Below the chilly heights of Davos: turbulences. Credit crunch to Russia

January 25, 2008

kudrindavos.jpgThis year’s World Economic Forum gathering at Davos is running full steam. Top CEOs and politicians from all over the world flocked in to discuss ways to improve the state of the world. On top of the magic alpine mountain, all these leaders appear like they are seeking respite from the current turbulences in the world economy, in order to philosophize on the state of the world. In between fancy wine tasting sessions, the Credit Crunch is wielding its threatening sword on the fate of the world’s businesses and economies. George Soros himself wrote this week that it is the worst market crisis in the last 60 years. So Soros:

“Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.”

Indeed, the developing world and emerging markets, but surprisingly as well, Germany’s economy, seem resilient. Fingers crossed. The “rot” is mainly based in the United States (talks of a recession are all over), in a time when its status and policies are in crisis. Anecdotally, the last edition of Foreign Policy magazine has an entire section with recommendations on what America could do to regain its standing in the world. In the meantime, Kenya is in deep turmoil, despite an overall more positive picture for Africa. Pervez Musharraf found it important to show up at Davos, after an earlier visit this week in Brussels, while he is responsible for a lot of the political fire that is setting his country ablaze.

One of my favourite areas of turbulence is well known: Russia. “Russia’s economy looks good from Davos”, is the title of a short overview article in The Moscow Times on the strengths and weaknesses of the Russian economy. Russia’s economy looks bright (on the surface) – on the back of high oil prices. But Russia’s politics are increasingly murky, to say the least. While the current finance minister Alexei Kurdin attended Davos, one of his predecessors under Putin’s rule, Mikhail Kasyanov, was in Brussels, speaking at a conference. Kasyanov became first deputy prime minister under Putin, then was ousted in 2004, around the time of the Yukos Affair. A profile from the BBC, reminds us that Kasyanov “set out three key priorities – the fight against corruption; tackling Russia’s considerable drugs problem; and protecting the rights of property owners”. The first and latter being exactly what the Kremlin has not been standing for in the last years.

Since his ousting, Kasyanov has become an outspoken critic of Putin’s policies and ruling style. He is one of the candidates for the presidential elections due to take place early March. But the authorities are trying to stop him from doing so and are accusing him of forging a big part of the 2 million signatures required to be accepted as a candidate. Kasyanov has not exactly the cleanest of track-records himself, and is believed to be unpopular in Russia. But right now he does stand for an alternative Russia that respects the rule of law. His speech in Brussels was tailored to the needs of a liberal European audience. Yet very moving. With his striking voice (“gravel-voiced” was the term used by the BBC) he set onto forcefully denouncing the latest developments under Putin’s rule, especially since the end of 2004, seen in many instances as a turning point. Rogue foreign policies – denouncing complacent attitudes toward Iran, for example, expressing a sense scandal at an “irresponsible” policy coming from a “nuclear power”. Growing corruption and the licentiousness of the police. And last but not least the “farce” of the last parliamentary elections in Russia. The presidential elections are a “last chance” for Russia. It is about giving alternative views and some voice to the democratic aspirations of a large part of Russian society. In EU-Russian relations he pleaded to keep up the idea that Europe and Russia have common values. Their new Partnership and Cooperation Agreement that is theoretically to be negotiated ought to be based on “values”. He insisted on the need for both European and Russian societies to know each other. Russians in particular should be able to travel to Europe: to see “what normal life is about”…. Wish him good luck.

His views were not shared by all. Many analysts of Russian-EU relations think that they should not emphasize common values, but be “realistic”, and focus on targeted, technical matters. There is even in some corners a striking complacency. Germany, France and Italy are afraid of offending Russia more by continuing to enlarge NATO (giving in to spheres-of-influence thinking?). And oil majors bow in to Mr Putin. At another session of this conference dedicated to business relations with Russia, a representative of British Petroleum spoke. He gave an optimistic view of Russia, while stressing the need for Europe to create a strong and competitive internal energy market to counteract “monopolist” actions. Yet to a question asked by a Polish MEP, on recent renationalisation of foreign assets in oil and gas by the Russian government – BP had to cede part of its stake in the Kovytka gas field in Siberia last year to Kremlin-controlled Gazprom -, the representative, in obvious bad faith said: “this was a purely commercial transaction”. At this sentence, Mr Kasyanov and his acolyte, who were sitting in the same row in the audience as me, chuckled. A deep Russian guttural chuckle…

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