30 August 2006

I am sorry

said with heavy Russian accent;

But my template on Blogger is a mess of broken html and partially implemented stuff from back in the days when I gave a shit.

So over the next few days (read the weekend) I am going to start again - which means that if you read this via a feed-reader (83% of you) you may get multiple re-publishings of my posts of the last 30 days.

Instead of getting pissed at me follow the links in the “legs” posts and smile.


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Sucher, Head of Alfa Capital, Resigns

Sucher, Head of Alfa Capital, Resigns:

I have no inside information to impart other than to say that there have been rumours that all has not been sweetness and light at work recently.

Whatever the rights and wrongs of the dispute, Alfa is the loser.  Bernie is hugely respected, vastly intelligent and worth an evening of beer and darts at anytime.


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The Times They Are....

not the same as they were before.

Up until 2000-ish I used to describe Russia as a “hand shake economy” - meaning that you agreed a deal face-to-face, man-to-man (there were no women until after the deal) and it mattered little what the lawyers lawyered thereafter - I honour my word etc.,

And the world has changed.  A deal is not a deal until you have signed, stamped and initialed, in original, one copy for every one in the room, and any pets they might have as well.

Which is all well and good - it works in the US.  Except that in Russia no one can be bothered to actually read the agreements they are due to be signing until they are due to be signed. Bosses never read agreements, it would be like admitting that you did more than surf porn on your computer.  Getting an NDA signed takes 3 days, a term sheet at least a week.  Closing a deal - hair that I can no longer afford.

Five fucking hours in a negotiation that would have taken 5 minutes if the other side had read the documents.  Lets put a measurable cost on that;

1 hour prep time with our lawyers - $600
5 hour meeting - $3,000
1 hour traveling  - $600
Me working until 22.00 doing work that I could have better done earlier - annoyed
My sense of humour - invaluable

Rationale - if it was easy every one would be doing it.


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25 August 2006

Expert Says Sychyov's Injuries Caused by Hazing

Sychov was the unfortunate soldier at the Armor (sic) Academy who had to have his legs and genitals amputated after.......

Two expert witnesses provide two different theories.

A civilian (non-army) doctor says that his injuries were caused by being forced to remain in one position for an extended period of time and a brutal beating;

Expert Says Sychyov's Injuries Caused by Hazing:

An Army doctor however believes that his injuries were caused by a long-standing problem and that if the diagnosis had been correct he would not have lost his legs and genitals.  The unspoken element of which is that if he had not been hazed (brutally beaten) then his genetic disorder would not have become evident.

Burdenko Doctors Say That Sychyov Was Misdiagnosed

I'll let you make your own minds up.


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The Devilish Triangle of Budget Policy

An age ago I posted on the Kanutian approach to financial management that the 5th Directorate Thugs so enjoy.  And here from the ante-deluvian Moscow Times comment yet more evidence.

The Devilish Triangle of Budget Policy:
But then President Vladimir Putin reshuffled the cards. Apparently talks with businessmen convinced him that a stronger ruble could harm the economy. So now the government and Central Bank have three assignments: keep inflation down, halt real ruble appreciation and, foremost, increase government spending. In short: Do the impossible.

The joy of a command economy without criticism is that you can command.  If inflation, ruble growth and government spending are to be controlled together then that is how it must be.  If the order comes from VVP, its pretty difficult for the press to point out that only someone who ran an administrative office in Dresden could possibly believe that the three can have a mutually happy ending.

There is a seeming surfeit of articles saying that if the price of oil was not so high then the Russian economy would be in trouble.  But it is, high that is. Whether you believe in Hubbert's Peak Oil theory or, more prosaically, that demand is growing faster than supply;    the price of oil in the medium term is destined to remain above its long term average. 

Meanwhile I am trying to find who has the cure for the Dutch Disease that seems to have replaced Bird Flu as the global pandemic to worry about.

As a friend never tires of saying;

If we had some eggs, we could have have ham and eggs.  If we had some ham.


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14 August 2006

Failing to Join the Global Supply Chain

Today, I wrote to our investors that one of the company's achievements, where I sit on the Board, in the last quarter was finding alternate sourcing for all of the components that it had previously developed and sourced in Russia.

Not because the suppliers were bad, in fact they had been an integral part of the component development, nor unreliable, nor expensive but because if you manufacture a product that is part of a global supply chain then reliability of delivery is vitally important.

As the components had to pass through Russian customs on their way to assembly plants in Thailand and Malaysia it became impossible to predict delivery time.  These were high value added components in the whole package and the key behind the intellectual property of the package.

So the plants in Russia lost out on the manufacturing income and are now effectively outsourced R&D (really product development) centers.

And it has got worse since the new man was brought in.  Do you think he reads Ruminations or is currently in Cantineta or Sardinia/South of France/not at his desk?

I read in a study that Intel opening its fab in Israel was a key moment in Israel's development as a high-tyech center.  We have certainly benefitted from employees who have passed through on their way to more entrepreneurial jobs and finally “home.”


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12 August 2006

The Presidential Panic

As I might have mentioned Friday night turned in to a classic night of Moscovian bacchanalian excess, not helped by a lack of food.  Two themes recurred; Gin Martinis and risk.

The event was a Russian birthday party, expat participation was limited, which is why I spent from midnight to 03.00 arguing over what comes next with two Russian real estate and restaurant entrepreneurs - in Russian.  A female and her father - she comprehensively drunk me under the table.  Did I mention that I speak Russian fluidly?

By what comes next they mean who follows Putin, and what that means for their business.  Already they believe that their businesses are hamstrung by Chinovnik rent-seekers.  Father wants to stop investing in Russia and find opportunities in India and China because of his concerns.  Whilst there is a certain element of grass always being greener etc., he expressed more fluently than most that he was not going to risk cash in Russia until he knows what comes next.  I had assumed that we would start to see evidence of Russian risk aversion in 1Q 2007.  It would seem that it has already started.

Balls-of-steel and stomach-of-iron daughter who runs the business on a day-to-day basis was more comfortable with transition risk.

I think that the difference between their positions reflects a generational change; she had not left University when the Soviet Union collapsed, Dad is 30 years older.  He believes that everything can change - and indeed in his lifetime it has.  She has only been in meaningful business since the crisis - when life has been good.  Indeed it will probably be remembered as a/the golden period.

What does your Poster think?


  • Putin will step down from the Presidency
  • I don't think that we will see any silly constitutional games that will see him installed as Prime Minister
  • He will continue to be a very active participant in Russian political life - Chairmanship of Gazprom?
  • Which means that he is not, and will not be a lame duck President
  • A chosen successor will take over - Medvedov better than Ivanov.  Anyone better than Sechin.  Kozak better than all of the above.
  • There will be no meaningful attempt at a colorful revolution
  • Freedom of speach will not be the winner but it will be democratic as it will reflect the will of the people and the Russian narod and your Poster's business will be better off as a result

I expect that the 5th Directorate thugs who are gorging themselves on the Greenspan-inspired global liquidity excess will try to engineer a pathetic quasi-legal attempt at reinstalling Putin.  Putin will resist and succeed.

What does that mean for the private equity business in Russia?


  • Now is a better time to be a buyer than a seller - indeed we should see prices drop from their currently over-inflated levels
  • Deal making will slow - watching which of the Oligarchs is doing deals may be a very good reflection, if indirectly, of the current state of internal fighting.
  • Expect to see Russian millionaires and billionaires in the restaurants and shops of London, New York and Paris as they enjoy their wealth and wait for the Presidential elections to play out.

Finally if a Russian businesswoman declares that she likes vodka, declare yourself to be a tea-total, vegetarian tree-hugger and wake up on Saturday morning better off than your Poster.


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Ventursome Consumption

Everything that is tagged “Russia” or “russia” for that matter on del.icio.us ends up in Endo, my RSS feed reader.  The most common subject over the last week or so has been a piece on Russian Web2.0 apps.  I have been harsh before on just how slow Russia has been to catch on to Web2.0 but I was genuinely shocked at the paucity of the offerings and the complete lack of original thought.  Nearly all the sites listed are direct copies or clones of popular US sites; My Space, Linked In, Flickr etc., (no link love - if you can't find them on your own it's probably time to stop reading.)

