Johnson's Russia List #5623 31 December 2001 davidjohnson@erols.com A CDI Project www.cdi.org [Note from David Johnson: 1. Reuters: Karl Emerick Hanuska, Amid global gloom, more Russians have cash to shop. 2. Interfax: Russian president's aide comments on economy growth. 3. UPI: Martin Sieff, The Year Ahead: The U.S. and Russia. 4. AP: Jim Heintz, Russia Veering to West-Oriented Course. 5. Itar-Tass: Muscovites see Kursk salvage as "the most pivotal event." 6. The Times (UK): Clem Cecil, Doubts raised over Russia's commitment to oil cutback. 7. The Times (UK): Clem Cecil, A wizard game for Russian muggles. 8. The Guardian (UK): Ian Traynor, Colonel commands share in post-Soviet prosperity. After a decade of upheaval, officers are among winners. 9. www.znet.org: Boris Kagarlitsky, The Riddle Of Putin. 10. The Independent (UK): Anthony Bryer, Obituary: Professor Sir Dimitri Obolensky.] ****** #1 Amid global gloom, more Russians have cash to shop By Karl Emerick Hanuska MOSCOW, Dec 31 (Reuters) - The slump after September 11 left U.S. shoppers and others worldwide pinching pennies ahead of the Christmas and New Year holidays, but more and more Russians are spending gleefully as their economy resists the gloom. Russians hand out their presents at New Year, still their biggest holiday. The Orthodox Church celebrates Christmas on January 6. The fledgling market economy might seem an unlikely oasis of stability but high prices in 2000 and early 2001 on oil and other key exports have fuelled economic growth, filled government coffers and created better jobs that are helping to create a class of more deep-pocketed consumers. "We've got extra cashiers working all shifts. The number of customers coming through the door has been tremendous," said a Moscow manager for the Ramstore hypermarket chain, owned by Turkish conglomerate Koc Holding. "There has been no slowdown in spending since September 11. If anything, sales have only picked up and continue to do so as the holidays get closer." After expanding at a post-Soviet record of 8.3 percent last year, Russia's gross domestic product in 2001 is expected to have grown more than 5.5 percent despite lower oil prices now. Stronger growth translated into a 9.1 percent rise in the average income in 2000, with a similar increase predicted for 2001. Vast numbers of Russians still live near or below the poverty line, but rising affluence among much of the population has fed retail spending across the country. SPEND IT IF YOU'VE GOT IT While there are concerns about what lower crude prices could mean in 2002, Russians who have been hardened by years of crises seem generally unconcerned and are flocking to the shops in droves to spend some of their new-found wealth. The spending spree is most evident in the capital Moscow, by far Russia's wealthiest city, which accounts for 30 percent of retail spending nationwide and where the average annual income of nearly $6,000 is many times the national average. It took Marina, a university student and mother of a young son, all of 10 minutes to make her biggest purchase of the holiday season -- a $1,000 television for herself. "I feel bad about what is happening to other people, but job losses and terrorist attacks are no reason for me to stop spending," she said, handing a cashier a stack of crisp roubles. Many other Russians appear to feel the same -- the glittering shopping malls, supermarkets, and boutiques that have sprung up in recent years in larger cities like Moscow and St Petersburg are brimming with shoppers. In Moscow, spending is rising at about 10 percent a year. Major construction projects have sprung up across the city, where retail space per capita is only about 10 percent of that in London, to meet demand. The Swedish home furnishing giant IKEA has benefited from the buoyant consumer mood. Some 45,000 people visited its second Moscow store in one day when it opened this month. People queued for hours in sub-zero temperatures to get into the $45 million store, which will see a neighbouring 90,000 square metre (968,800 square feet) shopping centre open a year from now. RUSSIANS TRAVELLING ABROAD Despite concerns internationally about the threat of terrorist attacks, Russians are finding no reason to stay at home during the holidays and have booked trips to beaches or ski resorts that for many have become traditional. Flag carrier Aeroflot is seeing robust demand, with key international routes sold out during the peak of the season as Russians take advantage of big discounts offered by hotels and resorts hit by a tourism slump. "Russians are not easily shaken," an Aeroflot spokeswoman said. "If anything I think the very grim last few months around the world has only made people more determined to enjoy the holidays this year." Many Russians, who spend up to 80 percent of their income on consumer goods compared with 30 to 40 percent in the West, are also experiencing the joys of buying on credit for the first time. Options are available to pay on credit for everything from apartments to kitchen appliances and holidays. "Demand for credit has surged over the last few weeks. People are using the New Year holiday as an excuse to buy something nice for themselves or their families," said a manager from the M. Video electronic goods shops near the Kremlin. "For most people buying on credit with us, this is the first time they have ever bought on credit. I think that it is a sign of confidence in Russia and their own situations." A slide in the rouble that has seen the currency recently drop to record lows on the back of falling oil prices has also helped holiday spending. With many people expecting the rouble to tumble even further, some think they are better off putting their savings into something tangible rather than see them depreciate. "Who knows what tomorrow will bring," said Marina as she prepared to carry her new television from the store. "In 1998 during the financial crisis my mother lost her savings in a bank collapse. If you've got the money you're better off spending it now." ******* #2 Russian president's aide comments on economy growth Interfax Moscow, 31 December: One of the Russian president's aides Sergey Yastrzhembskiy believes that the trends ensuring political stability in Russia were dominant in society in 2001. "This is the basis, without which Russia would be unable to move forward with confidence," he said in an interview with Interfax. The second result, the presidential aide stressed, is