Category Archives: Energy

kovane On Russia’s WTO Accession

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By far the best and most comprehensive article I read on the subject: Russia at the WTO Gate: Locking the Status of a Raw-Materials Supplier, or Striding Toward a Modern Economy?

I really recommend you read it all, but here is the conclusion.

The optimistic scenario, hailed by liberal economists, proclaims almost immediate benefits for everyone. Consumer will get lower prices on a wide range of goods, businesses will become more integrated into the world economy, and the WTO will improve Russia’s law system and investment climate. The World Bank’s research forecasts a gain of 3.3% of GDP in the medium term, inflow of FDI and the reduced cost of business services. Moreover, according to the report, 99.9 percent of the households will gain from 2 percent to 25 percent of their household income, poor households slightly more than rich ones. The influence of the WTO on particular industries is presented here.

This scenario also stirs questions. The experience of Ukraine and Georgia shows that any expectation of significant price reduction is somewhat inflated. As a consequence, the described gain of households will be significantly lower. The inflow of FDI due to the lowered administrative barriers is also a very bold assumption. The WTO accession is no magic elixir to such deeply-entrenched ills of the Russian economy. And Russia is certainly not the first choice of foreign investors. But the hope for improvement in the law system is not baseless, and Russia certainly could use it, especially in the customs code and accounting.

The WTO entry is a necessary step for any country aspiring to develop a modern economy, however the timing and conditions leave much to be desired. The problems encountered by Ukraine highlight the dangers of a rash decision to seek membership in the WTO no matter the cost and an inconsistent economic policy. But the Russian government has all means to deal with the challenges of a more open economy. And the way it will carry out the complete revamping of the economic policy will be a litmus test for the ability of Putin’s Administration to modernize the economy. However, the price of error here is very high, and all that remains for the common voter is to wait and watch.

Alex Dryden, A Hack’s Hack

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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.

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Interview with Craig Willy (Letters from Europe)

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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.

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Russia’s Roads to Nowhere, or: build Railways instead!

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Though it’s not quite true that Russia has “no roads, only directions”, the old saying isn’t far off the mark. The World Bank’s recent report on Russia’s economy notes that the Eurasian giant’s road network is primitive and crumbling, coming in 111th in a global ranking (the railway system does much better at 33rd); more than half its highways do not meet minimum riding quality requirements. None of this should come as a big surprise to anyone who has had the pleasure* of driving beyond Moscow’s MKAD.

One of the main gripes of Russia’s limousine liberal opposition is the low priority the Kremlin places on the country’s road development – according to Boris Nemtsov, the rate of road construction during the Putin era fell by two or three times relative to the Yeltsin years (these figures don’t tally well with the official statistics but whatever). My intention here isn’t to wrestle over numbers and details in an attempt to either vindicate or condemn Putinism, instead I am going to consider a far more fundamental question: is it really worth Russia’s while to invest limited resources in a high-entropy system with no future that will furthermore accentuate socio-economic divisions in the short-term?

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Why Russia is cemented to the other BRICs

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In the wake of the economic crisis in which Russia’s GDP fell by a stunning 7.9% in 2009, its status as a BRIC economy – with its connotations of promise and progress – was brought into question. After all, isn’t it a dying nation with rapidly degrading infrastructure? Isn’t it amazingly corrupt? Wouldn’t its contempt for liberal democratic values doom it to stagnation? And what happens now that oil production, the main locomotive of the Russia economy, has stalled thanks to the politicized persecution of “brilliant entrepreneurs” like Mikhail Khodorkovsky? Indeed, was not its economic collapse in 2009 a portent of things to come? And so on*.

There are many reasons to dismiss these arguments, as I will try to show in this post. First, the very inventor of the BRICs concept, Jim O’Neill of Goldman Sachs (who has probably thought more about it than anyone else) dismisses the argument that Russia is ineligible on the basis that is was the only country amongst them to show (highly) negative growth during the economic crisis as “rubbish”. He goes on to add that “the only reason that Russia was hurt so badly was unlike the others, it borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.” ** Of course, the Russian economy’s dependence on Western intermediation for its credit is a structural weakness, and one that was exposed in late 2008. But potential faultlines like this are hardly unique amongst the BRICs – its most promising member, China, critically depends on exports for continued growth***, and its banks are saddled with bad debts.

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The People’s Choice, or how Ukrainians are learning to stop worrying and love Eurasia

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I enjoyed the egg-throwing scenes from Ukraine’s Rada on the ratification of the gas-for-fleet deal with Russia as much as anyone. It also reflected the polarized commentary on the interwebs. The Ukrainian patriot-bloggers get their knickers in a sweaty twist. The academic beigeocrat Alexander Motyl (he of “Why Russia is Really Weak“ fame some four years back) now warns of the “End of Ukraine”. Ukraine’s (self-styled) intelligentsia writes open letters condemning the Kharkov deal and Yanukovych’s sellout of the national interest. 2000 protesters stage a demonstration against his pursuit of closer ties with Russia in Kiev, a city of three millions. Alexander Golts, liberal Russian military analyst, argues that the asymmetric nature of the exchange – “with the lower gas prices to take effect immediately, Ukraine can now save roughly $4 billion annually, whereas the lease extension will only take effect only after the current agreement expires in 2017″ – means that Russia was duped. In my view, these screeds are ideologized, or approach the issue from a set of false or incomplete assumptions.

