Daily Archives: January 14, 2008

January 14, 2008 — Contents


(1) Another Original LR Translation: Illarionov on Bhutto

(2) VTsIOM Falls to the Kremlin Axe

(3) Milestones: Visit #200,000!

(4) Annals of Russian Barbarity in Georgia

(5) Will Kasyanov Make the Ballot?

(6) Inflation Ravages Russia

NOTE: As we report on Publius Pundit, Vladimir Putin is prosecuting the parents of the children who lost their lives in the Beslan attack for trying to find out what happened to their children. That’s right. Prosecuting them.

Another Original LR Translation: Illarionov on Bhutto (by our Original Translator)

NOTE: The noted Russian author (shown above, right, with Benazir Bhutto, former Primer Minister of Pakistan), a former Kremlin insider, compares Russia and Pakistan, and finds that Russia is in some ways the more desperate of the two. In the forum that follows the article, several readers commented grimly that while tens of thousands of Pakistanis took to the streets to protest Bhutto’s murder, only a few hundred Russians could bestir themselves to protest their own rigged parliamentary elections.

The Word and the Bullet

Andrey Illarionov

Yezhednevniy Zhurnal

January 10, 2008

On December 27, 2007 Benazir Bhutto, twice the Prime Minister of Pakistan, the leader of the opposition People’s Party, and the sure victor in 2008 parliamentary elections, was assassinated in a terrorist attack in Rawalpindi.

Three months before her death Benazir Bhutto appeared before a large gathering of representatives from the American political, economic and intellectual elite. Her presentation simply captivated the auditorium. No matter what the topic, she demonstrated astonishing erudition, clarity of thought and lightning speed in her responses. And all this with a surprising sense of tact, respect for her interlocutors and conviction in her own position. With what grace she carried herself! When the thin scarf that lightly covered her head slipped momentarily to her shoulders, one simply had to see it, the genuinely royal gesture with which she replaced it!

In the hall were several former U.S. Secretaries of State and Defense, along with a number of high-ranking officials from the current Administration. The topic of discussion was U.S.Pakistan relations. Bhutto talked about the mistakes the U.S. had made in this relationship, and what heavy consequences followed from America’s support for the military regime – consequences for Pakistan, for South Asia as a whole, and America itself. One of the former U.S. Secretaries of Defense tried to object. Bhutto’s response was instantaneous, parrying the objection with several examples. And she did this with such conviction, so perfectly pointing out the horrible failures of the Pentagon’s actions in those very years when her questioner was its leader that the latter sat back down with a gloomy expression, not daring to pose any further questions.

At the end of her presentation the entire hall rose and gave Benazir Bhutto a standing ovation. One should note that the American establishment is not easily won over. It has seen it all, and is not known for its sentimentality, especially toward those who publicly flay America for its mistakes. But all five hundred participants in the event (with a total net worth of probably several hundred billion dollars) stood and applauded this brave woman in a white Muslim headscarf, finding themselves enraptured and unable to resist the genuine miracle that had just taken place before them.

One of the U.S. presidential candidates had addressed the same audience a few hours before Benazir. Without a doubt, the possible future U.S. President did not receive one-tenth the applause, attention and praise that was lavished on this former Prime Minister of a foreign country. That same evening, under the deafening roar of applause, the organizers of the conference in almost total seriousness urged Bhutto to run for president of their own country.

I talked for awhile with Benazir Bhutto. Naturally, the discussion turned to the political situation in our two countries, Pakistan and Russia. And naturally as well, we noted more than a few parallels.

Both Pakistan and Russia are large, developing countries with diversified economies and a diversity of internal regions. In both countries the intelligence services were never brought fully under control by a civilian government. In both countries for the past eight years all power has been held by intelligence and military officers. In both countries, all the institutions of modern governance – separation of powers, independence of the legislative and judicial branches, an independent press – have been systematically destroyed. Both countries have had their epic struggles against the regime – in Pakistan from the bar association, in Russia from the Yukos oil company. In both countries the main means by which the regime interacts with is people is brute, demonstrative force. In both countries there are border regions that are poorly controlled by the central government, but which the intelligence services actively use as places to iron out their methods and recruit assassins. In both countries the victims of terrorist attacks are leaders of the press and public opinion – politicians, activists and journalists. In both countries the clients and authors of contract killings are the masters of bullet and bomb.