that despite all the world economy's ups and downs, the national economy continued to grow so that "the poverty zone has reduced" on this basis. "This is very important for any country. The smaller this gap, the larger the middle class and the greater the chance that the country will get out of the clutches of economic and political upheavals," said Yastrzhembskiy. ****** #3 The Year Ahead: The U.S. and Russia By Martin Sieff UPI Senior News Analyst WASHINGTON, Dec. 30 (UPI) -- At the start of 2002, Russia is the inscrutable sphinx of the great powers, facing both east and west, confronting the prospects of both prosperity and poverty, offering America the possibilities of cooperation and confrontation, supposed to be helpless, but in fact far from it. In the months following Sept. 11, Russia proved America's most valuable partner in the struggle against the Taliban regime and the al Qaida terrorist organization in Afghanistan. Without Russia's wholehearted support, the United States could not have projected its power so effectively so fast into the heart of Central Asia. Now, however, Russian President Vladimir Putin looks more likely to tacitly support Iraqi President Saddam Hussein against possible U.S. military attack, in part because he has been disappointed in the response from President George W. Bush to his support in the war on terror. Bush cleared the way for Russia to become virtually the 20th member of NATO. But he also dashed Putin's hopes of forging a closer strategic partnership when the Russian leader visited him in Washington and Crawford, Texas. And the Russians are angry at his decision to pull the Untied States out of the 1972 Anti-Ballistic Missile treaty to clear the way for development of an eventual multi-tiered ABM shield against missiles fired from so-called "rogue nations." Putin is still looking west. He continues to woo the leaders of Western Europe and stays on good personal terms with Bush. But he retains the option of looking east, too. On June 15, he signed a far-reaching security treaty with Chinese President Jiang Zemin and four Central Asian leaders to set up a Shanghai Pact security organization covering more than half of Eurasia. Its barely concealed purpose was to counter U.S. influence in the Eurasian heartland. In energy policy, too, Putin appears to be swinging from a policy of cooperation with the United States to one of confrontation. He has authorized cuts in oil production to cooperate with the Organization of Petroleum Exporting Countries to raise global oil prices. Some analysts believe his decision to play ball with OPEC could boost global oil prices by as much as $5 to $7 a barrel. Russia's economy stabilized and began to recover for the first time in a decade thanks to the revival in world oil prices over the past three years, but in the past three months, those same prices have dropped by almost a third. So far, that drop has not dented Russia's economic revival, but it has already created a shadow of uncertainty over whether that recovery will continue, and what will happen if it seriously falters. In the last two weeks, however, economic indicators coming out of Russia have been good, and barring a catastrophic global economic downturn, they augur well for the coming year. On Dec. 14, the State Duma, the main house of the Russian parliament, passed the 2002 budget, and Finance Minister Alexei Kudrin announced that gross domestic product in 2001 was expected to grow by 5.5 percent. This would prove to be a slowdown from the 8.3 percent GDP growth recorded in 2000 but would still be a healthy figure. Current Russian government economic projections for 2002 put expected GDP growth at a still robust 4.3 percent with a healthy budget surplus estimated at 1.63 percent of GDP, Kudrin said. Responsible international analysts respect the Russian figures. The international rating agency Standard & Poor's announced Dec. 13 that it expected to boost Russia's ratings from its current B- as the investment climate there has markedly improved. S&P analysts gave credit to Putin for pushing through crucial and long overdue structural reforms. These were already cushioning the estimated $1 billion loss in revenues since September as global oil prices have fallen. The International Monetary Fund too is more bullish on the Bear these days. The IMF announced Dec. 12 in a statement that "the large external current account and fiscal surpluses, together with the relatively comfortable level of foreign reserves, have placed Russia in a strong position to deal with the less favorable environment" caused by the falling oil prices. Putin rides high politically, too. No Russian or Soviet leader since Leonid Brezhnev nearly 40 years ago has built such a firm foundation for retaining power. In only two years as president, Putin has reversed the apparently inexorable drift towards regional rule and the disintegration of the vast Russian Federation, and reestablished effectively the Kremlin's control over its far-flung regions. He has also slowly but remorselessly cracked down on freedom of expression in the broadcast media from which nearly all Russians outside Moscow get their news and perceptions of the world. And he has put the once mighty billionaire oligarchs in their place, driving several to exile and forcing the rest to toe his political line. Still, even if Russia's macroeconomic performance remains robust, Putin still faces the challenge of funneling the proceeds of that recovery down to the impoverished lowest third of Russian society. And he still has to turn around what he has repeatedly called Russia's most pressing and dangerous problem: its literal population implosion. Death rates continue to far exceed birth rates, and an estimated 8 million abortions are performed every year. In the moral rubble and material squalor that remain a decade after the collapse of communism, the world's second best-armed thermonuclear power still confronts dire problems and an uncertain future as Putin swings between east and west, seeking the best strategy to deal with them. ******* #4 Russia Veering to West-Oriented Course December 31, 2001 By JIM HEINTZ MOSCOW (AP) - When Vladimir Putin gives one of his rare smiles, there are lines and sags around his eyes that weren't there when he became president two years ago. But the former KGB operative has put his own marks on Russia since rising to power after the surprise resignation of Boris Yeltsin on New Year's Eve 