Friday, December 14, 2007

A brave Kremlinologist. Too bad for him.

Your typical Kremlinologist lives in the surreal world of opinion, generalized claims, and qualitative (rather than quantitative) judgments. Why? Because it is an absolute defense against claims of incompetence. If you challenge a general opinion or an unsubstantiated claim, even if you have all the facts in your possession, you are merely demonstrating that given the facts another interpretation is possible -- you are in effect pitting another opinion against that of a Kremlinologist. That quickly degenerates into a mud-slinging contest of claims and counterclaims, in which Kremlinologists excel, and not a scientific debate grounded in facts and their interpretation, where your typical Kremlinologist would not excel. Such tactics are really nothing but moral cowardice, a ploy to allow a Kremlinologist to slither away from the onslaught with credibility undamaged, in order to continue to spew the same rubbish on a different date in a different venue. Incidentally, in this way Kremlinologists and Creationists are quite similar -- the latter also like to leave such escape routes when attacked by the scientific community.

With this skeptical mindset I began reading the latest work product of Michael McFaul, a rather eminent Kremlinologist, and Kathryn Stoner-Weiss, whose name doesn't ring a bell, and whom I am too lazy to research, entitled "The myth of Putin's success". But what a surprise awaited me when I got to this passage:

The murder rate has increased under Putin. Health spending averaged only 6 percent of GDP from 2000 to 2005, compared with 6.4 percent from 1996 to 1999. Russia's population has been shrinking since 1990, thanks to decreasing fertility and increasing mortality rates, but the decline has worsened since 1998. At the end of the 1990s, annual alcohol consumption per adult was 10.7 liters; by 2004, this figure had increased to 14.5 liters. In short, the data simply do not support the popular notion that Putin's more autocratic state is also a more capable or effective state in addressing Russia's significant public policy challenges.

I was so stunned by this discovery that I dropped my vodka bottle and startled my pet bear. Do I see statistics? Do I see quantitative judgments? Do I see verifiable facts?!! What courage! A Kremlinologist willing to stick his neck out, provide some facts, and be judged on that? I cried. With tears flowing down my cheeks, I proceeded to verify these facts.

And what did I discover? Well, let's proceed to list these in the order in which they appeared:

#1 "The murder rate has increased under Putin."

Murder rate per 100,000 population, 2007 rate annualized based on Jan-Sept

Source: Rosstat

Conclusion: Our brave Kremlinologists lied.

#2 "Health spending averaged only 6 percent of GDP from 2000 to 2005, compared with 6.4 percent from 1996 to 1999."

As usual, no source given. Let's verify from sources that we have:

Source: Euromonitor quoting WHO

Average for 1996-1999: 5.8%
Average for 2000-2005: 5.7%

A more correct conclusion would be that health expenditures as percent of GDP remained on virtually the same level throughout the period, especially if we factor out the unexplained spike in 1998. But we cannot say that the authors are wrong in their implication that such expenditures were decreasing during Putin's term, even if the source of their numbers is unknown. But we'll return to that later.

Meanwhile, some fishy choices need to be explained. Why were the years 1992-1995 excluded from the calculation? Could it be in order to make the pre-Putin average appear bigger compared to the Putin average? Such shameless manipulation...

Now, what do these numbers tell us? That Putin is evil? Well, I'm sure the authors were trying to tell that. But they forgot some important considerations: 1) Why would health expenditures increase if the population is decreasing? 2) Why use indirect statistics relative to GDP, rather than absolute numbers?

Given the fact that Russia's population had decreased during the given period, while GDP increased, we can safely say that in absolute numbers health expenditures per capita have grown significantly. Ah, that evil Putin!

Conclusion: Can't say that our brave Kremlinologists lied, but they did engage is some unseemly manipulations with numbers.

#3 "Russia's population has been shrinking since 1990, thanks to decreasing fertility and increasing mortality rates, but the decline has worsened since 1998."

Natural population growth rate, per 1000 population (only death and births counted, migration excluded), 2007 rate annualized based on Jan-Sept

Source: Rosstat

Conclusion: Our brave Kremlinologists lied.

#4 "At the end of the 1990s, annual alcohol consumption per adult was 10.7 liters; by 2004, this figure had increased to 14.5 liters. "

Our brave Kremlinologists are slightly confused here. The alleged alcohol consumption figures are usually alcohol sales figures. If we assume that alcohol sales figures correspond to consumption, we'll have to admit that Russia is one of the more sober countries on this planet, which does not correspond to empirical observations. In reality, these figures indicate that Russians started buying more legal alcohol. They say nothing about purchases and consumption of illegal alcohol, such as counterfeit products and moonshine, or of alcohol products not intended for consumption. Therefore, no conclusions can be drawn based on this evidence alone.

However, alcohol consumption can be measured indirectly through mortality statistics.

Deaths due to accidental alcohol poisoning, per 100,000 population, 2007 rate annualized based on Jan-Sept

Source: Rosstat

Conclusion: Our brave Kremlinologists lied.

And so it goes. You find some brave Kremlinologists, and even they are liars. What a disappointment.

Tuesday, June 26, 2007

Writer's Block and New Format

It has become really difficult to review media analysis about Russia due to my preference for factual statements that I can verify using commonly available sources. Unfortunately, most of the writing on Russia consists of unsubstantiated allegations and accusations, which, while being easy to refute from the point of view of pure logic, cannot provide much material for a blog entry. For example, if someone claims that Putin personally put polonium in Litvinenko's tea, or similar drivel, how am I going to respond? "No, he didn't?" "You forgot to provide any credible evidence?" None of that is impressive, even if such responses are logically sound.

So, if the analysis of Russia is of such poor quality, why do I have to maintain high standards in my blog? Sometimes I also want to have fun and simply trade barbs with various barely competent individuals who feel compelled to write something about Russia. For today, I will comment on a marvelous piece -- an editorial in Investor's Business Daily, courtesy of some unnamed editor. Here's the full text, and my comments:

Diplomacy: President Bush invited Russia's leader to Kennebunkport this week, but he's hardly our good amigo.
Is Bush Russia's good amigo?

His latest provocations should be enough for Bush to cancel the trip and re-evaluate this friendship.
There was a friendship to begin with? And is friendship between leaders of sovereign states a prerequisite for talking to one another?

On July 1, President Bush will honor Russian President Vladimir Putin with access few other world leaders experience. He's heading to the Bush family compound in Kennebunkport to dine on lobster and view the beautiful Maine scenery, as only a few distinguished world leaders, like Poland's Lech Walesa and Jordan's King Hussein, have done.
I'm sure Putin has seen better scenery than Maine's, and has eaten better food than lobster. If that was the extent of what the author thinks Bush's friendship toward Putin is, then I must point out that it's not terribly impressive so far.

Sure there are differences, the media kits say, but the rationale is that the two leaders, away from their aides and public pressure, can finally get together like old friends and hash out differences.
No harm in trying, is there?

But in Putin's case, there's some doubt about that going to plan.
As opposed to Bush's case?

Instead of presenting at least a temporary spirit of friendship...
Putin's job description is Russia's president, not America's friend. Given the author's unique understanding of what "friendship" means (as we'll see later), it is an impossible task to defend Russia's legitimate interests and be America's friend at the same time.

...Putin in recent days has issued increasingly shrill, belligerent public statements...
Hmm? I've heard those statements, and they seemed to be quite calm and composed, as it has always been with Putin. This editorial, on the other hand, is shrill and belligerent. Now, let's not project our faults on others, shall we?

...and his recall of history is a surreal revisionism harkening back to the days of Soviet propaganda.
Revisionism implies revising an established opinion. If Putin, as the author claims, goes back to the days of Soviet propaganda, then it hardly qualifies as "revisionism", as nothing is being revised. Logical, no?

