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Last Updated: Aug 14, 2008 - 2:36:07 PM |
They continue to stay there and promise to remain in South Ossetia and Abkhazia for the foreseeable future.
This is not surprising, nor is the supine reaction of the European states which have never been occupied by the Soviets. It is the very self-indulgent hypocrisy of the European response which has helped bring about this invasion. The Europeans have locked themselves into a dependence on Russian oil and gas and fear any change. The German government set the tone early when it forced the European recognition of Slovenia and their Ustashi friends in Croatia which accelerated the dismemberment of Yugoslavia. They, and the other Europeans, proved unwilling and incapable of resolving the Balkan War and it took the US and Russia to help set it right; or as right as it could. Now they have engaged in a similar stupidity in recognising the UGK murderers and bandits of Kosovo. To compound their error they waffled on the admission of the Ukraine and Georgia into NATO, inviting Russian response.
This is not to say that Georgia belongs in NATO; only that vacillating on the subject agitates the Russians unnecessarily. The real question is what the Europeans are doing in NATO? NATO was designed in 1949 as a military co-ordination centre for the remains of the wartime alliance. It was not a policy-making organisation. Its job was to formulate military scenarios based on current information and prepare the co-ordinated Western response. That is, it had drawn up plans for numerous possible military crises and had delineated specific troops and equipment from its member states which would be activated immediately to carry out a military plan which had been prepared in advance and for which combined military exercises had been conducted. Its aim was to have a knee-jerk response to triggers from the Soviet Bloc involving all NATO members which could come into play without prior reference to the NATO governments.
This is not NATO today. Today’s NATO is a talking shop of politicians and the military establishments without a focus, a common enemy and without contingency planning. There are very little commitments of troops; no coordination of the logistics functions; and a woeful lack of human and military resources to carry out any policy agreed to by the members. The whole notion of NATO has become transmogrified into a military negotiating committee of wrangling national groups all of whom, except for the US, Canada, Great Britain and Turkey have no military to speak of and whose pretence at projecting military power does not frighten anyone; especially the Russians. The French have troops to bully and massacre Africans but the others don’t even have that capacity.
The Europeans:
The preposterous notion of a European Defence Force is not just fatuous, it defies any analysis. Any European troops which exist have already been coerced into supporting the ‘NATO’ intervention in Afghanistan and are there. Some of them actually engage in military pursuits; the rest are decorative baggage, like the Germans who are constitutionally unable to say harsh words in public. The remainder are marching bands, sporting clubs, retired veterans or officers in the far rearguard surrounded by batmen and lackeys. If there were a war anywhere outside the European autoroute system the European troops would have to walk there, paddle there or bum a ride on a US aircraft or boat. That is not what NATO was set up for. The current crisis has demonstrated just how shallow and impotent is the European response to a military crisis and the debilitating effect of such a position on any possible US response.
How can it be that the Finnish foreign minister at the head of the OSCE can state that he doesn’t care to assess blame for the Russian invasion as this might be counter-productive? Finland has come a long way from 1939 and has obviously failed to teach its own history to its children. There are still some people in Finland, no doubt, who remember November 26, 1939 when the Soviet artillery shelled areas near the Russian village of Mainila, then announced that a Finnish artillery attack had killed Soviet troops, thus allowing to Soviet troops to attack Finland.
What then is the value of the continuing US commitment to NATO, or inviting new members if it is incapable of reacting or offering mutual protection to its members? One might well ask, not if Georgia or the Ukraine should join NATO, but whether it is any use to include France, Germany or, Belgium inter alia in the NATO alliance. Europe has been largely free of major wars since 1945 essentially because one-half of Europe was under US military control and the other half under Soviet control. With the end of the Cold War these occupations ended and the European states were responsible for their own defence. They refused to spend the money required to run a modern armed forces and made do with pretence and bluff. They didn’t see a common enemy so they felt they didn’t have an urgent need for defence. It was easier to pretend to have an army; mostly they didn’t bother to pretend to have a navy or air force. They saw their enemies as third generation warfare. They didn’t prepare much for that either but allowed their police to co-operate with other police.
So, when push came to shove in Georgia the Europeans were impotent and hesitant. They had no force to offer in support of Georgia and couldn’t get there anyway. They wanted to preserve their energy links with Russia so are very careful in their language. In short they are as much use as tits on a bull; they exist but have no useful function.
The Russians:
Fortunately, the other masters of bluff and pretence are the Russians. Throughout the history of the Soviet Union much of their vaunted ‘first world status’ was based on fiction. Except for their military almost nothing else worked. There were no consumer goods to speak of; less food; intermittent public services and the factories were run by central command without reference to price or efficiency. There were at least three people for every important job in the USSR; one from the civil administration; one from the party organisation, and one from the control agencies. The power was not divided equally among them. This was even more complicated in the regions with local party and civil administrators participating and offering advice.
