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Next in our line of Watching the Russia Watchers interviews is Mark Chapman, the fiery Canadian sailor who’s been blazing a path of destruction through the fetid Russophobe ranks since July 2010. That was when he first set up The Kremlin Stooge, after being blocked from La Russophobe, who couldn’t withstand his powerful arguments without resorting to Stalinist tactics. The blog’s name, as he explains below, was bestowed by one of LR’s commentators (“Soviet Goon Boy” was considered, but rejected). Since then, he has expanded his coverage well beyond exposing La Russophobe and now goes from strength to strength: humiliating the self-appointed experts, drawing guest posts, being regularly translated by InoSMI, praised by La Russophobe, and making first place in S/O’s own list of the Top 10 Russia blogs in 2011. Without any further ado, I present you Mark Chapman the Kremlin Stooge, the Rambo of the Russophile blogosphere!

The Kremlin Stooge: In His Own Words…

Why did you start blogging about Russia?

As I’ve mentioned before in various exchanges with commenters, I was invited – hell, the whole world has been invited – to start my own blog by La Russophobe. Most have noticed “she” doesn’t care for dissent or for having her own blog rules used to regulate her conduct, and a common response is “why don’t you go and start your own blog, and see who reads it”. So I did. Of course, the invitation is based on the presupposition that it will be a grim failure which will teach you what a useless worm you really are.

I stumbled upon the La Russophobe blog during a search for early souvenirs of the Olympic Games in Sochi – I was looking for a backpack as a present for my wife. La Russophobe ran a post mocking the Russian souvenirs at the Olympics then in progress in Vancouver, because they were allegedly tacky and cheap. An exchange took place between us, and eventually I was banned from commenting. I invented a new ID – snooty Englishman Francis Smyth-Beresford (so as to have the initials FSB, and it was amazing how quickly otherwise-clodlike Ukrainian/Australian La Russophobe devotee Bohdan caught on). I tried hard to keep the criticism subtle, but eventually I was banned under that name as well. After that, I started The Kremlin Stooge, adopting the name from one of Bohdan’s favourite insults.

Prior to the initial accidental visit to La Russophobe, I was quite honestly unaware of that brand of barking mad Russophobia. I understood, of course, that bias against Russia existed, but there’s some degree of bias against almost everybody, and I rationalized that some had good reasons to dislike Russia while others just thought they did. But there’s a gulf of difference between reasoned disapproval and slobbering hate. I enjoyed challenging that hate, and exchanges with commenters who took a more reasoned approach while backing up their opinions with solid references taught me a great deal. Starting a blog seemed enormously daunting because I’m not that computer-savvy. However, for anyone who’s thinking it over, it’s dead easy and I encourage you not to wait if that’s what’s holding you back.

What were your best and worst blogging experiences so far?

The best was probably the first time a post was picked up by inoSMI; it was one I had done on Georgia and Saakashvili, about 6 weeks after I started the blog. I thought something had gone wrong with my stats counter, because I got more hits in one day than I’d accumulated to that time in total, I think – 1,146 where my total for all of July, the month I started, was only a pitiful 854. Also great is any time I get a comment from one of the blogging greats I admire, like Eugene Ivanov, Leos Tomicek, yourself, Sean Guillory or Kevin Rothrock.

The worst is whenever I get my ass handed to me because I failed to research something properly. A good example was the post, “Are Slavs Stupid?” At the time I’d had a running argument going for some time with a commenter who appeared to be a borderline white supremacist, and we’d gone the rounds of blacks being criminals because they were black to Mexicans being lazy because they were Mexicans, to Slavic peoples being genetically less intelligent because of their nationality. I kept pecking away at the post until quite late, and hit upon some killer references that totally vaporized his arguments by demonstrating that Estonians had an extremely high incidence of apparently uniform academic excellence. Unfortunately, I didn’t take the crucial step of ensuring Estonians were Slavs – which, by and large, they’re not. I just assumed they were. I was too tired to take the extra 5 minutes it would have required to check my main argument, and as a direct result the whole thing fell apart. The larger point that Slavs are no stupider than any other group and that research supporting “genetic intelligence” has been broadly discredited was lost in the triumphant mockery, which of course I richly deserved for my laziness. I’d like to say it taught me a lesson, but still every now and then a dodgy bit of research or some shortcutting has resulted in me getting my legs kicked out from under me. Live and learn, they say.

What are the best blogs about Russia? What are the worst?

That’s hard to answer, because there are so many good ones and not really any bad ones. All serve a purpose. I really like “Russia: Other Points of View”, especially those entries contributed by Patrick Armstrong – the blog strikes just the right tone of reproachful correction of errors or misconceptions without a lot of screeching histrionics. But it’s dull because there are hardly ever any comments or argument, and I’d love to learn from a really good bare-knuckle fight at that elevated level of discourse. “Truth and Beauty” is another really good one. I did a review of the Russia blogs right after we rolled through 100,000, but it left out all the brilliant ones I haven’t discovered yet. Mark Galeotti’s, “In Moscow’s Shadows” has had some fascinating discussion of Russian legal and constitutional reform and Caucasian politics, but it’s not updated very often and the comment format is awkward.

Even blogs like La Russophobe serve a purpose – they’re really funny, not only because of the over-the-top exaggeration, fabrication and deliberate attempts to mischaracterize actual reports, but because of the breathless arrogance, swollen ego and holier-than-thou self-stylings of its author or authors. It used to motivate me to argue, but now it more often makes me laugh on the rare occasions I read it, and I’ve kind of gotten away from using it for inspiration. I remember in his interview AGT singled out Catherine Fitzpatrick as well, for generally long-winded blather, and there has been a good deal of speculation that she actually is La Russophobe. While her writing often runs to lengthy rants and she does seem to fall into that Soviet expat Russia-is-the-root-of-all-the-world’s-problems pigeonhole, she comes across as intelligent and well-educated, and you can sometimes reason with her a little (both of which argue against her being La Russophobe, if anyone cares). I don’t think those kind of blogs are responsible for too many attitude changes, so they’re mostly harmless.

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

I’m not well-traveled in Russia at all, and have never been outside the Primorsky Krai. I love Vladivostok, and was greatly encouraged the last time I was there to see ongoing efforts to restore and properly maintain some of its old buildings, with their beautiful architectural detail. There are so very many places I’ve never been, but I tend to favour places with a lot of history and large areas where the “old city” is preserved. For that reason, I’m especially interested in St Petersburg. Although Moscow seems to me like a grey, anonymous city that could be anywhere, there are probably fabulous attractions there as well that I’d love to see. I enjoyed visiting a lot of small villages around the Primorsky region – usually just passing through – and would like to spend more time there as well. Generally, I’m less interested in going someplace I already know everything about, and more interested in discovering a place I know nothing about.

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

The First Directorate: My 32 Years in Intelligence and Espionage Against the West”, by Oleg Kalugin [AK: Click to buy]. I imagine you were thinking more of a book that reveals the true Russian soul, or reflects a defining phase of the nation’s history. Doubtless such works exist, but I’m not an academic and I haven’t read them; besides, I’m not convinced my assessment of what constitutes the key to the Russian soul or a significant historical moment would have much value. Kalugin’s book was compelling because it revealed so much about the inner workings of the KGB, including how influential it was on all aspects of state policy. It was instructive in its substantiation that the best intelligence assets simply walk in off the street rather than being wooed by “honey traps” like you see in the movies, and that they are nearly always motivated by money. Kalugin was one of American spy John Walker’s handlers, and the most senior KGB operative to write about the organization he had been an influential part of. He also revealed that for many years they had a very highly-placed source in the Royal Canadian Mounted Police (RCMP) Security Service (which eventually became our version of the American CIA, the Canadian Security Intelligence Service (CSIS)); something I never knew.

For what it’s worth, I asked my family – all Russians (my Father-in-Law, Mother-in-Law and wife) – the same question. Each got a pick, although it inspired much anguish and a comment from Sveta that it was like asking a mother of ten to choose her favourite child. They came up with Nikolai Gogol’s “Taras Bulba” , Leo Tolstoy’s “Anna Karenina”, and Tolstoy again with “War and Peace”. I’m not trying to cheat and recommend four books for a question that asked for just one, but to point out that the essential character of Russia means different things to different people.

If you could invite three Russians, past or present, to a dinner party, who would they be?

Vladimir Putin, Aleksandr Revva and Alexander Solzhenitsyn. Mr. Putin because his leadership of Russia fascinates me, Aleksandr Revva in case the mood got too somber because everything he does and says is hilarious, and Alexander Solzhenitsyn in case I had to do the cooking myself. I learned from “One Day in the Life of Ivan Denisovich” that he’s not a fussy eater, and would likely make anything look tasty. Aleksandr Revva might not count, because he was born a Ukrainian, but he’s been a staple feature of Russian comedy for a long time.

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

All of those, I think, but I don’t have any firsthand knowledge and am basing that assessment simply on statistics. There will always be people who are dirt-poor no matter how good the economy becomes, because they don’t know how to manage their money and won’t ask for help. But the opportunities to be richer and freer are certainly present to a greater degree, as are those to be well-informed and connected. The entire category of what constitutes the “average Russian” has changed since 1988.

Who knows what makes people happy? Russians are no different than anyone else in that respect, and some people everywhere are happy regardless of the conditions that define their lives. But I believe Russians feel much more self-determinant and in control of their own lives now. If that’s happiness, then yes.

To what extent is there a difference between Putin and Medvedev, and who do you think offers the better vision for Russia’s future?

Medvedev is a dreamer and Putin is a pragmatist. Medvedev seems out of his depth trying to actually run a country – it’s quite a bit different from running a company – and there seem to be too many variables for him to grasp, while Putin knows as much about running a country as anyone in Russia. Medvedev would be gobbled up in nothing flat without Putin behind him, while Putin demonstrably could survive quite well without Medvedev. For all of that, Medvedev has a better vision for Russia’s future, because he’s a dreamer and he wants things that will only come true – in the short term – in dreams. I don’t doubt he wants what’s best for Russia, but the opportunities for him to fall into a pit on the way are legion. Putin is considerably more a realist and his ideas for reform are generally more achievable as a consequence of his worldview. Together they make a pretty good team, and would be even better as Medvedev gains a little political experience and learns when saying nothing is better than saying something stupid.

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

National image management. Even though resistance is strong to any attempts by Russia to put itself in a positive light on…well, just about anything you care to name, it’s just a skill like any other, and you get out of it what you put into it. Look at Israel – legendary lobbying skills. The USA is very, very good at it as well. Russia, frankly, stinks out loud at it. Past time for a makeover.

This came up awhile ago, in a couple of places. One was at Eugene Ivanov’s blog, where he proposed – half-jokingly – in the comments section of an excellent post on the odious Jackson-Vanik Amendment that Alina Kabaeva be deputized as the “new face” of United Russia. Of course she doesn’t have any real qualifications for the job except that she couldn’t possibly be as stupid as Sarah Palin is, she’s beautiful and has eye-magnetizing cleavage. But the implication that Russia needs to get away from arm-waving “Commie” stereotypes who are too easy to mock and move in the direction of suave, personable diplomats who have been groomed all their working lives for their assignments is spot-on.

