“A modern transport infrastructure is the real road to Russia’s future,” said then-President Putin to a gathering of highway construction workers in the city of Krasnoyarsk in late 2007. And yet, not a single highway or expressway and only a smattering of smaller roads have been built in Russia over the past two decades. By comparison, China has laid more than 40,000 thousand miles of high-volume roadways over the same amount of time. “Naturally,” said Latynina, “this raises the question: Has anything been built in Russia with this money? And if yes, then what?”

It turns out that something was.

“For example, the presidential residence in the city of Yekaterinburg, which cost 1.2 billion rubles [about $40 million] to construct, and which President Medvedev has stayed in once,” said the journalist. A similar example was Konstantinovsky Palace in St. Petersburg, a crumbling historic landmark that Putin ordered be renovated in 2001 for use as a presidential residence. The official cost of renovation: $250 million.

There were more. One new presidential residence was constructed just two years ago. Another called Lunnaya Polyana is now in the works, blocked off from public view. An Olympic residence in Sochi is also planned for construction. All in all, said Latynina, Russia has built thirteen official residences for its president. Compare this, she proposed, to the number of official presidential residences in America: there are but two. And neither the White House nor Camp David is anything to rival the grandeur of Konstantinovsky Palace. “My point is that if you consider the number of residences, then Russia is a superpower and the United States just gets these two little things,” the journalist said.

On the topic of superpowers, Latynina questioned Putin’s declaration that Russia is a superpower in the raw materials market. “It’s very interesting to compare Russia with the production of natural gas in the United States,” she said, and followed to rattle off a list of figures: In 2008, Russia extracted 640 billion cubic meters of gas, 550 billion of which were from the state-owned company Gazprom – the latter figure being the more telling, as that’s what gets sold abroad. American production of gas totaled 582 billion cubic meters during the same year – less than Russia, but more than Gazprom. Then there’s the revenue: American gas sales totaled $185 billion in 2008, while Russian sales to Europe, its primary source of export, totaled only $47 billion. In addition, Russian production fell in 2009 to 575 billion cubic meters of gas, with 460 from Gazprom. America’s grew to 620 billion. “So why is Russia called a raw materials superpower?”

Russia, Latynina explained, has virtually no chemical industry. The United States, on the other hand, has the world’s most highly developed chemical industry. Thanks to its more energy-efficient facilities, she explained, the States are able to sell gas at a much higher price than Russia with its long, cold, ineffective pipelines. Meanwhile, instead of building more effective facilities, Gazprom built an exact replica of Konstantinovsky Palace for its CEO, Aleksei Miller. “I invite you to think about the philosophy of the matter,” said Latynina. “Bill Gates could not allow himself to build a Konstantinovsky Palace, because it’s a different philosophy of life… But Aleksei Miller could.”

Frivolous spending on the part of the Russian elite brought about the question of why the Russian government tells its citizens that “the West doesn’t love us.” If that were true, asks Latynina, then why would Deputy Prime Minister Igor Sechin, Putin’s right-hand man, keep his plane in Helsinki and buy three different villas in Sardinia? Why are oligarch Roman Abromovich’s yachts registered in the West, including the $50 million one he gifted to Vladimir Putin? Why do all of the people who tell Russia’s citizens that the West doesn’t love them send their children to study in England? “Why don’t they keep their money in the banks of Iraq, North Korea, Venezuela, or the other wonderful countries that are friendly to Russia and love us a great deal?” asked Latynina.

In some cases, they do. On October 17, 2009, Prime Minister Putin announced the government’s decision to make a $500 million purchase of microprocessors with 90 nanometer process technology from the primarily government-supported French-Italian firm STMicroelectronics. Two weeks before this happened, Intel had announced that they were going to begin producing microprocessors with 32 nanometer technology. What was the point of buying something so expensive that was already out of date? According to Latynina, it was simply a way of transferring money abroad.

