BETWEEN ART AND POLITICS

By Nina Khrusheva, The St Petersburg Times

The fact that Russia is supposedly bad doesn’t make the United States better — or better off — at the end of George W. Bush’s presidency, when it is mistrusted by the world and is bogged down by two wars and a severe economic crisis. In this environment, is Russia a threat to the United States? Unlikely, but branding it as a dictatorship revives the old fears and diverts attention from the immense problems Washington faces today.

Barack Obama’s presidency promises to usher his country into a new era of post-unilateral decision-making, international diplomacy and coherent foreign policy making. This new era should also, perhaps, end senseless public animosity toward Russia that has continued since 1991, when the Soviet Union lost the Cold War and disappeared.

Becoming the world’s only superpower proved very damaging to the United States. It is no surprise that U.S. overconfidence bred hubris. In the 1990s, President Bill Clinton’s administration tirelessly reminded the former Soviets that they, the losers, should unwaveringly follow the lead of the all-powerful United States. President Boris Yeltsin’s privatization program was not speedy enough, at least as judged in a Washington anxious to spend as little as possible helping Russia. Any thoughts of a Marshall Plan to ease Russia’s path were dismissed in Washington as welfare for the communists.

Russia is certainly far from perfect, and its current return to authoritarianism is not all, or even mostly, Washington’s fault. But the economic arrogance from the Clinton era, coupled with the political egotism of the Bush years, was not a sound strategy, at least in terms of impact on Russia. Wagging the dog of Putinism can serve only one purpose — to appeal to the familiarity of the communist threat in order to cover up the United States’ own imperfections.

A CNN conversation with high school students once revealed that some of them equate Putin with Osama bin Laden, arguing that a diplomatic sit-down is not possible with either. What this “young generation of future policymakers” should have known is that although Russia continues to occupy 11 time zones, it’s not the Soviet Union, no longer communist or locked in self-imposed isolation from the world. But even Thomas Friedman, The New York Times foremost authority on internationalism, in one interview called Putin’s Russia “the Soviet Union.” Although Putin is by no means the ideal democrat, he is no Stalin either.

Indeed, how much better was Pervez Musharraf, the former Pakistani president whom the Bush administration hailed as a beacon of democracy even as the Taliban regrouped in his country’s tribal regions? Or Afghanistan’s Hamid Karzai, another purported democrat who arguably presides over the most corrupt government in the world? What about Georgian President Mikheil Saakashvili, a politician who under the guise of democracy has been silencing Georgians who protest his rule? Then there are of course Hugo Chavez and Mahmoud Ahmadinejad. And the United States’ own claim to fame was former Vice President Dick Cheney, a perverse constitutional theorist and modern Dr. Strangelove if there ever was one.

But Russia is the butt of political jokes, the focus of Sarah Palin’s foreign policy ire and the new Red Scare for The New York Times. And let’s not forget Hollywood, where the Russians have returned, after a brief interval, as the designated bad guys. In the latest “X-Files: I Want to Believe,” Russians are the horrible dog trainers and organ harvesters; in the 2004 “Hellboy,” the mummified Grigory Rasputin seeks to spread evil around the world; in “Hitman,” we have a bad Russian president, his criminal double and his corrupt brother; even in the Coen brother comedy “Burn after Reading,” Russia is made into an enemy, albeit a fake and funny one. In “The Golden Compass,” the latest in a series of grand fairy tales that attempted to take Americans’ mind off their troubles, the villainous animals speak perfect Russian.

We all need a good enemy. As U.S. Defense Secretary Robert Gates once shrewdly pointed out, the talk of a new Cold War fills him “with nostalgia for a less complex time.” Indeed, the world made a glib sort of sense back then — communism vs. capitalism, good vs. evil empire.

Terrorism is too amorphous, bin Laden you actually have to catch and the Arabs as the enemy is, somehow, politically incorrect.

We shouldn’t be unfair to the Chinese. They too would make an excellent adversary, but China is too mysterious for a simple us-versus-them confrontation with its middle kingdom of Jet Li, kung fu and capitalists posing as communists. China also produces toys, medicine and everything else for U.S. consumers; even if tainted, leaded or spiked, there is no living without them.

