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Even a few months ago, it looked as if Ukraine had taken a significant step towards Eurasian integration by signing up as an observer to the Customs Union between Russia, Kazakhstan, and Belarus. However, in the past month, evidence is emerging that it was but a temporary ploy to appease Russia while in reality speeding up the Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union. This is scheduled to be signed in Vilnius late this November.

The Ukrainians say that that does not preclude further integration within the framework of the Customs Union. However, it is difficult to see how it could simultaneously have free trade with Europe while simultaneously being a part of strategic protectionist bloc. Although it is entirely possible that in the Customs Union will eventually be gradually merged with and into the European economic area – Putin himself has hinted as much – any such scenario will likely be decades in the making.

Putting aside for the moment geopolitical (Atlanticism vs. Eurasianism) and cultural (European civilization vs. Orthodox-Slavic brotherhood) considerations for the moment – which have been overdiscussed anyway both on this blog and Leos Tomicek’s and many others, with the result that there is now little left to add – I would like to frame the debate in economic terms.

The EU Path

As Mark Adomanis points out in his blog, most Russian claims regarding the disadvantages of DCFTA ratification at the recent Yalta summit were in fact based on technical considerations (the Russian negotiator Sergei Glazeyev’s comments on irredentism and ostensible blackmail that have dominated media coverage appear to have been offhand and taken out of context anyway).

The free trade area will make imports cheaper, but at the cost of an even greater current account deficit – Ukrainian factories aren’t likely to compete well with German (or even Czech) ones on equal terms. This current account deficit will be financed by external borrowing, which is short-term and limited due to Ukraine’s poor credit status. This means that either it will have to do a default or devaluation of some kind, so the Russian argument goes, or seek a bailout.

And who is going to provide that bailout? Russia? Of course not. As for the EU states, many of them are strained themselves, and have quite enough pasta and paella on their plates anyway. For the same reason, the generous transfers that eased the Med’s convergence with the European core in previous decades are now a thing of the past; if the Ukrainians expect freebies, they will probably be in for a disappointment. In any case, actual membership of the EU is extremely remote. In any case, the advantages conferred by the supposed “transparency” and “rule of law” that European integration brings are oft-overstated, as we have witnessed many times.

Fortunately, unemployment will be contained, if free trade is accompanied by an easing of visa restrictions; but not so much in terms of demographics, which will take a hit just as they show tentative signs of recovering somewhat. A positive side is that there might be more European investments and technology transfers, especially in western Ukraine, since countries like the Czech Republic and Poland start to become too rich to be attractive as sources of cheap, educated labor.

The EEU Path

This would integrate Ukraine with the Russian economic sphere of modest protectionism coupled with an industrial policy aimed at reviving Soviet mainstays such as the aircraft indistry as well as delving into new spheres like nanotechnology. The technological level of Russian industry isn’t substantially higher than Ukraine’s, and furthermore, the latter’s will receive a boost in the form of lower energy prices; as such, there will presumably be no big threat of many factory closures or unemployment spikes. As such, in the short-term and medium-term, it is clearly preferable to the EU path.

In the long-term, that depends on your view of whether Russia’s own modernization path is sustainable or not, and also perhaps on whether the Customs Union / EEU is destined to merge with the EU in some way. But those are entire debates on their own.

Sitting on the fence?

It’s interesting to note that that the DCFTA is pushed for by a government whose electoral support is rooted in the Russophone east and south – indeed, one which is frequently accused of being a stooge of Russian imperialism.

The Party of Regions isn’t a stooge of Russian imperialism. If it is a stooge of anyone, it is of the Donbass heavy industrial oligarchs. The interests of those oligarchs are clearly mixed. On the one hand, many of their factories will no longer be profitable under conditions of free trade and regulatory convergence with Europe. On the other hand, they will get a chance to increase their status and long-term security by merging with the transnational oligarchy based around London and New York. As for electoral strategy, the choice to pursue the European vector is… downright curious. For it is its own electoral heartlands that free trade with Europe will hammer the most, especially in the short and medium term. Are they hoping that their voter base wouldn’t connect the dots?

This is why it’s difficult to say right now whether the Ukrainian elites as a group (including the oligarchs who fund PoR) have made a definitive choice to integrate with Europe – or whether it is merely continuing its very old game of playing off both sides against the other in return for concessions. Still, if I had to guess, I’d go with the former. The “civilized” West has a ineluctable charm to many overly idealistic citizens in the former Soviet Union that is not often appreciated by Westerners themselves. This charm transcends both reason and the realistic observation that many civilized Westerners themselves don’t reciprocate those warm feelings, and certainly don’t consider Ukrainians (or Russians – though at least Russians don’t tend to have quite as big an inferiority complex on this) to be civilized Europeans. What else could explain PoR taking a course that will probably end up majorly shafting their own electoral base *and* (at least in part) the oligarchs who fund them?

(Republished from Da Russophile by permission of author or representative)
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Just when I thought the paper of Luke “I Plagiarize Off The eXile” Harding and Miriam “Putin Stole My Dry Cleaning Ticket” Elder could get no more incompetent, vindictive, and mendacious in its Russia coverage, it did. I present: Putin calls in Darth Vader to tighten his grip on Russia’s energy assets by Alex Dryden, who seems to be the Guardian’s new Moscow correspondent. How many tropes and outright lies can you, dear reader, identify in that 800-word diatribe? I could find at least a dozen or so.

Manichaeism: Apparently Sechin is “Darth Vader” and “the scariest man in Russia”, according to Russians. That’s certainly news to me. I have never heard Sechin called any of that. The blogger Mark Galeotti did alert me to the fact that he’d used the moniker in a blog post, but did say that “joking aside, I haven’t seen Russians call Sechin Vader.” I searched on Russian Google for these associations and all I could find was references to Dryden’s own article, an article from Forbes a few years back that also called Sechin a Darth Vader, and a few bloggers. However I doubt that a majority of Russians even know who Sechin is let alone think of him as Emperor Palpatine’s Putin’s enforcer.

