Monthly Archives: September 2011

Nomadic capitalism: Nokia moves again – from Romania to China

«Nokia’s New Home in Romania» titrated with the large letters SPIEGEL INTERNATIONAL just three years ago. “Finns happened like to us now. Romanians will happen the same when will be cheaper to manufacture elsewhere” warned workers angry at Bochum closed the gates. Nokia withdrawal balance one year after the Bochum plant closing was not a positive one in spite of all compensation programs, vocational integration and stimulating investment in the area. Of the 2,300 former employees, only about 850 had found a stable job. During this time the Romanian workers from the new locations believed that God descended in their garden.

Today, the history is repeated. Nomadic capitalism of Nokia is moving to China. All employees of Nokia factory in Jucu – Cluj, about 2,200 people were called on Thursday for a work session with the participation and leadership of Nokia Europe. Nokia’s officials announcement has left speechless on most employees: Jucu plant closes by year’s end. “Even if Nokia leaves in five years, we will remain with lots of good things, roads, indoor plumbing, etc. Since its arrival, there is a prosperous future ahead of us.” said in 2008 Jucu mayor Dorel Pojar. Now the future does not look as promising, even though Nokia officials say that they will seek an investor to take over the factory.

Romania loses about 1.5% of  GDP

More, the Nokia closing is a shock for the entire Romanian economy. Low economic growth announced by the Government Boc could be zero next year. Or, even less, while the volume of exports (in euros) of mobile phones made in Jucu exceeded that of cars in Renault Pitesti. It means about 1.5% of Romania’s GDP, a figure that will disappear with the Jucu lockout. Apparently, all these could be made based on “bad luck” or a marketing error. According to Nokia officials, nobody could have predicted in 2008, crisis or dramatic loss of market share to Nokia. In reality, however, it’s not “lack of luck” or “crisis”, but a wrong concept of growth of an economy based on “global solutions” and “strategic investors”. And although he has officially recognized that such a strategy is counterproductive, Romanian President, Traian Basescu held that the best comment at the closing Romanian plant of Nokia is to lobby for another “strategic investor” – Gold Corporation Rosia Montana. But this is already another discussion. A discussion about which I will return in the future.


Dimitrovgrad Apocalypse – Kudrin resigned

Monday should be a new Apocalypse? Well, was one… to Dimitrovgrad (Volga).

After the replacing of Mikhail Prokhorov in composition of the Commission for Modernization, Innovation and Technological Development of Russia’s Economy (the presidential decree was published Sunday on the website of the Russian Presidency), new week began under the auspices of not very peaceful. Within the framework of the 26th meeting of the Presidential Commission mentioned above, President Medvedev – in an access of recovery dignity (lost Saturday at the Congress of United Russia party) and that would have deserved a better

Meeting of the Commission for Modernization and Technological Development of Russia’s Economy

cause – sharply warned Vice-premier and Finance Minister Alexei Kudrin and ordered him to resign if he continued to disagree over economic policy. In reply, Alexei Kudrin, disciplined this time :), a few hours later resigned… After all, according Putin’s spokesman Dmitry Peskov, Kudrin will remain in Putin’s team … team that in May 2012 will move  to the Kremlin and will supervise activity of Prime Minister Medvedev’s government. Government that will have to take many unpopular measures that are needed, but normally will be postponed until after elections. Medvedev’s approach was a non-constructive, useless and more likely to turn against him.

So a brief recap: After Saturday’s announce about Putin – Medvedev rocade, Mr Kudrin (in the United States at the G20 meeting works) said in a press statement that “he could not serve in a new government next year if, as expected, Prime Minister Vladimir Putin and Mr Medvedev switch roles and he could not serve under Mr Medvedev if he becomes prime minister because of differences over budgetary policy” – said AP. Monday, president Medvedev not hidden their disapproval and pointed with his finger to Mr. Kudrin: “If, Alexei Leonidovich [Kudrin], you disagree with the course of the president, there is only one course of action and you know it: to resign. This is the proposal I make to you. You need to decide quickly what to do and give me an answer today” Mr Medvedev said. Mr Kudrin said he would consult with Prime Minister Putin. Later, he offered his resignation and it was quickly accepted.

Medvedev’s televised speech can be watch here.

So, that might be even more important move then Saturday’s Putin’s decision to run for the third term. Alexei Kudrin has been Finance Minister of Russia in the last 11 years, during the mandate of Putin and Medvedev presidency. It is considered a professional, with excellent relations both among bankers on Wall Street and the world of European finance. Although excellent relations with Prime Minister Putin, his relations with Mr Medvedev had been strained for some time. Recent he criticised the president’s plans to increase military spending. In my opinion should not be a specialist to notice that in times of crisis such a priority does not sound good. But politics has other reasons sometimes less visible.