Let us also note that the author limited himself to affixing labels, but hasn't actually managed to claim that what Putin said was false. I wonder why?

Over the weekend, Putin derided the U.S. memorial to the victims of communism and declared that no one should make Russia feel guilty for the epic crimes of Stalinism.
So that is Putin's unfriendly gesture? The little bastard does not want to feel guilty about the crimes of "Stalinism", and doesn't want his compatriots to feel guilty either? So that is what it takes to buy America's friendship these days? To feel guilty about something you didn't actually do or had any control over? Quite impressive.

And of course, while Putin's refusal to feel guilty about what some ancient government did to its own people (which I naively thought was an internal Russian matter) is clearly an affront to the US, the memorial to the victims of communism whose purpose is to instill that guilt, going so far as to falsify some (if not most) aspects of Soviet history, is obviously a friendly gesture.

In fact, the West had far more to answer for, he said.
Less paranoia, please. Putin merely implied that the West wasn't all white and fluffy either; he did not call the West to account.

"We have not used nuclear weapons against a civilian population," Putin said. "We have not sprayed thousands of kilometers with chemicals, (or) dropped on a
small country seven times more bombs than in all the Great Patriotic (War)."
Which of these statements is not true?

Questionable on its own merits, given the human losses of Stalinism (60 million murdered)...
Hmm? The population of the USSR in 1926 was 147 mln. So in the next 30 years the population of that size suffered losses of 60 mln due to "Stalinism" and 27 mln due to WW2 (not to mention severe reduction in birth rate due to urbanization, famine, and war), and in 1959 still amounted to 209 mln? Something doesn't compute, my dear unnamed editor. How's your 'rithmetic?

In reality, per declassified archival materials (both NKVD stats and demographic data), the population losses due to Stalin era repressions amounted to at most 3 million, but more likely around 2 million (that's before discounting the excess mortality among the prisoners caused by the German invasion, rather than Soviet policies). Which does not make this any less reprehensible, but still -- the truth is the truth. Now, every time I point this out, someone invariably asks if it really matters how many people were killed during Stalin's rule, they were all innocent victims after all. And now we know why it matters -- the reason for the falsified figure of Stalin era victims (exaggerated by an unbelievable factor of 20 or 30!) is to make sure that whatever the crimes "the West" has ever committed, the USSR would look worse (at least to those naive enough to buy the propaganda, or those dishonest enough to pretend to believe it). Hence the skillful use of this figure by our nameless editor from the IBD. well as the Soviet Union's role in prolonging World War II...
How, pray tell, did the Soviet Union prolong the war? Didn't fight hard enough? The correspondence between Stalin, Churchill, and Roosevelt during the war indicates otherwise, and in fact places the blame on the other side.

...and involvement in the Cold War's conflicts, like Vietnam...
But isn't it also true that while being involved in "in the Cold War's conflicts, like Vietnam", the USSR did NOT use nuclear weapons against civilian population, did NOT spray thousands of kilometers with chemicals, and did NOT drop seven times more bombs than during the GPW on any small country?

...Putin's claims are even more disturbing because they come just ahead of the red-carpet welcome he's getting here.
The red-carpet welcome and the 21 gun salute are a standard courtesy for any visiting head of state, regardless of what and how is being discussed. Chill out, IBD's nameless editor.

What kind of a leader says that ahead of a major summit?
What kind of a leader opens a memorial falsifying the history of a different country ahead of a major summit with that country's head of state?

While Putin's words give us pause, his actions are worse. He has threatened to fire missiles at Europe if it deploys a U.S.-led missile defense.
What Russia actually said is that it will have no choice but to target the new bases being set up close to Russia's borders. We still live in the world of MAD, after all. How that translates into a threat to fire those missiles remains a mystery. Plus, the nameless editor promised us examples of actions, and instead once again provided an example of mere words being said. Deceived once again, aren't we?

In May, Russia boldly tested a new intercontinental missile, sending a clear message to Europe that the threat is real.
Certainly boldly testing new missiles is an affront. Everyone knows that missiles should be tested cravenly. Then it would be interpreted as a friendly gesture. Like the friendly missile tests that the US conducts.

Putin also reportedly began delivery of five MIG-31E advanced fighter jets to Syria, a terror-supporting regime.
Are there any international sanctions in place against Syria that prevent Russia from selling aircraft to it? No? Has Syria ever threatened to attack the US? No? For example, Georgia (not the state) (and no, it's not named after George W. Bush) (no, not even his father or King George, for that matter) has threatened to overrun its rebellious provinces of Abkhazia and South Ossetia, despite the fact that Russian peacekeepers are stationed there, hence directly threatening the lives of Russian citizens. In a display of friendliness, the US and other NATO countries have supplied most of Georgia's current arsenal -- right after Georgia's unhinged defense minister made those threats. Maybe Russia should learn from such friendliness and start supplying weapons to Al Qaeda?

His words also come as Venezuela's unhinged dictator, Hugo Chavez, declared over the weekend that he still hopes to buy advanced Russian submarines and use them against the U.S., explicitly citing Puerto Rico.

Well, if the US doesn't attack Venezuela, then the dastardly dictator (despite being popularly elected) Hugo Chavez will not have to attack Puerto Rico, will he now? And if the US is planning to attack Venezuela after all, is that Russia's problem?

Was this a trial balloon from Putin to remind the U.S. that Russia's malign reach extends to our hemisphere?
The author seems confused. Hugo Chavez said something, but it's Putin's trial balloon? Are they the same person in this confused author's mind?

On top of this, Putin has brazenly rescinded democratic rights inside Russia...
I'm sorry, which democratic rights have been rescinded inside Russia? I just asked several Russian acquaintances, and they couldn't recall any of their democratic rights that they found lacking all of a sudden during the Putin presidency. Maybe the author can help locating the missing rights? Unless, that is, he wasn't being entirely truthful...

...and is stepping up hostile spying against the West.
While the West is stepping up friendly spying?

He seems to be angling for a third term in office and may well succeed.
That's despite the fact that Putin has said about 20 times already that he will not be running for the third term. My dear IBD editor, are you by any chance... slow?

Another term and he'll be able to make huge trouble for us...
Like what? Sell more fighters to some other developing country? Or recall the fate of the Native Americans? Or, God forbid, refuse to feel guilty once again about something he didn't do?

...especially if Americans mistakenly elect a weak president in 2008.
Instead of all this drivel about Russia, the author should've started with this main idea of the entire rant. "The enemies are lurking all around us, they hate our freedom, so we must elect a Repub... erm, a strong leader". If you're campaigning for Republicans, don't drag Russia into internal American political squabbles. It hurts the country's foreign policy.

Putin, like a wild bear, seems to have lost his fear of the West...
So the author thinks the West should be feared? That's quite an advertisement of the West's friendship.

...and views its friendship as cheap.
The bear must jump through more hoops before he earns that friendship? Then not only will he be invited to Kennebunkport, but also (what an honor!) will be allowed to eat off the master's plate?

Despite concessions and conciliatory language from the West, his hostility has only grown.
Concessions? Name one (sorry, "Maine lobster" will not be accepted as an answer). Conciliatory language? As exemplified by this editorial?

Russia seems to have no intention of meeting the West halfway as a friend. It might be wise to rescind the generous U.S. invitation, and let Putin visit his friends in Venezuela and Cuba instead.
Now the author just sounds jealous. "Boohoo, go play with your other friends if you like them so much!" Fortunately, global politics are not a kindergarten playground.

