Whither Russia?

Resistance is Futile: the Kremlin’s Oil and Gas Agenda
By Daniel Simpson

“Lower your shields and surrender your ships. […] Your culture will adapt to service us.”
– The Borg (Star Trek: First Contact)

“Russia needs a Tsar”
– (Not so) popular saying

MOSCOW - Depending on your choice of newspaper, Vladimir Putin’s Russia is either creeping towards fascism or a Soviet-style anti-Western collective. Or both. Murdered dissidents and volleys of rhetorical missiles sell alarmist banner headlines, while the business pages are given over to fretting about state-sponsored scams by the Kremlin’s corporate behemoths. But much of what’s actually happening is buried under forests of misleading cliché. If anyone’s lost Russia, it’s arguably the foreign press.

Strip away the sensationalism and there’s a government with an authoritarian streak, trying to centralise power. If it’s paranoid, then that’s partly because it’s weaker than it looks. And if it seems hostile to foreign energy companies, well, that’s largely a function of how they muscled their way into the country on preferential terms, hoping to siphon off valuable resources. As Putin prepares to stand down, as he’s constitutionally required to next March, the clearest legacy of his two terms as president is already established: a consolidating chaebol of commodity monopolies, enriched by record oil prices and run, if not quite as fiefdoms, then as semi-nationalised instruments of an assertive foreign policy.

How worried should we be? Not especially, notwithstanding the scaremongering and souring relations with NATO governments, chiefly Britain and the United States. Russia’s economy keeps expanding, as does international trade. And a quarter of Europe’s natural gas still comes from Gazprom, the conglomerate that epitomises a fusion of state and corporate power, doubling as Putin’s piggy bank. Despite a succession of setbacks for Western oil majors, Russia remains open for business and the coming decade offers numerous opportunities for foreigners, provided they’re prepared to play by new rules. Essentially, these amount to accepting minority ownership of energy joint ventures, as in most oil-producing nations, and a role as service providers, rather than equal partners. Transition to the post-Putin era may prove fractious, but the one thing almost everyone wants is stability and radical policy shifts are unlikely. From a long-term investor’s point of view, if not geopolitically, the outlook seems broadly positive. So why do we hear so little about it?

“Most of today’s coverage is all about the state taking over the economy, even if the vast majority of business is private and booming,” laments a foreign correspondent in Moscow, who struggles to interest his editors in more representative financial news. “It’s either that or ‘if the Russian’s aren’t threatening us with nukes then they’re going to turn off the gas taps’, which is just laughable when their wealth depends on export revenues.”

According to Bernie Sucher, an entrepreneur and investment banker who’s worked in Moscow for the past decade and a half, there’s a matrix of biases at work. Whether seen through a Cold-War prism, or just disillusionment after a gush of post-Soviet optimism, news about modern Russia focuses on negatives, stereotypes and official spin, as it tends to elsewhere. It also loads words like “liberal”, “reform” and “democracy” with meanings that convey little about the complexity they describe, adopting labels worn by disenfranchised oligarchs, and their U.S.-sponsored political allies, as they bid to regain power. The nastiness of the state’s assorted tentacles makes a better story than business as usual, which is quietly changing the country while a handful of thugs and former spies hogs the limelight.

“The most important dynamic in this country politically is liberty, personal liberty,” Sucher notes. If Moscow stands for anything these days, it’s a turbo-capitalist cocktail of greed and fear that’s been spawning a society of consumers as quickly as it’s jacked up prices. The girls queuing up for nightclubs where pink champagne costs $1,500 a bottle aren’t all out to bed a “minigarch”. Many have happily spent a hefty percentage of their salaries on imported makeup just because it’s the done thing. “The space for the state has shrunk dramatically in the past 15 years and ordinary people filled the vacuum,” Sucher continues. “When people focus on the Kremlin they’re looking at a window on the part of the country that’s changed the least.”