“In fact, for me it turns out to be a very sad story,” she went on. “It’s the story of the technical degradation of the foundation that we had from the Soviet Union.” While the STMicroelectronics purchase was sure to hinder the pace and efficiency of Russian industry and development, other instances of such degradation represented more direct threats to the safety of ordinary Russians. Poor construction and shoddy upkeep lead to the deaths of 75 people on August 17, 2009, when an old turbine in the Sayano-Shushenskaya hydroelectric dam spun out of control, breaking open the ceiling and flooding the facility. On the night of December 4, 2009, more than 150 people died in the Lame Horse club in the city of Perm when, having violated “every single possible fire safety regulation,” it shot up in flames. But most of the dead bodies dragged out of the club, Latynina pointed out, had no burn marks: the victims died almost instantly from smoke inhalation and carbon monoxide poisoning that resulted from burning foam polystyrene insulation. A commission set up to investigate the fire released its findings on March 9, concluding that the club’s own management was to blame. “But the scariest part is that it said in this report, verbatim, that ‘we cannot establish how harmful the foam polystyrene insulation was, how chemically harmful it was for people, for the reason that there was a lack of men on whom we would have liked to conduct experiments.'”

Really? “After the fire in the Lame Horse,” Latynina went on, “the government made quite a big fuss, especially President Medvedev. He loves to stomp his feet, crying ‘I’m going to deal with it,’ he always yells in future tense. ‘We must put an end to terrorism; we must put an end to corruption.’ I still haven’t heard that we’ve put an end to it, so it’s always in future tense.” It was clear, Latynina said, that the government wanted the situation to go away, and suppliers of construction materials had paid off the commission to keep silent about the foam. “So it turns out that they don’t have any men,” she said. “The president stomps his feet.”

Thus, in a nutshell, was Latynina’s dour prognosis of Russia’s current state of affairs.

During the questions that followed, Latynina was asked who would make a worthy Russian president. Her response: “Khodorkovsky,” the former oil tycoon currently sitting in prison. And what is to become of him? “He’ll sit in prison as long as Putin is in power.”

Latynina played down the audience’s fears that her safety was at stake for criticizing the Russian government. Arguing that Russia lacks internet censorship (as opposed to China) and allows Ekho Moskvy radio to broadcast whatever it wants, Latynina linked fears that free speech was being suppressed to the legacy left over from Soviet times. Back then, she said, people were arrested or murdered for speaking out against the government. “The maximum now is that they turn off the broadcast.” When numerous members of the audience objected that Russia figures as the third most lethal country in the world for journalists, Latynina countered that Russia was a lethal country for everyone. “It’s more dangerous to be a citizen of Russia than to be a journalist,” she said. “If you drive down Leninsky Prospekt and meet Lukoil Vice President Barkov, he’s not going to ask if you’re a journalist or not.”

That said, Latynina was skeptical of the effectiveness of initiatives by the Russian opposition, including a petition calling for Putin to resign that has so far gathered more than 18,000 signatures.

Asked for her opinion on Moscow’s plan to put up posters of Josef Stalin for Victory Day celebrations in May, Latynina replied: “Every person who wants to has a right to march for Stalin, because unlike Hitler, Stalin was never sentenced for having committed any crime – there are no laws saying that he was a criminal. But when it’s state-sponsored… You know, when dealing with these situations, I always think: What would Stalin do with Putin? He would put him up against the wall!”

It became apparent during the question and answer session that Latynina’s cynicism had frightened at least some members of her audience into considering the prospect that democracy in Russia was simply not possible, leaving Putin’s regime as the only viable choice. She was quick to dispel this notion, and delivered a more hopeful version of events then one might otherwise have come to expect. “First of all, I maintain that democracy in Russia is of course possible,” the journalist said in response. “But, you know, democracy is like a refrigerator. You can’t say that a certain refrigerator doesn’t work in Russia; it’s just that in Russia the electricity flows different. No – the refrigerator works in Russia if it has the particular electrical wiring for the place where you want it to work. If it doesn’t have the wiring, then it isn’t going to work.”

Writing for the Wall Street Journal, Russian opposition leader Garry Kasparov calls for President Barack Obama to face the reality of Russia’s interests in continued high tensions in the Middle East, and to take a serious stance in talks with Moscow over Iran’s nuclear program.

Russia Worries About the Price of Oil, Not a Nuclear Iran
The Obama administration’s foreign-policy goodwill has yet to be repaid in kind.

By GARRY KASPAROV
October 18, 2009
Wall Street Journal

Last Wednesday in Moscow, the remaining illusions the Obama administration held for cooperation with Russia on the Iranian nuclear program were thrown in Secretary of State Hillary Clinton’s face. Stronger sanctions against Iran would be “counterproductive,” said Russian Foreign Minister Sergei Lavrov, just days after President Dmitry Medvedev said sanctions were likely inevitable. This apparent inconsistency should remind us that Mr. Medvedev is little more than a well-placed spectator, and that Prime Minister Vladimir Putin, who discounted sanctions in a statement from Beijing, is still the voice that matters.

