the common enemy of Islamic militancy, Israel and Russia have embarked
on a path of close cooperation. Prime Minister Sharon's visit to Russia
last month was a resounding success. Faced with these millennial
geopolitical developments, anti-Semitic conspiracy theorists are having
a field day.
The Jewish lobby, they say, is coercing America, its long arm, to
hijack the Iraqi oil fields in the forthcoming war and thus to
counterbalance surging Russian oil exports. Israel, they aver, planned
to carry out, in October 2001, an operation - "Mivtza Shekhina" - to
secure southern Iraq's oil fields while also mitigating the threat of
weapons of mass destruction aimed at its population centers.
Conspiratorial paranoia notwithstanding, it is unlikely that the USA is
motivated by oil interests in its war on Saddam. A battle in Iraq aimed
solely at apprehending its crude would be fighting over yesterday's
oilfields. Only an easily replaceable one tenth to one eighth of
American oil consumption emanates from the Gulf, about a million
barrels per day of it from Iraq. Moreover, the war is likely to
alienate far more important suppliers, such as Russia - as well as the
largest European clients of Gulf oil extracted by American firms.
Strictly in terms of oil, a war in Iraq is counterproductive.
Additionally, such a war is likely to push oil prices up. According to
the Council on Foreign Relations, "for every dollar-per-barrel increase
in oil prices, about $4 billion a year would leave America's $11
trillion economy, and other importing countries would lose another $16
billion per year."
Israel understandably did discuss with the USA its role in a showdown
with Iraq. Russia, unsettled as it is by America's growing presence in
central Asia and exercised by its determination to take on Iraq - may
be trying to lure Israel away from its automatic support of US goals by
dangling the oiled carrot of a joint pipeline.
Russia also hopes to neuter the rapprochement between Israel and the
Islamic nations of Turkey and Azerbaijan, traditional adversaries of
Moscow. Israel is the second largest buyer of oil from Azerbaijan. It
is one of the sponsors of a pipeline from the Baku oilfields to the
port of Ceyhan in Turkey. The pipeline stands to compete with a less
costly and more hostile to the West Russian-Iranian route.
These are momentous times. Oil is still by far the most strategic
commodity and securing its uninterrupted flow is essential to the
functioning of both developed and developing countries. There is a
discernible tectonic shift in production and proven reserves from the
Persian Gulf, the US except Alaska, the North Sea, and Latin America to
northern Europe, Russia, and the Caspian Basin. Yet, oil is still a
buyers' market. OPEC has long been denuded of its mythical power and
oil prices - even at the current interim peak - are still historically
low in real terms.
But Russia stands to gain whichever way. Middle East tensions, in
Palestine and Iraq, have ratcheted oil prices up resulting in a
much-needed budgetary windfall. Russia's mostly-privatized oil industry
has cleverly ploughed back its serendipitous profits into pipelines,
drilling, and exploration. When the dust settles in the deserts of
Arabia, Russia will emerge victorious with the largest oil market
share. Israel is not oblivious to this scenario.
Russia's Idled Spies
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Also Read
The Industrious Spies
Russian Roulette - The Security Apparatus
Sweden expelled yesterday two Russian diplomats for spying on radar and
missile guidance technologies for the JAS 39 British-Swedish Gripen
fighter jet developed by Telefon AB LM Ericsson, the telecommunications
multinational. The Russians threatened to reciprocate. Five current and
former employees of the corporate giant are being investigated.
Ironically, the first foreign buyer of the aircraft may well be Poland,
a former Soviet satellite state and a current European Union candidate.
Sweden arrested in February last year a worker of the Swiss-Swedish
engineering group, ABB, on suspicion of spying for Russia. The man was
released after two days for lack of evidence and reinstated. But the
weighty Swedish daily, Dagens Nyheter, speculated that the recent
Russian indiscretion was in deliberate retaliation for Swedish
espionage in Russia. Sweden is rumored to have been in the market for
Russian air radar designs and the JAS radar system is said by some
observers to uncannily resemble its eastern counterparts.
