Coffee House

Letting Russia into the G8 gave tacit approval to Putinism

3 March 2014

3 March 2014

Expelling Russia from the G8 is an option being urged on Barack Obama this morning. The logic for admitting Russia in the first place was always tenuous – as Anne Applebaum argued in the Spectator when it last hosted the summit.

For sale, the advertisement might read: One very large Russian energy company. Estimated assets, including oil wells, reserves, refineries: $60 billion. Possible liabilities: four major international lawsuits, a part-time CEO who works full-time as President Vladimir Putin’s deputy chief of staff, and a certain — shall we say — lack of clarity about whether the company legally acquired most of those assets at all.

I am talking here about Rosneft, the very large Russian energy company whose shares go on sale in London next week. Don’t worry if you’ve never heard of Rosneft; it hasn’t been a very large Russian energy company for long. Much of its wealth was acquired recently — last year, in fact — when the Russian government forced another oil company, Yukos, into bankruptcy by demanding $30 billion in back taxes and sending its chairman to a labour camp. Only one bidder — a previously unknown company whose listed address turned out to belong to a mobile phone shop in an obscure town — showed up at the auction of Yukos assets. A few days later that mystery company sold its Yukos property to Rosneft for a pittance — which was not surprising, given that Rosneft’s major shareholder is the Russian government. Have I mentioned that the Rosneft CEO works as President Putin’s deputy chief of staff?

But the truly unusual, almost comic aspect of the Rosneft sale is the openness with which this extraordinary company has presented itself to the London Stock Exchange. When a prospectus was issued two weeks ago, it contained a few warnings, including some that are uncommon in the rarefied world of Morgan Stanley, Goldman Sachs and the other investment banks which are straight-facedly managing the sale. ‘Crime and corruption could create a difficult business climate in Russia,’ notes the prospectus, which also points out that 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 maximise shareholder value’. Translation: when the Russian government walks away with your money — as it walked away with Yukos investors’ money — don’t say no one warned you.

There is no pretence here. The Rosneft sale next week — scheduled for 14 July —will establish the principle that companies with illegally acquired assets can receive the imprimatur of the international financial establishment — as long as they are rich enough. But maybe that shouldn’t surprise anyone. After all, on the following day Prime Minister Tony Blair, President George Bush and the leaders of Italy, Germany, France, Canada and Japan will meet in St Petersburg to help President Putin preside over the annual meeting of the Group of Eight. By doing so, they will establish the principle that authoritarian governments can receive the imprimatur of the international political establishment — as long as they are rich enough.

Admittedly, the G8 isn’t as serious an institution as the London Stock Exchange. Although it started its life as a private meeting between the leaders of the world’s largest industrial democracies, the organisation has lately come to resemble nothing so much as a very expensive circus. The Japanese, who consider the G8 a substitute for the UN Security Council they’ll never join, racked up a $750 million bill last time they hosted it. Others, the British Prime Minister included, have chosen elaborate, crowd-pleasing ‘themes’, such as last year’s save-the-Africans extravaganza, to boost their particular agendas. The first Russian president, Boris Yeltsin, was allowed to attend meetings on the muddled grounds that making him a member would magically turn Russia into one of the world’s largest industrial democracies. It did not.

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Nevertheless, President Yeltsin stayed in. His successor, President Putin, stayed in too, mostly on the equally muddled grounds that it would be too embarrassing to kick him out. Mr Putin has now taken full advantage of this muddle and turned the St Petersburg meeting into a major propaganda offensive, dedicated to the idea that Russia is still a superpower — an ‘oil and gas superpower’ — and a democratic, free-market one at that. Just last week he defended his country’s deployment of gas-pipeline blackmail to disrupt the Ukrainian elections on the grounds that Russia had merely been ‘using free-market principles in the gas trade with some of our neighbour states’. His top adviser held a rare public meeting to announce that Russia is in fact a ‘sovereign democracy’ after all. The Russian government has even hired a powerful American public relations company (Ketchum, whose clients include Disney and Pepsi). Ketchum’s job is to explain (as one Ketchum executive put it) that recent problems are ‘exceptions to the rule’, and more generally to encourage the Western press to join their leaders in ignoring President Putin’s transformation of Russia.