Another was at Denise Martin’s blog, where we were discussing the late-50’s-era novel, “The Ugly American”. Although it was a work of fiction, it bore down fairly strongly on American foreign policy vis-à-vis Asia and the fictional nation featured was often said to mirror real-life South Vietnam; it was tremendously influential on JFK’s revamped and revitalized foreign policy, and instrumental to the creation of the Peace Corps. In the novel, American diplomats are clumsy, ignorant and uncaring, speak the native language poorly or not at all and are plainly uninterested in learning. Their Soviet (at the time) counterparts are sophisticated and urbane, firmly in touch with the culture and traditions of their hosts and speak the language like natives. Consequently, their influence is viewed in a much more positive light than that of the United States.

Take a memo, Russia. Stop staffing your diplomatic corps with bad copies of Boris and Natasha from “The Rocky and Bullwinkle Show” and start recruiting people foreigners will want to listen to.

HARD Talk with The Kremlin Stooge

Now you often come off as a big Canadian patriot (in a good way), but you also respect Russia’s assertive foreign policy of recent years. But what happens should the two collide? They have conflicting claims in the Arctic, due to overlapping continental shelf extensions. In recent years, Ottawa has criticized Russia for planting flags at the North Pole and flying bombers near its airspace. Both countries are expanding their military forces in the High North. Whose claims are the most valid? Who is most to blame for the intemperate rhetoric? Is this just political grandstanding, or is there a risk of an escalating cold war?

I don’t see any risk at all of it escalating beyond the decision of a UN Commission, if it even goes that far. After all, in accordance with the Illulissat Declaration, all nations with skin in the game are resolved to settle the issue by bilateral agreement. Russia’s current claims do not extend into the existing coastal boundaries (EEZ’s) of any Arctic coastal claimant, although opinions differ on overlapping claims beyond those, as you say. From what I can see, although I certainly am not a geologist, the Lomonosov Ridge is just as likely to originate on the Canadian side as the Russian side, and that’s the subject of intense research, but it’s like trying to determine which end of the Golden Gate Bridge is its origin after everyone who built it is dead and there are no plans.

In truth, I would have to say Canadian rhetoric I have read on this specific issue has had more of the ring of challenge about it, while Russia’s position appears more conciliatory. However, our government – especially when it is a conservative government as it is now, often echoes the concerns of its more powerful neighbour without thinking too much about whether the issue actually threatens us. About 85% of our trade goes south to the USA, and any “misunderstanding” that might imperil that relationship is to be avoided. To be honest, any government would do the same in the same circumstances, because any hiccup would have immediate impact on our economy. And the USA is the only nation that has yet to ratify the United Nations Convention on the Law of the Sea, although the Senate Foreign Relations Committee voted overwhelmingly to send it to the Senate for a vote 5 years ago. The USA seems to be waiting for new developments before committing itself, and the potential for an open Northwest Passage is likely a big part of that reluctance. I see Canadian rhetoric on this issue as mostly strutting for the benefit of our partners to show them we are keeping their concerns in mind. The offshore patrol vessels currently in the imaginative design phase for the Canadian Arctic are unlikely to have any serious offensive capability, and surely are not intended to fight a war for the high north.

As far as flying bombers “near” another nation’s airspace goes, when did that become illegal? As the agreement cited above specifies, all Arctic coastal states share responsibility for and stewardship of the Arctic. And almost all Russian aircraft designed and crewed for long onstation patrol functions are military.

My first loyalty is always to my own country; but I see no need for bellicose posturing and swaggering and believe it serves no purpose other than to make you look an ass when you are probably not. I’m in agreement with U.S. Senator John Quincy Adams – “Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.”

You’ve praised A Good Treaty, and he rewards you by telling La Russophobe that “you guys really deserve each other.” Ouch! Have anything to say to that?

I’m glad you brought that up, because I was really hurt. I threw up my supper, stumbled to my room, buried my face in my pillow, drummed my feet on the bed and screamed, “Fuck you!!! Fuck you!!! What do you know, anyway??” Now that I’ve had time to cool down a little, I demand satisfaction – let’s settle this like men. We’ll fight. Since it was my idea, I get to choose the weapons, and I pick can openers in six feet of water (I hope he’s a short little bastard). Meet me in Shreveport, Louisiana on July 16th (my birthday), MoFo, and only one of us will walk away.

Seriously, I doubt Kevin thinks very much about my blog, although he’s kind enough to leave it on his blogroll and I get a lot of referrals from AGT. But I believe Kevin sees himself as a Serious Blogger, while seeing me as a Fundamentally Unserious Halfwit. He announced at his first blogging anniversary that he was going to hang up the tilting-at-windmills stuff and try for serious analysis. Maybe there’s just not as much room in his life for silliness any more, or he’s lost his patience for it. Also, he has a new baby in the house – must be just about time for some teeth – and maybe he was just tired.

Anyway, I really didn’t take any offense, because he’s right – we do deserve each other. There wouldn’t be any Kremlin Stooge without La Russophobe, and although I don’t use her articles for inspiration as often as I once intended, it’s great blogs like his that coaxed my interest in Russia beyond the panting fury on show at her nutblog. I guess he’s entitled to a little criticism. And I’m pretty sure there’s still plenty of room in the Russia-watching blogosphere for Serious Bloggers and Fundamentally Unserious Halfwits.

In the previous section, you said that Medvedev was a “dreamer.” Could you please elaborate? Because some would say that he has been very active at implementing reform. He has fired far more senior bureaucrats and regional bigwigs than Putin ever did, e.g. in the course of the police reforms a third of the most senior officers were recently dismissed. To give a range of other examples, in the past year Medvedev ordered state officials to leave the boards of state companies, signed a law that eliminates prison terms as mandatory punishment for white-collar crimes, promoted the privatization of state assets, and asked the government to draft a program for the support of education of Russian students in leading international universities. So is your attitude not, in fact, a “presumption of failure” in Eugene Ivanov’s words?

Actually, I kind of wish I had read that post before I responded. The comments as well; especially Patrick Armstrong’s, in which he pointed out that the attitude toward reform in Russia – from a typical western perspective – is that it’s immediately a complete success or else it’s another dismal failure. But it probably wouldn’t have changed my response much. Still, you’re right – as is Eugene – that Medvedev has achieved a good deal that he’s received little or no credit for, and perhaps that’s deliberate although it’s difficult to reconcile a west that wants to see Medvedev in the big chair rather than Putin with a west that never says anything good about Medvedev.

No, what I meant to infer when I said Medvedev was “a dreamer” was not so much Medvedev’s/Putin’s actual accomplishments (and admittedly, the list of Medvedev’s accomplishments is more impressive than I would have thought) as Medvedev’s hopes that these accomplishments are going to win over the west and inspire a renewed rapprochement with it. Putin, whom I described in the same question as “a realist”, knows there will be no such rapprochement unless the west has no other alternative, and that the international game of musical chairs in which the west tries to inch closer and closer with encircling military bases will continue long after the music stops. In this comparison, Medvedev looks like Charlie Brown; unable to stop himself from taking another run at the football, even though on some level he understands the probability it will be yanked away just as he commits.

However, if you suggested that’s uncharitable, and that someone who really wished Russia success insofar as her interests do not trample on those of someone else’s rights, you’d be correct. The thing to do would be to get behind Medvedev’s plans, and amplify his successes as they deserve to be. I humbly so resolve. And although I remain unconvinced he’s the strong leader Russia needs to consolidate and progress its gains achieved over the past decade, I apologize for my lack of faith in his ability to achieve anything constructive. If for no other reason, because anything that appears to put Lilia Shevtsova and I on the same side cannot go on unresolved.

When Putin came to power he promised to “eliminate the oligarchs as a class”, but as of last year there were 114 billionaires – an order of magnitude greater than under Yeltsin. Putin’s judo buddies and Ozero friends have done particularly well; e.g., to quote Daniel Treisman, “During his second term, control over valuable Gazprom assets began to pass into the hands of one of [Putin’s] old friends, Yury Kovalchuk… After Gazprom bought the oil company Sibneft from the oligarch Roman Abramovich, much of its oil was sold by another old Putin acquaintance, Gennady Timchenko.” (I’d also note the latter was sold the Port of Murmansk for $250 million this year with no public bidding). All this isn’t exactly out of character for Putin either; back in 1999, when the Prosecutor-General Skuratov insisted on investigating corruption in Yeltsin’s Family, Putin helped discredit him with a sex video and pressed him to resign. Even if we accept your arguments that Putin isn’t personally corrupt, isn’t it undeniable that he broke his promise and far from eliminating the oligarchs he has ensconced their power? And given the favors he’s dispensed to his friends, will he not be able to cash in on them with interest once he leaves the Presidency and thus enter the oligarchy himself?

First, what’s the direct relationship between numbers of billionaires and oligarchs? I’m afraid I don’t see a natural correlation between oligarchs and billionaires – if you are one, are you, ipso facto, the other as well? Is T. Boone Pickens an oligarch? If everyone in Russia is a little bit better off financially than they were under Yeltsin – and they are unless they are making a conscious effort to not be – are they incrementally more corrupt?

Although FT often goes out of its way to spin every news item that concerns Russia in an unfavourable light, this reference is at pains to point out that one of these oligarchs is Mikhail Prokhorov. Back in 2007, Prokhorov was allegedly forced by Putin to sell his 26% stake in Norilsk Nickel. This, according to the New York Times, suggests the Kremlin flexing its muscles and punishing Prokhorov. Bouncing back to your reference, we learn that the Kremlin actually did him a huge favour, since when markets collapsed, Prokhorov was “the only oligarch with any cash to spare.” If the Kremlin was able to foresee the market collapse a year before it happened, why didn’t every sugar-daddy make out like a bandit? There’s a disconnect here, in which (according to the NYT) “…under Mr. Putin, the Russian government is establishing vast, state-owned holding companies in automobile and aircraft manufacturing, shipbuilding, nuclear power, diamonds, titanium and other industries. His economic model is sometimes compared with the state-owned, “national champion” industries in France under Charles de Gaulle in the 1950s. The policy of forcing owners of strategic assets to sell their holdings has also been compared to recent nationalizations in Venezuela and other Latin American nations. “Yet while Putin reinvents the Soviet Union – and, according to Irina Yasina, “In Russia today, no serious deal can be made without approval from the Kremlin” – despite the fact that there were no oligarchs until Yeltsin sold off state assets at fire-sale prices, somehow Putin is consolidating everything under the state’s iron grip, while a burgeoning bumper crop of oligarchs is getting rich. How? How can these two conditions coexist? A new Soviet Union and a simultaneous flabbergasting spike in private wealth? Come on, guys – get your narrative nailed down.

FT also points out that the surge in personal wealth by the wealthy it persists in referring to as “oligarchs” originates with a 20% increase in value in the Russian stock market in 2010, and increasing demand for raw materials from China. It’s a bit of a stretch to maintain that Putin personally controls the Russian stock market and is shunting sweet deals to his friends – when would he find the time to do that, and how could he have been such a dink as to let it crash in 2009, wiping out billions in his pals’ money? – but anyone who means to suggest Putin is behind Chinese economic growth is asking to be laughed out of the room. Maybe some of those wealthy businessmen gained their original oligarch spurs during the privatization giveaway (under Yeltsin); but if you make more money in straight business deals using that money, are you still an oligarch? When does that stop – ever? Is the west as unforgiving of the source of personal fortunes in the west?