1999. At first, Putin was seen as a leader who would try to reassert the Kremlin's Soviet-era place at the center of world affairs by resisting and undermining Western influence. His regime spoke repeatedly and harshly against the eastward expansion of NATO. Russia cultivated relations with North Korea, Iraq and other countries unfriendly to the United States in a campaign that it said aimed at establishing a ``multipolar world'' to replace American dominance. The Kremlin also vehemently objected to U.S. proposals to pull out of the Anti-Ballistic Missile Treaty and proceed with development of a missile defense system. Putin himself threatened to scrap all strategic arms-reduction treaties. Yet, today Russia has forged remarkable new levels of cooperation with NATO, although still nominally holding to its opposition to the alliance's expansion. When President Bush gave formal notice of a U.S. withdrawal from the ABM treaty, Putin responded not by scrapping arms-reduction treaties, but by proposing even deeper cuts. Since the Sept. 11 terror attacks, the Kremlin has redirected its foreign policy toward working with the United States and other Western countries - including its unexpected acquiescence to NATO nations basing warplanes in former Soviet Central Asia for the military campaign in Afghanistan. The latter impressed even some of Putin's strongest critics, such as Andrei Piontkovsky, a columnist for the newspaper Novaya Gazeta. ``The man went to great political and personal risk for the sake of what he considered to be the true interests of Russia,'' Piontkovsky wrote last week. Putin, whose demeanor is rarely anything but steely, has managed to make such policy changes without looking as if Russia is backing down or being inconsistent. Although firm whenever he speaks, he does not appear to be gripped by ideological insistence. Cool pragmatism is a sharp contrast to Russia's years under Yeltsin, who by turns seemed visionary or barely lucid, and many observers regard it with clear relief. ``We are entering civilization. We have recognized that the United States is the only sphere of influence. We're not playing the game of 'a multipolar world' ... We are looking for our place in the world,'' said Igor Bunin, an analyst at the Center for Political Technologies, a think tank. But that same pragmatism worries other observers. Putin increased the presidency's powers by pushing through measures that reduced the influence of regional governors, including taking away their seats in the Federation Council, the upper house of parliament. ``The system of restraint and counterbalance has been practically broken. The role of parliament is sharply weakened,'' analyst Lev Gudkov said in an interview with the newspaper Noviye Izvestia. ``Achieving such control over the Federation Council and the Duma (the lower house) allows the formation of a semi-authoritarian regime.'' His critics also point to the takeover of the only nationwide independent television channel by the Kremlin-connected natural gas monopoly and the closing or overhaul of some publications critical of Putin and his government. The decline of independent-minded media has led to reduced coverage of what may be Putin's major weakness - the war in Chechnya, which has entered a third year with no end in sight. Putin and the rest of the Kremlin refer to it not as a war but as an ``anti-terrorist campaign,'' drawing parallels between Chechnya and the U.S.-led campaign in Afghanistan. With that justification, it would be difficult for Putin to call a halt to the fighting even if he wanted to. ``Understanding that the hopeless situation, the continuing war in Chechnya, threatens his authority, it appears he simply doesn't know what to do,'' Gudkov said. Although public anger and dismay were sharp during the first Chechnya war, in 1994-96, little reaction to the second war is apparent in public opinion. In a mid-December poll of 1,600 Russians, 73 percent of the respondents approved of Putin, the Interfax news agency said. ******* #5 Russia: Muscovites see Kursk salvage as "the most pivotal event" ITAR-TASS Moscow, 30 December: The salvage of the Kursk nuclear submarine is the most pivotal event in the life of Russian society in the outgoing year, claimed Muscovites. Some 50 per cent of residents of the Russian capital who participated in a public opinion poll, carried out by TASS on Sunday [30 December] in four Moscow districts, described the submarine's salvage as "the most worthy and important action by Russian authorities in this year". "The authorities showed that, apart from promising, they also do something specific for their citizens," the Muscovites noted. In their opinion, this event considerably consolidated Russia's prestige abroad, since the authorities showed their "firmness in implementing their decisions" as well as "technical and scientific might of the country". In the opinion of nearly a third of Muscovites who participated in the poll, the terrorist acts in the United States on 11 September and the start of combat operaitons in Afghanistan became an event which considerably influenced both the international community and Russia. Incidentally, many noted that these events have raised Russia's status in the West. More than 15 per cent of Muscovites also called direct nationwide conversations between Vladimir Putin and Russian citizens live on the ORT and RTR television networks as the most important event for Russia in the outgoing year. Some respondents noted that such actions of Russian leaders "promote further construction of civil society, settle on the spot sore problems of population and help to take into account interests and requirements of citizens in implementing the state's policy". The Muscovites expressed a desire that "it would be good to make such gifts to citizens not only on the New Year". Other respondents called as important events the congress of the Civil Forum, the country's economic growth and "absence of bad news in society's domestic life". ******* #6 The Times (UK) 31 December 2001 Doubts raised over Russia's commitment to oil cutback FROM CLEM CECIL IN MOSCOW OIL analysts are already questioning Russia’s commitment to reduce crude output in support of Opec’s move to cut its members’ quotas by a total of 1.5 million barrels per day (bpd). Opec’s agreement, announced on Friday, is intended to lift the price of crude from below $20 a barrel to its minimum price target of $22. The move, supported across