In Pakistan they killed Benazir’s father, the former Prime Minister Zulfikar Ali Bhutto, two of her brothers, and thousands of pro-democracy advocates.

In Russia they killed Aleksandr Men, Larisa Yudina, Galina Starovoytova, Nikolai Girenko, Sergey Yushenkov, Yuri Shchekochikhin, Anna Politkovskaya, Aleksandr Litvinenko, Yuri Chervochkin, hundreds of residents of the apartment towers blown up in Fall 1999, members of the audience in the “Nord-Ost” theater raid, schoolchildren and parents at Beslan, and tens of thousands in the Northern Caucuses. In Ukraine they killed Vyacheslav Chornovil, the leader of parliament and leading presidential candidate in 1999, and poisoned the presidential candidate Viktor Yushchenko in 2004.

Terror is used against leaders of the press and public opinion because people listen to them and follow them by the thousands and millions. Because unlike intelligence agents, public opinion leaders are influential. And not only influential, but genuinely powerful as well – in their words, their convictions, and the support they receive from millions of followers. In the battle of words, the secret police are doomed. The have nothing with which to oppose the leaders of public opinion except terror. Terror is the weapon of losers, of the defeated, of those who don’t stand a chance in normal, peaceful, human life.

The word is the argument of the strong. The bullet – the argument of the weak. The question most frequently asked of Bhutto by participants at the event three months ago was, “Won’t it be dangerous for you to return to Pakistan?” Benazir invariably replied: “I cannot not return. They are waiting for me at home.” These words reflect the main difference between the leaders of public opinion and the Masters of Cloak, Dagger and Bullet. People await the first. The second need only themselves. The first are flooded with letters. But no one writes to the Colonels (intelligence officers). The first are remembered with gratitude and reverence. The second are cursed for eternity.

VTsIOM Falls to the Kremlin’s Axe

Paul Goble reports more shockingly outrageous news from the Neo-Soviet Union, more proof that data produced by the Kremlin simply cannot be trusted, just as was the case in Soviet times:

The All-Russia Center for the Study of Public Opinion (VTsIOM), Moscow’s largest survey firm, has been corruptly transformed from an independent polling firm into a part of the Kremlin’s propaganda machine, according to Natalia Morar, the New Times journalist who was denied re-entry to Russia last month. In a carefully documented story posted online yesterday entitled “Payment for Loyalty,” Morar describes how the Presidential Administration has insisted on structuring surveys to get the results it wants and then rewarded VTsIOM leaders by allowing them to privatize state property, avoid paying taxes and send the profits to offshore banks.

This corrupt exchange, Morar says, has been especially important during this year of elections because the Kremlin needs the right answers in order to sway public opinion and votes and can count on the fact that many people will assume that VTsIOM’s reports are accurate. According to Morar, Aleksei Chesnakov, the deputy chief of section of the Presidential Administration responsible for domestic politics, carefully keeps track of what polls VTsIOM plans to do and meets frequently with VTsIOM director Valeriy Fedorov to review questions, answers, and presentation. “Every Friday,” Morar reports, officials in the Presidential Administration go over and then approve the press releases that VTsIOM has scheduled to release in the following week to ensure that these will be on message. But the Kremlin’s involvement at VTsIOM is far deeper than that, the investigative says. Sometimes, she says, its officials demand the inclusion or deletion of particular questions. But most often they limit themselves to requiring that the questions and answers be written in a way that leads respondents to give the answers that the Kremlin needs.

