February 13, 2016 by AK
Among other things cut out, Medvedev claims that when he first moved to Moscow (from St. Petersburg), the federal budget depended on oil and gas for 70-75% of its revenues but this share went down to 55% later and only equals 45% now.
As Meduza points out, the current share of oil and gas related revenues in the federal budget is indeed close to 45%. The 75%-to-45% narrative is plainly absurd: oil and gas taxes and duties never accounted for 75% of the budgetary revenues. Never having reached them, this share could not have slid from those unimaginable heights down to 45%. It actually peaked in 2014 at 51% and came down to 45% in 2015 simply because the oil price crashed.
The 51% number might be understated, as far as I understand, and the year-over-year changes might be slightly different if counted more accurately (see the chart on Andrei Illarionov’s blog). The long-term 2000-2015 picture is still the opposite of Medvedev’s claim: the share of oil and gas revenues in the federal budget was much higher during Medvedev’s presidency and premiership than at the start of Putin’s first term.
In the year 1999 – Medvedev moved to Moscow that fall – oil and gas revenues were less than 20% of the federal budget’s total; the next year, 25%; in 2001, 26%. The low share had to do with the low oil price and the now-defunct tax system. Whatever the reason and however large the margin of error, 25% is quite emphatically not 75%, not even close. Medvedev’s narrative is a fantasy.
February 12, 2016 by AK
In his perennial quest for relevance, Dmitry Medvedev has granted a long interview to the German business newspaper Handelsblatt. It’s hidden behind a paywall on their site but posted in English on the official site of the Russian government. Naturally, Medvedev is pretending to be less than amused by the EU’s potential collapse from the refugee crisis. Underneath that mask, he’d probably love the whole European project to fall apart, and soon: his glee would mirror George Soros’ grief.
A: …you must come to terms on something together, because if you simply start ruining the Schengen space, this is likely, first, to entail what is in effect a disintegration of the European Union, and, second, you will achieve nothing because the extremists will only be pleased to migrate from country to country.
Q: Do you think this crisis will destroy the EU?
A: I’m not saying this.
Remark: Do you think so or do you fear it…
A: Frankly speaking, this would be a most dramatic turn of events for the EU.
Medvedev’s secret hope is probably as out of proportion with reality as are Soros’ fears. Days before the first Russian bombing raid in Syria, Soros suggested that the EU accept at least a million asylum seekers a year “for the foreseeable future.” Clearly he considered the union resilient enough to accomplish that feat. He even suggested the EU should borrow more to pay each refugee $1,400 per month for two years:
The EU should provide €15,000 ($16,800) per asylum-seeker for each of the first two years to help cover housing, health care, and education costs — and to make accepting refugees more appealing to member states. It can raise these funds by issuing long-term bonds using its largely untapped AAA borrowing capacity.
If the EU can accept and provide for a million people a year from non-European societies, it can sort out the Kremlin just fine.
February 11, 2016 by AK
George Soros talks sense…
Putin is a gifted tactician, but not a strategic thinker. There is no reason to believe that he intervened in Syria in order to aggravate the European refugee crisis. Indeed, his intervention was a strategic blunder, because it embroiled him in a conflict with Turkish President Recep Tayyip Erdoğan that has hurt the interests of both.
But once Putin saw the opportunity to hasten the EU’s disintegration, he seized it.
…then gets a little hysterical:
The fact is that Putin’s Russia and the EU are engaged in a race against time: The question is which one will collapse first.
The Putin regime faces bankruptcy in 2017, when a large part of its foreign debt matures, and political turmoil may erupt sooner than that.
From the maturity schedule of its foreign debt and from all I have heard about it, I rather doubt that Russia is facing bankruptcy in 2017, although the risk is obviously much higher than a year ago, to say nothing of two years ago, before the seizure of Crimea.
Political turmoil might erupt any time but, on the other hand, this regime could carry on for years upon years, with the economy, the living standards and the people’s morale in gradual, inexorable but – up to some still-blurry future point – manageable decline.
It’s not yet a determined march of the lemmings to the cliff, more of a long, slow slide of the depressed into misery. The slope may get fatally steep any moment, but no one knows when and most hope it’s still far out into the future.