For those with memories as short as those of London investors, it’s therefore worth stopping for a minute to recall the highlights of that transformation. To start with, President Putin destroyed independent Russian television, which is now almost entirely state-controlled. He twisted election results to ensure that he and his allies won by landslides (not that, lacking media attention, his opponents would have won anyway). He recently passed laws designed to make existence close to impossible for Russia’s beleaguered human rights groups, environmental groups and other independent advocates. All the while, he continued his stunningly brutal (and now totally invisible) guerrilla war in Chechnya, which long ago moved beyond any legitimate repression of terrorism and into the realm of massive human rights abuse. The blatant illegality that accompanied the transfer of assets from Yukos to Rosneft — Mikhail Khodorkovsky, the Yukos CEO, was arrested, put through a macabre, Soviet-style show trial and sent to a prison camp where he suffers mysterious ‘accidents’ — put a permanent dent in national respect for the rule of law.

Much worse, though, for anyone who wishes Russians well, are the subtler changes in the Moscow atmosphere. Paranoia is back: 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. Fear is back too: once again, my Russian friends are too nervous to be honest on the telephone. Some of them report visits — perfectly polite, it’s true — from agents of the FSB, the agency formerly known as the KGB, who are very interested in their foreign acquaintances and bank accounts. 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.

All of these changes at home have, of course, coincided with Putin’s use of gas-pipeline blackmail in what Russia calls ‘the near abroad’ (and by extension Western Europe); his attempts to undermine the governments of Georgia and Ukraine and his increasingly ambiguous role in Iranian nuclear and Middle East peace negotiations. Yet none of these changes has prevented Bush, Blair and e
veryone else heading for St Petersburg, where the leader of the ‘oil and gas superpower’ with a ‘sovereign democracy’ and ‘free-market principles’ will welcome them with open arms.

And here is the real crux of the matter: it’s not the meeting itself that counts; it’s the context. President Putin has met with Western statesmen many times, and rightly so. Indeed, advocates of realpolitik are absolutely right to argue that we should have normal relations with Russia, that President Putin is a potential ally on many issues, that Russia is not North Korea. But a G8 summit is not a normal, bilateral meeting. The G8 is an informal gathering of the world’s largest industrial democracies. By allowing Russia to head it, we have accepted Russia as one of us.

And after everyone goes home? The Kremlin — along with Venezuelans, Iranians, Arab leaders and other oil tyrannies — will sit back, laugh and agree that the leaders of the so-called West merely pay lip service to the ideals of freedom and democracy; they don’t really believe in them. If you have enough oil, they’ll let you into their fancy clubs anyway. As Putin’s defence minister recently put it, ‘In the contemporary world, only power is respected.’ As Putin’s adviser recently put it, ‘They [the West] talk about democracy but they’re thinking about our natural resources.’

What is at stake here, in other words, is not just Russian–Western relations, but the West’s very ability to go on talking about democracy — in Russia, in Iraq, anywhere — and still get taken even remotely seriously. In a world where the promotion of democratic and liberal values is itself a realpolitik necessity — some form of political liberalisation is absolutely essential to the battle against al-Qa’eda and the ultimate integration of the Middle East into the global economy — that’s a pretty big problem.

Oddly, the only people who seem really worried about the long-term credibility of the West are Russians. In Washington a few months ago, Andrei Illarionov, an economic adviser to Putin until his dramatic resignation last year, told me that Putin always returns from G8 meetings feeling utterly convinced of the rightness of his political course; more than once, Putin’s opponents have been arrested or put on trial in a G8 summit’s wake. By attending the G8 summit this month in St Petersburg, Illarionov said, Western leaders will show their approval of ‘the nationalisation of private property, destruction of the rule of law, violation of human rights and liquidation of democracy’. Garry Kasparov, the chess champion who dabbles in politics, has also said that the G8 will resemble ‘the Berlin Olympics in 1936’ and predicts it will be followed by the ‘equivalent of Munich 1938’ — the de facto acceptance of Putin’s Russia by the West.

But perhaps it is not surprising that Russians, not Americans or Brits, are the ones pointing this out. 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. Russians also understand better the significance that the G8 — a dull bit of bureaucracy to most of us — has acquired in the rest of the world. When I told Illarionov that Americans and West Europeans don’t care much about the G8 one way or the other, he shrugged. ‘What is important is not how you in the US view the G8. You have to think how your participation will be viewed and used in the world.’

