answering any questions, let me take a second to thank Anatoly Karlin of Sublime Oblivion for taking the time to draft some very challenging questions that were very fun to (try to) answer. I tried to invent responses that were equally thought-provoking, and while I may have failed in that enterprise, I do hope to explain a little bit about the way I approach this work, which occupies a startling amount of my time.

Why did you start blogging about Russia?

I’ve been studying and working on Russia for about nine years now. Russia = bizarre, alluring, etc. I figure anyone reading my blog shares my interest in the Motherland.

I don’t expect this blog to have any impact on public policy or academic debate, but I do personally benefit a great deal from having a forum through which I can better synthesize my own ideas and listen to the responses of others.

The specific angle of AGT (the whole ‘realist’ POV) was a conscious decision I made after working in Washington for about a year. Democracy promotion, I soon discovered, has really supplanted all other approaches to foreign policy. Speaking outside this framework is the easiest way to get oneself painted as un-American and pro-dictatorship. This is largely a sham, since the United States has hardly stopped cooperating with nasty foreign states, but the dialog carried out in DC makes it very difficult for anyone to acknowledge this. Basically, I set out to avoid the old, tired normative analysis.

What were your best and worst blogging experiences so far?

The most fun I’ve had so far is writing direct responses to articles that appear in the press. Doing this, I’ve managed to gain the attention of other bloggers and journalists, which has produced some stimulating private email exchanges and led InoSMI to translate a few of my posts (three, so far) into Russian.

The worst thing about blogging is an inverse of one of its best aspects: I’m regularly reminded how many talented, bright people there are out there with my exact specialty, who are regularly producing fascinating original work, and living abroad in Moscow, which I think of as a sort of bittersweet adventure.

What are the best blogs about Russia and the Eurasian space? What are the worst?

Some of my favorite Russia blogs (in no particular order): Julia Ioffe’s Moscow Diaries, Mark Adomanis’ On Russia, Sean’s Russia Blog, poemless (RIP — just kidding), this blog — Sublime Oblivion, The Russia Monitor, and Scraps of Moscow. I’ve recently started following Democratist, Dividing My Time, The Kremlin Stooge, and Neeka’s Backlog (which posts the loveliest photographs of Eastern Europe). In Russian, Maxim Kononenko at Idiot.fm and Oleg Kashin’s LiveJournal provide regular amusement. Evgeny Gontmakher, Medvedev’s “man on the outside,” has some amusing op-eds on his ‘blog’ at Ekho Moskvy. For military affairs, I regularly turn to the following three blogs: Russian Defense Policy, Russian Military Reform (Dmitry Gorenburg), and Russian Strategic Nuclear Forces (Pavel Podvig).

The Russia blogs with which I torture myself by reading are some of the following: the LJ blogs of Vladimir Milov, Vasily Yakemenko, and Andrey Illarionov. Catherine Fitzpatrick’s Minding Russia reliably produces some of the longest, most rambling posts you’ll find online. Oleg Kozlovsky’s blogs (WordPress for English and LJ for Russian) are both as boring as they are terrible. Since Oleg decided to integrate his Tweets with his LJ account, there has been five times as much garbage. Ilya Yashin’s LJ blog, modestly titled in Spanish “El pueblo unido jamás será vencido” (A People United Will Never Be Defeated), is full of the same D-list self-promotion, but he sometimes includes photography and multimedia that makes reading his PR slightly more fun. (Also, he volunteered sordid details about an alleged threesome sex scandal that never got any corroboration beyond his own ranting. So, it can be entertaining on occasion, without a doubt.) And finally, Vladimir Kara-Murza’s blog, Spotlight on Russia, is another publication I love to hate for its unwavering commitment to recycling the most vapid, useless tropes about the ills of Russia.

I don’t even bother reading La Russophobe, which seems to just scrape the bottom of the Window on Eurasia barrel — another blog I skim but lack the stomach to honestly read. I think LR is too much opinion without enough style. Mark Adomanis (On Russia) and Mark Chapman (The Kremlin Stooge) are also very opionated and often openly insulting, but I’m able to enjoy their stuff mainly because (a) I don’t find their opinions to be so crazy (sorry, what can I say — I love to affirm my biases), and (b) their writing is immensely better.

What is your favorite place in Russia? Is there anywhere you haven’t been yet, but would love to visit?

I haven’t traveled Russia nearly enough. The farthest east I’ve been was a brief visit to Kazan’, which I thought was fascinating and beautiful. The local Kremlin there, which hosts both an Orthodox church and a mosque, has a marvelous statue out front dedicated to the world’s proletariat. Though I’m not a Marxist, the monument is awesome. Imagine Atlas breaking Ghostrider’s fire-chain in slow motion, and perhaps then you’ll understand how cool this thing is. Hell, just look at it here.

I’d love to see just about anywhere else in Russia I haven’t already been, which is most places.

