Ruminations on Russia

Or in my case the other way around abandoning SWMBO and SWMBO2 in London on the Sunday after the Friday when Imperial Energy (IEC.L) was (mostly) reprieved from Mitvol's predations and TNK-BP was given two weeks to a. wait until the G8 summit is out of the way and/or b. for Alfa and Access to lower their price expectations for the TNK part of TNK-BP.  Meanwhile Rusal announces that it is has been given Kremlin clearance to list on the main board of the LSE.  To be fair that's not what it said but that's the truth.  The spin meisters who placed the story in the Sunday Times would have you believe, oh gullible reader, that by listing its shares, as opposed to GDR's Rusal would be subject to greater corporate governance and disclosure rules.  That is what is known as steaming heap of bullshit.

In case you doubt my skepticism, I urge you to read, by way of analogy, the story of Sports Direct which is still majority owned by its founder Mike Ashley.  Post-IPO Mr. Ashley still owns 57% of the business and is running it as he did when it was private - except of course he took GBP920 million out of the business and its currently trading 33% below its floatation price - oh and its Chairman just resigned.

If you can explain to me how Rusal will be exempt from the rule which says that majority shareholders can run the business anyway they like, especially as the Chairman will be its largest shareholder - I'm listening.  No seriously.  I have no objections to investors investing to make money but lets lose the bullshit - Rusal will be run for the benefit of its owners.  The other shareholders will own an option on capital appreciation - and absolutely nothing more.

And whilst I am it, more bullshit; Rusal is not raiding London investors, the Russian government is raiding TNK-BP and has raided Shell and any attempt to suggest that there is a link between the two is intellectually bankrupt.  The LSE is a market where you can play if investors want to play with you.  Rusal is the largest (?) aluminium producer in the world - investors want to play.  Russia is a (very, very long list) where national energy policy is the fig-leaf masking personal enrichment.  If investors want to rent a piece of Rusal, udachi, renting a piece of Russian natural resources is not really possible whilst the pre-election rapine pillage continues.  I contend that VVP has lost control of his cohorts and now is a very good time to keep your head beneath the parapet in case what's yours ends up in someone else's pocket.

Technorati Tags: Corruption, Rusal, Russia

For fear of debating why Russia and Europe are going through a monumental spat and who benefits and why, at the moment it would appear that comparative penis size is the Russian blog meme du jour.  As the ever acerbic Copy Dude (what did you do wrong to be de-CIS'ed?) puts it, this is the moral equivalent of Haze Homeful of Freshness Awards

copydude » A Fistful Of Winceyette:
A Fistful Of Winceyette

sleepwalkers

I am reminded that it’s time for the Fistful of Euros Satin Pyjamas Awards. When I worked in advertising, I used to promote the Haze Homeful Of Freshness Awards, which was a real mouthful too. But if you squirted your house daily with Haze, so that your eyes were red and streaming with CFCs when our mystery sniffer called, you could be the lucky winner.

It was always a golden rule of direct marketing that there should be consolation prizes. Obvious rationale: more prizes, more interest. So it was disappointing to see that only one blog per category will win the Satin Pyjama. There will be no scrapping over places for Winceyette or Polyester sleepwear.

Given the current acrimony over blog rankings, it’s rather brave of Fistful to introduce fresh controversy. Why are blogs grouped geographically rather than by genre? Specifically, how can the academic ‘European Tribune‘ hope to compete with ‘My Boyfriend’s A Twat‘ ?

Siberian Light chimes in with some more rankings.  Mental masturbation.  Particularly as this list includes the "never knowingly correct" Edward Lucas.  Edward has at last found his metier and was today writing in the Daily Mail (the link is to his own blog where, without much success he tries hard to downplay the fact that an Economist journalist is writing in the Daily Mail and yet still claiming that he means it.)  I assume that much of what he has written comes from the heart as the application of the head would have resulted in a different story.

Whilst the Ruminator was also bizarrely nominated for the Pajama awards, I have voted for English Russia as I would rather see pictures of cars in holes in the road than read my own drivel on energy security and other strange Russian goings on.

For those who know me, life is returning to normal - I'm blogging again - I wasn't going to bore you with nappy tales - but to be honest its more interesting and insightful than the Russian blogosphere.

Technorati Tags: blog, Russia

However shitty and miserable the weather is it does not rain before midday on 1 May.  Parade over, like magic the first drops of the rain pattered on the windscreen of the taxi taking me to the delights of spring in London.

OK, I don't know that they are in Switzerland, but you get my drift.

