The predatory and stifling Oligarchy

          Inside the “poor power”, there are Russians like Croesus. What Elena Lenina published more than fifteen years ago is still relevant and allows, with the eye of an entomologist, to better identify profiles of a species – which by definition is rare – is far from being endangered.

The Russian oligarchs are a bit like the Saudi royal family. We know the most striking figures, but much less the princes of second rank and even less the limits of these categories of persons and the budget they all benefit from.

The State is me, said Louis XIV, but in Russia the oligarchs are also part of he State under another label and with a specific status, different methods and means. Because the oligarchs – and this was particularly visible under Boris Yeltsin, whose re-election they ensured in 1996 – have in a way founded the contemporary Russian state and economy; they even directed them, relying on the State to seize the national wealth; they also sometimes crossed a red line which was that of the political ambition for which Berezovski or Mikhaïl Khodorkovski – the latter imprisoned for many years -, paid a very high price. 

Under these circumstances, and to the extent that they are fairly widely identified with the State of Putin, whether out of conviction, pure interest or even simply weakness, it is entirely justified that they are the target of international sanctions, including nominative ones.

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Oligarchs have not really contributed to the development of the country. Large foreign companies’ contracts with their own groups did not result generally in expected results, be it civil aviation, rail or even nuclear industry.

Were the hundreds of billions of dollars of accumulated reserves used before and after the 2008 international financial crisis to invest in infrastructure, a factor in future development? The answer is naturally negative in the light of the foregoing considerations.

Has the standard of living of the Russian people benefited, as it might have been, from the immense energy and mineral wealth to rare metals such as palladium and titanium of the Urals mines, which is absolutely necessary for aerospace industry? The answer is the same.

In reality, the State – the ultimate decision-maker in the big business of a mixed economy whose oligarchs are both figureheads and beneficiaries, without forgetting substantial retro-commissions – is especially concerned when contracting with western groups to divert as much as possible Western technology. The oligarchs, on the other hand, focus mainly on the complex financial circuits on which are grafted many partners.

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Appearances are generally misleading. M&A transactions respect the forms, with the support of specialized law firms and renowned banks. But the reality is hard to pinpoint. Indeed, how can we be sure of the reality of things when audit teams are multidisciplinary and plethora, usually operating in open and regulated economies, are set up from Zurich, London or Paris and are suddenly immersed in an economical environment,  sometimes provincial and in any case impenetrable, where they have no reference?

A very bright and friendly Russian oligarch, who lived abroad and came to Moscow only under heavy protection as a head of state, had asked me about the methods of an audit which involved the coming every week from European cities, of 80 people reunited in teams of technicians, lawyers and specialists of finance. He concluded our exchange by saying, “I don’t know what your audit budget is, but you could cut it in half. Anyway, you won’t learn anything and you won’t understand more in the end.” He ended up making his own estimate: if we respect his orders of magnitude he considered that we had spent 2 when in his opinion it should have cost only 1; He didn’t really know that our budget was 10, meaning that the difference had not been lost for everyone.

To the opacity, is added endemic corruption at different levels. It takes the form of a “glass wall” for cases of a significant amount. You don’t see it, but you bump into it and you don’t progress an inch. Such a system, is made of meandering and obscurity, behind great declarations on cooperation and modernization.

Russia has never realized a very high speed train (NB: high speed starts in Russia at 200 km/h) between St.Petersburg and Moscow, yet ideal distance of 800 km between the two most populated cities of Russia. The cost had been estimated at $20 billion, a considerable amount, but rather insignificant compared to the loss of $200 billion in four months (November 2008-February 2009) – because of the unnecessary intervention policy of the Central Bank of Russia to stem the decline in the value of the ruble – and also the benefits expected in terms of regional economic policy and economic development that would have resulted from the high-speed train.

This same TGV had also been considered for a time for a Moscow-Kazan line in Tatarstan, a city 1500 km away. The same goes for the Moscow tram, whose renovation was necessary for a cost of 9 billion dollars, according to the estimates of the City Hall of the capital then headed by Yuri Luzhkov. And we could multiply the examples in the aeronautical industry as well as as nuclear industry and there is much to fear that history will not pass the dishes twice.

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One can be skeptical about the capacity of the governmental apparatus and a real will to reduce this gangrene due to consanguinity at the highest levels. It is not always a real complicity because the relationship can be competitive in the good old tradition of the relationship between the tsar and the boyars.