This week the Government's VC fund-of-fund effort took another step towards its laboured birth.  I have been here before and don't intend to recover old material in length; the precis - good idea, will lose money, should help build the ecosystem.

Meanwhile the Poster in recovery mode from a somewhat surprising consumption of gin martinis, champagne and vodka (in that order, I think) on Friday night has been in slow recovery mode all Saturday (I'm a lot better now - thanks for asking) which involves catching up on a bunch of reading.  The Economist had an article from the beginning of August titled Venturesome Consumption the principal theme of which is the ongoing US angst over losing its “upstream” technical lead to India, China and Russia with their greater share of science graduates.

There is a dissenting voice who speaks sense - Amar Bihde, a Professor at Columbia business school.  You can find his presentation here.  His thesis, or my take on it, is that the origination of technology is (reasonably) irrelevant.  Its the ability to:

  • Make money from innovation - business model application
  • Improve business through the use of technology - willingness to adapt management procedures and take risk to improve business
  • Consumers who are willing to try new products
which is more important. I am not qualified to comment on the US end of innovation.  I can say that Russia has a lot of brains and academia and almost no innovation.

I feel a little like a stuck record (or is that a faulty DVD laser?) on this issue.  Russia can churn our as many scientists and programmers as it likes but until it starts to churn out entrepreneurs who know enough to take risk - just taking risk because you don't understand what you are risking is not enough - it will not profit from academia or its supposed benefit in scientific schooling.

Silicon Valley/ the Bay Area and a couple of other US centers (Boston, Dallas/Austin, NY) continue to have a disproportionate affect on new technology adoption because:


  • They have access to entrepreneurs and managers who understand how to sell new products
  • Companies which are genuinely willing to try new technologies to give them a competitive advantage
  • Consumer and early adopters who will try new products
  • An environment which believes that it is better to try-and-fail than not to try at all
  • Compare this with a Russian youth who believe that the best job that they can get is as a Chinovnik
The smothering hand of the bureaucrats, or chinovniki in Russian, is a constant problem. “Mr. Chinovnik is like a parasite on people like me,” he said.
Its business not technology that makes technology business work.


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11 August 2006

Airport Fuckwittery

No this is not about having to board long plane rides with nothing but your underwear.

Instead the wise and mature business heads that are otherwise known as the government are drafting a plan that would have Sheremeytevo run all other airports.

This is clearly a good idea because:

Sheremeytevo is clearly the worst run airport in the my experience anywhere in the world (although CDG runs it close)
Why allow well run airports take passengers from badly run airports with an indeterminate journey time which could be 40 minutes or 4 hours.
Everyone should suffer the same pain except of course those who draft the laws who have blue flashing lights and fly in private jets on their government salaries
Only a complete fuckwit could dream up a plan like this
There are no other reasons why this is a good idea

I hope that this plan will take as long to come about as the fabled rail line to Sheremeytevo which is at the 8 years and counting stage.

Plan Calls for Sheremetyevo to Manage Other Airports
Bloomberg

The government may put state-owned Sheremetyevo Airport in charge of other airports in the country to improve efficiency and pool financial resources for their development, according to a plan being drafted by the Transportation Ministry.

Sheremetyevo, which is 100 percent state-owned, may become a management company for an undisclosed number of domestic airports in which the government also holds stakes, Transportation Ministry spokesman Timur Khikmatov said by telephone Thursday.

The plan reflects the government's push to control strategic sectors of the economy, including transportation. Earlier this year, the government said it wanted to combine several domestic airlines with Aeroflot, the country's largest carrier. It is also merging aircraft manufacturers to form the Unified Aircraft Corporation.

Russia's 185 airlines flew 35.1 million passengers last year, 3.9 percent more than in 2004. Their growth is constrained, however, by limited resources to expand fleets because of high duties on imported jets and insufficient domestic production of airplanes.

Khikmatov said there was no definite list of airports that would participate in the government plan. He said it might involve airports in St. Petersburg, Novosibirsk, Sochi, Krasnoyarsk, Samara and Yekaterinburg.

“It makes sense to bring them together to turn this amorphous government collection into a stronger player on the international market,” Sheremetyevo deputy chief executive officer Dmitry Kalinin said by telephone. He added that the plan was still at an early stage.


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MTS Logo

A wry smile crossed my face as I read this gem.  Clearly the new team at MTS had to establish new kick-back arrangements.  MTS needs to be renamed not rebranded.  My favourite suggestion is “ad agency fee-fest.”

They are right the egg is an abomination, but it took them over a year to get to the egg, still better than the railway line to Sheremeytevo.

Saatchi & Saatchi to Promote MTS
Bloomberg

Mobile TeleSystems, the country's largest mobile phone company, picked a new advertising agency as the company is dissatisfied with a recent rebranding campaign, Kommersant reported without saying where it got the information.

Mobile TeleSystems picked Israeli advertising company Saatchi & Saatchi in a tender to promote a new brand that was introduced in May.

Meanwhile, the company will continue to work with Leo Burnett advertising agency, Kommersant reported Thursday.

Executives at Mobile TeleSystems dislike the new company brand logo, introduced in May, which features a white egg against a red background, Kommersant said, citing unidentified advertising companies that took part in the tender.

Mobile TeleSystems spokesman Kirill Alyavdin declined to comment on the report. Both Leo Burnett and Saatchi & Saatchi are owned by Paris-based Publicis Groupe, the world's fourth-largest advertising company.


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10 August 2006

Drive by Shootings in Sin City

thecopydude is worried by the lack of drive by shootings - where has the city of sin gone and the lack of economic reality being shown by backpackers - I mean why negotiate with an impecunious tourist when the easy prey wears a sharp suit and pointy shoes.

Sin City:
What image do potential tourists have of Moscow? According to Moscow officials, it’s one of corruption, prostitution and the dark side of life. And it’s all the fault of the Lonely Planet Guide - the backpacker’s bible.
redsquare
Today’s UK Guardian says Lonely Planet has been blasted on Russian TV for slagging Moscow, but hardly springs to its defence. I know my (borrowed) Lonely Planet guide to Moscow has a chapter on ‘Dangers and Annoyances’, but it runs just half a page in a 50 plus page section. If anything, the skinny on Sin City is understated. True, it warns against flatheads and xenophobic drunks but you’ll find these in any English pub.
So I was surprised when the Guardian article puts it all in perspective by adding some ‘Moscow Facts At A Glance’. Here you learn that ‘drive-by killings are common‘.
Really? How common is common? Some lengthy googling found no crime statistics to support this. It was fascinating to discover that more dead bodies turn up in Moscow (95) than missing persons (64). And that public drunks (3,922) outnumber dead bodies - assuming you can tell the difference. I thought I was on to something when Google matched the phrase exactly with: ‘drive-by killings are more common than butter’. Disappointing:  this only linked to a detective novel I’d already read.
Finally, though, my patience was rewarded, and the whole rationale for the Guardian’s story came out. One wonders why it wasn’t correctly attributed to Pravda:
Open Season On Crows
Crow-killing as a popular movement of city bird hunters took shape in 2005. A few hundred crow killers shoot the birds in Moscow and vicinities. Most of the hunters are the well-off types who shoot out the windows of their cars. (Drive-by shooting.)
So there you have it. There is no point in ordering a balcony, street-facing room at the Ukraina or the Metropole. The drive-by excitement may fall short of the Guardian’s promise. And if a crow lands on your balcony it could be nasty.
Just for good measure, I ran a last check on Virtual Tourist dot com. No eye-wtiness reports of drive-by killings there either but still a handy tip about prostitutes: Quote:
Moscow is crawling with ‘working girls’ and just because she doesn’t charge don’t mean she ain’t one’
Virtual Tourist doesn’t explain how the visiting American woman came by this deep insight but certainly not from Lonely Planet, which is careful to point out that all prostitutes in Moscow are in Western Hotel lobbies. Of what use this is to backpackers, who can’t afford to sleep in a hotel lobby never mind the trimmings, isn’t clear. Or maybe it does explain why those on the Lonely Planet are lonely.
Quite why Moscow Tourist Officials picked a fight with Lonely Planet is also a mystery. Lonely Planeteers are a loyal clan and there is bound to be Backpacker Backlash. They might just all up and take their nits and thermos flasks to Prague or Kiev. Or was that the idea?