It's quite likely that I owe Jerome an apology for mischaracterizing his review of the Economist article yesterday.  If you have the patience to read to page 21 (of 22) of his article "Gazprom as a Predictable Partner.  Another Reading of the Russian-Ukrainian and Russian-Belarussian Energy Crises." (which can be found somewhere at www.ifri.org) he unequivocally acknowledges Russia's most significant energy issue;

"The real long term worry is the inability of Russia to produce enough oil and gas for its own internal demand as well as for Europe's growing needs." 

This may well be a divergence from his previously held views, it also goes further than mine.  Russia does not lack reserves.  For all the right economic and risk/reward reasons there has been precious little investment in exploration since the collapse of the Soviet Union, and for reasons of cash in the decade prior to its collapse.  The low-hanging fruit has had (more) modern extraction techniques applied to them and they are reaching, have reached or are beyond plateau production.  Every barrel of oil equivalent from now on requires real lon-term cash investment, not just cash flow expropriation.  Fifth Directorate Thugs are not well-schooled in the long-term. Why should they be when emerging market investors (viz LSE) are so happy to uncritically reward short-termism (Sir Nigel Rudd,  you are right) and there is so much cash floating around in lucrative transit trades (see below). So as I have written both here and elsewhere the issue is not reserves of either oil and gas but investment in them and, to expand on the headline, an investment climate that rewards long-termism in the natural resource sector.

One, of the many, difference between continental Europeans and the anglo-saxon world is the placing of conclusions at the end of worthy articles.  The assumption being that you have both the time and the inclination to wait to the end to be told the conclusion.  The more time-constrained anglo-saxons tend to conclude first and hope that you might just honour them with a cover-to-cover read.  In true continental European style I am hiding the conclusion at the end of this post.

Western commentators on Russian energy politics frequently (always?) confuse personal wealth grabbing with national policy.  National policy is a smoke screen for cash generation justifies by nationalism.  Empirical evidence points to personal wealth creation usurping the original point of nationalizing.  Jerome would point you to the more recent spats with Ukraine and Belarus which are about dividing the spoils and not about energy policy;  80-90% of all Russian gas headed of Europe transits Ukraine.  The December 2005, and subsequent 2006, Ukraine/GAZP/Turkmen gas deals played magical games with numbers whereby GAZP pays nothing to transit gas through Ukraine provided that it sells gas at sub-netback parity rates i.e. RosUkrenergo pays European prices, minus the sum of  transit fees on all gas transiting its territory.  Except that the transit fees on all gas transiting Ukraine accrues to individuals and not to GAZP (Bill are you listening). In addition to which the replacement of Yeltsin-era Red Directors (Vyakharev et al) with Fifth Directorate Thugs means that the institutional memory has been lost and any form of industrial competence has been buried under a pile of personal wealth creation.  As opposed to personal wealth creation competing with industrial competence.

And so, finally, to the point.  If Russia's energy policy is not driven by policy but by personal wealth creation what does that mean for Russia and Europe's energy policy?  Actually it's a little scary.  If you can drag yourself back to the quotation at the top of the page someone is going to be short of gas, and maybe oil, in the medium term.  Continental Europe has been building gas-fired power stations a plenty - they are cheaper and cleaner than their competitors, except of course nuclear which is either cleaner or very, very dirty.  Russia is amongst the worlds most inefficient energy users - it starts with the apartment fortichka and goes downhill from there - and it's energy base in European Russia is predominantly gas-fired.

The gap between Gazprom and Central Asian production in 2010-15 and European and domestic demand is expected to be 100 billion cubic meters p.a. (about $100bn in revenue terms.)  We are assured that GAZP relies on the European market today (which it does).  But if domestic prices achieve netback parity in 2011 (current assumptions) why go through the hassle of exporting gas when it can be sold in Russia's borders.  Because there is little rent on domestic sales - that's why.  Always assuming the same guys are in charge of course.

So Europe should be concerned. So should Russia - because no one actually knows whose Swiss bank account will need to be filled in 2011.

After a period of relative silence debate has flared again (sic) on Europe's dependence on Russian gas and whether Gazprom can produce enough gas to feed both Europe and domestic Russian demand.

The Economist started the process with a long-article on Europe's uncoordinated Russia policy, relationship(s) with Russia and demand for and supply of Russian gas.  Jerome responded on The Oil Drum, albeit belatedly, attacking the Europe-under-threat-from-Russia line which the Economist and FT continue to peddle, but which the facts consistently fail to support.

As I said in my comment (copied below in full) to Jerome's post I am not qualified to comment on the benefits, or otherwise, of the liberalization of Europe's distribution networks.  I might be being a little optimistic but I detect a subtle change in emphasis in the Economist article - which might just make it a more useful "newspaper."  On re-reading Jerome's article I note that his executive summary of his debate is more cognizant of the supply/demand issues than his subsequent critique of the Economist article.