The use of leading questions in public opinion research is “absolutely impermissible,” Lev Gudkov, the head of the Levada Center polling company. “It is either cheating or political technology, but it does not have any relationship to sociology whatsoever.” At the very least, “it is not scientific.” At least some working-level people at VTsIOM feel the same way. Leontiy Byzov, the head of social-political analysis there, told Morar that using leading questions and leading answers is simply a concealed way of advancing particular ideas and thus nothing more than propaganda. For their loyalty, the top people in VTsIOM have been well-rewarded, Morar continues, highlighting just how important their distorted picture of Russian public opinion is for President Vladimir Putin and his Kremlin advisors in their effort to strengthen their grip on power. Not only have they been able to effectively privatize what is a state company – indeed, Kremlin officials are on its board – but VTsIOM leaders have been able to avoid paying the taxes they owe by means of a series of shadow companies and to send their profits to offshore accounts in the British Virgin Islands and Cyprus.

Morar shared documentation on this with financial experts who confirmed her judgment that this was more than simply sharp business practice. Given that VTsIOM is still nominally a state enterprise, one expert said, such actions are too risky — unless those involved enjoy protection at the highest levels. But perhaps the most damning and certainly the most immediately accessible indication of what is going on are the words of a highly placed VTsIOM employee who not surprisingly insisted on anonymity. He told Morar that “they [in the Kremlin] are paying us for loyalty by giving us the opportunity to steal. They permit us to use certain financial flows and they do not control what we do with them. This is a classical example of bureaucratic rent: the use of a state enterprise for the extraction of incomes going into the pockets of bureaucrats.” Indeed, he said, “they permit us to work only as long as we fulfill all [their] conditions. But if we say something somewhere beyond what is wanted, they will immediately dispense with us. In general,” the source added, “VTsIOM in its current form is not a research organization … It is part of the [Kremlin’s] propaganda machine.”

For all those who remember the extraordinarily positive role VTsIOM played in the past, Morar suggests, it is truly tragic that this institution has been so thoroughly corrupted, even if as yet many people do not view its findings as any more unreliable than those of other polling organizations. Established in December 1987, VTsIOM played a key role in the creation of modern polling in the late Soviet and early post-Soviet period. In 1998, it was transformed into a unitary state enterprise, and the following year, it was given the status of a scientific institution. But in 2003, VTsIOM was converted into an open stock company entirely capitalized by the state. That step led to the departure of Yuri Levada and the other top sociologists who had worked there up to that point and to the installation of Fedorov, the director who now does the Kremlin’s bidding.


This blog began publishing on April 2, 2006, and it took us until May 31, 2007, to receive our first 100,000 visits from our readers — a total of almost 14 months, but still an astounding feat for a specialized publication, blowing the accomplishments of all other Russia blogs that had come before right out of the water.

Last Friday, more than two months shy of our second anniversary, we collected our 200,000th visit from a reader — which means it took us less than eight months to collect our second 100,000 visits; in other words, our traffic over our second year has been nearly twice as high as it was during our first.

Web pages created by this blog (which, as of December 19th, numbered over 3,000) have now been viewed by readers almost half a million times in the period of less than two years we have existed. If you consider the traffic we generate on Publius Pundit and Pajamas Media, it becomes abundantly clear that we are the most significant Russia bloggers in the world in terms of traffic (with our fearless leader Kim Zigfeld being first and foremost among us, of course).

Another thing our counter doesn’t record is visits to our backup blog on WordPress, a format some readers prefer. Amazing as it seems, on January 8th the counter on that blog caught and passed the counter on venerable Russia blogger Vilhelm Konnander’s actual blog, which has existed much longer. That’s right, our backup blog, whose only purpose is to safeguard our data and whose contents are often weeks out of date, is more popular — far, far more popular — than Konnander’s actual blog. Rather odd, then, that his blogroll doesn’t even acknowledge we exist, isn’t it? Perhaps it’s a clerical error.

The average reader who visits this blog spends over four minutes perusing our content, an astoundingly long period by blogosphere standards.

And YOU are responsible for all this impressive data, as we’ve said many times before. This is YOUR accomplishment as much as it is ours, especially if you are a regular reader and/or commenter.

