Streetwise Professor

February 16, 2018

Now That He’s Tackled the ORGANIZATION, When Will Mueller Indict Grandfather Frost?

Filed under: Politics,Russia — The Professor @ 10:19 pm

Today Mueller indicted 13 Russians for “interfering” in the US election.  The indictment would be hilarious, if it weren’t so tragic: for nigh on a year the country has been transfixed and the government convulsed by an investigation that is descending into farce.

So this is the best that a “dream team” (nightmare would be more like it, given the presence of people like Andrew Weissman) of prosecutors can come up with:

August 18, 2016, Defendants and their co-conspirators sent money via interstate wire to another real U.S. person recruited by the ORGANIZATION, using one of their false U.S. personas, to build a cage large enough to hold an actress depicting Clinton in a prison uniform.

No, really.

The ORGANIZATION. Yeah. Just like the cosa nostra or the Cali Cartel or something. You cannot make up this stuff.

As yet there is no evidence of collusion (which is not a crime, actually), let alone a conspiracy, between anyone in the Trump campaign or administration and any Russian individual or organization. Indeed, the fact that Mueller apparently feels that he can waste his time on such trivialities suggests strongly that there is no evidence of anything untoward, let alone criminal.

Amidst all the harrumphing, all I can say is that if the republic can’t survive such Mickey Mouse efforts as described in the Mueller indictment, it doesn’t deserve to survive.

Deep thinkers like Ben Sasse say that Putin is attempting to raise doubts about American institutions.  That is unnecessary: the institutions are doing a bang up job at that without any foreign assistance.

Further, as I noted in a talk on the forthcoming Russian election at Rice University last week, there is nothing new here. Nothing. The Russians have been doing this (and far worse) continuously since, oh, around November 8, 1917.  They almost certainly did it 99 years later out of habit, rather than conviction, or a sincere belief that it would have any effect.

But it has had an effect, because by obsessing about it the American political class is actually ensuring that Putin and his creatures are succeeding beyond their wildest dreams.  This obsession, moreover, is not driven by the real threat posed by the Russian effort, but by the need of the political losers to excuse their failure, and to destroy the usurper who deprived them of what should have been theirs by divine right.

The indictment is all for show, because the Russians are in, well, Russia, and hence out of reach of US law enforcement. Mueller might as well have indicted Putin–or Grandfather Frost, for that matter–for all the real effect it will have.

But Mueller desperately needs to show that he is actually doing something.  In this he has succeeded. He has shown that he is chasing phantoms, and wreaking havoc in the process.  But since he is accountable to no one, and politically sacrosanct, he will go on and on, to serve the political class and to justify his existence. A perfect illustration of the a-constitutional monstrosity that is a special counsel.

Shut. It. Down.

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Putin’s Rock-and-a-Hard-Place Situation in Syria

Filed under: Military,Politics,Russia — The Professor @ 11:17 am

The Syrian war has been dragging on for a bloody seven years, but now the sh*t is truly getting real–because now it has become a cockpit for global and regional power rivalries. The most fraught development involves the potential for escalating conflict between Iran and its proxies (notably Hezbollah) and Israel–and that puts Vladimir Putin and Russia into a very difficult position.

Last week an Iranian drone allegedly violated Israeli airspace. The Israelis shot down the drone, and then launched a massive attack that apparently destroyed half of Syria’s air defenses, losing an F-16 in the process.  The Israelis also bombed Iranian forces in Syria. Things have settled down a bit since then, but the potential for escalation is clearly present.

Despite Russia’s long-term (and by long-term I mean centuries-long) rivalry with Iran/Persia, the countries have been de facto allies in Syria because both have a strong interest in saving the Assad regime.  But the interests in Assad are vastly different, and now that the Syrian regime’s survival seems assured, those interests are not aligned.

Iran views the Assad regime as vital because under its control Syria is a vital component of Iran’s anti-Israel strategy.  In particular, Syria is the essential logistic bridge to Hezbollah in Lebanon.  With Syria in unfriendly hands, Hezbollah would be completely isolated.  With Syria in Assad’s hands, Iran can funnel massive supplies to Israel’s arch-foe.  Given the centrality of Israel to Iran’s strategic ambitions, Assad is a vital Iranian national interest, and an ongoing national interest.

Putin’s interests in Syria were always more limited.  A naval base (which would be completely useless in a real shooting war given its isolation and Russia’s lack of a real blue water navy), a few airbases, and an ability to reassert Russia as a player in the Middle East. Those objectives have largely been achieved, and Putin was no doubt hoping that the stabilization of the Syrian regime would permit a drawdown of Russian activities there.

Furthermore, Putin has always tried to maintain good relations with Israel.  Netanyahu and other high-ranking Israelis have made numerous trips to Moscow.

But if Iran pushes issues with Israel, the Jewish state’s heretofore relatively benign approach to the Syrian regime (which has involved no more than occasional punitive strikes and a largely hands-off attitude in the Syrian civil war) will change. The regime is Iran’s and Hezbollah’s center of gravity, and if Iran escalates confrontation with Israel either from Lebanon or Syria directly, Israel will hit Assad’s regime very hard.  This will again put its survival at risk, and cost Putin what he has gained so far.

In other words, it is in Russia’s interest to restrain Iran, but it is not clear that Iran can be restrained. Putin has nothing to gain from an Iran-Israel conflict in Syria and Lebanon, and all that he has gained so far is at risk from such a conflict.  For its part, if Iran decides to escalate, it means that it has decided that the Syrian regime’s vulnerability to local forces has been largely eliminated, and it doesn’t really need Russia anymore.

All of which means that Putin is now largely at the mercy of a highly ideological regime with an agenda that not only does Putin not share (the destruction of Israel), but which he actually opposes.