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09 August 2006

A Russian looks at Western Democracy

White Sun of the Desert, or should that be No Sun in Sakhalin, has done us all a favor by deconstructing an incredibly poorly put together argument from Konstantin.  Personally I gave up reading at the point Konstantin described India as a country in which conflict was frowned upon - clearly complete nonsense.

A Russian looks at Western Democracy:
Konstantin of Russia Blog has written a post on the failure of western democracy, and it contains such an enormous number of factual errors that I am compelled to address his entire post on here.
Firstly, he makes the assertion that:
It is not hard to see that at the heart of the model of democracy lies confrontation. Conflict and conflict based competition is the essence of democracy. Elections, multi-party system, checks and balances, free press, civil society – they are all about competing, warring, struggling for power, dividing people into winners and losers, fighting for minorities rights.
Well, quite.  The whole idea of democracy is that issues which lead to confrontation are resolved non-violently, even though the confrontation remains.  As rational debate is a non-violent alternative to a fist-fight, so democracy is an alternative to going to war for political ends.  Indeed, conflict and conflict based competition is the essence of democracy as it is the essence of human nature:  managing that conflict is therefore essential, and democracy is the best way of achieving this without killing people or locking them up.
It all works in aggressive cultures where people prefer competition over harmony, criticism over consensus, and change over stability.
I’m not entirely sure what he means here.  Is he saying that there are cultures where people prefer harmony over competition in all cases?  If so, I pity their olympic team.  Is there a culture anywhere which reaches a concensus without first enduring criticism from within?  I doubt it.  And assuming that the world can be divided into “aggressive” and “non-agressive” cultures, does a quick look around us confirm that the it is only the former that are able to successfully adopt democracy?  It wouldn’t seem so.  The Dutch, Danes, Swedes, Finns, Irish, Canadians, New Zealanders, and Portugese could be described under the circumstances as “non-aggressive”, yet they are all functioning democracies.  Yet places where violence is commonplace such as the North Caucasus, East Africa, and the Middle East are devoid of anything which could be described as a functioning democracy.  The evidence does not stack up in support of the sentence I’ve quoted above.
How comes people of democratic cultures did not annihilate each other so far? I think it’s a result of several factors.
First, the ability to keep aggression “pacified” is a result of a thousand years of never ending wars in Europe between dozens of countries varying is size. The sheer instinct of survival “civilized” European nations and by the time first concepts of democracy were tried European wars were so “civilized” that citizens of some Crapenburg Principality didn’t even know if today they belong to France or to Prussia although the quantity of wars and conflicts never really decreased. Millennium of European never ending wars also brought up a new type of man – a person who is friendly or neutral towards occupying troops, who is ready to compromise, who values above all the life of an individual but doesn’t care much about the fate of his Crapenburg Motherland. But the most important - Europeans learnt to treat conflicts and even wars more like a game that should be kept within “civilized” rules forged over centuries. Fortunately, it all ended with an invention of weapons of mass destruction.
I’m not sure exactly what he is saying here.  It seems to be that after centuries of fighting, Europeans adopted a style of warfare which was less brutal than that practiced elsewhere and Europeans were more concerned with individual wellbeing than nationalism.  Whether this actually occurred at any point I am not in a position to say, but I can assure Konstantin that had this ever been the case, all these principles were abandoned at the outbreak of WWI and by WWII they had been long forgotten.  I don’t think there was anything that was civilised about the Nazi invasions of WWII and the subsequent occupations, and I certainly don’t think there were a great many examples of “a person who is friendly or neutral towards occupying troops, who is ready to compromise”, with the notable exception, of course, of the Vichy French.
In countries where wars were very rare and where people could enjoy at least a hundred years of peace another type culture was molded. We are talking about India, China, Japan, and Russia. In these cultures conflicts were frowned upon, harmony was more important than competition, unity more important winning, where individual interests were less important then interests of a family, group, nation or country. In such cultures conflicts were subdued, competition highly regulated, team spirit encouraged and individualists ostracized.
I really don’t know where to start with this one.  I think I can see what Konstantin is trying to say, and that is in many non-European cultures the unity of the family or group is more important than that of the individual.  We have a word for this kind of arrangement: tribalism.  Far from being a model of harmony and unity, it is probably the single biggest cause of bloodshed in the world today.  Take a brief look at the histories of each country he mentions, for instance.
Prior to India being occupied by the colonial forces of Portugal, Netherlands, France and the United Kingdom, India did not exist as a single entity but as dozens of sultanates, kingdoms, and fiefdoms.  Contrary to Konstantin’s suggestion that conflict was frowned upon, these various entities fought each other tooth and nail until the Europeans arrived who took advantage of the fractious nature of relations between the kingdoms to establish their colonies and eventually subdue the whole of what became India.
China was similar to India in that the country we now know as China existed only as a collection of ruling dynasties and states,  who fought with each other with a regularity broken only when one or two grew strong enough to completely dominate the others.  Then the Mongols invaded and slaughtered the northern Chinese peasantry in the millions, which doesn’t exactly stack up with Konstantin’s assertion that conflict was frowned upon.  Then the peasants overthrew the Mongols, and founded the Ming Dynasty which embarked on a series of military conquests which kept it in power for 300 years before it was overthrown with much bloodshed and the Manchu Dynasty took over.  Sadly for Konstantin’s theory and the Han Chinese, the Manchu Dynasty set about subduing the latter and wound up fighting the bloodiest civil war in history which cost some 20 million lives.
Japan as a conflict free, peaceful nation in harmony with itself and others sounds more like post 1945 than any time before that.  Power struggles between rival clans characterised Japan’s medieval era, with the emergence of the warrior class known as the samurai.  Presumably these warriors lay around getting bored, under Konstantin’s version of history.  Then there was a bloody ten-year civil war which led to the “Warring States” or Sengoku period.  Things then looked good for a while, until Japan invaded Korea, leaving only when kicked out by the Chinese, who had come to Korea’s aid.  This brought things into the Edo Era, characterised by - you guessed it - fighting between rival families and clans, all seeking to suppress the others by brute force.  After adopting numerous Western institutions, Japan proceeded to fight and defeat China, thrash the Russian navy, and annex Taiwan, Korea, and the south of Sakhalin Island.  Helping itself to several Pacific islands in WWI, Japan then invaded and occupied Chinese Manchuria and later enter into the war with the USA which would eventually lead to Japan’s complete destruction and capitulation.
All three of the above are examples of tribal conflict, or its big brother nationalism.  Whereas conflict within each family unit, clan, or nation is rare in such a setup, this is because any dissenters are dealt with quickly and brutally.  And under such a system, discontent and conflict was directed, quite deliberately, to those outside the family, clan, or nation.  Far from being a system of peace and harmony, it has caused more wars and bloodshed than any perceived violent by-products of Western Democracy.
The fourth nation which Konstantin cites as being a place where wars were rare and people lived in harmony rather than conflict is Russia.  I am not sure which period he is referring to, but I think we can safely rule out the time from the violent revolution in 1917, through the barbaric civil war in which no less than 4 sides fought each other across the whole country in thousands of localised actions over 5 years, to the brutal suppression, incarceration, and starvation of the population up to the Great Patriotic war which claimed somewhere around 25 million lives.  No, I don’t think he’s referring to this period.
But what about the Tsarist times?  Weren’t they periods in which wars were rare and conflict frowned upon?  Hardly.  Having eventually kicked the Mongols out, under whose occupation Russians had suffered for 300 years, Russia spent the next 350 expanding their empire in all directions, fighting Poland, Sweden, Belorussia, Ukraine, Turkey, France, Britain, and Japan.  During this period, Russia conquered and claimed the vast stretches of Siberia and Far East, destroyed the tribal rulers in the Caucasus, and smashed the khanates and kingdoms in the process of annexing most of Central Asia.
I can only assume that the period of peace and harmony that Konstantin is referring to is the post WWII period until 1991, during which the opportunities to express dissent with the ruling powers were almost nil, and the government demonstrated its willingness to use force in the face of opposition by sending tanks to crush protests in Budapest and Prague.  Small wonder the voices of political dissent remained a squeak.
Now what happens when an aggressive democratic model is installed in such countries? Let’s have a look. In Saddam times Sunni and Shia lived together in peace, marriages between Sunni and Shia were common, people didn’t even know if their neighbors are Shia or Sunni.
This, in my opinion, is utter nonsence.  I have yet to meet any Sunni who has married a Shia in the Middle East.  In Kuwait, hardly a bastion of western democracy, Sunnis and Shias live together in peace but are fully aware of which side of the line their neighbour sits.  During the Iran-Iraq war, Sunnis in Kuwait sent money to Iraq whereas Shias sent cash to Iran.  And all this ignores the suppression of the majority Shia by the minority Sunni under Saddam Hussein, which involved years of bloody repression culminating in the massacre of Shia by the Iraqi army after the USA had unwisely persuaded them to rise up in arms against the ruling elite before neatly leaving them right in the shit.  Shia and Sunni lived in peace side by side in Saddam’s Iraq for the same reason there was peace in 1930s Russia: anyone who spoke out was murdered, along with their family and close friends.
Of course, there were small groups of radicals but they were underground.
Yes, they were underground all right:  in mass graves.
Then “democracy” comes. It was all but natural that major political parties and organizations competing for votes start profiteering on the most evident topic – religious differences. Conflict that was almost invisible before is blown out of proportion.
The conflict was invisible because anyone who made it visible was immediately killed.  As in the case of the Soviet Union’s demise, conflict arose in the post-Saddam Iraq once the iron fist of tyranny was removed, not because democracy arrived and forced these hitherto peaceful folk to start competing for votes.  Like a boiling pot whose lid is suddenly removed, previously suppressed internal conflict boils over into violence once a tyrant is removed from power.  The notion that democracy forces peaceful people to start shooting each other as they compete for votes is utter nonsense,
At the same time, unlike Westerners, people in Iraq are not used to treat conflicts as a “game”. They take it very seriously. A country is divided by implacable differences – you belong either to a Sunni party or to a Shia party. What’s more – the so-called system of checks and balances leaves no hopes to resolve the conflict peacefully. We get a civil war but what is the real reason of the civil war – religious differences or a model of democracy that encourages confrontation?
So here we have a country with an ugly sectarian split running down its middle, yet the sectarian fighting is not caused by religious differences but by a model of democracy which encourages people to turn violent?  Sorry, but this is shite.
More then that – countries that achieved some harmony are strongly criticized by democracy pundits for lack of conflicts and fights.
Eh?  Such as where?  What countries which are currently living in peace and harmony are criticised by democrats for not being in a state of war?  Sadly, Konstantin doesn’t say.
There are hundreds of examples when a Western type model of democracy gave rise to civil wars.
Really?  Hundreds?  Name them.  And have there really been more civil wars born from western democracy than tribalist systems of government?  No.
American model was probably the worst although Americans try really hard to implement it all around the globe.
And why is the American model the worst form of western democracy?  Again, Konstantin doesn’t say, but I suspect it is simply because it is American and nothing more.
Take Latin America, for example. In the 19th century it took only a year or two for a Latin American country to adopt American type “democracy” and a new civil war between “Democrats” and “Republicans” started.
I think it only took a year or two of a Latin American government adopting Communism, receiving large handouts of Soviet cash and weapons, and beginning a process of confiscating property which before civil war would break out.  Under current circumstances, those Latin American countries which have adopted constitutional democracy seem to being doing better than at any time in their history.
Wonder why only 15 years ago conflict between Ukrainian-speaking citizens of Ukraine and Russian-speaking Ukrainian was almost non-existent? Why differences between Northern and Southern clans in Kirgizia were so meager?
Erm, would that be because anyone advocating such nationalist ideas as Ukrainian language would find themselves harrassed, jobless, arrested, imprisoned, or shot prior to 1991?
“Democracy” in countries like India or Japan is very far away from the Western model. Japan managed to live fifty years with a one-party parliament, symbolic checks and balances system, incredible lack of any political dissent on TV and in newspapers. Things are not better in India.
It is true that the Japanese Liberal Democrat party held the reigns of power for 35 years, but since the early 90s various opposition parties have sprung up and been included in coalition governments and nobody can say that in the last 15 years there has been an incredible lack of any political dissent.  Currently, Japan’s governmental system very much resembles that of western democracies.  So where is the violence and fighting which according to Konstantin should have occured following Japan’s supposed conversion to western democracy?  It doesn’t exist, of course.  Konstantin, in an effort to promote tribalism and dictatorship over western democracy, is talking utter nonsense.