It simply stands to reason that if the economy of the whole country is picking up, the rich will get richer and new rich will join their ranks. It’s astonishing how many places that happens, and the risks are demonstrably greater in Russia along with the rewards.

How has Putin “ensconced the oligarchs’ power” when Prokhorov is the first to dip a toe into politics since Khodorkovsky, and allegedly on the Kremlin’s side at that? As to the other part of the question, is it unusual for national leaders to be connected to the rich? Does this presuppose Putin will become a rich oligarch when he leaves politics? Maybe, but as someone who has not flaunted conspicuous wealth all his life as many similarly-connected western leaders have, it would not simply be a return to type. There’s no denying the opportunity is there. But a Putin no longer in a position to “dispense favours” might not be an advantage worth the price.

As a follow-up to the last question, don’t you think that the only reason Khodorkovsky was singled out by the regime for prosecution was because he funded the opposition and called for transparency? After all, plenty of other oligarchs who misappropriated Russia’s wealth in the 1990’s were allowed to enjoy their riches – or get even richer with the Kremlin’s help.

No, I don’t. Only a fool would argue everyone who deserves to be in jail in Russia is in jail, any more than that state of affairs prevails anywhere else. It was indeed unconscionable to make a deal with the oligarchs in the terms it’s been described – stay out of politics, and yer can keep the swag, ahrrrr. However, once again, was it effective? The country has prospered, the remaining oligarchs have indeed stayed out of politics or moved abroad to protect their wealth (have a look at the numbers of wealthy Americans moving abroad to avoid what they say are crippling taxes), and the chances of success for a policy that would have seen Putin pitting himself against the accumulated wealth of Russia’s richest and all the influence they could muster would have been, I submit, dim. Perhaps Mr. Putin viewed it as a necessary deal to move the country forward without opposition. Again, there’s no evidence to suggest he did it to enrich himself.

There certainly is a sizable segment of society that would like to believe Khodorkovsky is guilty only of funding the opposition and advocating transparency. However, despite YUKOS’s reputation for transparency in business dealings, company records are no such thing and Khodorkovsky is defiantly unrepentant for defrauding Russia of legal tax revenue in order to increase his profit. I believe he funded the opposition mostly to put stumbling-blocks in the government’s way and keep them occupied while he increased his personal control over Russian affairs, and that he had no interest in running the country himself as a political leader because it would have limited his opportunities to enrich himself further, provided he still wanted to court western support. I further believe he was sandbagged disproportionately hard for tax evasion because the government could not get anyone to testify against him for more serious crimes, although there is considerable circumstantial evidence those crimes occurred. Unfortunately, the government’s star witness – the former mayor of Nefteyugansk – is dead, and Mr. Khodorkovsky’s former chief of security is in jail for it.

In September 2000, central Russia was wracked by a series of apartment bomb blasts. As you probably know, many questions about it remain unanswered. There was the bizarre Ryazan incident, the materials on which the Duma voted to seal for 75 years. There was Duma Speaker Seleznyov telling the deputies about a bombing in Vologda, accurate in all respects but one – it occurred three days after his announcement. And those who tried to carry out independent investigations tended to see a drop in their life expectancies; one by one, they were assassinated (e.g. Yushenkov, Schekochikhin, Litvinenko). Is it possible that, directly or indirectly, Putin’s sky-rocketing popularity in late 2000 – and consequently, his Presidency – was built on the blood of innocents blown up by the FSB?

Well, of course it’s possible. However, every story has two sides, and in a disagreement regarding an event for which no direct evidence has been produced, much goes to the credibility of the defenders of each respective viewpoint. So, let’s take a look at who said what. On the “Putin did it” side, David Satter – former Moscow correspondent for FT Russia, then columnist for the Wall Street Journal. Yury Felshtinsky, co-author (with dead Alexander Litvinenko) of “Blowing Up Russia”, sponsored by Boris Berezovsky, in which Felshtinsky accuses Putin of masterminding the bombings to achieve political power. Supposedly the target of a 3-man FSB assassination team, which had arrived in Boston in 2007 to kill him, Felshtinsky is unaccountably (and embarrassingly) still alive 4 years later – perhaps they’re tied up in customs at Logan International (What? Poison gas-tipped umbrellas are illegal???). Boris Berezovsky himself, former oligarch who high-sided it to the UK with his money and forecast in 2001 that Putin would be gone by the end of the year, while blathering on as an authority on what constitutes corruption although the source of his fortune is generally acknowledged to have devolved from his connections with the Yeltsin “family”. The reference also helpfully notes that Berezovsky broke with Putin when he “moved to rein in the oligarchs”. Boris Kagarlitsky, editor-in-chief of Levaya Politika and democracy activist. Vladimir Pribylovski, another co-author with still-not-dead Felshtinsky, and another admittedly biased opposition supporter through his political website Anticompromat.ru. On the “That’s just bullshit” side, Gordon Bennett of the Conflict Studies Research Centre, a former component of the Defence Academy of the UK and present component of the Advanced Research and Assessment Group. Robert Ware, noted expert on the North Caucasus. Henry Plater-Zyberk, former analyst for the British Foreign Office, specialist in Russia and Central Asia and senior analyst at the Conflict Studies Research Centre. Simon Saradzhyan, security and foreign policy expert, former editor of the Moscow Times and research fellow at Harvard. Richard Sakwa, Professor of Russian and European Politics at the University of Kent, and recognized expert in Russian and Eastern European politics. Who has more invested in the “Putin blew up his own people” story being true?

None of the people mentioned were present when the bombings took place. Although there’s been a lot of talk about “evidence”, there apparently has been none brought forward, and those who supplied testimony are more or less disposed to lie depending on who’s telling the story. Novaya Gazeta reported the testimony of one Private Pinyaev, for example, who supposedly was party to a group who made tea with some “sugar” which was actually Hexogen and which “tasted terrible”, although RDX derivatives like Hexogen are a poison that is toxic even if inhaled or absorbed through the skin and can lead to seizures. That’d be hard to forget.

There are indeed inconsistencies in the case that are difficult to explain. However, the actions supposedly undertaken by the FSB seem so clownishly verifiable that it’s hard to imagine they would so obviously incriminate themselves. The side that argues for it being a false-flag operation consists mostly of political dissidents and democracy activists, while the side that argues against that explanation consists largely of respected academics with a good deal of experience. And if the FSB are all liars, well, it’d be worth remembering where Litvinenko came from.

I noticed that in the original discussion that drew you to La Russophobe (and blogging), you made the following bet with commentator Felix: “The Sochi Winter Games will go ahead as scheduled, and the positive reviews will far outnumber the negatives.” Are you still confident about that given the rate of embezzlement corroding that project? (For instance, one road was found to cost $8 billion; it would have been cheaper to pave it with black caviar). And if you’re wrong do you still intend to send Felix his beer?

I’m still confident Sochi will be rated a success, even though many English-language sources will be disposed to look for negatives. I believe that case of Stella is as good as mine, but of course a bet is a bet and I will pay up if I’m wrong. Note, though, that Felix defined the terms very narrowly, and it does not even need to be a roaring success for me to win – Russia merely has to hold to full completion more than 20 medal-winning events (20 is proposed to be a tie; less, and I lose), and as Felix points out, that’s less than half the events held in Vancouver. Money for jam, as the British used to say.

In that post I also got away with arguing that Boris Nemtsov was not from Sochi, which was Ding! Ding! Ding! incorrect. I didn’t know any better then. Of course, I do now.

As far as the road to Sochi goes – come on, Anatoly. You blew that one to pieces yourself, here. I quote: “Intended to be completed within 3 years in an area with a poorly developed infrastructure, this so-called “road” also includes a high-speed railway, more than 50 bridges, and 27km of tunnels over mountainous, ecologically-fragile terrain!” Once you consider that, you told us, “things begin to make a lot more sense.” That kind of construction ain’t cheap. Although doubtless corruption has inflated the overall expense, this is commonplace with government projects in many countries, few of whom are sufficiently pure to cast aspersions; let’s not inflate it to “Congo-like proportions”. Say, did you notice it’s only Russophobes who counsel using caviar as an alternative – and economically competitive – road surface? I beg to differ: it has serious durability issues compared with asphalt, and in summer! Well, I don’t have to tell you what a caviar road would begin to smell like.

Back to the Future

Many Russia watchers don’t like to put their money where their 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.

Russia will be a full member of the WTO by the end of 2012. Joint Asian financial institutions will form which will channel tremendous direct investment into Russia, and ties between Russia and China particularly will strengthen. New spheres of influence will form, and China and Russia will hold annual large-scale joint military exercises. Russia will permit a much greater degree of foreign ownership in state assets. The new Japanese government will formally forswear all claims to the Kuriles, and Russo-Japanese relations will dramatically improve.

That last one is really going out on a limb, as if any such initiative does look likely there will be intense lobbying from the USA to discourage it, and the USA is likely to remain strongly influential in the formation of Japanese foreign policy. But I feel good about it nonetheless.

And specifically, could you make any predictions on who will be the President from 2012?

Whoa – too close to call. I still think it’ll be Putin, and that’s what I’d like to see, but the list of Medvedev’s accomplishments you reeled off earlier makes me think he’s a better bet than I had at first supposed. Either of them could win easily, so I could just say, “The United Russia candidate”. But that’d be facetious.

I think it would be better for Russia if Putin won, for reasons I stated earlier. He’s less easy to seduce with saccharine promises of western cooperation, which is not going to be forthcoming unless whoever wins swears to run the country according to western diktat. However, Medvedev is the more likely of the two to push for liberal reforms that will benefit Russia long-term.

What are your plans for The Kremlin Stooge?

As long as I’m having fun, I plan to keep on keepin’ on. If I can encourage some more of my lazy commenters to put their opinions where my posts are, I plan to have more guest work. Confusion to our enemies, and death to Russophobia!!!

Thanks to The Kremlin Stooge 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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After a year long hiatus from interviewing Russia watchers, I decided it was time to get back in the game. As it happens, my attention first fell on a Europe blogger – and not just any incisive, counter-intuitive scribbler whose intellect and analytical acumen is matched only by the number of themes he is prepared to expound upon, but also someone who has experience in politics (work in both the US Congress and the European Parliament), journalism (with the EU policy news site EurActiv), ideological adventurer (started off very neocon, but Iraq War and education fixed that), and a fellow rootless cosmopolitan (having been raised in France and briefly in the US, and studied at the London School of Economics). I am talking of none other than Craig Willy, who writes the irreverent (and informed) Letters from Europe.

Craig Willy: In His Own Words…

What first sparked your interest in blogging and Europe, and how did the twain meet?

I’ve been in love with history, politics, thought and argument since I was maybe 14. I remember very clearly telling a friend at the time that I wanted to “be paid to say my opinion”… Perhaps not the easiest career path and not one I persistently pursued!

Blogs don’t provide money, usually, but they are an absolute liberation for the aspiring writer: costs are zero, middlemen are eliminated, and you can reach every person on the planet who has Internet. How could I not blog? I started my first blog in 2004 and I don’t think I’ve changed the mix of more analytical pieces with humor, including on Euro-nonsense.

