Streetwise Professor

October 2, 2010

The *Really* Interesting Fight Under the Rug

Filed under: Economics,Energy,Politics,Russia — The Professor @ 11:53 am

The news from Russia of late seems to be all Luzhkov, all the time.  To me, it seems to be a perfect illustration of the feudal nature of Russian politics.  A baron gets too full of himself, and gets smacked down by the king.

As to the larger implications, so much of the commentary just illustrates that the old is new again.  Kremlinology is back in vogue, which means that the signal to noise ratio is small indeed.

Some things to watch going forward.  The redistribution of the massive wealth and power inherent in such a transition bears in it the seeds for conflict.  And the potential here is high given the amounts at stake.  We’re not talking about getting rid of the governor of some obscure Siberian oblast, or even a Rossel.  This is the biggest and richest city in Russia, and its political heart.  Hence, the economic and political consequences of a shift there are potentially seismic.  This is particularly true inasmuch as Russia is entering a period of heightened uncertainty relating to the next presidential election.

But it is difficult to know what to conclude from that.  You could argue that Medvedev and Putin are sufficiently confident in the stability of the country that it could withstand the messiness inherent in a transition to a new equilibrium.  You could argue the reverse, that the political condition in the country is so fraught that Medvedev, or Medvedev and Putin, determined that extraordinary measures were required, even knowing that the immediate consequences bear their own risks for the system.  You could argue that this is a unilateral political strike by Medvedev.  Or you could argue the reverse yet again, that it is the result of an agreement between Putin and Medvedev.

In fact, I’ve seen people argue all of the above.  Given the information at hand, the best we can do is advance hypotheses, and be sure to keep in mind that they are just that.  It is very difficult to know exactly what is going on under the rug: what the dogs are fighting over, how the fight started, who is winning.

What’s more, I consider this story far more intriguing because of its potential implications:

The deputy prime minister who chairs Russian oil company Rosneft (ROSN.MM) on Thursday backed its ambitions to sell gas to China — a challenge to Gazprom’s monopoly on exports from the world’s biggest gas producer.

“This is a unified position and right now it exists in the form of an idea, a request,” a spokesman for Rosneft’s chairman, Deputy Prime Minister Igor Sechin, told Reuters.

Rosneft and Gazprom are the economic bulwarks of the two major clans in Russia.  They are intense rivals who have, in recent years, co-existed in a live-and-let-live peace, adjudicated by Putin.  Rosneft is the Sechin-siloviki entity.  Gazprom is more closely identified with Medvedev.

With mafias, drug gangs, and cartels, a simulacrum of peace is maintained primarily by explicit or tacit agreements not to invade rivals’ turf.  Slight shifts in the balance of power, or crucially, an anticipation that conditions might soon change in a way that makes maintenance of the deal impractical or unattractive, can lead to a breakdown in such arrangements.

Sechin’s threat to invade Gazprom’s turf represents a major challenge to the status quo.  Given the centrality of these two companies to the entire Russian political structure, the ramifications of this could be quite substantial.  This is the Russian equivalent of Bugs Moran’s North Side gang hijacking Capone’s South Side gang’s bootlegging trucks.  And we know how that turned out. (Chicagoans still hear about it on trips abroad:)

These two remarks by Sechin are enigmatic, and interesting: “Coordination with Gazprom will be worked out with Gazprom itself” and

“Initiatives like that are discussed with the chairman. That is an agreed position, so far in the form of an idea, a wish. Cooperation with Gazprom will be worked out,” Sechin’s spokesman said.

Worked out with Gazprom itself?  Just between Gazprom and Rosneft?  That’s not usually how these things work.  In Russia, adjustments of relations between major clans are usually intermediated at a political level, usually by Putin.  Assuming the translation is accurate, Sechin’s explicit use of the reflexive pronoun suggests something different: “this is between him and me.  Butt out.”

“An idea”?  “A wish”?  “A request”?  Sounds like an offer you can’t refuse.

