Streetwise Professor

Putin held a meeting with the CEOs of seven state-owned enterprises to discuss the sale of minority stakes in their companies (a move sometimes mischaracterized as “privatization”). Putin frankly admitted that the impetus for this discussion is Russia’s dire budgetary situation. Putin caused some confusion by saying the “new owners of privatized assets must have Russian jurisdiction,” leading some to conclude that he was ruling out foreign investment. Peskov clarified the next day, saying that Russia welcomed foreign investors, but “If the question is about a foreign investor, that’s one thing. If it’s about a Russian investor, it must not be another offshore scheme.”

I consider it likely that this initiative will be stillborn, at least insofar as sales of stakes to foreigners are concerned. Putin said that the sales must not take place at “knockdown prices.” Well, in the current environment, the prices (especially for Rosneft and VTB) are likely to be very low indeed.

This is especially so since foreign investors will demand a substantial discount to compensate for expropriation risk. Savvy investors with long memories will recall that Putin justified expropriating Shell’s Sakhalin II project by saying that the terms of the Sakhalin PSA were unfair to Russia, and that Shell had exploited Russia’s economic desperation when it signed the deal at a previous time of low energy prices. Putin (or whoever succeeds him) could easily resurrect such rhetoric in the future when oil prices rebound. Further, minority shareholders in Russian enterprises–especially state enterprises–have few protections against schemes that divert assets, or which dilute their holdings.

Given that prices are likely to be very low, if there are sales to foreigners, it will indicate (1) that Russia is desperate indeed, and (2) Putin et al consider it unlikely that sanctions will be relaxed anytime soon.

If there are sales, it is likely to be to Russian oligarchs, and in particular those with extensive holdings outside Russia. Just as Putin dragooned them into paying for Sochi and other prestige projects, he could well pressure them into overpaying for stakes in the state enterprises. This would allow him to kill two birds with one stone. It would help stanch the budgetary bleeding. It would also advance Putin’s longstanding goal of onshoring Russian capital. That would fit with the “owners must have Russian jurisdiction” remark.  And Putin has substantial leverage to get oligarchs to do his bidding–literally.

Even if partial sales take place, it will be merely a stopgap budgetary measure: it will not indicate a fundamental reconsideration of Russian economic policy.  Putin is still obviously a firm believer in the state control/state champion model, despite its manifest inefficiency. Putin prefers the control over resources that state control provides to having an efficient economy. Which is why he finds himself in his current straits.

Hillary’s email excuses get more lame by the day. For months her story–and she has stuck to it–is that none of the emails were marked as classified. Yesterday, when (miracle of miracles!) George Stephenopolous called her on this, her excuse became even lamer. And if I were Cheryl  Mills, Huma Abedin, or Jake Sullivan, I would be afraid, very afraid, after hearing it.

Specifically Stephenopolous asked about a non-disclosure agreement Clinton signed before becoming Secretary of State, which states: “classified information is marked or unmarked … including oral communications.” That is, marking is a sufficient, but not necessary, condition for establishing whether something is classified. The mention of “oral communications” points out the obvious issue: if marking was necessary, verbal information could never be an official secret, which is obviously absurd.

Hillary’s response? Here’s to you, Cheryl, Huma, and Jake!:

Clinton pointed to her aides, saying: “When you receive information, of course, there has to be some markings, some indication that someone down the chain had thought that this was classified and that was not the case.”

Someone down the chain is apparently responsible for establishing whether something sent up the chain should be classified.

There’s only one little problem with this. Per an Obama Executive Order on classified information (which parallels EOs of previous presidents), Hillary was an”original classify[ing] authority.”

Sec. 1.3.  Classification Authority.  (a)  The authority to classify information originally may be exercised only by:

(1)  the President and the Vice President;

(2)  agency heads and officials designated by the President; and

(3)  United States Government officials delegated this authority pursuant to paragraph (c) of this section.

(b)  Officials authorized to classify information at a specified level are also authorized to classify information at a lower level.

(c)  Delegation of original classification authority.

(1)  Delegations of original classification authority shall be limited to the minimum required to administer this order.  Agency heads are responsible for ensuring that designated subordinate officials have a demonstrable and continuing need to exercise this authority.

The “classification authority”, as the title suggests, has the authority and responsibility to classify:

Section 1.1.  Classification Standards.  (a)  Information may be originally classified under the terms of this order only if all of the following conditions are met:

(1)  an original classification authority is classifying the information;

(2)  the information is owned by, produced by or for, or is under the control of the United States Government;

(3)  the information falls within one or more of the categories of information listed in section 1.4 of this order; and

(4)  the original classification authority determines that the unauthorized disclosure of the information reasonably could be expected to result in damage to the national security, which includes defense against transnational terrorism, and the original classification authority is able to identify or describe the damage.

In brief, Hillary was the ultimate classification authority in the State Department, and everyone else in the Department was exercising that authority because it had been delegated by her to them. Further, Hillary had the authority to determine whether “disclosure of the information reasonably could be expected to result in damage to the national security.” The power to make these determinations was explicitly vested in her.

In other words: the classification buck should have stopped with Hillary. She cannot escape the authority and duties assigned her by statute and implementing executive orders.

But of course, the only bucks that stop with Hillary are those donated to the Clinton Foundation for “speaking fees” from Goldman, etc., or extracted from tuition paying college students by political sycophant university administrators.

Hillary is clearly preparing  to throw her closest aides to the wolves. “I was failed by my subordinates who failed to mark properly this information that should have been classified.”  It’s the Clinton way.

It’s also a legal travesty. The woman who believes that it is her right to be a successor of Harry Truman definitely does not live by his motto: “The Buck Stops Here.” It stops with the patsies who have to take the fall in order to protect Her Highness’s political viability.