The Leopard Quietly Grows His Spots Back
By ATWadmin On March 24th, 2007Strange as it might seem for my first ATW post, it is a Guardian article I wish to highlight for all to peruse. It concerns the plight of the opposition parties in Russia, deepened further by Putin’s lackeys in the Supreme Court outlawing the small Republican Party in a move which reduces the official opposition to just three parties, former Chess champion Gary Kasparov’s United Civil Front, the National Bolsheviks, and the Popular Democratic Union.
Those of us with long memories remember all the Russian technology found within Iraq during the first Gulf War, and the Russian listening posts which were picked up by radio but never positively identified. Russia of course has a long history of providing weapons and aid to Arab States, even to the point of threatening military intervention during Arab-Israeli conflicts should Israel actually launch full-scale retalitaory invasions having defeated the Arab armies. Even today it was one of the first nations to recognise the Hamas terror government, indicating its continued willingness to maintain ties with the West’s enemies in the Middle East. As the USSR it used proxies throughout the world to attempt to destabilise and stretch the West militarily, but was always to some extent hampered in this goal by having its own military capability hamstrung by the need to internally administer such vast tracts of territory, many of them containing ethnically homogenous population groups which were at best uncooperative and even at times downright rebellious.
Now of course the new Russia is unburdened by many of those unruly population groups, and is quietly but carefully rebuilding the previously rotting infrastructure of its military. It has become aware that it can wield huge political power against Europe by use of energy supplies and of course by the EU’s eternal willingness to barter massive bargaining chips away for the sake of ‘goodwill’ when it comes to the democratic aspirations of its nominal client governments such as that of Belarus.
It was just a few days ago that somebody chastised Tom Tyler on an ATW thread for ‘missing the fall of Communism’. Well, Communism may have fallen, but its traditions and (for the ‘ethnic Russians’) legacy of powerseeking definitely lives on. Welded into one leaner state, with a resurgent military and iron-hard dictatorial power, the ‘new Russia’ is it seems beginning to turn back into an entity the West should once again learn to regard with the utmost caution.
DSD,
Good post on a thoughtful topic. As you say, Russia is changing but not for the better under Putin. I fear that our dependency on Russian energy may give us huge problems ahead.
Yes a good and thought provoking post. With all the current focus on the Islamic militant threat we should not forget the grizzly eastern bear.
DSD
Well said.
It was me who pointed out that gangster capitalism has replaced communism in Russia. Perhaps I should have described it as corporate state gangster capitalism, since most of the big players like Gazprom are state-sponsored.
And of course the energy blackmail card will be played against Western Europe for all it’s worth. All the more reason for Britain to get on with alternative energy asap – nuclear, wind, wave, tidal and solar. Anything’s better than Russian gas in the long term.
And assume that Russia will not be a proper democracy for decades to come.
"Anything’s better than Russian gas in the long term."
Amen to that.
Great post – dont think it will send Cunningham into a seething spitting rage but that wont take long, you managed that by merely announcing your arrival – fun to see
Welcome DSD…
Peter – agree 100% – we dont need to be tied into another region run by overpaid gangsters.
They also led the Egyptian army in it’s spectacular crossing of Suez into Israel, a highly competent manoeuvre, and a one-off for the Arabs. provided all the air cover. And all the while arrogantly guaranteeing Arab territory in the event Israel managed to fight back.
We, in the West, put up wihh this like lemmings.
Don’t share your analysis about the Gangster capitalism. Most of the ‘oligarchs’ are now tucked up in safe havens like London, and seem to have fallen out with Putin. I think Putin may be a bit maligned, and there’s a danger we may swallow the propaganda of his enemies.
No shame in linking to the Guardian, to my mind. Once you learn to read between/ignore the lines of its obvious left-wing bias, it’s a pretty good, incisive read actually. I rarely agree with the broad thrust of its analysis/commentary articles, but they do make me think.
….Apart from Steve Bell’s cartoons which I simply find crude, and Toynbee who is just laughably inane, that is.
Well , NATO supported the islamists in Bosnia and Kosovo just like they did in Afghanistan . The wounds of the West are mostly self-inflicted .
Instead of fighting alongside Russia and its traditional allies against islamists , the West is busy tearing apart a nation state – Serbia .
They simply lack geopolitical common sense – by opening another front with muslims – this time inside Europe .
"Most of the ‘oligarchs’ are now tucked up in safe havens like London, and seem to have fallen out with Putin."
