- (July 2015)
Hardline on Putin?.
In June 2015
the White House dismissed Putin's nuclear threats as "saber-rattling".
But who is really "saber-rattling"? The one who annexed Crimea and de facto
Eastern Ukraine, or the one who keeps talking but not doing anything about it?
Clearly, the saber-rattling is coming from the West. Putin can be accused of
a lot of nasty things, but it is hard to deny that he puts his army, navy and
airforce precisely where his mouth is.
Secondly, it is not clear who is "right" about these issues. Ukraine would
have never allowed a referendum in Crimea to let people decide their fate.
Putin had no choice but to use force to annex a region that most likely
thinks of itself as Russian, speaks Russian and wants to be Russian.
Denying the obvious is neither fair (to the people of Crimea) nor useful
(to the cause of a free and democratic Ukraine). We now know for sure that
Putin was right when he claimed that Georgia had attacked the two separatist
"republics": it was not Putin being aggressive and arrogant towards Georgia,
but Georgia being aggressive and arrogant against two of its provinces that
committed the same "crime" that Kosovo committed (except that Kosovo ended up
being escorted by the West towards independence). And there are certainly
other cases in which the Western public opinion would be better served if it
listened to Putin's "propaganda" instead of trusting the White House.
That said, there is general consensus (even among many of Putin's supporters)
that Russia is being ruled by gangsters, and you can take that word at face
value. Plenty of evidence links Putin to the St Petersburg mafia, plenty of
opponents have been assassinated with mafia-style methods, plenty of cases
have been closed by judges the way Chicago judges used to close cases against Al
Capone and the likes. There is evidence that Putin's secret services carried
out the terrorist attacks that were blamed on "Chechen terrorists", and that
later Putin used as a pretext to launch a military offensive against Chechen
separatists that killed tens of thousands of civilians. There is overwhelming
evidence that only those loyal to this mafia are allowed to prosper in Russia.
Corruption is so endemic that films and articles about it leave ordinary
If that is what truly annoys the West, then the West should be honest and,
instead of claiming that Crimea was unlawfully annexed by Russia, should
simply declare that its goal is regime change in Russia.
That would translate into a campaign to delegitimize Putin in his own
people's eyes. Start with broadcasting news into Russia about the crimes of
Putin's regime. Broadcast inside Russia interviews with investigative reporters who
can tell the Russian people what truly happened in those "terrorist" attacks.
Interview economists who can explain to the Russian people how Putin has
been mortgaging the future of their children by creating an economy that
simply sells natural resources to the rest of the world. Interview analysts
to discuss how isolated Russia is (more than it has ever been in its history:
the Soviet Union had way more allies). Interview experts to explain how
Putin's deals with China benefit China a lot more than Russia in the long
term. Publicize the success stories of Poland the Baltic states, publicize
the poverty that still prevails in much of the Russian empire.
And so forth. These are mostly undeniable facts, except that the Russian
people rarely heard them.
Putin has been winning the propaganda war for more than a decade, virtually
Do not play the soccer world cup in 2018, one of the achievements of the Putin
era that ordinary people look up to. The world cup is the biggest event in
the world. Let Putin's team play against Kazakhstan, Belarus and North Korea,
while forcing China to choose whom she wants to play with.
It is hard to invoke sanctions when Europe depends on Russia's gas and oil,
but it would be more coherent if Western Europe stopped laundering the money
that Putin's "mafia" ships abroad (see
Comparing Russia's and Western Europe's Kleptocracies).
What to do when Putin stirs separatist fervor in the Baltic, in Moldova and
in Georgia is
simple: destabilize Russia's own regions, starting with Chechnya.
(See this excellent Al Jazeera article).
There are plenty of Russian regions that resent Moscow's power.
Encourage them to seek independence.
The West is fighting the wrong war in Ukraine:
maybe its eastern regions truly want to be Russian.
If the West does not like Russia's policies in general,
the real target should Putin and his "mafia".
The West is instead legitimizing Putin's power.
I am not saying that this would necessarily be a winning strategy.
Putin has mostly outsmarted the West over the years, and the West has often
been wrong on Russia-related issues
(see Putin's Russia).
I am saying that, at least, it would an honest strategy:
let the goal be the fall of Putin's regime not the fight against the will of
the Russian-speaking ethnically-Russian people of eastern Ukraine.
Then, again, a good question is: what happens after Putin? Can Russia
produce an alternative to Putin's one-party nationalistic klepto-capitalism, or
will the next president simply continue his policies? Perhaps the lack of
an answer to this question is the reason that noone seriously contemplates
undermining Putin's current power.
TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.
