The Great Kremlin Stock Market Coverup

The Kremlin is attempting to hide the stock market crash from the people of Russia, exactly the way the USSR would have done.  The Moscow Times reports:

As a wave of grim news swept in from global markets Monday, the MICEX halted trading a record three times, while the RTS shut down twice. The day still ended in a bloodbath, with both indexes plummeting about 19 percent.

But you wouldn’t know that from watching the evening news.

Instead of reports about the markets’ losses, the three main television channels — state-controlled Channel One, Rossia and NTV — showed billionaire Mikhail Fridman telling President Dmitry Medvedev that the global financial meltdown offered new opportunities for Russian companies abroad. “I am convinced that the Russian financial system is protected from such a fundamental shock to a greater degree than many other countries,” Fridman told Medvedev at the Gorky presidential residence outside Moscow.

When faced with unpleasant news, the government has often resorted to a strategy that can be summed up as: “If we don’t report it, it didn’t happen.” The tactic led to delays in news about the Beslan attack in 2004, the Kursk submarine sinking in 2000, and even Leonid Brezhnev’s death in 1982. This “silent treatment” now appears to be a government strategy for dealing with the fact that the global financial crisis has reached Russia.

The main channels have either downgraded or ignored altogether Russia’s financial turmoil since it began in mid-September, according to media monitoring companies and research by The Moscow Times. On Monday, for instance, none mentioned the meltdown in Russia or any possible repercussions from the crisis. Only the smaller Ren-TV and Zvezda channels mentioned the stock plunge, according to Medialogia, a private company that tracks the media. Channel One and NTV did mention in their Wednesday evening newscasts that trade on Russian exchanges had been suspended after indexes plunged by 10 percent to 15 percent.

The Kremlin recently instructed both state and privately owned television channels to avoid using words like “financial crisis” or “collapse” in describing the turmoil in Russia, said Vladimir Varfolomeyev, first deputy editor at Ekho Moskvy radio. “Specifically, the blacklist includes the words ‘collapse’ and ‘crisis.’ It recommends that ‘fall’ be replaced with the less extreme ‘decrease,'” Varfolomeyev said in comments posted on his LiveJournal blog late last week. He said the instruction has been in force since early last week. Reached by telephone, Varfolomeyev refused to identify his sources.

Anton Nosik, a pioneer of the Russian Internet, said on his LiveJournal blog that the VGTRK television company, which runs Rossia, banned the broadcast of a recent speech by Finance Minister Alexei Kudrin because of its “excessive frankness.” Kudrin, speaking at a financial conference last Wednesday, drew a parallel between Russia’s fortunes and the Biblical story of Joseph and the Pharaoh’s dream of seven fat and seven skinny cows. Kudrin said that just as Joseph saw seven years of plenty followed by seven years of famine, Russia’s stabilization fund would see an end to the boom years and the start of leaner times. Channel One and Rossia spokeswomen denied Wednesday that the channels had received instructions and said there were no limits to what they could report. NTV declined immediate comment. A Kremlin spokesman, speaking on condition of anonymity, said he was unaware of any instructions that might have been imposed on television. He acknowledged, however, that the television coverage might be out of sync with reality. “So far, nobody is looking at this like a full-blown collapse, which is what is taking place indeed,” he said.

While television channels are ignoring or downgrading news about the crisis in Russia, they are not mincing words about the turmoil in the United States. Medvedev and Prime Minister Vladimir Putin have repeatedly assailed the United States for causing the global financial meltdown, and Putin, in his most recent comments on the topic, accused the United States last week of “irresponsibility” and an “inability to make appropriate decisions.” Speaking in Evian, France, on Wednesday, Medvedev blamed the crisis on “the economic egoism of a number of countries.”

State-controlled media are not alone in glossing over the Russian crisis. A reporter with RBC Information Systems, a holding that includes a television channel, a newspaper and a news wire, said management instructed reporters in mid-September to avoid citing analysis that might affect the markets negatively. “We were told that this is not a game” because the entire company and reporters’ salaries depended on a healthy market, the reporter said. “Nobody interpreted this as censorship,” he added.

Yury Rovensky, general director of RBC, said the company had received no orders to downgrade the financial situation in Russia and said reporters were responsible for balanced coverage of the market. “Nobody issued directives to call black gray or white,” he said in e-mailed comments. “But the demand for objective and measured coverage remains despite a desire to give in to panic.”

Other businesses are also pleading for a more positive spin. In an open letter released Wednesday, Sergei Polonsky, billionaire owner of Mirax Group and first vice president of the Builders Association of Russia, asked journalists to create “a positive picture” of the struggling construction market, saying people’s livelihoods and well-being were at stake.

Sidelining news about the crisis appears to be paying off, at least for now. More Russians now believe that the economic situation in Russia is satisfactory than in July, according to the latest survey by the Public Opinion Foundation, a state-connected pollster. Fifty-seven percent of respondents polled on Sept. 27 and 28 thought that the economic situation in Russia was satisfactory, up from 53 percent in July. Roughly 20 percent said the global liquidity crunch was a boon for Russia, with respondents explaining “it gives Russia an opportunity to develop independently” and “when America is worse off, Russians are better off.” A quarter of the respondents had not heard about the global crisis at all.

Figures released by the State Statistics Service this week indicate that more than 33 percent of Russians surveyed favor the changes that have taken place in the country this year, up from 30 percent in the same period last year. Twenty-seven percent expect positive economic developments, up from 25 percent last year. Vladimir Frolov, president of LEFF Group, a Kremlin-connected government relations and PR company, said he did not know whether the government had intervened in television coverage but that any instructions would serve “the public good.” “The last thing that we need is what the English call a run on the banks,” he said. Mikhail Maslov, of Maslov PR, which works with the Kremlin, agreed that there was no need to talk up the crisis. “A certain calmness wouldn’t hurt our investors,” he said. He declined to discuss the nature of his work for the Kremlin. He said those who were interested in learning more about the crisis had resources like newspapers and the Internet at their disposal. “He who has ears, let him hear,” he added.

A Western PR specialist working for the Kremlin said the Russian government was not alone in its fight to deal with crisis fallout. “In a way, that’s something that a lot of governments are struggling with,” he said on customary condition of anonymity. Some analysts said, however, that national television was doing a disservice to Russians by keeping them in the dark. When average Russians start to feel the squeeze in the future, it will be an unpleasant surprise for them, said Ksenia Polyak, a Rostov-on-Don-based consumer goods and real estate analyst at Univer investment group.

“Nobody has a clue about the crisis and what it will mean for them,” she said.

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