(2) EDITORIAL: The Day of Reckoning in Georgia
(6) Browder Speaks
(2) EDITORIAL: The Day of Reckoning in Georgia
(6) Browder Speaks
Russia, Imploding Once Again
As shown in the chart above, as the price of oil has plummeted to a three-month low and Russian “prime minister” Vladimir Putin has issued yet another crazy, unhinged attack on a major Russian business entity (last time oil major YUKOS, this time steel major Mechel) , in the last three weeks the Russian stock market has lost 18% of its total value, matching a drop in the price of oil (from $145 to $120) jot for jot. In the last six weeks, it’s down a shocking 25% from record highs around 2,400 on the RTS Index. The market was down 3.7% last Tuesday alone as it shuddered under the impact of falling oil prices.
The Russian stock market is being bled white. Indeed, one has to wonder if Putin isn’t somehow intimidated by growth in the market and the creation of wealth beyond his control that it implies, and whether he isn’t just as pleased as Stalin was to see a crippled nation groveling at his feet. After all, it’s so much more difficult to govern healthy, vigorous, wealthy people.
And yet, crude oil is still selling at stratospheric prices in excess of $100 a barrel, and crude oil is Russia’s bread and butter. If Russia had any kind of economic fundamentals, its stock market ought to be charging ahead. It’s not, and that’s because Russia has no economic fundamentals at all. It’s a crude, third-world dictatorship governed by a proud KGB spy, a relic of a failed state with no training or experience in business, economics or social policy (much less democracy). The Russian market tracks the price of oil so precisely because the price of oil is the only thing standing between the price of oil and apocalypse.
In short, if the price of oil were not artificially inflating the Kremlin’s economic performance, we could very well be witnessing a major depression in Russia, followed by the fourth major collapse of the Russian state in the past century. The recent spike price in oil is quite simply a disaster for Russia, because it has finally given the West the incentive it needs to aggressively seek out alternative fuels; the Kremlin’s rabid hostility to the West combined with the huge price surges has made the world wake up from its stupor and begin to wean itself from oil dependence. As time goes on, Russia’s oil stocks will both deplete and marginalize, and the Russian economy will degenerate into anarchy.
How could it be otherwise? By what twisted, neo-Soviet logic do Russians imagine that they can be successfully governed by the KGB? What possible credential or qualifications could Putin have to address complicated economic issues? Isn’t it clear that the priorities of a KGB spy are irreconcilable with the prosperity of a modern nation? Isn’t it obvious he will simply divert the nation’s resources towards oppression and world domination instead of dealing with pressing social issues and creating a vibrant economy, in other words that he’ll behave just as Stalin did, with the same results?
What is happening in Russia today is unprecedented in human history. Russians watched a KGB regime ruin their country, butchering millions of Russians, destroying the civilian economy and causing the collapse and dissolution of the USSR. Then, when the dust settled, they blithely turned the reins of power right back over to the KGB.
Below, we report that a Russian judge has recently ruled that not only is sexual harassment of female workers by male superiors legal in Russia, it’s to be encouraged. Russia is already one of the most corrupt societies on the face of the earth, as rated by Transparency International and a host of other international experts, and things are getting even worse. We then report on Russia expelling one of its leading investors, on the world-famous anti-Soviet dissident who supported Putin’s KGB regime and betrayed his whole life’s work, and on the barbaric antics of those who claim to lead but in fact act more like savage children. And that’s just one day’s news!
Russia is disintegrating before our eyes and, just as has been the case in the past, the people of Russia will not lift a finger to stop it.
The Day of Reckoning in Georgia
Russia’s hypocrisy in the matter is truly mind-numbing.
Where Chechyna is concerned, Russia demands that the outside world not only refuse to provide any tangible support for the breakaway region, it insists that we not even offer any criticism of Russia because it is a “domestic” matter and none of our business. Yet, where South Ossetia is concerned, Russia feels it has the right not only to provide support for the rebels but to invade the region with regular Russian army forces in a naked act of territorial conquest. Apparently, Russia sees no inconsistency between these actions and its Chechnya policy whatsoever, a duality of truly Soviet proportions.
NATO had the chance to forestall any armed conflict by decisively admitting Georgia as a member, but it dithered and mumbled and put it off until later. Seeing this, Russia believed it had a free hand to invade with massive force, and did so. Georgia, of course, responded by seeking to liquidate the Russian forces, as any nation would do when its territory was invaded, and now Russia is seeking to use the Georgian response as an excuse to impose the same type of control over Georgia proper as it had during Soviet times.
The world must act immediately and forcefully to dissuade Russia from its fanciful notions of neo-Soviet imperialism. Russian forces have only barely been able to keep the lid on Chechnya (we’ve documented many instances of ongoing violence both there and in Ingushetia). Georgia is a far harder target than Chechnya and Russia’s imperialistic advances can only result ultimately in disaster in the long term. Russia’s stock market took a 6.5%, $57 billion loss on news of the Russian incursion. Even worse, Russia’s image is permanently destroyed now, as it has laid bare before the world its naked, bullying imperialist aggression — and in so doing wiped out any moral high ground it may have claimed to exclude the West from involvement in its own breakaway region.