The choice of Russia's friends is also odd. At first Russia is accused of selling weapons to Venezuela and Syria, but the friends Russia should go and play with are Venezuela and Cuba? Why did Cuba get dragged into this without an introduction about its misdeeds, and Syria got left out? And does the unnamed author actually realize that Castro doesn't like Putin, ever since Putin shut down the Russian military facility in Lourdes? Now that was a concession and meeting each other halfway. Russia shuts down a military base on the US border, and Bush... invites Putin to dine on Maine lobster. And that ingrate Putin doesn't even appreciate Bush's unprecedented generosity? The US builds military bases on Russia's borders, and the wild bear is going to target these democratic outposts with its authoritarian missiles? The US, in a display of friendliness, builds a whole memorial dedicated to Russia's non-existent crimes, and these people dare to say they're not going to feel guilty? Don't they appreciate the effort that the US went to for their sake? Such ingratitude, such rejection of friendship... I'm sorry, I can't write anymore, I can't see the monitor because my eyes are tearing up...

Oh, wait, one other thing. I'm sure there are plenty of idiots who will read this blog and claim that I think the USSR was better than the US, even though I haven't actually said this anywhere. In reality, I think it's inevitable that during a conflict such as the Cold War both parties commit crimes and neither comes out smelling like roses. But this blog entry is not about that. It is about... friendship. Friendship is when you say "OK, we're both good guys, just slightly misguided, but now let's be friends like the good guys we are". Or you can say, "OK, we were both pretty bad guys and many people suffered because of us, but now let's pretend like it never happened and just move forward as friends". But when you say "I'm the good guy, and you're the bad guy, but being the friendly person that I am, I'll suffer your miserable existence as long as you feel guilty about it... Wait, what? You don't think you're the bad guy? You dare to reject my friendship?!! That's it, I'm not inviting you to my house to play anymore!" -- is that friendship? Or is it a temper tantrum of a kindergartener?

Saturday, March 24, 2007

Bashing the Economist is like shooting fish in a barrel

Kirill Pankratov's overview of The Economist's Russia coverage:

I only bashed that publication once in this blog where, besides specific comments, I also made some sweeping generalizations about its quality. Kirill's brilliant expose demonstrates that my generalizations were on target.

Thursday, March 15, 2007

On the Follies of Extrapolation from a Small Sample

Luke Harding from the Guardian decided to demonstrate his concern for Russia's poor pensioners today. It turns out that while Russia now has 53 billionaires and is "£100bn in the black", "for Russia's poor it is just getting worse" and "petro-dollars fail to trickle down to pensioners, jobless and government workers". Normally, I am all for such concern, but in Luke Harding's case it reads more like anti-Putin propaganda (people starve while the dastardly Kremlin hoards cash and doesn't even want to share it!) and is extremely incompetent from the economic and journalistic point of view.

In the past, one used to read such exposes written by western journalists out of their Moscow hotel rooms. Nowadays, Luke Harding was forced to not only get out of his hotel, but even leave town and head to Orel (not the most successful of Russia's region, with Gross Regional Product per capita giving it only the 47th place among Russia's regions in 2004). Failing to find the required amount of misery in Orel, our intrepid explorer proceeded to the "village of Lavrov" in the Orel oblast'. Now, don't bother looking for that village on the map, because it doesn't exist. The real name of the village is Lavrovo. "Lavrov" would be a name for a town or the current foreign minister. Surely someone who knows enough Russian to get to Orel would know that a village name ending in "-ov" is highly unlikely?

In that village of Lavrovo Luke met one "Sasha Ivanovich" (the author didn't confuse last name and patronymic by any chance, and why is he calling a 56 year old "Sasha"? -- this seems more like a fake Russian name that certain writers without any knowledge of Russian or how Russian names are formed make up for their debut spy novels), whose primary concerns are that "Everything has got more expensive. Bread has gone up. Cigarettes have gone up. My sister pays my gas bill. I can't afford vodka. Can you give me 100 roubles?" Here something leads me to suspect that a person who's concerned about the affordability of vodka and hits up strangers for 100 rubles is actually an alcoholic. Well, I can believe that if you want to write about how Russian poor are getting poorer, you have to travel far from Moscow, skip the regional capital, find a village that's dying out because its residents are moving out to get higher wages in the cities, in that village find an alcoholic, and then you will have your article about every single one of Russia's poor, pensioners, teachers and hospital workers. In a similar vein, you can travel to the Russian tundra in order to write an article about how Russia is actually a frozen wasteland, or travel to Buryatia to expose the true Buddhist nature of Russians, despite their millennium long pretense at being Christians.

This, of course, leaves me wondering -- in three years time, how far will intrepid journalists have to travel to find how Russia's wealth doesn't trickle down? I'd recommend the Southern Federal District (which includes Chechnya) or beyond the Arctic Circle. Maybe some few remaining Chechen separatists hiding out in caves or polar bears drifting on shrinking ice sheets will not have cashed in on Russia's booming economy by then.

The assertion that Russia's economic growth fails to "trickle down" to groups such as pensioners is rendered somewhat dubious by the fact that the author did not manage to cite any relevant statistics and was forced to travel to the boondocks to find anecdotal evidence of such "trickling down failure". Let's attempt to fill in Harding's omissions with some relevant data about pensions in Russia.

Average monthly pension (nominal rub.)694.301023.501378.501637.001914.502364.002726.10
Nominal pension growth (100=previous year)147.4134.7118.8117.0123.5115.3
Consumer Price Index (100=previous year)120.2118.6115.1112.0111.7110.9109.0
Real pension growth (100=previous year)128121.4116.3104.5105.5109.6105.7*
*my estimate based on the CPI, Rosstat uses a different measure for inflation

Source: Rosstat

So that's how it is. During the period from 2000 to 2006, the average growth of nominal pensions worked out to 25.6% per year, and it not only kept up with inflation, but actually surpassed it in every single year, by 28% in 2000, by 5-6% in 2006. Speaking in real terms, the purchasing power of an average Russian pensioner in 2006 increased by approx. 80% compared to 2000 (or by over 100% compared to 1999!). Of course, these days pensions don't grow as fast as they used to when the Russian economy had just begun recovery, but they still grow, and an average pensioner can still afford more and more goods and services with every passing year. So much for "failure to trickle down"! But it is possible that life for one "Sasha Ivanovich" is getting worse, if he cannot afford vodka...

While these pensioners are clearly suffering under the brutal Putin regime, why is that dastardly regime hoarding money? In fact, as Luke Harding points out, "Russia has so much money that it doesn't know what to do with it" and "the Kremlin is now sitting on a vast mountain of cash, coyly known as the stabilisation fund. Last week it topped $103.6bn. (Others suggest Russia's total surplus is more like $300bn.)" Well, here we'll have to help Luke Harding, who apparently slept through his Economics 101. For starters, in Russia the money supply is determined by the amount of rubles. Russia doesn't have "so much money". What Russia has is foreign currency, which, for some mysterious reason, cannot be used to pay pensions. And if it is used for that, then your average pensioner will take those dollars or euros to the nearest currency exchange and trade them in for rubles. And if every pensioner starts doing that, then the ruble is going to significantly appreciate against a basket of foreign currencies, which will force the Central Bank of Russia to turn on the printing presses in order to satisfy the increased demand for its currency. If that's the case, why even bother distributing those funds? Might as well print more rubles and give them out to anyone who wants them, and skip the extra steps. Of course, the experience of the countries that had done just that (e.g. in Latin America) is not very inspiring. The other option is to let the ruble appreciate and feel the full force of the Dutch disease and deindustrialization caused by it -- after all, with a strong ruble Russian manufacturers will be unable to compete against imports and will simply shut down. Yes, these are two very attractive options. But I would recommend Luke Harding to try them in his own country first, and then dispense advice to others.

