Conflict of Interest at the Moscow Times
We’re growing awfully tired — sickened, actually — of opening our virtual copy of the Moscow Times and finding an op-ed piece pontificating about the rosy prospects of the Russian economy written by a Russian stock broker looking to generate business for his firm without being required to declare his conflict of interest so that lay readers are not misled. We count ourselves as among the MT’s greatest fans, but if the paper cannot be a beacon of the standards of Western journalism in the benighted neo-Soviet dictatorship of Vladimir Putin’s Russia, it might as well not exist now that it has largely abandoned the tough pro-democracy editorial line that used to be its hallmark.
Take for instance the piece entitled “Why Russia Should Recover Faster” which appeared on March 19th, penned by Yevgeny Gavrilenkov, the managing director and chief economist at Troika Dialog — a Russian brokerage house. Not only don’t readers get explicitly told about Gavrilenkov’s conflict of interest, they also don’t know that it’s virtually impossible to sue or otherwise penalize a Russian broker for violating the standards of care that would get you sent to prison in a civilized Russian country. But most of all, they don’t learn that Gavrilenkov’s firm has a long-time financial relationship with the MT and its publisher. In any civilized country, all this would disqualify the writer from publishing in this forum. But not, of course, in Russia, where it’s simply par for the indescribably corrupt course.
Echoing the Kremlin’s ridiculous drumbeat about Russia being merrely part of a “global” economic problem caused by the evil empire of the United States, Gavrilenkov states:
Across countries, however, the situation may differ. Russia is among those countries that can overcome the current problems much faster. First of all, Russia is mostly a pipeline exporter, and the elasticity of pipeline exports is not as high as that of, say, automobiles. That said, on the exports side, Russia was mainly hit by falling prices and only to a lesser extent by decreased volumes. Adjusting the exchange rate, which has largely already occurred, should do much to stabilize the balance of payments and money markets. Hence, I believe that Russia’s recession is not only externally influenced, but largely a homegrown phenomenon originating from the slow reaction of the authorities.
Is it just a coincidence, we’d like to ask Mr. Gavrilenkov, that this view happens to coincide nicely with your own perrsonal business interests, convincing folks to invest money in the Russian stock market? Would you really admit it, we’d love to ask, if the opposite were true?
We doubt it — to put it mildly.
But most of all, we’d love to ask Mr. Gavrilenkov: So what?! Let’s say you’re right and the Russian ecomony does stage some sort of recovery? Will that mean a proud KGB spy no longer presides over the country, crushing dissent and civil society more and more every day? Will it mean the danger of the Kremlin seizing foreign investments or screwing it all up all over again is less? Did you, sir, tell your hapless investors about the possibly that Russia’s stock market, currency and foreign reserves would collapse this last year?
The answer to all these questions is quite simple: Of course not.
He does have to admit that Russia isn’t perfect, of course. He states: “Russia is the only country among the Group of 20 with double-digit inflation, and this remains one of the country’s most serious problems.” But then look how he tries to spin it:
Russia’s key dilemma is how to contain inflation while allowing the Central Bank to cut its benchmark interest rates. Meanwhile, in an environment of soaring Central Bank lending in recent months, the relatively cheap and abundant supply of rubles was converted into foreign cash, thereby shrinking the money supply. This stands in contrast to what occurred in other countries, where many banks loaded up on toxic assets. This was never a problem in Russia. Given that Russia’s financial system is not as deep as those in other countries — the total ruble money supply fell to around $330 billion as of Feb. 1 — Russia’s version of the balance sheet recession should last for a much shorter period of time.
This is some sick, sick stuff. Is he actually attempting to argue that it’s good for Russia tha tit doesn’t have a highly developed financial system? Is he really suggesting that the furious spending of precious foreign currency reserves to artifically inflate the value of the ruble is also useful to the health of Russia’s economy? If so, it is a truly maniacal diatribe.
And then to finish it off, a nice shamless whopper. Russia did, in fact, “load up on toxic assets” just like every other banking system looking to make easy money, and that action was a major contributing factor in Russia’s financial downfall. That downfall, this lunatic doesn’t care to tell you, was much much worse than that experienced by any other country, including the virtual annihilation of Russia’s stock market.
But let’s be fair. No reasonable person could expect a Russian stock broker to tell readers the truth about the Russian economy. To do so would be to undermine his own business, to take bread out of his own mouth. One can’t expect those kind of ethics from anyone operating in the Russian financial markets. The fault, instead, lies with the newspaper that published this dreck without any warning to its readers about what they were about to behold, and that newspaper in this case is the Moscow Times.
Shame on you, MT. We are disappointed.