Wednesday, November 18, 2009

Nasty ...

I blogged a while back the state-facilitated thievery of Russian 'capitalism' as experienced by asset manager Hermitage.

Foreign investors get ripped off all the time in many countries. What makes this story unique is the state officials working together to steal $230m from the Russian state itself. The sharks have started to feed on their own blood.

What makes it even more worrying is that the Russian government took no action to recover the money when we reported the crime. Rather than going after the rogue officials and criminals, the government turned the full weight of the law enforcement apparatus against us for reporting it. They arrested our lawyer, Sergey Magnitsky, who uncovered the tax rebate fraud. He has since been kept in pre-trial detention on cases I believe were fabricated.

Telegraph :

A lawyer representing Hermitage Capital Management, the fund manager, has died in jail amid a dispute between the fund's co-founder Bill Browder and Russian authorities. The death of Sergei Magnitsky, a 37-year old father of two, is set to reignite concerns about investing and doing business in Russia. Irina Dudukina, a spokeswoman for the investigative committee of the Interior Ministry in Moscow, told The Moscow Times that Mr Magnitsky had died of heart failure and toxic shock.

I don'ty know what the word is for this sort of political system. It's got some medieval features, some gangster features, some free(ish) market features heavily moderated by the gangsterism and powerbroking, all wrapped in something marked 'democracy'.

UPDATE - more here and details of Magnitsky's formal complaint (in September) to the prison authorities over his treatment here.


Mark said...

The 'state-facilitated thievery of Russian 'capitalism'' as you accurately term it was, in the 1990s, urged on Russia by western 'advisors'.
See this link-

Anders Aslund, referred to in the link, has (since around 2003, and break-up of Yukos) been vocal in his criticisms of Putin & Medvedev. Yet he is seemingly oblivious of his role in laying the foundations of the gangsterism that followed after Yeltsin took the path of 'market fundamentalism'- on his advice.

A cynic might say that Aslund and his ilk had no objections to 'gangster capitalism' in Russia when many of the beneficiaries (Khodorkovsky, Berezhovsky etc) there were also pro Western political players. Only now that they have been replaced by pro Kremlin oligarchs does 'gangster capitalism' appear to have become something to get agitated about.

Anonymous said...

Ther word is Kleptocracy.

Pat said...

re Mark:-Whoever gave the advice- they took it

Ivan said...

Yes Mark, if you were there the Russians would not have been in these dire straits. The fact is native Russians with connections have ripped up their own state. The essential difference between the earlier Jewish oligarchs and the current crop of thugs is that the Jews (why be coy) knew how to run businesses, could turn a dime, and they had overcame shortages. Indeed while the Soviet Union was a major producer of industrial raw materials such as steel, cement and cotton, the Soviet command economy destroyed the value of such production further down supply chain. As Edward Luttwak pointed out, good cotton is transformed to ghastly clothing which no one wants, cement and steel pile up at construction sites and become unusable after time as buildings take ages to complete. Under such circumstances, thievery is beneficial. Had the Jews been allowed to run things, the situation would have evolved to a state similar to that of the US in the late 19th century. Coupled with the reforms initiated by men such Chubais and Gaidar, Russia would have been on its way to having a functioning economy. Instead, Putin and his murderous thugs have wasted all the money from the commodity boom and have nothing to show after more than a decade of (mis)rule. Their insatiable greed is of an order worse than that of a Khodorkovsky or a Berezhovsky.

Anonymous said...

Mark - lets not stray too far down the path of those market reforms lest we note who the economists concerned were, or who sent them, or who ended up as the largest group of oligarchs.

That would be quite wrong, and any apparent connections purely a coincidence.

Never ascribe to malice (or conspiracy) what can be ascribed to cock-up etc etc

Anonymous said...

Mark - lets not stray too far down the path of those market reforms lest we note who the economists concerned were, or who sent them, or who ended up as the largest group of oligarchs.

That would be quite wrong, and any apparent connections purely a coincidence.

Never ascribe to malice (or conspiracy) what can be ascribed to cock-up etc etc

Mark said...

Ivan,I've no doubt that Berezovsky at least is both highly intelligent, extremely ruthless, and capable, as you say, of 'turning a dime'.I've seen him speak in person and would describe him as 'dauntingly impressive'. His modus operandi at the Togliatti car plant has been described thus-

'The car dealerships were extremely profitable, in part, because of a process Berezovsky called the privatization of the profit of a state enterprise. Avtovaz produced Ladas at an average cost of about $4700 but sold them to autodealers at $3500 per car. The dealers then sold the cars for $7000 each. The underpricing of the cars by Avtovaz came as a result of the control of its management. Thus Berezovsky moved the potential profit of the state enterprise out of the enterprise and into the private enterprise of the dealerships. Since such a money-losing enterprise would not have much market value it would be cheap to buy ownership. This is the scenario proposed by Berezovsky'.

This is undoubtedly a way of 'turning a dime', but I fail to see what wider social utility it serves.

An essential feature of gangster capitalism is that privileged insiders are the principal gainers.The identity of these privileged insiders has changed somewhat under Putin, with the likes of Deripaska and Potanin at the heart of the magic circle, rather than Khodorkovsky and Berezovsky. And it isn't simply a matter, as you suggest, of 'native Russian' oligarchs displacing Jews (Abramovitch has remained on codial terms with the Kremlin and, market vagaries excepted, has retained his fortune).

During the noughties in Russia the precipituous decline in both GDP per head and life expectancy (the defining facts of the 90s) have been slowed and to some degree reversed. For that the Russian masses appear to be thankful to Putin & Medvedev- and they also seem willing to ignore atrocious acts of state thuggery, one of which Laban has highlighted here. Russia shows no signs of becoming a larger, less affluent Sweden just yet- even if western fantasists tried to create such a wet dream in the 90s, and at the expense of ordinary Russians.

Sgt Troy said...

Well the Kraft bid for Cadbury's is also state facilitated thievery because RBS, who would provide some of the funding, are state owned to all intents and purposes.

We all know that the production would then be off-shored, they'd doubtless just leave the visitor centre.

This is all part of the genocide to which our people are being subjected, all of a piece with the race replacement and the cultural and historical destruction and re-writing of history(eg Poliakoff's apparently ghastly film)

No wonder "white" wc boys are failing so badly, they've had their identity stripped away from as well as their prospects.

Call a spade, a spade - it's ethnic cleansing