Streetwise Professor

February 19, 2019

Whoops, They Did It Again

Filed under: Economics,Politics,Russia — cpirrong @ 7:27 pm

An American investor, Michael Calvey of Baring Vostok, has been arrested for fraud in Russia. It has been some time since something like this has happened, a fact that has been attributed to Putin’s direction that business disputes should not result in the imprisonment of any of the disputants. But when it comes to westerners, it just may be the case that there aren’t many of them around to be arrested.

The FT article reports a stunning statistic that speaks to this point. Foreign direct investment, which totaled $79 billion before Putin’s glorious triumph in Crimea, had fallen to $27 billion by 2017 . . . and a pathetic $1.9 billion in 2018. Less FDI, fewer foreign direct investors–and hence fewer to arrest.

Between sanctions, and the stultified (and risky–financially and personally) economic environment in Russia, foreigners have finally wised up. Once upon a time, the returns looked very appealing, and many were willing to take the plunge. Well, the returns were high for a reason–they were compensation for risk of expropriation, sometimes facilitated by, er “legal” means. And evidently, most have decided that the rewards don’t justify the risk.

I have some sympathy for Calvey, but not a great deal. He assumed a known risk, presumably thinking he would be able to manage it–or perhaps foolisly assuming that Putin really cared about trying to create a more hospitable investment environment. Further, no doubt that anyone who swam in those waters for as long as he did had more than a little shark in him.

The FT article is titled “Calvey’s arrest sends chills through Russia’s foreign investors.” To which I say: what foreign investors? The article includes this quote:


A person close to the Vostochny dispute said: “This is transformative. This kills FDI stone dead forever . . . This sends the message, can you use the security services against your business rivals over a few million dollars? Yes, you can.”

But (see above) FDI is already as dead as Monty Python’s parrot, and there was virtually no prospect for resurrection. As for sending a message: uhm, if you hadn’t gotten this message by now, you are a little slow on the uptake. A decade plus slow.

And that’s likely why Putin has said and done nothing about this. Kudrin may think this is “an emergency for the economy,” but Putin almost certainly recognizes that Kudrin is living in the past, and that the parrot is indeed dead.

Moreover, the last thing he would do now is take any action that would give the impression that he is kowtowing to the West. His political persona is now heavily invested in the image of a strong Russian leader standing up against a West–and an America in particular–that desires to subjugate Russia. He’s particularly unlikely to abase himself (in his eyes) before the US/West when he realizes that the payoff for doing so is negligible.

Michael Calvey was a fool who rushed in where angels fear to tread, and his arrest is more of an echo of the past, than a harbinger of the future. Certainly as long as Putin is around Russia will be largely isolated from the West, and will stagnate accordingly.

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February 16, 2019

The Idiotic Freak Out Over Putin’s Middle East Diplomacy

Filed under: China,History,Military,Politics,Russia — cpirrong @ 8:59 pm

There has been a steady chorus of wailing about how the US “retreat” from the Middle East (which is at present limited to an announced intention to draw down in Syria) is empowering Russia, and that Putin is exploiting the “vacuum” left by Trump.* This WSJ oped is representative of the genre. Which is to say it is incoherent to the point of idiocy.

For one thing, this piece, and the entire genre, mirrors one of Putin’s most glaring intellectual failings: zero sum thinking. If Russia gains, the US must lose, right?

Wrong. The US has global interests, and does not have unlimited means to pursue them. Strategic prioritization–most notably, focusing on China–and redeploying resources to focus on the new priorities is vital and beneficial and advances US interests. Perhaps Russia gains in some ways from this, but those gains do not come anywhere near erasing the benefits accruing to the US of downplaying peripheral theaters and focusing on more important ones. Further, any local gains Russia may achieve in, say, Syria are almost certainly to be more than offset by the disadvantages of competing with a United States that has its strategic priorities straight. Putin–and other American adversaries/enemies, notably Iran–have exploited US misadventures in the Middle East. Focusing efforts and husbanding resources makes the US stronger, not weaker, both absolutely and relative to would be competitors–including Russia.

I have yet to see anyone make a remotely plausible case of why an enduring US role in Syria makes any strategic sense. As I’ve said from the very day that Putin put troops there–if he wants the shithole, let him have it. It has no strategic importance to the US, especially in its utterly wrecked current condition. We have far more important issues to deal with, China foremost among them.

The WSJ piece also provides room for considerable doubt about Putin’s prospects. Specifically, it inadvertently demonstrates the inherent contradictions in Putin’s policy. The author, Angela Stent, spends much of the piece fretting about the warming relationship between Russia and Israel. She also frets about the cooperation between Iran and Russia. Well, those policies are utterly incompatible, given that Israel and Iran view each other as existential enemies. The rapprochement between Russia and Saudi Arabia is similarly incompatible with a strong cooperative relationship between Russia and Iran. Something has to give.

I also fail to see why having Russia and Israel on good terms is a bad thing, especially in light of the fact that the Soviet Union was Israel’s arch-enemy (except for a brief, historically miraculous moment in which Stalin thought supporting Israel–and arming it–advanced Soviet interests), and armed its enemies (including Syria) throughout the Cold War. This was a major reason why the US had to take substantial risks to defend Israel in the Cold War–and why some said this risk wasn’t worth it, and that the US should jettison its support for Israel. Indeed, Soviet support for Arab states waging war on Israel brought the USSR and the US to the nuclear brink in 1973. A Russia that values its relationship with Israel is more likely to put a brake on Israel’s enemies with whom it has influence (notably Iran and Syria). That reduces the likelihood of conflict in the Middle East, and reduces a source of friction between the US and Russia.

