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Rothschilds russian oil 1900 royal dutch shell { March 5 2004 }

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In the early 1900s, when the tsarist empire held second place behind the US in oil production, Russia's main fields enriched Alfred Nobel and the Rothschilds, whose Caspian Company formed the basis of Royal Dutch Shell.

What is to be done?
By Stephen Kotkin
Published: March 5 2004 18:23 | Last Updated: March 5 2004 18:23

A country ravaged for seven decades by the secret police elects a former colonel of that police as president: after one term, he's more popular than ever and is on the verge of a landslide re-election. A few weeks before that election, he fires his entire cabinet. This is seen as an act of wisdom. The country's communists, who sometimes march bearing portraits of Stalin, stand up for the prerogatives of parliament and protest against creeping dictatorship - only to be trounced at the ballot box. Would-be barons grab on a continental scale and, when expropriated by the state, get defended by NGOs dedicated to the memory of millions of political prisoners.

Such is the paradoxical nature of Vladimir Putin's Russia.

After the Soviet state cracked open, a freewheeling media, NGOs, new religions and billionaires arose in the cracks. Little of this was based upon secure private property, an independent and powerful judiciary, or genuine parliamentary (as opposed to "presidential") rule. The illiberal state institutions that were inherited by the newly independent countries began to regroup, and these hyper-executive bodies found few obstacles to closing the cracks - a grim process, first visible in Central Asia. Non-state media were shut down or taken over, NGOs forced out of existence or underground, private enterprises confiscated, internet routing points policed. The newly elected elites found that governing a modern society - encouraging private investment, building public infrastructure, combating crime and Aids - was extremely hard. But for them, surveillance and persecution are second nature.

All this has provoked howls about the overturning of "democracy". It's an understandable lament, but it emanates from a misinterpretation of the 1990s, when disarray rather than institutionalised rule of law prevailed. The present offensive on the part of the central state (less successful than either proponents or critics claim) cannot be credited solely to Putin - any more than Ukraine's can be attributed to Leonid Kuchma, Belarus's to Aleksandr Lukashenka, Uzbekistan's to Islam Karimov, Kazakhstan's to Nursultan Nazarbaev, Turkmenistan's to Saparmurat Niyazov, and the rest. The phenomenon is not Putin, it is structural - a Soviet hangover. It is with this in mind that we have to assess the Russian president's anticipated sweep at the polls on March 14, as well as the future of Eurasia.

Just two decades ago, in the great Orwellian year, Konstantin Chernenko, then dying of emphysema, succeeded Yuri Andropov, who had just died of kidney failure. In a semiconscious state, Chernenko became the fifth general secretary of an empire with nearly 300 million souls, more than half-a-dozen dependencies on three continents, nearly six million soldiers, comparable legions in overlapping administrative agencies, 40,000 nuclear warheads, an even greater cache of chemical and biological weapons, and tens of thousands of elephantine factories mass-manufacturing toxicities in 11 time zones. It was utterly out of sync and a throwback to the epoch between the world wars, yet still very formidable: a wheezing dinosaur, but one with fearsome teeth. Almost alone, the political-prisoner-then-exile, Andrei Amalrik, forecast demise - in Will the Soviet Union Survive Until 1984? - but he foresaw collapse resulting from a cataclysmic war with China. Such a confrontation may come to pass, but it will be too late for the Soviet Union.

Chernenko's brief, oxygen-tank rule expired in 1985. That same year, Saudi Arabia abruptly cranked up oil production, knocking down the price of crude to one of its lowest levels since the second world war - a bruising lesson administered to non-Opec producers, including the Soviet Union. With the world transfixed by the arrival of Mikhail Gorbachev, the vigorous new general secretary, Riyadh's move drew less attention than it should. But for the Soviet Union, it was momentous: it meant that Gorbachev's incipient perestroika was instantly fleeced of much of its hard-currency receipts. Most Soviet crude was being consumed at home, profligately, or supplied at a fraction of market prices to the Communist bloc, but exports to the capitalist world, around two million barrels a day, filled Kremlin coffers and paid for imports of strategic technologies, from state-of-the-art electronics to soap. The plunge in prices was a disaster: perestroika was indelibly joined to privation. Less than six years after the Saudi action, the Soviet Union was gone, and its successors were broke. And you thought the Polish pope brought down Communism?