The same day, a Russian military intelligence (GRU) colonel, Aleksander
Sipachev, was sentenced in Moscow to eight years in prison and stripped
of his rank. According to Russian news agencies, he was convicted of
attempting to sell secret documents to the CIA. Russian secret service
personnel, idled by the withering of Russia's global presence, resort
to private business or are re-deployed by the state to spy on
industrial and economic secrets in order to aid budding Russian
multinationals.
According to the FBI and the National White-collar Crime Center,
Russian former secret agents have teamed with computer hackers to break
into corporate networks to steal vital information about product
development and marketing strategies. Microsoft has recently admitted
to such a compromising intrusion.
In a December 1999 interview to Segodnya, a Russia paper, Eyer Winkler,
a former high-ranking staffer with the National Security Agency (NSA)
confirmed that "corruption in the Russian Government, the Foreign
Intelligence Service, and the Main Intelligence Department allows
Russian organized criminal groups to use these departments in their own
interests. Criminals receive the major part of information collected by
the Russian special services by means of breaking into American
computer networks."
When the KGB was dismantled and replaced by a host of new acronyms,
Russian industrial espionage was still in diapers. as a result, it is a
bureaucratic no-man's land roamed by agents of the GRU, the Foreign
Intelligence Service (SVR), and smaller outfits, such as the Federal
Agency on Government Communications and Information (FAPSI).
According to Stratfor, the strategic forecasting consultancy, "the SVR
and GRU both handle manned intelligence on U.S. territory, with the
Russian Federal Security Service (FSB) doing counterintelligence in
America. Also, both the SVR and GRU have internal counterintelligence
units created for finding foreign intelligence moles." This, to some
extent, is the division of labor in Europe as well.
Germany's Federal Prosecutor has consistently warned against $5 billion
worth of secrets pilfered annually from German industrial firms by
foreign intelligence services, especially from east Europe and Russia.
The Counterintelligence News and Developments newsletter pegs the
damage at $13 billion in 1996 alone:
"Modus operandi included placing agents in international organizations,
setting up joint-ventures with German companies, and setting up bogus
companies. The (Federal Prosecutor's) report also warned business
leaders to be particularly wary of former diplomats or people who used
to work for foreign secret services because they often had the language
skills and knowledge of Germany that made them excellent agents."
Russian spy rings now operate from Canada to Japan. Many of the spies
have been dormant for decades and recalled to service following the
implosion of the USSR. According to Asian media, Russians have become
increasingly active in the Far East, mainly in Japan, South Korea,
Taiwan, and mainland China.
Russia is worried about losing its edge in avionics, electronics,
information technology and some emerging defense industries such as
laser shields, positronics, unmanned vehicles, wearable computing, and
real time triple C (communication, command and control) computerized
battlefield management. The main targets are, surprisingly, Israel and
France. According to media reports, the substantive clients of Russia's
defense industry - such as India - insist on hollowing out Russian
craft and installing Israeli and west European systems instead.
Russia's paranoid state of mind extends to its interior.
Uralinformbureau reported earlier this year that the Yamal-Nenets
autonomous okrug (district) restricted access to foreigners citing
concerns about industrial espionage and potential sabotage of oil and
gas companies. The Kremlin maintains an ever-expanding list of regions
and territories with limited - or outright - forbidden - access to
foreigners.
The FSB, the KGB's main successor, is busy arresting spies all over the
vast country. To select a random events of the dozens reported every
year - and many are not - the Russian daily Kommersant recounted in
February how when the Trunov works at the Novolipetsk metallurgical
combine concluded an agreement with a Chinese company to supply it with
slabs, its chief negotiator was nabbed as a spy working for "circles in
China". His crime? He was in possession of certain documents which
contained "intellectual property" of the crumbling and antiquated mill
pertaining to a slab quality enhancement process.