But in the short term, the domino principle applies. Let Russia get away with annexing part of Georgia, it will take the rest. Permit that, and Ukraine is next. After that, who knows where the bloodlust of Russia’s KGB regime will end. Writing in the Telegraph Robert Parsons, international affairs editor of France24 TV, states: “This is no longer about a tiny country way off most people’s radar. Georgia’s fate is about the future world order, Europe’s place in it and persuading Moscow to desist from the brutish behaviour that has marked its recent foreign policy.”
U.S. Secretary of State Condoleeze Rice gets it. She stated: “We call on Russia to cease attacks on Georgia by aircraft and missiles, respect Georgia’s territorial integrity, and withdraw its ground combat forces from Georgian soil.” Former U.N. Secretary of State Richard Holbrooke gets it too: “They have two goals. To do a creeping annexation of South Ossetia and Abkhazia and, secondly, to overthrow Saakashvili, who is a tremendous thorn in their side.” Even Barack Obama gets it: “As I stated in April this year, I am committed to upholding the sovereignty and territorial integrity of Georgia. This commitment has long been a fundamental building block of U.S. policy, and it will not change under the Obama administration. I also affirm Georgia’s right to pursue NATO membership. This aspiration in no way threatens the legitimate defense interests of Georgia’s neighbors.” Now it’s time for President Bush to be heard (he recently snubbed Putin by refusing to meet with him in Beijing at the Olympiad, a powwow Putin had bragged would occur).
Russia opposes even economic sanctions against Iran, demanding negotiation. But when Georgia is at issue, Russia is entitled to immediate resort to military action. This is neo-Soviet hypocrisy in its full horror.
It. Must. Be. Stopped.
As Poland did in World War II, as Czechoslovakia did during the Cold War, the valiant people of Georgia are painting an indelible image in blood of the monstrous KGB regime that wields power in Moscow. Now, at last, that monster is laid utterly bare before the eyes of the world. The warning call has been sounded for many years now, but so many have paid it no heed.
We. Must. Act. Now.
Watch the President of Georgia discussing the Russian attack here on CNN.
Writing in the Moscow Times Russia scholar Richard Pipes exposes the fraud that was Alexander Solzhenitsyn:
Alexander Solzhenitsyn, viewed as a political figure, was very much in the Russian conservative tradition — a modern version of Dostoevsky. Like the great 19th-century writer, Solzhenitsyn despised socialism and yet had no use for Western culture with its stress on secularism, freedom and legality.
The Moscow Times reports that the more things change in Russia, the more they stay the same. The nation still labors under the same appalling class inequities that provoked the Bolshevik revolution and persisted in Communist times:
Nikolai Nikitin by all appearances is Russia’s Average Joe. The 82-year-old retiree with blinking blue eyes supplements his monthly pension of 4,000 rubles ($170) with what grows in the garden in front of his small wooden house. His nephew Mikhail, 47, brings home another 15,000 rubles ($635) a month from his job as a security guard. Together they barely scrape a living. Nikitin may not be so average in having surpassed the country’s male life expectancy of 59 by 23 years. But in his neighborhood, he stands out for his poverty. Nikitin is encircled by wealth.
As if the world needed any more reasons to stay as far away from Russia as humanly possible, the Teleraph reports that sexual harassment is now perfectly legal in Russia. In fact, the judges are encouraging it!
The unnamed executive, a 22-year-old from St Petersburg, had been hoping to become only the third woman in Russia’s history to bring a successful sexual harassment action against a male employer.
She alleged she had been locked out of her office after she refused to have intimate relations with her 47-year-old boss.
“He always demanded that female workers signalled to him with their eyes that they desperately wanted to be laid on the boardroom table as soon as he gave the word,” she earlier told the court. “I didn’t realise at first that he wasn’t speaking metaphorically.”
The judge said he threw out the case not through lack of evidence but because the employer had acted gallantly rather than criminally.
“If we had no sexual harassment we would have no children,” the judge ruled.
Since Soviet times, sexual harassment in Russia has become an accepted part of life in the office, work place and university lecture room.
According to a recent survey, 100 per cent of female professionals said they had been subjected to sexual harassment by their bosses, 32 per cent said they had had intercourse with them at least once and another seven per cent claimed to have been raped.
Eighty per cent of those who participated in the survey said they did not believe it possible to win promotion without engaging in sexual relations with their male superiors.
Women also report that it is common to be browbeaten into sex during job interviews, while female students regularly complain that university professors trade high marks for sexual favours.
Only two women have won sexual harassment cases since the collapse of the Soviet Union, one in 1993 and the other in 1997.
