Tuesday, June 27, 2017

Russia Earned Three Trillion US Dollars from Petroleum Sales Abroad and Exported More than Half of That, OilStat Analysts Say

Paul Goble

            Staunton, June 26 – Russian companies have earned some three trillion US dollars from the sale of oil and gas abroad since Vladimir Putin came to power; but instead of using this money to increase the capitalization of these firms or to transform the economy, Russians have exported more than half of that to foreign accounts and the purchase of property abroad.

            That is the conclusion of analysts at the Oilstat portal in an unusually detailed article which suggests that the Putin years for Russia have been ones of missed opportunities at home although they have left the wealthiest Russians and the state with an enormous amount of money abroad that can be used for various purposes (oilstat.ru/analytics/121578).

            Between 2002 and the end of 2016, they say, “Russia received additional income of approximately three trillion US dollars from the export of fuel and other goods. These means could have changed the mono-cultural economy of Russia,” they argue. But “this didn’t happen. And so, where did all these trillions go?”

            They didn’t go to the increase in the capitalization of the companies involved. In fact, these companies had to come to the Russian state for assistance, something that should not have been needed had they retained these profits.  A portion went to funding the sovereign fund and hard currency reserves and for financing an increase in foreign investment in Russia.

            But, Oilstat says, “the main part of the money was sent abroad on the private accounts of the constantly growing group of the wealthiest citizens of Russia who actively worked in foreign financial markets or in property markets.” 

            What it did not go into abroad was into investments that would send earnings back to Russia, as one might have expected.  According to the Russian Central Bank, this export of money out of Russia amounted to 1.56 trillion US dollars. Independent analysts suggest that number may in fact understate the amount.

            “Wealthy Russians have put billions in their own accounts in foreign banks and brokerage accounts or in property. And although a significant part of the transfers … were carried on a legal basis, analysts recognize, Oilstat says, that much of it went via uncontrolled and illegal channels.

            That means, although Oilstat’s analysts don’t say this, that there is an enormous amount of money in the hands of oligarchs who working with the Kremlin on whom they depend for their standing can deploy it for political as well as economic goals, thus creating a dangerous new challenge for the international community.

If Moscow Doesn’t Extend Power-Sharing Accord with Kazan, There Will be Problems in Tatarstan and for Russia

Paul Goble

            Staunton, June 26 – Moscow’s Kommersant reports today that an anonomous source in the Presidential Administration says that there will not be any new power-sharing agreement between the Russian Federation and the Republic of Tatarstan and thus the present accord will be allowed to lapse.

            The paper says opposition in the Kremlin has been led by Sergey Kiriyenko, who is now in charge of domestic affairs within the Presidential Administration but who a decade ago was presidential plenipotentiary in the Volga Federal District and helped prepare the extension of the accord which was originally signed after Tatarstan (like Chechnya) refused to sign the federation treaty (kommersant.ru/doc/3336514).

            The original power-sharing accord on the delimitation of authority between the Russian Federation and Tatarstan was signed in 1994 by the two presidents of those republics, Boris Yeltsin and Mintimer Shaymiyev respectively.  It specified that the republic had the right to its own laws, taxes and citizenship.

            The revised accord, signed in 2007 for a ten-year period, reduced the powers of Tatarstan relative to the Russian Federation but allowed Kazan the right to adjust laws to its own conditions, have its own special passport inserts, and require that any president of the republic know both state languages, Russian and Tatar.

            In recent months, Tatar nationalists and Tatar leaders both past and present have pressed for the extension of the power-sharing accord, with Shaymiyev specifying repeatedly that it simply needs to be extended and does not require renegotiation as was the case with the first treaty a decade ago.

            As Kommersant acknowledges, it is still not clear that there will not be a last-minute announcement of a new treaty. (The treaty will lapse only in July.) Members of the Duma and the Federation Council the paper contacted couldn’t see for certain but indicated that the whole issue was so sensitive that no one should talk about it.

            If the treaty isn’t extended, the World Congress of Tatars will take up the issue at its congress in August; and the All-Tatar Social Center will press for more radical solutions including some kind of unilateral action by Kazan.  But the big loser will be the current president of Tatarstan, Rustam Minnikhanov.

            Not only would he likely then lose his title as president – Tatarstan is the only federal subject which still has a president, an arrangement it bases on the current power-sharing accord – but he would lose much of his standing among Tatars who see the accord, as limited as it is, as a surety of their special, even unique status within the Russian Federation.

            That may be exactly why Kiriyenko is opposed to extending the treaty. Clearly, Kommersant suggests, he does not have warm feelings for the leaders of Tatarstan as a result of the difficulties of negotiating the 2007 accord.  And now, he may be taking his revenge from his new vantage point in the Kremlin. 

            But a weakened Tatarstan may become a less stable one, with nationalists pushing for more radical measures and some in the republic government possibly seeking to exploit them against Moscow. And such instability given Tatarstan’s geographic location and influence could have serious consequences well beyond its borders.