Tell me why this is a bad thing.

And don’t forget–it takes two to canoodle. Here Putin is canoodling with Benjamin Netanyahu, who is (a) extremely hawkish, and (b) recognizes that Israel’s security depends crucially on the US. If Netanyahu believes there are gains to trade to be realized from dealing with with Putin, it is likely that the US is a gainer too.

Having Russia on friendly terms with Israel enhances the Jewish state’s security, and thereby advances American interests. And if in the end Russia chooses Iran and Syria over Israel, the pearl clutching about a budding Russian friendship with Israel will look rather foolish, no?

The friendliness between Russia and KSA can be analyzed similarly. The contrast with the Cold War again deserves comment. The inflection point in US involvement in the Middle East generally, and KSA in particular–the Carter Doctrine–was a response to the perceived Soviet threat to seize the Arabian Peninsula. Although the military threat ebbed with the collapse of the USSR, a KSA with fewer enemies and threats requires less US protection.

Here it should be added that the main reason for KSA and Russia to cooperate now is oil. But this in many respects is a confession of weakness, not strength. The resurgence of US as a major oil producer has undercut the market power of the Saudis and Russia, and their cooperation is largely defensive, rather than offensive.

Those who are paying attention, moreover, realize that there is considerable disagreement within Russia about the desirability of cooperating with OPEC (which, in effect, means with KSA) on oil output. In particular, my old buddy Igor Sechin is lobbying hard against continued cooperation, claiming it is a strategic threat to Russia:

“The participants of the OPEC+ agreement have actually created a preferential advantage for the USA – that sees raising its own market share and the seizure of target markets as its primary task – which has become a strategic threat to Russia’s oil industry development,” the letter [from Sechin to Putin] seen by Reuters says.


“The key strategic challenge which the domestic oil industry is faced with today is the further decline in Russia’s market share, despite the availability of quality recoverable oil reserves, necessary infrastructure and personnel,” it said.

Here Sechin is actually expressing some economic reality. Given its market share, Russia’s–and Rosneft’s–demand elasticity is substantially greater than one, and restricting its output reduces its revenues/income. Russia/Rosneft would likely be better off with a lower price and higher output–which is precisely why for years it abstained from cooperating with OPEC.

This internal discontent among extremely powerful players–and Sechin is arguably the most powerful player in Russia after Putin–sharply limits the potential for enduring cooperation between Russia and the KSA. Again, the fears are vastly overblown.

In sum, freaking out over greater Russian diplomatic efforts in the Middle East is totally unjustified. Russia’s gains are not America’s losses–the world is not zero sum. There are inherent contradictions in Russian efforts that will inevitably force them to make choices that limit their influence. And some Russian initiatives could actually serve to reduce the likelihood of major conflicts that would harm US interests.

I can’t write about this subject without mentioning today’s remarks by the most annoying leader in the world today. And no, I don’t mean Putin–I mean Angela Merkel. At the annual security conference in Munich, Frau Merkel chastised the United States for its plans to draw down in Syria and Afghanistan:

German Chancellor Angela Merkel has warned that a hasty U.S. pullout from Syria runs the risk of strengthening the roles of Russia and Iran in the Middle East.
Speaking at the Munich Security Conference on February 16, Merkel questioned whether the planned U.S. withdrawal was “a good idea.”
“Will it once more strengthen the capacity of Iran and Russia to exert their influence?” she asked.
She also cautioned against a premature U.S. withdrawal of forces from Afghanistan, saying that NATO’s Resolute Support mission in that country was dependent on the U.S. military’s commitment.

Well, for starters, lady, if you are so convinced of the need for military engagement in Syria and Afghanistan, why don’t you order your pathetic military to pick up its broomsticks and take the lead in the fights there? Oh. I forgot. You are the leader of the biggest free rider in Nato, who constantly lectures everybody else about global responsibilities, but who never puts her money–or the lives of German soldiers (assuming they still have any) where her fat mouth is. Until you do, you can kindly STFU.

The outrageousness of Merkel’s bloviation is even more remarkable given that in the very same speech called Russia a “partner” and “made a robust defense of Germany’s foreign trade relations and ties with Russia during her speech.”

Why, some might call that collusion!

So which is it? Russian influence is something to be contested, or embraced?

Merkel has also been a robust defender of the nuclear deal with Iran, and critical of the Trump administration’s withdrawal from it. German has led efforts to circumvent US sanctions on Iran–which are intended precisely to limit Iranian influence. But then she tells us we have to garrison Syria to fight Iranian influence.

Square that circle for me.

Angela cannot go away soon enough. But alas, no doubt she will be replaced by someone equally annoying. Germany is not America’s friend. But it is probably too much to expect that those who are demented by Trump hatred will understand that, just as it is too much to expect that said demented people will recognize that some modest Russian diplomatic achievements in the Middle East do little harm to the US, and indeed, may actually redound to our benefit.

*The whole idea of a US “retreat” in the Middle East is so completely unmoored from reality that anyone who uses this term, or similar expressions, should be ignored and mocked. The US is still in Iraq. It has actually increased its involvement in the Persian Gulf, most notably in its confrontation in Iran. It supports the Saudi’s fiasco in Yemen. It periodically bombs Libya. Support for Israel is at unprecedented levels. Egypt’s military government is getting military and political assistance from the US. If this is retreat, I’d hate to see an advance. Reducing involvement in what is arguably the least important country in the region–Syria–when its whole reason for being there (the presence of ISIS as a territorial entity) is strategic rationality, not a retreat.

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January 16, 2019

Don’t Bother Me With the Facts! I Have a Narrative I Need to Flog!

