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Putin’s Resurrection

If he just had the ‘flu, why didn’t they say that he just had the ‘flu? We’d all have sent him get-well cards, and that would have been the end of it.

The lengthy and mysterious absence of Vladimir Putin ended on Monday, when the Russian president emerged in St. Petersburg to greet the visiting president of Kyrgyzstan, Almazbek Atambayev. The only explanation he offered for his 11-day disappearance from public view was that “It would be boring without gossip.”

The rumour mill certainly went into overdrive during his absence. He had suffered a stroke. He was in Switzerland for the birth of his child with his alleged girlfriend, gymnast Alina Kabayeva. He’d had a face-lift, or maybe just another botox job. There had been a palace coup, perhaps connected in some way to the murder of opposition leader Boris Nemtsov last month.

All mere speculation, whose only useful function was to hold the ads apart. The Kremlin remains, as it was in Communist and Tsarist times, a place of perpetual intrigue, and Kremlinology is as imprecise a science as ever. There are clearly rival factions struggling to influence Putin’s decisions, but nobody can clearly say what they want or even who belongs to which one.

Why, for example, was Putin’s first action after his resurrection an order to put the Russian navy on full combat readiness in the Arctic, of all places? That’s a long way from Ukraine, which is the focus of the current confrontation between Russia and the Western powers. Is Putin opening up a new front, or just demonstrating his resolve? And if so, who is the demonstration aimed at? NATO? Some faction in the Kremlin? Both?

The problem with an opaque regime like Putin’s is the difficulty in reading its motives and intentions. Even democratic governments like that of the United States can be reckless and unpredictable – consider President George W. Bush’s decisions after 9/11 – but American policy is a miracle of transparency compared to the decision-making process in Moscow. The difference is stark, and it has serious effects in the real world.

At the moment, for example, there is a major debate underway in Washington (and in other NATO capitals as well) about whether Putin must now be seen as an “expansionist” leader who has to be stopped before he goes any farther. The debate strongly resembles the one about Soviet intentions after the Second World War, which ended in a Western decision that the Soviet Union was an expansionist power that had to be “contained”.

The debate back then drew heavily on analogies with the rise of Hitler in the 1930s and the failure of the policy of “appeasement” – and the decision to surround the Soviet Union with alliances and military bases, right or wrong, led to an extremely dangerous 40-year Cold War.

Hitler has been dead for 70 years and the world is now a very different place, but here comes the same old debate again. If you argue in Washington today that Putin’s actions in Ukraine are not the first step in his plan for world conquest, but just a clumsy over-reaction to the overthrow of pro-Russian former president Viktor Yanukovych by the rebels in Kiev a year ago, you can be sure that various people will accuse you of being an appeaser.

They don’t even understand what the “appeasement” policy actually involved. British defence spending, for example, more than doubled in the five years between Hitler’s rise to power and the decision to go to war with Hitler. They knew they might have to fight him in the end, but they used the time before they were ready to fight to see if he could be appeased by giving him back some of the territory Germany had lost after the First World War.

If it had worked, it would have been a lot cheaper than fighting a second world war. In the end it didn’t work, and so Britain and France went to war. But it is extremely unlikely that the NATO powers are in a similar situation now. For one thing, they never really disarmed after the end of the Cold War, so they don’t have to re-arm now even if Putin does turn out to have big plans.

If Putin really is planning on world conquest – or at least on recreating the old Soviet Union – then he has left it very late. Hitler started grabbing territory within a couple of years of coming to power. Apart from a little war with Georgia (which Georgia started), Putin has waited fifteen years to make his first move. If he does have a plan, it’s a very slow-moving one.

Besides, his strategists will be warning him that Russia could not hold up its end of a new Cold War for very long. Russia has only half the population of the old Soviet Union, and it is now a largely de-industrialised petro-state with a GDP comparable to Italy’s. He is probably just blundering around, trying desperately to save face after his humiliation in last year’s Ukrainian revolution.

Unfortunately, what goes on inside the Kremlin is so obscure that nobody can be sure of his ultimate intentions. That leaves a nice large space for the hawks in the West to play in, and they are taking full advantage of it. But Putin probably just had a bad case of ‘flu.
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To shorten to 700 words, omit paragraphs 5, 10 and 11. (“Why…both”; and “They…plans”)

How Long Will the Oil Stay Cheap?