Although the Luzhkov follies are garnering all the attention, this one deserves close watching, as it would represent a major transfer of turf between the two most important politico-economic interests in Russia.  And if Sechin prevails here, do you think that will sate his appetite?  If so, think again.  Success of this gambit would reflect a tectonic shift in Russia, and this would unleash yet further changes.

So watch this issue.  It could be far more important than whatever transpires with Luzhkov and the corpse of his empire.  This is the really interesting tussle beneath the rug.

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26 Comments »

  1. Medvedev is on a firing spree. In 2 years he’s replaced more vassals than Putin ever did. Even ethnic Satraps previosly believed to be irreplaceable are gone: Shaimiev, Ilyumzhinov, Rakhimov. (Let’s see him try that with Kadyrov, though!) OTOH, the 6 week anti-Luzhkov media campaign was a sign of weakness. That kind of stuff is resorted to when the normal levers are not working. BTW, I’ve recently discovered that there exists a Russian version of “Married with Children”. A very faithful adaptation, apparently. Set in the Russian Chicago.

    Comment by So? — October 3, 2010 @ 12:36 am

  2. Sechin is forever waffling on about exporting oil and gas to China. It’s got to the stage where he needs to just shut up and do it. Personally, I think he’s letting his ambitions outweigh his abilities.

    Comment by Tim Newman — October 3, 2010 @ 2:53 am

  3. To me, it seems to be a perfect illustration of the feudal nature of Russian politics. A baron gets too full of himself, and gets smacked down by the king.

    Well, Craig, given your uncanny similarity to your role model Sarah Palin, I don’t expect you to be aware of a newspaper called “New York Times”. However, if you visit their web site, you will find an article there on the Medvedev-Luzhkov altercation. In particular, it says:

    http://www.nytimes.com/2010/09/24/world/europe/24moscow.html

    But a slight jab at President, Dmitri A. Medvedev could now bring the mayor’s once inviolable authority to ruin. In a recent article, Mr. Luzhkov appeared to criticize the president for indecisiveness, while seeming to call for his predecessor, Vladimir V. Putin, now prime minister, to return to the presidency.

    “He intended to try to push a wedge between Medvedev and Putin,” said Gleb O. Pavlovsky, a political consultant who advises the Kremlin.

    “As the elections approach, there are people in the presidential administration who are afraid that the mayor will support not President Medvedev, but Prime Minister Putin,” she said in an interview with the Russian news magazine, The New Times, published this week.

    In other words, Medvedev took his shots at Luzhkov for the latter’s support for Putin for president in 2012.

    Yes, the Russian politics are still feudal, but your thinking that Medvedev is the all-powerfull “king” is sadly mistaken: Putin is still the biggest king, but this last incident gives pro-european-minded Russians hope that Medvedev is finally beginning to fight against the Putin cabal.

    Comment by Ostap Bender — October 3, 2010 @ 3:13 am

  4. Ostap–you’re the one who doesn’t understand feudalism. In most feudal societies, kings were anything but all powerful. Hence their constant battles with their supposed vassals. Under feudalism, kings were often little more than impotent figureheads. In England, with a few exceptions (Henry II, Edward I), kings seldom achieved dominance over their barons, and were often completely in their thrall. On the continent, only with the advent of gunpowder and artillery, and the resulting economies of scale in warmaking, did French kings crush baronial opposition, and become absolute rulers. Russia is an interesting case, in that the boyars seldom were as threatening to the dominance of the tsars as was the case in medieval Western Europe. It is interesting to contemplate why that was so. I did so in a post years ago (2006? 2007?–I’ll have to look. Basic theory: it was due to considerations of geography, the marginal economic resources of the nobility, and the legacy of the Mongol invasion, most importantly the ability of the Muscovite princes to call upon the Mongols/Tatars to crush any upstart opposition.)

    Feudal kings often moved ruthlessly against powerful barons precisely because of the threat that they would conspire with other powerful lords to unseat the king. In the present instance, Medvedev is the king, largely a figurehead, but perhaps with ambitions to be more. Putin is formally a mere baron, but in fact a great lord with more true power than his ostensible overlord. Luzhkov was a great baron in his own right, but not quite so great as Putin.

