Wall Street Journal
March 30, 2007
By Garry Kasparov
This month's flurry of auctions for pieces of the state-controlled Russian energy company Rosneft has attracted an impressive number of A-list banks and Western energy companies. Many reputable corporations seem happy to loot the corpse of Yukos, the dismembered parts of which are being sold and handed off, over and over until the last drops of blood are cleaned away.
That's a disappointment, but not a surprise. The surprise will come when the investors find out their Russian partners are cashing out as quickly as possible, ready to head for the hills -- or their mansions abroad -- in the face of rising political and economic uncertainty.
Anyone trying to make a fast buck investing in Russian President Vladimir Putin's police state should first practice our traditional triple kiss. That's one for kissing off moral principles, another for Mr. Putin's backside, and the last to kiss their money goodbye when a fresh government comes in and starts looking into all these dirty deals.
While the Kremlin's favorite oligarchs pack their suitcases (doubtless full of cash), the former head of Yukos, Mikhail Khodorkovsky, sits in prison for not bowing low enough in front of the Kremlin throne. Yukos was only the biggest and best-known example of what has become standard practice under the Putin regime. There is no dividing line between bureaucrats, gangsters and the police. Allegiance to the Kremlin is the only thing that matters.
The loyalty screws are being turned tighter, illustrating the administration's increasing instability and paranoia. In recent weeks, the Kremlin's political cleansing continued with the liquidation of the Republican Party led by Duma member and Kremlin critic Vladimir Ryzkhov. In a batch of recent political appointments, old cronies from St. Petersburg were called up in force -- for example Alexander Veshnyakov, one of the architects of our stage-managed election process, has been replaced. Vladimir Churov, who in his four years in the Duma never proposed a single piece of legislation and never once spoke in parliament, is now in charge of next year's presidential election. Mr. Churov was elected to the post on a competitive basis -- with one name on the ballot.
It would be easy to believe that Mr. Putin picked up the concept of "stay the course" when President Bush discarded it last year. Mr. Putin's course, in brief: Loot as much public and private money as possible and get it into the companies and personal accounts of those loyal to the Kremlin. Clean the looted assets abroad with IPO's, auctions and eagerly complicit Western investors. Crack down on any sign of public or political opposition, no matter how small, using overwhelming force. Invalidate or ban parties and groups opposing the Kremlin. Harass, beat and even jail their activists. Shape the election laws to strip away democratic rights and civil liberties. Create menacing new laws that allow the executive and its courts to define anything they like as "extremism." Maintain tight control of the media, especially television, and use it to promote the regime and its leaders while blaming "foreign-sponsored extremists" for all problems.
Western political leaders, pundits and investors are willing, even content, to accept this in the name of the cherished legend, "stability." But when 20,000 police are amassed in Nizhy Novgorod to smash an opposition rally, does that speak of stability? What about when the local government blocks access to a Russian pro-democracy opposition Web site?
The outdated Russian infrastructure is collapsing and it's taking the Kremlin's façade of stability down with it. The standard of living for a huge majority of Russians is declining steadily. The 20 million or so Russians lucky enough to live in Mr. Putin's dream world of energy riches and its ripples are all the West sees, or wants to see. The remaining 120 million are becoming poorer and more agitated by the day.
The uncertain battle over what will happen when Mr. Putin is supposed to step down from power in 2008 is the primary cause of the increasing shakiness of the administration. But it is not the only cause. The nationwide pyramid scheme that sucks the money out of the regions and funnels it to Moscow and St. Petersburg is running dry from the bottom up. There are countless bureaucrats who are now being squeezed, so they must squeeze harder themselves. The top is taking from the middle now, and before this year ends the elite will turn on each other. We can only hope that there is still some cash left for the next government to stabilize and rebuild. Any administration wanting to bring about genuine change will have to move a lot of debris first. In many cases the existing bureaucratic structures will have to be demolished and built again from scratch.
The missing link is that, due to the Kremlin's complete control of the media, few Russians make the connection between their problems and the current administration. The reforms of the 1990s, mainly associated with Yegor Gaidar and Anatoly Chubais, created in most Russians' minds a link between free markets, democracy, corruption and poverty. The Putin regime consistently exploits those fears. They say, "it's dirty and unfair, but this is democracy, this is capitalism. Look, here is your president welcomed as a peer by President Bush and the rest." The Kremlin wins on both ends. They profit from each transaction and then go on the news to blame these shady and rapacious dealings on the corrupt and imperialistic West.
The Kremlin's policy has its supporters outside of Russia as well. A recent editorial by Henry Kissinger called for "maximizing incentives" and "removing frictions to active cooperation" between the U.S. and Russia. If Ronald Reagan had had that mindset I would still be playing chess for the Soviet Union! Was President Reagan "removing frictions" when he told Gorbachev to "tear down this wall"? The lack of Western political will to stand up and acknowledge the true state of affairs in Russia only encourages Mr. Putin and his gang to push further.
The politicians are passive while the foreign business elite actively supplies the Kremlin with the confidence and ammunition -- literal and figurative -- to crush the democracy movement. Those who do business with this oppressive regime are putting themselves in the compromising position of supporting repression to protect their investments.
Opposition rallies will take place on April 14 in Moscow and the following day in St. Petersburg. The police state will again be out in a show of force, this much is certain. But will anyone be watching? Mr. Kissinger also referred to Russia's authoritarian government as "inherently transitory," and here I must agree. It is a transition to a dictatorship -- one that is forming right under the pinched noses, blind eyes and closed mouths of the West's political leadership. Mr. Kasparov, former world chess champion, is a contributing editor at The Wall Street Journal and chairman of the United Civil Front of Russia.