If you could recommend one book about Russia, what would it be?

I wouldn’t trouble anyone with a whole book. To understand Russia’s transitional conundrum, one should begin by reading Yuri Slezkine’s 1994 article “The USSR as a Communal Apartment, or How a Socialist State Promoted Ethnic Particularism“.

Do you think the average Russian lives better today than in 1988? 1980? 2000? Are they richer, freer or happier than before?

My impressions from talking to Russians is that life is better now that it’s been before. It’s still pretty lousy for most people, though. (I don’t think Russia is alone in this.) Whatever the benefits of modern living, Soviet nostalgia (for geopolitical status, for scientific respect, for athletic greatness, etc.) is also a patently real political force. Material realities are important, but it’s public perceptions that ultimately make the world.

How would you classify Russia’s political system? Is it a liberal democracy, an authoritarian regime, or a hybrid crossroads? Which current or historical political economies does it most resemble, if any?

Every polity is at a crossroads all the time. Every society in every nation in history is also a hybrid of various trends and persuasions. Russian politicians tend to have a more statist leaning in their way of conducting affairs, but this isn’t to say Western officials aren’t entangled in comparable webs of intervention, assistance, and power brokering. I honestly find very little to be gained by pursuing any classifications like those you suggest. If we call Russia ‘authoritarian,’ there are a thousand examples of information freedom and public debate to debunk this label. On the other hand, there are countless instances of repression to suggest that the Kremlin is indeed an authoritarian menace. Take your pick, but please leave me out of this errand.

On balance, do you think Putinism was good or bad for Russia? (Try not to sit on the fence here).

First of all, I don’t like the term “Putinism.” I think it gives too much ideological credit to the Putin administration, which has never bothered much with a real intellectual architecture for either the Power Vertical or United Russia. (Sorry, Surkov, but I’m just not seeing the big picture when you tell the Nashi kids to ‘innovate’ the way to tomorrowland.) Putin consolidated power during a time of political and economic anarchy. Was that a good thing? Of course it was. Russians were deeply unhappy with Boris Yeltsin’s second term (which they were scared into granting thanks to the a spectacular PR scheme by the oligarchs), and Putin brought more than just stability to the country — he managed a period of genuine prosperity that, at the very least, benefited enough of the country’s elites that they ceased open, internecine warfare.

The new focus on modernization and innovation under Dmitri Medvedev, whom I believe to be a political ally and proponent of “Putinism,” is just the next phase of a process begun ten years ago. Perhaps it’s thanks to Putin’s flexible non-ideology, but I believe that he’s capable of adapting tactics to the needs of the moment. If his financial team is telling him that foreign investment is a must, it’s no shock that the Kremlin is now pursuing FDI with all its might.

It’s not all roses with the Putin years. In 2001, Russia was 79th in Transparency International’s Corruption Perceptions Index. Last year it was tied for 146th. (Hint: higher is worse.) While we shouldn’t attach apocalyptic significance to the designation of a number by a single NGO, the general consensus is definitely that corruption has been on the rise. This is a serious problem — it’s the serious problem. An optimistic take might be that, as the Kremlin begins to crack down on bribes and dodgy deals, the wrongdoers are trying to exact maximum rents as long-term insurance.

Or maybe Putin’s own web of rent distribution is the backbone of the ‘legal nihilism’ behind Russia’s Africa-level corruption. If that’s the case, then perhaps that way of doing business is no longer optimal. Recent overtures from Medvedev (presumably acting in agreement with Putin) suggest that the authorities are, at the very least, considering new priorities. It’s Russian politics in action.

If you could advise the Russian government to do one thing it isn’t already doing, what would it be?

Harassing the liberal opposition by denying them rally sites with fake counterprotests (for example, blood drives, and so on) seems to me to be a completely pointless exercise. It’s exactly this negative publicity that the opposition needs to survive, and the authorities continue to feed them this sustanance. Putin’s response, delivered to Shevchuk at the infamous luncheon exchange, was that these decisions aren’t up to him, but lie with local officials. Very well, Vladimir Vladimirovich, but why the hell don’t you get off your ass and exercise a little of that characteristic paternalism to steer your ship to calmer shores? I can only guess that the Kremlin is either unconcerned or desperately afraid — either of which seems like a stupid mindset for the leaders of the Russian Federation.

Additionally, I don’t see the point in squashing mayoral elections in cities across Russia. A few opposition victories by the communists or the SRs in buttfucknowhere cities is desirable! When Kondrashov won the Irkutsk spot recently, I thought ‘Wonderful!’ A few more such incidents will not even dent United Russia’s juggernaut, and it both injects some alternative voices into national politics and serves as excellent PR for Moscow to use in the faces of people who moan about attacks on democracy. And then I heard about Kondrashov switching affiliations to register with the ruling party. And then it turned out that the regional duma was seeking to abolish mayoral elections altogether in favor of an opaque ‘city manager’ appointment system. Again, the Kremlin and the authorities demonstrate an entirely unnecessary panic about the threat of opposition parties. If I had Putin’s or Medvedev’s ear, I’d scream into it that they need to display a bit more confidence — even if it’s in their own puppet political theater.