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08 August 2006

Peak Oil update

Really scary

Peak Oil update:
What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline. At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.


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Long or Short Legs

Long or Short provided a helpful response to yesterday's long or short legs question which I have posted below for your edification as well as a pair trade in their natural state:

Long or Short Capital » On Legs, Long Russian Legs

Mr. Juggles is on a romantic Latin American holiday with Kaiser, so I’ll substitute for them. While it is possible to do the aforementioned pair trade, it is not recommended. Muscovite legs may indeed be experiencing a temporary outflow, but the imminent economic domination of Europe via Tsar Putin’s oil lasso combined with surging demand for nubile russian legs in Moscow ensures that this outflow is not sustainable; fundametal pressure is on the side of the Muscovite legs. The valuations multiples on Russian legs should expand as the price (implied or cash) converges with Western World leg prices; recent acquisition multiples have been bearing this out. We are bullish on attractive Russian women assets as a whole. There is the potential for a virtuous circle, for as the Russian rich get richer, the women around the rich get hotter (and able to command higher prices).







V photosession, originally uploaded by monkey_gastello.

06 August 2006

Long or Short

Long actually, very long but just not in Moscow - legs that is.

With the meme borrowed from Long or Short Capital the leading “Online Financial Humor/Abstract Investment Recommendation” blog.

It was pointed out to me by several westerners coming in to Moscow this weekend that the airports were full of long-legged Russian beauties heading for the flesh spots of Europe.  Where, it would seem that  Moscow's business community has decamped to (Moscow is Russia, but Russia is not Moscow).  As the incomers lacked the cynicism of a long-term Muscovite, I felt it important to point out to them that they were probably the reserve/replacement high-class hookers heading to the south of France and Sardinia to replace those who have been on duty since early June.

So a question to Mr. Juggles, clearly now is a good time to be long legs, but is it possible to short legs in Moscow and be long them in the south of France?

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03 August 2006

Answering Comments

I write all my posts in Ecto, a super-cool Mac-only blog writing tool, and get my comments via email to my gmail account.  In short I never go to my actual blog-site.  It's always good to get comments on posts and mostly, I like to reply.  There has to be an easier way than logging in to my own blog and leaving myself a comment.

There just does not seem to be an easy way - am I missing a trick here; help needed.

copydude responded to my Clapton post suggesting that Clapton's guitar solo was going to shake the murals off the wall of St. Basil's.



“ Andrei Batalov, head of the cathedral's restoration commission, believes that . . . Moscow's construction boom is not the only threat facing the cathedral. He said it is also being put under strain from rock concerts on Red Square. The music is frequently 100 times above the legal norm, he said, and St Basil's intricately restored wall murals and icons are at risk of peeling off the walls as a result.”

If that was the reason then a statement that there would be no more rock concerts on Red Square as a result then suggestions of impropriety could be withdrawn.

I reiterate my previous statement based on some inside information that Clapton's people got fed up with being mucked around.


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Internet advertising, less irritating than other types of advertising

Russian is a much more direct language than English, and in particular English English.  In English English obfuscation is an art form which can only be interpreted by the culturally attuned.  So I was delighted by this headline from Romir, which is absolutely spot on:

Internet advertising seems less irritating for the users than the other types of advertising:
Two thirds of the Russian Internet-users noticed that during the last 12 months the quantity of advertising in Internet increased. And 42% of the respondents pointed out that it increased considerably. As to their attitude to Internet advertising, above half of the participants feel irritation: in 30% of cases it irritates like the other types of advertising and in 20% of cases – it irritates a bit less than the other types of advertising. Still Internet audience has the most loyal attitude to advertising, that makes the advertisers hope for stronger effect of advertising placement in Internet if compared to other advertising vehicles and types of advertising...


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30 August 2006

I am sorry

said with heavy Russian accent;

But my template on Blogger is a mess of broken html and partially implemented stuff from back in the days when I gave a shit.

So over the next few days (read the weekend) I am going to start again - which means that if you read this via a feed-reader (83% of you) you may get multiple re-publishings of my posts of the last 30 days.