the Middle East, has raised concern in industrial nations over higher energy costs, particularly for motorists, at a time of slow economic growth. Opec’s cut in output was made possible because a number of non-Opec nations, principally Russia, had also agreed to curb production. Russia is the world’s second largest exporter of oil after Saudi Arabia. However, analysts and oil traders believe Russia’s decision to reduce exports by 150,000 bpd in the first quarter was designed to placate members of the Opec cartel without actually affecting the country’s output. Russian oil exports normally fall by between 100,000 and 150,000 bpd during the winter quarter as domestic demand rises sharply. Thus the timing of Opec’s emergency meeting in Cairo on Friday allowed Russia to implement a “virtual” cut in output and push oil prices up. Russian oil companies have also said they will increase output significantly next year. The companies, now privatised and operating with a greater degree of independence from the Government, have publicly supported the Opec deal while making plans to increase their own revenue through higher production. Yukos, Russia’s fastest growing oil company, announced an intended 24.3 per cent rise in production. Sibneft, its rival, announced a 22-25 per cent increase, and Surgut has predicted 8 per cent growth. But the Russian Government is of a different opinion. Oil accounts for up to 20 per cent of government revenue in Russia and 25 per cent of the country’s export earnings. If the oil price fell to, say, $14 per barrel, the Government could lose up to $4 billion (£2.7 billion) in revenue. Hugo Erikssen, director of Yukos’s international information department, said: “Yukos will comply with all decisions regarding oil exports in as far as they affect Yukos.” However, there are ways of insuring against the effects of a short-term cut in exports. Opec is not demanding restrictions on refined oil products. Surgut plans to send any excess crude oil to Belarus, which is within Russia’s custom zone, meaning that it would not count as export. Dmitri Avdeev, an oil analyst at United Financial Group, the Moscow stockbroker, said: “The volume of oil produced next year will increase, in spite of any cuts.” ******* #7 The Times (UK) 31 December 2001 A wizard game for Russian muggles FROM CLEM CECIL IN MOSCOW HARRY POTTER is so popular in Russia that aficionados have created a down-to-earth version of his favourite sport, Quidditch. In J. K. Rowling’s books, Quidditch is played in the air on broomsticks. Together with the staff of a Russian newspaper, Komsomolskaya Pravda, Alexander Maryin, of the Adventure Collection, a Moscow children’s club, has transferred the game on to an ordinary playing field. In the Russian version, broomsticks are replaced by human beings who carry the players on their shoulders. The “human broomsticks” change places every five minutes to avoid exhaustion. The dilemma of replicating the golden snitch, the small winged ball that plays a vital role in the game, was solved with pieces of string and eggcups. Two golden snitch prototypes were developed, one for younger players and the second for those who want more of a challenge. The first consists of a ball on a string attached to a wooden egg cup. The idea is to throw the ball into the air and catch it in the egg cup. The second variation is a rod, on to which a ball with a hole in it is attached with a length of string: the aim is to spear the ball on the end of the rod. The first Muggles Quidditch match was played in a temperature of -15C in Moscow last week. ******* #8 The Guardian (UK) 31 December 2001 Colonel commands share in post-Soviet prosperity After a decade of upheaval, officers are among winners Ian Traynor in Moscow Seeking respite from a bitter, snow-bound Moscow on a Thai beach over the New Year holiday, Lieutenant-Colonel Viktor Grigorov can only marvel at how sweet life can be. His £150,000 flat in one of Moscow's better areas is stuffed with electronic goodies, smart furniture, and a fancy "Swedish sauna". The Toyota Landcruiser sits downstairs. His two teenage sons are at good schools. Foreign holidays several times a year have become routine. "Never in my wildest dreams," he smiles, "would I have imagined I would have all this." Ten years ago Viktor Grigorov was a small-town police officer earning 200 roubles a month, the son of a poor factory hand. His only glimpse of life beyond the Soviet Union had been as a young communist on a trip to Finland where he was astounded by the tidiness of Helsinki graveyards. "My life itself is a mark of the transformation of Russia. The main thing I got from these 10 years has been freedom of choice. I can go where I want, I can buy what I want, I can read what I want." Ten years ago last week the Soviet superpower expired when President Mikhail Gorbachev resigned, the communist red flag was hauled down from the Kremlin, and Boris Yeltsin's Russia embarked on a high-risk course towards in dependence, democracy, and free markets. It has been a decade of huge upheaval, national decline, massive opportunity, and great corruption - a time of promise and trouble that turned lives upside down. Lieut-Col Grigorov, now 48, recalls big rows with his father. "He believed fervently in Stalin and Lenin and was so proud of the victory in the second world war. But he couldn't understand anything any more. His whole life was a waste - his youth, his passion, his love, everything. That generation, they were all involved, willy-nilly, in the system. I told him, look dad, look what's happened to this country. No one could go anywhere. We were all locked up and deprived of all chances." Viktor is well named: he is a winner. In the vicious post-Soviet lottery, he seized his chances after a humdrum 20-year career as a criminal detective in the small town of Serpukhov 50 miles south of Moscow where he was CID chief and head of the Communist party committee. "You had to be a party member to get on. And I was a Soviet man. Now I don't need to be a member of any party and there are no consequences." The great awakening came with the eruption of freedoms under Mikhail Gorbachev in the late 80s. The CID chief started reading voraciously, quit the party, and bitterly concluded that Bolshevism was "a great lie, an experiment on the Russian people intended to destroy it". His disgust deepened, however, with the ascent of Boris Yeltsin and the accompanying power struggles. "Any man