Filed under: History,Military,Politics,Russia — cpirrong @ 7:20 pm

US ambassador to Germany Richard Grenell recently tweeted that the Trump administration had been tougher on Russia than any of its predecessors. The reflexive anti-Trumpers wouldn’t stand for this. Not for a second.

NYT columnist Bret Stephens leaped into the lists to tilt at Ambassador Grenell:

And let’s play no word games about the difference between USSR and “Russia.” Putin’s Russia is the USSR reborn under the exact same management.

That’s what’s called “projection”, Bret, for you are playing word games by transmogrifying Putin’s Russia into the USSR.

Today’s Russia “is the USSR reborn” only in Putin’s wildest dreams. By any objective measure, Russia today pales in comparison to the USSR as a threat to the US (or the West generally). From 1945 through 1991, the Soviets had millions of men and thousands of tanks poised on the borders of western Europe. Today the men do not exist and the tanks are rusting away in storage–and all are hundreds of miles to the east of the Elbe. The Soviet Union had a very credible navy: Russia’s navy is back from the utter decrepitude of the 1990s and early 2000s, but is still a pale shadow of what it was under Admiral Gorshkov. Whereas the Soviet Union posed an extreme conventional threat to the US and the west, Russia poses no threat at all.

Oh, by the way Bret–where is Putin’s Warsaw Pact? Oh, that’s right–they are all Nato members.

The USSR was also a formidable ideological adversary, and its ideology was aggressive and expansionist. Especially prior to the 1980s, the Soviet ideology had substantial international appeal, especially in the Third World. The Cold War was as much intellectual and ideological, as it was military and economic.

Putin tries on new ideologies like a teenage girl tries on new clothes. But his ideological fashion choices are primarily for domestic political effect, and have no appeal outside Russia’s borders. Zero. Zip. This is in large part because most of Putin’s ideologies are nationalist and insular. His embrace of Russian Orthodoxy is a particularly telling in this regard. It only has very limited appeal even within Russia, and none whatsoever outside it.

Russia is not an ideological nation. It is a kleptocratic regime.

Yes, Putin laments the demise of the USSR. But his efforts to rebuild it are pathetic in the extreme. In his nearly 20 years in power, his efforts to reconstitute the USSR have succeeded in reclaiming–wait for it–Abkhazia and South Ossetia, and some rather decrepit bits of Ukraine. These are the offal of the USSR. He is now putting the squeeze on Belarus–but Lukashenko has no desire to go back to the Soviet Union.

And even these “accomplishments” have succeeded primarily in isolating Russia, with one of the consequences being economic stagnation that leaves Russia even further behind the US in the wellsprings of military power. After a brief splurge in defense spending, the realities of Russia’s parlous economic condition have forced Putin to cut back again, and announce new weapons with great fanfare–but not to produce them in meaningful numbers. Potemkin revisited.

In sum, Putin’s Russia is at best a pitiful simulacrum of the USSR. To equate the two, as Stephens does, is beyond farcical.

So after dispensing with Stephens’ sleight-of-hand turning 2019 Russia into 1979 USSR, let’s evaluate Ambassador Grenell’s statement on the merits, administration by administration post-USSR.

The Clinton administration was all in propping up Yeltsin. When Yeltsin shelled the Duma in 1993, Clinton said: “I guess we’ve just got to pull up our socks and back Ol’ Boris again.” When Yeltsin was in grave peril of losing the 1996 election, Clinton said: “I know that means we’ve got to stop short of giving a nominating speech for the guy. But we’ve got to go all the way in helping in every other respect.” (Can anyone say “interfering in an election”? I knew you could.) The Clinton administration also supported Russian policy in Chechnya.

Bush II famously gazed into Putin’s eyes, and his administration got on rather well with Russia. Even the 2008 invasion of Georgia did not trigger a vigorous response.

And Obama. Where to begin? Of course there’s the Reset, complete with Hillary grinning like a buffoon standing next to Lavrov, holding an idiotic button (mislabeled in Russian, no less). Then there was Obama paling around with Medvedev–they were burger buddies, remember? Oh–can’t forget the hot mike statement that Medvedev should tell Vladimir to be patient, as Obama would have more flexibility after the 2012 election. In the 2012 campaign, Obama mocked Romney saying that Russia was a threat.

Given this, it’s not surprising that Putin smelled weakness, and that his peak aggressive phase occurred during the Obama administration.

Obama’s response was 90 percent petulance and condescension about Putin not following the arc of historical progress, and 10 percent rather ineffectual measures.

It is against this standard–not that of Cold Warriors facing an existential threat–that the Trump administration should be measured. And as Grenell said, by this standard Trump has indeed been far more robust. He has provided Ukraine with weapons (which Obama steadfastly refused to do). He has embarked on rebuilding the US military. He has implemented more vigorous sanctions than the Obama administration. And the US military smoked 200+ Russians who tried to throw their weight around against US forces in Syria.

Further, look at other news involving Grenell. The Germans are in apoplexy over Grenell’s threat to sanction any company that cooperated with the Nordstream II pipeline that will bring Russian gas to Europe. Merkel’s party spokeswoman huffed: “The American ambassador operates in a, shall I say, somewhat unusual diplomatic manner. He’s shown that not only through this letter [on Nord Stream 2 sanctions] but also from when he took office.”

And this is not a new thing. Trump has been bashing Nordstream since he took office–and the Germans have been reacting with outrage every time.

Trump’s notorious criticism of Nato is also hardly pro-Russian. His main criticism is that Nato countries–especially Germany–don’t do enough to counter Russia, but expect the US to do it for them.