Instead of getting pissed at me follow the links in the “legs” posts and smile.


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Sucher, Head of Alfa Capital, Resigns

Sucher, Head of Alfa Capital, Resigns:

I have no inside information to impart other than to say that there have been rumours that all has not been sweetness and light at work recently.

Whatever the rights and wrongs of the dispute, Alfa is the loser.  Bernie is hugely respected, vastly intelligent and worth an evening of beer and darts at anytime.


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The Times They Are....

not the same as they were before.

Up until 2000-ish I used to describe Russia as a “hand shake economy” - meaning that you agreed a deal face-to-face, man-to-man (there were no women until after the deal) and it mattered little what the lawyers lawyered thereafter - I honour my word etc.,

And the world has changed.  A deal is not a deal until you have signed, stamped and initialed, in original, one copy for every one in the room, and any pets they might have as well.

Which is all well and good - it works in the US.  Except that in Russia no one can be bothered to actually read the agreements they are due to be signing until they are due to be signed. Bosses never read agreements, it would be like admitting that you did more than surf porn on your computer.  Getting an NDA signed takes 3 days, a term sheet at least a week.  Closing a deal - hair that I can no longer afford.

Five fucking hours in a negotiation that would have taken 5 minutes if the other side had read the documents.  Lets put a measurable cost on that;

1 hour prep time with our lawyers - $600
5 hour meeting - $3,000
1 hour traveling  - $600
Me working until 22.00 doing work that I could have better done earlier - annoyed
My sense of humour - invaluable

Rationale - if it was easy every one would be doing it.


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25 August 2006

Expert Says Sychyov's Injuries Caused by Hazing

Sychov was the unfortunate soldier at the Armor (sic) Academy who had to have his legs and genitals amputated after.......

Two expert witnesses provide two different theories.

A civilian (non-army) doctor says that his injuries were caused by being forced to remain in one position for an extended period of time and a brutal beating;

Expert Says Sychyov's Injuries Caused by Hazing:

An Army doctor however believes that his injuries were caused by a long-standing problem and that if the diagnosis had been correct he would not have lost his legs and genitals.  The unspoken element of which is that if he had not been hazed (brutally beaten) then his genetic disorder would not have become evident.

Burdenko Doctors Say That Sychyov Was Misdiagnosed

I'll let you make your own minds up.


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The Devilish Triangle of Budget Policy

An age ago I posted on the Kanutian approach to financial management that the 5th Directorate Thugs so enjoy.  And here from the ante-deluvian Moscow Times comment yet more evidence.

The Devilish Triangle of Budget Policy:
But then President Vladimir Putin reshuffled the cards. Apparently talks with businessmen convinced him that a stronger ruble could harm the economy. So now the government and Central Bank have three assignments: keep inflation down, halt real ruble appreciation and, foremost, increase government spending. In short: Do the impossible.

The joy of a command economy without criticism is that you can command.  If inflation, ruble growth and government spending are to be controlled together then that is how it must be.  If the order comes from VVP, its pretty difficult for the press to point out that only someone who ran an administrative office in Dresden could possibly believe that the three can have a mutually happy ending.

There is a seeming surfeit of articles saying that if the price of oil was not so high then the Russian economy would be in trouble.  But it is, high that is. Whether you believe in Hubbert's Peak Oil theory or, more prosaically, that demand is growing faster than supply;    the price of oil in the medium term is destined to remain above its long term average. 

Meanwhile I am trying to find who has the cure for the Dutch Disease that seems to have replaced Bird Flu as the global pandemic to worry about.

As a friend never tires of saying;

If we had some eggs, we could have have ham and eggs.  If we had some ham.


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14 August 2006

Failing to Join the Global Supply Chain

Today, I wrote to our investors that one of the company's achievements, where I sit on the Board, in the last quarter was finding alternate sourcing for all of the components that it had previously developed and sourced in Russia.

Not because the suppliers were bad, in fact they had been an integral part of the component development, nor unreliable, nor expensive but because if you manufacture a product that is part of a global supply chain then reliability of delivery is vitally important.

As the components had to pass through Russian customs on their way to assembly plants in Thailand and Malaysia it became impossible to predict delivery time.  These were high value added components in the whole package and the key behind the intellectual property of the package.

So the plants in Russia lost out on the manufacturing income and are now effectively outsourced R&D (really product development) centers.

And it has got worse since the new man was brought in.  Do you think he reads Ruminations or is currently in Cantineta or Sardinia/South of France/not at his desk?

I read in a study that Intel opening its fab in Israel was a key moment in Israel's development as a high-tyech center.  We have certainly benefitted from employees who have passed through on their way to more entrepreneurial jobs and finally “home.”


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12 August 2006

The Presidential Panic

As I might have mentioned Friday night turned in to a classic night of Moscovian bacchanalian excess, not helped by a lack of food.  Two themes recurred; Gin Martinis and risk.

The event was a Russian birthday party, expat participation was limited, which is why I spent from midnight to 03.00 arguing over what comes next with two Russian real estate and restaurant entrepreneurs - in Russian.  A female and her father - she comprehensively drunk me under the table.  Did I mention that I speak Russian fluidly?

By what comes next they mean who follows Putin, and what that means for their business.  Already they believe that their businesses are hamstrung by Chinovnik rent-seekers.  Father wants to stop investing in Russia and find opportunities in India and China because of his concerns.  Whilst there is a certain element of grass always being greener etc., he expressed more fluently than most that he was not going to risk cash in Russia until he knows what comes next.  I had assumed that we would start to see evidence of Russian risk aversion in 1Q 2007.  It would seem that it has already started.

Balls-of-steel and stomach-of-iron daughter who runs the business on a day-to-day basis was more comfortable with transition risk.

I think that the difference between their positions reflects a generational change; she had not left University when the Soviet Union collapsed, Dad is 30 years older.  He believes that everything can change - and indeed in his lifetime it has.  She has only been in meaningful business since the crisis - when life has been good.  Indeed it will probably be remembered as a/the golden period.

What does your Poster think?


  • Putin will step down from the Presidency
  • I don't think that we will see any silly constitutional games that will see him installed as Prime Minister
  • He will continue to be a very active participant in Russian political life - Chairmanship of Gazprom?
  • Which means that he is not, and will not be a lame duck President
  • A chosen successor will take over - Medvedov better than Ivanov.  Anyone better than Sechin.  Kozak better than all of the above.
  • There will be no meaningful attempt at a colorful revolution
  • Freedom of speach will not be the winner but it will be democratic as it will reflect the will of the people and the Russian narod and your Poster's business will be better off as a result

I expect that the 5th Directorate thugs who are gorging themselves on the Greenspan-inspired global liquidity excess will try to engineer a pathetic quasi-legal attempt at reinstalling Putin.  Putin will resist and succeed.

What does that mean for the private equity business in Russia?


  • Now is a better time to be a buyer than a seller - indeed we should see prices drop from their currently over-inflated levels
  • Deal making will slow - watching which of the Oligarchs is doing deals may be a very good reflection, if indirectly, of the current state of internal fighting.
  • Expect to see Russian millionaires and billionaires in the restaurants and shops of London, New York and Paris as they enjoy their wealth and wait for the Presidential elections to play out.

Finally if a Russian businesswoman declares that she likes vodka, declare yourself to be a tea-total, vegetarian tree-hugger and wake up on Saturday morning better off than your Poster.


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Ventursome Consumption

Everything that is tagged “Russia” or “russia” for that matter on del.icio.us ends up in Endo, my RSS feed reader.  The most common subject over the last week or so has been a piece on Russian Web2.0 apps.  I have been harsh before on just how slow Russia has been to catch on to Web2.0 but I was genuinely shocked at the paucity of the offerings and the complete lack of original thought.  Nearly all the sites listed are direct copies or clones of popular US sites; My Space, Linked In, Flickr etc., (no link love - if you can't find them on your own it's probably time to stop reading.)

This week the Government's VC fund-of-fund effort took another step towards its laboured birth.  I have been here before and don't intend to recover old material in length; the precis - good idea, will lose money, should help build the ecosystem.