Mendacity hollowed out what turned out to be an easily toppled edifice, lies having enveloped every aspect of the Soviet system. Dissident and secret policeman agreed on this; Alexander Solzhenitsyn had long insisted on it, and later so did Nikolai Leonov, the KGB's chief analyst. But hydrocarbons - which had looked like a Soviet strong point - proved to be an unexpected Achilles heel. In retrospect, it's clear that the 1980s involved a petroleum price war over world-market share that Riyadh won and that Moscow - possibly without being fully cognisant of the contest - lost. The Soviets' calamitous loss of oil revenues was worsened by a steep decline in extraction, a consequence of the perverse incentives and exploitative practices of the command economy. By the mid-1990s, production in the Commonwealth of Independent States had plummeted to fewer than seven million barrels a day, from a high of 12.5 million in 1987/88. Of that, Russia's output accounted for around six million - a fall-off of 5.5 million, which equalled the total output of all but one Opec producer.

Russia not only surrendered world-market share: it faced the expensive prospect of oil imports. Toward the end of the 1990s, though, something else astonishing took place. Russia's oil sector - privatised via insider deals that might make Wall Street blush, or more likely, turn green - emerged re-energised by new drilling techniques and management. In 2003, having increased output for the fifth straight year, Russia produced between seven and eight million barrels a day. And whereas high-end estimates of combined output within a decade for Azerbaijan and Kazakhstan - Kuwaits on the Caspian - come in at five million barrels a day, Russia's production could rise to double that, the immediate limiting factor being transport. True, world prices have remained high for some time, but achievements in cost-cutting could cushion Russian producers in the event of a world price decline. Overall, Big Oil in Russia has some distance to go in developing new fields and attending to a despoiled environment, but its surprise rejuvenation is a very big story, with global implications for some time to come.

No country anticipating economic growth over the next half-century can ignore Russia. Saudi Arabia is credited with 25 per cent of "proven oil reserves", but Russia's estimates are lowballed because of the presumed costs of extraction in rugged locations. Because extraction costs with current technology exceed projected revenues, Russia's full underground holdings do not count as proven reserves - until new extraction technologies emerge. Factor in natural gas: Russia commands one-third of the global gas reservoir, more than double second-place Iran. Keep in mind, too, that geography and geopolitics render Turkmenistan - with among the largest proven gas reserves in the world - a wholly owned subsidiary of Russia. Ditto for Uzbekistan's natural gas. As the full scope of Russia's fossil fuel holdings and distribution powers slowly sinks in, it has been undergoing a shift from a regional to a global energy provider. Geographically, Russia could scarcely be better positioned, abutting expanding markets in Europe and especially Asia. Stalin never possessed such leverage, because Russia's biggest oil and gas discoveries were made after his death.

Politically, the feared bogey in 1990s Russia was Communist restoration. This spectre stirred Washington to open up the IMF's sluices to support not macroeconomic stabilisation but the re-election of the unpopular Boris Yeltsin to a second presidential term. The slogan for the oft-hospitalised, resolutely anti-Communist Yeltsin could well have been "Better Dead than Red." In any case, it suited many people's interests inside Russia, too, to cast the election in Manichean terms: democracy - however imperfect - versus revanche, whose scariest incarnation entailed a red-brown coalition, or fascist-communist crossbreed.

Yeltsin won with the help of discriminatory media and unchecked recourse to administrative resources: above all, the state budget. Who foresaw that his victory in 1996 over the Communist presidential candidate, in the name of preserving democracy, would be followed by the apparent revival a few years later of authoritarianism under the tutelage of Communist-era KGB men? Surprises can be fun, but I doubt this development would qualify (as a surprise). That's because the Soviet Union, besides having been a hydrocarbon colossus, also was a social formation. Contrary to the prevailing view that totalitarianism eliminated organised society, the Soviet system created its own society: immense social facts on the ground, rooted in institutional structures such as the KGB. In March 1918, a few months after the Bolshevik coup, the secret police numbered perhaps 100 operatives. By Brezhnev's day, thanks to forced collectivisation, mass purges, the war against the Nazis, the atomic project, the cold war, the fencing in of a sixth of the world's land mass (border troops and installations accounted for half the KGB's budget) and, not least, to sheer bureaucratic aggrandisement, the KGB swelled to 750,000. After 1991, these functionaries (most with families) did not go the way of the kulaks - the proprietor peasants liquidated by Stalin in 1928. Nor was the KGB's extensive real estate in the historic heart of Moscow taken away. To be sure, the ranks thinned as officers vanished into private companies, promising "agents of influence" inside the government and boardrooms. But the preponderance of security personnel returned to their offices in the newly independent republics. Boris Yeltsin's Russia inherited upwards of 250,000 KGB personnel.