Annals of Russian Barbarity in Georgia

Vladimir Socor, writing in the Eurasia Daily Monitor:

On January 8 the runner-up presidential candidate Levan Gachechiladze (with 27% of the votes cast, according to the provisional final returns) headed a group of opposition leaders that burst into Central Electoral Commission (CEC) offices and encircled CEC chairman Levan Tarkhnishvili. They threatened to evict the chairman physically and — in Gachechiladze’s words — to “punish” him as a “criminal” if the opposition comes to power. Leaders of the nine groups supporting Gachechiladze joined him in the jostling and shouting. Gachechiladze resorted to obscenities not for the first time. The incident occurred in the presence of journalists (Civil Georgia, EurasiaNet, Rustavi-2 TV, January 8).

Opposition leaders accuse the CEC of “rigging” the January 5 presidential election. They are threatening to call protest demonstrations unless the CEC and the courts invalidate or revise the election’s results. Western observers — present in record-high numbers throughout the country — have validated the election, the provisional final returns of which show Mikheil Saakashvili winning re-election with close to 53% of the votes cast. The remainder is divided among six other candidates. However, opposition leaders reject the Western observers’ essentially positive assessment of the election and are calling for a runoff or a rerun.

Meanwhile, many institutions and groups of international observers are validating the election, alongside the four main observer delegations — OSCE/ODIHR (Office for Democratic Institutions and Human Rights), OSCE Parliamentary Assembly, Council of Europe’s Parliamentary Assembly (PACE), and European Parliament — which did so jointly on January 6 (see EDM, January 7). All of these institutions and groups are urging the opposition to recognize the legitimacy of the election just held.

The European Union’s Presidency — held by Slovenia since January 1 — supports the Western observers’ conclusion that “the election was in essence consistent with most of the OSCE and Council of Europe commitments and standards for democratic elections.” It also expects Georgia to “address the shortcomings that were identified” (EU Presidency press release, January 7).

The Washington-based National Democratic Institute (NDI) and International Republican Institute (IRI) have issued basically positive assessments of the election. Significantly, both institutes have for many years been working with opposition parties in Georgia and continue to do so. According to NDI’s preliminary conclusion, the election “met basic democratic principles,” while problems encountered in the process of balloting were irregularities, not rigging and not affecting the expression of people’s will (Rustavi-2 TV, January 7). The IRI, which led an international delegation of observers, similarly concluded, “The election broadly met international standards. However, technical problems continue to affect the electoral process” (IRI press release, January 6). Both institutes are recommending to the government and opposition to work cooperatively to resolve these issues.

Presidents Toomas Ilves of Estonia, Valdis Zatlers of Latvia, Lech Kaczynski of Poland, Viktor Yushchenko of Ukraine, Ilham Aliyev of Azerbaijan, Robert Kocharian of Armenia, Nursultan Nazarbayev of Kazakhstan, and Nicolas Sarkozy of France as well as Ukrainian Prime Minister Yulia Tymoshenko and Moldova’s Christian-Democrat leader, parliamentary vice-chairman Iurie Rosca have variously telephoned or written to Saakashvili with congratulations on his reelection. Ilves also cited the Western observers’ recommendations to Georgia to correct remaining flaws and continually improve the quality of the electoral process. Ukraine’s Ministry of Foreign Affairs cited Ukrainian and international observers saying that the openness of the voting and large presence of observers made it impossible to rig the election. Estonian observers (including 12 members of parliament) and the Lithuanian delegation (totaling 131 members, the largest of all delegations proportionate to the nation’s size) supported the Western positive assessment of the election, despite “minor irregularities that do not influence the outcome.” The three Baltic states’ ministries of foreign affairs released similar opinions, citing the respective delegations of observers (BNS, UNIAN, January 6, 7, 8; Turan, Agence France Presse, January 8).

