A Disturbing Message from a Noted Former Soviet Dissident

I received this message from noted Soviet-era dissident, Yuri Yarim-Agaev. It illustrates the current "party line" of Putin's KGB state. I cite it below with Yuri's permission:. I and Yuri would appreciate comments.

Gentlemen,

I recently watched two movies, which you may find interesting. One is an eight part documentary СССР, крушение (The Collapse of the USSR). Another one, Товарищ Сталин (Comrade Stalin) is a four-part fiction, with a claim to historical truth. (Links attached). Both are very biased and promote the current position of the KGB that it was the guardian of the State, rather than of Communism. The positive characters in the second movie, Stalin and Beria, are “protectors of the state” (государственники); the negative characters, Suslov and Khrushchev, are party ideologues.

There are very disturbing episodes concerning Andrei Sakharov in both of these series. At the end of the second part of СССР, крушение, Philip Bobkov, the former head of the 5th Directorate of the KGB, who was responsible for persecuting dissidents, states that they did not exile Sakharov to Gorky, and that it was Sakharov’s own decision to move there. There are several other outrageous lies in the same episode, none of them challenged by the narrator or rebutted by any other participant.

In Товарищ Сталин, also coincidentaly, at the end of the second part, Beria, who at that time headed the A-bomb project, comes to Stalin. Stalin tells him that he received information that the young scientist Sakharov asked to send him 15,000 political prisoners to complete his experiment, and Beria had not provided them yet. Beria complains that he cannot keep up with Sakharov’s ongoing requests for political prisoners whom he disposes like flies in his experiments.

These two episodes are good reminders that the KGB/FSB hasn’t changed much and continues to pursue its propaganda and active measures. The latter includes disseminating false facts, fabricating documents, and embedding their agents in our ranks. 

Have we forgotten that? Sometimes it seems to me that we have become too complacent and lost our scruples when we give too much validity to the archives only because they come from Soviet secret vaults, when we grant too much credulity to testimonies of former Soviet officials only because they occupied high positions, and when we embrace as our peers people from Russia of very questionable background and views. 

 I do not suggest ignoring documents or testimonies. They can provide us with many important facts--as long as we remember their origin and view them in a more general context.

Questioning China's Economic Model: One Spark?

The New York Times’ As Growth Slows, China’s Economic Model is Questioned sets a tone in marked contrast with its enthusiastic accounts of China’s prowess. One of its most respected columnists, Thomas Friedman, has been singing the praises of  Chinese infrastructure for years. In New York City, Friedman sees potholes. In China, gleaming highways. Friedman never met a cement mixer he does not like. China has plenty. We have too few because the Republicans won’t authorize an infrastructure bank. We have political stalemate, while China is run by wise technocrats dressed in muted business suits who decide what is best for the country and are not hobbled by the rule of law, property rights, and other small things that get in the way of progress.

The Times piece raises an uncomfortable question for those who regard the Chinese model as the way of the future. Could it be that China is a house of cards, ripped apart by political infighting over political power and spoils, that is kept alive only by embattled  private enterprise?  Could it be that the polite men in dark business suits, who are feted in Washington as our equals, rob state enterprises for their personal benefit, suppress dissent because they know that one spark can destroy their party monopoly, and compete among themselves to see who can waste public savings the fastest by pouring concrete faster than their regional competitors.

go to forbes.com

Dr. Gregory's latest book can be found at Amazon.com.

To WSJ: Get the Headline Right: “Europe [Does Not] Delay Bailout Payment"

The WSJ headline reads: “Europe Delays Bailout Payment.” If you read the article, it says that the Eurozone lenders  released only 4.2 billion Euro instead of the agreed-upon 5.2 billion. The remainder, Eurozone governments threaten, will not be paid unless Greece forms a coalition government that will honor its austerity pact.  Remarkably the 4.3 billion covers the 3.3 billion Greece must pay next week. The slow drip-drip torture continues.