Indeed , the UK is supporting those shady people – as long as they have something to offer in return , that is
Don’t forget Sweden and Norway supporting Hamas in a time when even Russia lost its patience with muslims ( see the Iran reactor case )
I have a friend who does very serious resettlement work in places like Kosovo. As a sideline he also collects witness testimonies to help build war crimes cases. Trust me when I say that in the case of the Bosnian conflict it was both right and proper to be protecting the Bosnian Muslims against the appalling aggression of the Serbs (not that NATO really tried very hard).
You have to understand that Bosnian Muslim society was/is not a radicalised one such as in the Middle East. Normally as I’m sure your aware I am the last one to leap to the defence of Islamists but I honestly dont feel you are being either fair or correct in this case.
Russia may have its own Islamic issues but this hasnt stopped it aiding and abetting Islamists which dont directly threaten it where it helps to destabilise and militarily stretch the West.
"it was both right and proper to be protecting the Bosnian Muslims against the appalling aggression of the Serbs "
It will be amusing to see the same muslims busy to replace the western civilisation with their own – sharia law and all . The work of NATO reminds me of the westerner who built the great bombard for the turks , just in time to conquer Constantinople and kill the christians , westerners included
"Bosnian Muslim society was/is not a radicalised one such as in the Middle East."
They only wanted to kill christians ( serbs , croats etc ) and jews , right – and they will do that again , with the support of the jihadists who entered the country and settled there by marriage . Just look at Albania today – it’s rotten to the core – and yet they want more and more land .
"aiding and abetting Islamists "
Come on , even they are bashing Iran today
And the UK is packed with evicted russian oligarchs with dirty hands who fight the russian government , yet nobody says a thing 
Thought that this piece written by Eric Kraus may be of interest:
Since the beginning of the Putin era, the kind reader will have been repeatedly warned of Russia’s impending collapse. Hair-raising stories in the financial press told of dysfunctional government, criminal oligarchs, industrial decline, corruption and chaos. Yet oddly enough, since 1998 Russia can boast the world’s best-performing equity market (the RTS Index has appreciated from 58 to >1930, i.e. more than 37-fold!) as well as the fastest GDP growth rate of any country outside of Asia. Why?
Neither of the two usual explanations: "it’s just a bubble," or "oil prices!" hold much water. Markets can temporarily move out of sync with their fundamentals, but they tend to snap back fairly fast – witness the Russian Bubble of 1996-97 (or NASDAQ 2000). For a "bubble" to grow continuously for almost a decade would suggest that it had an unusually strong skin. As for oil prices, certainly, they have been the icing on the economic but then oil prices are high for Venezuela and Saudi Arabia too, yet their markets are in the tank. Furthermore, relatively high oil prices in 1995-96 did not benefit Russia – the notorious Russian Oligarchs pillaged their own country, pumping their export revenues abroad. As Russia starved, a few unscrupulous operators such as Mikhail Khodorkovsky became fabulously rich.
The resultant 1998 debt-crisis marked a watershed – over the ensuing years, Russia prepaid the lion’s share of her foreign debt, while the economy has doubled in size; at $310bn foreign exchange reserves are now the world’s third largest; inflation has fallen into the single digits for the first time in 20 years while Russia is rated investment-grade by all rating agencies.
Russia’s spectacular recovery from the crisis was made possible by some tough belt-tightening. First, they stopped borrowing. Under Putin the tax system was revamped, with a 13% flat tax on income (Russian immigration forms are available on request!), provoking a huge increase in tax receipts. The government ran massive trade and budget surpluses, and the $100bn "rainy-day" Stabilization Fund meant to buffer the effects of commodity price volatility is now large enough to last an entire monsoon; Russia could maintain 2006 budget spending unchanged for four years at any oil price – Including zero.
With real revenue per capita growing at more than 10% per year, there is an explosion in Russia’s middle class – retail distribution is growing like wildfire as vast shopping malls mushroom up around the major cities, consumer lending is rising to European levels, mobile phone penetration has surged to over 100%…and with several hundred thousand new automobile registrations each year, traffic in St. Petersburg and Moscow’s is grinding to a halt (ah, for the good old days, when one could have safely stopped to have a picnic in the middle of any Soviet street…) For the first time ever, the average Russian can enjoy the things that Americans have long taken for granted: buying a car, a new washing-machine, and escaping the cold Russian winter for a quick flight to the beaches of Egypt.