Note that Russia has also been exploring cooperation with Iran’s other arch-enemy, Saudi Arabia, especially in the field of energy.  Siding with Iran puts that at risk too.

So what will Putin do? Hard to know. But it is clear he has no real good options.

The other big story involving Russia in Syria relates to the devastating American response to an attack mounted on a base of US-supported fighters where some American advisers were located. The US responded with extreme–and I mean extreme–violence. In response to a battalion-sized attack, they threw just about everything in the arsenal at the assault–artillery, F-15Es, MQ-9 drones, AH-64 Apaches, B-52s(!), and AC-130s.

This extremely forceful response was clearly sending a message.  It reminds me of what Mattis told Iraqi tribal leaders: “I come in peace. I did not bring artillery. But if you fuck with me, I will kill you all.”  The assaulting force was f*cking with the US, and Mattis’ military responded by pretty much killing them all.

They’ll think twice next time. And that’s the point.

The biggest mystery is the identity of “them all.” Was it regime paramilitaries leavened with a few Russians, or a force predominately made up of Russian mercenaries? The Russians first denied Russians were killed, but after some widows went public it admitted to the deaths of 5 Russians.  Other reports, supposedly sourced from Russian military sources, put the casualty toll in the hundreds, with 100-200 KIA. (The Russian government dismisses these reports as “disinformation,” but its credibility is near zero.)

The big question is why was the attack made? A purely regime-directed operation that used Russian mercenaries without the knowledge or approval of the Russian military? (Highly doubtful.) An attempt by the Russians to test the Americans, or to send a message? (If so, the answer was given with extreme prejudice.) One theory floating around in Russia is that the mercenaries (from the firm Вагнер) had become inconvenient to the Russian military and government, and were set up to be destroyed.  I have no idea–I just hope that Mattis, Trump, et al do.

Then there’s the conflict between the US and Turkey over support for Kurdish fighters (who were the only anti-ISIS troops who can, in the words of George Patton, “fight their way out of a piss-soaked paper bag”).  Turkey has mounted an attack into Syria, and Erdogan has threatened to give the US an “Ottoman slap” if we interfere. (By the way–did the Ottomans have nukes? Just wondering.)

All in all, Syria makes Game of Thrones look simple, and now the potential for a conflict between the big dogs is greater than ever. It’s hard to see this ending well for anyone–Vladimir Putin least of all.

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February 10, 2018

Counterintelligence Follies–What a Country!

Filed under: Politics,Russia — The Professor @ 8:02 pm

One thing that seems to have passed without notice in the furore over Carter Page is the utter implausibility of the Russians using him in a high-level clandestine outreach to Donald Trump.  No, implausible not because of Page’s fringe-status–though that would have probably been sufficient–but because of the fact that Page had been in contact with Russian intelligence operatives who were eventually arrested by the FBI.

We now know that Page was one of the individuals (“Male-1”) cited by the FBI agent in the complaint against the three Russians.  Now the Russians might not have known for certain that Page was “Male-1” or anyone else cited in the complaint, but you can be damn sure that they would have identified every American the indicted Russians had been in contact with, and every one of them would have been under suspicion.  Indeed, the detail from the recorded conversation involving Page and his background included in the report would probably have been sufficient for Russian intelligence to identify him.

So we are supposed to believe that less than two years after the indictment, the Russians would have thrown open the doors to Page, granted him an audience with Igor Sechin, and then proceeded to include him in a campaign to bribe an American presidential candidate?  A guy who had already been interviewed by the FBI, and hence was at the very least in the crosshairs of US counterintelligence, and even possibly an asset thereof?  A guy who had been involved in burning three of their operatives?

As. Effing. If.

Except, maybe, as part of an elaborate scheme to spread disinformation about Trump.

But there is no way that that anyone who had come in contact with the indicted Russian agents would have been used as part of a serious operation to bribe a US president.

If the FBI had actually entertained the possibility that the Steele dossier was legitimate (which, of course, they might never have done), they would have had to asked themselves: why would the Russians conspire with a guy that they had every reason to suspect was in league with, or compromised, by the US counterintelligence? That alone should have been sufficient either to discredit the dossier, or conditional on accepting the truth of the dossier, concluding that the Sechin offer was part of a disinformation scheme.

Stephen McIntyre makes an important observation about the dossier’s claims regarding the Page-Sechin meetings.  Specifically, the first mention in the dossier (in July) of the meetings is lacking in specifics regarding (a) the “brokerage fee”, and (b) Page’s assurance that Trump would lift sanctions.  Miraculously, the second mention of the meeting–in a Steele report three months after the alleged meeting–includes these details.  Said details, of course, were included in the FISA application. And get this: the last Steele report that adds these apparently essential details was produced (or should I say “invented”?) 4 days before the FBI approached the court.

You know exactly what happened, don’t you? The FBI tells Steele: “This is all you got? We need more than this.” And like a short order chef, Steele starts cooking, hits the little bell with his spatula, and serves up a steaming pile of hash, made to order.

Which provides further evidence that the FBI knew all along that it was providing fiction to the FISA court.  Unless, of course, you are going to choose option “B”–that the FBI were clueless, credulous morons.  (There is no option “C”.)

In other counterintelligence follies, the NYT reported that the CIA was duped into paying a Russian $100,000 (and had agreed to pay $900,000 more) in exchange for stolen hacking tools and dirt on Trump. The story is sourced to the Russian, and to US officials.

The CIA denies, of course.

It is clear that the story about paying for stolen hacking tools is utter tripe. You don’t pay for what can be–and has been–copied, and what you already own. So if this did happen, it means that what was really bought was dirt on Trump, and that was the intent all along. If this is what went down, then no doubt that the arrangement broke down after the first meeting because the Russian delivered such obvious garbage that even anti-Trump CIA people realized it was worthless.