Russia, on the other hand, remains a distant land of ballet, bombs and Dostoevsky. The Cold War mystery has defrosted, but the familiarity of the threat remains conveniently alive.

What makes Russia a great enemy is that unlike bin Laden, you don’t need to worry too much about it — not yet. But if the Russians continue to be treated as if the first Cold War never ended, the new Cold War will actually arise.

Nina L. Khrushcheva, professor of international affairs at The New School University in New York, is the author of “Imagining Nabokov: Russia Between Art and Politics.”

(Comment by Michael Baehr:) Maybe you could interview Nina on "ON THE ECONOMY".

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h2>

The fact that Russia is supposedly bad doesn’t make the United States better — or better off — at the end of George W. Bush’s presidency, when it is mistrusted by the world and is bogged down by two wars and a severe economic crisis. In this environment, is Russia a threat to the United States? Unlikely, but branding it as a dictatorship revives the old fears and diverts attention from the immense problems Washington faces today.

Barack Obama’s presidency promises to usher his country into a new era of post-unilateral decision-making, international diplomacy and coherent foreign policy making. This new era should also, perhaps, end senseless public animosity toward Russia that has continued since 1991, when the Soviet Union lost the Cold War and disappeared.

Becoming the world’s only superpower proved very damaging to the United States. It is no surprise that U.S. overconfidence bred hubris. In the 1990s, President Bill Clinton’s administration tirelessly reminded the former Soviets that they, the losers, should unwaveringly follow the lead of the all-powerful United States. President Boris Yeltsin’s privatization program was not speedy enough, at least as judged in a Washington anxious to spend as little as possible helping Russia. Any thoughts of a Marshall Plan to ease Russia’s path were dismissed in Washington as welfare for the communists.

Russia is certainly far from perfect, and its current return to authoritarianism is not all, or even mostly, Washington’s fault. But the economic arrogance from the Clinton era, coupled with the political egotism of the Bush years, was not a sound strategy, at least in terms of impact on Russia. Wagging the dog of Putinism can serve only one purpose — to appeal to the familiarity of the communist threat in order to cover up the United States’ own imperfections.

A CNN conversation with high school students once revealed that some of them equate Putin with Osama bin Laden, arguing that a diplomatic sit-down is not possible with either. What this “young generation of future policymakers” should have known is that although Russia continues to occupy 11 time zones, it’s not the Soviet Union, no longer communist or locked in self-imposed isolation from the world. But even Thomas Friedman, The New York Times foremost authority on internationalism, in one interview called Putin’s Russia “the Soviet Union.” Although Putin is by no means the ideal democrat, he is no Stalin either.

Indeed, how much better was Pervez Musharraf, the former Pakistani president whom the Bush administration hailed as a beacon of democracy even as the Taliban regrouped in his country’s tribal regions? Or Afghanistan’s Hamid Karzai, another purported democrat who arguably presides over the most corrupt government in the world? What about Georgian President Mikheil Saakashvili, a politician who under the guise of democracy has been silencing Georgians who protest his rule? Then there are of course Hugo Chavez and Mahmoud Ahmadinejad. And the United States’ own claim to fame was former Vice President Dick Cheney, a perverse constitutional theorist and modern Dr. Strangelove if there ever was one.

But Russia is the butt of political jokes, the focus of Sarah Palin’s foreign policy ire and the new Red Scare for The New York Times. And let’s not forget Hollywood, where the Russians have returned, after a brief interval, as the designated bad guys. In the latest “X-Files: I Want to Believe,” Russians are the horrible dog trainers and organ harvesters; in the 2004 “Hellboy,” the mummified Grigory Rasputin seeks to spread evil around the world; in “Hitman,” we have a bad Russian president, his criminal double and his corrupt brother; even in the Coen brother comedy “Burn after Reading,” Russia is made into an enemy, albeit a fake and funny one. In “The Golden Compass,” the latest in a series of grand fairy tales that attempted to take Americans’ mind off their troubles, the villainous animals speak perfect Russian.