We, like the London Stock Exchange, have now been warned.

You can read the full Spectator archive here.


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Show comments
  • Fergus Pickering

    The G8 is just a rich persons’ junket. It has no importance as the Russian interviewed on The World aT oNE SEEMED TO HINT.

  • Tom Tom

    The G-8 is a farce, it has Italy as a member but not China. It has France but not India. It has Britain but not Brazil. yet France, Britain and Italy also have the EU as a member. It is a Club of Has-Beens when the G-20 is more realistic

  • Baron

    So tell us, Anne, who is it you’d like to see running Russia? Mother Teresa, if she can be resurrected? Saint Paul, if we could dig him up? Jesus himself?

    After roughly 400 years of oppressive governance, the last half a century of unimaginable cruelty, the Russians have never had it better. They deserve more, no doubt about it, but in the transitional phase, it’s not doable. Most of those in power are recruited from the old stock, tainted by the ideas of Russia’s communist past. If we genuinely want Russia to turn our way, barking at Putin is the last thing we should be doing.

  • David Webb

    Anne Applebaum’s husband, Radek Sikorski, the Polish foreign minister, played a key role in precipitating the crisis by his constant interference in Ukrainian politics. The Ukrainians are split and Yanukovych won the presidential election 49% to 45%. To argue that those who lost the election can turf the president out of power without waiting for the next election – this can only lead to civil war. I suppose to Radek, the Ukrainians are just collateral damage. To go to a country and egg on violent demonstrators is deeply irresponsible, and I would argue amounts to a Polish declaration of war on Russia.

    • Michael Mckeown

      The EU countries never thought this through, to think for one second that Russia is going to stand by and see its key military bases become EU territory is moronic.

    • Baron

      Seconded, David, and again, seconded.

      The election that elevated Yanukovych to power may not have been prefect, but they were pretty close the expression of the will of the people of Ukraine, the new puppet government is the expression of the EU interference.

      The ballot box rather than a violent mob should remain the only tool for changing governments. The EU should apologize, and buzz off from the country.

    • dmitri the impostor

      Mr and Mrs Sikorski are a pair of squawking manichaeans who think in slogans.

    • dalai guevara

      Oh dear oh dear, another defender of tyranny delivers waffle without substance. WE KNOW WHO ANNE APPLEBAUM IS, dude. So what? How does that invalidate facts?
      What you appear to have done is blank out completely another fact, the fact that one hundred thousand plus Ukrainians went to the street to demand what, David?

      • Baron

        Tyranny? Hmmm

        If you know Russian, Baron suggests you read the link below. The paper, one of many backing opposition to Putin, has a circulation of some 200,000, its coverage of the crisis is by far to the left of the BBC, the Guardian, the Western elite’s interpretation of events in Ukraine. How come then it can be freely published in a tyranny?

        http://www.novayagazeta.ru/

        • Marina Arane

          Dear Baron, in the Soviet Union the major newspaper Pravda had 20 mil. circulation, and it was tyranny
          before the events mr. putin closed all independent tv, radio, and yesterday 20 sites covering ukraine. today he shut down two ukrainian tv channels, say nothing of internet
          400 hundred people arrested in one day for having a logan ” no war”, etc, etc

          • Baron

            Marina, over here Baron cannot watch any TV except RT, cannot listen to the radio. He can read newspapers, however, and both Новая газета and Независимая газета are opposed to the Russian intervention, criticize Putin, call for negotiations.

            Where were the 400 people arrested? In Moscow, another city?

      • Tom Tom

        Payment from Soros Foundation and Konrad Adenauer Stiftung.

      • David Webb

        Was it 100,000+ who demonstrated? I don’t know the number – but 12 million plus voted for Yanukovych – and it was a 49%-45% split, so any president of the Ukraine is likely to have considerable opposition. The democratic way is to allow the guy who got elected to complete his term (he only had a year left) – and then contest the election – not to organise a putsch and seize power – all egged on by Anne Applebaum’s husband.

    • Tom Tom

      Well
      Yanukovych had a better mandate than Cameron. Can we have mass
      uprisings to remove the Establishment from power here and anoiunt a new
      regime ?

