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2 September 2015

Putintern: a view from Russia

Putin’s Western friends affiliated with Putin’s regime: a regime with no ideological justification

‘…Barack Obama and Mitt Romney are both idiots who come out with very strange statements every so often. These are dangerous people. And so even Putin is less dangerous than Obama’ – a well-known US investor Jim Rogers argued in his interview for RBK daily in 2012. Rogers also spoke of the weakness of the dollar whilst praising North Korea a number of times, predicted high oil prices in December 2014 and so on. It was only a month later, after Rodgers had been appointed investment advisor of the Direct Investment Department of the Russian state-owned company ‘VTB Capital that the two US presidential candidates turned out to be idiots. The case of Rogers’ is explainable by a classic anecdote of the days of the Soviet regime in which a Russian and an American meet and begin to argue over the merits of the political systems in their respective countries. The American says: ‘Ours is a free country. I can go to the square and say that Reagan is a fool and nothing will happen to me because of that’, and the Russian retorts: ‘I can also go to the square and say that Reagan is a fool’.

Unlike the Сomintern of the days of the USSR, which was a union of communist parties of different countries including the leading role of the Communist Party of the Soviet Union, now, Putin admirers can be found worldwide across various ideological planes: including among top politicians, yesterday’s or today’s presidents and prime ministers, and among fascists, leftists, in Europe, and countries of the second world and even in the USA. It would be wrong to reduce this phenomenon down to pragmatic considerations only, including the financial ones, although, undoubtedly, these are also very important considerations.

One has to understand (and this goes not only for Putin but any authoritarian regime) that the value of money is fundamentally different in authoritarian and democratic states. For Putin, the Arab monarchies of the Gulf or China millions are mere pennies. This is only a side effect of the grip of power, and an average European MP has never held this kind of money in his/her hands and yet its value from the point of view of electoral campaigns is tremendous. It is no accident that Marine Le Pen takes loans from Russian banks, and it is no accident that the institute of Ron Paul - the US’s main advocate of Putin – is closely associated with different pro-Putin organizations. All sorts of old communists like Gregor Gysi or Giulietto Chiesa didn’t even need retraining: they were already in favor of the Communist Party of the Soviet Union and Soviet authoritarianism. We will certainly only learn about this after the end of Putin’s regime just as the Soviet dissident Vladimir Bukovsky published documents of the Communist Party of the Soviet Union on the financing of pro-Soviet politicians and propagandists including Palestinian terrorists, obtained during the trial at the Constitutional Court, in his book ‘Judgement in Moscow’ in 1996. I highly recommend this work by the way, in particular from a technological viewpoint as it perfectly illustrates the logic of the propaganda of ‘the struggle for peace’.

And economic motives, as a rule, typical of the current leaders of states having economic ties with the Russian Federation (RF) are quite transparent and well-analyzed. Although, incidentally, it is noteworthy that the largest share of the RF’s exports headed precisely to the EU countries which disapproved of Putin: Latvia, Lithuania, Poland and Finland. For example, the share of Lithuania’s trade with Russia constituted 21% in 2013, before the war in Ukraine, whereas it was 5.3% for Italy – formerly an advocate of Putin and currently an adherent of big caution - and as little as 3.8% for Germany. One should not overestimate the support provided to Putin by some of the smaller countries since they are highly dependent on European financing. Notable amongst these are Hungary, Greece and Cyprus. None of these countries vetoed the introduction of sanctions against Russia and they pay only with their cordial words for Putin’s favors which take the form of loans.

Ideology is far more important. The breakdown of votes in the PACE to deprive the Russian delegation of voting rights in January 2015 is extremely interesting from the point of view of factions. As regards the assertion that Putin is supported by ‘the extreme left and the extreme right wing’, numerical results only go halfway towards confirming this, as regards left-wingers. Eleven out of the 14 members of the UEL ultra-left faction who participated in voting voted for Putin. However, as regards the most far right faction of EU Eurosceptics as few as 6 out of 38 voted for Putin, and the head of the faction – the Brit Christopher Chope voted against him. By the way, deputies outside factions from ‘The Finns Party’ and Dutch ‘Party for Freedom’ voted against Putin, too. Out of the 74 participants of the vote from the European People’s Party, as few as 8 voted for Putin, and the chairman of the faction Pedro Argamunt voted against him. It is interesting that members of Orban’s Hungarian party, Ivanishvili’s Georgian party and Sargsyan’s Armenian party which are considered ‘pro-Russian’ also fell within the ‘against’ faction. Among the socialists: 13 out of the 60 voters voted for Putin, including the head of the faction Andreas Gross. The smallest number of adherents of Putin’s appeasement was from the ALDE liberal faction: 2 out of 26 of those to cast votes.