We all need a good enemy. As U.S. Defense Secretary Robert Gates once shrewdly pointed out, the talk of a new Cold War fills him “with nostalgia for a less complex time.” Indeed, the world made a glib sort of sense back then — communism vs. capitalism, good vs. evil empire.

Terrorism is too amorphous, bin Laden you actually have to catch and the Arabs as the enemy is, somehow, politically incorrect.

We shouldn’t be unfair to the Chinese. They too would make an excellent adversary, but China is too mysterious for a simple us-versus-them confrontation with its middle kingdom of Jet Li, kung fu and capitalists posing as communists. China also produces toys, medicine and everything else for U.S. consumers; even if tainted, leaded or spiked, there is no living without them.

Russia, on the other hand, remains a distant land of ballet, bombs and Dostoevsky. The Cold War mystery has defrosted, but the familiarity of the threat remains conveniently alive.

What makes Russia a great enemy is that unlike bin Laden, you don’t need to worry too much about it — not yet. But if the Russians continue to be treated as if the first Cold War never ended, the new Cold War will actually arise.

Nina L. Khrushcheva, professor of international affairs at The New School University in New York, is the author of “Imagining Nabokov: Russia Between Art and Politics.”

Crisis Puts Putinomics to the Test

By Anders Aslund

Suddenly, Russia stands out as one of the countries likely to be worst hit by the international financial crisis, although it entered the crisis with huge budget and current accounts surpluses since 2000 and the third-largest currency reserves in the world. It would be unfair to blame only international markets, as Prime Minister Vladimir Putin does, considering how flawed his own economic policy is.

Apart from Russia's excellent fiscal policy, just about everything has been wrong with the country's economic policy since authorities arrested former Yukos CEO Mikhail Khodorkovsky in October 2003. Shortly after this, Yukos was confiscated. The only significant short-term relief is to free the ruble so it can depreciate. Apart from the very fall in oil and other commodity prices and the international liquidity squeeze, Putin has caused the lion's share of the country's current economic problems.

Initially, Russia was hit with a huge exogenous shock when its terms of trade deteriorated sharply because of the sudden fall of oil, gas, metals and other global commodity prices. With current commodity prices, the country's exports next year could plummet by some 40 percent in current dollars, or by $200 billion. Budget and current account surpluses will quickly turn into deficits.

Russia is praised for its large currency reserves and its limited domestic leverage, but it suffers from minimal domestic financial intermediation because inept state banks dominate the financial market. The state takes money out of the country, while its big corporations are forced to borrow abroad, maximizing their currency risk. If Russia had privatized its banking system as most other post-Soviet countries, its companies would suffer from fewer currency risks.

Putin's chief project has been to develop huge, unmanageable state-owned mastodons, considered "national champions." They have stalemated large parts of the economy through their inertia and corruption while impeding diversification. In addition, they have financed themselves with foreign loans rather than equity, and this has aggravated the country's currency risks.

Russia's nationalistic energy policy after 2003 has stalled the development of major new energy investments (apart from the Sakhalin projects, which date back to the Boris Yeltsin era). Gazprom and Rosneft have financed themselves with foreign debt rather than with equity capital, accounting for almost one-fifth of Russia's corporate foreign debt of $490 billion. Gazprom's aggressive pricing and delivery disruptions have scared away customers, reducing the demand for its gas.

Huge public funds are being diverted to state corporations, which either hoard the money or siphon it off. In their new book "Putin and Gazprom," Boris Nemtsov and Vladimir Milov have offered a staggering and credible account of how Putin and his friends pilfered assets of $80 billion from Gazprom during his second term as president. Investors have taken notice, slashing Gazprom's market capitalization from $350 billion last spring to $70 billion at its nadir. Although Russia is the 46th-richest country in the world in per capita terms, it is ranked 147 out of 180 countries on Transparency International's corruption perception index for 2008. Only Equatorial Guinea is both richer and more corrupt than Russia.