Human rights activists say that Russian women remain second-class citizens and are subjected to some of the highest levels of domestic abuse in the world.
Last week, at a meeting in Nizhny Novgorod, Prime Minister [Vladimir] Putin came down hard on a company which was damaging Russia’s economy with its work.
It turned out this company was by no means Baikalfinansgrup, which bought Yuganskneftegaz at a non-competitive auction on credit provided by the government. And it wasn’t the Gunvor group, which belongs to a friend of premier Putin and receives 70 billion dollars annual income from the export of Russian oil. And not RosUkrEnergo, whose right to deliver gas to the Ukraine using non-transparent arrangements is whole-heartedly defended by Russian bureaucrats at the highest level.
It turned out to be Mechel, condemned for selling coal abroad at prices two times lower than domestic ones. The company’s owner, Igor Zyuzin, did not appear at at the meeting, citing illness. “Of course, illness is illness,” premier [Putin] said, then recommending a speedy recovery for Mechel’s owner. “Otherwise we’ll have to send him a doctor to clear out all these problems.”
Putin’s promise to send Zyuzin a doctor cost Mr. Zyuzin 5 billion dollars — it was exactly this amount by which Mechel’s market capitalization collapsed that evening on the New York exchange.
The reason why Mechel in particular dissatisfied the premier was such: The largest Russian metallurgical giants, including the Novolipetsky [NLMK] and Magnitogorsky metallurgical complexes, buy up coal on the side, and as a consequence, are interested in long-term contracts for coal delivery during times of sharp price increases.
Mechel, which supplies them with coal, is a coal extracting company, and is accordingly interested in spot contracts for coal delivery, which allow it to maximize sales profit; And, should the opportunity arise, to use the deficit of coal as a lever to gain control over small factories (Gubakha, for instance).
It is clear that giants like NLMK and Magnitka are much closer to the Kremlin, and especially to Vice-Premier Sechin, who now oversees industry. It was precisely Sechin, who, with active participation of the metallurgical giants, prepared the report that has raised so much attention.
It sticks out like a sore thumb that this is already Premier Putin’s second attempt at direct interference in the economy. A week ago, high prices for jet fuel elicited his discontent. If earlier, during his presidency, President Putin underscored in every way that “the Yukos affair” was an exception, then now, it seems Premier Putin is making it clear to everyone that he is intent on directing the economy by hand.
Mechel, which was worth around 15 billion dollars just last week, recently laid out around 2.5 billion dollars for a controlling stake in two large coal companies –Yakutugol and Elgaugol –and in doing so, beat out the state-run ALROSA. Yakutugol has been online for a long while. Elgaugol is simply a section of taiga, and several billon dollars are needed to develop it.
It is obvious that in the near term, it will be hard for a company that paid money for non-operational assets in an open auction to raise the means to develop them. If Mechel goes bankrupt, and its assets are sold for peanuts, Mechel’s shareholders (I’ll remind you that the company had its IPO and lists its shares on the New York Stock Exchange), may well file against Premier Putin in the New York City court.
And if the Yukos shareholders, in filing their corresponding lawsuit, expect to prove that precisely Vladimir Putin or Igor Sechin are guilty for their misfortunes, then everything is available right here. It is hard to imagine George Bush, threatening to “send a doctor” to Bill Gates. One doesn’t speak to businessmen this way in the free world. Crime bosses speak this way to an out of line merchant. Usually, proof of these threats is obtained in a strategic way, wrapping oneself in microphones. Here the threats sounded right on the television.
One question –how much will this affair cost Mechel? Although in my opinion, something else is far more interesting –how much will it cost the Magnitka and Lipetsky [metallurgical plants]. What has happened comes out as the classic illustration of the proverb: don’t call a wolf to help you with the dogs. The metallurgical giants turned to Vice-Premier Sechin, to help him fight with inflation by forcing Mechel into long-term contracts. The general fall of the market has already cost Russia’s steel sector far more than the losses from spot contracts, by which Zyuzin sold coal. After all, zealous bureaucrats will now be checking everyone, not just Mechel. It is always this way with chekists and bandits: if you ask them for a favor, it’s uncertain if they will accommodate it or not. But you’re still certain to owe them.
But the most interesting part –how much will this affair cost Premier Putin? It isn’t a question of whether business will start to speak up in Mechel’s defense –no one has any illusions here. Business will be tearing chunks out of Mechel, and its mouth will be busy. But then Mechel will likely run for protection to President Medvedev, and there aren’t any reasons why President Medvedev wouldn’t provide it with protection. If nothing happens with Mechel, and prices for airline tickets don’t fall, this will mean that Premier Putin can’t regulate the prices of either jet fuel, or coking coal.
And this is very bad, when the premier sends a doctor every week, and the doctor just doesn’t arrive. This way one can quickly tumble down to the level of Premier [Mikhail] Fradkov, who every week would loudly censure [German] Gref, or [Alexei] Kudrin. But for some reason, he could never do anything to them.