Thursday, December 18, 2008

Wprost column

Okiem Brytyjczyka - Listy z Czekistanu

Numer: 51/52/2008 (1356)
Nie nazywajmy tego państwa Rosją, bo to nie fair wobec Herzena, Sacharowa, Achmatowej i innych inspirujących, bohaterskich postaci z historii „prawdziwej Rosji”. Polish version available here

Don't call it Russia--that is unfair to Herzen, Sakharov, Akhmatova and the other heroic, inspiring figures from the history of "real Russia". I prefer "Putinland" or "Chekistan". That highlights the way in which the entity born on the rubble of the Soviet Union was hijacked by the ex-KGB "Chekists", with their toxic mixture of authoritarianism and chauvinism. During the past eight years they have squandered the better half of $1.3 trillion in extra oil and gas revenues. A lot was scammed and stolen. A lot was wasted. A lot went in a boom in consumption, and associated spending on private construction (retail malls, luxury apartments etc). Very little went into worthwhile projects in infrastructure and public services.

And now the economic crisis has caught the Chekists with their pants down.

Russia's huge reserves (nearly $600 billion at their peak this summer) are down by a quarter. The rouble is sliding down. Default is looming for the big Russian companies that so recklessly borrowed tens of billions of dollars from equally reckless foreign lenders.

In theory, the answer is clear: to liberalise Russia's economy, dismantle cartels, open up decisionmaking to public scrutiny, allow the courts to deal with high-level corruption, restore political competition so as to punish the incompetent and crooked. That is about as likely as Disneyland opening a new theme park on Red Square. The system that the Chekists have built up is the basis of their wealth and their political power. Reforming it means their own destruction. Can you imagine Vladimir Putin going on television to announce that in light of the failures of the past eight years, he is retiring to a villa in Montenegro and wishes the country's new rulers well? I can't.

Indeed, from Putin's public statements so far, it seems that he does not understand the nature and extent of the economic crisis facing Russia. His instincts are to use administrative means--directing credit and fixing prices. If (in fact, when) that fails, the next step will be to impose capital controls. Kremlin cronies will still be able to get their funds out of the country. For less-favoured businesses and individuals, that will be a lot harder (creating another lucrative source of income for whatever lucky bureaucrat is in control of the procedure).

So what can they do? Restoring a planned economy won't work: that's the one big lesson that the ex-KGB learned from the "catastrophe" (as Putin described the collapse of the Soviet Union). Another option is the blame game: Putin loses no chance to point out that the crisis is "made in America". That is not actually true. If you want to find an over-leveraged financial system, feeble regulation and rich people with too much political influence, Moscow is not a bad place to look. Maybe the Kremlin will next start blaming the bankers: greedy (and Jewish), they can easily be demonised. If the authorities don't do that, the mob may. Having hammered shut every safety valve in the political system, the Chekists will have only themselves to blame if public anger explodes into pogrom-style violence--perhaps directed against ethnic minorities, perhaps against the rich.

In the Soviet era, the Kremlin could deal with rare episodes of public unrest (such as revolts in the Gulag, or the workers' protest at Novocherkassk in 1962) by using brute force. Now I wonder if they can do that. Already. the authorities are losing control of the north Caucasus. What happens when big industrial towns start rioting? The danger is that--squeezed between public discontent and the lack of an economic policy alternative--the Kremlin tries to find a foreign adventure to distract the population. That could mean a new war in Georgia, a provocation in another ex-Soviet country or--most alarmingly--something to stir up a conflict in the Middle East. That would send the oil price soaring, divide Europe and America, and let the Kremlin play peacemonger. Fasten your seatbelts: the end of this ride will be rough.


Martin said...


Cehistan? Do you realise how ugly that looks in print?

Even if you're right, the Russians seem to have made their choice. They prefer Chekistanis to thieves.

Anton said...

"most alarmingly--something to stir up a conflict in the Middle East."

No need, Israel has already started wiping out Gaza.