JULES EVANS, LONDON
SHOULD RUSSIA HOST THE G8?
Anne Applebaum, the Pulitzer Prize-winning author of Gulag, has written the cover story for the Spectator magazine this week. It’s called ‘Should Russia Host The G8?’, and the answer is a resounding no. The article is, in some ways, typical of Western op-ed coverage of Russia’s presidency of the G8, and I want to look at it closely to show some of the mistakes that western commentators are making.
The article begins by criticizing the Rosneft IPO. It makes some mistakes right from the start, claiming for example that the ‘part-time CEO’ of Rosneft is also Putin’s deputy chief-of-staff. The CEO of Rosneft, Sergei Bogdanchikov, is very much full-time. It’s the chairman, Igor Sechin, who is Putin’s deputy chief-of-staff.
Applebaum also says Goldman Sachs and Morgan Stanley are lead-managers for the IPO. Goldman Sachs is not involved in the Rosneft deal. It has never done an IPO in Russia, and barely has a presence there at all.
Applebaum says that the Rosneft IPO legitimises the Kremin’s theft of Yukos assets. This, she says, is admitted in the company prospectus, which says the company is controlled by government officials “whose interests may not coincide with those of other shareholders…and may cause Rosneft to engage in business practices that do not maximize shareholder value”. “Translation”, - writes Applebaum, - “when the Russian government walks away with your money – as it walked away with Yukos’ investors money – don’t say no one warned you”.
This is a wilful misinterpretation of the prospectus. Rosneft may indeed not always act in the interests of shareholder value. That’s because it’s a state-owned company, and so will occasionally act in the interests of the state even if it doesn’t make business sense, just like Gazprom does. That should be obvious to investors. The question is whether the patronage of the Kremlin is a sufficient advantage to outweigh the disadvantage of the company sometimes taking decisions for political rather than business reasons. Many investors will conclude that, as in the case of Gazprom, the upside makes it worth it even if the company is inefficient and bureaucratic.
It is fair enough to criticize Rosneft, as Applebaum does, for stealing money from Yukos investors. But shouldn’t she at least mention how Khodorkovsky got hold of his assets in the first place? Shouldn’t she at least refer to the shady world of his business empire, which the CIA referred to in the 1990s as one of the most corrupt banks in the world with ties to organized crime?
She says that the Kremlin’s seizure of Yukos assets has “put a permanent dent in national respect for rule of law”. Come on. Does she really think Russian people believe Yukos was the lawful private property of Khodorkovsky? Does she herself think this?
Khodorkovsky became one of the richest people in the world in one of the greatest robberies ever perpetuated. It was this, and the robberies by other oligarchs, that put the real dent in ordinary Russians’ respect for post-Soviet capitalist democracy. The 1990s privatisations almost killed Russian capitalist democracy in its infancy, totally depriving it of legitimacy in Russians’ eyes. The state’s re-nationalization of Yukos assets was messy and terribly executed. But, as smart commentators like Al Breach of UBS have noted, it may actually help to increase the legitimacy of the post-Soviet system in the long-run.
She likewise accuses the Kremlin of shutting down independent television in Russia. I watch Russian TV quite often, and it’s certainly true that TV news is increasingly propagandistic and one-sided. But again, isn’t it important to point out that TV stations like NTV were formerly owned by oligarchs, who used them as extensions of their political power. If you believe the oligarchs’ effective rule of the country after 1996 was highly damaging and had to be stopped, which I think most sensible people would agree, then the Kremlin had to take control over their TV stations. The question is what to do with them now, which the Kremlin has so far failed to answer.
Applebaum accuses Russia of “gas-pipe blackmail” with regard to Ukraine, claiming Russia tried to interfere in Ukraine’s elections by threatening to raise the gas price. It’s true and regrettable that the Kremlin did and will continue to meddle in the affairs of the smaller countries on its western border. But if you talk about “gas-pipe blackmail”, shouldn’t you at least make the point that Russia was formerly selling gas to these countries at a fourth of the market price? Just to be a fair journalist, shouldn’t you at least mention it?
The author says that a new climate of fear and paranoia exists in Russia. Her evidence? “Recently, when the American Foreign Affairs magazine published an obscure article that idly speculated on the aftermath of a US nuclear attack on Russia or China, the city was instantly awash with rumours of impending nuclear war”. Was it? Do any Muscovites remember these rumours washing around? I certainly didn’t hear any. Does she think Russians pay that much attention to Foreign Affairs, a rather niche Washington publication that no doubt she reads avidly, but is not the stuff of the average Moscow conversation, let alone the rest of Russia.
Fear is back too, she says. “A Russian visiting America last spring told me that he was surprised by how many people, both in Washington and in Russia, had asked whether he’s really returning to Moscow afterwards —‘will you dare go back?’ being a question that no one even considered asking five years ago. It is tragic but true: once again, Russia is a place where the blunt-speaking watch their backs.”
The fact that people in Washington are asking this person if they dare return to Russia is not evidence of fear in Russia. It’s evidence of misunderstanding in Washington. I can’t imagine any serious Russian asking another Russian if they “dare” go back to Russia, unless perhaps they are oligarchs. It’s just totally out-of-step with ordinary Russian opinion.
Russians, she says, are complaining most bitterly about the country’s presidency of the G8. And then she gives as the evidence…yes, Andrei Illarionov. It amazes me that Illarionov merely has to open his mouth, and the western press avidly picks it up. This is a man, let us remind ourselves, of such radically liberal views that he compared the Kyoto Protocol to Auschwitz. He’s no longer in power, and is merely clinging to the lime-light and to the interest of the West by criticizing the Kremlin at every opportunity. His comments are evidence of his desire for status in the West, not the Kremlin’s unsuitability for the G8.
And he is utterly untypical of ordinary Russians’ opinions. So it’s misleading to write, as Applebaum does, that “Russians, not Americans or Brits, are the ones pointing out [that Russia shouldn’t host the presidency]. After all, it is they, not we, who really care about abstract ideas like ‘democracy’ and ‘free markets’ since it is they, not we, who will suffer without them.” What’s she talking about? Does she really think ordinary Russians are all little liberals like Illarioniov, who really care about ‘democracy’ and ‘free markets’, if only the Kremlin would get off their backs? It’s like a Russian journalist saying Noam Chomsky is indicative of ordinary American opinion. It’s just wrong.
I’m not going to answer the question Applebaum raises of whether Russia should host the G8. Why is the G8 such a big deal anyway? It’s a rather pointless club that has never really achieved anything of significance. We should be flattered that anyone is keen to join it.
But what troubles me is the sheer sloppiness of Applebaum’s reporting. This is a Pulitzer Prize-winning journalist writing a cover story for a serious political magazine, and she doesn’t even check basic facts, or have the integrity to put forward the other sides to the criticisms she makes, even when these other sides are crying out to be made.
And most of the article’s readers will nod, put the magazine to one side, and think ‘yes, those Russians really are barbarians’. Their prejudices happily confirmed, their critical faculties generously undisturbed, they will perhaps take a short nap.
Julian Evans, a British freelance journalist based in Moscow.
July 10, 2006
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