This WaPo article by Steven Pearlstein sends the right message by absurd means: it is a sensible story told by an idiot (it would seem), or, rather, a poorly informed person, or a propagandist. Quoting Garry Kasparov, who believes in Anatoly Fomenko’s theories, on politics, is nearly as convincing as quoting Bobby Fischer. Garry argues that “the only way to deal with a bully like Putin was to throw him out of the [G-8] club and stop the flow of investment capital.” Well, in case you didn’t know, Russia needs no foreign “investment capital” as it has experienced large capital surpluses for several years and accumulated large currency resources sitting idly at the Central Bank. The only way to change that is to make oil prices drop or to prevent Europe from buying Russian oil and gas, which is, I’m afraid, impracticable at the moment.

Moreover, Bush has no reason to censure Vlad, who has been such a pliable buddy with his habit of raising hell and backing down. Putin has backed down on Ukraine twice and Georgia a couple of times; there is no question he will soften on Iran and the rest of the world provided he is properly compensated. The phantom of the Cold War is just that, a phantom for the gullible. For all practical purposes, Putin is Zbigniew Brzezinski’s and Richard Pipes’ wet dream, a politician leading Russia down the path to disintegration — or, which also sounds bad to me — de-Russification [via population replacement].

Now if Bush really wanted to put some heat on Vlad, he would threaten to freeze his foreign assets and have European countries follow him.

This said, the message of Pearlstein rant is this: the bulk of Rosneft’s assets have been stolen. Stolen, that is, from YUKOS, whose former subsidiary, the E&P company Yuganskneftegaz, is now Rosneft’s key asset. It is not a good idea to buy stolen property. Yet I am sure the Rosneft IPO will go ahead, likely at the inflated price that puts the company’s value at $65 or $70 billion. Who’s going to buy the stock then?

— Risk-loving foreign investors (the usual suspects)
— Risk-loving and ignorant Russians
— Russian companies depending on the Kremlin’s approval, such as Surgutneftegaz, Sberbank and other banks, pension funds and lesser fish

What’s the bottom line? Well, don’t buy Rosneft: there may be a speculative rally in the first days or weeks (though the fundamentals would still say “sell”), but as long as you’re not into fencing, stay away. But there’s no ultimate bottom line, really: what’s going on is too absurd, I’ve given up on finding meaning in it.


  1. Alex(ei), may I ask, whom do you regard as the most knowledgeable and substantial english language commentators and (book length) authors on contemporary Russia? (Or historically as well, for that matter?)

  2. Michael, this is a difficult question that I can’t answer right away. Anatol Lieven is the first name that comes to mind. Then Geoffrey Hoskins, the British historian. Anything by Edwin Dolan and Michele Berdy is worth reading. Cliff Gaddy and Barry Ickes may be helpful. Of the old school, I would recommend Russia by Sir David Mackenzie Wallace. More later.

  3. Alexei, can I ask what may be a strikingly unsophisticated question to you? How is Putin leading the country to ‘de-russification?”

  4. Saying Russia doesn’t need foreign capital seems absurd considering the IPO offerings occuring in the petroleum industry there and the need for capital for petroleum infrastructure improvement. You don’t offer to sell pieces of your company unless you need capital.

    Accumulated large currency reserves are there to stablize the ruble against foreign currencies. This is what governments and central banks do. It is one of the reasons why the ruble has been relatively stable. It is simple good economic policy. That isn’t money to spend to support and grow Russian businesses and jobs.

    I wouldn’t be so sure about Cold War phantoms with Russian booming arms sales. That is, after all, how much of the original Cold War was fought. And again – it is another way of bringing in foreign capital and supporting the military industrial complex in Russia before it becomes bankrupt.

  5. Criticize all you want, Russia will rise and become stronger than ever. Sure it has problems, but who doesn’t? The Rosneft IPO will be successful just like it was with Mobilnye Telesystemy IPO, which drew similar criticism (and look at it now)!

  6. Alex(ei), thank you. If others come to mind that will be appreciated, though have ordered a couple from what you recommended above, Lieven’s “Ukraine and Russia” and Mackenzie. (Additionally ordered Billington’s “The Icon and the Axe” and, differently, Kolakowski on Marx.) Again, thanks.

  7. Wally, I’m not sure I understand what IPOs you are talking about — the Rosneft IPO is not primarily a bid for foreign capital. As I’ve said, I expect it to be mostly placed within Russia. In general, it may be easier for an individual Russian company to raise money through a global IPO than to borrow domestically, but the reason for that is Russia’s undeveloped capital markets, including its banking system (as opposed to Kazakhstan), rather than the country’s overall shortage of capital. In other words, I believe that profits generated by Russia’s exporters may be adequate to meet Russia’s investment needs (“export-led growth”) but immature capital markets can’t yet channel them into the right projects. To keep USD240 bn at the CBR is a bit too much just to support the rouble. The true reason Kudrin (like Illarionov before him) wants to keep the lid on (so I suspect) is the risk that the money will be spend on the wrong projects. If Russia’s problem is its financial institutions, denying it access to foreign capital should give it an incentive to fix the problem.