I’m in Alberta, the province that produces most of Canada’s oil, and there’s only one question on everybody’s lips. How long will the oil price stay down? It has fallen by more than half in the past nine months – West Texas Intermediate is $48 per barrel today – and further falls are predicted for the coming weeks.

This hits jobs and government revenues hard in big oil-producing centres like Alberta, Texas and the British North Sea, but its effects reach farther than that. “Clean” energy producers are seeing demand for their solar panels and windmills drop as oil gets more competitive. Electric cars, which were expected to make a major market breakthrough this year, are losing out to traditional gas-guzzlers that are now cheap to run again.

Countries that have become too dependent on oil revenues are in deep trouble, like Russia (where the rouble has lost half its value in six months) and Venezuela. Countries like India, which imports most of its oil, are getting a big economic boost from the lower oil price. So how long this goes on matters to a great many people.

The answer may lie in two key numbers. Saudi Arabia has $900 billion in cash reserves, so it can afford to keep the oil price low for at least a couple of years. The “frackers” who have added 4 million barrels/day to US oil production in the past five years (and effectively flooded the market) already owe an estimated $160 billion to the banks.

They will have to borrow a lot more to stay in business while the oil price is low, because almost none of them can make a profit at the current price. Production costs in the oil world are deep, dark secrets, but nobody believes that oil produced by hydraulic fracturing (“fracking”) comes in at less than $60-$70 per barrel.

The real struggle is between the frackers and Saudi Arabia, because the latter is the “swing producer” in OPEC (the Organisation of Petroleum-Exporting Countries), the cartel that has dominated the global oil market for the past fifty years.

All oil exporters want to keep the price high, but Saudi Arabia was the one OPEC member that could and would cut its production sharply for a while when an over-supply of oil in the market was driving prices down. It could afford to do that because it has a relatively small population, very large savings – and a cost of production so low that it can make some profit on its oil at almost any price.

But even the Saudis cannot work miracles. They can aim for maximum production or maximum price; they cannot do both at the same time. Normally they would cut production temporarily to get the price back up. This time they refused to cut production and let the price collapse, despite the anguished pleas of some other OPEC members that need money NOW.

The Saudis are thinking strategically. OPEC only controls about 30 percent of world oil production, which is a very low share for a cartel that seeks to control the price. If fracking continues to expand in the United States, then OPEC’s market share will fall even further. So it has to drive the frackers out of business now.

At first glance the Saudis look like sure winners, because they can live with low prices a lot longer than the deeply indebted frackers can. The banks that have lent the frackers so much money already won’t get it back if the industry implodes in a wave of bankruptcies, but they don’t want to throw good money after bad.

The real wild card here is the US government, which wants the “energy independence” that only more domestic oil production through fracking can provide. Will it let the American fracking industry go under, or will it give it the loan guarantees and direct subsidies that would let it wait the Saudis out?

Stupid question. Of course it will do what is necessary to save the fracking industry. Ideology goes out the window in a case like this: you can get bipartisan support in Washington for protecting a key American industry from “unfair” foreign competition. That will certainly be enough to keep the frackers in the game for another two or three years.

Meanwhile, the OPEC members that depend on oil income to keep large populations well fed and at least marginally content (e.g. Iran, Nigeria and Venezuela) will be facing massive public protest, and possibly even the threat of revolution. Their governments will be putting huge pressure on Saudi Arabia to save them by cutting production and driving the price back up.

It’s impossible to say how this game will end, but it’s pretty easy to say when. Two years ought to do it. Once the outcome is clear, the price of oil will start going back up no matter which side wins, but it will go up relatively slowly. We are unlikely to see $100-a-barrel oil again before 2020 at the earliest.
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To shorten to 725 words, omit paragraphs 9 and 13. (“The Saudis…now”; and “Meanwhile…up”)

Murder in Moscow

“Every time I call (my mother),” said Russian opposition leader Boris Nemtsov recently, “she gives me a talking-to: ‘When will you stop being rude about Putin? He’ll kill you.’”

Now Nemtsov is dead: four bullets in the back as he was walking home in Moscow with his girlfriend on Friday night. The protest march against Putin and the war in Ukraine that he was planning to lead on Sunday became a memorial march instead.