HARD Talk with A Good Treaty

ANATOLY KARLIN: As I understand, you are not the biggest fan of the Russian liberal opposition. You believe their leaders kowtow to the West and couldn’t care less about the everyday concerns of ordinary Russians. But consider the case of a patriotic Russian who detests the corruption and proizvol (arbitrariness) of state institutions and genuinely wants to improve human rights – not just those of Khodorkovsky, but of prison inmates, conscripts, minorities, etc. What can she realistically do about it, apart from ranting about the return of neo-Soviet totalitarianism in front of foreign TV cameras?

A GOOD TREATY: People “do” all kinds of things. Thirty-six parents and teachers in Ulyanovsk went on a week-long group hunger strike to successfully protest the closure of several local schools. On the opposite end of the spectrum, a group of youths in the Far East, fed up with local law enforcement and inspired by a particularly trigger-happy version of nationalism, decided to arm itself and start attacking police officers. Some people make it their profession to work in the line of danger — people like Natalia Estemirova and Sergey Magnitsky. Others lead scholarly human rights organizations like Oleg Orlov of Memorial, dedicated to unearthing a Soviet past they believe is forgotten at Russia’s peril.

All of these people are patriots in their own heads, and who am I to disagree?

I don’t begrudge the liberal opposition for ranting hyperbolisms in front of foreign TV cameras. This is half the business of being in the Russian liberal opposition, after all: (a) they need to provoke/tempt the authorities into cracking down on their rallies, otherwise nobody would ever care, and (b) they need to attract the attention of the West — for financial aid, for international connections, and for status. The liberal literati are frequent visitors to the United States — even the younger, student-”employed’ members like Ilya Yashin (who recently concluded a cross-country tour of the U.S.) and Oleg Kozlovsky (who’s been Stateside for weeks and is currently attending some kind of not-at-all-propagandistic-sounding democracy workshop at Stanford University).

These boys are more than welcome to globetrot wherever they like, but I personally can’t help but see them as a bunch of spoiled brats, partying to their own celebrity and hopelessly out of touch with the needs of ordinary Russians. (I’ve made it a point on AGT to focus on their endless infighting in order to highlight how self-centered and oblivious they really are.)

ANATOLY KARLIN: You noted that Oleg Kozlovsky’s rush to disassociate Solidarnost’ from the gay rights movement, or “radical LGBT activists” as he calls them, is remarkably similar to the Kremlin’s own arguments for dismissing the Russian liberal movement: neither minority enjoys much approval from ordinary Russians (see On “Minor & Non-Critical” Issues: Oleg Kozlovsky vs. Gay Rights). This is an inconsistency at best; a less charitable explanation is that many Russian liberals are themselves hypocrites and homophobes.

But consider this from another perspective – though claiming to be “a fan of free societies”, you insist the current Russian liberal movement is morally bankrupt and should moderate its anti-Kremlin rhetoric to be accepted by ordinary Russians. But if compromise is the key to political breakout, why should Russian liberals embrace the LGBT movement, an act that is sure to “alienate the vast majority of the population”, as Kozlovsky says, but improve neither rights of assembly nor LGBT rights? Are you not guilty of the same double standards as both Kozlovsky and the Kremlin?

A GOOD TREATY: The leaders of the liberal opposition may be a band of egotistical creeps, but I don’t think the principles of the movement itself are necessarily bankrupt. Like with the communists, there’s an unhealthy degree of backward-looking thinking, in their case consumed primarily with nostalgia for and white-washing of the ‘troubled 1990s.’

I don’t think the opposition needs to “moderate its anti-Kremlin rhetoric.” Plenty of Russians are more than responsive to criticisms aimed at the authorities, and liberals from Eduard Limonov to Liudmila Alexeeva could remain prolific dissidents without abandoning their principles. Remember that even at 70% approval ratings, almost one-third of all Russians still disapproves of the political status quo.

What liberals would benefit from is a reappraisal of their goals. Over the last few years, they’ve moved from one fad to another. ‘Other Russia’ to ‘Solidarity.’ ‘Marchy nesoglasnikh’ to ‘Days of Rage.’ The newest campaign, ‘Strategy-31,’ is catchy, but it likely maxed out its publicity potential with the blowup at the end of May. (We’ll see if the next one in three days proves me wrong.) As Vladimir Milov pointed out in a radio debate with Ilya Yashin, Solidarity and its various rally projects have peaked. More people just aren’t coming anymore (in fact, many seem to be leaving, he claims).