If this deal did occur, it’s also almost certain that the Russian approached the CIA because word was out that the agency was actively seeking information on Trump, and the Russian sensed an opportunity.

Whether this happened or not is actually far less interesting than why it was leaked.  Maybe the Russian was the one who initiated the contact with the NYT, but somewhere along the line “US officials” corroborated it.

Now who would that be? My guess is that these are pro-Trump officials engaged in a clandestine war with elements in the CIA.

Like Yakov Smirnoff says–“What a country! America–I love it!

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February 2, 2018

American Siloviki

Filed under: Politics,Russia — The Professor @ 3:43 pm

The long anticipated–and by many feared–release of the House Intelligence Committee majority’s letter on the origins of the Carter Page FISA warrant came out today.  From the pre-release wailing, rending of garments, and gnashing of teeth over the grave threat that it posed to national security, one would have thought it would have contained nuclear launch codes and shocking revelations about Area 51.  In fact, it was anticlimactic, and demonstrated what any sentient being should have been able to figure out: that the FBI and DOJ relied upon the dodgy, fundamentally tainted Fusion GPS/Steele/DNC dossier to obtain a FISA warrant to spy on Page–and hence on others in the Trump campaign.

Anticlimactic, but damning and disgusting nonetheless. Particularly given the revelation that Andrew McCabe, erstwhile deputy director of the FBI, admitted under oath that but for the dossier, the FISA warrant would never have been sought in the first place.  It was clearly pivotal, despite all of the desperate attempts in the media and among Congressional Democrats over the last few days to insinuate that Page had long been on counterintelligence radar.  (This actually cuts the other way–if the pre-dossier evidence against him was so strong, why wasn’t he under surveillance until after the dossier was obtained?)

The essence of the memo (just described) doesn’t really require much discussion.  Those facts speak for themselves. A few details do deserve some comment.

One is the use of a tactic that I have mentioned as being characteristic of KGB methods (though they are no doubt a staple of all intelligence services): planting “information” in a media source as a way of laundering it, enhancing its credibility, and getting it into circulation.  The typical use of this technique is to get the planted information (or disinformation) into the media foodchain so that it gets disseminated more widely.  Here the use of the technique was far more sinister. It was recycled through a friendly journalist (Michael Isikoff) who was then cited as corroboration in the FISA application.

The memo leaves some wiggle room for the FBI and DOJ to claim that they didn’t know that Steele had approached Isikoff, but this requires them to claim that they can’t add 2 and 2: once they read the Isikoff article, knowing what Steele had told them they had to have known that Steele was the source. (Steele apparently tried to craft a cover story by pointing the FBI to a report containing similar information prepared by Clinton crony Cody Shearer–thereby providing a possible alternative source for the Isikoff story.)    Furthermore, within a few weeks the FBI learned that Steele was talking to journalists, and they fired him–yet they did not inform the FISA court about that their initial application was tainted in their applications for renewal.  (I further note that since the FBI fired him–that means they hired him!)

And the renewals brings up another issue: one of the signatures on at least one renewal was Rod Rosenstein’s.  You know, the guy who appointed Mueller and who is overseeing the independent counsel investigation for DOJ because of Session’s recusal.  What the holy F? Rosenstein’s involvement in the FISA process, which is deeply embedded in the Russia investigation, means that he is conflicted as hell.  He should have had nothing whatsoever to do with the appointment of the Special Counsel, and nothing to do now with overseeing him.  This is particularly true since Rosenstein’s knowledge must have included the fact that the original warrant was the fruit of a poisoned tree, and that he failed to disclose that to the FISA court.

James Comey’s fingerprints are all over this as well.  I can’t wait to hear his deep exegesis on the ethics of swearing to a court about the veracity of “salacious, unverified” (his words!) info produced by a rabid partisan and paid for by a presidential campaign to get a warrant to spy on Americans.  And to the ethics of withholding material information from the FISA court.

This last is particularly and disgustingly ironic given that one of the FBI’s objections to the release of the memo was that it omitted relevant facts. I can’t imagine what omitted fact would reverse the conclusions that flow from those that are included.  Putting that aside, the FBI’s objections give a new meaning to chutzpah.

The pre-release shrieking about the memo was beyond hysterical.  Among the most hysterical claims (made by Leon Panetta and others) was that a release of the memo would unleash a Constitutional crisis.

Just how would the Chief Executive’s declassification of a document about the actions of parts of the executive branch constitute a Constitutional crisis? The President holds ultimate classification authority, and is responsible for the execution of the laws and the conduct of executive branch departments, agencies, and employees. Disclosing information about the misbehavior of executive branch officials does not represent a Constitutional crisis: if anything, it is the misbehavior of those officials during a presidential election that raise the issue of such a crisis.

Some of the reporting and commentary on this issue has been utterly incredible (in many senses of the word).  For example, Trump overruled current-FBI director Wray’s objection to releasing the memo.  The WaPo framed this as “Trump defies Wray.” Um, who the hell works for whom? If there is defiance going on, it is Wray’s going public with his objections to the actions of his Constitutional superior.  Wray should have raised his objections in private to Trump, and if overruled (as he was, in the event), kept his mouth shut in public, or resigned–and then kept his mouth shut. To lobby publicly (and disingenuously, by raising national security concerns) in an attempt to pressure his superior into doing something is beyond the pale.

Or should be, anyways. But one thing that this entire sordid episode has demonstrated is that the bureaucracy generally, and the intelligence and federal law enforcement agencies in particular, consider themselves an independent power, a co-equal–superior actually–branch of government, the Constitution be damned. Trump is deemed the usurper.  Indeed, it is clear that many senior members of the FBI, DOJ, and the intelligence community considered it their right to intervene in the election in order to prevent Trump’s election, and failing that, to kneecap his presidency. And virtually all of the political class in the US is on their side. This is the real Constitutional crisis.