bearing a weapon and wearing epaulettes - the army, the police, the judges, the procurators - we all became tools in the power struggle, under orders to take sides. It was almost a civil war. I refused. I decided I will not do this. So I was forced to remake my life entirely." His first marriage broke up. He quit the police, moved to Moscow, and fell in with some Serbian business types trading in and out of Yugoslavia during the international sanctions of the mid-90s. That proved lucrative. They formed a building firm at Pancevo outside Belgrade where Viktor Grigorov lived for three years. He also invested in a restaurant owned by the family of his second wife on the Adriatic coast of Montenegro. Back in Moscow by the late 90s, he also went into the booming "legal trade", taking advantage of contacts in the security services to advise clients in business and politics and doing private detective work. He was not alone. Former army officers, KGB veterans, and policemen have been some of the greatest beneficiaries of the Russian free-for-all, moving into banking, business, and the booming "private army" sector of the security trade. They have also flourished in politics under President Vladimir Putin. As the chaos of the Yeltsin years recedes, it is the Grigorov generation with security service backgrounds who are running Russia now. Lieut-Col Grigorov is Mr Putin's age and, like him, a non-smoking, non-drinking fitness fanatic wedded to visions of restoring Russian greatness.' "It was shaming for me to watch Yeltsin on television, to see him drunk, to listen to him. But now when I see Putin on TV my heart rises in pride." Such has been Mr Putin's impact that Lieut-Col Grigorov has come full circle. When he gets back from his Thai holiday next week, he is hoping to hear he has landed a job back in the police, in an elite unit combatting organised crime. With his separate income, the low pay is not a concern: "I want to rejoin the police because things are different now," he says. "They are changing because of Putin." ****** #9 www.znet.org December 22, 2001 The Riddle Of Putin By Boris Kagarlitsky MOSCOW - There is evidently some kind of natural law at work: if the business press and the leaders of the financial world name some country or other as a success story, then this is precisely the country where you can expect things to go badly wrong. Not long ago the newspapers were full of rapturous accounts of the Argentinian economic miracle. We were urged to study and reproduce the "Argentinian model". Now Argentina is on the verge of bankruptcy, unemployment has become a national catastrophe, and the population no longer believes anyone. In the recent parliamentary elections, voters crossed out all the politicians and wrote in Osama bin Laden. In two precincts he received a majority of the votes, and in others, a creditable second or third place. The Czech Republic was also hailed as an example of successful reforms, until problems arose there. For some reason, the experts then immediately lost faith in that country. The most popular story of recent years, however, has concerned the "new economy" in the US. This story came to an end with the fall of the Nasdaq, after which America ceased to be the "motor of world development", and turned into a source of problems for the rest of the world. The "Russian Miracle" Developments in Russia confirm the general rule. The crash of 1998 was preceded by enthusiastic assessments from Western experts, predicting the onset of an unprecedented economic boom. After 1998, the same experts wrote Russia off entirely as a basket case where reforms had failed and corruption and inefficiency reigned. Needless to say, Russian economic indices promptly started to rise. It took Western analysts around two years to notice this. Finally, in the third year of steady growth Western business leaders recognised Russia as a land of opportunity, once again declaring that reform was proceeding successfully after all. Unfortunately, this turned out not to be an exception to the rule either. No sooner had Russia received a high rating from the world business community, than oil prices started falling, and the government confessed that it doubted whether the budget it had just adopted could be implemented. A new economic crisis became a serious prospect. The problem with most economic analysts is that as a rule, they do not analyse anything. If things are going well, there is no point in exploring the specific reasons for the success. Everything is due to the consistent implementation of neoliberal policies. If problems emerge, then the policies have not been carried out consistently, or are not radical enough. No-one is bothered by the fact that the very same governments, whether of the Czech Republic, Argentina or Russia, have first been described as practitioners of consistent and effective liberalism, and then as examples of inefficient bureaucratism. In the years from 1999 to 2001, there have not been any radical structural changes in the Russian economy. The major developments have included a fall in the exchange rate of the ruble, followed quickly by an increase in the price of oil. The lack of any reforming initiatives on the part of the government no doubt helped allow the stability and predictability, short-lived but real, without which the present upturn would have been impossible. From the moment when the flow of petrodollars dried up, the structural problems of the Russian economy reappeared in all their force, and worse still, it has become clear how little relation the standard set of liberal prescriptions at the disposal of the government has to these ills. Once again we have been confronted with a massive disproportion between the resource sectors which bring in real income, and the half-starved manufacturing industries on which most of the population depends for its existence. Equipment is wearing out, private-sector investment is disastrously inadequate, and the state itself has quit the economy, handing over the main sources of real income to the oligarchs. Meanwhile, the population is too poor for its demand to act as a stimulus to production. This is not the first time the government has had to correct its budget. But the economic upturn of the past few years has only been possible because the resource monopolies have had a surplus of funds, and because this surplus has been spontaneously redistributed to the benefit of other sectors. People have started