Russia Finance chief resigned generated a lot of conflicting opinions. Mass media, social networking, renowned experts and politicians have said opinions. Of course, not without speculation. It spoke that public conflict between President Dmitry Medvedev and Minister Kudrin in fact has exposed deep cracks in unity over Vladimir Putin’s plan to return to the Kremlin. Most government and Kremlin officials kept a low profile on Monday. None rushed to side with Kudrin. But the presidential aide Arkady Dvorkovich wrote on Twitter: “Kudrin did much good for Russia, was one of my teachers. In the current situation, a decision was not, the reasons the President called”. There were some who argued that Kudrin’s departure is good news and it will escape Russia to the domination of  Wall Street′s bankers. I am not specialist in finance and economics … but I cannot believe that a fool can remain in office minister 11 years, even if talk of Russia. “Mr Kudrin’s resignation will worry foreign investors, who have praised his handling of Russia’s economy” says the BBC’s Steve Rosenberg in Moscow. “Putin seems to have decided that Kudrin’s head was a price to be paid to ensure his smooth succession back to the presidency,” said Timothy Ash, emerging markets economist at Royal Bank of Scotland. “The market will now fear that relative fiscal prudence, for which Kudrin was seen as a linchpin, will go out of the window.” Julia Tsepliaeva, Chief Economist Russia and CIS for BNP Paribas, said Kudrin’s departure could lead to populist government spending and quickly run down the rainy-day fund. “In addition, the dismissal of the strongest representative of the liberal economic wing of the government may result in the strengthening of the ‘siloviki’ (security forces) influence” she said. “It is difficult to see how Mr. Kudrin’s resignation can be anything but market-negative” said Neil Shearing, chief emerging markets economist at Capital Economics Ltd in London. “With oil prices starting to slide and financial markets still jittery, now is not a good time for the government to lose its arch fiscal hawk.”

Of course, there are many questions. In some of them will find answers, others may not. It said that Kudrin, a close Putin ally who appeared to be frustrated at not being offered the premiership under the succession plan, was left with little option but to resign. Ok. Moscow policy even can to offer surprises of double or triple the agreements. But Kudrin is not a child, is not a neophyte (like Prokhorov, par example). How did such an emotional reaction? (Update – 29 September 2011:In his first statement after resignation, former Russian finance minister Alexei Kudrin said that his decision was not an emotional reaction. “In connection with the numerous commentaries about my resignation, I would like to clarify the following. My statement about how I do not see myself in the Cabinet of 2012 (after the elections) was well-thought out and considered. First, over the course of several months, despite my numerous objections, including public ones, decisions were made in budget policy that without doubt raise the risks to the budget.  And risks to the budget linked most of all to inflated appropriations for defense and the social sector would inevitably spread to the entire national economy.” Full statement can be read here.)

Agreed that the president Medvedev was surprised and humiliated after Kudrin’s statement in Washington. But the change a minister with 11 years of experience when the capital markets are crazy, the statements of key political and financial players are more worrying and any day could collapse the world financial markets ?! …What is the most important for Russia President? Pride or wisdom?

Such policy disputes are rarely seen and spoken aloud in public in Russia, where political life is usually orchestrated at the highest level, the agreements are made behind the closed doors and open dissent over policy is unusual. But there are already two such scandals in just two weeks: Prokhorov vs Surkov, Medvedev vs Kudrin. What is the price of Russia’s future stability? And who pays in the end?…

and, finally, why smiling relaxed Mr. Surkov during the Kudrin’s «verbal execution» by President Medvedev ?? 😀

John Helmer – «Watch the puppet’s strings, not his mouth or nose»

  • interview with John Helmer

1. It looks like there’s going to be a hot autumn in Moscow? Or is that just an illusion due to very vocal electioneering and of course the media accompaniment?

Meteorologically, as well as politically, Moscow feels the heat in July or August. October surprises more often happen in Washington DC; and the autumn so far should cause French President Nicolas Sarkozy to sweat – at least since all US charges against Dominique Strauss-Kahn were dropped, and he returned to Paris. There has been the sense under the surface of Russian politics that an accident might happen – might even be provoked with an orange or rose colouring – and have destabilizing consequences for the run-up to the December 3 national parliamentary election. But so far there is no sign of an incident, protest, or issue around which Russian opposition might mobilize. The only one sweating at the moment in Moscow is outgoing President Dmitry Medvedev.