This was monumentally inefficient. No one had sufficient individual responsibility to run anything. There were phantom factories, phantom workers and phantom transport links. These were sufficiently well documented that they passed for reality and got their budget allocations and requisitions. In one year in the 1970s, the most efficient and productive facility in the USSR was a shoe factory near Lake Ladoga which had never been built. It did so well because there was no real factory and no real person was working, and they thus avoided the shortfalls and quota delivery problems which plagued existing companies.
This did not improve with the fall of the USSR. It was inefficiency coupled with chaos. There were no savings, no pricing system, no organised companies or government agencies. It was all done by the seat of the pants management and the intervention of overseas capitalist who came in to make their money from Russian resources. By the end of Yeltsin era and the start of the Putin regime there were many wealthy oligarchs who had risen to power and wealth on the chaos of the system, by a weak central government and a central core of organised crime which was tolerated and indulged. With Putin a new sort of ‘boyar’ came to power; the ‘siloviki’.
The new and powerful people (‘siloviki’) have been almost exclusively drawn from the ranks of the ‘Chekists’. A ‘Chekist’ is a general, if pejorative, term for those who are or once were employed in the security operations of the Soviet state- KGB, GRU, MVD, FSB etc.(the ‘Organs’) Dzerzhinsky’s original agency was the Cheka. Under Putin, these new ‘siloviki’ have been firmly installed in the corridors of power.
Under Putin, the Chekists, primarily the St. Petersburg flavour of Chekist, openly took power as ministers, government advisors, governors, bankers and politicians. There may be as many as six thousand of these Chekists in powerful positions in the Russian state. There is no mystery about who they might be; Nikolai Patrushev, FSB director; Igor Sechin, now head of Rosneft and Deputy Prime Minister; Yuriy Zaostrovtsev, FSB deputy director (and a director of Sovkomflot and first deputy chairman of the board of directors of Vneshekonombank); Viktor Ivanov, deputy chief of the Kremlin administration (who succeeded Nikolai Patrushev as the Head of the Internal Security Department of Russia's FSB and a director of the Antey Corporation and Almaz Scientific Industrial Corporation, developing and producing air defence systems and the Chairman of the Board of Directors of Aeroflot); Boris Gryzlov Minister of the Interior (chief of police); Sergei Ivanov, Defense Minister; former Prosecutor General, Vladimir Ustinov; Sergei Stepashin, chief of the Audit Chamber; Sergei Pugachov, president of Mezhprombank Bank; Nikolai Negodov, deputy transportation minister; Vladimir Yakunin, first deputy president of the Russian Railways Co.; Konstantin Romodanovsky, chief of internal security at the Ministry of the Interior; Viktor Cherkesov, formerly head of the Tax Police (Deputy Director of FSB under Vladimir Putin and Nikolay Patrushev and now the Chairman of the State Committee for the Control of the Circulation of Narcotic and Psychotropic Substances of the Russian Federation); to name but a few. To this list must be added the names of Viktor Alekseyevich Zubkov, the last Prime Minister (having served with Putin in Sobchak’s St. Petersburg) succeeding Fradkov who was named the new head of Russia’s Foreign Intelligence Service. Perhaps the most important of the new siloviki is Rosboronexport CEO Sergei Chemezov. Chemezov has a long, personal history with Vladimir Putin, dating back to their KGB days in Dresden.
Well, one may well ask, where’s the harm in concentrating power in the hands of the siloviki? The unelected ‘vlasti’ have always lived like parasites on the backs of the Russian people, from the days of serfdom, to the boyars to the political commissars to today’s oligarchs. Well, the answer is that today it is Western investors and economies which are suffering along with the Russian people. Western energy security is at risk. This is a different type of stew. While it is interesting to see the continuity of the ‘siloviki’ in historical context, it is their present activities which cause concern. There is little unity in the ‘siloviki’ position. There is no one united plan that they follow. These ‘siloviki’ are in competition with each other and form cliques, alliances and temporary groupings to further their aims. In doing so, they often attack other members of the clan and do serious damage to Russia. There are more factions of siloviki than there are factions of Trotskyites.
The key question is why these ‘siloviki’ have been so determined to move into business and take over control of public companies and take others back into public ownership? The answer is very simple – greed. There are no laws against insider trading in Russia. Putin has allowed the creation of a new set of oligarchs; oligarchs in epaulets. There were phenomenal sums of money being earned in Russia as a consequence of the Yukos case. There is no insider trading law which prevents this. The government knew when it was going to make an announcement about Yukos; an announcement that would send its shares up or down dramatically. It knew when it would announce news about stopping or starting oil flows; an announcement that would send oil prices up or down. If they knew this they could use their banks and broking companies to ‘anticipate’ the markets. Fortunes were made.
This has been equally true in the invasion of Georgia. In the five days prior to the Russian invasion these siloviki dumped their shares and shorted the major companies. These shares (as evidence by the RTS and MICEX) dropped like a stone. When a ‘cease-fire’ was signed these indices and underlying shares rose, after they covered their short positions and went long again. The siloviki made a killing, if you pardon the expression, on the Georgia invasion and are likely to do it again as they manoeuvre the troops.