This is not a hard call. The Trump administration has objectively been far harder on Russia than its predecessors–including most notably its immediate predecessor, whom people like Bret Stephens now lavish praise on. It isn’t even close. To claim that US policy towards the USSR is the appropriate yardstick by with to measure US policy towards the decrepit, dissolute successor state of Russia requires breathtaking intellectual dishonesty. But Bret Stephens is obviously up to the task

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December 22, 2018

Given the Realm at Stake, Why Play This Game of Thrones?

Filed under: China,History,Military,Politics,Russia — cpirrong @ 2:57 pm

The most recent shrieking emanating from DC and its various satrapies is the result of Trump’s decision to exit Syria and draw down forces in Afghanistan, with the clear implication that the US will leave there too in due course. The conventional wisdom is almost universally against him, and as usual, the conventional wisdom is flat wrong.

In evaluating any policy or operation, the first question to answer is: what is the objective? In Syria, is it a limited one–the defeat of the rump of ISIS? Or is it a more grandiose, geopolitical one–to control the outcome of the Syrian civil war and determine who rules there?

Trump has made it clear that his objective is limited and tactical. He has apparently decided that although ISIS has not been extirpated in Syria, it has been so attrited that its remaining enemies can contain it, or finish it off. And there is a Machiavellian aspect to that: why not let American adversaries, Russia and Iran, spend their blood and treasure dealing with the dead enders that remain? You wanted Syria, Vlad–have at it!

The conventional wisdom embraces the more grandiose objective. Perhaps this is purely self-aggrandizement, and lets them resume their college dorm games of Risk for real. Issues of motive aside, it is beyond cavil that those who want the US to remain in Syria, and indeed, to become more heavily involved there want to commit the country to being a player in a Game of Thrones that puts the fictional version to shame.

And that is why the conventional wisdom is wrong. For what does the survivor who sits on the throne rule over? A country that was a largely irrelevant shithole even before seven years of internecine warfare that utterly wrecked and largely depopulated a nation that was already pitifully poor and weak before the war began.

Congratulations Bashar! Congratulations Vladimir! Congratulations Ali! Behold the spoils of your victory! And indeed, spoiled is the right word for it.

And again, from a Machiavellian perspective, tell me why it isn’t smart for the US to let Russia and Iran plow resources into rebuilding a devastated nation? If they do so, these are resources they can’t use against the US elsewhere. Furthermore, even if Russia gains a presence in the country over the longer term, it is an isolated and completely unsupportable outpost that (a) could not provide a base for power projection in the event of a real great power struggle, and (b) could be cut off and destroyed in a trice by the US. Let the Russians put their very limited resources into a strategic dead end.

As for the Iranians, yes, their presence in Syria poses a challenge to Israel. But (a) I am highly confident that the Israelis can handle it, and (b) it’s far cheaper for the US to support their efforts to do so with material support for the Israeli military. And just as is the case for Russia, for Iran Syria would be utterly unsupportable in the event of a real confrontation between Iran and Israel.

The principle of economy of force–something that the policy “elite” in DC appears never to have heard of–applies here. One implication of the principle is that you should concentrate your resources in decisive sectors, and not fritter them away in peripheral ones. For the US, Syria is on the periphery of the periphery. In any geopolitical contest with Russia and Iran, our resources are far better deployed elsewhere.

What’s more, despite the obsession of the foreign policy elite with Russia and Iran, they are secondary challengers to the US. China is far more important, and poses a far more serious challenge. Throwing military resources into Syria is to waste them in a peripheral theater of a secondary conflict.

When I first read of Trump’s decision, I turned to a friend and said: “I wonder what this means for Afghanistan.” And indeed, hard on the heels of the Syria announcement the administration stated that it would draw down forces in Afghanistan, with the clear implication that US involvement there would wind down fairly quickly.

All of the considerations that make Syria a strategic backwater for the US apply with greater force in Afghanistan. The country has spent over 17 years, the lives and bodies of thousands of soldiers, sailors, and Marines, and trillions of dollars on a country that is the poster child for shitholes. Yes, it was the refuge of a particular terrorist threat 17+ years ago. And yes, if we leave it will likely continue to be the cockpit of vicious civil war. Just like it has for the past two plus millennia. It was barely tractable for Alexander, and the British and Russia found it utterly intractable in their 19th and 20th century wars there. We’ve arguably done better, but not much. And again: what’s “winning,” and since the demise of the Silk Road, what in Afghanistan has been worth winning?

The war in Afghanistan has proved a sisyphean task. Sisyphus didn’t have a choice: the gods condemned him to roll the rock up the hill, only to watch it roll down again. The US has been engaged in that futile task by choice, and Trump has evidently decided that he doesn’t want to be Sisyphus anymore. (My skepticism about US involvement in Afghanistan also dates to years ago–as indicated by this post from almost exactly 9 years ago.)

One of the administration’s most important, and largely ignored, decisions has been to reorient US efforts away from conflicts against terrorism in isolated, poor, and peripheral places towards recapitalizing the military for peer conflict against China and Russia. This is the right choice, and long, long overdue. (I wrote a post in 2007 that expressed concerns about prioritizing anti-terror over conventional warfare capability.)

Alas, God will not restore the years the locusts have eaten in the Hindu Kush or on the Euphrates. But sunk costs are sunk. Looking to the future, the right strategic choice is to continue the pivot away from peripheral conflicts to focus on central ones.

And these costs are not purely monetary. Last night, due to a travel nightmare, I ended up returning to Houston on a flight that landed at 0230. On the plane were a half dozen young Marines heading home for the holidays. There were also two men, in their late-20s or early-30s, with prosthetic legs. They almost certainly lost them to IEDs in some godforsaken corner of the Middle East or Central Asia. With Trump’s decision in mind, I thought: what is the point of turning more young men like the fit and hearty 19 or 20 year old Marines into mutilated 30 year olds in places like Afghanistan and Syria? I certainly can’t see one.