This, I think, has more to do with the focus (or lack thereof) of the professional liberal protesters. Everywhere they look for concrete platform ideas, they’re terrified of casting the net too narrowly. Hence, they mustn’t support the gays for fear of alienating the masses. Certain environmental causes are taken up (such as the movement to protect Lake Baikal), but it’s usually in response to local initiatives elsewhere, and it’s after the real hubbub has ended. What Moscow’s protesting “elites” typically trumpet is an unattractive medley of ad hominem attacks on national figures. So it’s “Putin v ostavku” or “Luzhkov v tiur’mu” — the Russian equivalent of Bush-era peacenik demonstrators demanding the president’s impeachment or today’s Tea Party comparing Obama’s healthcare plan to National Socialism.

For the individuals involved in this movement, I’ve no doubt that they think they’re speaking ‘truth to power.’ On a superficial level, it’s certainly a pretty daring person who delights in taunting Russian OMON troops, essentially begging them for a beating and an arrest. But it’s that photogenic rush that seems to fool these folks into believing that they’re soldiers on the 21st century front against totalitarianism. When I met Oleg Kozlovsky earlier this year, he was asked if people feared for their jobs when attending rallies. His answer? Nope. Nobody gets fired for coming to these circuses. Come one, come all, to the political pageant.

If people like Yashin and Kozlovsky (and Milov and, I’m sure, nearly all the high profile lib leadership) want to ignore the gay rights movement for fear of endangering their popular appeal, I wonder why they can’t apply that same political sense to the rest of their activism. Either they are purists proudly pontificating from the periphery, or they’re cutthroat and calculating, and presumably seeking a way to speak to the interests and tastes of society at large. Right now, they seem to be occupying a sort of idiot’s limbo, where just about everyone has a reason to dislike them. And — what a shock — most Russians do.

ANATOLY KARLIN: When the Feds rolled up the “extremely undangerous” Russian spy ring, you argued that they managed to “jeopardize” an important relationship with the world’s second nuclear superpower. But STRATFOR would argue that you missed the point (see Russian Spies and Strategic Intelligence). Though Boris and Natasha failed to steal anything important, that wasn’t their goal to begin with! The traditional modus operandi of Russia’s intelligence services is to recruit young, promising Americans with potential careers in organizations like Lockheed Martin or the CIA (think Robert Hanssen or Aldrich Ames). Unless you want foreign moles infiltrating the Homeland’s national security agencies and military-industrial complex, why would you criticize the FBI for doing its job?

anna_chapman_facebook13.jpg A GOOD TREATY: It’s funny that you mention Robert Hanssen and Aldrich Ames as examples of people at risk of being ‘turned’ but Russian secret agents, as both these men initiated their work as spies by themselves. Hanssen and Ames each lived beyond their means, and apparently approached Russian embassy personnel to sell U.S. state secrets in order to cover their debts and subsidize the high life. No unregistered foreign employees were required to flip these Americans, whose volunteered treachery led in turn to the deaths of Soviet and Russian traitors working for us. If Anna Chapman or anyone from her team of ‘Illegals’ was in a position to ‘flip’ an important American source, it would have marked a departure from the history of U.S. sellouts, who typically defect of their own accord to registered Russian officials.

ANATOLY KARLIN: You describe yourself as a foreign policy realist and admire Otto von Bismarck for his political acumen. But what if American geopolitical imperatives and “a good treaty with Russia” are incompatible? Let me expound. The foundations of geopolitics are Mackinder’s Heartland Theory and Mahan’s Influence of Sea Power upon History. According to this view of the world, the Russian Empire seeks hegemony over the Eurasian Heartland; in direct opposition, the United States tries to prevent its emergence through geopolitical balancing, economic constriction and amphibious interventions (in what Aleksandr Dugin calls the “Anaconda Strategy”). These geopolitical dynamics colored the Cold War and are once again coming into play: even as Russia reasserts its influence over the post-Soviet world, the US is preparing to withdraw from Iraq and is building forward bases in the Balkans and expanding defense ties with Poland.

Two questions follow from the above. First, one of America’s great strengths is the abiding attraction of its purported democratic model. Why then isn’t then the US export its “freedom” to check Russian expansionism, and if possible undermine the Kremlin itself? (After all, if guys like Kasparov or Khodorkovsky come to power, they can be expected to participate in the “international community” / serve Western interests). Second, as a realist, why would you disagree with Mearsheimer’s argument for a Ukrainian nuclear deterrent?

A GOOD TREATY: The U.S. is withdrawing from Iraq … and doubling-down in Afghanistan. Being overstretched and unable to seriously deliver on open-ended defense pacts with Eastern European states, the White House’s rhetoric about missile defense and security investments along Russia’s western periphery is worrying, to say the least. The decision to militarize what could have functioned as a peaceful buffer zone between Russia and Europe seems to me to have been an extremely unwise decision by U.S. decision-makers. Even at the height of the Cold War, American buildup in Western Europe was met by (or in response to) Soviet maneuvers within the Warsaw Pact. It was certainly competition, but spheres of influence were generally agreed upon, and — even during the various uprisings that led to Soviet troops being deployed in 1953, 1956, and 1968 — the U.S. never threatened intervention, and any direct confrontation remained a nonfactor. In the 2008 Ossetian war, however, George W. Bush’s advisers apparently lobbied for an attack on the Roki Tunnel — an act of war that would have engaged American soldiers directly against Russian troops. That the U.S. has reached a stage where it even contemplates initiating military strikes against the Russian army indicates the frightening recklessness behind any worldview built upon a foundation of “America’s great strengths.”

