Expelling Russia from the G8 is an option being urged on Barack Obama this morning. The logic for admitting Russia in the first place was always tenuous - as Anne Applebaum argued in the Spectator when it last hosted the summit.
For sale, the advertisement might read: One very large Russian energy company. Estimated assets, including oil wells, reserves, refineries: $60 billion. Possible liabilities: four major international lawsuits, a part-time CEO who works full-time as President Vladimir Putin’s deputy chief of staff, and a certain — shall we say — lack of clarity about whether the company legally acquired most of those assets at all.
I am talking here about Rosneft, the very large Russian energy company whose shares go on sale in London next week. Don’t worry if you’ve never heard of Rosneft; it hasn’t been a very large Russian energy company for long. Much of its wealth was acquired recently — last year, in fact — when the Russian government forced another oil company, Yukos, into bankruptcy by demanding $30 billion in back taxes and sending its chairman to a labour camp. Only one bidder — a previously unknown company whose listed address turned out to belong to a mobile phone shop in an obscure town — showed up at the auction of Yukos assets. A few days later that mystery company sold its Yukos property to Rosneft for a pittance — which was not surprising, given that Rosneft’s major shareholder is the Russian government. Have I mentioned that the Rosneft CEO works as President Putin’s deputy chief of staff?
But the truly unusual, almost comic aspect of the Rosneft sale is the openness with which this extraordinary company has presented itself to the London Stock Exchange. When a prospectus was issued two weeks ago, it contained a few warnings, including some that are uncommon in the rarefied world of Morgan Stanley, Goldman Sachs and the other investment banks which are straight-facedly managing the sale. ‘Crime and corruption could create a difficult business climate in Russia,’ notes the prospectus, which also points out that the company is controlled by government officials ‘whose interests may not coincide with those of other shareholders …and may cause Rosneft to engage in business practices that do not maximise shareholder value’. Translation: when the Russian government walks away with your money — as it walked away with Yukos investors’ money — don’t say no one warned you.
There is no pretence here. The Rosneft sale next week — scheduled for 14 July —will establish the principle that companies with illegally acquired assets can receive the imprimatur of the international financial establishment — as long as they are rich enough. But maybe that shouldn’t surprise anyone. After all, on the following day Prime Minister Tony Blair, President George Bush and the leaders of Italy, Germany, France, Canada and Japan will meet in St Petersburg to help President Putin preside over the annual meeting of the Group of Eight. By doing so, they will establish the principle that authoritarian governments can receive the imprimatur of the international political establishment — as long as they are rich enough.
Admittedly, the G8 isn’t as serious an institution as the London Stock Exchange. Although it started its life as a private meeting between the leaders of the world’s largest industrial democracies, the organisation has lately come to resemble nothing so much as a very expensive circus. The Japanese, who consider the G8 a substitute for the UN Security Council they’ll never join, racked up a $750 million bill last time they hosted it. Others, the British Prime Minister included, have chosen elaborate, crowd-pleasing ‘themes’, such as last year’s save-the-Africans extravaganza, to boost their particular agendas. The first Russian president, Boris Yeltsin, was allowed to attend meetings on the muddled grounds that making him a member would magically turn Russia into one of the world’s largest industrial democracies. It did not.
Nevertheless, President Yeltsin stayed in. His successor, President Putin, stayed in too, mostly on the equally muddled grounds that it would be too embarrassing to kick him out. Mr Putin has now taken full advantage of this muddle and turned the St Petersburg meeting into a major propaganda offensive, dedicated to the idea that Russia is still a superpower — an ‘oil and gas superpower’ — and a democratic, free-market one at that. Just last week he defended his country’s deployment of gas-pipeline blackmail to disrupt the Ukrainian elections on the grounds that Russia had merely been ‘using free-market principles in the gas trade with some of our neighbour states’. His top adviser held a rare public meeting to announce that Russia is in fact a ‘sovereign democracy’ after all. The Russian government has even hired a powerful American public relations company (Ketchum, whose clients include Disney and Pepsi). Ketchum’s job is to explain (as one Ketchum executive put it) that recent problems are ‘exceptions to the rule’, and more generally to encourage the Western press to join their leaders in ignoring President Putin’s transformation of Russia.