So, two questions. Did President Vladimir Putin order the assassination? And if he didn’t, then who did, and why?

The hit was carried out with professional skill only three minutes’ walk from Red Square, St. Basil’s Cathedral and the Kremlin, in an area that is infested day and night by militia (police) on constant alert to break up demonstrations. You could put together a feature-length film with the footage from the countless CCTV cameras that tracked Nemtsov’s walk across the square and down to the bridge where he died.

It took accurate intelligence to know where Nemtsov would be on Friday night, and serious organisation and planning to carry out the killing in such a heavily policed area. That points to members of the military or security forces, though not necessarily to ones who were acting on official orders. Because the first thing to say about this murder is that it did not serve Putin’s purposes.

No doubt the Russian president disliked and despised Nemtsov, but neither he nor any other opposition leader posed any threat to Putin’s power. Thanks in large part to his seizure of Crimea and his military intervention in eastern Ukraine, Putin is currently enjoying an 85 percent approval rating with the Russian public. Why risk upsetting this happy relationship with the first public killing of a senior political figure in more than a decade?

It’s much more likely that the killing was carried out by serving or former soldiers or intelligence officers who took it upon themselves to eliminate an “anti-patriotic” politician who condemned “Putin’s War” in Ukraine. In the superheated atmosphere of nationalist paranoia that currently prevails in Russia, such people could easily imagine that they were doing just what Putin secretly wanted.

Putin is too clever to want that, and immediately condemned the killing as “vile and cynical.” It was a curious choice of words: “vile”, of course, but why “cynical”? The reason became clear when various senior regime members began hinting that the murder was a “provocation” by the Western intelligence services or even by Nemtsov’s own opposition colleagues, killing him to stimulate dissent and bring the Russian state into disrepute.

This murder will have no permanent impact either on Russia’s internal politics or on its relations with the rest of the world. The paranoid style is now so deeply entrenched in Russian politics that people who support Putin (i.e. most people) will either believe the nonsense about Nemtsov’s murder being a “provocation”, or be privately glad that Putin acts so decisively (as they imagine) to protect Russia from its myriad enemies.

As for the rest of the world (or at least the “western” part of the world), it has already written Putin off as a man you can do business with. The Russian leader is, in many Westerners’ eyes, an expansionist warlord who can only be contained by sanctions and threats. It may even take a new Cold War to stop him. Paranoia, alas, is a communicable disease.

The Western narrative that seeks to explain how, in less than a year, we have arrived at a point where the United States is contemplating supplying heavy weapons to Ukraine to kill Russian troops, has several large gaps. The first is that the revolution on the Maidan in Kiev last winter overthrew a legitimately elected Ukrainian president only a year before the next elections were due.

Putin initially accepted that outcome (with the elections moved up to only one month in the future), which was brokered by the European Union. In other words, he accepted the illegal overthrow of the pro-Moscow president, Viktor Yanukovych, so long as free elections followed rapidly. Quite possibly because he thought Yanukovych’s supporters in the east might boost him back into the presidency again.

That same thought may also be why the revolutionaries in Kiev broke the deal and insisted on Yanukovych’s immediate removal from power. It was only then that Putin concluded that he was faced with a Western plot to whisk Ukraine into NATO and create a strategic and political threat on Russia’s southern frontier.

There was no such plot: NATO has not the slightest desire to assume responsibility for the defence of Ukraine. But there was a great deal of open Western rejoicing at Russia’s discomfiture, and Putin lost his customary cool and responded with the annexation of Crimea and then the encouragement of pro-Russian rebels in southeastern Ukraine.

“Absolute power corrupts absolutely,” said Lord Acton. “All great men are bad.” In that sense, Putin is a bad man, and more dangerous for being both paranoid and increasingly isolated. (His circle of advisers has dwindled to a handful of hawks.) But he is not planning to conquer even Ukraine, let alone the rest of the former Soviet empire, and he almost certainly did not order Nemtsov’s death.
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To shorten to 725 words, omit paragraphs 8 and 9. (“Putin…enemies”)

Hungary’s Viktator

When I first interviewed Viktor Orban 25 years ago, he was an anti-Communist student firebrand whose whole purpose in life was to free Hungary from Soviet rule. But you can travel a long way in 25 years.