Any conversation about realism is incompatible with a question that opens, “If guys like Kasparov or Khodorkovsky come to power.” That being said, Vladimir Milov compares Kasparov to the early Bolsheviks, indicating that he might not be the friendliest candidate for a job in America’s global utopia. As for Khodorkovsky, installing him in the Kremlin would theoretically only put in his hands yet more power to buy or bump off his enemies and competitors. Even in this scenario, there’s reason to assume the U.S. would not find its ideal Slavic partner.

In living memory, it seems Washington has really only been happy when it’s been free to call all the shots — i.e., under the administration of Boris Yeltsin. If that’s really true, American spooks should look not to the liberal elite (who likely would only use more power to fight amongst themselves), but to institutional fissures in the Russian state. Yeltsin was in large part such a swell pal because he was all too happy to sell off the kitchen sink, as long as it meant the Soviet cooking space was left without running water. “Take all the sovereignty you can swallow” he commanded initially. It was only later, after he consolidated his own authority and raked the USSR’s ashes into the garbage chute, that national determination transformed into an all-out war for territorial integrity.

A weak Russian state will be less assertive on the international level, but destabilizing Russia itself can and would pose devastating risks to the human beings actually living there or nearby. (Luckily for Uncle Sam, I guess, his primary constituents are well across the pond.)

Regarding a nuclear Ukraine: great idea, but they surrendered the last of their bombs in 1996. Moreover: not a great, but a lousy idea. Russia would never have bought the concept that an unaligned Ukrainian state could exist with or without atomic weapons. Aside from the crippled era of Boris Yeltsin, the Kremlin has never been comfortable with the premise that Ukraine exists outside its “privileged sphere.” The attraction of a buffer zone does not apply to Ukraine. If Washington had insisted on maintaining a nuclear Kiev, Moscow would have interpreted it as a direct existential threat. In other words, it would have been extremely destabilizing in an already topsy-turvy decade.

Back to the Future

Many Russia watchers don’t like to put their money where they mouth is. Though I’m sure you’re not the type, feel free to confirm it by making a few falsifiable predictions about Russia’s future. After a few years, we’ll see if you were worth listening to.

Medvedev will be reelected in 2012. Putin will continue on as Prime Minister. There will be some staff reshuffling, but nothing will really change. By 2012, the Russian economy should be doing much better. (I expect the same to be true in the U.S., where Obama will likely ride an ‘It’s the Economy, Stupid’ mantra to a second term.)

The 2014 Sochi Olympic Games will not produce any major international embarrassments for Russia. Investigative reporters will have no trouble turning up horror stories about the waste that went into the project and the poverty it ignored alleviating in the surrounding areas, but I don’t expect any Dagestani terrorist attacks or roof collapses to indict the Kremlin for lousy management. As for Russia’s medal count: better than it was in Canada, but still low enough to trigger another slew of articles about the collapse of Soviet sports training.

Sooner or later, Alexei Kudrin will be ousted from his position in the Ministry of Finance. This guy’s name is attached to too many revenue-saving, unpopular budgetary measures for him not become a political liability eventually. I don’t expect him to go the route of Andrei Illarionov, however. He’ll be honorably discharged and put to use in some less public capacity.

The Solidarity Movement will fizzle out within the next few years, to be replaced by the next ‘it’ conglomeration of the very same individuals. Maybe they’ll call it the ‘March of the Raging 31 Dissidents.”

What are you plans for A Good Treaty?

I intend to simply keep posting 1-2 pieces every week on topics of my choosing. I like to alternate between big-headlines-grabbers (like the Russian spy ring) and stuff that requires me to be a bit more inventive and take time to research (like previous posts on Russian defamation law, the recent FSB law, the ‘Clean Water’ program, and so on). Unfortunately, based on the WordPress statistics to which I have access, it’s these latter posts that generate substantially fewer readers. I can’t blame the interwebs for sending me less traffic when I’m not writing about hot topics, but it is a little disappointing to know that some of the stuff that takes to most work to write is also the least popular.

The biggest thing I’ve started doing in connection with the blog recently is actively using Twitter. I include a snapshot stream of my tweets in the lefthand column on the blog, but I hope users will actually subscribe to my feed on Twitter itself, as this allows me to better track my followers, and allows for opportunities to interact with readers/users — which is something I love about the service.