U.S. State Department spokesman Sean McCormack and NATO spokesman James Appathurai each issued statements endorsing the Western observers’ validation of the election (press releases, January 7, 8).

At the moment, the EU in Brussels seems rather disengaged from the ongoing Georgian events. The EU’s High Representative for the Common Foreign and Security Policy, Javier Solana, issued a brief, vague statement, recognizing at least that the Georgian election was “truly competitive.” The EU’s External Affairs and Neighborhood Policy Commissioner, Benita Ferrero-Waldner, issued a belated statement on January 8 in which she cited the international observers’ essentially positive evaluation of the election, urged the Georgian government to address the shortcomings quickly, and called on the opposition to use only peaceful and legal means (Council of the European Union and European Commission press releases, January 7, 8). Solana and Ferrero-Waldner are about to finish their terms of office. The EU’s envoy for the South Caucasus, Peter Semneby, apparently could not take a position on the Georgian elections in the absence of a clear message from the top level in Brussels. Such a weak engagement by Brussels reflects the broader inadequacies of the EU’s Neighborhood Policy generally and in this region particularly.

Gachechiladze and the other presidential contenders cannot realistically hope to overturn the election’s validated outcome. Their moves seem designed at this stage simply to prolong the uncertainty and look for new tactical openings. Some of them may also look for a face-saving solution, after staking so heavily on toppling Saakashvili and the government. Their main demand, before and during the election campaign, was a Georgia without Saakashvili. Program and tactics were subordinated to that goal.

The Gachechiladze camp’s Mephisto bargain with billionaire Badri Patarkatsishvili showed that this camp was prepared to destabilize the country for the sake of toppling the president. The other presidential contenders stopped short of making that bargain for funds, but used the same brinkmanship tactics. At the moment, they all seem to be preparing to refuse to recognize the legitimacy of the re-elected president and possibly boycotting him in the run-up to the April parliamentary elections.

Such a development could bring with it another political crisis, fraught with artificially induced polarization. Unburdened by the responsibilities of governing and untrained for such responsibilities, the leaders of these small parties see their chance of gaining de facto political influence in a climate of political confrontation.

Meanwhile, the Moscow Times reports:

Georgian prosecutors on Thursday charged one of President Mikheil Saakashvili’s most powerful opponents, Badri Patarkatsishvili, with plotting a coup and attempting to organize a terrorist attack. The move, just days after Saakashvili won a presidential election the opposition said was rigged, could sideline the flamboyant tycoon from Georgian politics. “Patarkatsishvili should come to the Prosecutor General’s Office,” Khatuna Tskhvediashvili, a spokeswoman for the prosecutor general, said by telephone. She said the businessman’s personal bank account had been frozen.

Patarkatsishvili, who left Georgia after mass opposition protests late last year, is currently in London, one of his advisers said. The adviser declined to make any immediate comment when asked about the charges, which come after Saakashvili won the Jan. 5 presidential election he called after crushing opposition protests in November. Patarkatsishvili, who ran against Saakashvili and won about 7 percent in last week’s election, has previously accused the Georgian government of fabricating criminal charges to increase political pressure on him and his associates. He has accused Saakashvili of pushing Georgia into dictatorship, a claim dismissed by Saakashvili’s advisers. The charges are related to an audio recording, broadcast on Georgian television, in which a man whose voice sounds like that of Patarkatsishvili can be heard offering a $100 million bribe to senior Interior Ministry official Irakly Kodua. The man in the recording said he wanted Kodua to arrest Interior Minister Vano Merabishvili and go on television alleging that the authorities had asked him to rig the results of the election.

Patarkatsishvili has not confirmed if his is the voice in the recording. Kodua said he had reported the conversations to the authorities. A businessman who earned a fortune in Moscow as the Soviet Union crumbled, Patarkatsishvili initially supported Saakashvili when he came to power in 2003 on the back of the Rose Revolution protests. But Patarkatsishvili later turned against him and played a key role in bankrolling the opposition, which he has said he will continue to finance. He has had ties to self-exiled Russian businessman Boris Berezovsky.

