Magical Washington-Moscow "reset button" resets only the easy stuff

By Paul Wells - Monday, July 13, 2009 at 4:15 PM - 4 Comments

Obama visits Moscow; Medvedev visits Tskhinvali. Obama wants “Georgia’s territorial integrity” respected; Medvedev demonstrates his enduring belief that Abkhazia and South Ossetia have nothing to do with Georgia’s territorial integrity.

I’m not going to pretend I have an easy answer to this little impasse. If you want easy answers, go somewhere else, ahem. But especially  on the heels of Obama’s attempts to portray Medvedev as the Kremlin’s good cop, Medvedev’s own choice of travel destination seems rather pointed.

A silver lining for Russia

By Nancy Macdonald - Thursday, October 30, 2008 at 12:00 AM - 8 Comments

Amid the global financial bloodbath, few have been as hard hit as some of Russia’s oligarchs: the Kremlin-friendly super-rich. Aluminum magnate Oleg Deripaska, Russia’s richest man, has lost $16 billion in a month. Rumours suggest Deripaska—also embroiled in a political scandal in London—has sacked his servants, replacing them with cheap help from the provincial town of Tula. Russian No. 2, Roman Abramovich, who owns Britain’s famed Chelsea Football Club, has lost half his fortune. The word is he’s postponed his wedding to 26-year-old ex-model Daria Zhukova. Since the market peaked in May, Russia’s 25 richest men have lost a combined $230 billion, 62 per cent of their total worth; when the dust eventually settles, some will have been made “formergarchs,” forfeiting their metals, mining and telecommunication empires.

But it’s not just the oligarchs who are suffering. At a time when Prime Minister Vladimir Putin’s Moscow has been flexing its global muscle, the economic crisis could substantially weaken Russia and help curb its aspirations. At first glance, the country appears to be in deep trouble. Its two key stock indexes have lost over two-thirds of their value, wiping out nearly $1 trillion in wealth. Capital flight is running at over $12 billion a week. And the price of oil, crucially important to the Russian economy—and Russian power—has tumbled more than 50 per cent from a record high of $146 per barrel just three months ago. This week, it hit $64 a barrel, its lowest level in over a year.

In fact, the Kremlin has been forced to adopt a $200-billion rescue plan to shore up its troubled banks and companies. It’s unclear, however, whether the average Russian knows about these elite-level discussions, or, indeed, about the financial crisis itself (less than three per cent of Russians have mortgages or invest in the market). According to the English-language newspaper Moscow Times, Russia’s three main channels—Channel One, Rossia and NTV—have either played down or completely ignored the collapse of the main stock market, the RTS, which halted trading for the fourth time last week, after stocks took another plunge. Ekho Moskvy, Moscow’s independent radio station, says the Kremlin has banned state media from using the words “financial crisis” and “collapse.” (Russians do know, however, that Putin—whose personal popularity, one month into the crisis, has risen to 83 per cent—received a tiger cub for his 56th birthday this month, and that the prime minister, a marshal arts enthusiast, has released a judo DVD.)

Rather than financial ruin, however, some experts are predicting that Russia could emerge strengthened from the global meltdown—and in a position to exert even more pressure on its neighbours and others. The country is cash-rich, thanks to $1.3 trillion in oil and gas revenues over the past eight years, and the Kremlin is sitting on a $500-billion cash reserve: the world’s third-highest hard currency reserves. As well, Russia is largely debt-free (at 8.5 per cent of its GDP). The price of oil, meanwhile, is still double what was considered high just a few years ago. “Here in Russia, officials and experts see the crisis as much as an opportunity as a danger,” says Harvard University Russia expert Henry Hale, reached in Moscow. “They see opportunities to play a stabilizing role in the world economy, and to expand Russian influence.”

Indeed, while state media have downplayed Russia’s financial crisis, they have covered the West’s economic problems; ordinary Russians know that when Iceland was tottering on the brink of financial ruin, it turned to Moscow—not the International Monetary Fund, Washington, London or, indeed, any Western capital—a telling indication of Russian might. (At press time, Reykjavik, which last week agreed to a $2.1-billion loan from the IMF, was continuing discussions with Moscow for a loan worth as much as $5 billion.) And Russia has since announced a $2-billion loan to Belarus, a part of the former Soviet Union still within its sphere of influence. In return, Minsk has pledged to resume common currency negotiations with Moscow, edging it one step closer to all-out union with Russia.

But across the former Soviet sphere, where Russia has stoked separatist fires in recent months—handing out Russian passports in the Ukrainian republic of Crimea, and invading Georgia over the issue of breakaway South Ossetia—banking systems are teetering on the brink of collapse, making those countries more susceptible to the influence of their cash-rich neighbour. So far, they have gone elsewhere for aid. This week, Ukraine, whose stock market has fallen nearly 80 per cent this year, and which recently saw a panic run on deposits, received a $16.5-billion, two-year loan from the IMF; Hungary, its neighbour to the immediate southwest, whose currency and stock market are in free fall, will also receive a “substantial financing package,” from the institution.

Dmitry Medvedev out-poops our puffins

By Michael Petrou - Friday, September 12, 2008 at 12:29 PM - 0 Comments

Russian President Dmitry Medvedev says Georgia’s invasion of South Ossetia was his country’s equivalent of September 11. He also likens Georgian President Mikheil Saakashvili to a “pooch” and describes him as an “unpredictable, pathological and mentally unstable drug abuser.” This guy’s all class.

Georgia/Russia: A good cop emerges, but is that a tin badge?

By Paul Wells - Saturday, August 16, 2008 at 10:01 AM - 0 Comments

This business of a U.S. ballistic-missile defense system in Poland is a long story, but if you’re still reading my posts on the Georgia conflict, you will almost certainly have noticed the bellicose reaction of a senior Russian general, who said:

“Poland, by deploying (the system) is exposing itself to a strike — 100 percent,” Gen. Anatoly Nogovitsyn, the deputy chief of staff of Russia’s armed forces, was quoted by the Interfax news agency as saying.

He noted Russia’s military doctrine sanctions the use of nuclear weapons “against the allies of countries having nuclear weapons if they in some way help them.” Nogovitsyn said that would include elements of any strategic deterrence system, according to Interfax.

That’s maybe not ideal, this threatening a nuclear war thing. But I’m struck by the reaction of Russia’s president (should I put quotes around that word? “President”?), Dmitri Medvedev, who said the U.S. deployment in Poland “is sad news for all who live on this densely populated continent, but it is not dramatic.”

I frankly don’t know what to make of the two quotations juxtaposed. My hunch is that if you think you do know, you’re faking. Things are moving quickly, both Russia and the U.S. and its allies are changing the equation every few hours, but there seem to be two very different messages going out. One question though: If I was the president of a big country and one of my top generals was recklessly threatening nuclear strikes, I’d sack him. Yet Nogovitsyn keeps his job. Does Medvedev approve of his messaging, or is he unable to discipline his generals? (Again, perhaps that one needs air quotes: ” ‘his’ generals.”)