What is more disappointing is that while Luke Harding maintains that Russia hoards vast amounts of "money", he can't even figure out how much. While I'm not a journalist, I can safely say that the amount of "$100 bn (some say $300 bn)" that Harding quoted is indicative of his utter failure in his chosen profession. Why is it that I, neither a journalist nor an economist, can look up the exact amount in 3 minutes, and Harding, whose actual job it is to inform me of such matters, cannot? Well, looks like we'll have to help Luke Harding here as well. As of 9 March 2007 the foreign currency reserves of the Central Bank of the Russian Federation amounted to $317.3 billion (calculated at official CBR exchange rates on that date). That, apparently, is the "some say $300 bn" figure. As of 1 March 2007 the Stabilization Fund of the Russian Federation amounted to $103.55 billion. That is the "$100 bn" figure that was quoted first. The foreign currency reserves are the result of more foreign currency entering Russia than leaving it. This is mostly due to the current account surplus that Russia has been running for years. And no, they're not owned by the Kremlin -- the CBR is in control of them.

The Stabilization Fund is where the federal budget surplus from each year goes. No, it's not owned by the Kremlin either, it's under the control of the Finance Ministry. There is also nothing "coy" about the name -- since the biggest reason for the federal budget surplus is the rapid increase in oil prices starting in 1999, the government cannot commit these funds to expenditures. If oil prices suddenly drop by $20/barrel, the budget surplus will be wiped out and the government will have to contemplate raising taxes. Thus, the original intent of the Stabilization Fund was specifically to stabilize the budget in case of shortfalls due to unforeseen commodity price volatility. Now that the fund has become so sizeable, it is being split in two -- the first part being the fund for future generations, modeled after Norway's one. And the second fund being used to funnel the money back into the economy through various investment programs. That will do more to ensure growth in future years than misguided welfare programs, especially since standards of living are rising even without them.

The fact that Luke Harding can't tell the difference between foreign currency reserves and the Stabilization Fund suggests that he should concentrate on different topics, ones that require no hard numbers, no evidence, no knowledge of subject matter, just the author's unbridled fantasy -- for example, how Putin crushed the nascent Russian democracy or personally poisoned the "ex-KGB spy" Litvinenko with polonium-210.

Of course, to author's credit, he did not come up with the idea of giving out the "money" to the poor on his own. Oh no, he asked an expert, one Natalia Rimashevskaya. That expert does not believe that printing more rubles would cause inflation because, as it turns out, "at the moment 30% of all salaries are below the minimum needed to live." First of all, I fail to see how that factoid would prevent more rubles being thrown into the economy from causing inflation. But more importantly, I have to wonder what that "expert" had been smoking before making such claims. According to Rosstat study of Russian salaries in April 2006, bottom 30% of salaries would go to over RUR4200 monthly. (Needless to say, current nominal salaries should be about 20% higher than those figures.) If the "expert" thinks the minimum needed to live in Russia is at that level, she has some high expectations from life. In 2004 the minimum was actually RUR2376 per month, which adjusted for inflation to April 2006 would be around RUR2700-2800. More importantly, Russians with low salaries derive much of their income from other sources, such as government subsidies, since average monthly incomes (that's for the entire population, including children and pensioners, not just workers) for the bottom 30% also go up to around RUR4000 per person, higher than the subsistence minimum by a comfortable margin. Therefore, the percentage of Russians who live below the subsistence minimum, either in terms of wages only or total income, is significantly below 30%.

So what can we conclude about a journalist who quotes an "expert" who can't even get her numbers straight, while casually brushing off economists who have a different view, without even asking for their rationale? Or one who travels out to the boondocks to find an unfortunate soul to serve as an illustration to the thesis that everything is wrong with Russia, while failing to interview even a single pensioner right next door who might serve to disprove the thesis? Or what can we say about a journalist who writes about economic concepts while not even being able to distinguish foreign currency from the money supply or foreign currency reserves from the stabilization fund? Is it possible that this journalist is not only incompetent, but also has an ideological axe to grind?

Monday, March 12, 2007

The Washington Post asks the two eternal Russian questions

Russians, during their frequent bouts of self-criticism, like to point out that the two main Russian questions are "Who's to blame?" and "What's to be done?" From my observations, these questions are relevant to any society that faces a crisis, but only Russians manage to claim them as some kind of a national trait. Be it as it may, today these questions were asked by the Washington Post editor Fred Hiatt: i.e., who's to blame for losing Russia and what's to be done about it? While he did not manage to come up with any coherent answer to the first question, except general disingenuous whining about the allegedly sad state of affairs in Russia, his recommendations on what's to be done were so downright silly that I simply could not ignore them.

For starters, indeed, what a contrast: "On the one hand, you have, say, Estonia, a democracy of 1.3 million people, freely joining in 2004 an alliance of like-minded democracies. On the other hand, you have Vladimir Putin abolishing local and provincial elections, muzzling the press and imprisoning his political enemies."? Hmm, last time I checked, Estonia was an apartheid regime denying citizenship to much of its population. Indeed, the US in the first half of the 19th century was also a democracy, even if certain black "citizens" in the south of the country might've disagreed with that assessment. It's not that bad in Estonia, but a "democracy" that is not for everyone can hardly be called by that term. But, according to Fred Hiatt, things are even more bleak in Russia, where Putin, as it turns out, has abolished local and provincial elections. I'm sorry to do this, but on the issue of local elections I'll just have to go ahead and call Fred Hiatt a liar. Local elections (i.e. mayor level) were never abolished, and Hiatt knows this. On gubernatorial (so-called "provincial") elections Hiatt is also wrong, but I would blame it more on his incompetence than intent to deceive, as was the case with local elections. After all, there is a wide misconception about the process of appointing Russian governors, and an incompetent observer like Hiatt could easily fall in the trap even while trying to be honest. The reality of the situation is that direct gubernatorial elections were not "abolished", but replaced with indirect ones. Candidates for the post of governor are nominated by the local legislature (directly elected by the people) and approved by the President of the Russian Federation (also directly elected by the people). Thus, a compromise candidate can arise through a process indirectly controlled by the voters. There are pros and cons for either system, but that's outside the scope of this review. What's really interesting is that Hiatt also managed to put forward Ukraine as a shining example of democracy -- where governors were never elected in the first place. Apparently, Hiatt has no problems with France either. Hmm, how are things with gubernatorial elections in France, does anyone know? So the question of the relevance of specifics of gubernatorial elections to democracy remains unanswered.

What other sins is Putin accused of? Oh yes, the "muzzling of the press". Apparently, that's what Hiatt calls the fact that state owned media don't engage in anti-government propaganda anymore. Seriously, that's such a setback for Russia's democracy. After all, as we all know, in every real democracy it is the duty of media outlets to attack their owners 24/7. Which they all do, right? Right? No, seriously, they do it, don't they? Whoops...

The freedom of information in a given country is not so much a function of objectivity of any given media outlet as the sum total of all such outlets. It is fashionable in some countries for media outlets to claim to be "fair and balanced". But does anyone take the claim seriously? Can anyone in their right mind describe the Washington Post as fair and balanced? Unfortunately, no, the media is biased, and it is extremely naive to expect anything else from them. But the freedom of information is secured by the differences of bias, and that's where Russian media as a whole shine, despite the nauseating tendencies of some of the individual outlets. So evil Putin crushed the freedom of the press by getting the government-owned media to stop broadcasting anti-government propaganda? How did that affect anti-government media, such as Novaya Gazeta or the Kommersant? Their propaganda line has remained the same. But the picture is even more complicated by the fact that some government-owned media, such as Gazprom's Ekho Moskvy, still maintain their anti-government editorial policy? And what about statistics? Nicolai N. Petro provides some here and here. With so many independent media outlets, why aren't they muzzled? Is Putin simply incompetent, or is Hiatt prevaricating?