  8. ALEXEI: What you don’t seem to realize when attacking Kasparov is that Russia is in no position to be a chooser where opposition leaders are concerned. It’s a beggar, and nothing will change that. Anyone who is willing to risk his life to oppose the growth of a regime that will, without question, utterly destroy Russia, is to be embraced not attacked. Russia is now provoking the US into a new Cold War, and the USSR couldn’t win the last one with twice America’s population. This time, the consquences will be utterly fatal for Russia unless someone can come forward to turn the tide. Given Russia’s wretched history with such enterprises, there is no way to predict who might be the best candidate to do so, and until there are many you should nurture the few, not attack them.

    ANONYMOUS: You write: “Criticize all you want, Russia will rise and become stronger than ever. Sure it has problems, but who doesn’t? The Rosneft IPO will be successful just like it was with Mobilnye Telesystemy IPO, which drew similar criticism (and look at it now)!”

    This is clearly absurd gibberish, something Russians have been saying for a thousand years, and every year the country’s prospects get more and more bleak.

    The Rosneft IPO is an international laughing stock:

    It’s quite shocking that Russians can still engage in this kind of blatant, ignorant propagandizing totally devoid of any connection to the facts.

  9. La Russophobe: I don’t believe that Putin is provoking Bush into anything, since Putin is too insignificant on the world chessboard. Rather, I think Putin has carved out a niche for himself within which he is free to do what he wants if only he follows the Bush line elsewhere. Bush can get along fine with Putin the same way he is tolerating the dictators in Pakistan and Egypt.

    Kasparov and people like him are giving a bad name to the very concept of liberty and grassroot democracy. (Not that Kasparov is risking anything, by the way.) When too many clowns and knaves support a cause, it’s a lost cause.

  10. ALEXEI: You underestimate the passion that anti-democratic actions like Putin’s stir up in America on both sides of the political aisle.

    You also underestimate the bitterness with which Putin’s aid for North Korea, Iraq, Iran and Hamas has engendgered here.

    And I think you’ve got the big picture exactly backwards: The more puny Putin is viewed as being, the more likely that the U.S. will take action against him.

    There are already very significant voices in Congress being raised against Putin. His only main defender is George Bush, who is widely hated and will soon be long gone. You seem to be forgetting this. John McCain could be the next president of the U.S., what happens to Putin then?

    Americans don’t see Kasparov as being a clown. He got in the New York Times because his actions are viewed as being heroic. Maybe if Russians stopped thinking of people like Kasparov and Zhirinovksy as clowns and started thinking more seriously about how to support the right ideas (where is your own support for a better candidate than Kasparov??) Russia would be a better place to live.

    Since Russia has never once produced a truly heroic democratic leader, maybe Russians aren’t the best judge of how to identify them.

    In any case, if you don’t give public support to ANYONE who comes forward to challenge the regime, even Bolsheviks, you discourage EVERYONE from coming forward and Russia continues its slide into the abyss for sure.

    Maybe Kasparov would be worse than Putin. But at least he’d be different, and Russia is running out of time. The volitional return to the USSR would be the greatest epic tragedy in human history.

  11. Most Americans, though living in a liberal democracy, have no idea how to build a functioning democracy. Nor does anybody in the world, it seems. And yet, it still seems unwise to suggest that a person who was born outside of Russia, belongs to an ethnic minority, and has for most of his life belonged to a tiny elite of eggheads insulated from real life, should lead the democratic opposition. (Even the US is yet to elect its first minority president.) Compare Kasparov with Walesa, Havel and Yuschenko, and you’ll see the difference. His help may be precious, but he should not be the face of the opposition. Not that he would be a bad president — he just can’t win a democratic election in Russia.

    I, too, would rather see John McCain and not Hillary Clinton or Condoleezza Rice as president. But how likely is that?

  12. ALEXEI: Again, you’re confused. Nobody is asking Russia to build a functioning democracy. What we are asking is that Russians NOT build a functioning Neo-Soviet Union. That is what they are busily going about doing.

    Your prediction about Kasparov is silly. Who thought that Lenin had a chance of deposing the Tsar? What did people do when Yeltsin said Putin would be the next president? They burst out laughing!

    What’s more, the point isn’t only to win the election, the point is simply to challenge the regime. If you don’t get foursquare behind Kasparov then he certainly won’t get power, but that won’t be due to him it will be due to YOU and other passive, cowardly Russians who make excuses instead of taking action.

    If you can put forth somebody better than Kasparov, do so. If not, get behind him with all you’ve got or be prepared to take the consequences.

  13. Nobody laughed when Yeltsin said Putin was going to succeed him. By that time, Putin had been PM for a few months and was relatively well-known to the public.

    But that’s not important. Yes, I am a coward, perhaps more than most people around me. Most Americans, however, are not in a position to judge me or my compatriots. Besides, one does not need courage to vote for Kasparov or any opposition candidate. If Kasparov is the only alternative to Putin, I will vote for Kasparov. However, as far as American support matters — and I think it matters a lot — it shouldn’t be wasted on Kasparov. Pick an electable guy and help him — what can be easier?

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