I have always been interested in Europe as I was born and raised here (specifically in France and the UK). I have been interested in the EU insofar as it seemed to represent Europeans reclaiming their power in the world and historical agency. It usually fails in this respect and hence I used to find the United States of America – its historical role, politics and foreign policy organizations – much more interesting. I now think all areas of the world are worthy of study. The US is probably over-written about and, being based in Brussels and involved in EU journalism, I can genuinely add value writing about European affairs. If I wrote about the US I would be just another opinion. I also think Europe needs more pan-European writers: it is a very real entity but it has no public space.

Do you see yourself, first and foremost, as a blogger, journalist, or pundit? What are your best and worst experiences in these roles?

I do not see these as mutually exclusive. They all feed into each other as I often draw on my journalistic work for my blog and the people I meet through blogging often end up being professionally useful. I am not a pundit because I don’t have the fame.

My best experience, and it is ongoing, was beginning formal journalistic work in Brussels a mere three months ago. It’s the first job I really enjoy and find stimulation in, and one that doesn’t feel “false”. It’s also one in which I’ve learned a really incredible amount about how media really work, the complicity between politicians and journalists, the endless plethora of lobbies, pols, NGOs, etc trying to influence the news with their inane press releases, as well as the intricacies of various EU policy areas in practice.

The worst I don’t know. Well, as every blogger knows, blogging can be a lonely, unglamorous and perfectly un-remunerated activity. And still we do it. I don’t think we can do otherwise!

In the long run, I hope to become a completely independent blogger-journalist. In truth, objective text does not exist and to the extent that blogs recognize their subjectivity they are more honest than “normal journalism”. The main difference is in tone, a different idea of balance, and adapting to the publication’s style. In being part of a large organization – which has its culture, clients and priorities – you are obviously also far less free.

I am very attached to my freedom.

Who are the best Europe commentators? Who are the worst?

You know my Google Reader is chock full of European blogs and RSS feeds, and I have some difficulty answering that question…

Actually, the worst is undoubtedly one of the neo-Maurrassian race-baiting French pundits. I will pick Éric Zemmour as he is by far the most famous and influential of them and because as a Jew himself he should really know better than to constantly (and smugly!) demonize black and/or Muslim Frenchmen.

As to the best it is very difficult to say… J. Clive-Matthews, aka NoseMonkey, might have been the best EU blogger but he no longer writes much. Fistful of Euros was easily the best pan-European blog, but it was collaborative and the project has declined in output and coherence. There are lots of very good bloggers whom I usually disagree with but who both have large audiences and are worth reading whether Euroskeptic Tory MEP Daniel Hannan, Libération journalist Jean Quatremer or the Leninist Richard “Didn’t Get the Memo” Seymour. I wouldn’t settle on one person however and there is no really good pan-European blogger. It’s a hole I kind of aspire to fill…

You lived for substantial periods of time in France, the UK, and the US. What are their respective charms and blemishes? If you had to choose, where would you prefer to reside permanently?

The UK tends to be more down-to-earth and unpretentious than the other two. Americans, particularly those of the Midwest and my Dad in particular, have a wonderful “can-do” spirit and optimism. The French, if you can get a secure job, I think have succeeded most in reconciling the constraints of modern civilization with living a “good, flourishing life.”

Oh dear… I often go on rants about the absurdities and prejudices of this or that country. I don’t spare anyone and I could go on forever if I start… So I won’t!

If you could recommend three books about European politics and/or history, what would they be?

First, I urge everyone to read In Defense of Decadent Europe [AK: Click to buy] by the great French intellectual Raymond Aron, ideally in the original French though an abridged English version is available. Written in 1977, there is no better analysis of the strengths and weaknesses of “Western Europe” and the European Economic Community (precursor to the EU), its democracies and economies, their superiority to the Communist bloc, the unremarkable nature of the Communist countries, the course the Soviet Empire’s collapse would take, the mirage of Socialism (it appeared the Communists might win elections in Italy and a Socialist-Communist coalition nearly did in France)… The book is so lucid and right – it has nothing to do with Neoconservative simplifications and idiocies – that it convinced me a contemporary observer really can understand the world he inhabits. You don’t need to wait for time to give you “perspective” or the opening of the government archives. It is a better analysis of Europe in the Cold War than probably the majority of books that have appeared on the subject since.

Some of this might seem dated – environmentalism, neoliberalism and the War on Terror had yet to appear – but it is quite amazing how many subjects he touches upon that are still perfectly relevant, such as dysfunctional oil-rich countries and the glut of unemployed and overqualified graduates (already!). Incidentally, people should read everything by Aron. Most of it is available in English (The Opium of the Intellectuals [AK: Click to buy], Progress and Disillusion, War and Peace between Nations, Clausewitz…) but it is worth learning the French language just to be able to know his thoughts in the original.

Second, read everything by the great Marxist historian Eric Hobsbawm, and in particular Age of Extremes [AK: Click to buy], his history of the “Short Twentieth Century”. It is world history but Europe dominates it. He is a very lucid, very balanced and incredibly erudite historian and you can only come out of his books feeling more knowledgeable and intelligent.

Third, I have some trouble. I have yet to read a really good book on the EU actually. Tony Judt’s Postwar is more of a continental encyclopedia and doesn’t really deal with the EU. All the books that explain the EU tend to be textbook-style and very boring. I’ve heard Alan S. Milward’s The European Rescue of the Nation-State and Edgar Morin’s Penser l’Europe are very good, the latter is resting on my bookshelf, but I’ve yet to read them. Jeremy Rifkin’s The European Dream [AK: Click to buy] and John McCormick’s The European Superpower are worth reading but are pop works rather than “great”.

I suppose I will settle on Perry Anderson’s The New Old World [AK: Click to buy]. It is a very good introduction to Europe today from a Marxist perspective. As such it is mostly critical but like Hobsbawm very informed and provides a very good overview of various national politics, enlargement, the EU itself and EU integration theory (if you’re into that sort of thing…).

The US vs. EU quality of life debate may be cliché and overdone, but I can’t help asking a Europe buff this question: which would you say offers the preferable socio-economic model? (OK, it’s obvious from your posts that EU > USA. Please expound.)

The first point I want to make is that anyone who claims lack of “government” systematically leads to more economic efficiency and better outcomes is simply misinformed, wrong and perhaps arguing in very bad faith. You have the whole history of industrial civilization contradicting them. Look at 19th century America, Bismarckian Germany, Meiji Japan, Stalin’s Soviet Union, postwar Europe and Japan, the “Asian Tigers” or China today: each of these countries achieved stunning economic and industrial growth with some combination of tariffs (all of them, basically), industrial policy (publicly-funded railroads), mercantilism (support for export-oriented “national champions”, the undervalued Yuan) or even outright State control of the economy.

So I get pretty frustrated with the whole Republican spiel about laissez-faire dynamism and sclerotic Europe. You have to be incredibly ignorant of economic history – and I would say they very probably are – to believe what they do and the slurs they sling at Europe to justify the economic and social mess they’re making of their own country.

The second point is that though I am not an economist or an expert on economic or industrial policy, I can read statistics and they tend to indicate that modern civilization leads us to produce and consume more without this necessarily adding to either national well-being or personal happiness. It is true that the US’s GDP per capita is significantly higher than Europe’s. Why is this? It is due to a proportionally larger and younger active population, to longer working hours, and – it is true – to very high productivity (slightly higher than in most European countries).

But what have they done with this wealth? The numbers are eloquent. Americans eat so poorly and are so inactive that generals warn youth obesity is a threat to recruitment and national security. Energy efficiency and transport are catastrophic: the US emits almost 40% more CO2 than Europe (including Turkey and the Balkans) despite having a smaller economy and over 300 million less people. And it isn’t like the transport system is any good! Incidentally, this inefficiency, beyond environmental concerns, is a completely needless attack on America’s energy independence and national security.

The healthcare system is an economic and social disaster, costing almost twice as much per capita as that of France (one of the more expensive European healthcare systems), for not noticeably better and much more unequal outcomes. So much for “market efficiency.” Then there’s the prison-industrial complex, some 2.3 million people behind bars, on the scale of the Soviet gulag and by far the most in the world today, with many millions more under probation and other forms of police-state supervision. This reduces the unemployment figures and provides jobs for prison wardens in certain districts, but the costs are huge: billions of dollars wasted are nothing compared to the ruin this has inflicted on the black community. This is not due principally to excess criminality, but to draconian drug laws, discriminatory justice, weak welfare, and a conscious decision that the defense of the socio-economic system should be done in the most coercive way possible.

Most of these problems are not inherent to the American character or even US politics. They can be traced back, very precisely, to the failure of Lyndon Johnson’s Liberalism and the triumph of Ronald Reagan’s Conservatism. That was when the country and its political leadership completely failed to address oil dependence, the expanding prison population, embraced the doctrine of eternal war as an integral part of American nationalism, lost the egalitarian tendency, and so on.

If anything, I do not champion Europe’s various economic and welfare models. Europe is far from perfect and no one claims it is. It’s simply that the American alternative is unalloyed crap and the discourse about it, particularly by Republicans, is so manifestly false, hollow and hypocritical. An informed person could only see the US model for what it is: sickeningly inefficient and unjust. Even Americans see this: when Americans say in polls they want the income distribution on Sweden (easily the most “Communist” country today) but elect a Republican Congress, my brain simply can’t cope with fathoming that level cognitive dissonance in the American public (you made this point once). [AK: You mean here, where I talk of American false consciousness?] It is literally maddening.

As this blog focuses quite a lot on Russia, I can’t avoid asking you for your thoughts on EU – Russia relations. Are they improving or worsening? Is it at all plausible for Russia to enter the EU by 2025, and would it serve either of the two parties’ interests?

I think relations are good. There are no fundamental problems. Of course there are serious divisions within Europe – the new members understandably being very suspicious. (Although I like to tell them it only took a few years for France and Germany to make up after the Second World War…) Russia’s relations with France and Germany, incidentally, are very good. Paris and Moscow have similar visions of a multipolar world and both aspire to be genuine world powers while Berlin and Moscow are united by economic collaboration that can get downright incestuous (see Gerhard Schröder).

I cannot say what Russia’s destiny is. On the one hand, Russia and its near-abroad make up one of the four great poles of Western civilization, the others being (Western) Europe, North America and Latin America. That is to say as an economic, cultural and geopolitical space, it is and has long been distinct from “Europe” and, in my opinion, Russia needs to think about how it can weld the post-Soviet space into some kind of coherent economic and social union. I am not someone who believes that much was gained by the replacement of a stable Soviet Union with the collection of ethnic conflicts, impoverished and corrupt oligarchies, and poxy Central Asian dictatorships we have now.

On the other hand, I often think Russia must be reconciled with Europe in some way. There is an undeniable kinship and shared history but I don’t see how closer ties could work in practice. We are still very, very different and I don’t see all that much convergence. I think there is no chance of membership by 2025. Maybe by 2050 if Russia continues to grow but also becomes much more democratic. On the other hand, in the long run, how could Russia not join? The level of economic interdependence is always growing and the logic of regional integration often genuinely ineluctable. It would certainly make the linguistic situation very interesting if the Union has 150 million Russophones and perhaps more if Ukraine and others join…

How dangerous do you consider Europe’s reliance on Russian natural gas? With the anti-nuclear fallout post Fukushima, and France’s recent banning of gas fracking, do you think this dependence will grow in the next decade?