Soros stifles emotion for a short while:
…Putin will be able to gain considerable economic benefits from dividing Europe and exploiting the connections with commercial interests and anti-European parties that he has carefully cultivated.
Well said – but sobriety is short-lived and gives way to more prophesying:
As matters stand, the EU is set to disintegrate… today it is confronted by five or six crises at the same time, which may prove to be too much…
The race for survival pits the EU against Putin’s Russia.
If it were so, I still wouldn’t bet on the Kremlin in a long-term race against Europe.
February 10, 2016 by AK
Then the BBC’s latest from Moscow:
Authorities in Moscow have begun a big campaign to demolish street kiosks and convenience stores, sparking an outraged reaction among some residents.
Some 100 stores were to be torn down, reports said, amid claims operators had no legal title to the land.
But critics counter that the demolition, which began on Monday night and targeted dozens of stores, is itself on shaky legal ground…
The premises targeted, say observers, are often to be found outside metro stations and range from small kiosks to shopping centres with up to three floors.
Some of the property owners have valid building permits issued by the Moscow city government in the 1990s. Some have won court rulings confirming their right to use the land on which their stores were built. The mayor’s office merely changed the rules in December 2015, and the buildings were doomed.
It’s not Putin or the Kremlin or FSB at work. (Admittedly, one can never be sure.) The current mayor of Moscow, Sergei Sobyanin, was appointed by Medvedev and confirmed as mayor in an election that was much less unfair than the typical federal election in present-day Russia. But even the man in the Kremlin pays more attention to legal niceties, even if they are an empty shell of due process.
February 9, 2016 by AK
This piece by Natalie Nougayrède on the battle for Aleppo is peppered with the word “strategy” and its derivatives. According to Nougayrède, Putin had a strategy for Chechnya and is now applying it to Syria. Putin also has a strategy for regaining regional dominance in some parts of the world. We are also witnessing the “strategic weakening” of Europe.
In hindsight, a series of hasty tactical decisions, if success eventually ensues, can look like elements of a grand strategy. I am aware that even Edward Luttwak, for whom I have the greatest respect, has remarked that Putin, at the very least, understands strategy. Perhaps there is a semblance of strategic logic to P.’s actions if he is thinking in cliches of Soviet geopolitics. It has been suggested that P. enjoys international politicking – yet he is very much driven by his domestic agenda: he needs to constantly redefine and reassert himself before an audience at home. Syria popped up when the military intervention in Ukraine had mostly run its course.
Was there such a thing as an “anti-Chechen strategy” at all? In the early 2000s, the Russian army worked out, at great expense to soldiers and civilians, a ruthless and somewhat effective tactic against Chechen insurgents. It’s not surprising that the army should apply it in Syria (especially in its mountainous areas) because the military always does whatever worked last time. The refugee flow is a guaranteed side effect of such a military campaign.
Generally speaking, the KGB and its successors have always been at their best at destruction and sabotage but useless at anything creative. One is tempted to say what we’re observing is merely their being themselves, to whom wreaking havoc comes naturally. If it’s a grand strategy, what are the strategic goals and benefits? Spiting the adversaries does not count.
January 31, 2016 by AK
Moody’s has warned that Poland’s incoming bank tax threatens the profitability and credit ratings of the country’s lenders.
Fitch analysts are also warning against fiscal self-indulgence:
Fitch analyst Arnaud Louis told reporters that he expects Warsaw to keep the deficit below 3% of GDP in 2016 and 2017… However, evident relaxation of fiscal policy has shifted the “balance of risks to the negative side,” he added.
This said, Poland’s credit rating remains high for a second-world country: still two notches above the lowest S&P investment grade, BBB-. Before the downgrade, it was on par with Latvia, Lithuania, and Slovenia, although below Estonia, Czech Republic and Slovakia. Now, it is the same as Spain’s and above Italy’s – and way better than Hungary’s BB+, the highest of junk-bond ratings. Hungary lost its investment-grade rating in 2011, under the stewardship of Viktor Orban, reportedly a role model for Poland’s Law and Justice.
Poland’s current BBB+ rating equals Russia’s best-ever, in place in 2006-8, in better times. S&P downgraded Russian Eurobonds to junk last January after a decade of investment-grade ratings. At BB+, Russia finds itself down there with Hungary, Croatia, Bulgaria, Turkey and Brazil.