Under Putin, transparency has systematically been reduced, and we no longer dare to trust the government's public statements on its currency reserves. Officially, they have declined by $163 billion, or 28 percent, from $598 billion in early August to $435 billion in early December. But when Vneshekonombank was given $50 billion of state reserves to help Russian oligarchs with refinancing, nothing was deducted from the official reserves as it should have been. In an article on Gazeta.ru on Oct. 24, Alexei Mikhailov plausibly claimed that another $100 billion or $110 billion of "other reserves" had been transferred to the banking system and were nothing but rubles. To my knowledge, no official denial has been issued. If that were correct, the reserves have fallen by more than half to less than $300 billion, but the government sheds no light on this.

Russia's largest corporations have turned out to be much more leveraged than anybody had thought. The government has made clear that it will refinance their foreign loans to secure "strategic" ownership. So far, $13 billion has been paid, out of which United Company RusAl has received $4.5 billion and Altima $2 billion, but such private pledges are huge. Vneshekonombank has $37 billion left to spend, but it has already asked for $30 billion more from the government, and more is likely. Thus, Russia can swiftly lose more than $100 billion of reserves.

Putin has persistently denied that anything is wrong with the country's economic policy, while everything but its fiscal policy has been wrong. Domestic and foreign businesspeople realize that he does not talk about reality, which undermines confidence in the Russian market. Without free public debate, rational policy decisions are unlikely.

Incredibly, the government is repeating its mistake from 1998 to maintain a pegged exchange rate in the face of falling commodity prices. Until this summer, this policy provoked speculative capital inflows that boosted the money supply excessively and propelled inflation to 15 percent. Now, the pegged exchange rate, which is probably overvalued by up to 25 percent, promotes speculative capital outflows, quickly reducing the currency reserves. Devaluations in very small steps only convince the market that a major depreciation is inevitable. The coming combination of loose fiscal policy, negative real interest rates, current and capital account deficits and an overvalued ruble is unsustainable. The incentives for capital flight are overwhelming.

The global economic crisis is testing Putin's system. He has undermined the ground under the house Yeltsin built, transforming the country into a house of cards ready to tumble. He has wasted the oil wealth rather than investing it in infrastructure, health care, education and law enforcement reform. Russia needs fundamental change; above all, it needs to uproot -- or at the very least contain -- the country's pervasive corruption, which has gotten markedly worse under Putin. Nothing would serve the country better than the retirement of the failed prime minister, but that is evidently not in the cards.

One of the few policy measures that can be undertaken with Putin still in power is to let the ruble float freely, move to inflation targeting and boost interest rates to positive real interest rates. A commodity-exporting country needs to let its exchange rate float up and down with global raw material prices to balance its foreign payments. At present, all speculators sensibly bet on a ruble devaluation, just like in 1998, which quickly depletes the country's currency reserves. When the ruble is allowed to float, it is likely to plummet. But after that, nobody knows whether it will rise or fall, and this will reduce speculation and losses of currency reserves.

Does anybody still believe that Russia's economy will grow in 2009?

(Comment by Michael Baehr)Vlad Putin wants to go back to the good old days and blame capitalism for all that ails the world.

A RUSSIAN BUSINESS NEWSLETTER

Moscow, Jan 19, 2009 (RosBusinessConsulting via COMTEX) -- At the close of today's special dollar trading session for tomorrow deals, the dollar surged RUB 0.63 to 33.07 RUB/USD. Meanwhile, the euro closed at 43.67 RUB/EUR, which is RUB 0.46 greater than the level at the end of Friday's session. Analysts point out that the ruble continued to slide against the U.S. and European currencies. Experts also note that, unlike the previous week, the dollar has been increasing against the ruble at a much slower rate. Trading activity has also been considerably lower than last week, with the trade volume of roughly USD 12bn. This can be traced to a lack of trading in the United States due to a national holiday (Martin Luther King Day).

MOSCOW, Russia (CNN) -- The European Union, Russia and Ukraine have agreed on allowing a team of independent investigators to monitor inflowing gas pipelines from Russia into Ukrainian territory to help end a dispute that has left millions short of gas supplies.


Austria's OMV gas refinery -- one of Europe's largest -- has seen its deliveries from Russia cut.