I don’t think it is all that dangerous. Russia needs European money almost as much as Europe needs gas. Russia can pick a fight with smallish poor Eastern European countries but I don’t see what it could possibly gain in conflicts with its Western European partners and the gatekeepers to the biggest economic area in the world.

I am not sold on nuclear as a way of reducing energy independence. It can be used en masse to provide almost all your electricity, but electricity is only about 20% of the energy we use! A lot depends on whether renewables become a non-negligible source of energy and the extent to which fossil fuels are replaced by electricity (particularly in transport). Clearly nuclear has taken a catastrophic hit in Europe though, everyone but France is pretty much giving it up. France will maintain its capacity however and who can say which way the wind will blow in 10 or 15 years?

One of the biggest Russian gripes regarding Europe is its travel restrictions. To visit many European countries, Russians need to expend considerable time and effort to procure a visa. Is a visa-free regime possible within the next 5 years?

Access to its labor market is one of the most valuable things the EU can grant to another country. It is also, today, one of the most controversial due to the current anti-immigrant sentiment and race-baiting politicians. I can’t really say whether a visa-free regime will be possible within five years.

On the one hand, the very charming and funny Russian Ambassador to the EU Vladimir Chizhov said in an interview said he was upset by the recent developments in Europe because it would undermine his negotiations for a visa-free regime (by the way a very interesting interview covering lots of other subjects).

On the other hand, I was very surprised last November when EU granted visa-free travel rights to Albanians and Bosnians. They’re the sort of foreigners whose alleged criminality politicians would normally make noise about. The European Commission, which has little power itself, would normally cave in to the demands of said politicians.

HARD Talk with Craig Willy

ANATOLY KARLIN: I know that you have a great deal of enthusiasm for the European project. However, many observers – including myself – are skeptical about its longterm sustainability. The economic crisis has fueled popular resentment, e.g. the Greeks cursing outside financial authorities for imposing steep cuts to public spending, while the Germans deride them for their fiscal profligacy and dislike having to bail them out (recent polls suggest a majority of Germans want the Deutsche Mark back). The political right is enjoying a Europe-wide resurgence. National interests appear to be diverging, e.g. with France focusing on the Mediterranean, while Germany deepens ties with Russia. Border controls are reappearing. The global economic situation is cloudy, and high oil prices seem to be here to stay, presenting a further panoply of challenges to European solidarity. So is ever deeper union a realistic prospect, or is there a chance that the EU will end up as little more than a glorified free trade area by 2020?

CRAIG WILLY: As a disclaimer, I’ve gotten much, much more critical of EU officials and pols since I’ve come to Brussels. I am still wedded to the project however and I think most of the nonsense EU officials engage in is ultimately due to structural constraints imposed on them by the national governments.

The EU is not much more than an economic entity but it is much more than a free trade area. In fact, as soon as you have a commitment to a customs union (e.g.: a common external tariff and common trade negotiations with foreigners) and genuine single market, you can’t help but be a de facto economic power and have substantial integration, such as a common EU patent, common EU property rights, common EU approach to GMOs, and so on. The EU remains the world’s biggest economy and the truth is most international relations today involve economic issues above all. As such, the EU isn’t a wholly inappropriate entity for the (let’s call it) postmodern world.

I am pessimistic about further integration for at least another ten years. A lot depends on whether the national governments decide to reform the EU to actually make it democratic. There needs to be a connection between the elections to the European Parliament and the President of the European Commission. There is nothing in the treaties that makes this impossible; the pan-European parties only need to get their act together and agree on candidates. Commissioner Michel Barnier recently suggested that this happen and that the Commission and Council presidencies incidentally be merged. If this were done, there would be a genuine European politics and an identifiable face/mandated chief executive for the EU.

It is possible if they want it. Democracy is impossible without a common language but English has long been establishing itself as the lingua franca among Europeans. South Africa and India, much poorer countries with if anything harsher internal ethnic divisions, prove that multilingual and multiethnic democracy is possible. Of course, national leaders don’t want a democratic EU, like the old Italian and German princely states they prefer to maintain their own power, they prefer division to the common good. It doesn’t help that the current panoply of European leaders – Merkel, Sarkozy and Berlusconi in particular – are absolutely disgraceful for their lack of ambition and venality.

ANATOLY KARLIN: The discourse on Europe’s demography is decidedly pessimistic, though perhaps unreasonably so (in 2010, France may have overtaken the US in total fertility rates). Nonetheless, the pessimism is not without cause, as France (and the UK) are exceptions rather than the rule. Most of Europe, including the biggest countries – Germany, Italy, Spain, Poland – have been reproducing at well below replacement level rates for over two decades. What impact will this have on Europe’s economic dynamism and the welfare state? And in a world of limits to growth, could Europe’s demographic clouds have a silver lining?

CRAIG WILLY: I think the world needs less babies. Europe is less wasteful environmentally than America, but if every Asian and African achieved a European standard of living the Earth would become unlivable and exhausted within a few years.

Ageing is a huge challenge and will put incredible strain on Europe’s finances and lead to reduced power in the world. Low birthrates can also be a problem and the relative decline of France in Europe in the 19th Century can be directly attributed to the fertility of its German and British neighbors.

On the other hand, these are universal challenges characteristic of modern civilization. I would point to three things that make me optimistic about Europe:

  1. Birth rates on the whole are collapsing in developing countries. UN reports stress that, by the time they reach our oldish demographic profile, they will not have achieved the West’s current levels of wealth. As such, their pension, economic and health problems will be significantly worse than what Europe faces. (I hope that doesn’t sound like Schadenfreude!)
  2. East Asia’s birth rates and ageing are even more catastrophic than Europe’s! There is a very clear pattern here: an East Asian country develops very fast, Western commentators fret about our “decadence” and how we will be bought out by said East Asians, said East Asian country turns more-or-less gracefully into a fortified retirement home. I think of Japan of course but also of the forgotten “Tigers” South Korea, Singapore, Taiwan and Hong Kong. They all have birth rates around 1.2-1.4, lower than Europe. China, big scary China, is if anything in a worse situation. It is still very poor on a per capita basis but its fertility rate has dropped below 1.5. Given the trend in neighboring countries, I don’t know that the one-child policy is the only reason for this.
  3. The EU’s latest demography report points to some very interesting and counter-intuitive trends in terms of future family patterns that suggest godless French-style cohabitation, late-age childbearing and strong childcare policies are the cause of higher birthrates in certain countries. It is definitely worth reading the introduction at least. Another thing was that it points to the recent increase of EU fertility to 1.6 and perhaps soon to 1.7. It is unevenly divided across the Union but it not all that different from American non-Hispanic whites’ 1.8. Of course America has massive immigration and, as such, the US’s demographic weight in the world will continue to increase massively, while Europe’s has basically peaked. Speaking of “Eurabia”, Hispanics have a fertility rate of 2.9, almost 50% over the average, and immigration is not really letting up. Isn’t it much more likely that we see a Hispanicization of America? Certainly California, New Mexico, Texas and Florida look like they might be destined to return to Latin civilization…

ANATOLY KARLIN: You’re not the biggest fan of the “Eurabia” thesis. I totally agree with you, but I will play devil’s advocate. Please explain why you discount the possibility that: (1) the number of Muslims in Europe is under-counted (e.g. due to political correctness); (2) that migration from Muslim countries will not grow in the coming years, on the background of Europe’s demographic problems and population stress in Africa and the Middle East; and (3) the increasing radicalization of Europe’s Muslim populations (e.g. one third of British Muslims support the death penalty for apostasy).

CRAIG WILLY: I can’t talk to the statistics. I think they are basically accurate: 10% in France, 2-5% in most Western European countries, zero in Eastern Europe, and a certain number in Britain but outnumbered by immigrants of other origins (Indians, West Indians, Christian Africans, not to mention other Europeans…). The number of Muslims will increase over the next 40 years but will not be overwhelming.

There is clearly a strong, perhaps growing, cultural divide between European “natives” and European Muslims. Muslims are more conservative on the whole, somewhat like Hispanics in the United States but the difference is definitely more pronounced. I am not convinced Muslims are radicalizing. In France and Italy, the places where Muslims now live used to be poor working-class white areas. These areas tended to vote Communist (20-40% of the vote in France and Italy used to be Communist). I don’t see even the beginnings of mass political radicalization among European Muslims despite the fact they live in if anything more difficult circumstances. I actually would like more radical politics, not Islamist, but perhaps more of France’s anticolonial Indigènes de la République, its answer to America’s Black Power movement.

I am not convinced European countries are fully capable of accepting Muslims as equals and integrating them. Many Europeans seem to think the immigrant can and must integrate first before he is allowed to have the same job, have his children go to a decent school, or move into a nice area. It’s obviously a chicken and egg thing but many people aren’t able to accept this.

The climate and discourse in France in particular is getting pretty scary, the Front National acquiring a veneer of respectability and professionalism, and Sarkozy’s center-right actually embracing its anti-Muslim discourse. E.g.: the burqa ban, the “polygamous welfare-frauds” (our “welfare queens”), the ridiculous “Debate on National Identity,” openly racist statements by ministers (quote “too many Muslims”). It is quite depressing.

Europeans have demons sleeping inside them, like every other human being in the world. But our history has meant our demons came out in a horrifying way. Less than 70 years ago we slaughtered as many Jews and Roma we could get our hands on in a fit of organized psychosis and industrialized murder. Less than 20 years ago some Europeans decided there were “too many Muslims” and that there was only one solution to this “problem.” It’s something worth worrying about. We live in what are, even with the recession, relatively good and peaceful times. I worry for the Muslims if we ever started having really serious economic and social difficulties in Europe.

Back to the Future

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

Oh dear, I’ll have a crack at it:

  • No significant additional integration until 2020 or even 2025. No significant “rolling back” either however.
  • The Eurozone survives and expands to several Eastern European countries by 2020. Britain does not join.
  • The cultural divorce between Britain and the continent will grow. It will perhaps become insurmountable if Scotland acquires its independence. Britain will stay inside the EU however albeit with its continued semi-obstructive “yes-but-no” denialism.
  • The European economy will have near-zero growth in the coming decades for demographic reasons, productivity will continue to rise, its technological leadership will continue, and its overall size might increase if enlargement continues.
  • Turkey will not join before at least 2035, if ever. Most of the Balkans will have joined by then.
  • Socialism will not make a significant return barring an even more serious economic crisis. Social equity in Europe will decline somewhat, but not as much as in America.
  • Race relations will get worse.
  • European leaders will continue to be wholly materially and psychologically dependent on the Americans. They will not develop an independent foreign policy or a “common” foreign policy.
  • The socio-economic gap between the US and Europe will grow, as will the cultural one on abortion, gay rights, militarism and the like.
  • “European politics” will very slowly but surely emerge as interdependence becomes more glaring, the use of English spreads, and the Union is democratized. It’s an apparently undetectable process, like tectonic plates moving, but you can very clearly see the trend decade on decade.