There is a possible Russia blogging collaboration project in the works with Mark Adomanis, but I really can’t say anymore because I don’t know anything more than that. He contacted me recently about the idea, and we tentatively agreed to make something happen. As I said above, Mark is a very talented writer, and I’m pretty excited about the idea of mooching shamelessly off his celebrity. Thanks, Marco!

And thank you, A Good Treaty, for an excellent interview!

If you wish me to interview you or another Russia watcher, feel free to contact me.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Three months ago I wrote an extensive analysis of Russia’s economy during the crisis in which I said that although it is going to be damaged by the shutdown of its traditional financing mechanism – cheap credit from the West – sovereign solvency will not be threatened and there will be a strong recovery in the second half. I was too optimistic, mostly because I misunderestimated the sheer severity of the global crash. That said, let us see how well its predictions stack up against reality more than three months on. I will also update my thoughts on the US and world economy, including for the more distant future.

Following the ruble correction, the trade balance was shifting back into positive territory. As of January, although resource exports fell by about a half the decline was less pronounced, with machines / equipment and chemicals falling 30% and consumer goods / agricultural products by 20% – this despite the internal credit crunch, shrinking foreign demand and increasing protectionism. Imports fell severely, especially for the biggest category – cars and equipment. This is not surprising – import tariffs were raised on cars and sales have plummeted, while there’s little need for new physical capital (machine tools, etc) when demand falls for the goods it is used to make.

In my essay, setting oil at 50$ per barrel and making some assumptions resulted in 2009 exports of 245bn $ and imports of 223bn $ – annualizing the January figures gives 204bn $ and 104bn $, respectively. Pretty much what I expected for exports, but imports will probably rise as inventories clear out and the ruble (perhaps) strengthens against the US dollar and the euro, which is quite possible since I expect oil to finish the year between 60$ and 80$ (PS. In the article I guessed that oil will average 50$ for 2009 – looks like its going to be significantly higher, as it is already hovering around 52$). Nonetheless, the current account will remain very much in the black. Keeping our capital account assumptions constant for next year, I stick with the “78bn $ in the medium scenario (50$ oil)” (that assumed a 100bn $ capital outflow in 2009 and higher imports – now, some economists are predicting capital outflow will be less than 83bn $), so really the capital account may turn out to be slightly pink instead of deep red).

Despite the ruble correction inflation has not become a major issue. In fact Bank of America Securities-Merrill Lynch expects inflation in Russia to slow dramatically, to just 9% this year.

I was dead wrong about government spending, taking Kudrin at his word that the budget deficit will be at around -1%. In fact, it’s more like -7.4% as spending is increased in the face of a much worse than expected contraction. Still, this is not threatening. Besides, I suspect it will eventually turn out lower since this budget is predicated on average oil prices of 41$ for 2009, which is already looking outdated.

Industrial production started deteriorating in October and accelerated in January, falling 16% year on year.It recovered slightly in February, marking a fall of 13.2% on the same time last year. This is because many manufacturers simply extended the long January holidays to encompass all off the month so as to allow inventories to come down – for instance, after car production plummeted to below 20% of its equivalent 2008 level, it more than doubled to 40% in February.

Industrial production index relative to same month of last year.

Industrial production index relative to same month of last year.

There are a number of convincing arguments that Russia will emerge out of the crisis sooner than many other G7 countries. As Eric Kraus argued in The Wheels of Heaven Stop and earlier, wages and output correct much quicker in Russia than in the developed world. Once the ruble correction restored balance, the salary arrears and barter that were appearing in October-November retreated, as did the specter of outright financial failure and ruble collapse – as acknowledged in the WSJ.

Although the situation remains grim, there are a number of positive indicators. Firstly, the Russian manufacturing PMI surged to 40.6 in February from a truly dismal 34.4 in January. While it is rather lame to rejoice at improvements in second order differentials, the point stands that a few more such jumps and Russian manufacturing output will have plateaued.

Any value below 50 indicates manufacturing decline; above 50 means growth.

Any value below 50 indicates manufacturing decline; above 50 means growth.

It should be noted that Russia’s performance was no worse than the world average. The industrial crisis started in October, the rate of decline troughed at around 34 in Dec-Jan and rose sharply in February. Edward Hugh helpfully collected these graphs into one post at his blog. In the major European countries the crisis took off in August at the latest, hit troughs between 28 and 35, and is still fully in the doldrums. Japan’s PMI is edging up slowly from a catastrophic performance. The decline was not as steep in Poland, but was more prolonged. The US fall started in August, troughed in December and remained at around 35-36 in January and February. It appears to be somewhat better than the global PMI.

The least affected country there is India, which only began falling in November and never went below 44. China’s decline started in September, troughed in November and has since recovered to 45 by February. This is not surprising – their indigenous financial systems were relatively unaffected by the global / Western financial crisis (hmmm, remember all the brouhaha over how China’s financial system was supposed to collapse because of bad loans? And it turned out to be by far the more stable one), while Russian companies relied on Western intermediation to access credit. China tanked more sharply than India because it is more reliant on exports to the developed world, but will now presumably work to stoke domestic demand by countercyclical fiscal policies and more social guarantees.

