Streetwise Professor

September 13, 2009

Bad Karma

Filed under: Economics,Financial crisis,Politics,Russia — The Professor @ 8:04 am

Russia, and Oleg Deripaska’s RusAl, is getting a taste of its own medicine of expropriation.  The government of the African country of Guinea voided the sale to RusAl of a large alumina smelter there.  And Russia is none too happy about it:

“Guinean authorities have made an attempt to expropriate UC RUSAL’s property in court,” the Russian Foreign Ministry said in a strongly worded statement.

The ministry said it hoped Guinea would take responsibility for the “possible consequences of such actions for the general climate of traditionally constructive Russian-Guinean relations, as well as for the social-economic situation in the country.”

Given the cast of characters involved in this on all sides, it’s hard to tell whom to believe.  It could well be that Guinea is treating Russians like, well, the Russians are wont to treat folks whose assets they covet.  It could be that Deripaska cut a corrupt deal with Guinea’s late ruler.  Maybe both.  Who knows?

Regardless of culpability, however, the Russian foreign ministry’s umbrage is beyond rich.  Hypocrisy is seldom found in such pure, unadulterated form.

In other Deripaska-related news, contrary to some reporting and my conjecture that GM’s extreme reluctance to partner up with Deripaska would scupper the Magna-Sberbank/Gaz deal for Opel, the American (taxpayer) auto company has opted to sell to the Canadian-Russian bidder.  Apparently German government money was too good to pass up.  I’ve also read that details of the deal haven’t been released, but that the sale contract runs 1000+ pages, and took some very hard bargaining to complete.  Perhaps GM was able to negotiate enough contractual safeguards to feel immune from Deripaska depredations.  We’ll see.

One of the more interesting–and disturbing–things about the deal is the lengths to which Germany and Merkel were willing to go to ensure that a big piece of Opel went to a Russian buyer. According to the WSJ, Merkel deliberately chose Russia over the US:

If completed, it would represent the biggest Russian investment in Western European manufacturing industry to date, adding a significant economic tie with Russia that until now has been largely based on banking and energy transfers.

“It would mark a milestone in Germany’s de facto disengagement from the U.S. and its strategic shift eastwards,” said Douglas Busvine, an analyst at policy research firm Medley Global Advisors.

And Merkel’s “fellow” Europeans are not too happy either:

The deal to sell General Motors’ European business to a Canadian-Russian consortium raised sparks around Europe yesterday.

Belgium accused Berlin of reverting to protectionism, and the deal was criticised by opponents of Angela Merkel, the German chancellor, and by officials in the UK and Spain.

Didier Reynders, Belgium’s finance minister, said he wanted the European Commission to investigate state aid given by Germany to Magna International, the lead investor.

. . . .

Elena Salgado, Spain’s economy minister and deputy prime minister, said any plan for Opel must recognise that its plant in Zaragoza was GM’s most productive in Europe. Magna plans to shift some production to Eisenach, Germany. Talks are due to be held in Berlin next week on how the government aid needed to finance the spin-off will be shared among the countries where Opel and Vauxhall have plants.

There’s also this suggestion that it may not be over after all:

In Germany, Guido Westerwelle, head of the opposition Liberal party, said Ms Merkel’s government had struck a deal designed to help it in the September 27 federal elections.

“If you ask for the small print, nothing has been fixed yet,” he said. “I dread that after the elections there will be hell to pay.”

Maybe.  Maybe not.  But even if Westerwelle is right, there still remains the question of why Merkel was so intent to save a few thousand jobs and please Putin, even at the cost of alienating a major ally and her alleged European “partners.”  If Deripaska and Russia are experiencing bad Karma (cue Warren Zevon) in Guinea, Angela Merkel should worry indeed about a Karmic rebound from snubbing longtime friends and allies to favor the ruthless and trustworthy lot to her east.

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6 Comments »

  1. No offense, but the difference between what you (La Russophobe, Paul Goble, David Satter, penny, Andrew, etc.) say and what Medvedev said is the tone of it all. When you criticize Russia you go far beyond fairly criticizing and it sounds like you really, really HATE Russia.

    Everyone can take fair criticism. But hateful criticism, bordering on racism, is something else.

    Russophobes will get a lot more credibility and their anti-Russian agenda will become more compelling if they become more fair, and that includes not using hypocrisy and double standards and acknowledging the good and not just cherry-picking the bad.

    Comment by lisa — September 13, 2009 @ 6:11 pm

  2. Maybe you’re just a too passionate guy, I do not know. But just chill out dude, could be a good recommendation for you. Russia and America ain’t at war. All of us have far more important things to worry about in our personal lives and worrying about international geopolitics is just so lame.

    Comment by lisa — September 13, 2009 @ 6:14 pm

  3. According to the WSJ, Merkel deliberately chose Russia over the US:

    If completed, it would represent the biggest Russian investment in Western European manufacturing industry to date, adding a significant economic tie with Russia that until now has been largely based on banking and energy transfers.

    “It would mark a milestone in Germany’s de facto disengagement from the U.S. and its strategic shift eastwards,” said Douglas Busvine, an analyst at policy research firm Medley Global Advisors.

    Oh no! Strike up the WSJ editorial board and Bret Stephens to call it another Molotov-Ribbentrop. 🙂

    A certain Drang Nach Osten was inevitable as Russia’s economy revived from seventy years of Communism. Remember, Bismarck always said keep good relations with Russia, a policy his successors stupidly abandoned. Had the Kaiser not dismissed him maybe WWI could have been avoided or Niall Ferguson’s preferred outcome of a Mitteleuropa at peace with Russia under the Kaiser would have come to pass.

    Comment by Steve J. Nelson — September 14, 2009 @ 2:02 pm

  4. Lisa–

    Hey, we all spend our time in our own ways. You chill out your way, and I’ll chill out mine;-)

    And if worrying about geopolitics is so lame, why are you reading about geopolitics and commenting on it?

    The ProfessorComment by The Professor — September 15, 2009 @ 12:27 am

  5. I didn’t make fun of the Professor, I made fun of the WSJ for having their noses so far up China’s butt while loathing Putin’s Russia. The Prof at least has some credibility in the “double standards for Asians vs. Russians” dept.

    Comment by Steve J. Nelson — September 15, 2009 @ 12:22 pm

  6. “Now, in response to your foot-stomping childish ‘claims’ of ‘Russophobia’ by SWP, I offer you this older post on the subject. I suggest you read it and then print it out and then read it again. Maybe you can tape it on the inside of your padded cell… 😉
    https://streetwiseprofessor.com/?p=279

    If only Russians did something other than die for the time they were on a SWP-approved course towards the West. And if the West actually cared about Russia dying while she was doing so.

    Comment by rkka — September 16, 2009 @ 1:36 am

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