But the most damning indictment against "the Putin regime" is, of course, the "fact" that Putin jails his political enemies. You'd normally expect a list of such enemies to follow, but not from our ever so honest Fred Hiatt. I don't think I'll make a major discovery here when I point out that Hiatt was slightly prevaricating here as well. Not "enemies", but one enemy -- Mikhail Khodorkovsky, doing time for fraud, embezzlement, and tax evasion. This, of course, begs the question: did Khodorkovsky really commit the crimes he was accused of? If the answer is no, then Hiatt might have a point. If the answer is yes, then what is Hiatt blathering about? If he stole money and didn't pay taxes, then jail is precisely where the former "oligarch" should find himself. Does Hiatt know about the nature of charges against Khodorkovsky? Can Hiatt look someone in the eye and claim that Khodorkovsky was an honest businessman? Does his chutzpah go that far? I don't know. But one thing I do know is that the crimes of Khodorkovsky are real, and the evidence against him is real. An inquisitive reader doesn't even have to bother with reading legalese Russian of the indictment and the sentence, which are freely available on the Prosecutor General web site -- it is enough to read a very interesting explanation of the case from Peter L. Clateman. Khodorkovsky might've thought he was an enemy of Putin, but he is doing time for being a thief and a fraud. That's all there is to it.

Finally, the question of NATO. Hiatt specifically contrasts how the allegedly "democratic" Estonia (among others) is joining the alliance, while the allegedly "authoritarian" Russia is not. And the alliance, of course, turns out to be one for democratic countries, rather than a military alliance whose purpose was to engage in a war. This approach is actually quite illustrative. Considering the outright falsification with regard to Estonia's "democracy", Russia's "authoritarianism", and NATO as an alliance of democratic countries (Hiatt never bothered to count how many outright dictatorships and somewhat authoritarian countries joined NATO as it was being formed? Or is he lying?), maybe the logic here should be reversed? In Hiatt's world (and the world of other similar ideologues), it's not being democratic or not that justifies membership in western institutes. It's the membership that justifies the label. If a country is a part of the club, then Hiatt will gladly distort reality to apply the needed label of "democracy" to it. Similarly, if a country is not a part of the club, and even presumptuously behaves like it doesn't even want to beg entry, then Hiatt will distort reality to label it "authoritarian". In modern Hiatt world, the simple political terms became utterly divorced from their origins and are instead used as code words to specify belonging to selected groups. "Democracy" = "good guys" = "us". "Authoritarianism" = "bad guys" = "them". And who gives a damn about the actual intricacies of political systems and electoral processes, about availability of information to the population and their actual opinions? "We have an ideological battle to wage here, don't distract us with facts and requests for evidence. 'Cause you know, if we paid attention to stuff like that, we might never have gone into Iraq to bring freedom to its people."

So, what Hiatt's proposed solution? Why, it's to fund Russian opposition groups. Hiatt, apparently, hasn't noticed that the US government has been doing just that for years, and all that time Russians' opinion of the US has been steadily worsening. One of the chief accusations against Russian opposition figures has been the fact that they are puppets of foreign regimes. This funding has been of no benefit to the US, except bringing it accusations of neo-imperialism by buying up agents of influence in other countries. It morally destroyed much of the Russian liberal opposition, but giving credibility to the accusations that they are foreign agents -- the communists, who are widely distrusted, but are seen as honest, can make it into the Duma, while the liberals, who had much higher level of support in the past, cannot. It corrupted the nascent Russian civil society by giving an unfair competitive advantage to NGOs promoting American rather than Russian interests, and did much to discredit the whole concept. After all, NGOs receiving American money will sound exactly like Fred Hiatt does, and how will an average Russian see them after that? About the same way I see Fred Hiatt. Liars discredit every single concept they stand for, even if sometimes they tell the truth. And that's the saddest part of it -- the west and western-funded Russian propagandists turned the really positive ideas of democracy and liberalism into swear words in Russia. In reality, Russians are very much supportive of these concepts -- but the words themselves elicit a largely negative reaction due to their sad association with liars and propagandists. This has certainly stifled the public discussion on these issues and set back the development of a more just society in Russia. Thanks to all the Fred Hiatts who did their part. And now this Fred Hiatt wants it back. Great.

So, if I may answer the original question: who is to blame for losing Russia? Liars are. Fred Hiatt.

As to what should be done, it's easy: don't compare Russia with small countries begging to be accepted into NATO. Russia is certainly not opposed to the West, but only if it is treated as an equal, not a subordinate. If not, Russia will go the other way. Current global economic trends suggest that it's not going to be Russia's loss. And no, this doesn't have anything to do with "democracy" or "authoritarianism". Fred Hiatt will have to learn to deal with the fact that he and his ilk don't own the copyright to "democracy".

Thursday, January 18, 2007

Litvinenko the "Spy"

After reading for weeks about the "former FSB agent Aleksandr Litvinenko" in the Russian media, and an "ex-KGB spy Alexander Litvinenko" in the English language media, one can't help but wonder if Litvinenko was really a "spy". The FSB, the former employer of Litvinenko, is one of the descendants of the KGB. The KGB dealt with both intelligence (or spying) and counterintelligence (catching foreign spies, as well as suppressing dissidents). After the breakup of the Soviet Union, the KGB was split up into several agencies. The intelligence functions (spying) went to the SVR (External Intelligence Service), and counterintelligence, as well as fighting against organized crime, something that wasn't as necessary in the Soviet times, went to what is now known as the FSB (Federal Security Service). This former employer of Litvinenko operates inside the country and is not known to engage in what is commonly understood by the term "espionage" -- that's reserved for the SVR (GRU as well, but that has nothing to do with the former KGB). Therefore, referring to Litvinenko as an "ex-spy" basically misrepresents the work that he did in the Russian special services.

That's what I thought. However, after I cast doubt on the applicability of the term to our ex-FSB agent, a certain commenter proposed to teach me English and proceeded to rant at length, for starters pointing out that the word "spy" means "to watch secretly usually for hostile purposes, to search or look for intensively" [link and definition as provided by the commenter]. Let's forget for a moment that this would be teacher of English confused the verb "to spy" with the noun "spy". Because it gets more interesting. While admitting that the media does not claim that Litvinenko engaged in international espionage against foreign governments, the commenter decided to defend the "spy" label by pointing to examples of industrial espionage, and also claiming that since Litvinenko's work for the KGB involved spying on people, then he was definitely a "spy". And of course, since the KGB was such a secretive organization, how dare I presume to know what Litvinenko did there. Apparently, the irony of this accusation was lost on the commenter, who keeps claiming that Litvinenko was in fact a spy -- I guess the KGB must've been more secretive with me than with her.

So what does the common description of Litvinenko as an "ex-spy" imply about his line of work? That he was a foreign intelligence agent, or at least dealt with such agents, or that he simply "spied" on people? There can really be no two answers about it. The job of "spying" on people is performed by many professions, for example, by police, who gather intelligence on criminals. And even nosy people who pry into their neighbors' lives can be described to be spying. However, no one in their right mind ever refers to policemen or busybodies as "spies" without providing additional context. A description of someone simply as a spy, outside of any context, implies that the person is professionally employed as a spy, and the meaning of "spy" in this case becomes "a person employed by a government to obtain secret information or intelligence about another, usually hostile, country, esp. with reference to military or naval affairs." This is exactly what all the newspaper headlines implied about Litvinenko. This is exactly how it's been construed by the readers.