receiving their wages, and even if these are tiny, they are at least being paid regularly. This is why everything in the economy, from food processing to book publishing, has started to grow. In the space of three years so many good books have been published in Russia that it seems the publishing houses have not only caught up with their Western counterparts, but have made up for their omissions of previous years. The cinema too has started to revive. The surpluses of money have now come to an end. There is barely enough for the oil producers, and the other sectors, which had just begun to discover what normal functioning feels like, are all returning to their old semi-comatose state. After a lag of six to eight months, the prices for gas are following oil prices downward. Unless this trend is reversed, we will face a full-scale crisis in the coming spring. At best, we will hang on until next August.... The Russian Bubble The American economic boom of the late 1990s was accompanied by an artificial inflation of stock prices, with the creation of a gigantic soap-bubble on Wall Street. Fortunately, this bubble did not burst immediately, but subsided over time. Hidden inflation, pumped up by the stock-market speculators but restrained by the federal reserve system, found an outlet in high oil prices, among other things. In short, what was lethal for Americans was good for Russians. The Russian upturn was one of the side-effects of the American correction. The more the American bubble subsided, the more the Russian one grew. This occurred, however, in line with our national traditions. The Russian bubble has not been economic, but political. It might be described as "strong presidential power", or as "stabilisation of the state", or as "an increase in administrative effectiveness". Or perhaps, simply as Vladimir Putin's reputation. In essence, these are all one and the same thing. In Russia, a huge soap bubble has been mistaken for a balloon. From a distance, the two look very similar, but there is one difference: if you try to ascend into the heavens on a soap bubble, the result will inevitably be catastrophic. Our national peculiarities must be taken into account. Our bubble has proven astonishingly durable and long-lived, but there is a limit to everything. The Kremlin's political monopoly has rested on high oil incomes, and will vanish into the past along with them. The bubble is bursting, and the market correction will inevitably take the form of a crisis of power. The massive vote for opposition candidates in the most populous regions occurred even before the first symptoms of economic recession had appeared. With the onset of winter all the familiar social problems, which no-one is about to solve, are again making their appearance. Meanwhile, hopes that everything will resolve itself of its own accord are dissolving along with the flow of petrodollars. Putin was lucky. His political honeymoon lasted not a hundred days, as with other presidents, but a year and a half. All this time he could get away with not essentially solving anything, instead engaging in palace intrigues and personnel reshuffles, intimidating waverers, punishing personal enemies and encouraging old friends. Meanwhile, in Russia and the world at large everything went ahead much as ever. It did not go badly, either, so long as the economic upturn retained its momentum. The Putin Administration might be said to have coasted along, benefiting from the earlier efforts of the Primakov government and from the policies of OPEC. The first of these restored Russian industry to life, while the second raised oil prices, redistributing the "surplus" of dollars not only to the OPEC countries, but also to Russia. The Putin regime contributed precisely nothing to this situation, but was delighted to enjoy the results of others' work. If these two factors had not coincided (and also the default of 1998, which lowered the ruble and made our products competitive), all talk of a "Russian miracle" would have been absurd. Accounts were settled with Primakov, who was turned into a political outsider with a seat in the Duma, and when oil prices started to fall and the OPEC countries called on the Russian authorities to show elementary solidarity, they received a haughty refusal. Instead of addressing its own domestic and foreign problems, Moscow fraternised with Washington. The "big brother" from across the seas demands proofs of loyalty, and the Kremlin has an awed faith in US might. The friendship between Vladimir Putin and George Bush is developing against a background marked by war in Central Asia, an accelerating world economic crisis, and increasingly difficult relations between Russia and other oil producers. In all respects, Russia appears as a bastion of the "Western world", taking a stand against "Islamic terrorism", supporting the principles of "liberal economics", and refusing to collaborate with oil-producing countries in the Third World. Western politicians in their turn have been prepared not only to forget the Russian president's past career in the state security organs, but also the breaches of human rights in Chechnya. This is especially true now in the era of the "war on terrorism", with human rights in the West also being pushed into the background, even as a political slogan. If Putin has been given high marks in the West, back home all sorts of misfortunes are lying in wait for him. The new president received his strongest support from people who hoped that this veteran of the security forces would give Russia back its independence, strengthening its military might and allowing it to take its distance from the West. At the same time, they counted on him to put the oligarchs in their place. These people who believed the Putin myth now feel a deep sense of betrayal. To accuse Putin in this way is, however, quite unjust, since he has not betrayed anyone. He made no promises whatever. He never presented a program, and never outlined any political positions. There were only obscure hints that positions might be drawn up in the future. The people who linked their hopes of "national" or state revival to Putin were deceiving themselves, because they wanted to be deceived. They wanted to believe in the determination of the leadership to bring about national salvation; in the glory and grandeur of the security forces; and in the selflessness of the bureaucracy. For this reason, they looked for hidden meaning in empty words and