    Which all means that my feudal analogy is quite apt, and your criticism thereof is completely flawed, due to your misunderstanding of feudalism. That said, I do not disagree that Putin, though formally subordinate to King Medvedev, is in fact the power in the land.

    You have bought into one interpretation of the Luzhkov firing. It is plausible, but there are other interpretations that are equally plausible. As I say in the post, I view these as hypotheses merely, and am withholding judgment.

    The ProfessorComment by The Professor — October 3, 2010 @ 8:59 am

  5. So?–What is the Russian Chicago, BTW?

    The ProfessorComment by The Professor — October 3, 2010 @ 9:03 am

  6. Good post, Tim. We should have a contest: who despises/ridicules Sechin more–you or me? LOL. It is interesting to note, though, that in your post you have a quote where our old buddy Igor says he won’t challenge Gazprom’s monopoly. Now he’s saying the opposite. That could be important. That’s why I say this bears watching: if actions follow words, it would be a big deal. I know that’s a big “if.”

    All of Sechin’s talk suggests to me that he is a serial releaser of trial balloons, either to gauge the receptiveness of the various competing powers to his plans, or to get them to react so that he can learn more about their thinking. Either that, or he is engaging in a kind of signal jamming strategy, just spouting noise in order to confuse rivals as to his true intentions.

    But it is amazing, isn’t it, that such a slug has such power in Russia.

    The ProfessorComment by The Professor — October 3, 2010 @ 9:12 am

  7. My take on things:

    Sayonara, Luzhkov. Props to Jesse Heath for predicting it, Patrick Armstrong for IMO the best summary, and STRATFOR for the most bizarre interpretation (they think Luzhkov was dismissed because the Kremlin no longer needs him to control the Moscow Mob). The best way of viewing this is not as a struggle between the tandem, or even Medvedev asserting himself, but as the latest stage in the campaign to replace entrenched regional barons with civiliki that are closer to the Kremlin. This appears to be part of the overall Kremlin drive towards greater centralization and technocratic management.

    (More details in a later comment).

    Yes, the Russian politics are still feudal, but your thinking that Medvedev is the all-powerfull “king” is sadly mistaken: Putin is still the biggest king, but this last incident gives pro-european-minded Russians hope that Medvedev is finally beginning to fight against the Putin cabal.

    Why do you exalt “pro-european-minded Russians”? Is it not submission before the forces of Western chauvinism? Those same forces that rave on about their “progress”, their “civilization” and “freedom”, while exploiting and killing the “non-civilized” and “non-free” and repeatedly inventing totalitarian ideologies?

    Comment by Sublime Oblivion — October 3, 2010 @ 12:37 pm

  8. Russia has a really interesting solution to the inconvenience of market economics. When people want to trade in a way that makes you look bad . . . just don’t let them!

    http://www.bloomberg.com/news/2010-10-03/medvedev-curbs-company-eurobond-sales-on-record-low-yields-russia-credit.html

    Put them in jail, if need be, or, no less effective, kill them.

    The wonders of neo-Soviet economics!

    Comment by La Russophobe — October 3, 2010 @ 8:44 pm

  9. Thanks, LR. Looks interesting. I’ll probably blog on that article in the next day or two.

    The ProfessorComment by The Professor — October 3, 2010 @ 8:56 pm

  10. A revolution has taken place in Russia that would make Lenin turn over in his sarcophagus at the Red Square. No more ideology, long live money! Hundreds of billions of dollars have been already stolen from the state funds, Le Monde writes in an article entitled “Lenin pouts (Lénine fait la moue)”.

    http://www.lemonde.fr/europe/article/2010/09/30/lenine-fait-la-moue_1418271_3214.html

    The start to cover up this process has been given by the Kremlin and its gas arm Gazprom, which signed contracts with PR agencies Ketchum and GPlus Europe, subsidiaries of the US Omnicom, in 2006. They had to change their propaganda approach after a series of infamous cases: the murder of Politkovskaya and Litvinenko, and the “gas war” between Ukraine and Russia.