So who was Litvinenko, really? According to his own widely cited claims (usually lifted verbatim from his book "The FSB Blows up Russia"), he served in the army from 1980 to 1988, when he transferred to the KGB counterintelligence. After the KGB was split up, he ended up in what is now known as the FSB, in a unit specializing in fighting terrorism and organized crime. That's where he received an honorary badge "MUR Veteran" ("MUR" stands for Moscow Criminal Investigation Office). In 1997 he was transferred into allegedly "the most secret unit of the FSB RF" -- Directorate for the Investigation of Criminal Organizations. Such was his alleged history of employment until the famous press conference, where it all went downhill. The story from other sources is a little murkier. The current Defense Minister Ivanov, who also used to be an FSB officer, recalled that Litvinenko came to the FSB from the Interior Ministry's convoy troops -- that is, he had been a glorified prison guard. The KGB connection becomes unclear. His FSB career until 1997 also seems somewhat questionable. The unit he refers to was probably a joint task force set up by the FSB and the Interior Ministry to combat organized crime. Litvinenko himself most likely remained an Interior Ministry employee (that is, a policeman), since otherwise there is no explanation for him being dubbed a "MUR Veteran". FSB officers can hardly be described as veterans of simple criminal police of the Interior Ministry. His official recruitment to the FSB most likely occurred only in 1997, when he became Berezovsky's man. Be it as it may, his career in the special services apparently consisted of guarding prisoners and combating organized crime, as well as stints in Chechnya. None of these activities have any resemblance to espionage implied in newspaper headlines.

So while western newspapers attempt to sell more issues by marketing Litvinenko as a spy straight out of a Cold War spy drama, this causes problems to arise for Litvinenko's friends and family. That's because if he were a spy, he becomes a traitor in the traditions of the Cold War, which can be used to discredit his claims in Russia, and in the West this brings up the terrifying caricature images of the KGB and Litvinenko's possible role in it. Litvinenko's circle was immediately forced to defend him from these allegations. For example, a friend of his, one David Kudykov, complained bitterly on a Chechen separatist propaganda site: "The press calls Sasha [Litvinenko] a spy, and this puts a stain on him, that he worked for the kgb [sic]. But Sasha was an officer fighting against organized crime there, it was his official position, which had absolutely nothing to do with espionage." Litvinenko's wife Marina further commented in an interview with The Sunday Times that "she had decided to speak out after becoming angry at 'completely untrue' reports suggesting her husband was a man of dubious character. She said he had been an honest man, a crime fighter rather than a spy."

Since Litvinenko clearly wasn't a spy, all this talk about "ex-KGB spy" was simply a form of falsification. Was it done deliberately to sell more issues by calling up the mystique of a Cold War spy drama, or was it the result of incompetent journalists hearing the word "KGB" and immediately thinking "spies"? Probably a little of both. Frankly, I don't see this as such a big deal. It was really a harmless lie, even if it frustrated Litvinenko's wife. But I decided this needed to be investigated anyway, just to set the record straight.

Finally, since this is supposed to be a media review blog, not a ranting commenter review blog, let's start naming names of some of the incompetent hacks employed by various newspapers and news agencies, who for some reason thought that Litvinenko had been a spy. After searching through JRL archives, here's a very incomplete list for 2007 only:

Tony Halpin, The Times, 17 Jan
Daniel McGrory, The Times, 17 Jan
Josh Grossberg,, 16 Jan
D'Arcy Doran, Associated Press, 13 Jan
The aforementioned Alexandra Poolos, ABC News, 10 Jan
Phil Stewart, Reuters, 5 Jan
Andrew Osbron, The Independent, 4 Jan
Karen Kaplan, LA Times, 1 Jan
Thomas H. Maugh II, LA Times, 1 Jan

And an honorable mention goes to the commenter who attempted to prove that Litvinenko can be called a spy by implying that, since we don't know what the KGB was doing, he just might've been one.

Note: If anyone has more information on Litvinenko's background with the special services, and the work he performed there, please share it.

Saturday, January 13, 2007

The "Empire of Lies" Strikes Back

A certain Alexandra Poolos from ABC News came out with a stark indictment of the Russian media, which she titled "Russian Media Called 'Empire of Lies'". The meaning of the strange title is clear to anyone who reads enough of similar exposes, such as the unfortunate yours truly: It simply means that Alexandra Poolos really-really wanted to start calling Russian media names, but since she also really-really needed to appear "objective", she had to search long and hard to find someone willing to do that for her. And she did, which she immediately put in the title of her piece. This isn't her own opinion. Really-really.

For starters, the credulous reader will find out that, apparently, "while the world buzzes with disbelief and fascination over the poisoning and death of a Russian ex-spy, the story has captured scant attention in Russia." Of course, the overly truthful Alexandra Poolos, the great exposer of liars, probably doesn't even realize that Litvinenko was never a spy, and this label she applies to him actually makes her out to be a liar. But let's give the poor soul the benefit of the doubt and assume this was the result of simple incompetence, rather than an attempt to deceive. Instead, let's find out the extent of the "scant attention" captured by this story in Russia. Really, it's not a complicated exercise. For print media, there is a very convenient web site called, which indexes a large chunk of Russian newspapers and other periodicals, including all the mainstream ones. Searching for "Litvinenko" produces over 800 articles in the past month and a half (931 total hits), including ones in the government-owned "Rossiiskaia Gazeta". Such scant attention, really, only some 15-20 articles every single day, even if you discount for false hits. Not being satisfied with that, I proceeded to call upon Russians in a couple of Internet forums, as well as contact my acquaintances by email and IM, asking them whether there was much about Litvinenko in the news on TV, including the government channels. All replies indicated that indeed, the Litvinenko affair was mentioned "on all main channels in the news, on multiple occasions". Some even solicitously asked if I was right in the head to even be asking questions with such obvious answers. Well, I'll have to readdress this concern to Alexandra Poolos, on whose behalf I'm doing this. One great recommendation was to check the news archives (with the actual footage of the news programs) of the government-controlled Channel One. Searching in their archives for "Litvinenko", I found out that the story appeared 42 times in their news between 1 November 2006 and 13 January 2007. On some days, such as December 1, among others, it was the very first and the most important news item in the broadcast. Video clips of the broadcasts can be easily viewed on the same site. Scant attention, indeed. And this claim wasn't even hard to verify -- all you needed was an Internet connection and a desire to be honest. Clearly, Alexandra Poolos lacks one of these, and something tells me it's not a problem with her Internet connection.

Our fearless exposer of lies and liars, Alexandra Poolos, further maintains that if you "ask any seemingly cosmopolitan Russians on a downtown Moscow street about their take on the international scandal, [...] they will most likely shrug and suggest that the former spy Alexander Litvinenko poisoned himself just to make Russian President Vladimir Putin look bad." Well, from this I can only assume that Alexandra Poolos never actually bothered to "ask any seemingly cosmopolitan Russians" anything of that nature. Because the polling agencies, those who actually ask such questions as part of their job, came up with somewhat different results. For example, the independent Levada Center conducted a poll between December 8-12 and found that 20% of Russians believe Litvinenko was killed by his former business partners, 15% -- by Boris Berezovsky, 10% -- by Russian special services, 8% -- by western special services, 8% -- he accidentally got poisoned while smuggling radioactive materials, 1% believe it was a suicide. The same poll also asked why Litvinenko was killed. Only 19% of Russians believe it was done to make Russia (14%) or Putin (5%) look bad. Other theories included revenge for something Litvinenko did (15%), due to dangerous information he possessed (14%), in order to create a political emergency in Russia to enable Putin to run for the third term (4%). Thus, Alexandra Poolos's alleged "most likely" replies are possible only from the 9% of respondents who believe Litvinenko killed himself, and the 19% of respondents who believe it was done to damage Russia or Putin. And these two sets don't even necessarily intersect, which would make the number of people who espouse the "most likely" view rather tiny.