Politics
While investors in the G7 countries can usually pretty much ignore the politics, in the developing countries, this is often the top economic consideration. Thus, to understand the current situation, we need a brief historical overview:
Unlike America, which has enjoyed two really good centuries, Russia’s last millennium was – to put it mildly – difficult. It began with the catastrophic Mongol invasions, proceeded through Tsarism, devastation in the Napoleonic Wars, a largely wasted 19th Century, then the Bolshevik revolution, with renewed devastation in the two World Wars – where Russian losses dwarfed those of any other combatant.
By the mid-1980s when Mikhail Gorbachev came to power, the Soviet Union was showing the strain. Collapsing commodity prices, rising popular expectations, the Afghan war, and an increasingly-restive Eastern Europe were major challenges to the Communist Party. Yet vitally for the understanding of current Russian policy, the Soviet Union had seen off far worse crises since the 1917 Revolution; and in 1986-89, while it was shaky, it was nowhere near collapse. Instead, the Soviet Union was the first empire in history to voluntarily legislate itself out of existence.
While this voluntary liquidation was greeted as a millennial event in the West, for the average Russian, it was a period of intense misery. Prices soared as the rouble lost all value; with the social and industrial infrastructures collapsing, hunger stalked the streets. Russia was repeatedly humiliated on the global stage. Although well-intentioned Western leaders had vowed to respect Russia’s security concerns, nature abhors a vacuum; the temptation for NATO to forget Reagan’s promises and advance NATO’s forward bases up to Russia’s borders "just in case" proved irresistible. For ordinary Russians, the good-hearted Western powers and indeed, the very term "democracy" gradually became synonymous with hunger, chaos and national humiliation.
Economically, the 1990s were a lost decade. Russia had neither the historical experience of capitalism nor the institutions necessary to support a sudden liberalization. Instead, privatization benefited only a tiny fraction of society as the brutal "Oligarchs" gained control of entire industries by corruption and violence. Some of these same men are now belatedly spinning themselves as "heroes for democracy and transparency." That many in the West are ready to believe such fables demonstrates the power of well-managed PR!
At Yeltsin’s invitation, the Russian regions gradually broke away from central control; the regional elite – generally Soviet-era bosses-turned-privateers – built their independent kingdoms. The supposed Russian "free press" was firmly under the thumb of the Oligarchs who first demanded that their tame journalists ensure the dubious reelection of a desperately unpopular Boris Yeltsin in 1996, then, after winning the election, turned their fire on each other in the "Banker’s Wars", helping to bring down the "Young Reformers" government and ushering in the 1998 financial crisis.
When Yeltsin’s surprise resignation on New Year’s Eve 2000 catapulted then-Prime Minister Vladimir Putin into the presidency, the latter found himself at the helm of a badly-holed ship. The Western press gave Putin little chance of success, predicting that, like Yeltsin before him, he would be hamstrung by the all-powerful Oligarchs and their closest allies, the corrupt regional governors.
In fact, Mr. Putin was made of far sterner stuff than anyone suspected. He quickly moved to break the power of the most arrogant of the Oligarchs, while reducing the regional governors to dependency on the Kremlin. Tax and fiscal policy were totally revamped, reform legislation pushed through a newly-compliant Duma, vital energy resources were at least partially reclaimed by the State (like in every other major oil exporter) – and suddenly, Russia was back in business.
From Politics to Geopolitics
Many in the West have voiced concerns about the supposed loss of democratic freedoms – some perhaps sincere, but others clearly to advance their personal agendas.
Yes, Russian democracy remains very imperfect, although it is not intuitively obvious why Vladimir Putin, who regularly polls above 80% approval ratings, is any less "democratic" than was Boris Yeltsin, who rarely managed to make it into the 2 digits! Perhaps the systematically negative tone to Russian coverage by the foreign press since 2000 may have something to do with the fact that, while Yeltsin craved the approval of the West, Vladimir Putin has been far more focused upon courting his Russian electorate.
In any event, of the most successful emerging countries which rose from grinding rural poverty to
first-world wealth in a single generation, – first Singapore, Korea and Taiwan; now China, Vietnam and Russia – none was remotely democratic, at least during their early transition phases. Of course, as countries become richer, their rising middle classes gradually demand more political representation. Russia is not there quite yet.
The good news, on the other hand, is that any talk of a new cold-war is totally misguided. The Cold War was a confrontation of ideologies – today, like China, Russia has no desire to spread her politico-economic system to the rest of the world. Instead, Russia has entered into the hyper-competitive global capitalist game, and Mr. Putin intends to see Russia regain her status as a major economic, energy and diplomatic power in a multipolar world.