2. Will the mystery behind the Putin – Medvedev tandem unravel at the United Russia Party Congress or must we wait until December, after the parliamentary elections? What of importance will Medvedev put in his speech (if anything)?

The tandem isn’t a mystery — Vladimir Putin owns the bicycle, picks the road, applies most of the leg muscle. The fact that Medvedev also pedals can’t change that. Also, there’s nothing mysterious about wishful thinking – Medvedev’s. His attempts to campaign for reelection by stressing his positive differences with Prime Minister Putin – Mr Modern versus Mr Authority, Mr West v Mr East, Mr Young v Mr Old – have been fatuous; they have obscured the identicality of their underlying positions. Medvedev lacks the power to decide between powerful factions on any significant, big-money policy issue, and so far in his term, he has not done so. He therefore appears to be powerful when enunciating policy to which there are no objections; or when the issues are marginal and there is little resistance. The effect is magnified by western media, which want to see him retain the presidency in 2012, even replace Putin, if he could. This too is wishful thinking.

If you believe what you read in the Financial Times, the Economist, or Wall Street Journal, you might believe that privatization is a Medvedev policy priority, while state consolidation or renationalization is the Putin strategy. This is a mistake. It’s also a familiar prejudice from the voice-boxes of has-been imperialists still hoping for a foothold in Russia. Medvedev has been hoping he could push through a privatization or two of state assets in order to reward potential supporters from among Russia’s oligarchs. At this, Medvedev and the ministers supporting him – chief of staff Sergei Naryshkin, deputy prime minister Igor Shuvalov – have been a near-total failure. Naryshkin, for example, has been the closest state minister to Medvedev, but he ignored his April 2, 2011, decree removing state ministers from the boards of directors of state companies. The only privatization Naryshkin has stood for is the retention of his own seat as chairman of the board of the state-owned oil tanker company, Sovcomflot.

3. In the opposition parties can you see big changes in terms of representation and strategy? Should we talk rather of attempts to keep voters’ loyalty, and nothing more? Do you see lack of vision or a cold peace, acceptance of the dictates of political fate?

There are opposition forces, trends, individuals, sentiments, ideologies; but there are no opposition organizations complex enough to be called parties. Gennady Zyuganov sold the Communist Party to the oligarchs when Mikhail Khodorkovsky was paying his bills, and not even Khodorkovsky’s subsequent conviction and imprisonment have loosened Zyuganov’s tongue. His brain has atrophied in the meantime, and his grip on the communist party machine remains unbreakable, at least for one more parliamentary and presidential round. Vladimir Zhirinovsky’s Liberal Democratic Party of Russia is neither liberal, nor democratic, nor a party. The nearest thing to an opposition party in the broader European sense would be an alliance of environmental protection groups active across the country – if (it’s a big if) they could coordinate in the formation of a Green party. So far, they cannot – they haven’t.

In some theatres, it’s possible for the most wooden of puppets to convince audiences that they are their own masters and puppeteers, but turn on the lights – you can see the strings immediately. Still, the normal political equation – the inflation rate plus the unemployment rate = opposition – operates not less vigorously in Russia than elsewhere. Nut the latest economic results from the state statistics agency Rosstat suggest that this pain equation is moving against the electoral opposition, and in Putin’s favour. In August, real wages were growing at a year on year rate of 3.8%, the fastest monthly growth rate this year. Disposable income in August was up 1.4% year on year. Unemployment appears to be falling — it was 6.5% in July; in August it was 6.1%. These effects suggest that classic pork and trough politic, pump-priming and budget stimulus spending are reaching the voters — and with August retail sales up 7.8% year on year (compared to 5.7% growth in July), they are expressing their confidence by spending money. They will spend their votes the same way. In this situation, Putin is the one person and political force most Russians believe can deal effectively with the economic threats they consider priority concerns as security risks diminish. This is an empirical observation, not an ideological one. Accordingly, opposition forms within the parameters largely set by Putin. That’s also a personal achievement on his part. What he intends to achieve next is something he keeps to himself. So far.

4. But instead, look, runs more virtual noise on the Right Cause party. An oligarch – your well-known area – and a party in coma build the loyal opposition of power. But the recent scandal was surprised and creates confusion. Was it a project of the Kremlin or was a project’s Prohorov  – and he was accepted as controllable risk by the Kremlin (and when risk rised too much he was falls) ? Is Prokhorov a naïve person and he really not knows how is working political commitment?