It is obvious from the above that Alexandra Poolos believes these "seemingly cosmopolitan Russians" are deceived just because their opinion does not correspond to the one true opinion espoused by our fearless exposer of lying empires, which no doubt is that Putin personally did it, or if not, then it was the KGB on the orders of Putin, or if not, then it was the KGB without the orders of Putin, who is obviously a weak ruler, or if not, it was still Putin's fault somehow. But what are the opinions based on right now? Due to the obvious failure of the Scotland Yard to identify a motive for Litvinenko's murder, the only opinions possible are based on the simple principle of "qui prodest?" -- or "who profits?" -- and nothing else. Seeing how much Russia and Putin actually managed to profit from the affair, only one logical conclusion can be reached. And the fact that it differs for Russians compared to one Alexandra Poolos, it simply means that your average Russian is more intelligent, more logical, and more honest that your average Alexandra Poolos.

After that, we find out about Alexandra Poolos's source for the bizarre allegations above. A certain Jazz Ayvazyan went to London "a week after the story broke in early November." Well, I hate to rain on your parade once again, dear Alexandra Poolos and Jazz Ayvazyan, but the Litvinenko story did not break in early November. Litvinenko was allegedly poisoned on November 1. But there was nothing in the mainstream British media about the story until November 18, when it was claimed that Litvinenko had been poisoned with thallium (which later turned out to be completely false). No surprise there, since Berezovsky, who orchestrated the coverage of the Litvinenko affair, needed some time to retain the services of Tim Bell's PR agency. In contrast to the western media, who needed the Berezovsky PR money to start them rolling on the coverage, the Russian media was already reporting on Litvinenko's poisoning on November 11. As well as the statement from the London police that they know absolutely nothing about Litvinenko's poisoning on November 13. Thus, if you wanted to know anything about Litvinenko before November 18, you had to be in Moscow, not in London. Or at least have Internet access. Of course, further in the article our Jazz Ayvazyan confesses that he had "stopped watching Russian channels and replaced them with Discovery kind of entertainment". No wonder Jazz Ayvazyan doesn't know anything about the Litvinenko affair! After all, the Discovery Channel is the true "empire of lies". Can you imagine, the liars haven't said anything about Litvinenko?!! Good job, Alexandra Poolos, on exposing your own sources as incompetent and/or deceitful. Now I am starting to believe that you are truly out to set all liars straight.

Unfortunately, I should wrap up here, even though there is much to be said about every single claim in the article of the ever honest Alexandra Poolos. However, unlike the brave reporter being reviewed, I'm not paid for this. And since I am taking care to research and verify what I write with facts, I work somewhat slower than your average Alexandra Poolos, who I'm sure can fantasize much faster than I can do research, so she can proceed to the next topic, where she can expose another bunch of dastardly liars. Let's just hope that those "liars" don't decide to verify Alexandra Poolos's claims, like I just did. Because who knows, maybe they will not be as mild-mannered and soft-spoken as I am.

Tuesday, January 9, 2007

Alleged "Oil Woes" of an Alleged "Energy Superpower"

Joining The Economist's permanent obsession with Russia's economic doom and gloom is Leon Aron with his alleged "Russia's Oil Woes". Many amazing discoveries await us in this article. We find out that "the idea that Russia is a new “energy super­power” is all the rage in Moscow", and that it's in fact Putin's idea. That this idea is hollow because Russia cannot produce enough oil to satisfy world's demand. That the reason for this sad state of affairs is the statist ideology of the diabolical Kremlin, which takes over Russian oil companies and prevents them from increasing production due to its mismanagement. Once again, Russia is bound to fail.

The first thing I did upon reading this was to go to a Russian search engine and search for "энергетическая сверхдержава" (that's "energy superpower" in Russian). Quite predictably, the main hits that came up were translations of English language publications into Russian, e.g. from The Wall Street Journal. Now, there is some evidence of discussion on the topic, but the timing of the materials is quite clear. The "energy superpower" concept originated in the West and then migrated to Russia, and now the Russians are trying to figure out if it's worth it or not. Russia has not set out to become an "energy superpower" -- it's merely wondering about another set of ideas the West is trying to force on it. And incidentally, since Leon Aron hasn't noticed it, I have to point out that Putin has already rejected the idea of Russia as an "energy superpower". So, once again Russia is being ascribed a goal it doesn't have, and once it naturally doesn't achieve the goal it didn't have in the first place, Leon Aron, as well as most certainly the WSJ, will gleefully declare that Russia has failed yet again. Nothing new there.

Now, is all that Leon Aron's scaremongering worth the megabytes of network traffic it has generated? From the start, Leon Aron waxes indignant about how the diabolical Russian state destroyed and bought the allegedly "most transparent and efficient companies", Yukos and Sibneft, how it uses "environmental and ecological 'violations'" of Western oil majors to force them to renegotiate contracts. That's right, Leon Aron put "violations" in quotes. Apparently, he doesn't believe that Shell could ever allow any environmental violations while drilling for oil or gas. Apparently, numerous environmental activists who were writing on this topic long before Russia ever publicly concerned itself with Shell's doings, were actually secretly in the employ of the diabolical Kremlin. Leon Aron's indignation about Sibneft's purchase by Gazprom is also a total mystery. Sibneft was bought and paid for, where's the problem in that? As for Yukos, despite any machinations around the transfer itself, the basic cause is that Yukos failed to pay the taxes it owed (is anyone sane who's not being paid by Menatep going to argue that Yukos had been a law-abiding taxpayer?). The government could've chosen to go easy on it, but it didn't, and wiped out the company through legal means. It was within its rights. Finally, I find it difficult to see how anyone can take the claim of Yukos's alleged transparency and efficiency seriously, when enough has been written already to demonstrate that it was patently not the case.

Now that the issues of morality (why did they have to come up anyway, just to add noise and confusion?) have been settled, the only real question remains: is this situation really detrimental to Russia, as Leon Aron claims, or not? First, some facts: Oil, paid for in USD, accounts for more than half of Russia's export revenues (even if for a much smaller chunk of Russia's GDP). This flood of US dollars comes into Russia and is converted into rubles. The Russian Central Bank, in order to keep the ruble exchange rate stable, is forced to print rubles just to buy up all these dollars. In fact, practically all ruble emission is driven by export revenues, while Russia's foreign currency reserves have reached $299.2 billion as of 22 Dec 2006. The rapid increase in money supply causes significant inflation, which in 2006 was barely contained at 9% (it was even higher during the previous years). The federal budget captures more than half of the price of each barrel of oil exported through taxation. Due to rising oil prices, the budget has been running with significant surpluses, which were put into the so-called Stabilization Fund. The government cannot use that fund for fear of stoking inflation. This Stabilization Fund is now at around 3 trillion rubles. It is a paradoxical situation -- the Central Bank keeps printing rubles and the government keeps storing them away in order not to mess up the economy. Hence, the net benefit to Russia of a large chunk of current energy exports is simply more zeroes being painted on presently useless foreign currency reserves, and more zeroes on the presently useless Stabilization Fund balances.

In this situation, Leon Aron, can you somehow explain why anyone in Russia should give a rat's ass about decreasing oil production and energy exports? If Russia fails to export more oil and gas, a real disaster will strike -- the currently bloated foreign reserves will fail to increase yet again. How will Russia survive that? Not to mention the fact that any oil not sold today will remain for future generations of Russians to be used for themselves. Also, could you possibly explain why the government should not in fact own most of the country's oil and gas, as is customary in almost all other energy exporting countries? If 40% of the federal budget depends on energy export revenues, shouldn't the government have a large say in how that revenue is received and used?