Meanwhile the Poster in recovery mode from a somewhat surprising consumption of gin martinis, champagne and vodka (in that order, I think) on Friday night has been in slow recovery mode all Saturday (I'm a lot better now - thanks for asking) which involves catching up on a bunch of reading.  The Economist had an article from the beginning of August titled Venturesome Consumption the principal theme of which is the ongoing US angst over losing its “upstream” technical lead to India, China and Russia with their greater share of science graduates.

There is a dissenting voice who speaks sense - Amar Bihde, a Professor at Columbia business school.  You can find his presentation here.  His thesis, or my take on it, is that the origination of technology is (reasonably) irrelevant.  Its the ability to:

  • Make money from innovation - business model application
  • Improve business through the use of technology - willingness to adapt management procedures and take risk to improve business
  • Consumers who are willing to try new products
which is more important. I am not qualified to comment on the US end of innovation.  I can say that Russia has a lot of brains and academia and almost no innovation.

I feel a little like a stuck record (or is that a faulty DVD laser?) on this issue.  Russia can churn our as many scientists and programmers as it likes but until it starts to churn out entrepreneurs who know enough to take risk - just taking risk because you don't understand what you are risking is not enough - it will not profit from academia or its supposed benefit in scientific schooling.

Silicon Valley/ the Bay Area and a couple of other US centers (Boston, Dallas/Austin, NY) continue to have a disproportionate affect on new technology adoption because:


  • They have access to entrepreneurs and managers who understand how to sell new products
  • Companies which are genuinely willing to try new technologies to give them a competitive advantage
  • Consumer and early adopters who will try new products
  • An environment which believes that it is better to try-and-fail than not to try at all
  • Compare this with a Russian youth who believe that the best job that they can get is as a Chinovnik
The smothering hand of the bureaucrats, or chinovniki in Russian, is a constant problem. “Mr. Chinovnik is like a parasite on people like me,” he said.
Its business not technology that makes technology business work.


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11 August 2006

Airport Fuckwittery

No this is not about having to board long plane rides with nothing but your underwear.

Instead the wise and mature business heads that are otherwise known as the government are drafting a plan that would have Sheremeytevo run all other airports.

This is clearly a good idea because:

Sheremeytevo is clearly the worst run airport in the my experience anywhere in the world (although CDG runs it close)
Why allow well run airports take passengers from badly run airports with an indeterminate journey time which could be 40 minutes or 4 hours.
Everyone should suffer the same pain except of course those who draft the laws who have blue flashing lights and fly in private jets on their government salaries
Only a complete fuckwit could dream up a plan like this
There are no other reasons why this is a good idea

I hope that this plan will take as long to come about as the fabled rail line to Sheremeytevo which is at the 8 years and counting stage.

Plan Calls for Sheremetyevo to Manage Other Airports
Bloomberg

The government may put state-owned Sheremetyevo Airport in charge of other airports in the country to improve efficiency and pool financial resources for their development, according to a plan being drafted by the Transportation Ministry.

Sheremetyevo, which is 100 percent state-owned, may become a management company for an undisclosed number of domestic airports in which the government also holds stakes, Transportation Ministry spokesman Timur Khikmatov said by telephone Thursday.

The plan reflects the government's push to control strategic sectors of the economy, including transportation. Earlier this year, the government said it wanted to combine several domestic airlines with Aeroflot, the country's largest carrier. It is also merging aircraft manufacturers to form the Unified Aircraft Corporation.

Russia's 185 airlines flew 35.1 million passengers last year, 3.9 percent more than in 2004. Their growth is constrained, however, by limited resources to expand fleets because of high duties on imported jets and insufficient domestic production of airplanes.

Khikmatov said there was no definite list of airports that would participate in the government plan. He said it might involve airports in St. Petersburg, Novosibirsk, Sochi, Krasnoyarsk, Samara and Yekaterinburg.

“It makes sense to bring them together to turn this amorphous government collection into a stronger player on the international market,” Sheremetyevo deputy chief executive officer Dmitry Kalinin said by telephone. He added that the plan was still at an early stage.


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MTS Logo

A wry smile crossed my face as I read this gem.  Clearly the new team at MTS had to establish new kick-back arrangements.  MTS needs to be renamed not rebranded.  My favourite suggestion is “ad agency fee-fest.”

They are right the egg is an abomination, but it took them over a year to get to the egg, still better than the railway line to Sheremeytevo.

Saatchi & Saatchi to Promote MTS
Bloomberg

Mobile TeleSystems, the country's largest mobile phone company, picked a new advertising agency as the company is dissatisfied with a recent rebranding campaign, Kommersant reported without saying where it got the information.

Mobile TeleSystems picked Israeli advertising company Saatchi & Saatchi in a tender to promote a new brand that was introduced in May.

Meanwhile, the company will continue to work with Leo Burnett advertising agency, Kommersant reported Thursday.

Executives at Mobile TeleSystems dislike the new company brand logo, introduced in May, which features a white egg against a red background, Kommersant said, citing unidentified advertising companies that took part in the tender.

Mobile TeleSystems spokesman Kirill Alyavdin declined to comment on the report. Both Leo Burnett and Saatchi & Saatchi are owned by Paris-based Publicis Groupe, the world's fourth-largest advertising company.


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10 August 2006

Drive by Shootings in Sin City

thecopydude is worried by the lack of drive by shootings - where has the city of sin gone and the lack of economic reality being shown by backpackers - I mean why negotiate with an impecunious tourist when the easy prey wears a sharp suit and pointy shoes.

Sin City:
What image do potential tourists have of Moscow? According to Moscow officials, it’s one of corruption, prostitution and the dark side of life. And it’s all the fault of the Lonely Planet Guide - the backpacker’s bible.
redsquare
Today’s UK Guardian says Lonely Planet has been blasted on Russian TV for slagging Moscow, but hardly springs to its defence. I know my (borrowed) Lonely Planet guide to Moscow has a chapter on ‘Dangers and Annoyances’, but it runs just half a page in a 50 plus page section. If anything, the skinny on Sin City is understated. True, it warns against flatheads and xenophobic drunks but you’ll find these in any English pub.
So I was surprised when the Guardian article puts it all in perspective by adding some ‘Moscow Facts At A Glance’. Here you learn that ‘drive-by killings are common‘.
Really? How common is common? Some lengthy googling found no crime statistics to support this. It was fascinating to discover that more dead bodies turn up in Moscow (95) than missing persons (64). And that public drunks (3,922) outnumber dead bodies - assuming you can tell the difference. I thought I was on to something when Google matched the phrase exactly with: ‘drive-by killings are more common than butter’. Disappointing:  this only linked to a detective novel I’d already read.
Finally, though, my patience was rewarded, and the whole rationale for the Guardian’s story came out. One wonders why it wasn’t correctly attributed to Pravda:

Open Season On Crows
Crow-killing as a popular movement of city bird hunters took shape in 2005. A few hundred crow killers shoot the birds in Moscow and vicinities. Most of the hunters are the well-off types who shoot out the windows of their cars. (Drive-by shooting.)
So there you have it. There is no point in ordering a balcony, street-facing room at the Ukraina or the Metropole. The drive-by excitement may fall short of the Guardian’s promise. And if a crow lands on your balcony it could be nasty.
Just for good measure, I ran a last check on Virtual Tourist dot com. No eye-wtiness reports of drive-by killings there either but still a handy tip about prostitutes: Quote:
Moscow is crawling with ‘working girls’ and just because she doesn’t charge don’t mean she ain’t one’
Virtual Tourist doesn’t explain how the visiting American woman came by this deep insight but certainly not from Lonely Planet, which is careful to point out that all prostitutes in Moscow are in Western Hotel lobbies. Of what use this is to backpackers, who can’t afford to sleep in a hotel lobby never mind the trimmings, isn’t clear. Or maybe it does explain why those on the Lonely Planet are lonely.
Quite why Moscow Tourist Officials picked a fight with Lonely Planet is also a mystery. Lonely Planeteers are a loyal clan and there is bound to be Backpacker Backlash. They might just all up and take their nits and thermos flasks to Prague or Kiev. Or was that the idea?


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09 August 2006

A Russian looks at Western Democracy

White Sun of the Desert, or should that be No Sun in Sakhalin, has done us all a favor by deconstructing an incredibly poorly put together argument from Konstantin.  Personally I gave up reading at the point Konstantin described India as a country in which conflict was frowned upon - clearly complete nonsense.