But the most interesting thing, in fact, is that both in our papers, and during the debate, we ended up agreeing on many, if not most, things, the most important of which being:

    * European energy policy is inexistant and what passes for policy (the liberalisation of markets) is indeed considered insane by all;
    * Russian behavior is driven to a large extent by the personal strategies and interests of a few individuals at the very top. There is no overarching geopolitical plan, but a lot of political infighting and short term asset-grabbing strategies. That may be even more worrying in itself than purposeful strategies to use the "energy weapon", but the motivations are different. It is true however that the global energy situation allows Russia to be a lot more assertive, or even brutal, on the international stage, and there's little that can be done about that;
    * there is indeed a lot of uncertainty of what medium and long term production of gas in Russia will be - because of the decline of its existing "workhorses" (the huge fields that current provide most of its production) and the lack of incentives for Gazprom and/or its managers to invest in upstram assets. There are more or less optimistic views on this, but the question definitely exists for all - and brings us back to the lack of European strategy in the face of uncertainty.

Meanwhile this article from Ben Aris' increasingly good Business New Europe focuses more on the demand/supply conundrum which will impact both Europe and Russia over the next decade.

I will make no comment whatsoever on the gas cartel story - it's a piece of political theatre which is being kept alive for reasons that are entirely beyond me.

Jerome,

Your analysis of inter-national energy politics strikes me as being reasonable.  Whether liberalization of the European energy transport system is better or worse for Europe than national champions I am not competent to comment on.  Your analysis of Gazprom commitment to timely investment in upstream operations is clouded by your views of the big 4 as a political tool.

There is strong evidence already today that there is a significant shortage of gas available to the domestic market.  During the very short cold snap this winter businesses around Moscow were basically told to shut-up shop to prevent a brown out.  Three energo's in the Volga region (Samara, Saratov and Volgograd) cannot acquire additional gas at any price. They, like the better-advertised demand for gas from the Mayor of Moscow, state that they are willing to pay prices in excess of $100/mcm.  Not yet netback parity but getting close to it.  That Gazprom refuses to supply them at these prices should provide some comfort to worried Economist readers (and even more concerned FT readers). The price issue is important because it tends to negate the story that GAZP will only produce gas which it can sell at market prices.  Albeit that the politics of domestic gas provision requires a supercomputer to process all the competing claims.  My focus is on two; inflation and inefficient energy use.

This has policy implications for either Russia or the European Union, or both.  We would tend to agree that in the medium-term Europe will benefit ahead of Russian domestic demand.  There is strong evidence that Gazprom can, at the margin, increase gas supplies (winter of 2005-06) but with demand for electricity growing at in excess of 4%p.a. in Russia and with European Russia (the bit that’s really growing) being almost exclusively powered by gas-fired generating units – something has to give.  Note, that using BTU-equivalents an electricity producer in European Russia using coal would pay an equivalent of $180/mcm to produce the same kWH.  The Russian government’s response has been to apply pressure to non-GAZP producers to stop flaring associated gas and a statement (straight from the absurd) that independent gas producers will produce 60% of domestic gas demand by 2015, some price liberalization – immediately followed by the countermanding threat to increase extraction taxes to RUR700/mcm.

Knowing why GAZP behaves this way, personal enrichment as priority A, everything else as priority Z, does not alter the fact that there is an unmet demand for gas.  Also, and you have written about this previously, a lack of competent management at the highest level, which means that upstream plans are being missed on a quarterly basis.  Pipeline capacity (both absolute and access to) from the two main gas producing areas, Nadym and Surgut, is a much greater issue than the development of reserves themselves and there seems to be little evidence of more than holding maintenance.

For an eminently sensible primer on the demand supply issue I would suggest this article from Business New Europe, which tends to promote the view of those actually doing business in Russia as opposed to pontificating from London and Washington.

Technorati Tags: Gas, GAZP, Russia

It is with some joy that I can announce that I am posting again - hopefully with some regularity.  It pretty much depends on SWMBO and her movements.

The month of May will include few observations from Russia, but a number on Russia.

There is a slightly masochistic joy to traveling to and out of Moscow.  Moscow is no more Russia than London and New York are the UK and US respectively.  This particular trip has me in Saratov a rather charming city on the Volga which, as the locals say, was unfortunately not invaded by the Germans in the Great Patriotic War.  The centre is being rebuilt slowly but, like the centre of London, suffers from a surfeit of small roads which were designed for horses and carts and not for Lexus 4x4's.

Having spent the past two weeks in business class bouncing around Europe and the US it was a bit of a sharp return to reality to shoehorn myself in an economy class middle seat of a YAK-42 for a 80 minute flight.  Given that I am not of excessive height and my knees are firmly wedged in to the back of the seat in front I would hate to be anything over dwarf size.