Votes are like money in one respect, which all politicians, in Russia or elsewhere, must either understand, or go broke. They are promissory notes – tenders of support on condition the candidate who receives the votes understands that he is obligated to deliver on his promises with the power the votes ought to provide. In business, Prokhorov was already, according to those who have worked for him, famously short on attention span, long on self-absorption, and indifferent to minorities. Could he tell the difference between a buyer of shares in one of his companies – Norilsk Nickel until 2007; Rusal since 2010; Polyus Gold and Quadra (TGK-4) – and voters in an election campaign? The bare facts are these. Prokhorov claims he was invited to run the political splinter party called Right Cause during a meeting with President Medvedev in the spring. But there is no record of such a meeting with Medvedev until June 27. Two days earlier, on June 25, Prokhorov had already been voted by a party congress to head Right Cause and lead its campaign for the parliamentary election, due on December 3. At their June 27 get-together, Medvedev said: “Your ideas correspond on some points with my own views… I will think about them.” In fact, Medvedev had made a public showing that he didn’t back Prokhorov for the Right Cause post, and encouraged Finance Minister Alexei Kudrin to take the spot instead. That was on June 20, weeks after Prokhorov claims now he had gotten the nod. Back in May, it had also seemed that Prokhorov was the choice of the election advisors to Prime Minister Vladimir Putin, who didn’t need Prokhorov or Right Cause, so much as it seemed a good idea to ensure that Medvedev’s candidacy for a second term as president didn’t find a party platform and a national run for votes.

If that was Putin’s stratagem from the start, Prokhorov has proved to be the ideal stooge. In three months, the polls were showing that Prokhorov was good for an increment of just 1% on the Right Cause’s bedrock of between 1% and 2% of the electorate. A week ago, on September 12, Prokhorov began publicly running down a group he called “the Kremlin”. At first, he claimed he was under the gun for backing for a spot on the Right Cause ticket a man he claimed the Kremlin didn’t want – Yevgeny Roizman. The reason, Prokhorov told a newspaper interview, was he “may be…the only person in the country struggling against drugs.” Then Prokhorov intimated that his ideas were too radical, not to say democratic for “the Kremlin”. He spokes about rewriting the Constitution to give the State Duma powers to impeach government ministers, limiting the governing or majority party to 226 seats and reinstating direct elections for regional governors. According to Prokhorov, he had invested Rb 800 million ($27 million) in Right Cause, but the votes for the election list were “rigged” against him. Who had the power to say no to so much money? Prokhorov claimed there was a “puppeteer who misinforms the Russian government, putting pressure on the media, and the puppeteer’s name is Vladislav Surkov.” Also he said: “I am absolutely convinced that this is a personal initiative by Vladislav Surkov. From my experience I think that for quite a long time he has systematically misinformed the country’s leadership. And I, behold, I plan to meet with the president and the prime minister and in the first person to tell [them] how this whole process has occurred. As long as such people run the political process, politics in Russia is impossible, for my part I will do everything possible to bring Surkov down”. These were Prokhorov’s fighting words on September 15. Two days later, he announced: “there was no personal conflict with anyone″.

… In the end it was a conflict of ideologies,” Prokhorov wrote in on his blogs. “At this stage the conservatives won. I wanted change, but the system was not ready.” The prime minister’s and president’s schedules have yet to open and admit him. Prokhorov has a history of representing sentence-long slogans as public programmes or ideologies – paying for them as if they were prospectuses for outfits whose shares he controls like Polyus Gold. There is no evidence of votes sought or public endorsements issued for these “ideas”. In the only election contest Prokhorov had fought until this year – the Polyus Gold annual general meeting of shareholders in June 2008 — Prokhorov heaped vitriol on the one independent director who dared to challenge him – Lord Patrick Gillford. Prokhorov also lost the voting on that one. There is a pattern of his attacking the Russian leadership, and then retracting within 48 hours. In his relations with the French government, Prokhorov has demonstrated that he has been unable to procure either apology or acquittal and vindication on the charges that led to his brief imprisonment in January of 2007. Today, according to one of Prokhorov’s associates at his Onexim holding, the explanation for the loss of his political support was that he hadn’t had enough time. “Don’t put all the blame on him [Prokhorov], because he was given too little time to prepare the party for the elections and there was a lot of work to do, hence the party resistance he faced. Politics is a new field for him, and challenging, too. Moreover, he left all the people he trusts in his business projects, so he had practically no one to rely on inside the party.” Prokhorov himself is making the same complaint – “I had two and a half months to shake up the 83 regions. That is, in fact, less than one day for each region. I have had 20 meetings in the day, we met people, took away the best candidates, watched the party go with someone to the polls.” If Prokhorov hadn’t made a public fetish of keeping time more accurately, also more expensively than almost anyone else in Russia – wearing a Pierre Kunz Red Gold tourbillon – this calculation might be credible. Now that he’s down for the count, though, Prokhorov is the first oligarch to prove he has trouble counting whatever doesn’t belong to him.