There was much talk about creating a national rating agency back in 2014-15 to spite those Russophobic Soros-backed capitalists but the funding must have gone the way of the oil price since. Evil Wall Street, devious Sorosians against nationally-minded Main Street capitalists: we’ve heard all that, nothing to see here, give us something new, Beata & Jaroslaw.
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January 30, 2016 by AK
There has been much wailing from certain quarters that S&P’s January 15 downgrade of Polish foreign-currency debt from A- to BBB+ was motivated by “politics” and had nothing to do with Poland’s economy.
This argument does not make sense, and would still make none if “politics” were magically divorceable and insulable from “the economy” in the real world.
A credit rating is principally a risk assessment. Trust in a country’s government bears on the risk of lending to it. A one-party cabinet that started out by meddling with the constitutional court and seizing control of state media cannot be trusted to prudently run the state’s finances. It is particularly relevant when the ruling party has the irrepressible instincts (if none of the looks) of a Big Spender, even though it’s more likely a Tax-and-Spender than a Deficit-Spender.
In other words, if Kaczynski, Szydlo and Duda think nothing of breaking the constitution, what’s there to stop them from breaking the 3% deficit rule? Their other shenanigans – for instance, president Duda’s legally dubious pardon to Mariusz Kaminski, convicted of corruption and now heading Poland’s police and intelligence services – are merely business as usual in Eastern Europe. Challenging the separation of powers is not.
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January 27, 2016 by AK
Tuscany has been settled for thousands upon thousands of years and civilized through and through, yet it is still teeming with wild animals:
…[T]he Tuscan authorities say there are just too many animals in the region, largely because of plentiful forest and wild mountain ranges.
They estimate that there are around 200,000 wild boar and 300,000 deer roaming the countryside, with many more in neighbouring regions such as Umbria.
Despite the darkness of the name, Umbria is hardly a jungle either – the country of Assisi, Perugia and Spoleto. A great share of these wild boars are recent immigrants:
The Tuscan wild boar is a cross between native stock and eastern European boars introduced several centuries ago. They were hunted to the point of extinction by the early 1900s, but numbers exploded during the 1990s, thanks to boars migrating from the war-torn Balkans and the impressively productive breeding capacity of feral pigs, which can have up to two litters a year.
Obviously, the Balkan boars wouldn’t have stayed in central Italy if they hadn’t found a suitable habitat there. (Il cinghiale, it is said, is a Tuscan mascot.) Only twenty miles in a direct line from Siena, one of the birthplaces of modern banking, the countryside feels like wilderness. The slow train from Siena to Grosseto travels through primeval, deeply rural parts, yet palaces of Etruscan princes once stood on those hills.
Isabella Dusi writes in Vanilla Beans and Brodo: Real Life in the Hills of Tuscany:
If you were to arrive at Montalcino from the coast, through the Ombrone valley… you would find yourself winding through an entirely different terrain: the dense thickets and low bushes of the hunting woods to the west. This approach may be interrupted by the crack-crack-crack of rifle fire. Sunday is a popular hunting day when gunfire echoes over the village; often, standing along the wall, I hear the Sabbath fusillade in the Ombrone Valley coinciding with the joyful ringing of the church bells to bring the faithful to Mass.
Montalcino (of Brunello wine fame) is five miles away in a straight line from the Murlo station on the old Siena-Grosseto line, which runs along the Ombrone river (another dark name), nine miles from the Etruscan Antiquarium, 19 miles to the southeast of Siena.
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January 22, 2016 by AK
Serov was an extremely talented painter. His abilities were apparent in childhood. And his blazing debut in his early twenties was noted above.
On the other hand, Serov was never an innovator of art movements unlike Manet, Monet or Picasso. This, plus the fact that he practiced in distant (from Paris) Russia, probably accounts for his footnote-status in art history.
Definitely not so in the history of Russian art: Serov is the author of the near-iconic Girl with Peaches and The Abduction of Europa.
…I tend to look [at] a painting from a technical perspective, having been an art student as an undergraduate… I’m less likely when seeing a masterpiece to say “Oh wow!! What an experience!” than I am to think “Oh wow!! Look how he painted that silk gown!”