Comparing Russian with Chinese diplomacy, the Chinese appear happy to let Russia take the diplomatic flack, while they sit back, quietly and skillfully advancing their pawns. Russia, on the other hand, insistently demands her place at the top table because Russia feels herself to be a stake-holder in the current geopolitical system. No one in the Russian government is crazy enough to imagine that Russia can rule the world…nor even half of it. China, of course, may have other intentions.
It would be sheer madness for the West to continue antagonizing the Russian Bear, snatching defeat from the jaws of victory by pushing Russia into China’s welcoming embrace.
Economics
From the investor’s standpoint, Russia’s recovery can be divided into three phases:
-In the immediate aftermath of the 1998 crisis, Russian Eurobonds offered yields of 50% per annum (Russia never missed a payment on her external debt). It was easy money, at least if one believed that the whole country was not about to disappear off the map!
-By 2000, the bonds were getting pricier, and it was time for a look at the blue chip natural resources stocks – mostly oil and gas. With Russia’s top oil company, Lukoil trading at $6 (a P/E ratio of less than 2), and shares in the world’s largest gas company – Gazprom – going for pennies, it was akin to shooting fish in a barrel. Significantly, Russian domestic investors who – until then – had wisely avoided their own equity market were quick to recognize the new opportunities; they, and those few foreigners willing to make the leap of faith, enjoyed rich pickings.
-Now, seven years later, although the Russian RTS market index still trades at a tempting discount to its global emerging peers, the lowest-hanging fruit has already been picked. The blue chip equities still represent good value, but investors can no longer hope for 3-digit annual returns. Given the high taxation of oil exports, the Russian oil companies are becoming utilities – offering modest but unexciting profits at any realistic oil price, and the sharpest investors are looking further afield.
Sometimes the accepted wisdom is right. The global economic center of gravity is currently shifting from the G7 countries towards the industrial powerhouses of Asia – also enriching countries such as Russia, Argentina and Brazil which supply the "Dragon economies" with the commodities they so crave.
Smart investors are surfing this wave. The commodities cycle turned in 2000 – although in nominal dollars commodities now seem expensive, their real inflation-adjusted prices are just now rising off of their historic lows. With Asian economies firing on all cylinders, commodities are set to run right off the charts.
The main engine for Russian economic growth will remain the supply of raw materials to the Asian dragons: not just oil and gas, but also metals (precious and industrial), ores and minerals, chemicals, fertilizers and forestry products. After 50 years as the world’s top agricultural importer, Russia has become a significant exporter.
That said, as the Russian economy diversifies and Russia becomes a middle-income country, the best investment opportunities will be found the fastest-growing industries – companies oriented towards satisfying domestic demand: retail, construction, real estate, banking and insurance, telecoms, automobiles, etc. Yes, serious problems remain: creaking infrastructure, very uneven corporate governance (ranging from "international standards" to "simply dreadful"), too much bureaucracy and – like the world’s other two fastest-growing economies, China and Vietnam, widespread corruption. Yet, over the past 8 years, investors have been richly rewarded for taking the risk – provided that is, that they are present on the ground in Moscow, run properly diversified portfolios, and keep a finger on the pulse.
Russia is a vital part of any emerging markets portfolio, and investors wishing to prosper over the coming years must have some exposure to these powerhouses of global growth. While US-listed ADRs allow direct purchase of the Russian blue-chips, it would be unfortunate to miss the mid-cap opportunities, and for those not inclined to follow the market full-time (including nights and weekends), it would be best to invest via funds. The Russian bear is back, flaunting his new horns!
AMDG,
"They only wanted to kill christians ( serbs , croats etc ) and jews , right "
Sorry pal, but that simply is not true. The Bosnian Muslims were not the aggressors in any way shape or form. Unlike say, the Croats, they had no recent history of anti-Semitism or religious fundamentalism. As a community in WW2 they took no sides, unlike the Serbs and Croats.
"Come on , even they are bashing Iran today
"
No, they arent. Last time I checked they were offering up nuclear technology in exchange for some not exactly demanding conditions.
As far as the oligarchs go, well London is also host to the leaders and HQs of some of the world’s most notorious Islamic terror organisations. Your point being?
Stu,
Interesting article, notable for the cute lines such as:
"Yes, Russian democracy remains very imperfect, although it is not intuitively obvious why Vladimir Putin, who regularly polls above 80% approval ratings, is any less "democratic" than was Boris Yeltsin, who rarely managed to make it into the 2 digits!"