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- (April 2015)
Comparing Russia's and Western Europe's Kleptocracies.
Today i had the pleasure of hearing Karen Dawisha talk about her book
"Putin's Kleptocracy" at Stanford University. I had no idea that this book,
published by the reputable Simon & Schuster, is banned in Europe because of
Russia's pressures on the European Union. This would be weird enough, but
also it prompted me to investigate (through this book and others) the
connections between what Dawisha (an expert on Russia for 40+ years)
calls "Putin's Kleptocracy" and the European Union.
As Dawisha documents, in the last years of the Soviet Union there was one
entity that foresaw what was going to happen: the KGB, the Soviet spy agency.
The KGB saw how quickly Poland had switched to a multiparty system and banned
the communists and feared that the same was going to happen in the Soviet Union.
Therefore the KGB elite started moving the money of the
Communist Party outside the Soviet Union.
Top-ranking officials of the KGB, independently of Soviet leader Gorbachev,
stashed money in the West with a simple aim:
"the final objective is to build a structure of invisible party economics."
(quote from a KGB memo of 1990). Then the Soviet Union collapsed (in 1991).
A former low-ranking KGB officer stationed in St Petersburg, Vladimir Putin,
found himself with the power to help St Petersburg's organized crime operate
legally. Countless transactions helped the St Petersburg mafia profit from
what were meant to be social programs and then
launder abroad the money from their criminal activities.
In a word, Putin helped created the
colossal chaos and economic decline of the 1990s that later he would be
credited with ending.
(Dawisha credits the former KGB and Putin himself as already having dreams
of rebuiding an empire, but i think this is far-fetched: i think they were
just profiting from the chaos they were creating for reasons of greed and
power. I don't think he planned his rise to power, i think that Yeltsin, who
resigned in 1999, was
such an idiot that didn't see who Putin really was and accidentally turned him
into a national icon of restoration of order. I see him more as a clever
opportunist than a visionary statesman).
There is no question that the other side of the story is still true: after
the demise of the Soviet Union, Yeltsin's government, the first freely elected Russian government,
caused hyperinflation that devastated the middle class, sending
tens of millions of people under the poverty line, while enriching a few
friends through programs such as Chubais' voucher privatization of 1993-1994
and Chubais' loans-for-shares auctions of 1995-1997 (that gifted away
Russia's oil, gas and metal industries).
And these friends, the first generation of oligarchs,
stashed billions of dollars in Western bank accounts as well.
(So far "West" really means "Switzerland").
No wonder that ordinary Russians still think of "democrats" as "thieves".
Dawisha does not emphasize that Russia had already turned into a mafia-dominated
state at this point.
Contract killings had already started: Dmitry Kholodov, a reporter for the daily Moskovsky Komsomolets who was unveiling corruption in the army, was murdered in 1994; Vladislav Listyev, the head of Russia's Channel One, was murdered in 1995. Both cases were closed with no arrests and many believe that the minister of defence himself, Pavel Grachev, was behind the murders.
At the end of Putin's rule in 1999 organized crime already controlled the
state in a way that the Colombian drug cartels or the Italian mafia never
Corruption was already endemic at the top.
In 1996 Boris Berezovsky, Yeltsin's financial advisor,
was promoted deputy secretary of the Security Council
in charge of Chechnya. During the two years that he held that title
Berezovsky was involved in shady dealings with the Chechen "terrorists".
There is enough evidence to lend credit to the theory that he made deals with
Chechen warlords Shamil Basayev and Salman Raduyev so that both him and
them could profit
(both Chechen president Ramzan Kadyrov and
the former head of Kremlin security,
Aleksandr Korzhakov, agree), and even that he engineered the second
Chechen war by luring Chechen warlord
Movladi Udugov to carry a raid in Dagestan that Putin then used as a pretext
to launch a very popular military campaign in Chechnya
(a transcript of that conversation appeared on a Russian magazine).
The most powerful Russian oligarch of the Yeltsin era,
by 1998 Berezovsky had become Russia's richest man.
Thus Putin (whose main mentor within the Yeltsin's government
was, ironically, Berezovsky)
did not invent the collusion between bureaucracy, capitalists
and organized crime: he inherited it. He simply made it more rational and
efficient, changing some of the beneficiaries, and adding a fourth pole to it
when he realized that it helped him stay in power: nationalism.
The rest is history: Putin was appointed prime minister in 1999
and engineered the Moscow massacres of that year that were blamed on Chechen terrorists and that helped him win the 2000 presidential elections.