vacuous slogans, attributing the obscure and elliptical character of the president's statements to the secretiveness of a man used to conspiracy in his former employment. The idea that the emptiness concealed nothing but emptiness proved too difficult for people used to idolising authority simply because it was authority. In one respect, of course, the hopes of the "patriots" have been borne out. Under Putin, the military-repressive apparatus has indeed been strengthened to a degree - or more precisely, the position of its leaders in the Russian political elite has grown stronger. Even here, however, the hopes nurtured by patriotic opinion have been deceived, since these military-repressive structures are working closely with the US, and are protecting the positions of the oligarchs. The calculation in Moscow, it appears, is that once the support of Washington has been enlisted, everyone else can be ignored. However, miracles do not happen, and not even the sympathy of George Bush can stave off an economic crisis. When oil prices started to fall, the OPEC countries cut their production, trying to stem the decline. Quite unconcerned, Russia continued marketing its supplies. Venezuelan President Hugo Chaves flew to Moscow, and tried to explain to his Russian colleagues that it was wrong to profit at the expense of others, and that if Russia wanted to sell oil for more than $18 a barrel in future, it should join with the OPEC countries in cutting its output. Chaves was shown the sights of the Kremlin, was treated to a ceremonial dinner, and was sent home empty-handed. Moscow's initial pledge to cut production by 30,000 barrels a day was seen as derisory; the amount was so insignificant that it would have been better for the Russian ministers to have kept their silence altogether. The outraged OPEC countries declared a price war on Russia, and within three days had emerged victorious. The cost of producing oil in Saudi Arabia and Venezuela is half that in Russia, and as a result, Russia never had a chance. As soon as oil prices dropped below $18 a barrel, the ruble started to shake, and the government panicked. The Russian ministers rushed to consult with OPEC, promising real production cuts. In a country where the oil companies have been divided up among oligarchs, making these cuts is unfortunately easier said than done. For the oligarchs to reach agreement among themselves on the share that each should have of the reduced production is harder than reconciling Bush with bin Laden. The government cannot compel them to do it, since the oligarchs are themselves the government. The only remaining hope is that the oil magnates will have an eye to their self-preservation. More than likely, however, it is already too late. In the longer term, not even a cut in output will redeem the situation. Until now, Putin's most serious crises have been linked to the submarine Kursk and to the burnt-out Ostankino television tower. For all their symbolism, these were not issues on which the country's fate depended. In the autumn of 2001, Putin was forced to make crucial state decisions for the first time. The choices he made were a heavy blow for anyone who had confidence in the new president. Meanwhile, a single month can hardly have sufficed to inspire love for Putin in people who were already suspicious of him. The social base of the regime has narrowed rapidly. The Kremlin can console itself with the professions of love issuing from the West. The experience of two earlier presidents shows, however, that this love is rarely able to guarantee sympathy from the people of Russia themselves. The current tenants of the Kremlin instinctively understand this problem, and feel nervous as a result, but there is nothing they can do. No-one can say precisely how the crisis will develop, or what form it will take. All that is clear is that when the political bubble bursts, the noise will be even louder than when the bond market collapsed. ******* #10 The Independent (UK) 31 December 2001 Obituary: Professor Sir Dimitri Obolensky BY ANTHONY BRYER DIMITRI OBOLENSKY had presence enough to allow him a quick self- deprecatory tale or grin. It was the resonance of his voice and precision of his speech which did it. His singing, liturgical or profane, was memorable. His English and French were cultured enough. But to Soviet ears his Russian was simply electrifying: the living voice of the past, a reminder of a lost world. Obolensky was equally intrigued by the Russia that he had missed, and freely acknowledged its achievements. Such a complex man was a complex historian. As an academic, Obolensky began in 1946 with a Cambridge thesis on the Bogomils (1946), which may explain something. It is about medieval Balkan dualism, good and evil, and the identity of the fundamentalist and non- conformist followers of a hidden Bulgarian pop, or priest, which came to a show trial in Orthodox Byzantium in about the year 1110. In 1948 Obolensky dedicated the published book (The Bogomils: a study in Balkan Neo-Manichaeism) to his mother, Countess Maria Shuvalov (1894- 1973), and became a British subject. This was a turning point. A lesser move was from Trinity College, Cambridge, to Christ Church, Oxford, where some spotted that neat painters had made "Prof" out of "Prince" on Obolensky's door by 1961. In Oxford, Obolensky's measured lectures led to his most influential book, The Byzantine Commonwealth, first published in 1971. It is a classic. The title tells all: a touching reference to the liberal kingdom and commonwealth to which Obolensky had transferred his allegiance. How far could the lost state of Byzantium control its Slav successors? Where is good and evil; how in medieval terms can a totalitarian state implement its desires? Obolensky reported a discussion on such matters between senior Byzantinists and the Kremlin leadership in 1991 (when Gorbachev was unavoidably absent in the Crimea). It all ended in coffee cups. But in Oxford, Cambridge and elsewhere in his commonwealth, Obolensky taught his students how to understand geography and texts, ideas and identity. Two of them, Simon Franklin and Jonathan Shepard, were inspired to take one part of the matter on to The Emergence of Rus, 750-1200 (1996). Russianists know Obolensky best as editor of The Penguin Book of Russian Verse (1962) and its successors under various titles. He introduced a whole world of Russian poets and writers, such as Osip Mandelshtam and Anna Akhmatova (whom