I’m not a peacenick or a pacifist, by any means. But I understand the horrible cost of war, and fervently believe that it should only be spend on good causes that advance American interests. I cannot say with any conviction that this is the case in Syria, or in Afghanistan, 17 years after 911. Indeed, I can say the opposite with very strong conviction.

At the risk of stooping to ad hominem argument, I would make one more point. Look at the “elite” who is damning Trump’s decision in Syria. What great accomplishment–let alone accomplishments plural–can they take responsibility for? The last 27 years–at least–of American foreign policy has been an unbroken litany of bipartisan failure. The people who scream the loudest now were the architects of these failures. Not only have they not been held accountable, they do not even have the grace or maturity to admit their failures. Instead, they choose to damn someone who refuses to double down on them.

The biggest downside of Trump’s decision is that it apparently caused Secretary of Defense Mattis to resign. I hold General Mattis in the highest esteem, and believe that if he could no longer serve the president in good conscience, he did the right thing by resigning. But if he decided that Syria and Afghanistan were (metaphorically) the hills to die on, for the reasons outlined above I respectfully but strongly disagree.

My major regret at Mattis’ departure is again completely different than the conventional wisdom spouting elite’s. They lament the loss of an opposition voice within the administration. I cringe for reasons closely related to my reason for supporting a major pivot in US policy: I think that Mattis was the best person to oversee the reorientation of the Pentagon from counterinsurgency to main force conflict. We desperately need to improve the procurement process. We desperately need to focus on improving the quality and number of high end systems, and raising the availability of those systems we have: the operational availability of aircraft and combat units is shockingly low, and Mattis has prioritized increasing them. He has made progress, and I fear that a change at the Pentagon will put this progress, and the prospect for further progress, at risk.

Listening with dismay at the cacophony of criticism from the same old, failed, and tired “elite” reminds me of Einstein’s (alleged) definition of insanity: doing the same thing over and over, and expecting different results. The “elite” is invested in the same thing, and changing the same thing is a not so implicit rebuke for their failures. Until they can explain–which I know they cannot–why doing the same thing has led to such wonderful outcomes in the past quarter century, they should STFU and let somebody else try something different.

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December 3, 2018

Robert Mueller Deals More Collusion Crack to the Desperate Media Addicts

Filed under: Politics,Russia — cpirrong @ 7:35 pm
Last Friday, the Russia collusion crack addicts took another hit, supplied by their main source, Robert Mueller.  The Special Counsel announced a plea deal with Michael Cohen, in which the disgraced Trump fixer admitted that he had lied to Congress about his contacts with Russia regarding a potential Trump business deal.  According to the plea, Cohen was reaching out to the Russians well into 2016, after the time when Trump’s nomination appeared likely.

OMG!!!! THIS IS IT! TRUMP IS DONE! COLLUSION HAS BEEN PROVED! HE WILL HAVE TO LEAVE OFFICE! TOP OF THE WORLD! THERE IS A GOD! I CAN SEE HIS FACE!

Dudes, put down the pipe and check into rehab. Though to be honest, there’s nothing that can fix your addiction.  You don’t have a monkey on your backs: you have Bushman.

As is almost always the case with these pipe dreams, the media hot take is 180 degrees from reality.  Rather than showing Trump’s deep connections with Russia, and his obligation to Putin, it shows the exact opposite. Namely, it demonstrates that even as late as 2016 Trump had absolutely NOTHING going on in Russia, but was still begging for the opportunity to talk about business opportunities. (Or at least, his flunkies were.)

Indeed, to indicate just how  how much nothing he had going on, Cohen sent an email with an offer to Putin’s PR flack, Dmitri Peskov.  But wait! It gets better!  Cohen didn’t even have Peskov’s private email address, so he sent it to the address used for general press inquiries.  And to add insult to injury Peskov didn’t respond.  In fact, nobody responded, not even an intern saying “Thank you for your inquiry.”

In other words, Cohen rated the same response as Peskov probably gave to Nigerian princes offering the opportunity to make a vast fortune, in exchange for a little help.  That being no response at all.  He might have even given offers from Nigerian princes more thought.

Just as the Trump Tower meeting demonstrate beyond cavil that Trump had no deep connections in Russia, this farce demonstrates that Trump was not even remotely a player.  To use a Rumsfeld category, this represents evidence of absence.  Overwhelming evidence. If Trump was in deep with Putin prior to January, 2016, one of his flunkies wouldn’t have been sending plaintive pleas to a public email address.  And if Putin was hot to collude, there would have been an answer.

It’s not that complicated.  But then again, I’m not on crack.

Further, to the extent that Trump encouraged the outreach: (a) it’s kind of embarrassing, and (b) it’s hardly the actions of a man who thought he had the remotest chance of becoming president.  In fact, it screams the opposite.

If Cohen and the other person involved in attempting to gin up Trump business in Russia were acting on their own hooks, it would suggest they didn’t rate The Boss’ prospects too highly either.

The worst thing about this entire affair is that Trump relied on low-lifes like Cohen and Sater.  This hardly speaks highly of him.

So yet again, Mueller has delivered the collusion junkies a short term high in the form of a guilty plea to a process crime that does not get him any closer to proving that Trump colluded with Putin (or anyone else in Russia), let alone proving that he committed a crime (collusion per se not being illegal).  Indeed, this latest  “bombshell” merely proves yet again that when it comes to Donald Trump and Russia, there’s no there there.