    Russia also relies on the lobby, the paper continues, recalling that Schroeder from his post of the Chancellor of Germany went directly to the committee of shareholders of the Russian consortium Nord Stream. Schroeder got this job a few days after his German government had given state guarantees for the loan of the Deutsche Bank to Gazprom in the amount of 1 billion euros.

    The consortium is a sort of club of trustees, as the managing director here is none other than Matthias Warnig, a former agent of the Stasi, who worked as a Russian representative of Dresdner Bank and is also closely associated with Putin, the newspaper says.

    The majority of Russian companies have in their board foreign “independent directors” who are not involved in the decision-making process and are often hired “for the image” on the eve of release of company’s shares into the market.

    Among them is Elsie Loyng, a former Secretary of Justice of Hong Kong who moved to Rusal and a French Terry, the founder of the French Institute of International Relations.

    Russian banks are not left alone. Masterbank recently hired as a deputy director Igor Putin, the second cousin of the Russian leader and a son of a Russian military officer who graduated from a provincial Ryazan Automotive Institute. He later graduated from the Institute of Economics and Law, becoming … an engineer for tractors.

    And although you cannot call the 57-year old Igor Putin an expert in the field of finance, but the bank got the name Putin as a key to success, the paper emphasizes. This is confirmed by the experience of Avtovazbank, where Igor was a member of the board of directors since 2007: since his appointment, the number of accounts of legal entities increased by 12%, and the number of natural persons by 40%.

    For the bank, the Putin’s name is important, which also applies to a brand of vodka, a new sort of tomatoes and canned goods.

    A sonny of the former ringleader of the FSB boss Patrushev has been appointed as the ringleader of the Rosselbank.

    A sonny of the former KGB prime minister Mikhail Fradkov has been appointed as a deputy ringleader of the Vnesheconombank.

    A sonny of the former KGB vice-premier Sergey Ivanov has been appointed as the head of a department in the same bank. Another sonny of the same Ivanov has been appointed as a deputy ringleader of Gazprom.

    A sonny of the KGB mayor of St. Peterburg, Matvienko, in his 30 years is already the chief manager of a branch of the Vneshtorgbank.

    “But today, all eyes are directed at the Bank of Moscow, which manages the city’s budget and the savings of the Mayor Luzhkov. The bank, of course, is headed by a friend of the mayor, or rather of the ex-mayor, because Kremlin has just fired Luzhkov.

    It is actually unknown who the successor will be, but evil tongues joke that this man already owns a bank”, the French newspaper writes in conclusion, as retold in a censored review on the KGB InoPressa website, which the Kavkaz Center had to supplement, as always, with the material from the French original, within the framework of our fight against the KGB censorship in Russia.

    In its review for Russian readers, the KGB censored, first of all, reference to the theft by the top of the KGB clique of hundreds of billions of dollars, and then the data on the offsprings of the kingpins of the KGB junta and the crimes of German-speaking Schroeder against Germany and Germans.

    No censorship, except for the phrase about Putin’s vodka, tomatoes and canned goods, has been applied against Putin, who is doomed to a quick resignation in Perestroika-2, and the already ousted Luzhkov.

    Naturally, the FSB website InoPressa gave in this case no hyperlink to the article in French in an attempt to interfere with the analysis of the way of operation of the KGB censorship, which in all such cases is much more valuable for political scientists than the articles as such.

    Comment by Dominic Napolitano — October 4, 2010 @ 3:29 am

  11. Oh for goodness sakes Sublime Idiot, Russia is the one “repeatedly inventing totalitarian ideologies” you twit.

    Tsarism, Bolshevism, Leninism, Stalinism, Putinism, the list goes on.

    As for “exploiting and killing the “non civilised””, well Russia does that in spades, see all the killing done by Russia in the north and south Caucasus, the ethnic cleansing, the divide and rule imperialism.

    Really AK, eff off to Russia and live there if you think it is so wonderful, why do you insist on contaminating the US with your presence if you hate it so much?