In 1999, President Yeltsin named his secret-police chief, Vladimir Putin, prime minister and then his successor - a choice that the Russian electorate ratified in 2000 and is poised to re-endorse overwhelmingly for a second term. To some, the curriculum vitae of independent Russia's second president seems incongruous but that view also reflects lingering illusions. Thanks to the work of the Russian sociologist Olga Krysh-tanovskaia, who has been tracking elites since the taboo on such research was lifted in 1989, we now know that Putin is not eccentric, but typical. Kryshtanovskaia estimates that KGB-trained officials have come to account for up to 25 per cent of civilian administrative posts throughout the Russian bureaucracy, up from just 3 per cent prior to Gorbachev. In other words, KGB officers are serving not only in its successor police organisations, keeping watch over the civil administration, but more and more as elected federal and regional chief executives, appointed ministers and political functionaries. And the higher up the ladder, the higher the concentration. Kryshtanovskaia explains that, in line with common patronage practice, Putin brought his circle of associates with him to power, and in turn these people brought in their associates, and so on. Rather than a preconceived KGB takeover plan, she sees "a snowball effect".

Plausible enough, but even before Putin's rise the flakes started rolling. Remember that Communist party membership was rarely a job - apparatchiks proper were a small percentage of the 20 million members - so the dissolution of the old ruling party, in 1991, left most of state officialdom in place. To an extent, today's prevalence of KGB personnel indicates simply that it was an agency where a lot of people had worked - the largest component, along with the Interior Ministry, of the Soviet leviathan. More than that, though, the supposedly uncorrupt, disciplined KGB came to seem the antidote to the "chaos" of the prolonged Soviet collapse, a collapse that deepened after 1991. "Democrats" are fine subjects for op-eds and PhDs, but as Yeltsin himself discovered, such an amorphous group affords little traction in the struggle to manage an overstaffed, dysfunctional state. After encouraging dismemberment of the secret-police monster, Yeltsin began to build the subdivided services back up, and, by the end of his reign, police in civilian administration may have reached 19 per cent.

If Yeltsin's rule was not quite what most people took it to be, however, neither is Putin's. KGB alumni constitute informal networks that impart wherewithal to formal political office and they boast certain skills. But the Soviet Union folded ignominiously, and the idea that the security services again "control" the country is farcical. What is not silly is the behaviour of Russia's elites more generally, especially the professional classes. Many Russian journalists investigating the powers-that-be have been hounded and some have been murdered. And yet a few, such as Alexei Venediktov, have persisted in maintaining their independence and have still found public outlets for their views. By contrast, Elena Tregubova, a newspaper reporter assigned to the Kremlin pool under Yeltsin and then Putin, lost her entree and then published an insider tell-all, Baiki Kremlevskogo Diggera (Notes of a Kremlin Digger, 2003), which got her fired but has become a bestseller, bringing royalties and recognition. She details the banal if relentless pressure exerted by Kremlin flacks to toe the political line, but she also illustrates the cravenness of her colleagues, their eagerness to procure access and payola, their acceptance - well before her apartment building was bombed - of what is euphemistically termed "managed" democracy. "No caudillo," wrote Angel Rama, the Latin American cultural critic, "lacked intellectual councilors". Last October's arrest of Mikhail Khodorkovsky, a clever (but not that clever) oligarch, generated misplaced warnings of foreign investor fallout as well as the usual authoritative speculative explanations for his incarceration (my favourite: the rumour that the bespectacled billionaire once showed up for a meeting at the Kremlin dressed casually in a sweater, thus sealing his fate). In Dog Scent, Mikhail Zoshchenko's brilliant story of the 1920s, a canine innocently sniffs at people while on a stroll, and as the affectionate animal lingers, the accosted individuals blurt out confessions to various crimes. Everyone in Russia's perpetual legal twilight is guilty of something. Khodorkovsky has denied the charges of financial fraud and tax evasion and he awaits trial. It's hard to know what would be more sensational, a post-election release on bail, or an open trial conducted by a Russian legal system that wants to prove itself, yet whose laws and personnel are still mostly of the Soviet era. Still unresolved, the affair set off and was partly motivated by a mad scramble for a cash cow. But the detention, at bottom, represents a collision of two legacies - crude oil and the KGB - both recovering from a period of disarray, one inside the Kremlin and one with an eye on it.