You should view this as a Constitutional danger regardless of your partisan leanings. For ask yourself: would you like the same to be done to your guy (or gal)?

It is also disgustingly ironic that in a fervid controversy about the alleged intervention of the Russian siloviki into an American election reveals that high-ranking American officials in control of the vast powers of US law enforcement and intelligence used siloviki methods (including most likely disinformation planted by Russian siloviki!–you can’t make this up!) in an attempt to influence an American election and then to cripple the winner of that election when their original plotting failed

Indeed, the Russian siloviki have it going for them that they aren’t nauseatingly sanctimonious about their skullduggery–refreshingly cynical is more their style. James Comey and others cannot say the same.

And if you think the siloviki analogy is overwrought, consider the not-so-veiled threats expressed on the pages of the WaPo and NYT and by politicians and political pilot fish (e.g., Ben Rhodes) about how dangerous it is to confront the FBI.  Further proof that this rogue influence must be tamed.

Trump showed stones in confronting the FBI and the political class. But perhaps this just demonstrates that he has a strong survival instinct. He knows that he is in a knife fight for his political life–and perhaps his freedom and fortune–and it seems that he has decided that compromise is impossible so escalation is necessary.

This is not the end.  This is at most the end of a beginning. For the acknowledgement that the FBI and DOJ–and the Obama administration–used under false pretenses a dossier paid for by a political campaign and assembled by rabid partisans to obtain permission to spy on an American just raises other questions. Who other than Page was spied on? Were their names unmasked? What use was made of the information obtained from the Page surveillance? By whom?

Given the Herculean effort required to get the memo released, I doubt that these questions will be answered, and if they are answered, it will only happen in after a political brawl that makes the fight of the last few weeks look like childs’ play. The siloviki and their political handmaidens play rough, and play for keeps.

 

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January 23, 2018

Why Are ABCD Singing the Blues?

Filed under: Commodities,Economics,Russia — The Professor @ 9:49 pm

It’s pretty clear that the major agricultural trading firms, notably the ABCDs–ADM, Bunge, Cargill, and Dreyfus–are going through a rough patch of tight margins and low profits.  One common response in any industry facing these conditions is consolidation, and in fact there is a major potential combination in play: ADM approached Bunge about an acquisition..

I am unsatisfied with most of the explanations given.  A widely cited “reason” is that grain and oilseed prices are low due to bumper crops.  Yes, bumper crops and the resulting low prices can be a negative for producers, but it does not explain hard times in the midstream.  Ag traders do not have a natural flat price exposure. They are both buyers and sellers, and care about margin.

Indeed, ceteris paribus, abundant supplies should be a boon to traders.  More supply means they are handling more volume, which is by itself tends to increase revenue, and more volume means that handling capacity is being utilized more fully, which should contribute to firmer margins, which increases revenues even further.

Greg Meyer and Neil Hume have a long piece in the FT about the potential ADM-Bunge deal. Unfortunately, they advance some implausible reasons for the current conditions in the industry. For example, they say: “At the same time, a series of bumper harvests has weakened agricultural traders’ bargaining power with customers in the food industry.” Again, that’s a flat price story, not a spread/margin story.  And again, all else equal, bumper harvests should lead to greater capacity utilization in storage, logistics, transportation, and processing, which would actually serve to increase traders’ bargaining power because they own assets used to make those transformations.

Here’s how I’d narrow down where to look for more convincing explanations. All else equal, compressed margins arise when capacity utilization is low. In a time of relatively high world supply, lower capacity utilization would be attributable to increases in capacity that have outstripped gains in throughput caused by larger crops.  So where is that increased capacity?

There are some hints of better explanations along these lines in the FT article.  One thing it notes is that farmer-owned storage capacity has increased.  This reduces returns on storage assets.  In particular, when farmers have little on-farm storage they must sell their crops soon after harvest, or pay grain merchants to store it.  If they sell their crops, the merchant can exploit the optionality of choosing when to sell: if they store at a local elevator, they pay for the privilege. Either way, the middleman earns money from storage, either in trading profits (from exploiting the timing option inherent in storage) or in storage fees. If farmers can store on-farm, they don’t have to sell right after harvest, and they can exploit the timing options, and don’t have to pay for storage.  Either way, the increased on-farm storage capacity reduces the demand for, and utilization of, merchant-owned storage. This would adversely impact traders’ margins.

The article also mentions “rivals add[ing] to their crop-handling networks.” This would suggest that competitive entry/expansion by other firms (who?) is contributing to the compressed margins.  This would in turn suggest that ABCD margins in earlier years were abnormally high (which attracts entry), or that the costs of these unnamed “rivals” have gone down, allowing them to add capacity profitably even though margins are thinner.

Or maybe it’s that the margins are still healthy where the capacity expansions are taking place. Along those lines, I suspect that there is a geographic component to this. ADM in particular has its biggest asset footprint in North America. Bunge has a big footprint here too, although it also considerable assets in Brazil.  The growth of South America (relative to North America) as a major soybean and corn exporting region, and Russia as a major wheat exporting region, reduce the derived demand for North American handling capacity (although logistical constraints on Russian exports means that Russian export increases won’t match its production increases, and there are bottlenecks in South America too).

This would suggest that the circumstances of the well-known traders that have more of a North American (or western European) asset base are not representative of the profitability of grain trading overall. If that’s the case, consolidation-induced capacity “rationalization” (and that’s a major reason to merge in a stagnant industry) would occur disproportionately in the US, Canada, and western Europe.  This would also suggest that owners of storage and handling facilities in South America and Russia are doing quite well at the same time that owners of such assets in traditional exporting regions are not doing well.

