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Streetwise Professor

January 27, 2013

Always the Last to Know

Filed under: Economics,Politics,Russia — The Professor @ 2:30 pm

Dmitri Medvedev-prime minister of Russia, at least until Putin needs a sacrificial victim to blame for some failure, that being the main role of a Russian PM-claims that Russian business has not been harmed by the Magnitsky controversy:

Medvedev said the whistleblower’s death in jail, for which no one has been brought to justice, was being used by Kremlin critics to score points but was of no import to business leaders.

. . . .

“It does not interest anyone, except maybe certain citizens who are trying to use it to accumulate political capital,” said Medvedev, who was president from 2008 until Vladimir Putin returned to the Kremlin last May.

“Not a single businessman raises this issue,” he told state television in an interview focusing on his role in the forum. “But unfortunately it has become a factor in political life.”

Biznessmen have a different story-off the record, which is part of the point:

With international concern spreading after the 2009 death of Sergei Magnitsky, some Russian tycoons are worried their legitimate cross-border money transfers involving anything from industrial investments to luxury properties will get hit by red tape.

And they complain that the Kremlin’s hard-line stance on Magnitsky is not doing them any favours.

“The Russian business (community) is absolutely united. The situation is more than bad and things may well spread to the EU and UK and God knows who could be sucked in,” said a Russian billionaire, speaking at the World Economic Forum in Davos.

. . . .

Economist Sergei Guriev said: “Russian business is very upset. The last development they want is to see the EU or UK joining those sanctions. Quite simply it is where the Russian business has huge assets and where their kids are studying.”

Russian officials and bankers say the impact on commerce is becoming far too negative.

“Of course I have concerns about a worsening in (Russian-U.S.) relations. It creates unease for business. And it is a question for both sides – what’s the point of continuing all this? I think it is very important to move on,” said German Gref, head of top Russian bank Sberbank.

And here’s why what Medvedev says doesn’t mean bupkis:

The billionaire asked not to be named as he said the Russian business establishment was still afraid of bringing up the matter with Russian President Vladimir Putin

(And maybe they don’t bring it up with Medvedev because, like it would matter.)

Politicians say things they know are untrue all the time.  Perhaps that’s what Medvedev is doing.  But perhaps it is a reflection of one of the Achilles’ heels of authoritarian systems: fear keeps people from revealing inconvenient facts to rulers. Relatedly: a captive and docile press that is used primarily to disseminate the official line to the populace and which does not serve as an independent check on the government deprives the rulers of vital feedback.  Surrounded by yes men and deprived of independent feedback, authoritarian leaders often live in a fool’s paradise.  Problems are suppressed, and metastasize.  (In another example of our convergence to Russia from above, similar things are happening here, but for somewhat different reasons and in a somewhat different way.)

It is particularly ironic that the supposed crusader against legal nihilism blows off concerns about Magnitsky, and its effect on the business climate in Russia.  Perhaps he knows, but he is also afraid to challenge Putin (and the siloviki) on this.  (I would not rule that out, by any means.)  Or perhaps he is living in the authoritarian leadership bubble, cut off from feedback from planet Earth.  This is one of the sources of brittleness in authoritarian systems generally, and Russian in particular.  Regardless of the cause, the disconnect between what Medvedev says and what the nervous oligarchs say suggests that Russia will continue to underperform due to the failure (or refusal) of the government to address the Magnitsky case, and what it signals about the myriad dangers of doing business in Russia.

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8 Comments »

  1. Do you think Putin pulls out the video of Medvedev dancing to American Boys when he needs a good laugh.

    The only thing that Putin abhors more than weakness is strength. Medvedev may never be the fall guy because his low T makes for such a perfect Prime Minister for Vova. Hard to find someone better suited.

    Comment by pahoben — January 28, 2013 @ 6:55 pm

  2. @pahoben. I’m sure he does. That and the video of Medvedev getting out of the running car without putting it in park, and almost mowing down a crowd of bystanders.

    You are right that Medvedev’s beta status is his main attribute as PM. But there could come the time that Putin needs the sacrificial lamb.

    The ProfessorComment by The Professor — January 28, 2013 @ 7:46 pm

  3. I’m sure you knew this, SWP, but in the Theatre of the Absurd, Roosha, they are prosecuting a dead man – Magnitsky, as reported by Reuters.

    http://www.kyivpost.com/content/russia-and-former-soviet-union/russia-presses-on-with-plans-to-try-dead-whistleblower-319471.html

    pahoben, Putler is not only afraid of strength – he is afraid of a dead man.

    In Ukraine, they refer to Medvedev as “krilyk” – a rabbit. And there were comedy videos put out when Medvedev was first pulled out of the hat by Putler to be “president”, no wait, “prime minister.”

    It showed the rabbit sitting at a restaurant table, when Putler springs this incredible proposition on the rabbit – he is from nowhere, and he is to become “president,” no, wait, “prime minister.”

    Of course, the rabbit can’t believe his unbelievable dumb luck – it must be a joke.

    Roosha, Putler, the rabbit – all an unbelievable, dreadful joke.

    It’s hard to believe that Rooshans tolerate that shit.

    Comment by elmer — January 29, 2013 @ 7:25 am

  4. I saw this-

    I’ve been a resident of Berkeley since 1967 and graduated Berkeley High School in 1981 and excepted by the University of California at Berkeley

    and thought about the hilarity that would ensue if Putin became mayor of Berkely.

    @elmer-it is hard to believe..

    @Professor-there will not be much sport in it for Putin unless Medvedev wets himself on camera.

    Comment by pahoben — January 29, 2013 @ 2:42 pm

  5. @elmer. I’ve seen that, and written about it in the past. It reminds me of the Restoration in England, when they dug up Cromwell’s remains and drew and quartered them.

    This is a signal: “Cross us and we will persecute you beyond the grave. We will torture your mother and everyone who loves you.”

    That’s an insult to rabbits.

    The Rooshans will tolerate anything. And have. They consider it a sign of their great soul.

    @pahoben. I think Putin as mayor of Berkeley would be a great, great improvement. And there may be sport of the kind you describe in the future. I wouldn’t rule it out.

    The ProfessorComment by The Professor — January 29, 2013 @ 5:24 pm

  6. All this while Russian officials are celebrating an anniversary of GULAG: http://www.washingtonpost.com/world/europe/russian-prison-wardens-throw-party-to-celebrate-gulag-stalins-infamous-labor-camp-system/2013/02/05/8c5088de-6fb3-11e2-b35a-0ee56f0518d2_story.html . And yet those businessmen manage to find some reasons to be upset or even afraid. Go figure.

    Comment by Ivan — February 5, 2013 @ 2:48 pm

  7. This whole thing is more like a Marx Brothers skit than anything I can imagine, Prof. Oh, and in case you missed it, check this out:

    http://www.bloomberg.com/news/2013-02-05/goldman-sachs-hired-by-russia-as-corporate-broker-to-boost-image.html

    I swear to all that’s holy, I almost fell over laughing.

    Comment by markets.aurelius — February 5, 2013 @ 5:09 pm

  8. Welcome, back @markets. You’ve been missed.

    Didn’t miss that. We were laughing together. I should know not to be drinking coffee when I read something like that. Where do you start? Like-image is the least of Russia’s problems; Russia’s image is deserved; and why did they ask Goldman? Was Don Corleone unavailable?

    The ProfessorComment by The Professor — February 5, 2013 @ 9:20 pm

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