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8 July 2015

Has the West forsaken Russia’s love? Part 2

Economy and politics: What did Russia receive and was it short-changed?

The issue of the West’s support for the USSR and later Russia when under economic distress is one that is strongly debated. We should recall that the seventy years that it took to build communism in the USSR resulted in the absence of sausages on the shelves and the absence of moderately tasty food and reasonably decent things to wear which didn’t invoke a sense of shame in the person who wore them. For example, there was a deficit of regular meat –state-owned stores offered ‘soup sets’ consisting mainly of bones instead. The price of these produce in market places exceeded the price in state-owned stores manifold, sometimes to an order of magnitude. The USSR was even unable to provide itself with grain; grain was purchased in the USA and Canada! Obviously, the countries of the West were not to blame for this, it was stupid communist ideology and dictatorship which deprived citizens of a stimulus to constructive labor which was to blame. 

However, Western countries provided huge financial support to the USSR when it faced an unprecedented drop in oil prices in the days of Mikhail Gorbachev’s power. Whereas in 1985 foreign debt amounted to as little as $26 billion, it had already reached $42 billion by 1988 and totaled $83 billion in early 1992. Yes, of course, a considerable portion of this money was spent recklessly – on construction in progress (so-called ‘acceleration’) – it was eaten away at or else plundered while the USSR as such continued to credit its numerous ‘friends’ all over the world, stretching from Cuba and Africa to Eastern Europe. Then again, were it not for the purchase of food supplies with these loans, the USSR would have likely faced a real threat of famine, a threat which was in the air in 1991 and was a common topic for conversation for those waiting in queues. But the West was not at fault, the fault was that of Soviet leadership. The West, on the contrary – both as states and through commercial banks – generously helped Soviet chieftains.

Apart from money, humanitarian aid was also delivered. In 1991 alone, under the conditions of unwinding hyperinflation, 284 tons of humanitarian aid was delivered. But in truth, unlike Mikhail Gorbachev, the government of Boris Yeltsin, operating under the same conditions of low oil prices, received scant assistance. Yegor Gaidar wrote bitterly about that in one of his last works ‘Strife and institutions’. In 1992, the year which was critical to the success of reforms to a large extent, the IMF issued a mere $1 billion in loans and at the end of the year. Between 1992 and 1999 Russia received $22 billion from the IMF in loans while it continued to pay back the debts of the USSR, albeit with certain restructuring. Naturally, this aid is incommensurable with the aid provided to East Germany or Poland which benefitted from a large write-off of foreign debt. Nonetheless, this was helpful, too, since commercial banks simply did not want to grant Russia credit while the IMF loans had low interest rates.

Back in the nineties, communists liked to argue about ‘the enslavement’ of IMF loans. The delusional nature of these statements can be proven by the fact that, when oil prices began to rise in the noughties, Russia paid them back quickly. Besides, $12 billion of foreign direct investment and a four times larger portfolio of investment reached Russia in the nineties. However, the real boom in foreign investment occurred in the noughties and was related to the rise in oil prices and the increased attractiveness of Russia. These were precisely the investments which led to the explosive economic growth in the first half of the noughties. Then again, the inflow of capital has been replaced by its outflow since 2009. Anyway, by early 2014, FDI alone exceeded $566 billion in the Russian economy. Of them, according to my own estimates, more than $420 billion came from European countries, $18 billion – the USA, while, for example, China, much-lauded by Putin’s propagandists, - $4.5 billion. Finland, too, invested around the same amount.

If we were to discuss the technological infrastructure of Russian economy, virtually all contemporary enterprises in Russia use or used Western equipment in one form or another. It started with ‘CKD assembly’ in the nineties. Localization was rising gradually and it seems that now everything which is used is Russian, including equipment, in many enterprises. But originally, technology was imported!

Younger generations find it difficult to believe, but in the days of perestroika such things as personal computers, video recorders or cars (even of domestic production let alone foreign) were considered unattainable luxuries. By the way, if one wishes to, one can freely observe the level of technological advancement of the countries which do not use Western technology even now, for example, by taking a look at Cuba one can see what autarchy looks like.

Russian science survived in difficult times thanks to grants offered by private Western benefactors such as George Soros and the like, who spent almost a billion dollars in Russia. And the number of scientists who received help from him is estimated at tens of thousands. The United States Agency for International Development (USAID) spent $2.6 billion in Russia over the course of twenty years – not on assistance programs for human rights defenders which irritated the Russian authorities in the main part, but on help for patients with tuberculosis and AIDS, as well as the provision of technical assistance to the Russian government. One may still come across unremoved labels featuring clasped hands – the logo of USAID – on computers in ministries and agencies. And although, generally, in many respects Western help was, as illustrated above, not ideal, a famous Russian saying ‘Never look a gift horse in the mouth’ is very apt here.