Khodorkovsky was sailing not just close to, but right into, the wind. He had announced an agreement with the Chinese government to build a private pipeline from eastern Siberia. But the Russian government had insisted on maintaining the state monopoly on pipelines, and was negotiating with the Japanese for a different Asian pipeline to the port of Nakhodka, for export to Japan. He initiated contacts with American officials to discuss energy co-operation, and he toyed with the sale of a major stake in the Russian energy sector to American interests. Some industries are strategic. What might the Americans do if confronted by a pending Russian or Chinese purchase of, say, AT&T, which maintains the US government's telecommunications? We have to see this as a fair point, to fully understand what's happening. We also have to recognise that the conflict touches on more than national interests. It is, as always in Russia, about power, about the central state ensuring inescapable deference to itself, preventing what would be something new in that corner of the world: political forces with the wherewithal for autonomous action.

Beginning in the late 1980s, the Russian state became a plaything; now, inevitably, we are witnessing an overreaction in the opposite direction (to widespread domestic applause). In sorting out the offshore and onshore shenanigans of the infamous Russian conglomerates - and, along the way, settling scores and redistributing assets, a process destined not to end with Khodorkovsky - officials from the security services to the finance ministry are engaging real issues, however ham-handedly. Still, selective pressure against a few high-profile types does not entail Kremlin control over the economy (even if such a vision motivates some of the muscle involved). On the contrary, further privatisation appears unavoidable, and welcome. In the early 1900s, when the tsarist empire held second place behind the US in oil production, Russia's main fields enriched Alfred Nobel and the Rothschilds, whose Caspian Company formed the basis of Royal Dutch Shell. Back then, no major Russian-owned concern emerged - unlike today's multinationals, which are a point of pride. Important players in the Russian government recognise that brass knuckles can accomplish many tasks, but running global energy companies profitably is not among them. Many officials even understand that in market economies, pipelines that fail to make sense economically are not built - so Khodorkovsky's proposal for a shorter and less costly conduit to China may win out without him (it's possible that both China and Japan will get distribution routes eventually).

There's no honour among oligarchs and officials. They acquire state assets at give-away prices, wield the law enforcement system against their partners (let alone their competitors) and then get ensnared in the same state machinery. Eventually, one hopes, business in Russia will settle down to a recognisable, mundane capitalism (such as hostile takeovers and boardroom coups).

More disquieting is the circumstance that the Russian oil and gas sectors, like most Soviet-era industries located in hard places, are partially descended from the Gulag. Slave labour helped cut roads through the taiga, build settlements, and quarry the black gold. The barbed wire and guard towers are gone, the graves unmarked. No former camp guards are being hunted down. No restitution will ever be paid. Worse, no one seems even to know. Only musty state archives, underfunded and mouldering, bear witness to the genesis of Russian wealth.