So, if Russia doesn't lose from the decrease in energy exports, who does? Hmm, maybe looking at the figures for world's oil consumption will help. I am reasonably certain that China and Japan would love for Russia to produce and export more oil. I am also reasonably certain that the entire EU would jump with joy if Russia produced and exported more oil. But I am more than certain that the US, which consumes one quarter of world's oil, and which has a penchant for starting wars over it, would kill anyone to have Russia produce and export more oil. But short of that, maybe Leon Aron can do the work of trying to convince anyone credulous enough that it is apparently in Russia's own interest to further succumb to the Dutch disease in order to keep the US, the EU, China, Japan and many others supplied with energy.

Now, the conclusion: With all due respect, dear Leon Aron, but if you want to keep your article in its present form, you should retitle it "America's Oil Woes", since it is the US, not Russia, who is poised to suffer. If you want to discuss Russia's oil woes, I recommend examining how Russia exports entirely too much oil, and why she still accepts US dollars as payment for it. It also wouldn't hurt to write an article about the need for the energy importers to start seriously thinking about consuming less, rather than recommending to energy exporters to sacrifice the livelihood of their future generations in order to appease the spendthrift habits of today's SUV-driving suburbanites.

Saturday, January 6, 2007

Book Review Review

The Economist, it turns out, shares with the readers not only its expertise on Russia's economy (having predicted 20 or so out of the last 0 collapses of the Russian economy), but also on Russia's history. I was privileged to read its review of Geoffrey Roberts's "Stalin's War" (as well as another book, which is not that interesting) with a certain amount of amusement. Now, I haven't read the book itself, but it is the review that amuses me. Instead of explaining how the book is organized, which sources it draws upon, the review's author for some reason decided to argue with it. It is possible that the reviewed book is crap -- but the reviewer himself displayed such problematic knowledge of Soviet history, that it is exceedingly difficult to take him seriously. And, of course, I never did get to find out if Roberts actually did any archival research of primary sources, or if he is regurgitating same old memoir material.

For starters, we find out about a heretofore unknown "Hitler-Stalin pact". The official name of the said document is actually the Soviet-German Non-Aggression Agreement, sometimes called the Molotov-Ribbentrop Pact, by the names of the two foreign ministers who actually negotiated it and signed it. Or in the west it is propagandistically called the Nazi-Soviet Pact. These are all accurate titles, even if they serve to imply different things. But what does "Hitler-Stalin pact" imply? That Hitler and Stalin personally met to sign it, or exchanged messages discussing the agreement? This does not correspond to reality at all. Some journalist hack might use such sloppy terminology, but not any kind of an expert. But wait... it is The Economist... and it is in fact some journalist hack writing the review. Maybe I'll have to withdraw this objection.

Then, of course, what article on Soviet history would be complete without the tired old cliche of "Stalin the mass murderer". The repressions in Stalin era USSR, and Stalin's own complicity in them, were crimes, without a doubt. But packing the immense complexity of the whole phenomenon into a pathetic and sanctimonious "Stalin the mass murderer" concept, despite the fact that the events still haven't been adequately explained by historians, is an example of such extreme reductionism that it should become an affront to any thinking person. Might as well develop the "Bush the mass murderer" theory, despite the fact that it wasn't Bush alone who started the Iraq war, that he is by far not the only one killing Iraqis, and that intentions were different from the outcome.

Another eye-opening revelation was the "fact" of Stalin's alleged failure to prepare for the Nazi invasion. Yes, Stalin is largely responsible for the screwed up Soviet entry into WW2. But that was a momentary mistake of June 1941. But what about the industrialization, the increase of the size of the standing army to over 5 million men in 1941, compared to one million and change in the 30s? Over 20,000 tanks? Ammunition supplies that could last months of intense fighting? USSR possessed none of it 10 years prior. The military potential of the country was on the level of Poland, and it would've been just as easily overrun by the Germans had it not been for the fact that Stalin had been preparing the country for the war. Which is precisely why the Soviet Union won it. Despite the almost fatal mistake of June 1941, for which Stalin bears responsibility. But then again, what leader in his place would not have made the same mistake? Many forget, and this hardly competent reviewer among them, that there was another actor -- the Germans engaged in a very skillful deception campaign, and the disaster of 1941 was not simply Stalin's error of judgment, but also a very well executed deception operation on the part of the Germans. That operation had a high chance of success, Stalin or no Stalin.

But the best part comes last. In it, we find out that the Soviet High Command did not possess the doctrine of strategic defense because... you guessed it, Stalin executed "most of his military brainpower, among them the real Russian strategic genius of the age, Mikhail Tukhachevskii". Thus, in this review we have a curious mixture of Soviet and anti-Soviet propaganda. After all, the myth of Tukhachevskii's alleged genius arose in the 1960s in USSR, during Khruschev's de-Stalinization campaign. And it is now being faithfully repeated by The Economist. The reality is, we don't know if Tukhachevskii was a genius or not. His Civil War experience was mixed, and that war in general was not representative due to its numerous quirks and specifics. Tukhachevskii was basically a peacetime commander, but we can judge the skill of any military leader only in wartime, and Tukhachevskii never got the chance to prove himself. Ironically, the criminal purges of Soviet high command in 1937-1938 cleared the way for the real certified military genius, Marshal G.K.Zhukov, and enabled him to quickly rise to the top.

But the worst part of this Tukhachevskii claim is not even that. The stunning idiocy of this claim is apparent from the fact that Tukhachevskii was never a proponent of strategic defense. The reviewer hasn't read a single article written by Tukhachevskii, but he is oh so full of claims on the topic. The reason USSR had a strategically defensive military doctrine in the 1920s is simple -- USSR was a very weak state recovering from a ruinous civil war. Once the country managed to industrialize and increase its military might, the doctrine naturally changed to one of strategic offense. And that occurred even before Tukhachevskii's execution. The reason is quite clear -- strategic offense wins wars, while the purpose of strategic defense is to delay defeat as long as possible. In both world wars, every Great Power entered them with an offensive plan -- because they aimed for victory, not avoiding being defeated quickly. The only exception was France in WW2, and it cost them dearly -- their defeat was as spectacular as it was unexpected (in WW1, France was, of course, on the offensive, even though it failed). Even puny Poland had an offensive plan against East Prussia.

The cause of the disaster of 1941 for the USSR was not in the lack of defensive planning. The cause was the fact that the Red Army was incapable of either defense or offense at the start of the war. The two prerequisites for the start of a military campaign are a) mobilization -- where reservists are called up to bring military formations to their full strength and to make them fully combat-capable; and b) strategic concentration and deployment -- where military formations are loaded on trains (or march on their own power) and transported to the theater of operations and deployed there according to pre-war operational planning. If one or both of these prerequisites are not met before the start of major operations, the army is not capable of either offense or defense -- it is incapable any military operations. If its divisions are in the wrong location and significantly understrength, it doesn't matter if they attack or defend -- they are simply irrelevant and have no effect on the enemy advance. And this is precisely the situation in which the Red Army found itself on 22 June 1941 -- the mobilization and strategic deployment had not been completed yet (they started too late due to Stalin's error of judgment), and the Soviet forces could neither attack nor defend adequately. Whatever strategic doctrine the Red Army possessed before the war became completely irrelevant.

Thus, in the end, I did not get to find out what Roberts's book really represents. But I did find out that when it comes to the USSR or Russia, The Economist is not the place to go to look for answers, be it economics or history. So my time was not entirely wasted -- a negative result is also a result.