There is no way Greece can form a government that will adhere to its austerity agreements. The Eurozone leaders might as well bite the bullet now and save a few billion Euros.

It is time to recognize that the heart patient is terminal. There is nothing to be done short of a heart transplant of a blank check.

Buy Shares of Russian State Companies: This Time We’ll Behave

Russia’s advertising supplement in the New York Times carries an amusing headline: “New Russian Government to Back Privatization Effort.” Apparently the new Russian government wants to sell minority shares in ten state companies, including Sberbank, United Grain, and Novorosiisk Port. The article immediately below it is entitled “Moscow Welcomes Foreign Business.” The red carpet is out for foreign investors, so it seems.

The lead article explains that First Deputy Prime Minister Shuvalov is prepared to go ahead with the sale but that “influential” Deputy Prime Minister Sechin wants to wait until the prices are higher. I think Sechin would have to wait quite a while.

Sechin might be asked why share prices of Russian state companies are so low?  Gazprom, for example, has more reserves than ExxonMobil but sells for a tiny fraction. Why? Everyone knows how corruptly and incompetently Russian state companies are run. Gazprom is among the worst. Now the new Russian government expects naïve foreign investors to forget that there are no real audits of the companies to be sold, that the true owners are masked, and that these companies are run in the interests of the insider shareholders from Putin’s inner circle. Do not forget the past history of dilution and other cavalier treatment of minority shareholders. But the new Russian government is promising that this time will be different. Let’s wait and see.

The only reason to consider buying shares of Russian state companies is to wager that the corruption and mismanagement have been more than fully discounted. Investors cannot invest for value considerations.

If any one doubts what I am saying go to Alexei Navalny’s publication on his web site of the official audit commission report that shows that the management of the state pipeline company stole $5 billion. Navalny is not citing secret documents, but publicly available documents. This news did not seem to turn any heads. This is business as usual in Russia.

Consider United Grain and Novorosiisk Port. Both engage in activities that invite corruption and embezzlement by management. Tales of the corruption of Novorosiisk port have been floating around for a decade.

We’ll see how many foreign investors will walk down Russia’s new red carpet.

Dr. Gregory's latest book can be found at Amazon.com.

Swiss Try to Shut the Flood Gates for French Capital Flight

A well-informed colleague related to me that he had spoken with Swiss banking authorities trying to stem the flow of French capital into Switzerland. Wealthy French families have been spooked by the election of a socialist president threatening them with 75 percent tax rates. They cannot park their money inside the Euro zone; so they are flooding  Switzerland and England with capital flight.  The Swiss will likely impose a "parking fee" on incoming capital high enough to keep it within manageable proportions. If not, Swiss tourism and exports will be priced out of the market and the Swiss economy will take a nose dive. New York City realtors are also reporting French purchases of high end real estate.

Capital flight is the last thing France needs given its pressing borrowing constraints.

Dr. Gregory's latest book can be found at Amazon.com.

Lost in the Crowd: Putin’s Business-As-Usual Inauguration

Were it not for the French, Greece, and Schleswig-Holstein elections on Sunday, Putin’s inauguration for his third term would have been the top news.

The ceremony included a tepid speech by outgoing “President” Medvedev (“Putin was elected by a majority of voters”), comic-opera marching soldiers, inspiring Tchaikovsky, marches, and the singing of the revamped Soviet national hymn. Putin marched alone down the red carpet of the Kremlin Palace in his characteristic swagger and administered the oath to himself, after which the chairman of the constitutional court, clad in mortarboard and black academic robes, declared Putin president of the Russian Federation. The Ceremony ended, Putin re-transversed the red carpet, pausing at the end to greet well wishers.

Putin’s address made no reference to reforms. Nor did it offer any conciliatory words for those who oppose him, although tens of thousands of protesters had demonstrated angrily on Moscow streets the day before. The beatings and mass arrests Putin’s forces delivered to the demonstrators spoke volumes about his intentions towards any one who stands in his way.

go to forbes.com

Dr. Gregory's latest book can be found at Amazon.com.