A Russian looks at Western Democracy:
Konstantin of Russia Blog has written a post on the failure of western democracy, and it contains such an enormous number of factual errors that I am compelled to address his entire post on here.
Firstly, he makes the assertion that:
It is not hard to see that at the heart of the model of democracy lies confrontation. Conflict and conflict based competition is the essence of democracy. Elections, multi-party system, checks and balances, free press, civil society – they are all about competing, warring, struggling for power, dividing people into winners and losers, fighting for minorities rights.
Well, quite.  The whole idea of democracy is that issues which lead to confrontation are resolved non-violently, even though the confrontation remains.  As rational debate is a non-violent alternative to a fist-fight, so democracy is an alternative to going to war for political ends.  Indeed, conflict and conflict based competition is the essence of democracy as it is the essence of human nature:  managing that conflict is therefore essential, and democracy is the best way of achieving this without killing people or locking them up.
It all works in aggressive cultures where people prefer competition over harmony, criticism over consensus, and change over stability.
I’m not entirely sure what he means here.  Is he saying that there are cultures where people prefer harmony over competition in all cases?  If so, I pity their olympic team.  Is there a culture anywhere which reaches a concensus without first enduring criticism from within?  I doubt it.  And assuming that the world can be divided into “aggressive” and “non-agressive” cultures, does a quick look around us confirm that the it is only the former that are able to successfully adopt democracy?  It wouldn’t seem so.  The Dutch, Danes, Swedes, Finns, Irish, Canadians, New Zealanders, and Portugese could be described under the circumstances as “non-aggressive”, yet they are all functioning democracies.  Yet places where violence is commonplace such as the North Caucasus, East Africa, and the Middle East are devoid of anything which could be described as a functioning democracy.  The evidence does not stack up in support of the sentence I’ve quoted above.
How comes people of democratic cultures did not annihilate each other so far? I think it’s a result of several factors.
First, the ability to keep aggression “pacified” is a result of a thousand years of never ending wars in Europe between dozens of countries varying is size. The sheer instinct of survival “civilized” European nations and by the time first concepts of democracy were tried European wars were so “civilized” that citizens of some Crapenburg Principality didn’t even know if today they belong to France or to Prussia although the quantity of wars and conflicts never really decreased. Millennium of European never ending wars also brought up a new type of man – a person who is friendly or neutral towards occupying troops, who is ready to compromise, who values above all the life of an individual but doesn’t care much about the fate of his Crapenburg Motherland. But the most important - Europeans learnt to treat conflicts and even wars more like a game that should be kept within “civilized” rules forged over centuries. Fortunately, it all ended with an invention of weapons of mass destruction.
I’m not sure exactly what he is saying here.  It seems to be that after centuries of fighting, Europeans adopted a style of warfare which was less brutal than that practiced elsewhere and Europeans were more concerned with individual wellbeing than nationalism.  Whether this actually occurred at any point I am not in a position to say, but I can assure Konstantin that had this ever been the case, all these principles were abandoned at the outbreak of WWI and by WWII they had been long forgotten.  I don’t think there was anything that was civilised about the Nazi invasions of WWII and the subsequent occupations, and I certainly don’t think there were a great many examples of “a person who is friendly or neutral towards occupying troops, who is ready to compromise”, with the notable exception, of course, of the Vichy French.
In countries where wars were very rare and where people could enjoy at least a hundred years of peace another type culture was molded. We are talking about India, China, Japan, and Russia. In these cultures conflicts were frowned upon, harmony was more important than competition, unity more important winning, where individual interests were less important then interests of a family, group, nation or country. In such cultures conflicts were subdued, competition highly regulated, team spirit encouraged and individualists ostracized.
I really don’t know where to start with this one.  I think I can see what Konstantin is trying to say, and that is in many non-European cultures the unity of the family or group is more important than that of the individual.  We have a word for this kind of arrangement: tribalism.  Far from being a model of harmony and unity, it is probably the single biggest cause of bloodshed in the world today.  Take a brief look at the histories of each country he mentions, for instance.
Prior to India being occupied by the colonial forces of Portugal, Netherlands, France and the United Kingdom, India did not exist as a single entity but as dozens of sultanates, kingdoms, and fiefdoms.  Contrary to Konstantin’s suggestion that conflict was frowned upon, these various entities fought each other tooth and nail until the Europeans arrived who took advantage of the fractious nature of relations between the kingdoms to establish their colonies and eventually subdue the whole of what became India.
China was similar to India in that the country we now know as China existed only as a collection of ruling dynasties and states,  who fought with each other with a regularity broken only when one or two grew strong enough to completely dominate the others.  Then the Mongols invaded and slaughtered the northern Chinese peasantry in the millions, which doesn’t exactly stack up with Konstantin’s assertion that conflict was frowned upon.  Then the peasants overthrew the Mongols, and founded the Ming Dynasty which embarked on a series of military conquests which kept it in power for 300 years before it was overthrown with much bloodshed and the Manchu Dynasty took over.  Sadly for Konstantin’s theory and the Han Chinese, the Manchu Dynasty set about subduing the latter and wound up fighting the bloodiest civil war in history which cost some 20 million lives.
Japan as a conflict free, peaceful nation in harmony with itself and others sounds more like post 1945 than any time before that.  Power struggles between rival clans characterised Japan’s medieval era, with the emergence of the warrior class known as the samurai.  Presumably these warriors lay around getting bored, under Konstantin’s version of history.  Then there was a bloody ten-year civil war which led to the “Warring States” or Sengoku period.  Things then looked good for a while, until Japan invaded Korea, leaving only when kicked out by the Chinese, who had come to Korea’s aid.  This brought things into the Edo Era, characterised by - you guessed it - fighting between rival families and clans, all seeking to suppress the others by brute force.  After adopting numerous Western institutions, Japan proceeded to fight and defeat China, thrash the Russian navy, and annex Taiwan, Korea, and the south of Sakhalin Island.  Helping itself to several Pacific islands in WWI, Japan then invaded and occupied Chinese Manchuria and later enter into the war with the USA which would eventually lead to Japan’s complete destruction and capitulation.
All three of the above are examples of tribal conflict, or its big brother nationalism.  Whereas conflict within each family unit, clan, or nation is rare in such a setup, this is because any dissenters are dealt with quickly and brutally.  And under such a system, discontent and conflict was directed, quite deliberately, to those outside the family, clan, or nation.  Far from being a system of peace and harmony, it has caused more wars and bloodshed than any perceived violent by-products of Western Democracy.
The fourth nation which Konstantin cites as being a place where wars were rare and people lived in harmony rather than conflict is Russia.  I am not sure which period he is referring to, but I think we can safely rule out the time from the violent revolution in 1917, through the barbaric civil war in which no less than 4 sides fought each other across the whole country in thousands of localised actions over 5 years, to the brutal suppression, incarceration, and starvation of the population up to the Great Patriotic war which claimed somewhere around 25 million lives.  No, I don’t think he’s referring to this period.
But what about the Tsarist times?  Weren’t they periods in which wars were rare and conflict frowned upon?  Hardly.  Having eventually kicked the Mongols out, under whose occupation Russians had suffered for 300 years, Russia spent the next 350 expanding their empire in all directions, fighting Poland, Sweden, Belorussia, Ukraine, Turkey, France, Britain, and Japan.  During this period, Russia conquered and claimed the vast stretches of Siberia and Far East, destroyed the tribal rulers in the Caucasus, and smashed the khanates and kingdoms in the process of annexing most of Central Asia.
I can only assume that the period of peace and harmony that Konstantin is referring to is the post WWII period until 1991, during which the opportunities to express dissent with the ruling powers were almost nil, and the government demonstrated its willingness to use force in the face of opposition by sending tanks to crush protests in Budapest and Prague.  Small wonder the voices of political dissent remained a squeak.
Now what happens when an aggressive democratic model is installed in such countries? Let’s have a look. In Saddam times Sunni and Shia lived together in peace, marriages between Sunni and Shia were common, people didn’t even know if their neighbors are Shia or Sunni.
This, in my opinion, is utter nonsence.  I have yet to meet any Sunni who has married a Shia in the Middle East.  In Kuwait, hardly a bastion of western democracy, Sunnis and Shias live together in peace but are fully aware of which side of the line their neighbour sits.  During the Iran-Iraq war, Sunnis in Kuwait sent money to Iraq whereas Shias sent cash to Iran.  And all this ignores the suppression of the majority Shia by the minority Sunni under Saddam Hussein, which involved years of bloody repression culminating in the massacre of Shia by the Iraqi army after the USA had unwisely persuaded them to rise up in arms against the ruling elite before neatly leaving them right in the shit.  Shia and Sunni lived in peace side by side in Saddam’s Iraq for the same reason there was peace in 1930s Russia: anyone who spoke out was murdered, along with their family and close friends.
Of course, there were small groups of radicals but they were underground.
Yes, they were underground all right:  in mass graves.
Then “democracy” comes. It was all but natural that major political parties and organizations competing for votes start profiteering on the most evident topic – religious differences. Conflict that was almost invisible before is blown out of proportion.
The conflict was invisible because anyone who made it visible was immediately killed.  As in the case of the Soviet Union’s demise, conflict arose in the post-Saddam Iraq once the iron fist of tyranny was removed, not because democracy arrived and forced these hitherto peaceful folk to start competing for votes.  Like a boiling pot whose lid is suddenly removed, previously suppressed internal conflict boils over into violence once a tyrant is removed from power.  The notion that democracy forces peaceful people to start shooting each other as they compete for votes is utter nonsense,
At the same time, unlike Westerners, people in Iraq are not used to treat conflicts as a “game”. They take it very seriously. A country is divided by implacable differences – you belong either to a Sunni party or to a Shia party. What’s more – the so-called system of checks and balances leaves no hopes to resolve the conflict peacefully. We get a civil war but what is the real reason of the civil war – religious differences or a model of democracy that encourages confrontation?
So here we have a country with an ugly sectarian split running down its middle, yet the sectarian fighting is not caused by religious differences but by a model of democracy which encourages people to turn violent?  Sorry, but this is shite.
More then that – countries that achieved some harmony are strongly criticized by democracy pundits for lack of conflicts and fights.
Eh?  Such as where?  What countries which are currently living in peace and harmony are criticised by democrats for not being in a state of war?  Sadly, Konstantin doesn’t say.
There are hundreds of examples when a Western type model of democracy gave rise to civil wars.
Really?  Hundreds?  Name them.  And have there really been more civil wars born from western democracy than tribalist systems of government?  No.
American model was probably the worst although Americans try really hard to implement it all around the globe.
And why is the American model the worst form of western democracy?  Again, Konstantin doesn’t say, but I suspect it is simply because it is American and nothing more.
Take Latin America, for example. In the 19th century it took only a year or two for a Latin American country to adopt American type “democracy” and a new civil war between “Democrats” and “Republicans” started.
I think it only took a year or two of a Latin American government adopting Communism, receiving large handouts of Soviet cash and weapons, and beginning a process of confiscating property which before civil war would break out.  Under current circumstances, those Latin American countries which have adopted constitutional democracy seem to being doing better than at any time in their history.
Wonder why only 15 years ago conflict between Ukrainian-speaking citizens of Ukraine and Russian-speaking Ukrainian was almost non-existent? Why differences between Northern and Southern clans in Kirgizia were so meager?
Erm, would that be because anyone advocating such nationalist ideas as Ukrainian language would find themselves harrassed, jobless, arrested, imprisoned, or shot prior to 1991?
“Democracy” in countries like India or Japan is very far away from the Western model. Japan managed to live fifty years with a one-party parliament, symbolic checks and balances system, incredible lack of any political dissent on TV and in newspapers. Things are not better in India.
It is true that the Japanese Liberal Democrat party held the reigns of power for 35 years, but since the early 90s various opposition parties have sprung up and been included in coalition governments and nobody can say that in the last 15 years there has been an incredible lack of any political dissent.  Currently, Japan’s governmental system very much resembles that of western democracies.  So where is the violence and fighting which according to Konstantin should have occured following Japan’s supposed conversion to western democracy?  It doesn’t exist, of course.  Konstantin, in an effort to promote tribalism and dictatorship over western democracy, is talking utter nonsense.