    Comment by Andrew — October 4, 2010 @ 6:37 am

  12. Personally I can’t wait until some corrupt Russian pig sells the Chechens a biological weapon, then goodbye to the centre of evil in Moscow.

    So, Andrew, when are you going to “eff off” and join the Caucasus Emirate martyrs brigade?

    Comment by Sublime Oblivion — October 4, 2010 @ 12:31 pm

  13. Oh Sublime, I am not Muslim, but I am in the Caucasus, just the southern part.
    So I have seen your Russian murderers up close and personal, and also helped to deal with a lot of their victims.
    Kind of colours ones perceptions somewhat.

    Russia is the biggest bunch of mass murderers in history SO, they deserve to suffer for it, especially scum like you.

    But once again Sublime Retardation, I ask you, if you hate the western culture in general, and the US in particular, why do you insist on living there?
    Surely you would be happier living in the great anti-western workers paradise of Russia, come on, I am sure everyone will chip in for a one-way ticket.

    Comment by Andrew — October 4, 2010 @ 11:57 pm

  14. As you said to Voice of Reason, you work for a Georgian construction* company. What part of that, exactly, entails working with victims, and of “Russian murderers” no less!

    Comment by Sublime Oblivion — October 5, 2010 @ 9:49 am

  15. Oh, I do several jobs Sublime Retard.

    Unlike ivory tower Bolsheviks such as yourself, many of us have more than one job.

    I have three at the moment, two of which involve working with IDP’s on a regular basis, in addition I do infrastructure work including building housing for IDP’s as part of my construction contracts. Then I am also a qualified English teacher, and guess what, I have worked with Chechen refugees in the past, and work currently with, you guessed it, Georgian IDP’s

    Grow up SO, Berkley is obviously frying your brain. If you have one that is.

    Comment by Andrew — October 6, 2010 @ 12:28 am

  16. And most of my neighbors are IDP’s from the first war in Abkhazia.

    During the August war I was performing volunteer assistance work at several of the schools around where I live providing support for refugees from South Ossetia.

    Have you ever tried to talk to a 7 year old girl who watched her mother raped by Russian and Ossetian “soldiers”? And that was the least of it.

    So, once again, answer my question SO:

    Why do you live in the hateful west, in the US in particular, when the great anti western paradise of Russia beckons?

    They would love to have you, and we would love to see you go.

    It would raise the average IQ’s of both the US and Russia, everybody wins!

    Comment by Andrew — October 6, 2010 @ 12:32 am

  17. I wasn’t going to respond, but then I decided I’ll humor you after all.

    I do think the influence of Westernization on indigenous cultures – especially when spread by the barrel of a gun as it so often is – is almost always deeply malign, and hence provide the foundations for my trenchant criticism.

    I don’t have anything against the US. In fact, you’d find it rather difficult to find any statements from me that could reasonably be construed as “anti-American”.

    Comment by Sublime Oblivion — October 6, 2010 @ 5:49 pm

  18. Andrew,

    Let me see… You have been spending at least 15 hours per day posting to the LR blog. And you hold several jobs?!

    What kind of imbecile employers pay you “western size” salaries (as you told us) to post to LR? Do all of them know that you get paid for several jobs and devote all your waking hours to pointless blogging?

    Comment by Ostap Bender — October 6, 2010 @ 9:01 pm

  19. No Ostap the Bender,

    It does not take much time to post either to LR or SWP, or RFE/RL for that matter, and you can do it from a mobile phone in the field.

    You posted far more than me until you got banned for lying (again and again actually as you posted as Michael Tal/Phobodunce/Voice of Retardation/plus a few more incarnations)

    And I am pretty sure I work harder than you.

    @Sublime Retard

    I do think the influence of Russification on indigenous cultures – especially when spread by the barrel of a gun as it always is – is always deeply malign, and hence provide the foundations for my trenchant criticism, especially when it is accompanied by ethnic cleansing and mass murder by Russian military forces, as it so often is.