What are your future blogging plans?

I plan on continuing with Letters from Europe but am also looking to start much more semi-professional and collaborative blogging.

These include revamping Future Challenges, a blogging platform on long-term trends funded by the Bertelsmann Stiftung. As its Western Europe editor, I’m hoping to turn it into the standard for analyzing the continent’s long-term trends on energy, demographics, migration and economics.

I’m also involved with bloggingportal.eu, a very useful aggregator that brings together the sleepy world of EU bloggers. Its readership is not incredibly high, but it includes a fair number of prominent EU journalists and communications professionals. I highly recommend you sign up to its daily RSS of best posts from the EU blogosphere (a very good filter).

Finally, I’m thinking of launching some sort of multilingual pan-European blog. It’s still a little sketchy but it would involve something like national-oriented bloggers writing in German or French (and thus it being possible to get reasonable audiences, unlike for EU-centric blogs) while also translating these posts systematically into an English main feed. You’d then have overlapping global, EU and national audiences. I don’t know if it can work but my dream would be a cross between Glenn Greenwald (God bless him) and Fistful of Euros.

Arthur Miller once said “a good newspaper is a nation talking to itself.” I think that is true. Currently, even European leaders don’t read each others’ newspapers. They discover themselves and their continent, collectively, through the pages of The Economist, the Wall Street Journal and the Financial Times. Besides the particular political agenda of these publications, there is something wrong here in having the “continental conversation” through media that are either foreign or from not the most committed European country. Besides that, Europe is hardly their main focus. I hope to contribute in a small way to creating that infamous “European public space”.

I wish you the best of luck in that endeavor, Craig, and thank you for answering S/O’s questions!

As I said at the start, I’m planning to revive the Watching the Russia Watchers (and interesting others) series again in the next few days, carrying on from the interviews with Kevin Rochrock (A Good Treaty) and Peter Lavelle (Russia Today) last year.

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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A thundering takedown of the Financial Times transparently one-sided coverage of the Khodorkovsky affair -and Khodorkovsky says Putin is ‘pitiable’ can also serve as a palimpsest for Western media coverage of this topic in general – from Eric Kraus at Truth and Beauty. BTW, do feel free to add his blog Truth and Beauty to your subscriptions. As someone with a dozen years of investor experience in Russia, Kraus has cutting, pertinent commentary, with fine sarcastic wit, on Russian finance and economics and global affairs. His article Is Putin pitiable, or is the FT corrupt? is reprinted below.

Reading the FT on Russia, what is interesting is not what they write – it is why they write it. A friend of T&B was told face-to-face about six months ago by an FT editor that, as a journalist here, one’s role has to be ”to write about how awful Russia is”. (While, admittedly, T&B does not know many FT journalists in Poland, Belgium or Mexico, we strongly suspect that they have an entirely different mandate. Only in Russia has the paper descended to outright advocacy…)

A recent propaganda piece in praise of Khodorkovsky – proudly splashed across the front page of the Financial Times in defiance of the most basic journalistic ethics – is so transparently self-serving, dishonest, and in a few points frankly absurd, that one is at a bit of a loss where to start. We shall borrow a technique from Russia: Other points of view – numbering the paragraphs in the original for discussion.

Khodorkovsky says Putin is ‘pitiable’

By Isabel Gorst in Moscow
Published: December 24 2010 14:27 | Last updated: December 24 2010 14
(and still at the top of their website three days later…)

(Inserted numbers are by T&B, for ease of reference.)

1. Mikhail Khodorkovsky, the jailed Russian tycoon, has lashed out at Vladimir Putin, describing his nemesis as a pitiable but dangerous leader steering his country towards degradation and chaos.

2. In a newspaper article published on Friday, three days before a judge begins reading the verdict in a fresh trial that could keep him in jail until 2017, Mr Khodorkovsky said the Russian prime minister was trapped in the cynical political establishment he had created, indifferent to the fate of its people.

3. “I suddenly realised I was sorry for this man – no longer young, but vigorous and horribly lonely in the face of a vast and unsympathetic country,” he said.

4. The latest trial reaches its conclusion before the expiry of an eight-year sentence handed down after a first trial for fraud and tax evasion. After his conviction in 2005, Yukos, the giant oil producer he founded, was confiscated and sold, mainly to state oil companies, to help settle alleged tax debts.

5. Critics say the new charges are aimed at keeping Mr Khodorkovsky, who emerged as a champion of democracy before his arrest, behind bars long after presidential elections in 2012.

6. Together with Platon Lebedev, his business partner, Mr Khodorkovsky is now being tried on fresh charges of embezzlement that even his critics have slammed as absurd. On Monday, a Moscow judge will begin reading out a verdict that is expected to hand the two men additional prison sentences of six years.

7. The publication of the stinging article comes after Mr Putin suggested during a nationwide phone-in with Russians last week that Mr Khodorkovsky could have blood on his hands after Yukos’ former security chief was convicted for murder.

8. Defence lawyers for Mr Khodorkovsky accused Mr Putin of putting pressure on the judge to pronounce a guilty verdict and threatened to take the case to the European Court of Human Rights.

9. In his article, Mr Khodorkovsky said corruption had increased tenfold since Mr Putin came to power in 2000 and disputed the prime minister’s claims to have boosted stability in Russia.

10. He drew a direct link between rising corruption and the outbreak of racial clashes in Russian cities this month that has exposed a dangerous surge in ultra-nationalism in the country. “Don’t fool yourself. Thousands and thousands of suddenly brutalised youngsters are a clear signal that our children see no future for themselves. This is clearly the threatening result of Putin’s stability,” he wrote.

11. “They are our future, they are our grief, they are the most tragic result of the decade of ‘getting back on our feet’ when there was money in abundance but no compassion.”

12. Mr Khodorkovsky has said in the past he would stay out of politics after his release and dedicate his life to social and charitable projects. But on Friday he hinted of a possible return to politics. “ We will develop the country ourselves… We can do it. We are the people after all. And it is ours. Russia.”

13. Mr Khodorkovsky’s second trial is seen as a litmus test of Dmitry Medvedev, the Russian president’s pledge to reform the judiciary and uproot corruption.

Speaking to television journalists on Friday, Mr Medvedev, a lawyer by training, refused to comment on the trial.

“Neither the president, nor any other official, has the right to express his or her position on this case or any other case before the verdict is passed, regardless of whether it is a guilty or an innocent verdict,” he said.

1. Anyone living in Russia in the 1990s knows precisely what “degradation and chaos” look like. If Mr. Khodorkovsky is the sole oligarch to be truly concerned for the well-being of the Russian populace, why was it that, when he was becoming fabulously wealthy as his country dissolved into disaster, he never went on the record to complain of it? Why did he pay just $200m for an oil company worth tens of billions when the country was sliding into bankruptcy? Why use offshore schemes instead of paying taxes if he was concerned with the commonweal?

2. Again, Khodorkovsky – and especially his lieutenants the vicious Nezhlin and Lebedev – were notorious for his callous brutality. The privatization of Apatit alone filled up a medium-sized graveyard in the Urals. Russia may be a sometimes-brutal place, but people like him made it far more so.

3. Mr. Putin gives every sign of enjoying his job, and loneliness does not seem to be an issue for him. Perhaps Khodorkovsky is confusing the Prime Minister’s fate with his own.

4. Correct.

5. Khodorkovsky was never known to champion anything other than the power of the oligarchy. Had he been a champion of democracy, his first act would have been to stop freely corrupting the Russian Duma, media, and bureaucracy. Before his arrest, he never showed any signs of wishing to relinquish the corrupt oligarchic grip on the Russian political system. It is most unlikely that, were he to be freed tomorrow, he would do anything fundamentally different.

6. Nowhere else in the article are Khodorkovsky’s critics even identified – indeed, reading the FT text, it is hard to imagine that Khodorkovsky has any critics. T&B has not heard any of Khodorkovsky’s many critics describing the charges as “absurd” – perhaps the FT is confusing the words “critic” and “shill”. Otherwise, we would like to know who, precisely, they are referring to… Or did they simply invent it, in order to finish up the paragraph on a suitably acerbic note?

7. Khodorkovsky unquestionably DOES have blood on his hands. His head of security, Alexei Pichugin, is serving a 20-year sentence (see http://news.bbc.co.uk/2/hi/business/4393003.stm) for a series of contract murders: Menatep’s terror tactics were common knowledge in the 1990s, when their opponents lived in terror (and T&B was forbidden to write anything critical of them by our erstwhile employer). What is outrageous is that their head of security, the ex-KGB operative Pichugin, was convicted, but not the bosses who ordered the hits.

Explaining why he has not been accused, Khodorkovsky apologists claim that the charges would never hold up in court. Then, in almost the same breath, they claim that the courts are transparently manipulated by the government – one cannot have it both ways! Either the courts are fair, and Khodorkovsky is as guilty as Cain, or they are unfair, in which case it seems most unlikely that a murder charge would be rejected.

Perhaps the Russian government is holding the murder charge in reserve as an ultimate, nuclear threat against Yukos-Menatep if it were to do further damage – though we are at a loss to imagine what this further damage might be. In either event, it seems an outrage that justice not been done to the victims.

8. Prima facie absurd. Again, they have spent years telling us that the courts are totally controlled by the government. If so, why should Putin bother to publicly pressure a court which is in his pocket anyway? You cannot have it both ways. As for suing before the European Court of Human Rights – one can, if one wishes, sue the Bishop of Boston for Bastardy… But one is most unlikely to prevail.

9. He is on drugs! From what we read in the press, Russian corruption was reported to account for at least20% of GDP in 2000. So it now accounts for 200%? Why be so modest? Why not 2,000%?? More than 100% of GDP going to anything at all is a logical absurdity – but we are in the realm of fantasy here.

10. More insanity. “Suddenly brutalized” (!) – Russia has been a very hard place for the past several hundred years! Skinhead violence was as brutal and far more prevalent during the mid-1990s. It remains a serious problem. Anyone visiting the poorer suburbs of Moscow, but also of Paris or Brussels, will know how widespread it is.

Again, Khodorkovsky and his ilk showed no concern with such social ills in the past. Not surprising, in that they rode around in armoured limousines with large and well-armed security details.

11. Again, to claim that the “skinhead-nationalist-racist” problem is of recent vintage suggests he takes the journalists for morons (alas, at least in this one assessment, he is apparently correct!).

12. Mr. Khodorkovsky’s likelihood of winning an election of any sort in Russia is similar to T&B’s being appointed to the Holy Synod. Less likely really, since never having heard of him, the majority of the electorate does not hate T&B.

Anyone speaking a few words of Russian should simply ask a random selection of a) taxi drivers, b) shop clerks, c) people on the street car, what they think of the oligarchs in general – and of Khodorkovsky in particular. The responses will be fairly rabid. The only significant group of Russians supporting him is the small, English-speaking coterie of members of the Moscow chattering classes who surround most foreign journalists.

13. Who declared it a litmus test? The FT? Are they chemists? No one except the journalists and those in the pay of Menatep much cares anymore. It has been two years since a foreign investor enquired with us about this matter.

It is a criminal case against a man who was as guilty as the worst of his peers, but who, unlike them, refused to cease and desist after the feeble Yeltsin regime collapsed and a more purposeful government took its place.