In 1991 Orban celebrated the collapse of the Soviet Union, but now he says: “We Europeans need Russia. We need sooner or later – rather sooner than later – a strategic alliance with Russia.” Prime Minister Viktor Orban has become the odd man out in the European Union, putting a close relationship with Russia well ahead of any concerns about what is happening to Ukraine.

When Russia’s President Vladimir Putin came to Budapest last week to sign a new contract for supplying gas to Hungary, Orban said: “We are convinced that locking Russia out of Europe is not rational. Whoever thinks that Europe can be competitive…without economic cooperation with Russia…is chasing ghosts.” And Putin, standing next to Orban, said that the war in Ukraine was all the Ukrainian government’s fault.

But it’s not just a pragmatic decision by Orban to keep the country’s main energy supplier sweet. (Hungary has also ordered new nuclear reactors from Russia.) Other members of the European Union and NATO that also depend heavily on Russian gas have nevertheless condemned Putin’s actions in Ukraine. Viktor Orban has been on a philosophical journey, and it has delivered him to a strange place.

In a speech last July, he declared the western democratic model dead and argued that authoritarian regimes like those in Russia, China and Turkey pointed the way to the future. “We have to abandon liberal methods and principles of organising a society,” he said. “The new state we are building is an illiberal state, a non-liberal state, because liberal values (in the West) today incorporate corruption, sex and violence.”

Orban is not just talking. Since the 2010 election he has had a two-thirds “super-majority” in parliament that lets him amend the constitution as he likes. (Theoretically the supreme court might overrule him, but he has also chosen eleven of the fifteen supreme court judges.) New media laws have turned public television into a government mouthpiece, and he has ruthlessly gerrymandered electoral boundaries to guarantee victory for his Fidesz Party.

Other familiar elements of authoritarian nationalist regimes have also begun to appear in Hungary. Non-governmental organisations are under attack as foreign agents, and foreign-owned banks are to be partly nationalised. Land leased by foreigners any time in the past 20 years must be returned to its Hungarian owners. Every one of these arbitrary changes creates opportunities for corruption that rarely go unexploited by those close to the regime.

The problem has grown so severe that last year the US government, in an initiative unprecedented against an EU member country, blacklisted ten Hungarian officials, banning them from entering the United States on the grounds of corruption. And President Barack Obama, discussing corrupt, authoritarian governments, bracketed Hungary with Azerbaijan, Russia and Venezuela.

Victoria Nuland, the US assistant secretary of state for European affairs, went further, asking Orban “How can you sleep under your NATO blanket at night while pushing “illiberal democracy” by day, whipping up nationalism, restricting free press, or demonising civil society?” But she asked him from a safe distance (Washington: about 7,000 km.), and he didn’t bother to reply. And the Hungarians went on voting for him.

Yet in last April’s parliamentary election, Orban’s “big tent” Fidesz Party won two-thirds of the seats in parliament again (though only by one seat this time). In the European elections in June they won 12 of Hungary’s 21 seats. And in local elections in October, they won 19 of Hungary’s 21 larger towns and cities, including the capital, Budapest. Why do a majority of Hungary’s ten million people go on voting for him?

Well, actually, they don’t. In the April parliamentary elections, 2.8 million people voted for other parties, and only 2.3 million for Fidesz. But the opposition parties are weak and divided (except for the neo-fascist Jobbik movement, which has 14 percent popular support). Fidesz wins partly by gerrymandering, and partly by default – but that’s good enough for Orban, who enjoys his position as an illiberal yet democratically elected strongman.

Orban is a skilled demagogue, and Hungarians are as susceptible to nationalist rabble-rousing as any other people. But he cannot be completely secure so long as the democratic electoral system survives: a big enough swing of public opinion against him would win even despite the gerrymandering.

He has no immediate worries: the next parliamentary election is not due until 2018. But last Sunday Fidesz lost a single by-election, and suddenly its “super-majority” in parliament vanished. Viktor Orban said it didn’t matter, since he had already pushed through all the constitutional changes he wanted, and for the moment that’s probably true.

However, if dissatisfaction with his rule continues to grow (he’s now being called the “Viktator”), he may one day wish he had it back. Just in case he needs to change the constitution again.
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To shorten to 725 words, omit paragraphs 8 and 9. (“The problem…for him”)