  • swatnan

    Yes. He’s done a pretty good job on the Sochi Olympics.

    • Marina Arane

      so did hitler

  • Frank

    I realise that this is probably a pointless post, but the British govt should order the London Stock Exchange to cancel this and any other proposed listings for Russian entities.
    I find it very depressing that it should be the usual suspects (eg Goldman Sachs) trying to arrange this listing and that the London Stock Exchange should be willing to accept this piece of garbage for listing (mind you, they are now starting to have considerable form for this sort of rubbish listing).
    Secondly, Russia should be kicked out of the G8, thirdly, all UK, EU and USA travel visas for members of the Russian govt and Duma should be cancelled and all their personal/corporate foreign bank accounts frozen.

    • Michael Mckeown

      And Russia turns off the EU gas pipe thus our fuel bills double overnight and we all get very cold while the industry s move elsewhere.

      • Frank

        I am not aware of Britain shipping in any Russian gas. It might encourage everyone to frack though.

        • swatnan

          …. or open up the coal mines and get British manufacturing back on track.

          • Tom Tom

            Just watched the stationary windmills looking forlorn in front of Eggsborough power station belching vapour skywards…….quite a contrast between Technology and Fantasy

            • dalai guevara

              The non-fossil resource that is wind is free. When the wind blows all one needs to do is harvest it. Incidentally, neither the Germans nor the Danes rely on it.

        • Michael Mckeown

          Its not shipped its piped from Russia in to the EU.

          • D Whiggery

            Britain doesn’t buy much Russian Gas but Germany does.

            However, if Putin did turn it off it would just make Russia poorer still, where would be the sense in that?

            • Michael Mckeown

              Turning off the EU/Russian gas supply decreases supply globally and increases costs for everyone, its not logical but neither is demonizing Russia for protecting Russians.

              • D Whiggery

                I’m not demonizing Russia. However, I don’t believe that the neo-nazi elements of the revolution represent the majority of the revolution and equally I don’t believe that everyone especially in the south-east of the country agrees with the revolution. The truth in somewhere in between.

                I also don’t believe that Russia is as strong as she thinks she is. Western voters won’t tolerate a military response, but the most effective response would be an economic and diplomatic one in any case and no-one will have a problem with that.

                • Michael Mckeown

                  I’m not saying you are but Frank certainly wasn’t holding back.

                  Russia is militarily weak but they have still managed to annex a country without a shot being fired with the EU and the USA doing nothing but talk about ignoring them at future political gatherings.

                • Tom Tom

                  Western voters want war. War is the means to reduce excess population and worked wonders in 1914 don’t you think ? I am not sure Russian warheads would do much damage to London and i think we should push it to find out

                • D Whiggery

                  If you’d read the posts on here you’d quickly realize that that’s nonsense.

              • Marina Arane

                please, check with russians first. the new “governor” of Crimea is a well known thug, called goblin. people are afraid, they don’t care about money, it is the lives of their husbands who are beaten and killed, children of the military officers threatened directly if their fathers don’t surrender… money, cost, price… neither russia nor ukraine care about it, it is life

            • Tom Tom

              Hardly, China is buying lots of Russian gas

              • D Whiggery

                Not at the same price it’s not.

                • Tom Tom

                  No it probably pays much more than Ukraine but you forget that Gazprom is in a JV with Wintershall and Germany soaks up gas since Merkel decided nuclear was not green……without Russian gas Europe will de-industrialise and probably move production to Russia which is a superior location for car production anyway…….I think the huge German investment in Russia is great and the Island of Fools off the French coast can sink into oblivion with its stupid population who posture but do not produce

                • dalai guevara

                  I love it how you find the time to embed a plug for the Lada Niva in your post.

        • Tom Tom

          Do as much fracking as you want but Energy Policy is an EU preserve and you will export the fracked gas to Belgium just as N Sea gas goes to Belgium

    • Baron

      Why not invading Russia, ha, we seem to be keen invading countries the governance of which we dislike.

    • Tom Tom

      Britain should be kicked out of the G-8 for planning Wars of Aggression
      against Iraq, Syria, Libya, Afghanistan and committing the same war
      crimes for which Keitel was hanged at Nuremberg

    • Marina Arane

      And they should start with their children living in London, while they are waging wars

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