Of course, Mr. Putin is being disingenuous when he claims that he does not have evidence against any of the other oligarchs. There is ample evidence against many of them. The difference is they knew when to quit, and were not megalomaniacal enough to threaten the Russian state.

We have said it before – we shall say it again. The “journalist” authoring this paper is either a fool or a knave – either corrupted by Yukos money, or totally ignorant of what was public knowledge in the 1990s: that the oil oligarchs were robbing the state blind!

The argument that trying Khodorkovsky now involves double-jeopardy suggests either laziness or intentional disinformation. A quick look at Wikipedia will show that the first Khodorkovsky trial was for the criminal privatization of Apatit, not for the theft from Yukos.

In fact, the ONLY credible legal defense for Khodorkovsky is the “everyone was doing it too” argument. There is only one problem – that it is not a legal defense. We are not aware of any system of justice where it would be an accepted defense. The fact that there were other Ponzi schemes was not exculpatory for Bernie Madoff; that other guys were trading on insider information did not keep Boesky out of jail. People with dark and ugly pasts are best advised to be very, very careful and to avoid antagonizing those who could hold them to account for their past crimes… and the FT damned well knows it!

Lies, Damned lies, and the FT

A number of our readers have written to us expressing skepticism as regards our version of the Yukos affaire. This is hardly surprising – we scan the mainstream Western press in vain for anyone seriously questioning what has become the official narrative.

Is it not extraordinary that none of the famously free and fair Western media even expresses doubt as to whether he is not, in fact, guilty as charged? Could they, in fact, be regimented and beholden to a very specific agenda?

As we have noted previously – we do not find Russia either more or less corrupt than the West. The difference is that Russia has mostly “honest corruption” i.e. well-stuffed envelopes – fee-for-service, without any particular hypocrisy. In the West, on the other hand, the media are bought, generally not for cash.

Cash, of course, does play a vital role. Despite the best efforts of the Russian state, Yukos/Menatep retains control of its stolen billions parked abroad (it is for this reason that the Russian administration rightly fears Khodorkovsky – clever, vicious, infused with a sense of mission, with unlimited access to Western corridors of power, and controlling a multi-billion dollar war chest – back on the street he could be infinitely more pernicious than the equally criminal Berezovsky). This money is channeled through a dense network of political fixers, right-wing think tanks, Washington political operatives, PR and government relations firms (notably APCO, run, disconcertingly, by one Margery Kraus… no relation!), law firms such as Robert Amsterdam (essentially a very effective political huckster posing as an attorney), with scores of Western public figures on the payroll.

We do not have any evidence that publications such as the FT actually receive cash for their disinformation. That would be too simple. The most senior editors lunch with the good and the great – they attended the same schools – sit at the same clubs. Underpaid, they thrive on honours, access, that sense of belonging. Perhaps we are naïve – perhaps some cold cash changes hands. Simply – we are not aware of it.

Whatever the reason – the fact that it is openly “corrupt” is beyond reasonable dispute. The reader can draw his own conclusions as to whether a similar letter written by Bernard Madoff expressing his pity for Barack Obama would have made it onto the front pages of the FT!

This headline news was, after all, nothing more than a poorly drafted broadside by a convicted criminal lashing out at the legitimate government of his country. The fact that Khodorkovsky stole billions rather than millions clearly justifies his moving up on the page – but it does not make this front-page news!

No – the article was placed. Powerful and well-financed sources saw to it that it was given front page coverage. Money CAN buy you “Truth” in the Western press – and unlike the slightly jaded Russian populace, Westerners actually believe their own propaganda.

Other Khodorkovsky coverage of note since my last update: A Journalist Unmuzzled! – A Private Communication (how MSM editors dictate what Western journalists can effectively say – same Eric Kraus); Enough Grandstanding About Khodorkovsky, Ms. Clinton! (the hypocrisy of “rule of law” lectures from a nation that holds dozens of people indefinitely without trial – Yvonne Ridley); Khodorkovsky 2017 (doing the motions – Khodorkovsky’s lawyers); Oil tycoon Mikhail Khodorkovsky gets six more years (exercise: how many journalistic fallacies can you spot in this Independent piece?).

(Republished from Sublime Oblivion by permission of author or representative)
 
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A year ago I predicted that there will be a “decoupling from the unwinding“, as “emerging markets” by and large ride out the temporary shocks of declining Western demand for their exports (China) and the interruption of Western credit intermediation (Russia) before resuming growth. This is one aspect of the trends leading to the imminent demise of Pax Americana, which will be replaced by “the age of scarcity industrialism” / “a world without the West“. We are now entering this Empire’s endgame.

After briefly stalling in early 2009, China’s economy roared back to life on the back of massive credit loosening to build (or overbuild) infrastructure and industrial capacity. Though not the most efficient use of resources, it did have the advantage of 1) maintaining growth, 2) forestalling the social unrest that would rise up if it wasn’t, and 3) at least Chinese investments went into building up their real economy (amongst other things, it became the world’s largest producer of wind turbines and photovoltaic panels in 2009), instead of the pork and oligarch welfare programs more characteristic of the US “stimulus”. And though Russia’s GDP contracted by 7.9% in 2009 – far higher than expected by most commentators, largely thanks to the dependence its big corporations acquired on continuous flows of intermediated Western credit – it began to slowly recover from mid-2009, industrial output is now rising at a fast clip, and investment banks are predicting growth of 4-6% for 2010. The other two BRIC’s, Brazil and India, didn’t have too many problems at all since they had neither a big credit nor trade dependence on the submerging Western markets.

In the long-term, I argued that the brunt of the crisis would fall on the “submerging” Anglo-Saxon markets, thanks to their “charades over “quantitative easing” (translation: printing money), transfer of toxic “assets” onto the public account”, and unsustainable fiscal stimuli. Today, the American political system is for all practical purposes broken. Republicans won’t agree to tax increases, Democrats won’t agree to cutting entitlement programs. The legislative process is reverting to that of the 17th century Polish-Lithuanian Commonwealth, when a single veto could (and did) prevent anything being agreed on in their Sejm, or parliament. (Hint: the ultimate consequences weren’t good for Poland).

The inflated hopes and expectations accompanying Obama’s accession to power were indeed, just as I suggested on his election, “greatly constrained by financial and institutional realities”. He is a weakling President, alternating between meaningless populist rhetoric and pandering to the Wall Street oligarchs; scorned by the left as Bush II with gloss, and condemned by the right as a foreign Marxist Islamofascist: his policies and outreaches failing at home and abroad, rejected in his own heartlands, these outcomes are engendered by and in large part made inevitable by his hopelessly pollyannish belief in his own messianic powers of compromise and persuasion.

If you think things look bad now, with the budget deficit at 10% of GDP for 2009 and a similar figure projected for 2010, don’t look at what awaits us in a few more years. The fiscal pressure is only going to increase as the baby boomers start retiring, and as long as the US remains a populist democracy the public will not allow it to cut entitlements (at least until China and the world’s oil exporters force it on them). For instance, the Congressional Budget Office believes that the US will never again run a balanced budget, and you can guess its consequences for American global power. Furthermore, this doesn’t take into account that 1) the vast majority of prior budget forecasts have been optimistic and 2) this assumes that none of the potential breaking-points that could doom Pax Americana (which I’ve identified as imperial overstretch, geopolitical shocks, and oil-credit perturbations caused by peak oil) come to pass.

As shown above, the US has had an almost continous budget deficit since the start of its “age of diminished expectations” in the 1970′s, funded by investors willing to buy up its Treasuries, accepting low returns in exchange for America’s perceived status as a “safe haven” (so-called “American alpha”). Yet with the American empire crumbling at the margins and their own most optimistic forecasts predicting a structural deficit into the foreseeable future, will investors continue buying up Treasuries – or will they turn to more promising emerging markets? Could it even be possible that the US is already in its imperial endgame, as argued by John Michael Greer?

A different reality pertains within the Washington DC beltway. Where states that fail to balance their budgets get their bond ratings cut and, in some cases, are having trouble finding buyers for their debt at less than usurious interest rates, the federal government seems to be able to defy the normal behavior of bond markets with impunity. Despite soaring deficits, not to mention a growing disinclination on the part of foreign governments to keep on financing the same, every new issuance of US treasury bills somehow finds buyers in such abundance that interest rates stay remarkably low. A few weeks ago, Tom Whipple of ASPO became the latest in a tolerably large number of perceptive observers who have pointed out that this makes sense only if the US government is surreptitiously buying its own debt.

The process works something like this. The Federal Reserve, which is not actually a government agency but a consortium of large banks working under a Federal charter, has the statutory right to mint money in the US. These days, that can be done by a few keystrokes on a computer, and another few keystrokes can transfer that money to any bank in the nation. Some of those banks use the money to buy up US treasury bills, probably by way of subsidiaries chartered in the Cayman Islands and the like, and these same off-book subsidiaries then stash the T-bills and keep them off the books. The money thus laundered finally arrives at the US treasury, where it gets spent.

It may be a bit more complex than that. Those huge sums of money voted by Congress to bail out the financial system may well have been diverted into this process – that would certainly explain why the Department of the Treasury and the Federal Reserve Bank of New York have stonewalled every attempt to trace exactly where all that money went. Friendly foreign governments may also have a hand in the process. One way or another, though, those of my readers who remember the financial engineering that got Enron its fifteen minutes of fame may find all this uncomfortably familiar – and it is. The world’s largest economy has become, in effect, the United States of Enron.

And it’s not only tree-hugging Druids that are raising the alarm. Niall Ferguson, court historian for Pax Americana, is also tolling the bell for its imminent demise on the pages of the Financial Times (A Greek crisis is coming to America).

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect. …

For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941. …

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). [AK: Yes, Britain is screwed. So is Japan]. Then came Ireland, Spain and Greece (9 per cent). [AK: The PIIGS (Portugal, Italy, Ireland, Greece, Spain are screwed too, especially Greece and Spain at this point]. And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.

Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.

But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $15,000bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months. [AK: This refers to the dreaded "debt compound trap", in which the real costs of servicing debt spiral out of control and the only way out is restructuring (partial / negotiated default) or "monetization" of the debt (inflation). PS. The "debt trap" is essentially what brought down the regime of Louis XVI in 1789].

The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. [AK: Ha!] But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.

Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): “How long can the world’s biggest borrower remain the world’s biggest power?”

The US is a weakened skier and is now hurtling towards a rock-strewn double black for which it is not prepared in any way, shape, or form. But at least for now, its position looks stable – after all, it grew at an annualized 5.7% in Q4, 2009 (half due to inventories buildup). The same cannot be said of Greece and the Eurozone, which seem to be approaching a major crisis in mid-2010.