Pittenger was particularly impressed by Serov’s treatment of gradations in skin color:
…Serov varied his coloration treatment of faces, hands, and so forth from painting to painting to fit the color key while keeping the flesh colors realistic. Possibly these color differences were simply what he found in the various sittings. Perhaps he was trying to stretch his already formidable skills by setting up challenges to resolve. Or maybe he simply sought different color keys in order to amuse himself…
It makes me wish I had a wall covered with Serov originals to serve as inspiration and guides the next time I try doing a portrait.
Fast forward to January 2016.
Today, The Associated Press reported from Moscow:
Russians wait hours in freezing weather to see art exhibit.
Visitors excited by new exhibition break down door at the Tretyakov.
The artist is Valentin Serov; the exhibition marks his 150th birthday. It’s not at the central Tretyakov Gallery complex but in the Krymsky Val building, the usual venue for modern (20th-century and later) art events.
I have no clue what caused such inordinate interest in Serov’s work: a fair number of his paintings are always on display both in Moscow and St. Petersburg. Two years earlier, a major exhibit of Natalia Goncharova‘s works loaned from all over the world was not nearly so well attended.
The fact that Putin visited the Serov event earlier this week may have turbo-charged its appeal but abnormally long queues had already been reported for weeks.
January 22, 2016 by AK
When I got back to Moscow after the winter vacation earlier this January, one of the first things I had heard (on the boring but, at least, non-government-owned FM station that pretends to focus on “business” but mostly babbles amateurishly about financial markets) was news from Poland.
The Kremlin seems to influence the choice of subjects covered by private news outlets. Reports of any discord within the EU are music to certain ears in Moscow. The tiniest disagreements there get magnified to grotesque proportions in the Russian media.
After reading up on the Polish developments, I realized they were under- rather than over-reported. I’m not even talking about their media law passed this month. I’m talking about the Polish parliament’s assault on the constitutional court, which Martin Schulz, the president of the European parliament, has likened to a coup d’état.
What happened in December 2015 looked very much like a coup, with the parliament – with assistance from the president – usurping absolute power by emasculating the constitutional court (and all the judiciary). In particular, no parliament should be able to staff the highest court of the land with loyal members at will, bypassing the required hearings, or to interfere with the decision-making procedure at the top court.
Schulz has warned against the “Putinization” EU politics, but openly breaking the constitution is not Putin’s style. Compared with his devious Moscow cousins, the little man pulling the strings in Warsaw is a straight walker. The big man in Minsk seems more like his role model:
Professors Łętowska and Zoll compared the President’s acts to that of President Lukashenko of Belarus, who in a similar way, invalidated the appointment of a constitutional judge in 1993.
Not that Poland is going to be “punished”: Hungary has been denounced for similar shenanigans but otherwise let be. Maciej Kisilowski explains why the Kaczynski government had to resort to such ugliness:
Abortion or gay marriage are often the first issues that come to mind when we talk about constitutional courts. But the Polish court is already highly conservative in that respect. A much more plausible explanation is that the government needs the court’s acquiescence to pass the sweeping and costly economic reforms that Law and Justice promised during its political campaign.
The Law and Justice party (PiS) are socially conservative statists:
Just the flagship pledge to offer each family approximately €100 a month for its second and third child could increase the budget deficit above the 3 percent level accepted by the EU. And there is more: Law and Justice has promised a higher threshold for the zero income tax rate, a lower retirement age (as early as 60 for women), subsidies for coal mines, and a vast increase in defense spending.
The constitution sets the government debt ceiling at 60% of the GDP. Is the PiS desperately trying to bypass this restriction? Not necessarily: Kisilowski rejects this straightforward explanation:
…the new spending will have to be covered by unorthodox taxes, perhaps announced on short notice or even retroactively.
The retroactive Hungarian-style golden parachute tax has already been passed.
It’s a tax on severance payments to managers of state-controlled companies. Not necessarily a bad idea by itself – unless retroactive.
As George Soros reminds us, Putin wants the EU to collapse. I don’t think Kaczynski wants the same: Poland has benefitted enormously from being a member. But his conviction that a country can reap the perks of membership without playing by the rules of the club places him, in an odd way, on Putin’s side.
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