            Up to now, most analysts have pointed to the ways in which the end of the power-sharing arrangement will mean the strengthening of Moscow and the final victory of the power vertical over regional elites.  But that may be a misreading, and one Ukrainian commentator, Sergey Ilchenko, has suggested that the end of treaty relations could lead to Tatarstan’s independence and ultimately the disintegration of the Russian Federation.

            In an article in Kyiv’s Delovaya stolitsa today, he argues that the end of the treaty arrangement could mean that “Tatarstan will not be a subject of the Rusain Federation but an independent state that has been recognized as such by Russia” by earlier treaties (dsnews.ua/world/usmirit-kazan-stanet-li-tatarstan-dlya-rossii-vtoroy-26062017220000).

                And if that is so, Ilchenko continues, Tatarstan’s geographic location and importance means in turn “the end of this [Russian] federation as a single whole.” That is, once the power-sharing treaty lapses, “no Russia in its current form exists.” Tatarstan could form its own foreign ministry, ask to join the UN or take any of a number of similar steps.

            Were it to do so – and the Ukrainian commentator clearly hopes Kazan will – such actions “could serve as the detonator of the total collapse of Russia, just as the striving of Ukraine for independence [in 1991] set in train mechanisms for the collapse of the USSR.”

            In short, he concludes, the issue of the treaty is far from dead. Neither side is going to forget what it means. And as a result, the immediate future in Tatarstan and for Russia is certain to be “interesting.”

Kremlin Now Telling Russians They Face a Fallling Standard of Living for Years to Come, Shelin Says

Paul Goble

            Staunton, June 27 – “For the first time in the 21st century, the [Russian] regime is seeking to accustom its citizens to the thought that a worsening of living conditions is not the result of ‘temporary difficulties’ but rather a [new] norm of life,” according to Rosbalt commentator Sergey Shelin.

            Although official statistics are anything but trustworthy, he continues, and although the government deploys them selectively in order to make itself look as good as possible, the following pattern is obvious: production is rising slightly but because of regime policies, ordinary Russians are paying for that by taking a serious hit in their standard of living (profile.ru/pryamayarech/item/118101-luchshe-uzhe-ne-budet).

            It is increasingly obvious who is paying for Russia’s current economic difficulties, “the exhaustion of oil dollars, the upsurge in military and security spending, sanctions and counter-sanctions.” And “it is no less obvious who will be financing the two or three percent growth in the economy” the Kremlin likes to talk about it.

            It will be financed by the Russian people, who thanks to all this and to the regime’s failures, are having to pay higher prices for communal services, not getting inflation adjustments in their pensions, and thus giving without the regime acknowledging it a forced “loan” by the people to the regime.

            Worse, Shelin says, with each passing month, “the ordinary individual must pay more but will receive the same or less” because “even if there is some growth in the economy,” little of it will be distributed to him.

            “For the Russian 21st century, this logic is completely new,” the commentator continues. “From the end of the 1990s to the beginning of the 2010s, the level of consumption in Russia rose (according to official calculations) more than two and a half times.” Even if one allows that some of this is exaggerated, this “jump” was the greatest over more than the last century.

            “Without this, one cannot possibly understand the Putin regime” and the support it has received up to now, Shelin argues.  “For three decades, ordinary people had suffered first stagnation and then growing poverty. And here finally was a miracle.”  But that is now in the past, and the people are going to pay for what the regime has done and is doing.

            Given Moscow’s failure to create “free and competitive capitalism,” there is no possibility of “major private investment.” Who else can make the needed investments? The state, and where will it get the money? “From its subjects,” who will also be forced to be satisfied with domestic goods of far lower quality than imported ones.

            “Is growth possible in such a feudalized economy?” Shelin asks rhetorically and says that yes, “modest growth is possible.” But it will be so modest that the population will get little or nothing or even less than now once “the siloviki, the lobbyists, and the bureaucrats” take their whack out of what comes in.

            Russians increasingly understand this, despite their well-earned reputation for putting up with whatever those in power do, the commentator argues. Among the signs of change on the part of the people are strikes, admittedly not too successful but enough to make the regime fearful and willing to make what concessions it feels it can and must.

            Demonstrations and protests are no longer just events in the capitals but “in hundreds of other cities” where people are prepared to assemble “again and again,” despite the efforts of the powers that be to intimidate them and keep Russians from taking part lest they lose their jobs or land in jail.

            And repression, always the default setting for the current regime, is increasingly ineffective because it is increasingly transparent to the people what is going on; and they are angry: “Even in their parallel reality, the bosses recognize that the anger of ordinary people is growth literally from month to month.

            This new reality from below is forcing the regime to change course and to try to accustom its subjects “to see in the growing poverty they are living with normal.”  That attempt, Shelin says, should be “sent to the museum of administrative utopias” because like all similar projects it is doomed to fail sooner or later.