Daily Archives: May 15, 2007

May 15, 2007 — Contents


(1) In Neo-Soviet Russia, the Internet Searches YOU

(2) Pay No Attention to that Economy Behind the Curtain

(3) Bayer on the Neo-Soviet Union

(4) Economist on Chechnya

(5) Annals of Potemkin Russia: Eurovision 2007

In Neo-Soviet Russia, the Internet Searches YOU!

The Economist summarizes developments in Russia’s ongoing campaign of cyber terrorism/imperialism against tiny Estonia:

FOR a small, high-tech country such as Estonia, the internet is vital. But for the past two weeks Estonia’s state websites (and some private ones) have been hit by “denial of service” attacks, in which a target site is bombarded with so many bogus requests for information that it crashes.

The internet warfare broke out on April 27th, amid a furious row between Estonia and Russia over the removal of a Soviet war monument from the centre of the capital, Tallinn, to a military cemetery (pictured below). The move sparked rioting and looting by several thousand protesters from Estonia’s large population of ethnic Russians, who tend to see the statue as a cherished memorial to wartime sacrifice. Estonians mostly see it rather as a symbol of a hated foreign occupation.

The unrest, Estonia says, was orchestrated by Russia, which termed the relocation “blasphemy” and called for the government’s resignation. In Moscow, a Kremlin-run youth movement sealed off and attacked Estonia’s embassy, prompting protests from America, NATO and the European Union. Perhaps taken aback by the belated but firm Western support for Estonia, Russia has backpedalled. Following a deal brokered by Germany, Estonia’s ambassador left for a “holiday” and the blockade ended as abruptly as it began.

But the internet attacks have continued. Some have involved defacing Estonian websites, replacing the pages with Russian propaganda or bogus apologies. Most have concentrated on shutting them down. The attacks are intensifying. The number on May 9th—the day when Russia and its allies commemorate Hitler’s defeat in Europe—was the biggest yet, says Hillar Aarelaid, who runs Estonia’s cyber-warfare defences. At least six sites were all but inaccessible, including those of the foreign and justice ministries. Such stunts happen at the murkier end of internet commerce: for instance, to extort money from an online casino. But no country has experienced anything on this scale.

The alarm is sounding well beyond Estonia. NATO has been paying special attention. “If a member state’s communications centre is attacked with a missile, you call it an act of war. So what do you call it if the same installation is disabled with a cyber-attack?” asks a senior official in Brussels. Estonia’s defence ministry goes further: a spokesman compares the attacks to those launched against America on September 11th 2001. Two of NATO‘s top specialists in internet warfare, plus an American colleague, have hurried to Tallinn to observe the onslaught. But international law is of little help, complains Rein Lang, Estonia’s justice minister.

The crudest attacks come with the culprit’s electronic fingerprints. The Estonians say that some of the earliest salvoes came from computers linked to the Russian government. But most of them come from many thousands of ordinary computers, all over the world. Some of these are run by private citizens angry with Estonia. Anonymously posted instructions on how to launch denial-of-service attacks have been sprouting on Russian-language internet sites. Many others come from “botnets”—chains of computers that have been hijacked by viruses to take part in such raids without their owners knowing. Such botnets can be created, or simply rented from cyber-criminals.

To remain open to local users, Estonia has had to cut access to its sites from abroad. That is potentially more damaging to the country’s economy than the limited Russian sanctions announced so far, such as cutting passenger rail services between Tallinn and St Petersburg. It certainly hampers Estonia’s efforts to counter Russian propaganda that portrays the country as a fascist hellhole. “We are back to the stone age, telling the world what is going on with phone and fax,” says an Estonian internet expert. Mikko Hyppönen of F-Secure, a Finnish internet security company that has been monitoring the attacks, says the best defence is to have strong networks of servers in many countries. That is not yet NATO‘s job. But it may be soon.

Pay No Attention to that Economy Behind the Curtain!

Writing in the Moscow Times, Yaroslav Lissovolik, chief economist at Deutsche Bank Russia, examines the fundamentals of the Russian economy and finds them fundamentally lacking.

Uneven development, as reflected in political polarization, geographical and ethnic diversity, the minuteness of the middle class and sectoral imbalances, is a defining feature of Russian history. Imbalances persist today and are prevalent across regions and sectors, as well as in income distribution and the comparatively minor role of small and medium enterprises.

Addressing the problem of unbalanced growth has become a top priority for the government, and this to a significant degree will determine sectoral priorities as well as the macroeconomic mix of fiscal and monetary policies in the years to come.

The imbalance among economic sectors is most obvious in Russia’s excessive dependence on oil. The fuel sector — petroleum, petroleum products and natural gas — accounts for roughly one-quarter of gross domestic product, more than half of federal budget revenues and nearly two-thirds of total exports.