Western monitors have said the Jan. 5 poll was slightly flawed but still competitive.

Will Kasyanov Make the Ballot?

The Moscow Times illustrates that dominating the parliament was not the only purpose of the Kremlin’s blatant perversion of the recent Duma elections; as well, excluding all the opposition parties means that it becomes much more difficult (if not impossible) for them to field challengers in the presidential poll in March:

Alexei Dugin was cheerful despite the subzero temperatures and the nearly impossible task of challenging the Kremlin. It was late Thursday morning on Triumfalnaya Ploshchad, and Dugin was looking for potential supporters for former Prime Minister Mikhail Kasyanov, who must collect 2 million signatures by Wednesday in order to register as a presidential candidate.
“Everybody knows he’s not going to become president,” Dugin said. “But there’s got to be some sort of competition if we want to be a democracy.

While most Russians tuned out of politics over the New Year’s holiday, Kasyanov’s supporters were busy gathering signatures, collecting 1.7 million as of Tuesday, according to his web site. By law, candidates have two ways to get on the ballot in the March 2 presidential election: They can be nominated by a political party in the State Duma, or they can submit 2 million signatures to the Central Elections Commission, which experts describe as a daunting — but not impossible — task. Adding to the difficulty, no more than 50,000 signatures can come from any one of Russia’s 85 regions, and candidates have less than a month to collect the signatures.

“In principle, it’s realistic,” said Alexei Makarkin, an analyst with the Center for Political Technologies, noting that liberal candidate Irina Khakamada and Rodina party co-founder Sergei Glazyev managed to do it in 2004. Back then, Khakamada and Glazyev delivered truckloads of signatures to the Central Elections Commission just hours before the deadline.

Kasyanov may cut it close too. The former prime minister’s supporters plan to collect 2.4 million signatures, weed out the questionable ones, and submit 2.1 million by Wednesday, said Yelena Dikun, a Kasyanov spokeswoman. “We’ve been planning this for months,” Dikun said. She said no signatures would be forged and no voters bribed — practices that were alleged to have occurred ahead of past elections.

Besides Kasyanov, the other candidate seeking to get on the ballot by collecting signatures is Andrei Bogdanov, leader of the Democratic Party of Russia, a small liberal party widely seen as a Kremlin project to divide the opposition. Bogdanov’s campaign manager, Vyacheslav Smirnov, announced this week that 2 million signatures had already been collected for the candidate — a claim that prompted disbelief from some observers, especially since the DPR received less than 90,000 votes in last month’s State Duma election. “Our support came from people who did not vote,” Smirnov said by telephone Thursday. “This is more than half of the Russian population.” Smirnov said most of Bogdanov’s signatures had been collected by campaign workers going door to door. Many of the signature-collectors had worked for other parties in the Duma vote, including United Russia and the Communists, he added. DPR representatives have consistently denied that the party is backed by the Kremlin.

The candidate overwhelmingly favored to win the election, First Deputy Prime Minister Dmitry Medvedev, does not have to submit signatures because he has been nominated by two parties in the Duma, United Russia and A Just Russia. The two other candidates, Communist leader Gennady Zyuganov and LDPR leader Vladimir Zhirinovsky, are also spared the signature requirement thanks to their parties’ nominations. Of the five potential candidates, Kasyanov is by far the biggest outsider. Since being dismissed as prime minister in 2004, he has become a fierce critic of President Vladimir Putin, speaking regularly at anti-Kremlin street protests. Kasyanov’s supporters claim that they have been subject to a harassment campaign masterminded by the Kremlin — a charge the Kremlin denies. Among other things, they say their meetings have been disrupted when officials have shut down their planned meeting venues for fire-safety reasons.