Afflicted with a dysfunctional political system and chronically unable to balance its budget (sound familiar?), yet without the manifold benefits of “American alpha”, Greece is facing a looming default propelled by a 13%-of-GDP budget deficit (even granting full benefit of the doubt to Greece’s dodgy statistics service), public debt at 113% of GDP (well above the 60% limit imposed by Maastricht), and draconian austerity plans that are politically unrealizable.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral. …

Remember, Athens holds the whip hand over Brussels, not the other way round. Greek exit from EMU would be dangerous. Quite apart from the instant contagion effects across Club Med and Eastern Europe, it would puncture the aura of manifest destiny that has driven EU integration for half a century. …

No doubt, EU institutions will rustle up a rescue. RBS says action by the European Central Bank may be “days away”. While the ECB may not bail out states, it may buy Greek bonds in the open market. EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece’s debt, drawing out the agony. What Greece needs – unless it leaves EMU – is a permanent subsidy from the North. Spain and Portugal will need help too.

The danger point for Greece will come when the Pfennig drops in Berlin that EMU divergence between North and South has widened to such a point that the system will break up unless: either Germany tolerates inflation of 4pc or 5pc to prevent Club Med tipping into debt deflation; or it pays welfare transfers to the South (not loans) equal to East German subsidies after reunification.

Before we blame Greece for making a hash of the euro, let us not forget how we got here. EMU lured Club Med into a trap. Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom. The ECB was complicit. It breached its inflation and M3 money target repeatedly in order to nurse Germany through slump. ECB rates were 2pc until December 2005. This was poison for overheating Southern states.

And according to Stratfor:

The crisis is rooted in Europe’s greatest success: the Maastricht Treaty and the monetary union the treaty spawned epitomized by the euro. Everyone participating in the euro won by merging their currencies. Germany received full, direct and currency-risk-free access to the markets of all its euro partners. In the years since, Germany’s brutal efficiency has permitted its exports to increase steadily both as a share of total European consumption and as a share of European exports to the wider world. Conversely, the eurozone’s smaller and/or poorer members gained access to Germany’s low interest rates and high credit rating. And the last bit is what spawned the current problem.

Greece now has the following choices:

1) Balance the budget. To do this Greece would have to cut its government spending by as much as half, resulting in sky-rocketing unemployment (20%+) and severe social unrest. Greeks are volatile, not like disciplined Germans or apathetic Latvians.

2) Leave the EMU. And print a New Drachma to inflate away its debt into oblivion, as was once typical for the Med nations. But then it would lose its geopolitical anchor in Europe and lose access to any further foreign investor money. According to Willem Buiter, this isn’t too likely.

Would a eurozone national government faced either with the looming threat of default or with the reality of a default be incentivised to leave the eurozone? Consider the example of a hypothetical country called Hellas. It could not redenominate its existing stock of euro-denominated obligations in its new currency, let’s call it the New Drachma. That itself would constitute a further act of default. If the New Drachma depreciated sharply against the euro, in both nominal and real terms, following the exit of Hellas from the eurozone, the real value of the government debt-to-GDP ratio would rise. In addition, any new funding through the issuance of New Drachma-denominated sovereign bonds would be subject to an exchange rate risk premium, and these bonds would have to be sold in markets that are less deep and liquid that the market for euro-denominated Hellas debt used to be. So the sovereign eurozone quitter and all who sail in her would be clobbered as regards borrowing costs both on the outstanding stock and on the new flows.

A sharp depreciation of the nominal exchange rate of the New Drachma vis-a-vis the euro would for a short period improve the competitive position of the nation because, with domestic costs and prices sticky in nominal New Drachma terms, a nominal depreciation is also a real depreciation. Nominal rigidities are, however, less important for eurozone economies than for the UK, and much less important than in the US. Real rigidities are what characterises mythical Hellas, as it does real-world Greece, Italy, Spain, Portugal and Ireland. The real benefits from a nominal exchange rate depreciation would be eroded after a year – within two years at most – before you could say cyclical recovery. The New Drachma would be a little currency in a big global financial market system – not an instrument to be used to gain competitive advantage or to respond efficiently to asymmetric shocks, but a source of extraneous noise, excess volatility and persistent misalignments, rather like sterling.

A eurozone member state faced with the prospect of sovereign default, or just having suffered the indignity of sovereign default, would be immensely relieved to be a member of the eurozone. The last thing it would want to do is give up the financial shelter provided by membership in the eurozone to try and emulate Iceland, New Zealand or the UK.

3) Old-school default. And be shunned by the rest of Europe. Though threatening to blow up the bomb is to Greece’s advantage, since this will shift the burden to…

Europe – or precisely, Germany – having to make their choice.

1) Let them burn. Germany is getting impatient of being used as Europe’s cash cow for the past 60 years, and may simply tell Greece to deal with it herself. This will likely lead to spiraling debt service costs, fiscal-social-political breakdown, and heightened borrowing costs for the other PIIGS, maybe even a “cascading collapse” of Europe’s entire southern periphery (in the most extreme case, even Belgium and France would be threatened). This would finish off the EU as a meaningful institution, and with it will go the main vehice through which Germany and France wield power at a global level.

2) Berlin bails out Greece. Involves a different set of problems. A straight-out bailout will invite moral hazard and political dissatisfaction amongst the German electorate, who have had their wages constrained for years while the PIIGS wallowed in their bubbles. But all in all, preferable to the above scenario, or the prospect of a spreading crisis of confidence also forcing Germany to bail out Italy, Spain, or even France, all of whom have far bigger borrowing needs (and for which even Germany doesn’t have the resources). Therefore, Germany will probably lead an EU bailout of Greece (even though there is no formal mechanism for doing so) – but in exchange, it will want major political concessions.

But the days of no-strings-attached financial assistance from Germany are over. If Germany is going to do this, there will no longer be anything “implied” or “assumed” about German control of the European Central Bank and the eurozone. The control will become reality, and that control will have consequences. For all intents and purposes, Germany will run the fiscal policies of peripheral member states that have proved they are not up to the task of doing so on their own. To accept anything less intrusive would end with Germany becoming responsible for bailing out everyone.

Granted, at the moment the EU is stalling, not making any commitments; not surprising, given the cluttered and unwieldy talking shop that it is. But as Greece’s bond auctions (almost certainly) fail over the next few months to meet its soaring debt financing commitments, and as it falls into its debt compound trap, the fiscally secure nations – that is, primarily Germany – will realize the dangers of allowing the contagion to spread. And Germany in particular will see a chance to regain the sphere of influence over Mitteleuropa denied it since the Second World War.

Either way, in 2010 the EU institutions are going to be sidelined in favor of more workable, bilateral relations – especially between the Franco-German core and the weakening peripheries. The way will be opened for the return of Great Power politics to the European continent.

Looking further ahead, within a year the US will again enter a state of crisis. Based on Obama’s low popularity at the end of his first year (is he going to set a time record for failed Presidency?) and his loss of Massachusetts (!) to the Republicans, the political gridlock will only harden. As I forecast last September, “the feds will face challenges from the far-left (new Huey Long’s, anarchism, etc) and the far-right (demands for more state rights, anti-tax movements, “American reactionary patriots”, etc)” – though right now, the far-right movements appear to be the more powerful emerging faction (see the grassroots appeal of the reactionary, back-to-the-18th-century Tea Partiers, who in an electoral contest would now garner 17% of the vote – is the US finally going to see a powerful 3rd party?). PS. American corporations can now legally buy themselves political parties.

Second, in addition to the political problem, there will be a renewed economic and credit problem as the Second Wave of the Housing Crisis engulfs the nation because of rising defaults from adjustable-rate mortgages, many of which will be coming due by 2011.

And this brings us to a third problem, a renewed banking crisis. But this time, instead of withdrawing from emerging markets to the “safe haven” of the US, the banks will instead invest more into promising emerging markets (e.g. the BRIC’s) and commodity speculation (see peak oil), while divulging their US holdings and triggering capital flight. This will compount the political and economic problems, as America’s “rootless cosmopolitans” / financial and their political flunkies come under fire from both the far-left and right-wing producerist reactionaries.

Then there’s the fourth problem – peak oil. World oil production capacity may have peaked in 2010, and projections indicate that 2012 will see an accelerating downslide. This time there will be a both severe credit contraction, far exceeding the one in 2008-2009 (because this time capital will be fleeing the US) and soaring oil prices. The American consumer will live through a far more severe retrenchment than in 2007-2009, starting in 2011. The entailing fall in consumption will further reinforce the banking crisis, the wider economic crisis, and the political crisis. By this point, the “Tea Party”-Republican candidate may be well ahead of Obama, who by this point is utterly discredited.

Now what should Obama do? Note that by this time the Iran crisis will be coming to a head. Sanctions will have failed (China and Russia will see no reason to cooperate seriously). Israel will be getting extremely restless, since it treats the Iranian nuclear bomb as an existential threat. And Obama may well come to view a decisive resolution of the Iran issue as the only road still left open to him to claw back domestic and international legitimacy. However, Iran likely has the capability to block the Strait of Hormuz to oil tankers for several weeks using mines and anti-ship missiles. 20% of the world’s oil shipments pass through those narrow Straits. Needless to say, in a world entering the downslope of Hubbert’s peak, any disruption to global oil supplies will have tremendous, chaotic repercussions – economic, financial, political, and geopolitical – that we have no way of predicting in advance.

In conclusion, Pax Americana is going to face a series of severe crises in the next three to five years (and not only its lynchpin, the US). The European crisis, linked to the Med credit bubbles, is leading to the slow unraveling of the EU’s legitimacy in favor of its core states, France and especially Germany. It will come to a head in the next few months. Japan is facing an irredeemable fiscal and debt crisis, which will explode in the next few years: eventually, it will likely bandwagon with China (leveraging its technological base to gain favorable access to China’s markets and labor force) and ditch its post-1990 turn towards neoliberalism, which was never suited for the Japanese mentality anyway, in favor of Asian socialism.

Finally, the US itself will face a panoply of challenges – fiscal profligacy (stemming from its belief that it can have both guns & butter on a shrinking industrial base), imperial overstretch (Afghanistan, Iraq), political dysfunction, a new housing, credit, and economic crisis, soaring energy prices (disastrous for suburbia), and geopolitical challenges (Iran, China, Russia). It can deal with any one of them, but I can see no way how it would be able to deal with all of them coming within a few years of each other. The consequences?

Namely, there will be a partial collapse of legitimacy in the government; the feds will face challenges from the far-left (new Huey Long’s, anarchism, etc) and the far-right (demands for more state rights, anti-tax movements, “American reactionary patriots”, etc); fertility will collapse from the current replacement-level rates to around 1.3-1.7, as welfare shrinks and the utility of having children for the very poor, currently the most fecund social group, drops; crime will increase, etc. Yet within a decade a new social order will gradually emerge, probably fiscally and socially conservative and more authoritarian than the current one, and with it a new equilibrium will slowly, painfully come into being.

However, the US will almost certainly remain a Great Power. I certainly do not see it collapsing into separate states or regions, as dreamt of by the likes of Igor Panarin or Gerald Celente. In some ways, by casting aside its global imperial shell, it will actually become stronger – it will no longer be weighed down by the burden of global empire, and can focus on other activities the more effectively, such as reconstructing its industrial base and reinforcing its neo-colonial sphere around North America, the Carribbean, and perhaps Central America / Venezuela. Whatever form America’s new political economy takes (something resembling Putinism?, or maybe Chavismo?), it will likely be far better suited for the coming age of scarcity industrialism (characterized by economic statism, Realpolitik, and mercantile trade relations), than the crumbling colossus that is today’s Pax Americana.

(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.