Just as Western communists used to espouse not the real situation in the USSR but the myth of the USSR in the past, there also exists a myth about Putin. Unlike fairly solid communist mythology, this myth is eclectic: strength; efficiency; economic success; the fight against evil – from terrorism to ‘oligarchy’. And mutually exclusive arguments circulate depending on the sector of agitation.

Let us take a walk through this mythology: ‘from right to left’. Thus, according to the ‘right-wing myth’ about Putin (the myth favored by those who think more about economics and those, first and foremost, in favor of ‘traditional values’ and who are anti-migration) which is quite well represented in the famous manifesto of terrorist Anders Breivik or the statements of Ron Paul, or the former US Republican, TV presenter and now outcast Patrick Buchanan who considers Putin to be ‘one of us’, Putin appears to be a classic conservative who introduced low taxes in Russia, a supporter of family values and an opponent of the migration of alien culture. In fact, if we look at the classic research: Paying taxes (see page 155 and below), we can see that tax rates in the RF are higher than the global average and are even higher than in the USA and many European countries (48,1% compared to a mean of 40% globally; to compare: 44% in the USA, 21% in Canada, 34% in the UK, 29% in Switzerland, 48% in Germany, too, and even ‘socialist Sweden’ has a rate which is only 0.5% higher – 49,4%).

Labor costs are very high in Russia – in fact, apart from the income tax of 13% one should also include welfare contributions of 30% (some enjoy allowances on welfare contributions and that is why the total labor tax rate is estimated at the level of 36% and not 43%). That being said, in contrast to developed countries, there are almost no tax deductibles in the RF and it is not a family but rather a natural person of legal age which is a taxable entity. As a result, the effective tax rate is several times higher when compared to let’s say the USA or UK. The RF is the only one of the emerging economies to have a visa-free regime with underdeveloped Muslim countries of Central Asia. That is why in the RF approximately 9-10 million migrants are only ‘legally present’: about 10 % of Russia's adult population and an even higher proportion of the able-bodied population. Due to the visa-free regime, a huge number of migrants can enter the territory and reside there illegally. One of the closest associates of Putin’s, Ramzan Kadyrov, organized a mass rally in support of the Islamic terrorists who killed journalists in France while Foreign Minister Lavrov participated in a mourning procession in their memory. As for the number of abortions, twice as many are carried out in the RF as in the USA, one-and-a-half times more than the most disadvantaged countries in Europe and over three-times more than in the prosperous ones. The homicide rate in the RF amounts to approximately 10 per 100 thousand citizens, which is twice as high as in the USA and eight-ten times higher than in the European countries.

‘The left-wing myth’ about Putin is built on the notion that Putin is involved in the fight against oligarchs and the redistribution of wealth in favor of the poor. Let’s start with the oligarchs. In 2000, there was only a small number of billionaires; a number countable using the fingers of one hand. In 2015, Forbes listed 88 billionaires in Russia in its 29th annual rankings. Only the USA (536), China (213) and Germany (103) have more billionaires. At the same time, one should remember that the population of Russia is half the size of America’s one and only one-tenth the size of China’s. There are fewer billionaires in the countries whose absolute GDP exceeds that of Russia given their smaller populations: 53 in the UK, 47 in France, 39 in Italy and 24 in Japan. In accordance with a report by Credit Suisse, Russia has the highest level of wealth inequality in the world. Indonesia and the USA come next. In the nineties, friends of Putin’s such as Arkady Rotenberg and Gennady Timchenko, unknown in the nineties, ‘suddenly’ became the largest state contractors. ‘Advocates’ of Putin love figures about the growth in the population’s income in Russia in the nineties forgetting that oil prices have increased on the late 90’s manifold: from $10 per barrel in 1998 to more than $50 in the mid-noughties and more than $100 in 2010-2014. That being said, the real income of the population increased only twofold and is currently decreasing. Average remuneration in Russia amounts to 32 thousand rubles; that is approximately $500. The average retirement pension amounts to 12 thousand rubles; that is a little over $200. Instead, one-third of Russia’s budgetary spending is allocated to the army, police and FSB. Is this a benchmark you want your peoples to aspire to? − one should like to ask the European leftist.

Returning to where we started, it remains to wish that Rogers personally, and all of his associates working in Russia, do not share the same sad fate as Sergei Magnitsky – an employee of the Hermitage Capital Management of the well-known investor Bill Browder who died in a Moscow prison having been subjected to torture. Indeed, in December 2005, Browder gave an interview entitled ‘Putin is looking to the West’ in which he justified the Yukos case and eulogized about the investment climate in Russia. And yet, a few years later, he would demand that sanctions be introduced by the Western countries against the heads of the Russian security agencies. Tread carefully, Putin’s friends.

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