The trip though poses some observations;

1. The funny combination of numbers and a letter on the boarding card indicates your seat number.  The stewardess has already explained that it is not "free/svobodnaya" seating so how is it that it takes 10 minutes of rubric cube movements to get everyone in to an appropriate seat?
2. The curtains in the hotel room are there to perform a purpose, which is not to look pretty.  Such purpose is entirely undermined by making them out of see-through pink nylon.
3. Each room in the hotel has its own outside line - which allows some of the more enterprising amongst the female population to make direct contact.  If there is no way of easily removing the cord from the phone or the wall - I will rip it out so that I can sleep.
4. What materials are the walls made from such that anyone in the surrounding 4 floors who did accept the invitation proffered in point 3 above manages to channel their energy through the walls of my room?

Technorati Tags: Russia

Yeltsin

The Aeroflot / Alitalia merger where;

The onboard food is Russian
The baggage handling is Italian
Passport control is Russian
Timeliness is Italian
The airport design is Russian (well eastern German actually)
The stewards (or whatever they call themselves today) are Russian
And the prices are Italian
The rail/air link at Sheremeyteveo is built by Italians according to a Russian timetable with money from Berlusconi

Technorati Tags: Russia

For the PR-niks who subscribe to Ruminations to determine whether your antics are being reported on - hi.

Anyway, tucked in to the bottom of page 3 of Monday's physical version of the FT is a tiny headline - Waxman retreats on Diligence probe (no link love).

Do you think that someone pointed out that his support of IPOC probably flew in the face of a ton of established legal case history?

For those of you who lack my fascination with the Reiman vs Alfa battle (world population minus 1). Henry Waxman is "the Democratic chair of the US House of Representatives' top investigative committee."  Diligence is a UK-based/led "investigative agency" whose Chairman (given that Chairing a company is quite difficult and not possible in English) is Michael Howard, one of the swathe of useless Conservative Party leaders of recent history, and Home Minister under John Major who would have given Genghis Khan a run for his money as a right wing nut.  So reasonable potential for diplomatic consequences.

It would appear that Diligence was retained by/on behalf of etc, Alfa to prove what had been a matter of market knowledge for sometime.  It would appear that Diligence's methods were only slightly more ethical than those employed by the board of HP (pretexting - which is not what happens before you send a sms.)  Which caused someone to get someone on Waxman's staff to get all uppity and subpoena John "Genghis" Howard, or one of his flunkies anyway.  You would have had to have been me to even know, or cared, that this happened in the first place.  You would probably have to be me for a wry grin to cross your face after the subpoena was withdrawn.

I used to use a tennis analogy to follow the ups and downs of this saga.  Well try this one for size - this match is now Tim Henman (Reiman) vs Roger Federer (Alfa) in the quarter final of Wimbledon - only one winner.

Technorati Tags: Reiman vs Alfa, Russia

Fortune Magazine published an article entitled about Academgorodok, Novosibirsk entitled The new Silicon Valley. It is the most delicious-ed article with Russia as a tag, outdoing even English Russia, and its very wrong.

Once upon a time I would have gone to great lengths to explain why, but having read new Silicon Valley articles about, Cambridge, Mass, Cambridge UK, Bangalore, New York (Silicon Alley), China, Moscow etc there is little reason to specifically rubbish Academgorodok.  The author conspicuously fails to explain how Academgorodok will suddenly develop the attributes which makes Silicon Valley home to a unique successful risk-taking culture and Academgorodok to unfeasibly large mosquitos.

Technorati Tags: Russia

Given that VVP and his Fifth Directorate Thugs gets the blame for just about anyone who shuffles unnaturally of this mortal coil.  It is clear that the unnatural death of Bob Woolmer, Pakistan's cricket coach, due to applied asphyxiation (strangling) is as a result of rumours that Bob had been outspoken about VVP's version of controlled democracy and witheringly sarcastic about his "rule of law."  Clearly an enemy of the state. 

I am waiting for Edward Lucas' explanation of the facts to appear in any number of UK-based papers shortly.

Technorati Tags: Russia

Delighted to report that the weather and local populations attempts to succumb to an early and watery death have returned to more normal pattern.

Rescuers have saved all the 15 fishermen who went drifting on three ice floes toward the Gulf of Finland in northwestern Russia Saturday morning, a rescue official said.

Earlier reports put the number of fishermen at 23. The exact number could not be established because the ice floe, which carried the fishermen to the open sea, had broken into several pieces.

"The operation is over, 15 people have been rescued from the ice floes drifting in the Gulf of Finland," rescuers said, adding that the fishermen's health was out of danger.

The source said the fishermen had been rescued by a helicopter because motorboats were not very effective in the rough seas.