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November 29, 2018

The Incident in the Kerch Strait: Validating Existing Lines of Conflict, Rather Than Portending a Forcible Shift in Those Lines

Filed under: Military,Politics,Russia — cpirrong @ 7:45 pm
The big news over the weekend was the Russian firing on, ramming of, and seizure of several Ukrainian naval vessels attempting to transit the Kerch Strait.  Most of the news coverage has been hopelessly inept, especially with regards to the background and legalities.  This piece from Defense News is the most coherent and thorough that I’ve read.

My quick take is that given international maritime law and the 2003 Russia-Ukraine agreement on the Sea of Azov, Ukraine is right de jure–especially in light of the fact that no major nation acknowledges Russia’s seizure of Crimea.  But Russia has the upper hand de facto.  As the expression goes, possession is nine-tenths of the law.  Russia has seized possession of both sides of the Strait, and has the military force to enforce that possession.  And it did.

Russian justifications for their actions are risible.  But their explanations of so many actions are risible.  That may be the point: “we say this bullshit that you know is bullshit and we know is bullshit to let you know we don’t give a shit what you think.”

As the Defense News article states, Ukrainian naval vessels had transited the Kerch Strait in late-September without Russian reaction.  But this time it was different.

Why?

Presumably in part because the September foray embarrassed the Russians, who have been ratcheting up interference with civilian vessels since that happened.  Moreover, as many have suggested, Putin may be looking to bolster his patriotic bona fides.  He certainly can’t be doing it to attract international favor, because the opposite has happened.

This raises an interesting thought: if Putin really thinks he needs a domestic political boost so badly that he is willing to draw international opprobrium (note that Trump canceled a meeting with him at the G-20 over this) to get it, what does that say about his domestic political position? Or at least his concerns about it.  A tsar confident in his domestic standing wouldn’t feel it necessary to incur the cost of such a provocation.

Not that the cost is likely to be that high.  The Germans, in typical fashion, harrumphed about how horrible this is, but in the same breath said “Nordstream 2 is a go!”  But the episode probably makes any sanctions relief even less likely.

Revealed preference suggests two alternatives: (a) Putin figured that sanctions relief was extremely remote in any event, so the cost wasn’t that high, or (b) Putin actually doesn’t mind sanctions despite their evident toll on the Russian economy.  With regards to (b), note that sanctions often work to the advantage of those in power (e.g., Saddam, the Mullahs).  Pieces like this suggest that might be a real possibility.

What was Ukrainian president Poroshenko’s rationale?  He was likely appealing to his domestic audience, although a humiliating capture of a part of Ukraine’s pitiful remnant of a fleet hardly seems calculated to boost his re-election prospects.  Perhaps he was hoping for this very outcome, in the expectation that it would lead western countries to rally to Ukraine’s defense.  If so, he’s rather clueless.  It’s not as if the US and EU are unaware of Russia’s continuing predation against Ukraine: they’ve clearly acquiesced to the current status quo of frozen conflict, and the events in the Kerch Strait will not change that.  Poroshenko likely threw away a few ships and a couple of dozen sailors for nothing.

But in some respects, this is not surprising.  The Ukrainians are the Sovok Palestinians: they never miss an opportunity to miss an opportunity, and routinely self-inflict gaping wounds.

His declaration of martial law in parts of the country in the aftermath is highly weird, and raises questions about his real motives.

Does the incident portend a renewed Russian military assault on Ukraine?  I doubt it: it is more of an enforcement of existing redlines, rather than drawing new borders.  If the cost of bashing around a tugboat and a few minor combatants is bearable, the cost of a major move on the ground is a different matter altogether.

So the upshot is something like this.  The incident will not result in substantial increases in help for Ukraine.  It deepens and cements Russia’s isolation.  It is unlikely to portend a major escalation in the conflict.  In other words, it confirms and reinforces the status quo of a frozen conflict, rather than representing a new phase in the war.

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November 8, 2018

To Bad the Drydock Sank, Instead of the Carrier It Was Lifting

Filed under: Military,Politics,Russia — cpirrong @ 5:17 pm
A week ago Russia lost its largest drydock, while it was towing the country’s sole aircraft carrier, the Admiral Kuznetsov.   This is amusing, though not surprising: “The cause of the accident was reportedly an electrical malfunction that left the pumps in the dry dock’s ballast tanks stuck on, causing it to sink rapidly.”

The Kuznetsov was itself damaged, when a crane from the drydock toppled onto the carrier’s deck.

All things considered, the Russians would have been much better off had the Kusnetsov plunged to the bottom, rather than the drydock.  The drydock is actually potentially useful.  The carrier is a near hulk that is more trouble than justified by its military value, which to a first order approximation is zero.

I will take credit for being one of the first to point out the comical fact that the Kusnetsov always sailed with a salvage craft–a towboat–bobbing along in its wake.  Prudent precaution, you say? Never leave home without one?  Well, no other aircraft carrier in the world needs to take this precaution.

The Russians will reportedly attempt to raise the drydock, although as the linked article points out it may have been damaged by the sinking.   And if the electronics were dodgy before, think what months/years under frigid seawater will do to them.  The Russians will also apparently continue with refurbishing the Kuznetsov, although this is already running over time and over budget.

Hey, if they want to burn money, who am I to stop them?  Better for the US that they waste resources on this rather pathetic vessel than put it into something actually useful.

It’s not August, but Russia has been suffering an August-like autumn.  And no, I don’t mean the weather: I mean the fact that for years August was regularly marked by major accidents in Russia.  In addition to the Kuznetsov/drydock fiasco, recent weeks have seen the failure of the manned Soyuz launch.  The failure has been blamed on a sensor damaged during installation:

“The reason for the abnormal separation … was due to a deformation of the stem of the contact separation sensor…,” Skorobogatov told reporters.