Private business interests will not disappear in the new Russia because two oligarchs (Berezovsky and Vladimir Gusinsky) had their TV stations - decisive in elections - taken off them again. They have fled into plutocratic exile while a third, Khodorkovsky, convinced himself he could fight and triumph and now sits in a Moscow prison known as "Sailors' Silence". An oligarchic structure, rather than a market economy of thoroughly commodified assets, took shape around the gigantic production complexes: another Soviet legacy. Some two dozen national oligarchs reportedly "own" more than half of Russia, but every one of Russia's 89 regions has mini-oligarchs, who are largely unknown to the outside world - local kingpins who are occasionally knocked down too. The self-privatisers who have survived continue to commingle with the state, financing election campaigns and, increasingly, running for political office themselves. What makes the nexus of private property and state power in Russia more than commonplace are the natural resources cornucopia, the rudimentary judiciary, and the fraught history. Ostensible enemies, the oilmen and the policemen turn out to be partners joined together by the forgotten legacy of slave labour. In new forms, their links will persist, given the fossil-fuel revenues that float the Russian state. But beyond the fate of the capos of industry, Russia now has hundreds of second- and third-tier magnates - millionaires rather than billionaires - who are building businesses and social capital.

Russia has lost its blue water navy; its occupation forces in Europe and Asia are largely withdrawn. Yet the military real estate inherited in central Moscow, located on opposite sides of the Kremlin from the KGB, has not gone empty or been converted to other uses. On the contrary, without an army to speak of, at least one that is combat worthy, Russia retains a tenacious, top-heavy military establishment ensconced in the mammoth, Soviet-era, Defence Ministry complex. The brass - some 10,000 generals - count on soldiers' families willing to buy deferments, unworthy officers keen to purchase promotions, shipments of heroin from Afghanistan requiring safe passage and other remunerative opportunities. Whether this hollow force is more corrupt than the likewise business-oriented Chinese army can be debated, but at least the Chinese can afford to buy Russian-made weapons systems. Russia inherited more than 80 per cent of the Soviet military industrial complex, yet the hardware produced by its surviving defence contractors is almost entirely exported.

Oil may be among the most overhauled parts of the Soviet inheritance, while the KGB - and still more so the military - rate among the least reformed. In fact, no single reform has been announced more often by President Putin than military transformation, something Gorbachev began promoting in 1985. It has yet to happen. Last November, in a speech to a military conference, Putin took credit for the "programme" of military downsizing, which he declared complete. But recent reductions have not flowed from state policy, and the official figures for current troop strength - around 1.3 million - are hilarious. Soldat, a British documentary by the producer Paul Jenkins, captures Russia's rampant draft dodging and ensuing manhunts, its endemic barracks abuse and the miserable unfitness of a demoralised "army" garrisoned behind barbed wire. Add to this grim picture the overfed upper ranks, who sabotage reform while fulminating helplessly against US advances. Even the many-sided Chechen war, whose suicide bombings give it the appearance of a separatist struggle, is perpetuated by warlords on the Russian side, who embezzle "reconstruction" funds and ransom hostages. The poverty, weakness and corruption of the military constitute the single greatest threat Russia faces, or more precisely, fails to face.

At Russia's biggest war games in 20 years, staged a month before the election and attended by Putin, two ballistic missiles failed to launch and another went awry. This military decay figures not at all in assessments of Russian politics. How are we to square the failure of Putin to effect a changeover to a professional volunteer force and a complete renewal of the obsolete technological base, with the images of his ever-surer command over the Russian scene? Could it be that the putative master of the oligarchs, of the media, the Duma and foreign affairs is no match for the incompetents and crooks with shoulder boards?

The most generous reading of the military's non-reform is that Putin, having deemed it unredeemable, has his eye on Russia's other militarised formations - such as the oft-used and comparatively effective Emergency Situations Ministry - as more suited to taking over the tasks of the 21st century. Matters may reach that point, but in the meantime, why would Putin keep talking up nonexistent reforms of the armed forces, thereby exposing his powerlessness?

Usually, the Kremlin works harder at fostering illusions of its omnipotence than at governing, and even foreign pundits co-operate in this charade. Take the regions where, belatedly, appointments to federal bodies now emanate from the federal level, as they should. But contrary to Kremlin spin doctors and their echoes, the Western analysts, these and other changes have not established President Putin's "control" over regional governments, let alone brought about his oft-stated goal of raising professionalism (read: curbing corruption). The seven "super-region" offices created by Putin to "oversee" the 89 units of the Russian federation indirectly testify to the Kremlin's inability to rewrite the regional map - the 89 units endure. Governors are elected locally, not appointed centrally, and they are creatures not of national political parties, which in any case are virtual, but of local machines. Sure, the Kremlin has tipped a few cows. But most regional bosses still wield administrative resources in the maintenance of their power, with or without Moscow's collusion. The problem in Russian politics is not Kremlin control but unaccountable central and local power - a few million state officials running individual and group protection rackets.