So I am not satisfied with the conventional explanations for the big ag traders’ malaise during a time of plenty. I conjecture that the traditional players have been most impacted by changes in the spatial pattern of production that has reduced the derived demand to use their assets, which are more heavily concentrated in legacy production regions facing increased competition from increased output in newer regions.

Ironically, I’m too capacity constrained to do more than conjecture. But it’s a natural for my Université de Genève students looking for a thesis topic or course paper topic. Hint, hint. Nudge, nudge.

 

 

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January 21, 2018

Somebody Better Put a Tachometer on Lenin’s Corpse

Filed under: History,Politics,Russia — The Professor @ 6:50 pm

One of the most remarkable events–non-events, actually–of 2017 was the virtual total lack of any official Russian recognition of the centenary of the Bolshevik Revolution.  The dilemma is particularly acute for Vladimir Putin, a proud Chekist–and, of course, the Cheka was the creation of the Revolution, and arguably essential to its survival.

But the Revolution’s legacy–including its anti-religious, anti-nationalist ideology, as well as tens millions of dead and the ultimate collapse of the Soviet Union–clashes with Putin’s current ideology of autocracy, orthodoxy, and nationality 2.0.  Hence the low-key (bordering on no-key) recognition of the events of October, 1917.

Last week Putin attempted to square this circle with a truly Orwellian formulation: Communism was Christianity. No–really:

“Maybe I’ll say something that someone might dislike, but that’s the way I see it,” Putin said in an interview for the documentary Valaam, an excerpt of which was broadcast on Russia 1. “First of all, faith has always accompanied us, becoming stronger every time our country, our people, have been through hard times.

“There were those years of militant atheism when priests were eradicated, churches destroyed, but at the same time a new religion was being created. Communist ideology is very similar to Christianity, in fact: freedom, equality, brotherhood, justice – everything is laid out in the Holy Scripture, it’s all there. And the code of the builder of communism? This is sublimation, it’s just such a primitive excerpt from the Bible, nothing new was invented.”

Look, Lenin was put in a mausoleum. How is this different from the relics of saints for Orthodox Christians and just for Christians? When they say that there’s no such tradition in Christianity, well, how come, go to Athos and take a look, there are relics of the saints there, and we have holy relics here,” Putin concluded.

Somebody should look in said mausoleum to see if Lenin is spinning at about 1000 RPM at the the assertion that his creation and ideology were mere sublimations of primitive Christianity.  Ditto Marx’s grave in London.

Make no doubt that Putin is going all in on Orthodoxy: just note his recent frigid dip to celebrate the Epiphany.

Moreover, Putin is being very selective in his commemorations of Russian history. For instance, largely reviled by the Orthodox, Peter the Great is virtually absent. And now we see that he reinterprets the most epochal–and apocalyptic–event in Russian history, a Revolution that was driven by a hatred and rejection of orthodox, nationalist autocracy, as some sort of historical continuity.

This is all quite amazing. Evidently Putin does not believe that he can attack communism, Bolshevism, and Leninism outright, because they resonate with too many people–particular among his political base. But he is acutely aware of the tension between his current crypto-tsarist ideology and the militantly anti-tsarist ideology that dominated Russia for 75 years.  So in a very Soviet way he completely rewrites history to assert that black is really white.

When Putin says “that’s the way I see it” what he really means is: that’s the way Russians are supposed to see it–get with the program. Who are you going to believe, Putin or your lying eyes?

 

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January 10, 2018

Red on Red: Simpson vs. Browder

Filed under: Politics,Russia — The Professor @ 7:02 pm

Some time back I promised a post on Bill Browder. A hectic schedule and the holidays intervened, so though I’d collected loads of material, I didn’t have time to write a post. Events from yesterday–namely the release of the transcript of Fusion GPS head Glenn Simpson’s interview with Congressional investigators–make this timely, so I’ll try to summarize what I have concluded. Oddly, one conclusion is that when it comes to Bill Browder, Simpson and I are of like mind. On other matters no–but even there Simpson’s Browder testimony shows precisely why his opinions on Trump are suspect.

As for Browder, here are my conclusions in somewhat abbreviated form.

First, Browder assiduously cultivates the image that Diogenes’ search for an honest man would have ended had the old Greek met one Bill Browder. But in fact, his honesty, integrity, and scruples are highly questionable indeed.

The essence of the Browder as Hero narrative is that he was a lone crusader for honest business practices in Russia, and that he fought a corrupt and brutal establishment. In retribution, the establishment stole one of his companies in order to defraud the Russian government, and killed Browder’s loyal employee, Sergei Magnitsky when he had the temerity to challenge them. Bill Browder, martyr by proxy.

A review of his actual business dealings in Russia strongly suggests a very, very different story.

For one thing, Browder was engaged in the voucher privatizations of the 1990s. These were, without cavil, among the most monstrous acts of mass theft and fraud in modern economic history. They were the primitive capitalist accumulation that built many modern Russian fortunes (and filled more than a few graveyards). Any Dudley Do-Right who tried to operate in that environment would have been ground to dust within weeks, if not days. It was an extreme Darwinian environment in which the most unscrupulous and often most brutal prevailed. If Browder survived that–and indeed thrived–draw your own conclusions.

For another, Browder’s initial partner in Hermitage Capital Management (his investment vehicle in Russia) was Edmund Safra. Safra’s sketchy dealings are legendary. He always dismissed allegations about his shady business practices as antisemitic, but there are many other Jewish financiers who have not attracted the same criticism. Further, Safra was involved (through his Republic Bank) in a mysterious scheme to jet billions of dollars in cash to Russia during the 1990s–it was dubbed “the money plane.” Just what went on there is unknown, but it doesn’t pass the smell test.