    Comment by Andrew — October 7, 2010 @ 12:32 am

  20. So wrote: “Medvedev is on a firing spree. In 2 years he’s replaced more vassals than Putin ever did. Even ethnic Satraps previosly believed to be irreplaceable are gone: Shaimiev, Ilyumzhinov, Rakhimov. (Let’s see him try that with Kadyrov, though!) OTOH, the 6 week anti-Luzhkov media campaign was a sign of weakness. That kind of stuff is resorted to when the normal levers are not working. BTW, I’ve recently discovered that there exists a Russian version of “Married with Children”. A very faithful adaptation, apparently. Set in the Russian Chicago.

    I can feel your pain at seeing Medvdev fire the most despicable and corrupt regional leaders.

    Comment by Ostap Bender — October 8, 2010 @ 7:55 pm

  21. […] Streetwise Professor wrote, “Kremlinology is back in vogue”: […] You could argue that Medvedev and Putin are […]

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  22. The Professor should be more concerned about Gazprom expanding its business or even eyeing shale gas acreage in his back yard of Texas than about Kremlinology 4,000 miles away. If Total with CHK, why not GZP? And if that happens, then the fix is in. All those Russophobes in D.C. are gonna be crying in their martini lunches with Randy Scheunemann when the new GOP House majority doesn’t show much eagerness for rolling back the ‘reset’, and Palin doesn’t get the nomination. And when the Israelis announce a big arms deal with Moscow, so big even Frank Gaffney, Kristol, Krauthammer and Will won’t be able to ignore it anymore and the Economist has to condemn the Israelis for being bad, bad, bad boys.

    You keep focusing your attention on what’s happening in Moscow and before you know it you wake up and the Chinese own a big chunk of physical assets in America. Texas billionaire Richard Rainwater’s partner John Goff was talking the other day about high-level Chinese gov types calling him up to see if they could buy actual properties – hotels, malls etc. (not just paper backed by it). Maybe that’s a rumor, but what happens if the Professor wakes up one day and finds his friends office buildings in The Woodlands are owned by the ‘ChiComs’?

    And as for Andrew…well it always seemed there had to be at least one dude in the La Russophobe Collective. And besides, every human rights advocate in D.C., or at least the ones with ‘neocon’ connections, apparently has to put in a good word for Ahmed Zakayev and the glorious cause of Chechen independence, even though Zakayev is a terrorist paymaster:

    http://www.huffingtonpost.com/thor-halvorssen/moscows-shadow-war-playin_b_721391.html

    At a certain point you have to ask why, if LR and Jamestown are so insignificant, why do they act as the attack dogs for the bigger players like Freedom House? Who pays for the American Council for Peace in the Caucases? Are we gonna see a Chinese/Russian council for a Free Texastan in ten or fifteen years and the Igor Panarin Foundation in retaliation for this Promethean nonsense? Have you checked the Republic of Texas HQ lately Professor to see if they’re getting suitcases full of extra cripsy dollars fresh from Beijing (since they get the crispest most counterfeit proof first in Asia)?

    “I can feel your pain at seeing Medvedev fire the most despicable and corrupt regional leaders.” Well hell, who has Obama fired lately? He couldn’t even fire Bernanke by not reappointing him.

    Comment by Mr. X — October 9, 2010 @ 5:33 pm

  23. More on Zakayev here, summing up how he raised money for Chechen militants even after the Nord-Ost theater attack:

    http://www.russiaotherpointsofview.com/2010/09/zakaev-the-whole-story.html

    Comment by Mr. X — October 9, 2010 @ 5:38 pm

  24. […] Streetwise Professor wrote, “Kremlinology is back in vogue”: […] You could argue that Medvedev and Putin are […]

    Pingback by Russia: Moscow Mayor’s Dismissal and Some “Kremlinology” :: Elites TV — October 9, 2010 @ 7:23 pm

  25. […] Streetwise Professor wrote, “Kremlinology is back in vogue”: […] You could argue that Medvedev and Putin are […]

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  26. The Nord-Ost theater attack where the hostages were killed by the Russians using gas and not allowing the hospitals to access the antidote…..

    Comment by Andrew — October 11, 2010 @ 7:54 am

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