Back in Moscow, politics resembles a rugby scrum, whose direction, if there is one, is not always discernable, though roughly, there are two sides. One side insists that the key to restored glory is bureaucratic dominance; the other - something refreshing for Russia - that the key is far higher GDP (which, if doubled over the next decade, would reach the present-day level of Portugal). These two factions - the enforcers and the economists - subdivide. The advocates of deeper marketisation quarrel over a social-democratic approach versus unfettered liberalisation. Those pushing for a "strong" state battle over whether to retain the nuclear arsenal for the status it conveys, or forego the expensive nukes and continental battle plans to prepare for real-world threats, like endless borders that wind through some of the world's most explosive regions.

Further complications in the elite's make-up arise from the "clans" formed by geographical origin as well as from personal enmities, which cut across the enforcer-economist divide. Such a conflict-ridden playing field suits a presiding tsar, who has a foot in each of the two fractious camps and referees their intrigues. But it's debilitating for a would-be dictator, who also lacks an integrating ideology. Russia's line-up of interest groups also helps to explain why it seems to be pulling in two directions, which may or may not prove incompatible. Did Chile advance economically because of, or despite, Pinochet? Is China's sustained growth a result of Communist party dictatorship, or a rebuke to it, or both? Could Russia, whose stock indexes have topped emerging markets worldwide for five years, and whose GDP rose from a crash of under $200bn in 1998 to more than $400bn in 2003, follow South Korea with economic development under authoritarianism leading to democracy?

Since the 1970s, travel abroad began to widen the horizons of the inhabitants of Russia. Around the same time, a handful of civic organisations launched campaigns for the environment and human rights, and, in the 1990s, such groups proliferated; they now number up to 50,000, with some dedicated to protecting property rights and civil liberties. The shadow economy boomed in the Brezhnev period, a sign of private but also administrative initiative as well as breakdown - and of course, semi-legal dealing still flourishes.

Also in the 1970s, the heavy industrial economy started advertising its obsolescence, striking at the heart of hundreds of factory towns, while the able-bodied exodus from the village accelerated, developments that also continue. Life expectancy and infant mortality reversed course in the 1970s, beginning to worsen, and this has been compounded by a declining birth rate. Poverty and unemployment, formerly hidden, have increased. But the massive housing expansion of the 1970s was renewed in the 1990s. Russia now estimates home ownership at 70 per cent, with apartment values said to average $90,000 in the capital and one-third of that in the country at large. Russia is becoming a new society.

Public politics, too, are changing. To be sure, Russian politics after 1991 can seem uncannily like Soviet politics: both are systems in which the legislature and judiciary are indistinguishable from the executive; in which only a single party, the party of power, offers career advancement; and in which opacity reaches near perfection. But appearances deceive. Communism has been discredited, no more so than by the neo-communists, a quarter of whose Duma deputies are millionaires, and who compete for the nationalist vote with new "motherland" parties. One department of the presidential administration is occupied with buying votes in the Duma. It is this grease that assures a majority on important legislation, whatever the nominal party affiliations. In last December's Duma elections, liberal parties failed to cross the 5 per cent threshold required for party representation, largely because of their failure to unite. Chauvinists gained seats, making the president look that much more reasonable, and indispensable. The larger point is that Russia has divergent interests that jockey for, and purchase, advantage.

The still larger point, however, is the enduring institutional, economic, and ultimately psychological dependence on the executive power. Here we encounter a paradox that extends back beyond the Soviet past: somehow the Russian executive must force through radical change while guaranteeing overall stability. So, to maintain power, Russia's popularly elected president resorts to non-democratic methods. Equally contradictory, Putin simultaneously promotes liberalising measures and State authority. Divergent groups of the president's supporters bend over backwards to excuse the "trade-offs" that come with a stronger central authority capable of doing their bidding. Thus, strong statists overlook the economic liberalisation and many liberals excuse the state intrusiveness. Some supposed liberals don't even see the trade-off. Others criticise both Putin's accumulation of power and his failure to employ that power to force through momentous changes, such as imposing a democratic system. These critics desire a strong central authority but somehow that power is supposed to be benevolent. Politics in Russia - the art of the impossible?