So I suspect what we have is decoupling from the unwinding. There was a popular thesis around 2007 that the BRICs will manage to escape unscathed from any US slowdown – since then, most pundits consigned this theory to the dustbin. But I won’t be so quick. The shock was sudden and unprecedented – nonetheless, most emerging markets that weathered the tsunami (with the exception of those that got sunk by it, like Ukraine and Latvia) declined less – and are beginning to fall less rapidly – than their First World counterparts. Japan and Germany are getting mauled for their export dependence but they too will eventually plateau and start recovering once their now excess capacity is trimmed down.

The real worry, I believe, is primarily for the likes of the US and the UK. Their fiscal policies and imbalances are unsustainable and what they are now doing, with the charades over “quantitative easing” (translation: printing money), transferring toxic “assets” onto the public account (ed: swallow enough toxicity, and even a beast as large as the federal government could get poisoned) and fiscal stimuli (ed: only countries disciplined enough to run surpluses during the fat years should have this benefit), is postponing the Day of Judgment. I suspect that the fiscal stimuli will be relatively ineffective as they are not market-allocated; develeraging will have to continue regardless (e.g. house prices are still significantly above their longterm position relative to incomes); and the planned US budget deficit of 12% of GDP for 2009 will not be significantly reduced in 2010 or 2011. By that time the world will be abandoning US dollar assets in despair over ever getting repaid; the “solution” would be either a huge (read: politically unacceptable) cut in public spending or ever more money creation (which just feeds the spiral). Interest rates on the debt will rocket. It does not help that oil prices will almost certainly soar over the next five years, probably surpassing their 2008 peak because of peaking oil extraction and full recovery and resumption of growth in Asia.

Back to Russia in 2009. According to Finance Minister Kudrin, normal lending levels have now been restored internally. From looking at the news, it is clear that foreign investment in Russia continues – unlike its pariah-like status after the Soviet Union or 1998, they realize that it remains a promising market since it is just an average-affected country by a world crisis. (E.g. – Peugeot Citroen and Mitsubishi, GE and Magna, LG, etc are all starting to build factories there). Nor are things all bad amongst domestic manufacturers even now. Naval-military construction is even looking to hire people while there is a surplus of unemployed labor. Anecdotally, consumer sentiment remains significantly better than in the US or the UK. Nassim Taleb (of black swan fame) is optimistic. Some respected Russian economists think government predictions for the economy are too gloomy and actually expect significant positive growth this year (some like Sergei Guriev are gloomier). I predicted a range of 0-3% – now I expect it be about 1% to -2%, and certainly not less than -4% (on the latter point, a made a symbolic bet on this in late March with commentator “Michel” at SWP).

Thirdly, the stock market is rising. Along with China, the RTS has been one of the world’s best performing stockmarkets in 2009, rising from around 500 to 700 (of course, after an precipitous fall). Nor was the improvement restricted to the oil and gas sector. This might mean that investors finally predicted how tremendously oversold everything was and are beginning to snap up stuff at bargain prices, thus vindicating my predictions.

Finally, I highly recommend reading the two latest articles by Eric Kraus – the aforementioned The Wheels of Heaven Stop and (Yet Another) Year of Living Dangerously. In particular, the second one puts to rest some popular but false conceptions about Russian economic weaknesses. I’ll quote it in extenso, if you don’t mind Eric!

Unlike many of its emerging market peers, Russia is relatively immune to miscellaneous scourges facing the developing economies, and which threaten a number of Latin American (Mexico, Argentina), EMEA (Ukraine, Georgia, the Baltics, Hungary) and Asian (Indonesia, Thailand, Philippines, Korea) countries with economic collapse:

• Plunging global demand for manufactured goods

Russian exports are primarily in the commodities sector – and the main driver here is likely to be Chinese industrial activity. Manufactured exports are limited to military (a growth sector in troubled times), nuclear power generation, and relatively cost-effective heavy industrial machinery (turbines, power generation, etc.) suitable for the needs of the developing countries – where at least some infrastructure spending is likely to be maintained.

• Inability to fund the current account deficit due to collapse in remittances/bond markets/exports

Russia has no indispensible import requirements, being self-sufficient in all major commodities and basic foodstuffs. In a worst-case scenario, Russia could survive without Mercedes motorcars and French cheese for an unlimited period. Remittances are a negative item on the balance sheet, and the Federal government has virtually no foreign debt to refinance.