Let’s start from the “banderovtsy“ who despise the “sovok” Yanukovych for selling out Ukrainka to the Moskali Horde. (Yes, I’ve grossly caricatured three complex groupings in that sentence). Their problem is that they believe the “Ukrainian people” share their own rigid conception of Ukraine as a rigid nation-state, rejecting opposing views that stress its civilizational commonalities with the Orthodox, Slavic, or Eurasian spheres. This manifests itself in a particularly antagonistic attitude to Russia and Russianness, which are perceived, not inaccurately, as the greatest enemies of Ukrainian nationhood yesterday, today and tomorrow. Their biggest problem and frustration – indeed, their predicament – is that by and large, the Ukrainian people simply do not buy into their efforts to imagine into being a narrow, militantly Ukrainian vision of Ukraine*.

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In which I criticize Vladimir Putin

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I’ve been accused of being a “Russophile cockroach”, an “amoral Putin lackey”, and overall bad guy. Guilty as charged! Yes, I do like Russia and don’t have much good to say about the Western media’s coverage of it. Yes, I don’t give much of damn for the moralistic posturing that any vapid idiot Kremlinologist can easily excel in. And yes, I do have a positive opinion of Vladimir Putin (as do 75%+ of Russians). Now granted, part of this probably has something to do with the huge amounts of money his FSB minions kindly slip under my door for glorifying their Tsarist godfather on the Internet in my spare time. But this doesn’t necessarily mean that I set my alarm clock to VVP’s speeches, drink prodigal amounts of Putinka for breakfast, and bow before his icon at the Altar of Neo-Stalinism in my basement before logging onto my workstation to fulfill my job description as ein strammer Putin-soldat. In reality, my positive view of Putin is moderate and hedged.

Don’t believe my word as “the dishonest, progangadizing (very, very) little maggot” that I really am? Below I present five major shortcomings of the Putin Presidency.

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Regathering of the Russian Lands

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I have long noted Russia’s resurgence back into the ranks of the leading Great Powers; I predicted that the global economic crisis will not have a long-term retarding impact on the Russian economy; and within the past year I have bought into Stratfor‘s idea that the defining narrative now in play in Eurasia is Russia’s intention to reconstruct its empire / sphere of influence / call-it-what-you-will in the post-Soviet space. This “resurgence” is advancing along several major fronts: geopolitical, economic, demographic, military, and ideological. In this post I will cover recent major news on the first four.

Ukraine Returns to the Empire?

The most consequential big event is the electoral victory of Viktor Yanukovych (35%) in the first round of the Ukrainian presidential elections, followed by Yulia Tymoshenko (25%), Serhiy Tihipko (13%), Arseniy Yatsenyuk (7%), and Viktor Yushchenko (5%) – a result that I called 100% accurately. Disillusioned with the incompetence, economic decline, and “anarchic stasis” of five years of Orange rule, polls indicate three times as many Ukrainians now favor a “strong leader” over a “democratic government”, so no wonder that the liberal ideologue Yushenko, though the only major Ukrainian politician who is consistent and sincere in his views, suffered a crushing defeat as the last true representative of the Westernizing “Orange” movement. This marks a threshold in the accelerating “regathering of the Russian lands”*.

Below is an electoral map of the first-round Ukrainian presidential elections. As is always the case, the urban, Russophone / Surzhyk-speaking, Russian Orthodox Church-affiliated south and east voted for the pro-Russian Yanukovych, head of the Party of Regions, while the more bucolic, Ukrainian-speaking, Kyiv Patriarchate-affiliated / Uniate center and west favored Tymoshenko.

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Defending the Loop

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Following my posting of Russia’s Sisyphean Loop, the influential East-Central Europe expert, Vlad Sobell, wrote up an interesting critique at the Untimely Thoughts Russia Discussion Group. It addresses what may be considered some weak, or at least not thoroughly explained, points from the original article, so I thought it would be useful to reproduce it in full along with the ensuing e-mail conversation.

I first give a very condensed version (inevitably a caricature) of what he has written, and then proceed to inform him what is wrong with it.

His thesis goes as follows:

In its effort to modernise and catch up with the West (mainly for reasons of defence) Russia has been going in circles, or historical cycles – a Sisyphean Loop. Anatoly has developed a useful model (his Belief Matrix TM) which illustrates the parameters in which this cycle is set.

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Review of “The Prodigal Superpower” (S. Rosefielde)

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Rosefielde, Steven – Russia in the 21st Century: The Prodigal Superpower (2004)
Category: political economy, Russia, transition, military; Rating: 4/5
Summary: Google books; Introduction

This is a book about Russia’s past, and its alleged return to the future. Rosefielde outlines his theory that the Soviet Union was a “prodigal superpower”, exchanging Spartan living standards for great military power – a state of affairs he calls “structural militarization” (borrowing from Vitaly Shlykov), and alleges that Russia is likely to reinstate a political economy prioritizing full-spectrum, fifth-generation rearmament in the near future. This is because he is pessimistic about Russia’s prospects of evolving into an advanced, Westernized liberal democracy (which he regards as indispensable for economic prosperity) pursuing a security policy of optimized defense expenditures supporting downsized, mobile, RMA-enhanced military forces. Instead, Russian cognizance of the increasing threat posed by China and the West will impel it to reconstitute its “dormant structurally militarized potential”, dooming it to renewed impoverishment and an arms race it could not win in the long-term.

Although it contains an unfortunately high number of misconceptions about Russia, the conclusions are nonetheless mostly evidence-based, pertinent and though-provoking. (I originally planned to make this post a straightforward review, but my ideas ran ahead of my typing fingers and transformed it into a broad exploration of Russia’s military-strategic future. So enjoy ;) ).

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