The social and political (as opposed to technocratic) nature of fundamental reforms eludes most commentators. The latter also tend to see the rivalries, not the coalitions. But Putin's administration, rather than issue imperious decrees destined not to be implemented (a la Yeltsin), prefers to identify or create stakeholders in change. This leads to a drawn-out decision-making process, partly reflecting the president's inclination toward caution (some say, indecision), but also reflecting how reforms perforce threaten entrenched interests. In turn, though, the introduction of a new tax code, new land code, partial judicial reform, first-stage pension reforms, proposed restructuring of monopolies in electricity and railways, further sell-offs of state shares in companies, and much else - a banking system would help - will all have political consequences.

In other words, liberalisation in the economy may go some way toward undermining today's appalling extensions of police power. For now, though, GDP growth reinforces statism. Decried dominance by Moscow, which accounts for at least 10 per cent of GDP, is not the issue. Instead, too much of the Soviet-era economy (metals, chemicals) still dominates employment and politics. Worse, far too much of GDP, now perhaps 25 per cent, derives from resource extraction.

That's why Russia's long-term fate is linked not to the price of oil but to substitutions for it. Technologies that would knock the wind out of the fossil-fuel sector would choke off revenues to a bloated, would-be autocracy. This just might force ruling circles on to a different path - say, the harder but ultimately more lasting method of growing GDP, namely getting out of the way of small and medium businesses, which remain ruefully insubstantial. To be sure, the existence of a robust middle class does not automatically usher in a liberal order. But it would be a start. For now, Russia lacks the kind of civil service it needs to carry out the endlessly promised administrative reforms, which it hopes will transform officialdom... into a civil service. And without significant external pressure, such as WTO membership or prospective EU membership, reform of the state by the state remains difficult.

The Soviet Union was a European Union in reverse - first, it deeply harmonised institutions across a diverse landscape, then it broke apart into national states. Federal military cadres stationed in the republics as of 1991 were proclaimed national armies, whatever the individuals' origins. In Central Asia, as elsewhere, Russians comprised the vast majority of the officer corps, whose loyalty after 1991 seemed in doubt and whose replacement by the titular nationality required time. Some commanders who had taken an oath to the Soviet Union refused to serve their new states, resigning or emigrating; a few who stayed put carved out little statelets, such as the Transnistria region of Moldova.

That was not the only mischief. Belarus has been manipulated as a quasi-colony. And in Georgia's Abkhazia, in the early 1990s, freelancing Moscow-based generals aided local rebels who had no desire to remain an "autonomous" province of Georgia once Georgia was outside the Soviet motherland; so the Russians imported to Abkhazia fighters from Chechnya, who became warlords and soon turned the tables on their Moscow handlers in Russia's own North Caucasus. Chechnya, which brought Putin to the presidency, festers. In divided Moldova and Georgia, Moscow took advantage of the situation to "negotiate" peacekeeping forces and leases for regular bases, respectively.

Meddling continues, even though Russia lacks the resources to project power effectively, and has its hands full patrolling (by invitation) the former Soviet borders in Tajikistan. At the same time, however, Putin's Kremlin has interjected a new emphasis on economic interests in its foreign affairs. Russia has also been reviving Communist-era trade links to Eastern Europe, Iran, the Korean peninsula and China. A very junior partnership with the US has been rejected. Neither fully neo-imperialist nor fully post-imperial, Russia has yet to integrate itself into a new international order, but it has ceased to be able to "integrate" others. Russia has lost not only the requisite military, but also the rouble zone, much of the Russophone media space, and many cultural bonds. Only hydrocarbons could, though they need not, facilitate an attempted reassertion of Russian imperial power. The empire's effects are everywhere visible, but the empire itself is irretrievable. Could something better take its place, a Eurasian Union, rooted in inescapable geography, shared history, but also new behaviour?