Safra died under bizarre circumstances in Monaco in 1999. An ex-Marine who served as his nurse was convicted of murder, but few find that story plausible, or complete. One of the competing theories is that he was killed by the Russian mob. (There are so many suspects, that maybe the true story is something along the lines of Murder on the Orient Express–everybody did it.)

Regardless, voucher privatizations plus Safra is hardly the CV of a commercial saint.

Browder also claims that he tried to bring honest corporate governance to Russia. He points to his attempts to change Gazprom as an example.

A different story is far more plausible: Browder’s investment in Gazprom was an arbitrage play, pure and simple. Due to restrictions on foreign ownership of Gazprom’s Russian shares, those shares sold at a substantial discount to the ADRs traded outside of Russia. Browder found a way–legal he says, illegal say the Russians–to buy Gazprom Russian shares. This allowed him to capture the big discount.

Putting the legality of the structure that he used to buy the shares aside, making an arb trade like that can be very profitable, and thus very attractive. That’s why Browder and his investors wanted in. Given the farcical prospects for actually changing Gazprom’s governance, I’m pretty sure that the Corporate Crusader act that Browder put on was just a cover for his more mercenary motives.

And this is a general impression that I come away with after reading a lot about him. The whole Last Honest Man in Russian Investing shtick was a canny PR ploy that allowed his backers to distance themselves from the tawdry (and worse) reputation that investing in Russia had at the time. Browder was their beard that allowed them to pretend that they were in an honest relationship.

Browder has been prosecuted by the Russian government, both for tax violations and his purchase of Gazprom shares. He portrays these prosecutions as vengeance for his crossing the wrong people in his crusade for honest business practices in Russia. I have no doubt that his prosecution might have been selective, and indeed driven by vengeance–but maybe not as revenge for his honesty, but for his taking from the wrong people. Further, even if the prosecutions were selective (i.e., others doing the same but not prosecuted) and driven by vengeance, that doesn’t mean they weren’t justified–and perhaps even just.

I don’t have the basis to opine on the legality of the structure of his Gazprom purchases. But I can say that the Russian accusations regarding tax violations seem very plausible. These involved setting up companies that received tax breaks for hiring disabled veterans, but the Russians colorably show that he did no such thing.

The Russians also allege that he was in fact involved in the tax fraud that resulted in Magnitsky’s death. This allegation is far more speculative, and perhaps libelous–but it is not totally lacking in plausibility, especially in light of Browder’s track record.

Since getting kicked out of Russia in 2005, and since Magnitsky’s death, Browder has spent his life crusading against Putin and the Russian government. The centerpiece of his campaign is the alleged involvement of Russian government officials (tax officials mainly) in the theft of $230 million in tax refunds fraudulently obtained from a Hermitage company seized by the Russians, and the death of Magnitsky while in custody in an investigation of the theft.

Here it is evident that Browder’s relationship with the truth is, well, situational and transactional. The best evidence of this is his deposition in the Prevezon case in New York. Browder tried mightily to avoid being served, and here is one place where Browder and Simpson intersect: Simpson was part of the effort to serve Browder, on behalf of his (indirect) client, Prevezon CEO Denis Katsyv.

During that deposition, Browder admitted repeatedly that he had no evidence whatsoever to back some of his most lurid and damning allegations against those he alleges were complicit in the Russian tax fraud and the death of Magnitsky. For instance, he has claimed repeatedly that he could trace the ill-gotten gains from the tax fraud to specific individuals. In the deposition, he admitted he could not.

(Here Browder has something in common with dossier assembler Christopher Steele. Once in court testifying under the penalty of perjury, Steele was at pains to admit that the claims in the dossier were unsubstantiated, in contrast to his hair on fire representations to the FBI.)

This is particularly outrageous given the fury with which Browder attacks anyone who questions his dealings or veracity.

So my conclusion is: Browder is a con-man and a liar. If he tells you the sun rises in the east, buy a compass and wait for sunrise.

Glenn Simpson of dossier infamy is of the same opinion. Simpson did a deep documentary dive on Browder for Prevezon’s lawyers, Baker Hostetler, and came to many of the conclusions I outline above, and some more to boot. If you read the transcript of Simpson’s interview (not testimony) before Senate Judiciary Committee investigators, you’ll see what Simpson dug up and the basis for his conclusions.

Well, doesn’t this mean that I therefore have to give credence to Fusion GPS’s research on Trump? Quite to the contrary: the difference in the methods in the Browder and Trump matters is striking. When investigating Browder, Fusion GPS did a deep dive on documentary evidence in the US, Russia, and presumably Cyprus (where Browder registered companies). (See pp. 41-49 of the transcript. Simpson is so detailed in his description of what he did in the Browder investigation that the lawyer questioning him said “Thank you for the narrative answer.” LOL.)

In contrast, with regards to Trump, Simpson et al (a) read some books, and (b) commissioned the Steele investigation, which apparently just involved in talking to people (just who is a complete mystery) who passed on unverified and unverifiable gossip. The basis for Simpson’s claim that Trump had Russian mafia connections is that Trump had connections with Felix Sater who allegedly had connections with the Russian mob: similarly Paul Manafort.

Thus, whereas the foundation for Simpson’s opinions on Browder is rock-solid, that for his opinions on Trump are charitably described as quicksand.

Simpson’s statements also call into question his honesty. When asked when he had any Russian-speaking employees, he mentioned one guy–who happened NOT to be Nellie H. Ohr, wife of ex-DOJ Associate Deputy AG. We now know that Mrs. Ohr worked for Fusion. Sean Davis said on Twitter that this was an “interesting omission.” I said it was an interesting perjury.