Representatives of the three negotiating parties agreed Thursday on the creation of a tri-partite commission to investigate any possible legal and technical breeches that has led Russia to lock down its gas supplies, impeding flow into the rest of Europe.

The new agreement was hailed by EU officials who have protested Russia's move to turn off taps.

About a quarter of Europe's gas supplies come from Russia's national gas supplier, Gazprom.

The dispute is rooted in a dispute between Ukraine and Russia over pricing and contractual terms that date back to nearly a year ago. Watch why an end to the dispute may be near »

Among Gazprom's accusations, Ukraine has "siphoned off Russian gas illicitly" and "stopped gas deliveries to Europe's territory," forcing Russian officials to stop gas deliveries to Ukraine's entry point, using Belarus and other alternate routes.

Ukraine denies allegations of impropriety and called for independent investigations.


Heads of Russia's energy giant Gazprom and Ukraine's state-run gas company Naftogaz were in Brussels, Belgium, Thursday for separate talks with the European Union as gas supplies dwindled in the midst of winter.

All Russian natural gas deliveries to Europe through Ukraine were halted Wednesday, leaving millions of European customers at risk of gas shortages amid freezing winter temperatures. iReporter shivers in Ukraine

In a written declaration, the EU called the situation "unacceptable" and called for both parties to come to a quick solution.

The EU also called for Russia to honor their obligations and resume deliveries.


At least 10 countries have reported reductions or cuts in their gas supply from Ukraine since the situation flared this week.

The EU said it wants to find a longer-term solution to the crisis, "thus putting an end to regularly occurring crisis in the midst of winter."

(Comment by Michael Baehr) Well, the natural gas is flowing again, but nobody trusts the Russians to keep it that way. The agreement between Russia and the Ukraine was for ten years, lets see if that contract will last. Have a happy inauguration.

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A RUSSIAN BUSINESS NEWSLETTER

Vol 09 No 7

Published by: Michael F. Baehr

from the Moscow Times

Accusations Fly as Gas Fails to Flow

date: 14 January 2009

By Anatoly Medetsky / Staff Writer

Russian gas deliveries to the European Union failed to resume flowing through Ukraine as planned Tuesday, causing a flurry of accusations and Gazprom going so far as to accuse the United States of involvement in the disruption.





Gazprom said it began pumping gas toward Ukraine in the morning but that the country's transit system would not accept the fuel. Ukraine said it was unable to handle the gas on that particular route, calling Gazprom's choice of the entry point a provocation.





The EU in turn complained that its monitors -- intended to improve the transparency of gas deliveries -- were not allowed to access technical information both in Kiev and Moscow.It was unclear late Tuesday when gas supplies might resume to Europe.





"It's quite clear at this hour that Ukraine has blocked all our actions in respect to a renewal of the transit of natural gas to Europe, which is unbelievable," Gazprom deputy chief Alexander Medvedev said at 2 p.m. "I can't find any other words."





He suggested that Ukrainian officials, in their handling of the gas conflict, were taking orders from the United States.





"It looks like they are dancing [to] music that is not orchestrated in Ukraine," he said in a conference call with reporters, speaking in English.





"I am making a reference to the agreement which was signed by Ukraine and the United States on Dec. 19th.





"We don't have all the details of it ... but we do know that part of this agreement referred to the transit ... through Ukraine to Europe, which is especially suspicious," he said. "Now we could make some guess why Ukraine behaved in such an unreasonable way and continues to do so."





The agreement in question, titled "U.S.-Ukraine Charter on Strategic Partnership," mentions gas only once when it states that the parties "intend to work closely together on rehabilitating and modernizing the capacity of Ukraine's gas transit infrastructure," according to its copy posted on the U.S. State Department's web site.





The U.S. Embassy in Moscow issued a statement later Tuesday, saying Washington urged a rapid settlement of the dispute along normal commercial lines.





"We have encouraged all parties including Ukraine to work with the Czech EU presidency and with Russia to reach a prompt settlement," the statement said. "We hope Russia will do its part to end this dispute, resume and maintain gas supplies and avoid similar crises in the future."