Foreigners are also being arrested, though rarely. An American
businessman, Edmund Pope, was detained in April 2000 for attempting to
purchase the blueprints of an advanced torpedo from a Russian
scientist. There have been a few other isolated apprehensions, mainly
for "proper", military, espionage. But Russians bear the brunt of the
campaign against foreign economic intelligence gathering.
Strana.ru reported last December that, speaking on the occasion of
Security Services Day, Putin - himself a KGB alumnus - warned veterans
that the most crucial task facing the services today is "protecting the
country's economy against industrial espionage."
This is nothing new. According to History of Espionage Web site, long
before they established diplomatic relations with the USA in 1933, the
Soviets had Amtorg Trading Company. Ostensibly its purpose was to
encourage joint ventures between Russian and American firms. Really it
was a hub of industrial undercover activities. Dozens of Soviet
intelligence officers supervised, at its peak during the Depression,
800 American communists. The Soviet Union's European operations in
Berlin (Handelsvertretung) and in London (Arcos, Ltd.) were even more
successful.
Russia's Middle Class
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Also Read
Women in Transition
A conference held, at the beginning of the month, in St. Petersburg,
was aptly titled "Middle Class - The Myths and the Reality". Russia is
way poorer than Slovenia, the Czech Republic, Hungary, or even Poland.
But, as income disparities grow, a group of discriminating consumers
with the purchasing power to match, is re-emerging, having been
submerged by the 1998 implosion of the financial sector.
The typical salary in the large metropolises is now more than $600 per
month - four times the meager national average. Some 20 percent of the
workforce in Moscow earns more than $1700 a month, comparable to many
members of the European Union. Real average wages across Russia have
surpassed the pre-1998 level in May.
Moreover, Russians are unburdened by debt and their utility bills and
food are heavily subsidized, though decreasingly so. Few pay taxes -
lately dramatically reduced and simplified - and even fewer save. Every
rise in disposable income is immediately translated to unadulterated
consumption. Takings are understated - Russia's informal economy is
probably half as big as its formal sector.
A study, financed by the Carnegie Foundation, found that only 7 percent
of Russians qualify as middle class. Another 12 percent or so have some
bourgeois characteristics. Sixty percent of them are men, though the
Komkon marketing research agency says that the genders are equally
represented.
Figures culled from the census conducted this year throughout the
Russian Federation - the first since 1989 - are expected to confirm
these findings. About one fifth to one quarter of all Russian
households earn more than the average monthly income of $150 per
person.
Political parties which purport to represent the middle class - such as
the Union of the Forces of the Right (SPS) - garnered 10-15 percent of
the votes in the 1999 parliamentary elections. Direct action groups of
the "third estate" may transform the political landscape in forthcoming
elections.
In a recent study by sociologists from the Russian Academy of Sciences'
Institute of Philosophy, more than half of all Russians
self-flatteringly considered themselves middle class. This is
delusional. Even the optimistic research firm Premier-TGI pegs the
number at 19 percent at most.
Businesses adapt to these new demands of shifting tastes and
preferences. The St. Petersburg-based cellular operator Delta Telecom,
owner of the first license to provide wireless-communications services
in Russia, intends to test the market among middle class clients.
Ikea, the Swedish home improvement chain, has plunged $200 million into
a new shopping center. French, German and Dutch cash-and-carry and
do-it-yourself groups are slated to follow. Russian competitors, every
bit as sleek, have erupted on the scene. The investment spree has
engulfed the provinces as well.
Last month, Citibank opened a retail outlet for affluent individuals in
Moscow - though its standards of transparency may yet scare them off,
as Gazeta.ru observed astutely. A private cemetery in Samara caters to
the needs of the expired newly rich. Opulently-stocked emporiums have
sprouted in all urban centers. TV shopping and even online commerce are
on the up. According to the Washington Post, Moscow retail space will
have tripled by the end of next year from its level at the beginning of
2002.
The Russian Expert magazine says that the middle class, minuscule as it
is, accounted last year for a staggering 55 percent of all consumer
goods purchased and generates one third of Russia's gross domestic
product. The middle class is Russia's most important engine of wealth
formation and investment, far outweighing foreign capital.