Inconsistency. Sechin is apparently the “greyest of his éminences grises”. I always thought that title belonged to Surkov? Make up your minds already! But this isn’t all. Not only will Darth Vader help Putin “tighten his grip on Russia’s energy assets”, he is at the same time – according to the subtitle – to “begin a potentially tycoon-terrifying reprivatisation programme.” This is a logical consequence of the traditional view of the Western media that Putin / Russia can do nothing good: If he increases restrictions on party registrations, it is authoritarianism, if he loosens them, it is a Kremlin plot to crowd out genuine liberals with fake Kremlin parties, etc. But at least up till now Putin’s inevitably evil and mercenary choices were at least mutually exclusive. Alex Dryden goes one step further, adopting a kind of multi-universe perspective in which Putin both “tightens state control” and “reprivatizes” at the same time, with both serving to reinforce his dominance and enrich his corrupt cronies.

Outright lies: What IS actually being discussed is privatization of state controlled companies, however there is debate over the pace (it is likely to be slow and gradual) and final extent of this privatization. How that amounts to tightening “state control of the economy” must remain a Schrödingerian mystery.

Tinpot Russia: “But the “r” in the Bric nations looks increasingly vulnerable… Should Russia even be included as one of the Brics? As the American economist, Nouriel Roubini, says, Russia is “more sick than Bric”.” And Jim O’Neill, the inventor of the BRIC’s concept, is a consistent defender of Russia’s place in the BRIC’s. Indeed on most indicators Russia is at least as good as the BRIC’s average or better. It has the highest human capital and the highest GDP per capita (both in nominal and PPP terms). Its per capita growth over the past decade lags only China and is about equal to India (which is many times poorer), and its present growth trajectory is likewise superior to Brazil and about equal to India’s. It is also the fiscally strongest of the BRIC’s, despite the relatively high dependence of its budget on minerals revenue (which is not a sin: See Australia, Norway, etc).

Anonymous sourcing: “Oleg says”, “Oleg’s wife Veronika says”, “Oleg and Veronika are just two of the many young people in Russia considering leaving”, “Sources close to Putin”, “An officer in the economic department of the FSB, the KGB’s successor organisation”, “the head of a small Moscow oil company”, “A partner in AAR”. All of whom conveniently back the Guardian line on Russia, from its economy being a cash machine for the ominously anonymous “them” (that is, the siloviki, as Dryden helpfully clarifies for us) to “mafiosi methods” being the only possible way to do business there. I wonder why Dryden didn’t cite the voices in his head. It would at the very least be more credible for its honesty.

Dying Russia: “Russia’s population is in drastic decline. Much of this is due to emigration, nearly all of which is of the younger and smarter elements of the population. The rest is caused by a falling life expectancy and birth rate.” Four lies in three sentences. First, the population has been stable since about 2008, and has started to appreciably increase since 2011. In the first four months of 2012, the time of the year when it was usually declining the fastest, the population INCREASED by 42,000 people. This was helped by a 90,000 POSITIVE migration balance; a migration balance that remains positive even when just countries in the Far Abroad, i.e. the destinations of the “younger and smarter” emigrations, are considered (and this balance will remain positive EVEN if we assume that Russian statistics underestimate emigration by 50%). The life expectancy and birth rates aren’t decreasing; to the contrary, they are increasing at unprecedented rates, and in fact the former broke the Soviet-era record in 2011. Where does the Guardian get its fact-checkers? Do they even bother with them?

Mafia state: “…however, if you were one of the few who made outlandish amounts of money and commanded influence within the siloviki elites, life has been good in the past 10 years”. Unable to deny the truly undeniably realities of improving across the board statistics on everything from GDP per capita to automobile ownership, the Guardian goes back to the old anti-Putin cliche of ascribing all the benefits of this prodigal economic growth to a small coterie of (inevitably corrupt and slimey) pro-Putinist apparatchiks. Statistics that show massive gains in real median wages, as reflected in broad surveys of consumer power or the number of Big Macs a McDonald’s worker can afford per hour of labor, is of course unmentioned.

Lack of context: Russia is the weakest and most pathetic of the BRIC’s. It should be kicked out. It’s 120th on the World Bank’s Ease of Doing Business ranking for goodness’ sake! Except that Brazil is 126th, and India is 132nd.

If a freshman handed in this dross excuse for an op-ed to a journalism or political science in any halfway respectable institution, he would get an F. (For his own sake I hope this is something Dryden wrote up on a tight deadline, maybe while hungover from partying with Ioffe and Shawn Walker and their likes, to keep his paychecks flowing). But as it’s a Guardian journalist writing about Russia all is par for the course.

PS. I am not on good terms with the Guardianistas, them having mostly banned me from commenting on their pages like the upstanding democraticians they are, so I would appreciate it if one of my readers could write a complaint to them about Alex Dryden’s post, feeling free to cite this post as evidence.

PSS. I noticed towards the end of writing this post that Mark Adomanis had already done a similar rebuttal, making most of the same criticisms. In fact even Alexey Kovalev, a hardcore liberal who occasionally writes for The Guardian, says that Dryden is “spectacularly clueless” and a “total ignoramus” not to mention anecdotally confirming my points on demography and emigration.

PSSS. A few corrections from Kovalev. (1) “Fine, but calling me a ‘hardcore liberal’ is a bit far-fetched. The fact that I wrote for G doesn’t make me one.” (2) “Also I said that one is entitled to an opinion that makes them look like an ignoramus, not called Dryden one.”

(Republished from Da Russophile 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.