It looks like a long shot. But one element, long feared as a source of Russian imperial revanche, may turn out to promote post-imperial economic integration. That force is the Russian diaspora, which is on the move. During the decades of Soviet rule, the Slavic population of Central Asia grew by more than 400 per cent, so that by 1959, Askhabad, the capital of Turkmenistan, had two Russians for every one Turkmen, while Russians in Dushanbe, Tajikistan, outnumbered Tajiks three to one. In Bishkek, then known as Frunze, there were eight times as many Russians as Kyrgyz, and in Alma-Ata 10 times as many Russians as Kazakhs. Only in Tashkent, Uzbekistan, did the Russian population constitute a minority. But by the 1970s, Russians began leaving Central Asia, an outflow that accelerated in the 1990s, even if many remain. At the same time, emigration to Israel took off in the 1970s, and today more than a million Russians reside there. Diaspora communities, an estimated half-million each, have arisen in Germany and Britain.

So far Russia has not made much of this "exchange" of Central Asia for Israel and first-world Europe. In the meantime, major Russian communities have stayed put in Ukraine, Latvia, Belarus. Altogether, about 25 million Russians live outside Russia, whose population stands at 145 million. China, with a population of 1.3 billion, counts some 50 million compatriots living abroad, a spectacularly dynamic force that has pumped billions in foreign direct investment back to the mainland. Some Russians abroad have begun looking "home." A far-fetched analogy? Perhaps - but how to keep one's sanity without some degree of optimism in a part of the world where stockpiles of nuclear, biological and chemical weapons do not need to be sexed up?

Stephen Kotkin teaches history at Princeton and is the author of "Armageddon Averted: the Soviet Collapse 1970-2000"

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Goldman rothschild advise hongkong airport { August 28 2003 }
Hitler stalin rothschilds
Jacob and nat rothschild deutsche borse takeover
Lord wakeham rothschild stooge { January 30 2002 }
Mikhail khodorkovsky gives shares to rothschild
Nathan rothschild built india infrastructure { February 17 2004 }
Nazis looted rothschild art { April 12 1999 }
New york rothschild office hures banker for lazard
Nm rothschild merge french counterpart
Raiders steal millions rothschild gold
Restoring pavilion profitable
Reuniting under parisian baron david de rothschild { August 11 2003 }
Rothchilds recruit Rohatyn from comcast disney deal { October 13 2004 }
Rothschild advisor on mineral project
Rothschild and murdoch son team up bskyb { November 3 2003 }
Rothschild banking dynasty
Rothschild buys stake in chinese bank { August 15 2007 }
Rothschild consult india power company
Rothschild family unifies holdings { July 18 2007 }
Rothschild family unites french english branches
Rothschild fix gold price { June 9 2003 }
Rothschild israel [jpg]
Rothschild launches oil trading business { September 24 2003 }
Rothschild role in columbus state university { May 21 2004 }
Rothschild sets time for dpc buyer
Rothschild urges uk utility to partner in australia { January 22 2004 }
Rothschilds african banker mineral rights { February 1 2004 }
Rothschilds balfour declaration { November 2 1917 }
Rothschilds bankrolled europe { July 9 1999 }
Rothschilds buy into russia
Rothschilds dynasty { January 28 1998 }
Rothschilds gave gold to wellington army end napoleonic wars { April 15 2004 }
Rothschilds hiring agent
Rothschilds house architect
Rothschilds meet wine families twice a year { June 9 2004 }
Rothschilds replace american bank heads { July 2007 }
Rothschilds russian oil 1900 royal dutch shell { March 5 2004 }
Rothschilds story secretive dynasty
Rothschilds take wineries on west coast { May 18 2004 }
Rothschilds to repel sanofi hostile takeo { January 24 2004 }
Rothschilds wakeham enron
Rothschilds wealthy dynasties matrimony { July 22 2003 }
Rothshchild largest private bank does gold tour
Russian oil tycoon passes oil rothschild before arrest
Schwarzenegger flanked by buffet and rothschild
Suez canal rothschilds bank { July 20 2003 }
Tote hire rothschild for selloff advice
Uk rothschild group 200 years old
Vegetarian bush niece rothschilds
Vote machines rothschilds
Wedding unites rothschilds goldsmiths

Files Listed: 62


CIA FOIA Archive

National Security
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