This slap comes after repeated concessions—canceling the deployment of missile defenses in Eastern Europe, muted criticism of Russia’s sham regional elections—from the White House. Washington’s conciliatory steps have given the Kremlin’s rulers confidence they have nothing to fear from Mr. Obama on anything that matters.

And nothing matters more to Mr. Putin and his oligarchs than the price of oil. Even with oil at $70 a barrel, Russia’s economy is in bad straits. Tension in the Middle East, even an outbreak of war, would push energy prices higher. A nuclear-armed Iran would, of course, be harmful to Russian national security, but prolonging the crisis is beneficial to the interests of the ruling elite: making money and staying in power.

The Obama administration’s foreign policy has directed a great deal of optimism and good will toward friends and foes. Such a cheery outlook is commendable as long as it does not clash with reality. Unfortunately, there were several clashes in the past week.

On Wednesday, a top Russian security chief, Nikolai Patrushev, said in an interview in Izvestia, one of the main Kremlin propaganda papers, that Russia was planning to reshape its policies on nuclear force to allow for pre-emptive strikes and use in regional conflicts. Since it cannot be a coincidence that this news leaked while Mrs. Clinton was still in Moscow, it can be considered a response to Mr. Obama’s talk of a world without nuclear weapons and rescinding the deployment of missile defenses.

Also last week, Lt. Gen. Vladimir Shamanov was cleared of wrongdoing for dispatching a squad of his paratroopers to interfere with the criminal investigation of a firm owned by his son-in-law. Transcripts of the general’s phone calls demonstrating his involvement were published in Novaya Gazeta newspaper, the last print outlet critical of the Kremlin. But this was not enough to cause trouble for this idol of the second Chechen war, where his forces were repeatedly accused by Human Rights Watch and other organizations of atrocities against civilians.

Then there was the spectacle of Russia’s regional elections. They were as fraudulent and superfluous as every election under Mr. Putin’s reign, with real opposition candidates barred and the ruling United Russia party receiving its predetermined majority. This time the fraud was too blatant even for Kremlin-allowed opposition party leaders Alexander Zhirinovsky and Gennady Zyuganov, who loudly protested results that have moved Russia to the verge of a one-party dictatorship. Mr. Medvedev asserted that the elections had gone perfectly well. Meanwhile, the U.S. statement expressed the usual concerns and quoted President Medvedev’s own words on the importance of free and fair elections—as if he would be shamed by them.

From the shameless expect no shame. And from a corrupt and criminal regime, expect no changes unless real consequences are put on the table. With Russia, this would mean going after Mr. Putin’s coterie of oligarchs and hitting them where it hurts: their privileges and their pocketbooks. If the European Union and the U.S. started canceling visas and prying into finances, they would find the Kremlin far more interested in sanctions against Iran. Mr. Putin has used human rights and democracy as bargaining chips because these things matter to the West and not to him. Until the game is played for stakes with value to the Kremlin, it’s a one-sided contest.

If the U.S. is serious about preventing Iran from getting a nuclear weapon, then Mr. Obama must get to the point and state the penalties unequivocally. Repeating over and over that it is “unacceptable” has become a joke. For more than 10 years a nuclear North Korea was also “unacceptable.” If Mr. Obama says the U.S. will do whatever it takes to prevent Iran from attaining a nuclear weapon, then we will see if Tehran blinks. At a minimum, the White House should publicly promise that any attack on Israel with weapons of mass destruction will be treated as an attack on American soil and urge NATO to make a similar commitment.

Like many Russians, I was encouraged by Mr. Obama’s inspirational speech in Moscow last July, but he must know there is more to statesmanship than printing money and making speeches. Inflated rhetoric, like inflated currency, can lead to disaster. The goodwill bubble Mr. Obama is creating will burst unless there are real results soon.

Mr. Kasparov, leader of The Other Russia coalition, is a contributing editor of The Wall Street Journal.

Those looking for a bright side in the global economic meltdown are fond of invoking the old line about finding opportunity in a crisis. But also keep in mind that there are those who will incite a new crisis to escape or distract from the current one. This is the scenario looming in Russia as the Kremlin faces increasing pressure on multiple fronts.