The fuel sector is also the largest recipient of foreign direct investment and accounts for more than half of stock market capitalization.

The “resource curse” looms even larger when you factor in other resource-based sectors, such as timber and metals, which together with fuel account for nearly 90 percent of total exports, leaving Russia extremely exposed to swings in global commodities markets.

Among the regions, the imbalance begins with the city of Moscow. The capital’s per-capita consumption is more than twice that of any other region. It accounts for nearly one-fifth of the country’s GDP; if you add the oil-rich Tyumen region, this share increases to one-third.

One reason for the discrepancy in regional development is resource distribution. According to government statistics, 54 percent of all resources are extracted in the Tyumen region, and two-thirds of resource wealth is concentrated in just three regions.

As a result, per-capital fiscal revenues in the richest regions are 10 to 20 times higher than in the poorest regions, such as Dagestan.

Inequality among people has also risen in the last few years. Income disparity, already higher than in most Central and East European countries, continues to increase. At the same time, decreases in nonpayments and inflation, along with higher pensions and public-sector wages, have made reducing poverty a realistic goal. Government statistics show that the number of people below the poverty line declined from 29 percent in 2000 to 17.6 percent in 2004.

A key to structural asymmetry in the economy is the limited role of small and medium enterprises, which in most developed economies account for more than 50 percent of total employment and GDP. In Russia, these indicators are well below 20 percent.

Finally, there is the intergenerational divide. The living standards of the elderly continue to deteriorate relative to other age groups, driven by the declining value of pensions, among other things. If in 1998 the average pension was equivalent to 40 percent of the average wage, by 2006 its value had dropped to just 30 percent.

Empirical evidence on transition economies suggests that the costs of such imbalances could be high. An International Monetary Fund study of transition economies demonstrates a direct link between greater inequality and lower GDP growth.

During the tsarist period, persistent and high income inequality contributed to political instability and killed off modernization efforts under Peter the Great and again in the late 19th and early 20th centuries. In the 1930s, sectoral imbalances were the bane of the economy, as industrialization was pursued at the expense of the agricultural and service sectors.

More recently, concerns over economic imbalances have resurfaced as the election season approaches, putting the spotlight on income and regional inequality. The government’s failure to reform the social safety net, including pensions, has reinforced awareness of the unequal distribution of wealth, and the bungled reform of in-kind benefits resulted in shortages of free medicine for some of the most vulnerable members of society.

The government’s drive to modernize the economy once again faces the familiar challenge of unbalanced development.

Bayer on the Neo-Soviet Union

Moscow Times columnist Alexei Bayer summarizes neo-Soviet foreign policy:

The centerpiece of the All-Russia Exhibition Center is the Friendship of Nations fountain. It features gilded statues of 15 buxom women dressed in folk costumes that represent the once-fraternal republics of the Soviet Union.

If the Kremlin wanted to keep track of the growing list of disputes with its former dependencies, it could start moving the fountain’s statues to the sculpture garden at the New Tretyakov Gallery on Ulitsa Krymsky Val. There, under the stern gaze of Felix Dzerzhinsky, the founder of the Soviet secret police, a large collection of statues would have already accumulated, including Ukraine, Moldova, Georgia, Belarus, Kyrgyzstan and, most recently, Estonia.

Many people around the world may sympathize with Russia’s complaints about Estonia’s decision to move a Soviet war memorial from central Tallinn to a military cemetery. This is just the latest in a long series of spats, however, and in each case Russia has resorted to the expulsion of foreign nationals, import bans and energy blackmail.

Needless to say, none of these responses has yielded positive results for Russian diplomacy. On the contrary, in many cases the foreign leaders Russia has tried to unseat or discredit have emerged stronger than ever, and Moscow merely bolstered its reputation as the regional bully.

The upshot seems to be that Putin’s foreign policy team is either incompetent or, like all Russian bureaucrats, it is too busy appropriating and spending petrodollars to focus on the job at hand.

Russia’s preoccupation with World War II, highlighted in the quarrel with Estonia, is very significant. In the West, victory in Europe, which occurred 62 years ago last week, is celebrated with diminishing fanfare, and not only because the number of surviving veterans decreases each year.

While Hitler and Nazism have not been in any way exonerated, the war itself is now viewed by many historians as part of a longer, complex European conflict that started in 1918 and didn’t end until 1989. Even though victory in World War II is still seen as a major achievement, it is no longer the same unqualified event it was in the early postwar decades. Ambiguity has been introduced in particular by the tragic history of Central and Eastern Europe, which has been told in detail since the collapse of communism in the region.

Russia, which has ostensibly repudiated its Stalinist past, should be aware of this. To celebrate the Great Patriotic War as though it were a battle between good and evil is too naive for ordinary Russians and too disingenuous for the Russian government.