This latter dimension of the problem may explain, at least partially, the Khodorkovsky case. Putin had gathered (summoned) around him the main oligarchs (2009, 20010?) for breakfast at the Kremlin. On the same day, an hour before, the Russian justice made public (NB: at 7 am!) His decision to extend Mikhaïl Khodorkovski’s sentence by an additional 7 years in prison. The message was clear. Moreover, can we imagine that the State does not have the means to stem an annual flight of capital to private accounts abroad which amounts to tens of billions and exceed in any case, the estimated annual cost in recent years of $60 billion for the modernization of the Russian army? So there is a pendulum movement between latent opposition and complicity.

The latent opposition can never rise to political ambition because it is then a casus belli for the executive power. The Navalny case is probably more complex and it should be remembered that poisoning intervened on a flight from a city of the Urals, back from the Russian Far East where the opponent had campaigned against local oligarchs. So, convergence of interests or not?

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Probably the most serious problem for Russia is that the oligarchic system has stifled the development of democracy and killed the Republic in the bud, which is not exactly the same thing. The appropriation of national wealth is in fact the main factor blocking any virtuous evolution.

Russia will not be able to save itself from a revolution that we naturally hope will be peaceful. “es gärt im Volke” (it ferments in the people), said Thomas Münzer during the Peasant War in Germany in the 16th century. Is the Russia we have before us as monolithic as we think? Don’t the thousands of anti-war demonstrators, facing the City Hall on Tverskaïa Street, give us some answers?

If this cry of revolt is powerful and comes from the depths – but it would be dangerous to affirm it with certainty – it provides us with some elements of explanation about the military intervention in Ukraine which is in fact a war against Europe, freedom and democracy, for the perpetuation of lies and the exploitation of man by man. These Leninist post-communists have even forgotten the thought of Karl Marx. Have they even studied it? Would it be up to us to teach them?

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The real world of Russian oligarchs is surreal and even beyond fiction. Russians like Croesus provides us with an excellent introduction. To complete the description can lead to propose a bad novel, but there is no other option.

A leading figure of oligarchs, if not of the band, is the best known though the most secret and discreet among his peers: Roman Abramovitch, the Prince of Londongrad. In order to try to be forgotten a little, he has just handed over the management of his football club to a charitable organization. But we must not forget that the richest man in the United Kingdom was elected Deputy in the Duma in 1999. He represented the region of Chukotka, located in the Russian Far East, facing Alaska, 9 hours by plane from Moscow. Governor of the region in 2000, while living in London, he was re-elected by the Russian executive. Tchoutotka holds important gold deposits, this is not invented. But did he really need it, when his greatest feat of weaponry was to sell back to the Russian State for 13 billion dollars the Sibneft energy company (NB: Siberian Oil) that he had bought for a bite of bread!

At a more modest level, but the adjective seems out of place in this case, which is almost at the other end of the spectrum, we could talk about this President – in his spare time – of a Sports Federation which, As such, had visited Olympic Games in North America. From there, he had travelled toCosta Rica on his 200-seat private plane to compete in a World Angling Championship. It was still expensive for the fishing rod, which hopefully had to be provided to him so that he could write off his travel expenses.

Lena (for the intimate) Lenina, a woman of great intelligence, not dominating and brittle, but of a natural femininity because coming from a Siberia more in conformity with our myths and our imagination, gives us many illustrations in her entomology book  Russian as Croesus.

I met her for the first time at a reception in honour of Ievgeni Primakov, former Foreign minister and former Prime minister of the Russian Federation, proof that she was not lacking in interpersonal skills. In the midst of an assembly of men dressed in an austere manner, one would have said «Brigitte Bardot surrounded by babouchkas ». 

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My first guide, when I arrived in Moscow, still capital of Soviet Union, a few days after the coup against Mikhail Gorbachev, was eating half an apple for lunch. She seemed seized above all with a fever of culture and knew by heart all the works of the Pushkin Museum and the Tretyakov Gallery.

The keeper of the diplomatic compound where I later resided, seemed to have only one shirt, but he would have shared it. He invited you in the winter to drink a hot tea in his modest hut when he sensed that your morale was low.

Yes, Mr Putin, I am also nostalgic for the Soviet Union, but it is probably in a very different different way as yours. My attraction was about human, not power. The “greatest catastrophe of the 20th century” lies in our different approach to the realities of the world.

 

Help, Karl © PP

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