Despite warnings from rescue services, catching fish from ice-holes remains a favorite pastime for Russian fishermen in winter. The latest incident occurred on the Volga in mid-January when rescuers saved more than 60 fishermen stranded on drifting ice.

Technorati Tags: Russia

From the Daily Telegraph.

The best quotation:

"A man who thinks he has six children but cannot be sure, Sutyaging kept up a commentary on the adventures he anticipated if his skyscraper had been completed."

Winter and spring that is.  After a week of stunning winter, clear blue skies and good cold weather, I am reliably informed that winter is about to start ending by moving to that phase in which the sun does not shine, it snows/rains/hails and the nation's collective mood sinks a few degrees.  Each journey beyond the front door is a slog through 15cm's of snow-like mud, or is that mud-like snow, gently defrosting dog-turds and a winter of re-emerging cigarette butts.

All of which is made worse by the forthcoming national domestic violence day, otherwise known as International Women's day.

Fortunately, as I rarely see the outside of my office most of this will pass me by and I have no intention of giving SWMBO cheap, tacky cellophane stuffed with flowers.  The one benefit is that my secretary might actually pretend to do some work before next Wednesday so that I have a reason to give her a present.

And real spring, the green-ish one, is another 6 weeks away.

Good morning.

Technorati Tags: Russia, Weather

If, like me you are struggling with a balance sheet that won't balance because of a non-cash transaction which wasn't really non-cash, and I promise you I am not making this up, then here is some light entertainment.

As A Dodo: Bush and Blair 2001-2007:

Comedy fans are mourning the death of one of the world's funniest double acts, Bush and Blair, following today's shock announcement by British Prime Minister Tony Blair that he has decided to withdraw from his comic partnership with the USA's President George Bush and will no longer be joining him on the set of the latest in their series of hilarious "Road To" movies, "The Road To A New Vietnam".

It was in 2001 that Tony Blair decided to replace his former sidekick Bill "Slick Willie" Clinton after Clinton's comic persona as a loveable lothario - and catchphrase "I did not have sexual relations with that woman" - began to prove box-office death in America's post-millennial moral climate. Initially Blair had hoped to hook up with Clinton's old straight man, Al Gore, but was to opt instead for the guy behind the tongue-tied goof routine that stole American hearts and votes during the 2000 Presidential Election.

Almost immediately Bush and Blair began preparations for their hilariously titled - and now notorious - "Bringing Democracy" World Tour, Blair spending each day working on the wonderfully ludicrous "I'm a Pretty Straight Kinda Guy" routine that had won him the laughter of audiences across the United Kingdom, while Dubya perfected everything from his "Kenny Boy Lay? - Never Met Him In My Life" skit to the death-defying piece of physical comedy that was "Chewing A Pretzel".

With Bush and Blair's comic characters in place, Dubya playing a knuckle-dragging jock and Blair the smooth-talking poodle that insisted on following him everywhere he went, Bush's long-time manager Dick Cheney spotted the box-office potential in the sequence of scripts that would become the pair's "Road To" movies. Soon they were laughing on "The Road to Democracy", sweeping along the dusty "Road to Afghanistan Liberation" and crying on "The Road to Iraqi Freedom" (known in Britain under the title "The Road to Electoral Suicide").

It was during the filming of the last of these three movies that rumours of a split first began to surface. Crew members reported the sounds of heated arguments emerging from the pair's trailer and more and more often the once inseparable duo were seen to arrive and leave the set apart. The cause, some claim, was the latest script optioned for the pair by Mr Cheney, "The Road To Iran" (also known as "The Road to Armageddon"). Whatever the basis for the dispute, it was increasingly clear that relations between the two men had begun to sour. Indeed it came as little surprise when, on Tuesday night, Mr Blair announced that he would be pulling out of the duo's latest lraq tour, "The Big Troop Surge", to concentrate on other projects.

The comedy duo that was Bush and Blair will be remembered fondly by its fans, both of whom can be found in a secure wing of The Charge of the Light Brigade Hospital for the Militarily Insane.

Bush and Blair are now working on their solo projects: Tony Blair's "Legacy Tour" (fans should be aware that the tour has now been considerably shortened) and George Bush's "Who Gives A Crap? I Ain't Standing For Election Again" stand-up appearances in Washington's premier comedy venue, the White House.

Andy at Siberian Light commented and cross-posted on yesterday's democracy-themed post.  His question "how does Russia get from here (quasi-democracy) to there (democracy)"  (the italics are added by me for elucidation.)  He obliquely raises a another point; too much commentary on what has been and not enough (intelligent) commentary on where the country will be not just tomorrow but the day after that as well.  Or at least beyond the Presidential election (sic).