Russia's post-1998 fledgling middle class is described as young,
well-educated, well-traveled, community-orientated, entrepreneurial and
suffused with work ethic and a desire for social mobility. It is almost
as if the crisis four years ago served as a purgatory, purging sins and
sinners alike and creating the conditions for the revival of a
healthier, longer-lived, bourgeoisie.
But being middle class is a state of mind more than a measure of
wealth. It is an all-encompassing worldview, a set of values, a code of
conduct, a list of goals, aspirations, fantasies and preferences and a
catalog of moral do's and don'ts. This is where transition,
micromanaged by western "experts" failed.
The mere exposure to free markets was supposed to unleash innovation
and entrepreneurship in the long-oppressed populations of east Europe.
When this prescription - known as "shock therapy" - bombed, the West
tried to engender a stable, share-holding, business-owning, middle
class by financing small size enterprises. It then proceeded to
strengthen and transform indigenous institutions.
None of it worked. Transition had no grassroots support and its
prescriptive - and painful - nature caused wide resentment and
obstruction. When the dust settled, Russia found itself with a putative
- and puny - middle class. But it was an anomalous beast, very
different from its ostensible European or American counterparts.
To start with, Russia's new middle class is a distinct minority.
Prism, a publication of the Jamestown Foundation, quoted, in its August
2001 issue, the Serbian author Milorad Pavic as saying that "the
Russian middle class is like a young generation whose fathers suffered
a severe defeat in a war: with no feeling of guilt and no victorious
fathers to boss them around, the children of defeat see no obstacles
before them."
But this metaphor is misleading. The Russian middle class is a nascent
exception - not an overarching rule. As Akos Rona-Tas, Associate
Professor in the Sociology Department at the University of California,
San Diego, notes correctly in his paper "Post Communist Transition and
the Absent Middle Class in Central East Europe", a middle class that is
in the minority is an oxymoron:
"In democracies the middle class is the nation proper. The typical
member of a national community is a member of the middle class. When
democratic governments need a social group they can address, a
universal class that carries the overarching, common interest of the
country, they appeal to the middle class. This appeal, while it calls
on a common interest, also acknowledges that there are conflicting
interests within society. The middle class is not everyone, but it is
the majority and it represents what everyone else can become."
Russia has a long way to go to achieve this ubiquity. Its middle class,
far from representing the consensus, reifies the growing abyss between
haves and haves not. Its members' conspicuous consumption, mostly of
imports, does little to support the local economy. Its political might
is self-serving. It has no ethos, or distinct morality, no narrative,
or ideology. The Russian middle class is at a Hobbesian and primordial
stage.
Whether it emerges from its narcissistic cocoon to become a leading and
guiding social force, is doubtful. The middle class' youth, urbaneness,
cosmopolitanism, polyglotism, mobility, avarice and drive are viewed
with suspicion and envy by the great unwashed - the overwhelming
majority of Russia's destitute population. Empowered by their wealth,
the new bourgeoisie, in turn, regards the "people" with naive
admiration, patronizing condescension, or horror.
Granted, this muted, subterranean, interaction is not entirely
deleterious. It is the social role of the rich to generate demand by
provoking in the poor jealousy and attempts at emulation. The wealthy
are the trendsetters, the early adopters, the pioneers, the buzz
leaders. They are the engine that engenders social and economic
mobility.
A similar dynamic is admittedly evident in Russia - but, again, it is
tampered by a curious local phenomenon.
Writing for the Globalist, two Brookings Institution scholars, Carol
Graham, a Senior Fellow of Economic Studies and Clifford Gaddy, a
Fellow of Foreign Policy and Governance Studies described it thus:
"The eyes of Russia's middle class, on the other hand, are figuratively
directed downward, towards the poor. In fact, as poverty in Russia
increased dramatically in the 1990s, the middle class's reference norms
shifted downward as well. As a result, Russia may be the only country
in the world where the "subjective poverty line" is falling.