he helped bring to Oxford for her honorary degree in 1965). Byzantinists asked Obolensky of his own academic identity in a subject which he did so much to create in Britain. Obolensky claimed Francis Dvornik (1893-1995), Byzantinoslavist of Moravia, as his prime mentor. Dvornik had a vivid conception of good and evil in central Europe, which he was to transfer to Harvard University's Byzantine outstation at Dumbarton Oaks in Washington, DC, in the 1950s. But in the 1940s Obolensky and the Catholic cleric used the North Library of the British Museum as their common study. By the 1960s, young students in Oxford would daringly enquire if the Obolenskys were perchance related to the Romanovs? It was like asking a Plantagenet if he had anything to do with the Tudors. The truth was that Dimitri Obolensky's grandmother Countess Sandra Shuvalov (1869-1959), and great-aunt Sofka Demidov (1870-1953), daughters of Count Hilarion Vorontsov-Dashkov (d. 1915), Minister of the Imperial Court under Alexander III and Viceroy of the Caucasus under Nicholas II, indeed probably knew the last Tsar better than anyone else outside the Romanov family. I hope I have got that right, for I am reading Obolensky's notes off the backs of menu cards. At dinner at his club (the Athenaeum) in 1983, I asked him to explicate an authorised version of his genealogy. Ignoring the upstart Romanovs, Dimitri began firmly with Rurik, Scandinavian fonder of the Russian state circa 862, followed by Igor, Svyatoslav and St Vladimir (d. 1015). Another sainted ancestor, Michael of Chernigov (d. 1246), appears on the next card until, several cards and courses later, they expand laterally with Dimitri's three-greats-grandfather, Prince Michael Vorontsov (d. 1856). This Vorontsov was the prototype Viceroy of the Caucasus and everyone's anglophile hero. Edward Blore designed for him the Alupka palace in the Crimea, a sort of oriental Balmoral by the sea, where Churchill was to feel at home at the Yalta Conference of 1945. Observant visitors to Alupka may still spot (in the library next to the Hogarth painting) that the Vorontsovs maintained their subscription to Punch unbroken throughout the Crimean War, which was fought a few miles away - Gorbachev's 1991 hideout is even nearer. In 1918 the infant Dimitri Obolensky was brought through the revolution from his native Petrograd to the Alupka palace. One year later, after the longest period he was to spend in Russia, the Royal Navy embarked Dimitri (along with the Dowager Empress Marie Feodorovna and the Grand Duke Nicholas, among others) to an uncertain future. Obolensky's final book, Bread of Exile, published in 1999, is what those without menu cards had been waiting for. It is a history of his family, largely from six sparely edited texts of their own memoirs - his own the least revealing. Yet here is a living 19th-century family tradition, where (until 1861) nannies could be bought at auction. Here is Dimitri's father, Prince Dimitri Alexandrovich Obolensky (1882-1964) leading a country life reminiscent of Turgenev's tales. This Obolensky was an improver and patriot. As local marshal of the nobility he delivered a stirring speech to his peasantry when the Austrians bombarded Belgrade in 1914. Local police explained their enthusiastic response: "They thought you were talking about Belgorod near Kharkov where the relics of Saint Ioasaph are." With the subsequent revolution, family links were broken. In the dispersal, when every second taxi driver in Paris (including Dimitri's father) was a Russian prince, his mother married again. Dimitri's stepfather, Count Andre Tolstoy (1891-1963), ADC to General Wrangel, the final White Russian leader, was perhaps a more vivid influence. Such a background does not really explain how the infant refugee from the Alupka palace ended up as a senior member of Christ Church in Oxford and vice-president of the British Academy (1983-85). The latter is a sort of academic foreign minister, where Obolensky relished employing his diplomatic skills. Obolensky's original peers were commonly lost in the Russian emigre society and circular politics of Nice, even the lycees of Paris. But Obolensky differed from them by being equally at home in Britain. The Vorontsovs did not buy nannies, but employed English or Scottish governesses (for whom Punch was provided at Alupka). Dimitri's governess was called Miss Clegg. In a tale to do with an Englishman mispronouncing French and regrettably too long to repeat here, Dimitri found himself by 1929-31 in an archetypal English preparatory school (Lynchmere in Eastbourne). After such rigours there was no turning back. Dimitri Obolensky spoke with some protocol and correctness of his own background and identity, but maybe it was Eastbourne which endowed him with the unexpected grace of puckishness. Things could have been so much worse. He liked to cite Hilaire Belloc's cautionary verse on Godolphin Horne, who was "nobly born" and "held the Human Race in Scorn"; "So now Godolphin is the Boy / Who blacks the Boots at the Savoy." A consequence was that Obolensky chose British, rather than French, nationality in 1948. He also chose the medieval Rurukids rather than the modern Romanovs to illustrate his own genealogy. Obolensky had already explored the Bogomils. He was a pilgrim to Athos and a great traveller in Greece (I once found him slumming it in the back of a fish restaurant on Aegina). In Paris he knew the Russian Orthodox theologians and worked for the Emmaus community. He enjoyed, discreetly, his academic honours, and decent dinners at the Athenaeum and the Savoy. But I think Obolensky most treasured his invitation in 1988 to attend the great council of the Russian Orthodox Church, as a lay member, on the 1,000th anniversary of the baptism of the sainted prince Vladimir into the Byzantine Commonwealth. For Dimitri Obolensky it was, after all, a family occasion. Anthony Bryer Dmitriy Dmitrievich Obolensky (Dimitri Obolensky), historian: born Petrograd 1 April 1918 (Old Style 19 March 1918); Fellow, Trinity College, Cambridge 1942-48, Honorary Fellow 1991-2001; Lecturer in Slavonic Studies, Cambridge University 1946-48; Reader in Russian and Balkan Medieval History, Oxford University 1949-61, Professor of Russian and Balkan History 1961-85 (Emeritus); Student, Christ Church, Oxford 1950-85 (Emeritus); FBA 1974; Kt 1984; married 1947 Elisabeth Lopukhin (marriage dissolved 1989); died Burford, Oxfordshire 23 December 2001. *******