Putin’s poll ratings are give out by…the media that Putin exercises total control over. The Russians are brainwashed by constant pro-Putin propaganda with no room for opposition voices to be heard. A little bit beyond ‘very imperfect’, and a very snide implication that its OK for us to condone such activities as long as the little worker ants are happy in their brainahsed state. Sounds like…oooh, I dont know, Communism?
"It would be sheer madness for the West to continue antagonizing the Russian Bear, snatching defeat from the jaws of victory by pushing Russia into China’s welcoming embrace."
LOL, what a wonderful statement. If the author truly believes that the Chinese (who even when both nations were Communist sat glaring across the border at the Russians for decades just itching for the right moment, held back ony by that pesky old nuclear deterrent) are going to welcome the Russians with open arms *ever* then he/she really needs to a) read up on their history and b) tighten up the screw they obviously have loose.
The economic data in the report may well be credible but I’m afraid that ‘political’ elements are woefully incorrect.
DSD,
Yes, but the Chinese and others will, of necessity buy much of what they need from what Russia has in abundance, oil and gas particularly.
The politics? It doesn’t really matter; Putin will brook no opposition in his efforts to rebuild Russia, witness Shell’s difficulties in the Sakhalin-2 scheme.
I’m no shill for Putin but I think that we in the West had better understand his strategy.
" Unlike say, the Croats, they had no recent history of anti-Semitism or religious fundamentalism"
You should really read medieval history . The problems in the Balkans are quite old , and the arrival of the muslims there changed a lot the status quo . At present , there are plenty of jihadists married with bosnian women who don’t exactly like the west . Check also the connections of Albania for an accurate picture . Bottom line – the Balkans are an Afghanistan in the making .
"they were offering up nuclear technology "
Useless for weapons
Should I mention too the western technology transfer towards Saudi Arabia , the biggest sponsor of terrorism ? Or the western origins of Pakistan’s nuclear weapons ? 
So , will you fight for the muslims in Bosnia while the west is fighting them , from Pakistan to Somalia ? How amusing …
Good first post. Not much to disagree with even!
Its worrying how the glasnost and perestroika seem to be distant memories now.
I don’t agre with the defeatist tone of one of the posters above in terms of any actiona gainst Russia will push them towards China. However, realistically what can we do? (genuine question)
On the Bosnian Muslim thing, I’ve only met one Bosnian Muslim (who was in Sarajevo throughout the Siege) and she seemed a fairly happy beer drinking sort (ie non-fundamentalist), but by her account was typical of the vast majority of her compatriots. In terms of history, that community has less reason to be ashamed than any in former Yugolsavaia.
"You should really read medieval history . The problems in the Balkans are quite old , and the arrival of the muslims there changed a lot the status quo ."
AMDG,
No offence but I already have. I was quite careful to say no *recent* history.
I find it severely bogus to suggest that that Albania and the Balkans will soon open up a new jihadist frontline. Because it simply isnt happening, when all around the rest of the world the Islamists are bombing and murdering to their heart’s content. Not at all.
You might think that the idea of a society of genuinely secular-oriented ‘moderate’ Muslims is a fairytale. I think it was there in Bosnia for all to see, and the West let it down. But I also think it isnt too late to salvage it – time will tell.
DSD
What do you think of Turkish Islam then?
I ask as presumably Bosnian Muslims were
presumably connected to / descended from the Ottoman presence in the region.
Also, Turkey is a fairly aggressively secular nation. Their national hero, Attaturk was a bit of an enthusiastic drinker, gambler and womaniser.. not exactly promising fundamentalist material.
What about the ethnic cleansing – getting rid of the Christians ? It’s been happening in that region since the Turks invaded, and it’s still happening now(with a vengeance).
http://www.jihadwatch.org/dhimmiwatch/archives/007684.php
sorry for the typos in my message above.
basically i was wondering if you think that the Turks are similar to th Bosnians in the not-very-jihadi scale.
"I find it severely bogus to suggest that that Albania and the Balkans will soon open up a new jihadist frontline. Because it simply isnt happening"
It happened already in Bosnia , and it will happen now as well – hint – the violence in Kosovo is escalating , and will taint the whole region with another outburst .
"You might think that the idea of a society of genuinely secular-oriented ‘moderate’ Muslims is a fairytale"
Look at Turkey – they kill there christian priests , armenians , persecute kurds who want their nation state and so on . Are they the "moderate" muslims you want ?