Simpson also insinuated that the FBI had an independent source to justify FISA-ing Trump campaign personnel–and that this guy was a walk-in. When the transcript was released, a “source close to Fusion GPS” said nope. Never happened. He was referring to Papalopolous. Another strike for his credibility.

Simpson strains credulity past its breaking point when he claims that even though he had dinner with Natalia Veselnitskaya the night before and the night after her meeting with Trump Jr., the subject never came up (she was at the other end of the table, he doesn’t speak Russian and she doesn’t speak English–even though they apparently could communicate well enough for her to get him to help her obtain a visa). Simpson claims to have been shocked at the news. Please. Big investigative reporter turned PI/opposition researcher has no clue about a bombshell meeting even after spending hours with some of the principals? He didn’t even bother to ask through a translator (who Veselnitskaya must have had along) “hey, Natalia, whatcha been doing in New York?” Please.

So my rule for Simpson is the same as for Browder: unless he has the documents to prove it, don’t believe a word he says. He will distort the truth to advance his agenda.

The most entertaining part of this is the red-on-red nature of the battle. Heretofore Browder has been something of a hero among the anti-Trump set (yeah, I’m looking at you, Michael Weiss) because he is ardently anti-Putin, and Trump is supposedly Putin’s bitch. But Simpson has even better anti-Trump bona fides, for the dossier is directly anti-Trump, whereas Browder’s  anti-Putin stance is anti-Trump only via (an alleged) transitivity.

So given a choice between Browder and Simpson, most of the anti-Trumpers are going with Simpson, and either explicitly or implicitly dumping and dissing Browder.

Karma, Bill. Karma.

Browder being Browder, he will no doubt go after Simpson with all guns blazing.

I’m stocking up on the popcorn.

The left and the media (I repeat myself, yet again) may end up ruing their choice. Given the extremely dubious nature of the dossier and those who funded, created, and disseminated it, and the very great likelihood that it was used as the basis to engage in counterintelligence surveillance of Trump campaign personnel, I believe that the dossier will likely prove the greatest political boomerang in modern political history, and will end up braining those who threw it (which includes the Clinton campaign, Fusion GPS/Simpson, the FBI and other US intelligence agencies, the media, and the “Resistance”). And if this happens, Bill Browder will be little more than collateral damage.

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December 27, 2017

Vova the Squeegee Man

Filed under: Economics,Politics,Russia — The Professor @ 4:21 pm

My old buddy Vova is making a rather forced and pathetic attempt to persuade rich Russians to repatriate the money they have invested (squirreled away) overseas:

President Vladimir Putin is using the threat of additional U.S. sanctions to encourage wealthy Russians to repatriate some of their overseas assets, which exceed $1 trillion by one estimate.

I call the attempt forced and pathetic precisely because Putin feels obliged to try to persuade, rather than dictate. And because he is offering inducements:

Putin said on Monday that Russia should scrap the 13 percent profit tax on funds repatriated from abroad and renew an amnesty from penalties for businesses returning capital.

And because he’s raising the bogeyman of western sanctions (from the Bloomberg piece):

“We and our entrepreneurs have repeatedly faced unjustified and illegal asset freezes under the guise of sanctions,” Peskov said on a conference call Tuesday. “The president’s initiative aims to create comfortable conditions for businesses if they want to use this opportunity to repatriate their capital.”

Heretofore, sanctions have limited the ability of the affected entities to tap western financing: they have not involved expropriation or the kind of piratical corporate and government behavior that has been seen in Russia. Investments abroad remain abroad despite the more hostile environment to Russian money in the west because it is still safer than it would be in Russia. That’s why Vova has to beg and bribe to try to get Russians to repatriate. And previous efforts have hardly been successful:

Russia rolled out a similar amnesty program during the worst of the conflict in Ukraine, which coincided with a plunge in oil prices that triggered the country’s longest recession of the Putin era. That 18-month initiative, the results of which haven’t been disclosed, “didn’t work as well as we’d hoped,” Finance Minister Anton Siluanov said. Unlike that plan, this one waives Russia’s 13 percent tax on personal income, according to Dmitry Peskov, Putin’s spokesman.

Note that the mere threat of western sanctions has not been enough: hence the tax waiver.

Insofar as piratical corporate behavior is concerned, I give you Igor Sechin, ladies and gentlemen. What do you think is more intimidating, Sechin plotting–and the system cooperating–to jail a troublesome minister for eight years, or what the US and Europe have done to sanctioned entities? Or his serial extortions of Sistema, which recently agreed to an “amicable” settlement with Rosneft/Sechin? Said “amicable” settlement involved the former paying the latter $1.7 billion dollars to settle a suit . . . over what is rather hard to say. I still don’t get the legal theory under which Rosneft even thought it was entitled payment for Sistema’s alleged past wrongs. Given that this occurred mere days after Putin called for an amicable settlement, it is pretty clear that he was taking Sechin’s side and telling Sistema to cave–and do so with a smile.

This is why Russian money will stay out of Russia, Putin’s pleas notwithstanding.

Another story gives you a partial explanation for Putin’s neediness: “Russia’s Reserve Fund to be fully depleted in 2017.” The rainy day fund is empty, and the outlook remains cloudy.

Thus, for all the hyperventilating about Putin the Colossus, the objective basis for his power is shaky indeed. He can be a pest and troublemaker, but he lacks the economic heft to be much more. Yet for selfish political reasons, Democrats, NeverTrump Republicans, and the media inflate his importance daily. Enough. Putin is rattling his tin cup, hoping that some rich Russians will drop some rubles into it. Maybe if the tax inducement isn’t enough, he can squeegee their windshields.