From my narrow point of view the answer is relatively simple.  It is not for us to impose our views on Russia based on what we would like our home countries to be like.  Expats are amongst the most critical commentators on their home countries.  I fundamentally believe in the fuck-up theory of history as opposed to the conspiracy theory.  There are very few examples in political history of honourable people doing the right thing based purely on altruism.  My own country, Britain (which begs the question what I think of N. Ireland), has developed its version of democracy as a result of changes forced on the Monarchy and House of Lords and Commons over time.  It was not that long ago that Britain has its own rotten boroughs - the implication to the Duma being rotten is not implied, it's explicit.  The changes were forced at periods of weakness of the ruling power of the time - from Magna Carta through to female emancipation.

So what does that mean for Russia?  Whilst commodity prices remain high and local input prices relatively low I see little change to the Russian polity.  I don't put much faith in a growing middle-class forcing changes until the economy is forcing changes without their help.  No colourful revolutions here.  We may see a little more balance-of-power post-Putin, whenever that may be.  If I am being optimistic, a resumption of balance of power may mean an increase use of the courts as means of conflict resolution.  I generally find being optimistic, uninformed wishful thinking.

Where I may be proved (hopefully) wrong is the absolute fear that Power evidences of the people. This may result in changes running ahead of popular desire for change.  A continuation of the Fifth Directorate Thugs belief that they can manage the people.  See comments on optimism above.

Maybe the best prediction I can make is that the country in which we live and comment on will change in ways that we will fail to predict. 

Technorati Tags: democracy, Russia

Shikhovo, which is only a hop and a skip and way to close to need a jump, from the dacha is apparently one of the centres of the avian flu outbreak.  All of which is probably pretty underwhelming except for the bits of the story which don't add up.

Apparently a resident of Shikhovo who also as it happens to own/run/work at the somewhat malodorous chicken farm the aforementioned hop and a skip away was in Moscow buying chickens.  It was my impression that the role of a chicken farm was to; rear, grow and ultimately slaughter chickens.  Maybe the Shikhovo guy was just fattening up chickens he bought in the Moscow bird market.  What the hell do I know anyway.

The good news is that Russian-officaldom says no need to worry.  Because they are always trustworthy and open with the public.

In case you are interested the weather was great out there this weekend and the skiing tip-top.

Technorati Tags: chicken, H1N5, Russia

In an attempt to lift the La Russophobe debate out of the mire.

For those of you not fully-conversant in the politics of the english-language Russian blogosphere.  Andy at Siberian Light interviewed La Russophobe.  Who is, as the title of her blog suggests, Russophobic, and also anonymous.  The eXile has taken on the role of tracking her down, but as has already decided on the size of her ass - charming boys that they are.

She has many faults; not least of which is a pre-determined view of what has been posted. The one worth debating though is that of a George W. Bush-like fascination with democracy.  Which, in GWB's case seems Florida-strange, but has little to do with this post.

Her interview on SiberianLight mentions democracy a number of times (the list is not exhaustive, and the last point includes democracy in the question only);

• "the end of democracy"
• "democracy in the blogosphere"
• "I’d been told that Russia was a nation of democrats"
• "La Russophobe is trying to save the minority from the majority in Russia"
• "in a sham democracy and thereby poisons the well of Russian attitudes towards democracy"
• "I think anyone who sees a proud KGB spy as a transitional figure on a journey to democracy is quite mad."
• "11. Do you think Russia will ever embrace the style of representative democracy now favoured in (most of) the rest of Europe? Answer - Not unless it is led to the well by a revolutionary equal to Lenin and as steeped in the West as Lenin was and ten times more courageous. I’d be happy if Russia would just adopt the physician’s maxim for its government: “Do no harm.”"

But it is the fourth quotation which really describes LaR's view of democracy as being what she believes is best for the people of Russia.  Which includes having MBK and VVP switching places.  It may well be that MBK has had a Damascene conversion on his long and winding road to Chita.  But right up to the moment of his incarceration his view of democracy, as evidenced by his actions as opposed to his words, was that it was OK as long as it could be bought.  And he was buying it.

Democracy is undoubtedly a good thing, or as Churchill would have it, not as bad as everything else.  As the US-led coalition in Iraq is finding out, democracy is not just about voting, it is about the law, and balance of power which forces respect for a minority position.  Whilst it may be tempting to say that a leader with 70-80% approval rating better satisfies concepts of democracy than his U.S, French and British counterparts, it is important to separate populism from the building of democracy, given that there are and were a number of populist but not entirely democratic leaders around the world - Hitler, in the former category and Chavez in the latter.  Russia, in common with Iraq, has a representative democracy which is totally undermined by a lack of the basic protections of democracy, minorities and indeed life itself.