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08 August 2006

Peak Oil update

Really scary

Peak Oil update:

What happens next? It depends on the real condition of Ghawar. Perhaps a heroic drilling campaign could result in a temporary bloom in production, lasting perhaps three years, followed by a swift, terminal collapse. On the other hand, it is possible that the field has been so thoroughly exploited already that we are seeing the irreversible, rapid decline. At the ASPO conference a well-connected industry insider who wishes not to be directly quoted told me that his own sources inside Saudi Arabia insist that production from Ghawar is now down to less than three million barrels per day, and that the Saudis are maintaining total production at only slowly dwindling levels by producing other fields at maximum rates. This, if true, would be a bombshell: most estimates give production from Ghawar at 5.5 Mb/d.


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Long or Short Legs

Long or Short provided a helpful response to yesterday's long or short legs question which I have posted below for your edification as well as a pair trade in their natural state:

Long or Short Capital » On Legs, Long Russian Legs

Mr. Juggles is on a romantic Latin American holiday with Kaiser, so I’ll substitute for them. While it is possible to do the aforementioned pair trade, it is not recommended. Muscovite legs may indeed be experiencing a temporary outflow, but the imminent economic domination of Europe via Tsar Putin’s oil lasso combined with surging demand for nubile russian legs in Moscow ensures that this outflow is not sustainable; fundametal pressure is on the side of the Muscovite legs. The valuations multiples on Russian legs should expand as the price (implied or cash) converges with Western World leg prices; recent acquisition multiples have been bearing this out. We are bullish on attractive Russian women assets as a whole. There is the potential for a virtuous circle, for as the Russian rich get richer, the women around the rich get hotter (and able to command higher prices).







V photosession, originally uploaded by monkey_gastello.

06 August 2006

Long or Short

Long actually, very long but just not in Moscow - legs that is.

With the meme borrowed from Long or Short Capital the leading “Online Financial Humor/Abstract Investment Recommendation” blog.

It was pointed out to me by several westerners coming in to Moscow this weekend that the airports were full of long-legged Russian beauties heading for the flesh spots of Europe.  Where, it would seem that  Moscow's business community has decamped to (Moscow is Russia, but Russia is not Moscow).  As the incomers lacked the cynicism of a long-term Muscovite, I felt it important to point out to them that they were probably the reserve/replacement high-class hookers heading to the south of France and Sardinia to replace those who have been on duty since early June.

So a question to Mr. Juggles, clearly now is a good time to be long legs, but is it possible to short legs in Moscow and be long them in the south of France?

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03 August 2006

Answering Comments

I write all my posts in Ecto, a super-cool Mac-only blog writing tool, and get my comments via email to my gmail account.  In short I never go to my actual blog-site.  It's always good to get comments on posts and mostly, I like to reply.  There has to be an easier way than logging in to my own blog and leaving myself a comment.

There just does not seem to be an easy way - am I missing a trick here; help needed.

copydude responded to my Clapton post suggesting that Clapton's guitar solo was going to shake the murals off the wall of St. Basil's.



“ Andrei Batalov, head of the cathedral's restoration commission, believes that . . . Moscow's construction boom is not the only threat facing the cathedral. He said it is also being put under strain from rock concerts on Red Square. The music is frequently 100 times above the legal norm, he said, and St Basil's intricately restored wall murals and icons are at risk of peeling off the walls as a result.”

If that was the reason then a statement that there would be no more rock concerts on Red Square as a result then suggestions of impropriety could be withdrawn.

I reiterate my previous statement based on some inside information that Clapton's people got fed up with being mucked around.


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Internet advertising, less irritating than other types of advertising

Russian is a much more direct language than English, and in particular English English.  In English English obfuscation is an art form which can only be interpreted by the culturally attuned.  So I was delighted by this headline from Romir, which is absolutely spot on:

Internet advertising seems less irritating for the users than the other types of advertising:
Two thirds of the Russian Internet-users noticed that during the last 12 months the quantity of advertising in Internet increased. And 42% of the respondents pointed out that it increased considerably. As to their attitude to Internet advertising, above half of the participants feel irritation: in 30% of cases it irritates like the other types of advertising and in 20% of cases – it irritates a bit less than the other types of advertising. Still Internet audience has the most loyal attitude to advertising, that makes the advertisers hope for stronger effect of advertising placement in Internet if compared to other advertising vehicles and types of advertising...


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