He quickly disposed
of those who were dangerous (including Berezovsky himself, who fled to
Britain in 2000 and remained protected by the British government until his
death), consolidated power by promoting his own circle of friends to top
positions and winning impressive approval ratings among the Russian
population for his nationalist rhetoric.
Since then Putin and his cronies have scientifically raped Russia, throwing
bones at ordinary Russian families while amassing huge fortunes abroad.
Dawisha writes "risk is nationalized, reward is privatized".
The other side of the story, though, has to do with the West. The West was
not a passive spectator. Russians blame the West for inspiring the "democratic"
reforms that caused the chaos of the 1990s. They should blame the West for
something else. Oligarchs and mobsters laundered their money abroad, mainly
to Zurich and London. Huge fortunes were made in Russia overnight, and
those fortunes were kept not in Russia but in the West. The rich do not
trust the Russian system, which in fact provides no guarantees to citizens
about their property. They, on the other hand, trust the Western democracies.
Therefore what happened was a collusion between the financial world of the
West and the kleptocrats of Russia: the former benefited from the latter's
rape of Russia as much as the latter did.
To this day Britain has no interest in imposing sanctions on Russia because
Britain's top priority is to keep the cash flowing into London, as demonstrated
by a document photographed in 2014 in front of the prime minister's office
(see for example this article).
Real-estate funds in New York have benefited immensely from the flow of cash
coming from Russia (as disclosed by the New York Times in february 2015,
for example this article).
Abroad their property is protected by laws and police. At home it would be
at the mercy of Putin's mood. Western financial markets basically offered
a lucrative service to Russian crooks which amounds to nothing less than money
laundering at the very moment that Western countries were close to
bankruptcy because of the Great Recession.
In fact, one has to worry about Russia exporting its corruption to the
rest of the world.
One of the biggest corruption schemes of all times is
Nord Stream, a pipeline from Russia to Germany: the chairman of the board
is Germany's ex-chancellor Gerhard Schroeder.
The South Stream would have been equally appalling: Russia was going to
run the pipeline wherever it wanted to destabilize countries by buying
politicians. Russian companies still win uncompetitive bids in Eastern
Europe by bribing politicians from Hungary to Greece.
Dawisha repeats data that are now well known:
"the gap between rich and poor has become the greatest in the world".
Median wealth in Russia is a meager $871, lower than India's (and one
tenth of China's).
The annual cost of corruption is estimated at $1 trillion,
about 50% of GDP.
She estimates that "35% of the total wealth in the country is owned by
But the other side of the story is the money that flowed into the West.
Dawisha estimates that $330 billion flew abroad between 2005 and 2013:
that amount is greater than Greece's GDP.
In 2014, as the crisis over Crimea and Eastern Ukraine intensified,
capital flow hit an all-time high of $150 billion.
This explains why the West has tolerated Putin's kleptocracy, the genocide
in Chechnya and the various murders of dissidents: it all benefits the
economies of the European Union and of the USA.
The question then is why the West got angry in earnest (not just for show)
when Russia annexed Crimea.
The sanctions enacted by the USA since them are real because they target
specific individuals whose life's dream is not to live in Russia but to
enjoy the international jetset lifestyle: a villa in Spain, an apartment
in New York, children at Oxford, etc.
Chemezov (an old KGB buddy), Kovalchuk, Rotenberg (St Petersburg mafia) and Timchenko (St Petersburg mafia) alone are worth about $20
billion. They have not kept that money in Russia. They don't want to live
in Russia. They want to enjoy it around the world.
Recently money has been flowing out of Switzerland because of the sanctions,
but not back to Russia: it flows to Dubai, Hong Kong, and other financial
centers that are out of the USA's control.
By blacklisting these oligarchs, the USA has turned them into social pariah who share
the destiny of North Korean and Cuban officials. Putin's adventures in
Ukraine have destroyed their privileged international status.
Why does Crimea matter to the West? Maybe it was just the tipping point.
Or maybe Putin
is right and Ukraine was planned as a crucial step in the West's strategy to
weaken and encircle Russia. Or maybe the West was just looking for a pretext
to launch a campaign for regime change in Russia, and Putin's annexation of
Crimea just happened to come at the right time. Regime change in Russia won't
happen through a popular revolution, given that Putin's approval ratings are the
envy of all Western leaders. It can only happen if the oligarchs conspire to
get rid of a leader who is jeopardizing their lifestyles with his
The West may have tolerated Putin for a long time as someone who was keeping
the nationalists and the old communists at bay. But Syria, Iran and other
international crises are making Putin less and less attractive to the West.
Whatever the reason for the West's crusade against Putin's kleptocrats,
we have reasons to doubt it is based on concerns for ordinary Russians.
TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.
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