• Political instability

With due respects, reports of Russian political unrest are laughable. Whilst a number of EMEA governments are breaking under the stress, Russia remains remarkably quiet. We would note that the Western press, always desperate for bad news as regards Russia, has been recycling a single demonstration by Vladivostok used car dealer for nearly three months now…

Those of us who lived through the 1998 crisis were stuck by the total absence of popular protest – as the crisis worsened, people returned to their dachas to plant potatoes. Perhaps the experience of seventy years of collectivist rule durably chilled the popular enthusiasm for revolution.

As regards the international context, the crisis has diminished any Western ardour for confrontational politics, the opening of new military fronts, or expensive missile systems; a substantial improvement in US-Russian relations is thus to be expected. Similarly, some of Russia’s neighbours, previously fixated upon comprehensible but perhaps outmoded historical grievances, will now have far more important matters to attend to – in the current climate, even modest Russian investment capital flows will likely receive a warm welcome.

• Economic fragility

Despite claims by the western kommentariat that the Russian politico-economic system lacks flexibility, in fact, it is far more flexible than that of most developed economies. Downward adjustment of wages and staffing levels can occur virtually overnight, with production simply halted until inventories are reduced to the desired level – as indeed happened during the January 2009 period (resulting in industrial production numbers which were dramatic but quite misleading).

In summary, while our readers are undoubtedly familiar with the inefficiencies of the Russian economy, this does have a silver lining: no manufacturer in his right mind would attempt to set up a just-in-time supply chain in Russia. After 20 very eventful years, like an old Lada automobile, much of the local industrial fabric is relatively inefficient, but at least, admirably fault-tolerant.

Although we would expect to see further discouraging numbers through the first half of 2009, the period of maximal stress was apparently reached in October-November 2008; after a sharp rouble devaluation, successful support for the banking sector, and the recycling of official Forex reserves into the corporate sector, the increase in non-payments which mushroomed out in Q4 2008 has been almost entirely reabsorbed.

Although our view is temporarily unfashionable, we continue to expect a gradual differentiation between the potentially high-growth BRICs countries and the old economies of the West. Those wishing to predict the timing of a Russian rebound would do well to keep a close eye on Chinese growth trends. Whilst the financial disruption in Russia has been severe, the financial system has survived the stress test, and policy of both the Central Bank and the finance ministry are broadly appropriate. Over the next couple of years the opportunities in financial markets will likely match those enjoyed by investors in the 1998 post-crisis period.

As for the foreign currency reserves, unsurprisingly the media has largely fallen silent on it – mainly because nothing’s happened here in the past few months. They stood at 385.3bn $ as of March 20, unchanged from 386.5bn $ in January 23. I stand by my conclusions in the article.

Prediction: “A wave of consolidation will occur in the Russian banking industry”.

This is the context in which headlines such as Hundreds of small Russian banks close to failure need to be viewed in. The opportunity to prune Russia’s 1400 banks (far too many, plus a lot aren’t proper banks at all) that was missed in 1998 arises anew.

Prediction: “The oligarchs, Moscow and the middle classes bear the brunt of the crisis, while the provinces, agriculture and domestic manufacturing benefit, thereby reinforcing already latent tendencies in national development.”

The number of Russian billionaires has been more than halved and they’ve been warned subtly and not so subtly that there would be no more bailouts and that their future survival depends on how they behave themselves during the crisis. The rest needs more time to make itself evident, I believe – but with the ruble devalued, industrial diversification in the form of import substitution should if anything speed up.

Prediction: “All vital demographic statistics, with the exception of the total fertility rate, improve during this period ­ the expanding social safety net checks mortality increases, but the confidence crisis temporarily dents the former.”

According to January figures, births declined by 2.7% and deaths by 7.5% in comparison with the corresponding month a year ago. Infant mortality fell, marriage rates increased and divorce rates decreased. However, I will not draw anything from this yet since the monthly fluctuations tend to be pretty big.

Prediction: “Since Russia is still a rock of stability amidst dangerously overextended east ­central European countries, it is likely that its position and influence in the region will rise following the crisis…Relations with Ukraine greatly improve after the
generous aid Russia bestowed upon its cold, starving multitudes following the utter economic apocalypse that precipitated the peaceful protests that overthrew its Orange regime and replaced it with a friendly administration seeking integration into Eurasian economic and security structures.”

Yep, it is now obvious that Ukraine is already for all purposes insolvent – lots of reports about people unable to withdraw money from banks. More than a third have difficulties getting food (i.e. same as Russia in 1998). Not surprisingly, then:

We are in a pre-default situation, and it looks like Ukraine has already lost its chances to reform its economy and industry,” says Vadim Karasyov, director of the independent Global Strategies Institute in Kiev. “The worst thing is, people are starting to feel disillusionment in the idea of democracy itself. The demand for a strong hand, to fix this mess, is growing.

With the nation on the brink of bankruptcy, the market pricing in the likelihood of sovereign default at nearly 90% and its politicians more interested in controlling the lucrative gas transit “business” than providing leadership, I will not be surprised to see revolution in Ukraine over the next few months.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.