I own a rare document. It is a record of Leonid Brezhnev’s 1981 visit to Kiev to inaugurate the 62-meter Rodina Mat statue on a high bank of the Dnepr River honoring the city’s heroic role in World War II. The thin, illustrated book contains speeches by workers, generals, milkmaids and, of course, the thanatoid leader himself, all mouthing the same formulation: As time passes, the historical significance of the Soviet triumph in the war becomes ever clearer.

By then, the party’s ideology had been hollowed out, and the cynical Soviet people were no longer moved by Lenin, the Bolsheviks and other staples of Soviet propaganda. The Great Patriotic War was the only thing that still stirred at least some positive feeling, and this formulation was designed to make it relevant again.

In the 1990s, victory celebrations were muted — another thing for which Boris Yeltsin is now faulted. The current revival of patriotic pieties is damning, however. It shows that the government has failed to come up with any sort of national ideology other than the old prescriptions cooked up in the early 1980s at party ideologist Mikhail Suslov’s Marxism-Leninism Institute.

Economist on Chechnya

David Essel recommends the following review of the Chechnya situation from the Economist print edition:

Bandit land

EVEN by the standards of the Caucasus, the two little-noticed rocket-propelled grenade attacks in March on the United Nations’ office compound in Nazran, the main city of the republic of Ingushetia, were worrying. One of Russia’s poorest provinces, it hosts thousands of refugees, and is supposedly a safe base for international agencies working in neighbouring Chechnya. The bombardment gave the lie to Kremlin claims that life in the region is “normal”. But the real story of the decision by the World Health Organisation, the World Food Programme, UNICEF and others to pull their expat staff out to Vladikavkaz has a still more alarming aspect.

The Economist understands that the attacks followed a dispute about money between the UN’s security department and the bit of the Ingush interior ministry responsible for guarding their compound. The UN apparently resisted a demand by the guards that it pay for all their other work at the compound (which is used by other outfits too).

Officially, all sides deny any disagreement. A UN official in the region pooh-poohs a link with the grenade attacks as “half-arsed”. Yet some UN-niks have been heard to say that their supposed protectors have been harassing them. Curiously, one of the two grenades narrowly missed the building used by the UN security team. The other one hit it.

The unlikely good cop in this sorry tale seems to be Russia’s infamous Federal Security Service. It warned the UN about further violence, and of a serious threat of kidnapping. Foreign UN staff now avoid even travelling through Ingushetia, for example en route to Chechnya. The Ingush government has reportedly offered sympathy but little else. No wonder: bombings, killings and kidnappings are commonplace there, driven by a dizzying mix of politics, religion and revenge. Two members of the Ingush president’s family have been snatched. The security services are both victims and perpetrators of the chaos.

For all its oil-fuelled bravado, the Kremlin all too often fails to meet its people’s basic needs, relying instead on outside agencies and charities (it routinely accuses the latter of espionage). It seems that Russia—a permanent member of the UN Security Council—may be unable to protect that organisation’s staff from its own state servants. Unable, or unwilling: it can be hard to tell if corruption happens against the Kremlin’s wishes, or with its blessing.

Annals of Potemkin Russia: Eurovision 2007

Whenever it is faced with a choice of actually doing something or creating an illusion of seeming to be doing something, Russia invariably chooses the latter option, and when it fails as a result it invariably chooses to blame foreign conspiracy rather than lack of preparation and substance. This explains, in a nutshell, why Russia has a declining population and an average wage of $2.50 per hour. Case in point: The Eurovision 2007 song contest. Russia’s choice for contestant to represent the nation? The Moscow Times tell us:

Last year, the teen idol Dima Bilan won second place at the Eurovision Song Contest — a result that prompted outraged headlines and accusations of biased voting in Russia. This year, the Russian delegation made its intentions clear by sending an upbeat dance number titled “Song #1,” performed by a newly formed girl group called Serebro, or Silver (pictured above). The trio, put together by influential producer Maxim Fadeyev, held its first news conference last week, and braved a barrage of questions, ranging from whether the singers have boyfriends — they all claim to be single — to what they will wear at the contest’s final on Saturday. “We don’t promise first place,” one of the band’s two brunettes, Yelena Temnikova, told a crowd of journalists representing tabloids such as Zhizn and even the broadsheet Izvestia. “We want to get a buzz from singing the song. That’s the only way we can make people like us.”

So Russia feels that it lost last time because the foreigners cheated, and its response is to field a group that has never once performed together.

And so it goes in Russia.

May 14, 2007 — Contents


Yelena Tregubova: Poster Child for the Neo-Soviet Union

(2) Next stop for Chrysler? Russia, of course.

(3) Annals of Cold War II: The Battle of Britain Resumes

(4) Victorious Yushchenko Under Physical Threat (Again)

(5) Whom do they think they are kidding?

(6) The Lies from Russia Blog Never Seem to End