Similar troubles have allegedly plagued Kasyanov’s signature-gathering campaign. In Pskov and Rostov-on-Don, no notaries agreed to confirm the validity of his signatures, Kasyanov said during a visit to Samara this week, Interfax reported. Dikun said the main problem has simply been ignorance among voters. “In many cases, our signature collectors have had to inform people that there is an election scheduled for March 2,” she said. The biggest question mark hanging over Kasyanov’s campaign, however, is whether the Central Elections Commission will approve him as a candidate. Many experts believe that if the Kremlin does not want him as a candidate, the elections commission will reject his signatures on technical grounds.

Elections commission chief Vladimir Churov said this week that the 4 million signatures expected to come in from Kasyanov and Bogdanov would be inspected by a team of specialists from the Interior Ministry, the Federal Security Service and the Defense Ministry, Interfax reported. “These are professional experts,” Churov said in a radio interview. The commission has until Jan. 27 to announce whether the signatures are valid, which will finalize the list of candidates. The same day, Kasyanov’s supporters are planning to hold a Dissenters’ March street protest. Dikun said the protest was meant to pressure the authorities to “guarantee a free election,” but she did not link it to the commission’s deadline.

In the meantime, Kasyanov’s foot soldiers are focused on reaching the 2 million mark. That seemed like a distant goal at Triumfalnaya Ploshchad on Thursday morning, where only a small trickle of pedestrians were stopping by a van lined with Kasyanov posters. Dugin said he was getting about 100 signatures per day, mostly from people fed up with the Kremlin’s monopoly on power.

“He’s the only non-Kremlin candidate,” Dugin said.

A reader writes: “Of course another take on the Kozlovsky abduction is that this was timed deliberately to divert the energy of the opposition as well as removing one of their key campaigners, at a time when they need every bit of help they can to get their two million signatures. The sophistication of their evil never ceases to amaze me. I have a Russian friend who refers to the Kremlin/KGB/Putin inc as “Mordor”. The description is apt.”

Inflation Ravages Russia

The Moscow Times reports:

In August 2005, Susie Clark rented a two-room, European-style apartment in Polezhayevskaya, a quiet area of Moscow three metro stops outside of the Circle Line. The apartment cost $900. Two and a half years later, the owners of the apartment are offering it for rent at 1,200 euros ($1,765), a rise of nearly 100 percent. Once adjusted to take account of the depreciating dollar, the actual rise is closer to 75 percent. “That’s a pretty huge increase,” said Clark, a London-based advertising executive. She gave up the apartment last week.

But few are surprised. Moscow rental prices, particularly in central areas, have been climbing at unprecedented rates. While a 100 percent increase in 2 1/2 years may not be the norm, it certainly isn’t the exception. Inflation shot up by nearly 12 percent last year, the highest since 2003, according to figures released by the State Statistics Service this week. In a presidential election season, it is a figure that the government would prefer to forget.

No immediate relief is in sight. For now, the government is hanging on to its target of 8.5 percent for this year, but few economists believe that it will be achievable. Inflation is expected to remain high, particularly in the first half of the year, with year-end forecasts varying from 9.5 percent to 12 percent. The government’s challenge now, said Alexander Morozov, an economist at HSBC, is to figure out how to bring inflation back down in 2009. Economists broadly agree that the state’s loose monetary policy was one of the primary drivers of inflation last year, while the government has pinned the blame on external factors, such as poor grain harvests, combined with intensified global demand for grain, and higher costs of food imports.

In October, when the specter of spiraling inflation became all too real, the Kremlin jumped in with measures to target rising prices, including an appeal to food wholesalers and producers to freeze prices until the new year and a decision to cut import tariffs on some goods. Yulia Tseplyayeva, an economist at Merrill Lynch, said these measures were largely “cosmetic” and failed to address the underlying reasons for inflationary pressure. “The government is not ready to take more aggressive measures to tighten fiscal and monetary policy,” she said. Nevertheless, official figures indicate that the growth in food prices actually slowed in December, suggesting that the government’s inflation-busting measures did have some effect.