Finally, the most straightforward issue is about friendliness of the countries of the West towards the Russian authorities prior to the beginning of the aggression in Ukraine in 2014. Western leaders did not criticize neither Mikhail Gorbachev (even when the demise of the USSR was quite obvious after August 1991), nor Boris Yeltsin, nor Vladimir Putin before the recent attack on Ukraine. In 1996, Russia was admitted to the Council of Europe, its delegation became a participant of the PACE and it remained its participant throughout despite occasional calls voiced by ordinary politicians to suspend its membership in the aftermath of the violations of human rights in Chechnya and the war against Georgia in 2008. By the way, the mythical Western support for Chechen separatists based on the fact that some of their representatives – not necessarily the most odious ones – were granted political asylum – is also a propaganda myth. In fact, the West has never recognized the subjectivity of ‘Ichkeria’ in any form. In 1998, Russia became a fully-fledged member of the G8, even despite the fact that the size of the Russian economy provided no justification whatsoever for that at the time. But even earlier, Boris Yeltsin was treated as an honorable guest during G7 summits, starting with the summit in Naples back in 1994. In 2012, Russia joined the WTO, and the West literally forced official consent out of Mikheil Saakashvili (Georgia was the last country to reach an agreement with the Russian Federation as regards WTO accession). The Russian authorities came close to an agreement on visa liberalization with the EU, although an agreement was not reached, since they openly demanded that such a scheme start not to the benefit of students, but dozens of thousands holders of special passports and maintaining a visa-free regime with the backward states of Central Asia.

Despite rare criticism of the Russian authorities on behalf of individual Western politicians, criticism of the West was far more widespread in Russia and was often voiced by Vladimir Putin himself for many years and not only by inferior MPs. One may recall, for example, the scandalous speech of Vladimir Putin at the Munich conference of 2007 when he spoke of Russia outstripping the West along with China in terms of a form of purchasing-power parity and also criticized the West for continuing to preach democracy.

The West recognized all Russian elections up to 2011 when large-scale falsifications prompted mass protests in Russia itself. However, disapproval of the elections to the State Duma by the European Parliament did not have any practical consequences for Russia, either. Nearly all of the world leaders including the US President Barrack Obama congratulated Putin on his election as President in March 2012. One can say that it is not quite fair to Russian society but the Russian authorities cannot in any way lament about some bad attitudes. And even in 2012, when Russia vigorously prohibited the activities of foreign NGOs, ‘the Magnitsky Act’, thanks to the efforts of Obama, was adopted in a form which allowed the US President to unilaterally shape it, meaning only really minor officials were included in it.

The financing of Russian NGOs by the West used to be, and still is, very modest. By no means do all of them publish summary reports. However, according to the report by the MacArthur Foundation for the year 2012 – the budget for Russian projects amounted to $3.3 million. The demonic, in the eyes of the Russian propaganda branch of the IRI (the International Republican Institute) in Russia, operated on an annual budget of less than a million dollars, whereas a significant portion of this comprised operational expenses in the form of office rents and staff salaries. Official propaganda purposefully avoids mentioning specific projects of Russian NGOs financed through Western funds, although they are well-known based on reports submitted to official authorities. Otherwise it wouldn’t be possible to list billions of dollars received from foreign counterparties on the accounts of state corporations (in line with Article 7.1 of the Law on Non-commercial Organizations, it is a form of a non-commercial organization in legal terms) for the financing of the Russian opposition. At the same time, the counter effect of Putin on Western politics is far more substantial: the budget of the RT TV channel alone and its related legal entities amounts to tens of billions of rubles which is equivalent to hundreds of millions of dollars. As regards the financing of individual Western politicians, the full details, as with the financing of communist parties in the Soviet days we will, most probably, gain access to after the declassification of the archives of the security services. Although, even now, some of its elements reach us, such as the loans earmarked by Russian banks for the French politician Marine Le Pen. It will surely be interesting to see from what commercial income she plans to repay them.

***

A decent person tends to consider their own mistakes, look for the route-cause of problems, including within themselves. In this respect, a question addressed by the Western public is clear. But life is based on reciprocity. Such questions are worth asking when your partner is inclined to do so, too. Ideas regarding agreement and compromise which the Western political class was raised on after the Second World War, work well within that class. However, the logic of authoritarian regimes is different. This is the logic of conflict which perceives interrelations in the context of defeat or victory, and not in the context of mutually beneficial cooperation. These people only understand force; the concept of good will does not exist for them. ‘It is your fault that I’m hungry’ – using these words of the wolf from Ivan Krylov’s fable you can explain their logic well.

Additionally, reflections on the 'external enemy' are not permitted and rallying around the dictator without asking any questions are classic to any authoritarian regime. Speaking of relations with Russia, yes, it seems that greater support for economic reforms in the nineties could have helped Russian reformers strengthen their political reputations of successful governors. Incidentally, active economic investments in Russia of the two-thousands did not bring about anything of the kind. The Russian authorities successfully privatized economic successes, maintaining large-scale xenophobic propaganda against democratic states domestically and even moving towards foreign political and propaganda expansion. The West should consider not economic, but rather information investments in Russia, with, for example, the creation of a channel which could counteract Russian state TV.

 

Read "Has the West forsaken Russia’s love? Part 1 - War and Peace: Does NATO threaten Russia?"

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