Russia and its fellow petrodictatorships are in dire need of a way to ratchet up global tensions to inflate the sagging price of oil. Petrodictators, after all, need petrodollars to stay in power. The war in Gaza and the otherwise inexplicable skirmish with Ukraine over natural gas have helped the Kremlin in this regard, but $50 a barrel isn’t going to be nearly enough. It will have to reach at least $100 and it will have to happen soon.

The effects of the financial crisis are rapidly reaching every level of Russian society. With no avenue for political expression left open to us, Russians are ready to take to the streets. Vladimir Putin has reacted true to form, ramming through new “anti-extremism” laws, building up the interior ministry’s paramilitary police forces, and increasing the volume of the xenophobic propaganda in state-controlled media.

The natural place for the Kremlin to find its new crisis is the Middle East. Open hostilities between Iran and Israel would lift the price of oil back to a level that would allow Mr. Putin and his gang to keep funding the crackdown. Israel’s anxiety over Iran’s nuclear-weapon ambitions is the most vulnerable link in a very weak chain.

There persists a very damaging myth in the West, spouted by politicians and the press, that says Russia’s assistance is needed with Iran and other rogue states. In fact, the Kremlin has been stirring this pot for years and has a vested interest in further increasing turmoil in the region. The Hamas/Hezbollah rockets, based on the Russian Katyusha and Grad, are not delivered via DHL from Allah. It doesn’t require the guile of a KGB man like Mr. Putin to imagine a way to accelerate Iran’s nuclear program, which has been aided by Russian technology and protected by the Kremlin from meaningful international action.

So the question for Western leaders is whether they doubt Mr. Putin would hesitate to provoke a war in the Middle East. If his regime falls, he and his cronies will face the loss of their immense fortunes and criminal prosecution when their looting is exposed. What are thousands of lives in the Middle East to a Kremlin mob that is openly preparing for the day when they will have to open fire on their own citizens to stay in power?

This “mad bear” theory is even more plausible when you consider how tolerant the current cohort of Western leaders has been regarding the destruction of democratic rights around the world. There appears to be no line the world’s despots — and would-be despots — cannot cross with impunity.

It is time to bury the failed model of dealing with the world’s antidemocratic and bloodthirsty regimes. The real change we must effect in 2009 is toward a new global emphasis on the value of human life. Anything less confirms to the enemies of democratic civilization that everything is negotiable. For Mr. Putin that means democracy; for Hamas it means Israel’s existence. The Free World must take those chips off the table.

Israel has the capability to annihilate Gaza to secure the safety of its people, but it chooses not to do so because the Israelis value human life. Does anyone doubt for a moment what Hamas would do if it had the power to wipe out every one of the five-and-a-half million Jews in Israel? Hamas should not be considered less a villain simply because it does not as yet possess the means to fulfill its genocidal agenda.

Terror suspects such as the United Kingdom’s “liquid-bomb” plotters and the recently convicted group plotting to kill U.S. soldiers at the Fort Dix military base were arrested before they were able to carry out their lethal plans. Those who call Israel’s assault on Gaza disproportionate should write down on a piece of paper exactly how many Israelis should die before the Israeli Defense Forces respond.

The leaders of Europe and the U.S. are hoping that the tyrants and autocrats of the world will just disappear. But dinosaurs like Vladimir Putin, Hugo Chávez and Iran’s ayatollahs are not going to fade away by natural causes. They survive because the leaders of the Free World are afraid to take a stand.

Years from now, when Zimbabwe’s Robert Mugabe is either dead or deposed, his legacy will lead to another genocide trial in The Hague. Why don’t Western powers, many of whom are condemning Israel’s action in Gaza, take action now to stop the extermination in Zimbabwe instead of waiting a decade for a trial? Criticizing Israel is easy while rescuing Zimbabwe is hard. Choosing the path of least resistance is moral cowardice. It does not avoid difficult decisions, it only postpones them.

Mr. Putin’s Russia has invaded one neighbor and is threatening to freeze much of Europe by shutting down natural gas pipelines that flow through Ukraine. But since confronting Mr. Putin would take courage, Western leaders pretend his help is needed. This policy of self-deception will have disastrous consequences.

The futile pursuit of balance and neutrality by Western leaders and the media has become nothing more than a cover-up for the gravest of crimes. No doubt they would have judiciously considered the “legitimate grievances” of Stalin, Hitler and bin Laden. The time to stand up to such monsters is before they have achieved their horrific goals, not after.