In many areas of the economy, prices are rapidly outstripping inflation. Over the past year, sunflower-oil prices have leapt by 52.3 percent. Milk rose by 30.4 percent, while bread prices increased by 22.4 percent. Local amenities, such as heating, rose 14 percent in 2007. “The prices that are rising now are really hitting families and those on medium salaries. It does create some tension,” said Clemens Grafe, an economist at UBS. “There is a good reason why for the first time we’ve really seen strikes last autumn or early winter.”

Anecdotal evidence suggests that higher-end activities, such as leisure and restaurants, have substantially increased in price. Some banyas, for instance, raised their prices by up to 40 percent last year. “Sometimes people use the inflation factor as a reason to increase pricing — often even higher than real inflation,” said Tobias Weigl, a German citizen who works for DHL in Moscow. Rent, however, remains the largest single expense for many Moscow residents.

One British expatriate, who until recently rented a two-room apartment in the central Smolenskaya area, said it cost $500 per month to rent in 2003 and now costs 1,000 euros ($1,470) per month, an increase of nearly 200 percent in four years. Salaries are simply not keeping pace. Tseplyayeva said many people were losing out because their wages are not rising in line with inflation. “On average, wages grew about 15 percent in 2007 across the public and private sector,” she said. “But these are average figures.” Evans, a real estate agency that caters to top-end rentals, said rental rates had risen by 30 percent on average in the premium market.

Anya Levitova, the agency’s founding partner, said it was unheard of two years ago to attract renters willing to pay around $25,000 per month. Last year alone, she said, Evans secured 10 deals for rents of $23,000 or more. A one-bedroom apartment just outside of the city center, meanwhile, cost around $700 a year ago, compared with $1,200 now, Evans said. Part of the problem is that property prices are stabilizing, so investors are keen to sell before house prices go down, leading to a supply glut, real estate agents said. Previously, investors would buy properties, rent them out while the prices appreciated, and then sell them on. The good news is that price rises should start to slow. “Tenants won’t support that growth,” Levitova said, adding that over the next year, she expects rent increases to broadly keep pace with inflation.

But Russians could care less. Time to party and wallow in profligate waste! The MT continues:

The extended New Year’s holiday cost the economy 700 billion rubles ($28.5 billion), or about 2 percent of the gross domestic product, economists said Thursday. Most businesses across the country shut down for the 10-day holiday, which began Dec. 30 and ran through Jan. 8, the day after Orthodox Christmas. In addition, the regular work week got off to a slow start Wednesday, with many workers putting off their return to work until next week. Some of those who did come back found it difficult to get into the swing of things after the long break. Vladimir Bragin, an economist at Trust Bank, said the slowdown in economic activity costs Russia dearly. “I think that 10 days of pure holidays mean about 20 days of stress and hangovers. This is too high a price,” Bragin told Russia Today television.

In comparison, the Christmas holiday in Britain costs the local economy only $1.5 billion.

January 13, 2007 — Contents


(1) Update on Kozlovsky: He’s Winning!

(2) The Sunday Photos Part I

(3) The Sunday Photos Part II

(4) The Sunday Literary Supplement: Stalin Back in Vogue

(5) The Sunday Pogrom

(6) The Sunday Cultural Supplement: Soviet Dark Humor Back in Vogue

(7) The Sunday Funnies

NOTE: The Kaiser Foundation announces Seryozha (“Little Sergei”) — a documentary film about orphans living on the streets of St. Petersburg, Russia, some of whom are HIV-positive or have lost parents to AIDS. Filmmaker Denis Kuzmin follows the life of one orphan and through him tells the larger story of “street kids” exposed to drugs, sex and illnesses, including HIV/AIDS. Kuzmin received financial support through a fellowship program created by the Kaiser Family Foundation and Transatlantic Partners Against AIDS (TPAA) to produce this 27-minute documentary. The film, with English-language subtitles, may be viewed online.

NOTE: Check out our latest installment on Publius Pundit, where we cite Paul Goble’s recent report showing the extent of Vladimir Putin’s outrageous vote fraud tactics during the recent parliamentary elections. Feel free to add your comments as to how the West can best respond to this latest Russian outrage.