There is very little to fear from Russia. For years the air force pilots could only fly two hours a week because they had too little jet fuel. There are major industries processing raw materials but very little finished goods. The agriculture trade is still in its infancy and Russia’s infrastructure is creaking and falling apart. Russia is still terribly in need for investment and technology from the West.
It was no less of an observer than Lenin who said "The Capitalists will sell us the rope with which we will hang them." Well, the market for imported ropes has been drying up but the market for imported cash has never been higher in Russia. The reconstruction of the Russian economy into a perverse form of state capitalism, led by oligarchs in epaulets, is not a market structure that would have been familiar to Lenin or his successors. The current structure is a kleptocracy without ideology which manages to combine most of the failings of the former Soviet system with rhetoric of a free market. This has been made possible by the triumph of optimism over experience among Western investors who don’t seem to recognise that their cash is the new rope for their own necks.
The Russian economy is booming, Raw material prices for metals, gas, petroleum and ores are very high. The value of Russian production is soaring. On the other hand, Russia remains desperate for foreign investment and is cash-poor for domestic investment. The policy of Putin and the siloviki has been for the state to retake control of the ownership of the means of production and put them into invisible pockets. Equally as important, those Russian private companies which still exist are taking their investment portfolios out of Russia as quickly as they can. They are listing themselves on the London and New York stock markets to attract foreign partners; not for the cash but for widening of the shareholder base outside of Russia to make re-nationalisation more difficult when the siloviki decide that it their industry which must be retaken for ‘the national security’. Any Russian company of note has succeeded or is in the process of widening its shareholder book to include non-Russians. This has also meant that the cash has stayed outside of Russia as well, as a new ‘internationalism’ has energised Russian companies. They are now moving into the US, Canadian, Latin American and African markets in search of suppliers, alliances with competitors and safer markets.
These developments have had several major effects in Russia. The first is that these companies have become part of the state system. In Russia, this has always meant that there has never been a direct linkage between company activity, productivity and performance with the resources needed for its survival or expansion. The money pot is held by the state, as owners of the shares, and is made available to the companies at the whim or fortune of the group of competing siloviki who control it in the name of the state. Under the Soviet system, Gosplan, was supposed to regulate the management of this process. There has been nothing to supplant it. Theoretically these state-owned companies are the responsibility of a board of directors and management appointed by the state, but their retained capital and cash-flows are controlled outside of the company structure.
This has proved useful when the state wishes to purchase more shares in companies. The state uses mirrors and smoke and fake transfers to acquire companies like Yukos; pretending that these funds have been made available to Rosneft or Gazprom. There are enormous amounts of funds transferring about the Russian economy for share purchases; but no cash. The state can acquire companies this way, but they cannot make them work. Work requires investment in capital equipment; cash for repairs and maintenance; money for research and development, etc. The re-nationalised companies are all competing for the cash reserves of the state and are dependent on which group of competing siloviki has the ear of the keepers of the purse string.
One needs go no further than the Komi Republic to see massive oil spills from broken pipes; radioactive Inuit glowing in the Arctic night from nuclear leakages, and a rapid depopulation of the region due to the government’s inability to manage or invest in repairs. When the state takes over more and more of the oil and gas industry, where will the cash come for the purchase of pipes; the costs of drilling; the maintenance of the rights of way? Ownership doesn’t mean that there will be an end product. If that were true all the poor people with oil, copper and metals concessions in Africa would be immensely wealthy. They are still poor but they have valuable concessions. Modern business requires cash; a massive amount of cash and the Russian government is not making this available.
The Russian military is also a large bluff. Russia hasn’t fought a war since its defeat in Afghanistan, except for their clumsy efforts in Chechnya which is not yet a victory. It has had many problems with its leadership. The Navy is largely falling apart without a repair program. The problems with the Kursk illustrate the success of the submarine fleet. The missile program is out-of date and without the Black Sea fleet in the Crimea Russia remains trapped by ice for large portions of the year. They are the main beneficiaries of Global Warming. In a real battle the Russian armed forces are a lot less than they seem.
Summary:
In short Russia is very wealthy in oil and gas. Over all, it is Saudi Arabia with trees. It needs the West much more than the West needs Russia (except for the European energy consumers). Their vast cash holdings in Western businesses and banks are vulnerable to freezes. Their need for investments remains high if only to keep pace with their own internal demands. They desperately need to improve their infrastructure and cannot do so without external investment.
It is important for the European countries to build as soon as possible, liquefied natural gas trains (receiving stations) so they can get LNG by sea from anywhere. Africa is booming with LNG. The LNG is much more environmentally friendly and, unlike petroleum, doesn’t need to be refined. If the Russians want to threaten to stop oil and gas flows there are sources in Equatorial Guinea, Nigeria, and many other locations which can fill the shortfalls. If there is any lesson from Georgia it is that Europe needs to diversify its energy supply and the best way is LNG.
Source:Ocnus.net 2008
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