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December 3, 2017

Please Reconcile This: The Kremlin Is Hermetically Sealed to Outsiders, But They Told All to Christopher Steele

Filed under: Politics,Russia,Uncategorized — The Professor @ 7:45 pm

This article caught my eye last week: “At the epicenter of the Russian election manipulation story, reporters can’t report.”

As tensions rise, Ferris-Rotman finds reaching sources inside the government all but impossible. She says foreign correspondents based in Moscow can’t just pick up their phone and text or call an official.

“Russia is a very closed place,” she says. “It’s not like the U.S. where, you know, over years or over some time you can develop a source in the White House — someone who you can trust and that you trade information with. Basically (the Kremlin) is a sealed up institution and there’s no way for us to get into it. “

The Kremlin is a “sealed up institution,” but we are supposed to believe that Christopher Steele was able to get multiple sources within the Kremlin to repeat highly sensitive conversations involving the highest personages in the Kremlin, including Putin himself.

The dossier itself is bad enough, but its handling in the US–specifically by the FBI and the intelligence community–is downright sinister. This is even more evident after it was revealed that the FBI agent who was responsible for handling the dossier was a pro-Hillary/anti-Trump partisan who was fired by Mueller for exchanging anti-Trump texts with his lover, also an FBI agent. (Not that Mueller told us that this was why he was fired when it happened months ago. I guess he didn’t have time because he was so busy leaking.) Moreover, this same individual allegedly has been interfering with the House Intelligence Committee’s attempts to get to the bottom of the story of the dossier.

But there’s more: the same FBI official led the investigation of Hillary’s emails.

As the expression goes: the fix is in! Although here, it is necessary to use the plural: the fixes are in!

Boy, if only there was a Republican attorney general who could get control of a rogue FBI and get some answers about the dossier–how it was obtained, and how it was used by the FBI.

 

 

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Flynnsanity

Filed under: Politics,Russia — The Professor @ 7:29 pm

Friday was a bonanza for dry cleaners, as the media and the political class collectively wet themselves in glee at the news that ex-National Security Advisor Michael Flynn plead guilty to lying to the FBI.

Alas, their fondest desires ran well ahead of the reality–which is the norm for this lot.

As was the case with Manafort, Flynn plead guilty to lying but not to any underlying crime, least of all a conspiracy with the Russians. The most reasonable inference for this is that there WAS no underlying crime and no conspiracy.

Indeed, Flynn will testify that he lied about two conversations with the Russian ambassador, Kirlyak, neither of which was illegal or even unethical.

In the first conversation, he spoke not just to Kirlyak, but to the ambassadors of every nation on the United Nations Security Council, including Senegal, Egypt–and wait for it–Ukraine. The subject was not Russia, but the stink bomb of an anti-Israel resolution that the outgoing Obama administration supported  but the incoming Trump administration opposed.

And it was the incoming Trump administration, because this conversation took place in December, 2016.

Flynn allegedly contacted the ambassadors at the direction of Jared Kushner.

So this contact is about Israel, not Russia. Flynn talked to Russia only because Russia was on the UNSC. As it (or the USSR) has been since its creation in 1945.

But the breathless media coverage was almost all headlined “Flynn spoke to Russia,” insinuating that his plea showed that Trump was canoodling with Putin.

In econometrics, omitting variables leads to biased inferences. Here, omitting that Flynn also spoke to every other nation on the UNSC about an issue that had noting to do directly with Russia definitely led to biased inferences. And that was exactly the intention, which demonstrates the bad faith of virtually the entire journalistic establishment.

The other conversation was about Russia directly. Specifically, Flynn asked Kislyak that Russia not overreact to Obama’s out-the-door sanctions on Russia. Trump wanted to avoid an escalatory dynamic, which is perfectly reasonable, especially given the fact that Obama almost certainly levied these sanctions with the intent of making life difficult for Trump.

Since these events happened after the election, they did not advance the collusion narrative. The media and the political class dealt with this in two ways.

First, they just lied. Brian Ross of ABC News reported–and the rest of the media repeated–that Flynn was going to testify that he had spoken to Russians during the campaign. WRONG. He will merely say that the Trump team had discussed plans to improve relations with Russia post-election. Big difference.

But this is a classic case of Twain’s dictum about a lie getting around the world before the truth got its boots on. And isn’t it funny how all the lies are in the same direction?

This is in fact a huge benefit to Trump, because what better illustrates his assertions that the mainstream media is a firehose of fake news?

Second, they harrumphed about the Logan Act, a likely un-Constitutional historical curiosity dating from January 30 . . . 1799–and which despite its longevity has never resulted in an indictment, let alone a conviction. The law forbids private individuals from negotiating with foreign states in a dispute with the US. About its only relevance to today is that it was adopted in fevered political times (the wars of the French Revolution, which also spawned the infamous Alien and Sedition Acts) which bear some similarity to today’s febrile political climate.

Further, it is common–and indeed imperative–for incoming administrations to establish contact with foreign governments, including–and perhaps especially–those with whom the US is experiencing tense relations. Indeed, the Trump team received permission from the Obama administration to make such contacts, and an administration spokesman said publicly that Obama had no objection to such contacts, including specifically with Russia.

So if anything, the Flynn plea actually substantiates what Trump et al have been saying all along, and provides no evidence of pre-election collusion, let alone an illegal pre-election conspiracy.

The main conclusions here are: (1) Flynn was an idiot for lying about something that was perfectly legal and ethical, and (2) to avoid outbursts of idiocy, when the FBI comes knocking, don’t talk–there’s no upside, and a big potential downside.

As for the conspiracy theory that excites the imaginations of today’s McCarthyites and Birchers, it is a big fat nada. Zip. Zero.

But that will not deter them. They are so invested in this theory that nothing will disprove it in their eyes. They will react exactly the same to the next hyped non-event, and dry cleaners everywhere will cheer.

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