5. Is the security strategy promoted by Medvedev a failure? After the recent signing in Washington of an agreement on placing missile systems in Romania, it seems that the missile shield in the form proposed by the US will exist with or without the consent of Moscow. Does this change the perception of the foreign policy achievements of President Medvedev? Does it predict a new type of Cold War confrontation? Or does everything depend on who will come to the Kremlin in 2012?

Medvedev made a mistake in backing the Anglo-American invasion of Libya and NATO’s regime change strategy. If he believed that move would secure a more consultative, less confrontational relationship with President Barack Obama on military strategy in Europe, around Russia’s frontiers, he started with a naive illusion and ended with a fundamental misjudgement. All the talk of button-pressing between Russia and the US has not diverted by a single iota the US Government from pursuing its military strategy in the Balkans. Of course, you might ask whether Obama has made even bigger mistakes than Medvedev, and proved to be as powerless at home, even weaker than Medvedev, since there appears to be no Obama consensus to which the US President himself holds to for long. At least Medvedev is still on his election bike – Obama fell off some time ago.

The Romanian missile case reflects the continuity of US policy, and thus the failure of both the Great Powers, Russia and the US, to change or improve on what has gone before. What the missile agreement means in terms of US intervention in Romanian internal politics has been revealed in some of the State Department cables released by Wikileaks, but I don’t presume to guess how effective the US program for regime change in Romania has been, or will be.

The Libyan War might have been a test of the so-called reset relationship, but it has not. I doubt Medvedev would have gone so public on the interventionist side,  had he not been reflecting a silent consensus among Russian officials, including Putin, that Muammar Qaddafi could no longer be supported. I don’t believe the public version, emphasizing Qaddafi’s attacks on civilian protesters, was the decisive reason for Russian policy in that case. There is a much more durable tradition in Russian policy to condemn human rights violations, but at the same time oppose intervention in the internal affairs of states. The inconsistency on this and other Russian policy positions towards Libya was made public by Russia’s Ambassador to Libya, Vladimir Chamov, whom Medvedev claimed credit for dismissing in April. In fact, Chamov was reassigned within the Foreign Ministry without being sanctioned. The Chamov episode was also unique in another respect – never had a serving ambassador publicly criticized the commander-in-chief. Perhaps Medvedev calculated that he should sacrifice Qaddafi in order to ingratiate himself as the “new look Russian”, “pro-western” presidential candidate. Perhaps Putin thought Qaddafi unreliable, erratic, potentially dangerous, and judged that if Medvedev wanted to expose himself on the western side, Putin didn’t see any disadvantage to his own interests. Medvedev has made a fool of himself  without a serious risk to the Russian state interest  – that may have suited Putin. The Libyan War is also the first time that Russia’s non-government policy establishment sided against the President on an open and explicit way. All threats Medvedev and his circle issued in reaction – for example, a threat to sack Foreign Minister Sergei Lavrov – came to nothing. As the Islamist and fundamentalist elements in the so-called Libyan national opposition gain in strength and take control of the country, the Russian position internationally will be – we told you so.

 6. There is already a negative perception of Russia’s attitude to Al-Asad’s regime in Syria. Medvedev makes a new mistake at this time regarding Syria? What is you opinion?

 – Regarding Syria, Medvedev has not moved an inch from the traditional Russian policy consensus. The Kremlin will not tolerate another episode of regime change in the Arab world. Medvedev has reverted to form. This is all.

 7. Finally: What is your prediction about 2012 tandem president – premier?

 – Oh, that’s easy – the outcome of the presidential race is quite clear. Putin will rule. Whoever he decides on as his running-mate, and what title the latter is assigned, will not alter the political outcome. If Dmitry Kozak, another St. Petersburg lawyer and a long-serving junior minister of state, were to replace Medvedev, that would be worse for the oligarchs, better for the country than other candidates for the second spot. These candidates are much speculated about in chat shows, but their selection or deselection is little more than a weak signal of what coursew Putin will pursue in his third and maybe fourth terms. The question of Russian politics, the question for Putin is what he intends to do with the oligarchs – those individuals  who control the principal resources of the country, and dictate theft, corruption and deceit as a way of life.

Published – Cadran Politic, no. 86, October 2011