For those with memories as short as those of London investors, it’s therefore worth stopping for a minute to recall the highlights of that transformation. To start with, President Putin destroyed independent Russian television, which is now almost entirely state-controlled. He twisted election results to ensure that he and his allies won by landslides (not that, lacking media attention, his opponents would have won anyway). He recently passed laws designed to make existence close to impossible for Russia’s beleaguered human rights groups, environmental groups and other independent advocates. All the while, he continued his stunningly brutal (and now totally invisible) guerrilla war in Chechnya, which long ago moved beyond any legitimate repression of terrorism and into the realm of massive human rights abuse. The blatant illegality that accompanied the transfer of assets from Yukos to Rosneft — Mikhail Khodorkovsky, the Yukos CEO, was arrested, put through a macabre, Soviet-style show trial and sent to a prison camp where he suffers mysterious ‘accidents’ — put a permanent dent in national respect for the rule of law.
Much worse, though, for anyone who wishes Russians well, are the subtler changes in the Moscow atmosphere. Paranoia is back: recently, when the American Foreign Affairs magazine published an obscure article that idly speculated on the aftermath of a US nuclear attack on Russia or China, the city was instantly awash with rumours of impending nuclear war. Fear is back too: once again, my Russian friends are too nervous to be honest on the telephone. Some of them report visits — perfectly polite, it’s true — from agents of the FSB, the agency formerly known as the KGB, who are very interested in their foreign acquaintances and bank accounts. A Russian visiting America last spring told me that he was surprised by how many people, both in Washington and in Russia, had asked whether he’s really returning to Moscow afterwards — ‘will you dare go back?’ being a question that no one even considered asking five years ago. It is tragic but true: once again, Russia is a place where the blunt-speaking watch their backs.
All of these changes at home have, of course, coincided with Putin’s use of gas-pipeline blackmail in what Russia calls ‘the near abroad’ (and by extension Western Europe); his attempts to undermine the governments of Georgia and Ukraine and his increasingly ambiguous role in Iranian nuclear and Middle East peace negotiations. Yet none of these changes has prevented Bush, Blair and e
veryone else heading for St Petersburg, where the leader of the ‘oil and gas superpower’ with a ‘sovereign democracy’ and ‘free-market principles’ will welcome them with open arms.
And here is the real crux of the matter: it’s not the meeting itself that counts; it’s the context. President Putin has met with Western statesmen many times, and rightly so. Indeed, advocates of realpolitik are absolutely right to argue that we should have normal relations with Russia, that President Putin is a potential ally on many issues, that Russia is not North Korea. But a G8 summit is not a normal, bilateral meeting. The G8 is an informal gathering of the world’s largest industrial democracies. By allowing Russia to head it, we have accepted Russia as one of us.
And after everyone goes home? The Kremlin — along with Venezuelans, Iranians, Arab leaders and other oil tyrannies — will sit back, laugh and agree that the leaders of the so-called West merely pay lip service to the ideals of freedom and democracy; they don’t really believe in them. If you have enough oil, they’ll let you into their fancy clubs anyway. As Putin’s defence minister recently put it, ‘In the contemporary world, only power is respected.’ As Putin’s adviser recently put it, ‘They [the West] talk about democracy but they’re thinking about our natural resources.’
What is at stake here, in other words, is not just Russian–Western relations, but the West’s very ability to go on talking about democracy — in Russia, in Iraq, anywhere — and still get taken even remotely seriously. In a world where the promotion of democratic and liberal values is itself a realpolitik necessity — some form of political liberalisation is absolutely essential to the battle against al-Qa’eda and the ultimate integration of the Middle East into the global economy — that’s a pretty big problem.
Oddly, the only people who seem really worried about the long-term credibility of the West are Russians. In Washington a few months ago, Andrei Illarionov, an economic adviser to Putin until his dramatic resignation last year, told me that Putin always returns from G8 meetings feeling utterly convinced of the rightness of his political course; more than once, Putin’s opponents have been arrested or put on trial in a G8 summit’s wake. By attending the G8 summit this month in St Petersburg, Illarionov said, Western leaders will show their approval of ‘the nationalisation of private property, destruction of the rule of law, violation of human rights and liquidation of democracy’. Garry Kasparov, the chess champion who dabbles in politics, has also said that the G8 will resemble ‘the Berlin Olympics in 1936’ and predicts it will be followed by the ‘equivalent of Munich 1938’ — the de facto acceptance of Putin’s Russia by the West.
But perhaps it is not surprising that Russians, not Americans or Brits, are the ones pointing this out. After all, it is they, not we, who really care about abstract ideas like ‘democracy’ and ‘free markets’ since it is they, not we, who will suffer without them. Russians also understand better the significance that the G8 — a dull bit of bureaucracy to most of us — has acquired in the rest of the world. When I told Illarionov that Americans and West Europeans don’t care much about the G8 one way or the other, he shrugged. ‘What is important is not how you in the US view the G8. You have to think how your participation will be viewed and used in the world.’
We, like the London Stock Exchange, have now been warned.
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