That is, the amount of money that Russians say that they need in order
to stay out of poverty has been steadily falling over the past five
years. It is even below the objective poverty line. For the time being,
at least, these curious Russian attitudes, along with the existence of
the non-monetary virtual economy, have insulated the country against
political upheaval."
The list of anomalies is not exhausted.
The new middle class comprises the embryonic legitimate business elite
- entrepreneurs, professionals and managers - but not the remnants of
the financially strapped intelligentsia. It is brawn with little
brains. In dissonance with western Europe, according to a survey
published in the last two years by Expert magazine, the majority of its
members are nationalistic, authoritarian and xenophobic. Their
self-interested economic liberalism is coupled with social and
political intolerance. But two thirds of them support some kind of
welfare state.
Thus, there are major differences between the middle class in the West
and its ostensible counterpart in Russia.
The Russian parvenus - many of them women - do not believe their state,
their banks, or their compatriots. They fear a precarious future and
its inevitable calamities though they are not risk averse and are
rather optimistic in the short run. They keep their money under the
proverbial mattress, invest it surreptitiously in their ventures, or
smuggle it abroad. They are not - yet - stakeholders in their country's
stability and prosperity.
Often bamboozled by other businessmen and fleeced by a rapacious
bureaucracy, they are paranoid. Tax evasion is still rampant, though
abating. They trust in equity and avoid debt. Some of them have
criminal roots or a criminal mindset - or are former members of
Russia's shady security services.
Three fifths, according to the Expert-Komkon survey, find it "hard to
survive" when "observing all laws". "Strong leaders are better than all
sorts of laws" is their motto, quoted by Izvestia. Generally, they are
closer to being robbers than barons.
Early capitalism is always unruly. It is transformed into a highly
structured edifice by the ownership of land and realty (the prime
collateral), the protection of private property, a functioning
financial system comprised of both banks and capital markets and the
just and expedient application of the rule of law.
Russia has none of these. According to Business Week, bank deposits
amount to 4 percent of the country's mid-size GDP - compared to half of
GDP in other industrialized countries. Mortgages are unheard of,
deposits are not insured and land ownership is a novel proposition. The
judiciary is venal and incompetent. Might is still right in vast
swathes of the land.
The state and the oligarchs continue to represent a rent-seeking
opportunity. Businessmen spend time seeking concessions, permits,
exemptions and licenses rather than conducting business. The "civic
institutions" they form - chambers of commerce, clubs - are often mere
glorified lobbying outfits of special and vested interests. Informal
networks of contacts count more than any statute or regulation. In such
a mock "modern state" no wonder Russia ended up with a Potemkin "middle
class".
Russia in 2003
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Contrary to recent impressions, Russia's Western (American-German)
orientation is at least as old as Gorbachev's reign. It was vigorously
pursued by Yeltsin. Still, 2002 marks the year in which Russia became
merely another satellite of the United States - though one armed with
an ageing nuclear arsenal.
Russia's economy has revived remarkably after the 1998 crisis, but it
is still addicted to Western investments, aid and credits. Encircled by
NATO to its West and US troops stationed in its central Asian
hinterland, Russia's capitulation is complete. In the aftermath of
conflicts to be engineered by the United States in Afghanistan, Iraq,
North Korea, Iran, Syria and, potentially, Cuba - Russia may feel
threatened geopolitically as well as economically. Both Iran and Iraq,
for instance, are large trading partners and leading export
destinations of the Russian Federation.
If anything can undo the hitherto impressive personality cult of
Russia's new "strong man", Vladimir Putin, it is this injured pride
among the more penumbral ranks of the country's security services.
Russia's history is littered with the bloodied remains of upheavals
wrought by violent ideological minorities and by assorted conspirators.
Hence Putin's tentative - and reluctant - attempts to team up with
China and India to establish a multi-polar world and his closer
military cooperation with Kyrgyzstan and Armenia - both intended to
counter nationalistic opposition at home.
Luckily, the sense of decline is by no means prevalent.