Mr. Kasparov, leader of The Other Russia coalition, is a contributing editor of The Wall Street Journal.

The MICEX, meanwhile, halted trading at 14:10 after losing 14.24 percent, closing at 513.62.  The two indexes have lost over half their value in the past month alone.  Both will resume trading on Tuesday, October 28th.

The Russian collapse comes in line with falling share prices in Europe, although the reaction in Russia has been much more severe.  Fears of a global recession and oil prices at a 16 month low have made many investors fearful about the state of Russia’s oil and gas-rich economy.  On Thursday, the Standard & Poor’s rating agency lowered Russia’s long-term outlook to “negative” from “stable.”

Crude oil was trading at $63 per barrel on the New York exchange Friday.  This posed a serious problem for Russia’s 2009 budget, which will go into deficit below a price of $70 per barrel.

To combat sinking prices, the OPEC cartel announced today that it would cut production by 1.5 million barrels per day.  Unfortunately, many investors do not believe the move will be enough to counteract shrinking worldwide demand, and the cut did not have an immediate effect on markets.

—

Note: Many ordinary Russians do not invest in the stock market, and have not been affected by the market crash.  The global liquidity crisis, however, is beginning to spill over into the real Russian economy, and falling government revenue may ultimately create tangible consequences in government programs, pensions and other essential services.

The 70 dollar mark is significant for the Russian government, which relies heavily on tax revenues from oil and gas extraction.  In September, Deputy Prime Minister and Minister of Finance Alexei Kudrin made the public announcement that Russia’s 2009 budget would enter a deficit if oil prices sank below 70 dollars per barrel.

“70 per barrel is the price of a balanced federal budget for 2009,” Kudrin had said, noting that the budget was formed with that price in mind.  “That being said,” he went on, “the budget forecast for the average cost of oil in 2009 equals 95 dollars per barrel.”

Analysts said that the dropping oil price was related to three major issues: slowing economic growth connected with a global recession, a growing difficulty in obtaining credit, and increased production outputs from non-OPEC member countries.

The inter day drop may also relate to a Nigerian court decision, which mandates that Royal Dutch Shell hand over control of a major oil terminal to the local population.

OPEC, meanwhile, may lower their daily production output in response to the falling prices.

“It will be one million [barrels], or more,” Qatari Oil Minister Abdullah al-Attiyah told the al- Jazeera television channel. “Prices have fallen a lot and we need to take measures.”

Since it was founded by Tsar Peter I in 1724, the Academy [of Sciences] has enjoyed immunity from government interference. Freedom to think and work unfettered has enabled 17 of its alumni since 1904 to win science’s highest plaudit, the Nobel prize. Of those, 14 have been within the past 50 years and the most recent, Vitaly Ginzburg and Alexei Abrikosov, shared the prize for physics in 2003. . . .

Kremlin officials claim the institution needs dragging into the modern world to harness its members’ brainpower for lucrative scientific patents and commerce. But critics fear it will fall victim to Mr Putin’s appetite for control and his distrust of free-thinking institutions.

Prof Vitaly Ginzburg, who is 90 yet still academically active, said Mr Putin’s Russia was worse than Stalin’s Soviet Union. “Of course, in Stalin’s times the Academy was under the control of the central committee of the Communist Party,” he told The Sunday Telegraph.

“But in those days you could come up with an idea and create – that’s how we put the first Sputnik satellite into space. Now the government thinks science must bring only income and profit, which is absurd.”

He added: “Of course it is about Putin. Our democracy is far from ideal.”

The Kremlin tried last year to gain political leverage, but its officials failed to gain election to the academy. Some were said be so ignorant they could not explain the law of gravity.

We have no doubt that those same Kremlin officials will soon pass a new, stricter, law of gravity. Under Putin, as in Orwell, free speech equals dissent and free thought equals thought crime. And who needs science and innovation when you have oil at $65/barrel? Science is just another resource to be put under Kremlin control and squeezed dry.

As Garry Kasparov wrote in a Wall Street Journal editorial last August, “I am horrified as I watch my country turn into an oil-and-gas empire. From struggling workers in Vladivostok to top-notch lawyers in Moscow, we are a people proud of our intellectual traditions. Russia is a country of great literature and scientific accomplishments. It should not be our destiny to become another Saudi Arabia or Venezuela, to quite literally fuel the achievements of other nations while we lose ground.”