“It has been proven, fully confirmed that this happened specifically because of this sensor, and that could only have happened during the package’s assembly at the Baikonur cosmodrome,” he said.

I can imagine the conversation: “What do you mean it doesn’t fit, Boris?  Get a bigger hammer!”

Further, four bridges have collapsed in Russia since September.

In brief, Russia remains a shambolic place.   The gap between Putin’s chest-thumping and reality is as wide as ever.  The hamster wheel keeps spinning.

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August 28, 2018

What Happens When the Putin Hamster Wheel Stops Spinning?

Filed under: China,Politics,Russia — cpirrong @ 6:30 pm
In a Bloomberg interview, Russian sociologist Olga Kryshtanovskaya basically echoes things that I’ve written here for over a decade.

First, though she doesn’t use this exact terminology, Putin’s Russia is a quasi-feudal “natural state” in which Putin is the balancer, and maintains balance by allocating rents among jostling elite clans.

Second, the transition to a post-Putin Russia will be messy.  Kryshtanovskaya sketches out the game theory, which I’ve done in the past.  It’s not that complicated–collusive/cooperative arrangements among rivals unravel as the end game nears.  With a mortal man playing such a crucial role in enforcing the cooperative agreement, such an unraveling is inevitable.

Putin is subject to constitutional constraints that would, in theory, cause the end game to precede his demise or dotage, but he recognizes this, and will find some new role that concentrates power in his hands, thereby effectively neutering who ever succeeds him as president.

But that just delays the inevitable. As he ages, and the clans he keeps in check believe that the cooperative horizon is shrinking (perhaps due to observation that Putin is slipping mentally or physically), one (or all) will make a power grab.  That could lead to chaos.

One wildcard that  Kryshtanovskaya doesn’t mention, and which wasn’t as big of a factor when I was writing about this years back, is Kadyrov.  He is another actor–and a mercurial and dangerous one–who could play a decisive role in the end game.  Although it has been suggested that he has ambitions to rule Russia, it is more likely that he will make a play for greater autonomy when the center weakens, and will also throw his weight to influence the outcome of the battle to succeed Putin.  And once that is settled, it is not difficult to imagine that his demands and independence will result in a Third Chechen War.

It is precisely this inherent instability in a de-institutionalized, personalized political system that limits Russia’s long-run challenge to the US.  Periodic, episodic turmoil is not conducive to posing a persistent geopolitical challenge.

Until recently, China’s more collective leadership system and periodic, regular transfers of power have been another factor that makes it a more dangerous challenger to the US than Russia.  Interestingly, Xi’s concentration of power in his person may bring all of the trade-offs that Putnism has, with the biggest downside being instability and potential chaos when succession looms.

I’d say that bodes well for the US in the long run, but since we appear to be converging to Russia from above, perhaps not.  On that subject, more later.

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July 24, 2018

Who Knew Igor Was a Deadhead?: Sechin Plays Shakedown Street

Filed under: Economics,Energy,Politics,Russia — cpirrong @ 6:14 pm
The Sechin business model is clearly not to generate profit through canny investment, careful stewardship of capital, and containing cost.  Rather, it could be called The Rent Seeking Variations.

One of Sechin’s favorite variations is to pump up a flagging bottom line by shaking down his erstwhile partners.  The classic in this genre is the takeover of Bashneft at a knockdown price extracted by putting its owner Sistema under extreme legal pressure, which Sechin followed by suing Sistema for alleged misappropriations, which were only vaguely pleaded, and which if anything suggested that Rosneft was delinquent in its due diligence.

Sechin is now replaying this gambit, this time with its partners is Sakhalin I–which include ExxonMobile.  Again, the allegation is lacking in specifics.  Rosneft accuses the partners of “unjust enrichment” in 2015 and 2016.  In a world-class, epic act of projection, Rosneft accuses Exxon Neftgaz and the others of “interest gained by using other people’s money.”

The case was filed on Sechin’s home court–the arbitrage court on Sakhalin.  I seriously doubt that Exxon would have put itself into a situation where it was at the mercy of a Russian kangaroo court, so no doubt the first battle will be jurisdictional.

Sechin succeeded against Bashneft and Sistema in large part because Russia put its main shareholder Vladimir Yevtushenkov in jail at one point, and clearly was in a position to do it again.  ExxonMobil and the others in the partnership are less vulnerable, and Exxon in particular is used to these sorts of bruising battles.  So Igor has his work cut out for him.

For a while–during the Tillerson years–Exxon and Rosneft were chummy.  Sanctions put a kaibosh on the relationship, and this is clearly a signal that they are sooooo over.  Which just leaves Rosneft even more isolated than before, and unlikely to attract technology, expertise, and money from a major foreign power anytime soon absent some exchange of hostages that will curb Sechin’s predatory instincts.

The fallout for Russia more broadly is also clearly negative.  This is just another indication of its opportunistic and predatory approach to foreign investment, which just will raise further barriers to such investment in the future.

Operating on Shakedown Street can be lucrative in the short run, but pretty soon you run out of suckers to shake down.

Perhaps counterintuitively to some, this is an indication of why freaking out over Russia is so overdone.  Its internal dysfunction has hampered, hampers, and will hamper in the future its economic performance, and hence its potential to build capability to challenge the US in a serious way.   Yes, it can be a pain, but the very aspects of its system that make it so objectionable also serve to undermine its ability to pose a serious threat to any major power.