However, to place the blame for failing to democracy on VVP and his Fifth Directorate Thugs is to take a snapshot of history without understanding the historical relevance.  You will be pleased to know that I am not about to undertake a Figes-like review of Russian history.  The last 14 years condensed in to three periods will do;

• Collapse - financial, moral and of morale
• The pre-crisis party years
• The post-crisis revival - financial, moral and of morale

To tell a people that has suffered from the liberal economic and democratic experiment that it needs saving from itself invites the same reactions as post-collapse feminists encountered when spreading the good word.  And in my opinion rightly so - on both counts.  I have quoted Cobbett's "I defy you to agitate a man on a full stomach" to feel a little like a stuck record.  Repetition however, does not demean the point.  Democracy post-collapse has meant; valueless savings, rampant theft of state property or if you prefer, loans-for-shares, and complete collapse of anything that felt like being in control of your life.  Whereas this lack-of-democracy thing has meant; stability, food and consumerism.  Not unsurprisingly the narod have decided for now that they can live with their democratic freedoms being impinged.  But as they never knew what democratic freedoms were (see bullet three for bizarre belief in what you are told) it is more than likely that they aren't missing them now.  And won't, at least until the commodity cycle changes and they have no way of getting rid of this bunch of thieves.

Democracy is not the answer to Russia's problems, actually in today's environment it may add to them.  Would Russia would be better if it were democratic is like asking if you prefer peace to war - the answer is axiomatic.  However, democracy is not about voting and the right to vote.  That is purely the symbol.  Real democracy can only happen when rights and responsibilities are balanced.  Russia is not there yet.  It is poorer for not using this period of wealth to build the institutions, but a simplistic belief that Russia can copy US/UK participatory democracies and be better for it is too simplistic and short-term.  As always, black and white arguments seem reasonable and make a point.  I am sure that the narod would prefer that Schliefer et al and LaR did not make a point with their lives.

You can disagree with my point of view - but please make a reasoned argument or I will just disallow the comment.

Technorati Tags: democracy, Russia

I have a bit of a thing about space and the theories of physics that describe our world's first few seconds.  Which leads me to websites which have pictures like the one below.  I almost feel calm after abusing moronic drivers on my way back from work.

This all gets a little geeky. Like the changes in temperature post from earlier today the graph showing WTI oil contracts moving from sustained backwardation in to sustained(?) contango all go to highlight that the world in which we are going to live is different from the world in which I got to be old and fat.

The actual post from Seeking Alpha is all about trading oil/product futures.  Which is not overly helpful unless you have physical crude to deliver. 

The infamous Eric Kraus of the Nikitsky Fund and the longest-term oil bull I know (unfortunately RSS-unfriendly) puts it well, and I paraphrase; in a tight market oil prices will tend to be volatile and warm, or otherwise weather, will have a noted impact.  He joins Boone Pickens Jnr as a $100/bbl man.

Oil Contango: Roll Yield Rewards:

Forward shifts in crude oil. Source: thestreet.com.

The above figure shows how oil future forward curves, for any given month, have evolved for oil futures during 2004-05, from the typical oil backwardation to contango curves. As Howard Simons puts it:

Each ribbon in the chart represents a forward curve beginning with the front month and ending with the December 2005 contract. The near months are on the left of the ribbon; the far months are on the right of the ribbon. As time goes forward and as price rises, the switch from a backwardated structure -- front months over the back -- switches to a deeper and deeper carry and a bona fide contango.

Technorati Tags: Oil, peak+oil

Disclosure, to keep LaR happy.  I am personally interested in the weather, it impacts my daily schedule and on days like yesterday results in snow getting over the top of my shoes.  I am also interested because global warming is amongst the greatest threat to our future.  Furthermore I am interested because natural resource prices tend to spike when its very cold and very hot.  That being said you actually have to read the article and understand what it says before you have the right to comment.

I couple of the diagrams failed to import - you'll just have to go to TOD to see them.  Despite quasi-official attempts to say we are just in a period of natural warming its worth looking at the reconstructed temperature graph showing just how much warmer the world is today than the last period of global warming - the medieval period.  But then they did not have a/c, airplanes or cars then - apparently.

Kudos to The Oil Drum (link below).

• The warm anomaly over Asia and Europe has expanded and intensified between December 06 and January 07 (comparing Figures 2 and 3).  Note that the upper scale band for January is 4 to 11.6 degrees compared with 4 to 8 degrees in December.  The North Pole is 4 to 11.6 degrees warmer compared with the datum period (Figure 1).
• The Antarctic in December was cooler compared with the datum period but in January it too is now showing positive temperature anomalies.
• There are a few cool spots in January, notably North Africa, Arabian peninsula, SW USA and Mexico, Australia and East Siberia.  But these are dwarfed by the massive, large positive anomaly over Asia, Europe and the Arctic

• In January 06, Russia and Europe experienced anomalous cold weather that threatened gas supplies and sent gas prices soaring.  This is in stark contrast to January 07 (comparing Figures 2 and 4). Temperatures over a vast area appear to be somewhere between 8 to 20 degrees warmer this year compared to last year.
• North America was somewhat cooler this January compared to last year.