U.S. State Department spokespeople were not immediately available for comment in Washington.

(Comment by Michael Baehr) This seems to be an annual event, like the flooding of the Snohomish River in the Fall. It also appears to be a bigger diplomatic play with the European Union and the United States over the Ukraine joining the North Atlantic Treaty Organization.

Circulation:

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THE MICHAEL BAEHR REPORT

A RUSSIAN BUSINESS NEWSLETTER

January 13, 2009

Vol 09 No 6

Published by: Michael F. Baehr

from the Moscow Times

Accusations Fly as Gas Fails to Flow

date: 14 January 2009

By Anatoly Medetsky / Staff Writer

Russian gas deliveries to the European Union failed to resume flowing through Ukraine as planned Tuesday, causing a flurry of accusations and Gazprom going so far as to accuse the United States of involvement in the disruption.





Gazprom said it began pumping gas toward Ukraine in the morning but that the country's transit system would not accept the fuel. Ukraine said it was unable to handle the gas on that particular route, calling Gazprom's choice of the entry point a provocation.





The EU in turn complained that its monitors -- intended to improve the transparency of gas deliveries -- were not allowed to access technical information both in Kiev and Moscow.It was unclear late Tuesday when gas supplies might resume to Europe.





"It's quite clear at this hour that Ukraine has blocked all our actions in respect to a renewal of the transit of natural gas to Europe, which is unbelievable," Gazprom deputy chief Alexander Medvedev said at 2 p.m. "I can't find any other words."





He suggested that Ukrainian officials, in their handling of the gas conflict, were taking orders from the United States.





"It looks like they are dancing [to] music that is not orchestrated in Ukraine," he said in a conference call with reporters, speaking in English.





"I am making a reference to the agreement which was signed by Ukraine and the United States on Dec. 19th.





"We don't have all the details of it ... but we do know that part of this agreement referred to the transit ... through Ukraine to Europe, which is especially suspicious," he said. "Now we could make some guess why Ukraine behaved in such an unreasonable way and continues to do so."





The agreement in question, titled "U.S.-Ukraine Charter on Strategic Partnership," mentions gas only once when it states that the parties "intend to work closely together on rehabilitating and modernizing the capacity of Ukraine's gas transit infrastructure," according to its copy posted on the U.S. State Department's web site.





The U.S. Embassy in Moscow issued a statement later Tuesday, saying Washington urged a rapid settlement of the dispute along normal commercial lines.





"We have encouraged all parties including Ukraine to work with the Czech EU presidency and with Russia to reach a prompt settlement," the statement said. "We hope Russia will do its part to end this dispute, resume and maintain gas supplies and avoid similar crises in the future."





U.S. State Department spokespeople were not immediately available for comment in Washington.

(Comment by Michael Baehr) This seems to be an annual event, like the flooding of the Snohomish River in the Fall. It also appears to be a bigger diplomatic play with the European Union and the United States over the Ukraine joining the North Atlantic Treaty Organization.

Circulation:

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A RUSSIAN BUSINESS NEWSLETTER

January 13, 2009

Vol 09 No 6

Published by: Michael F. Baehr

FROM: THE ST.
PETERSBURG TIMES

Ukrainian Dispute with Russia Over
European Union Natural Gas

(BRUSSELS, BELGIUM): The European Union say Russia's Gazprom is insisting that Russians be included in the monitoring mission overseeing Russian natural gas as it flows through Ukraine pipelines.

Moscow's insistence to have Russians checking the gas flow through Ukraine goes against an agreement the EU had with Kiev to limit the group to EU observers alone.

An agreement on an observer mission would speed up the return of gas supplies from Russia to Europe, which is suffering a bitter winter cold snap.

Ukrainian officials have denied Russian accusations that they have siphoned off gas intended for Europe, saying instead they needed to use some of the Russian gas to keep the pipelines running.

(Comment by: Michael Baehr) This dispute between Russia and the Ukraine seems to happen every winter. It appears to end before the Ukrainians freeze to death.

Circulation:

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