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July 17, 2018

In Helsinki, Trump Declares That This Is War to the Knife–Against His Domestic Enemies

Filed under: China,Politics,Russia — cpirrong @ 6:04 pm
Even by the standards of the last two years, the hysteria that erupted over Trump’s statements in the press conference with Putin in Helsinki were off the charts.  Benedict Arnold! Treason! Traitor! Impeachment! On CNN some supposed ex-Watergate lawyer compared it to Kristillnacht. I suppose if we wait a few hours it will become the latter-day equivalent of Auschwitz.  I’m only surprised that I haven’t seen it compared to the Hitler-Stalin Pact.  Give it time!

The most disgusting comparisons in my mind were to Pearl Harbor and 9/11, suggesting that what Trump did would have been analogous to sitting down with Tojo after Pearl Harbor or Osama after the Twin Towers went down.

Reality check.  Pearl Harbor death toll: 2403. 9/11 death toll: 2996. 11/8/16 death toll: zero.  1,117 American sailors were vaporized, drowned, or incinerated on the USS Arizona alone on 12/7/41.  Anyone comparing Russian hacking to those catastrophes is completing lacking in perspective, not to say mental balance, and is willing to make the most outlandish comparisons out of partisan spite.  Especially inasmuch as spy games have been going on since time immemorial, and between the US and Russia/USSR for decades.  What transpired in 2016 is par for the course. Where’s the outrage been all these years?

And is the US supposed to go to war with a nuclear power over hacking? For that is the implication of the Pearl Harbor and 9/11 analogies.  That is not just lacking in perspective–that is utterly deranged.

And what is the hysteria about, in the end?: mere words.  Nothing of substance transpired at the summit–as could have been expected.  The overwrought fears that Trump would totally capitulate on Syria, or recognize the Russian seizure of Crimea, or sell Ukraine down the river turned out to be imaginary.  There were just anodyne statements about working toward common goals, which will likely result in nothing.

How would things have been different, or be different today, or tomorrow, or next year, had Trump aggressively chastised Putin publicly about the alleged interference in the 2016 election?  No different at all, except that the hysterics would have had to find something to be hysterical about.   And I guarantee you: they would have.

What would Putin have done had Trump called him out?  First, he would have denied.  As he apparently did when Trump brought it up.  Second, he would have responded with a litany of sins that the US has committed against Russia, in which he would no doubt include the 2011 elections in Russia. After all, the man is the master of whataboutism and bald face denials of the obvious.  Why would you expect any different yesterday?

“Did so!”  “Uh-uh.” “Stay out of our politics!” “You did it first!”

That would have been edifying.

Which would leave us where, exactly? Right where we are today.

And if the failure to say sufficiently condemnatory words about Russian interference is treasonous, what is the failure to do anything about it when it was happening, in full knowledge that it was happening?  Which is exactly what the Obama administration did–by its own admission.  Would the hysterics have given Trump a pass if he had imitated Obama and told Putin to “cut it out”?  Yeah.  Right.  This also suggests an utter lack of seriousness.

What I find most deeply disturbing about this is that the Russia/Putin fetish is distracting attention from a real strategic threat.  By every measure–economic, military, geopolitical–China is a more dangerous power than Russia.  Indeed, even if you emphasize cyberattacks as the primary threat, China is likely far more dangerous than Russia, although amnesia about things like massive penetration of the F-35 program or the OPM hack (which compromised the personnel records of every federal employee) seems to be epidemic.  And it is not as if China does not, and has not, attempted to interfere in US elections.  (Johnny Chung, anybody? Maria Hsia? Buddhist Temples?)

Chairman Xi must be beside himself in glee that the US is tearing itself apart over Russia, a declining power, to the neglect of China, a rising one.

Perhaps Trump could have spared himself some of the attacks had he been more critical–though I am doubtful that he could have done anything short of killing Putin that would have placated the critics.  But no doubt Trump knew that.  No doubt he knew that having a summit at all would put him in a vulnerable situation.  Certainly he was aware that the indictment of the 12 Russian GRU personnel was a trap set by elements in his own Justice Department.

Yet Trump had the summit, and indeed pushed to have it, and said what he did at the press conference, knowing the likely fallout.  Why?

Of course the anti-Trump theory is that he is in Putin’s thrall, either because of genuine admiration or blackmail.  But this does not comport with much of his actual behavior in office, which includes killing hundreds of Russians in Syria, opening declaring an energy war, browbeating Nato to spend more on defense directed at Russia specifically, blasting the Germans about NordStream II, and on and on.  Further, what is the likelihood that there is some deep dark secret that only a few Russians know?

I think the more likely explanation is that Trump deliberately provoked his frenzy in full knowledge of the consequences, to prove that he will not back down, and that he will not validate his critics by acquiescing to their demands.  It was a typically Trumpian in-your-face-what-are-you-gonna-do-about-it moment.

The only other person I have seen with a similar take is James S. Robbins:

The easiest thing to do politically would be to avoid Russia. The president did not have to attend this summit meeting, especially with the midterm elections months away and Special Counsel Robert Mueller’s expected report looming. He could have simply avoided both the issue and the optics.

But Donald Trump did not become president by doing the easy or expected thing. His political M.O. is to disrupt the opposition by owning the downside. A summit with Vladimir Putin is the perfect Trumpian way to say to his frantic critics that he couldn’t care less what they think. And it may force some of the more thoughtful ones to begin to consider the possibility that President Trump is right, and the entire Russian collusion narrative has been a lie.

I seriously doubt the last sentence.  Or at least, I doubt that there are any critics who are both frantic and thoughtful (and the former greatly outnumber the latter).  But it is pretty clear that Trump has signaled that this is war to the knife–against his domestic political enemies–and he is not capitulating.

 

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