• Orbital / Milankovitch cycles
• Solar / sunspot cycles
• Loss of Arctic sea ice / reduced albedo
• Melting Arctic permafrost

Technorati Tags: global warming, TOD, Weather

I am apoplectic over this complete heap of shit which pretends to be a piece of journalism from the Economist Boyars of Belgravia.  So ridiculously annoyed that you will have to dig the reasonable out of the useless.

A hint as to the title of this post;

"But the mood in moneyed London is still largely positive towards Russia. In thinking London it is increasingly negative. The battle continues."

Where is thinking London to be found?  Clearly not in the Economist which predicted that the collapse of oil would lead to Russia's destruction, nor that Intelligentsia love-child Edward "a monkey would have out-performed my predictive prowess" Lucas predictive prowess regarding almost anything in Russia (and why am I writing this in the past tense) has left him a laughing stock, but still much quoted.  Unless of course thinking is a synonym for morally superior failure to spot the obvious. 

Oh to be a member of the "Thinking Classes."  Would that make me like the the Soviet Union's Intelligentsia; outwardly indignant - soul sold down the river (or at least as far as Zvenigorod).  Happy to read Turgenev and (small frisson of rebellion) Mir - petrified of exerting their moral authority. 

Maybe, if I re-found my moral sight, I could be a member of London's intelligentsia where I would be worried about; which school my child went to, what car I drove and.. oh that's it.  If you want to dispute my bored-beyond-belief recollection of banker/lawyer-land dinner parties over the last 5 years in London stand by for a real rant. 

I could however, join the moneyed classes who spotted that Russia has a spot of oil, a bit of gas and a population willing to doll themselves up in frippery and finery.  These are the same "morally myopic" (hyphened surely - ed?) moneyed classes who spent at least one night not worrying about west London schools and figured out that Russia is a desperately corrupt place (any bids for a Deputy Ministry at the Oil and Gas Minsitry under $5mn for a 1 year appointment not accepted) but that if democracy is the will of the people as opposed to what you (see Thinking Classes above) will the people to think Russians are at least as happy with their lot as you are with Blair/Brown/Cameron.  There is corruption and there is Corruption - but if Loans-for-Peerages and sexed-up intelligence aren't CORRUPTION then we are in desperate need of a moral compass.  And that's before we all agree to start in to morally-religous otherwise degenerate Bush-dom.

No pretension that making money helps develop a middle-class.  The morally myopic make money, the middle-class makes Genghis Khan look only marginally more right wing than Scotland's own English Home Secretary (work your way through that Lothian question). 

Here's a suggestion; think, don't write, for a calm collected moment about the Scooter Libby trial.  Consider your profession to be on trial and take steps to write with balance and intelligence - or write about your own extinction as the much-derided amateur press do what you should be doing only better - and more cheaply.

Yours from nowhere near Tunbridge Wells.

Technorati Tags: Economist, Russia

If you work for Galmond (sic) in his battle to drag his erstwhile financial stable mate through the world's courts and press and you monitor my blog via email leaving your out-of-office reply switched on rates as not very clever.

If you want to know why I write about this subject a. find my name out - not very difficult, b. google and work out what I was doing in 1999-2000 also not difficult c. investigate the transactions that did and almost happened during that time period related to your clients (named and otherwise) d. assume we had meetings and did due diligence. e. ask yourself why you are perpetuating a lie.

Technorati Tags: Reiman vs Alfa

It's been a while but the Royal Gazette yesterday dropped this little nugget in to my feed reader.  The summary is that the Bermudan financial services is taking steps to close down Mr. Galmond's (sic) IPOC fund and, it would appear, a number of associated vehicles. 

Naiive statement for February; how can a telecom minister carry on in his job when an uncontroversial paper like the Royal Gazette makes statements like:

In a written statement yesterday confirming the move, Ms Cox said that it was sometimes necessary to take legal action “to address seeming breaches of our laws and apparent regulatory infractions”.

Some matters relating to the case have been passed on to the Bermuda Police Service for investigation.

The legal action is the latest twist in the IPOC saga, which has sparked litigation in several countries amid claims that the Fund was a money-laundering vehicle.

It was alleged that it was effectively a holding company for around $1 billion in telecommunications assets transferred through a network of shell companies. The WSJ claimed the scandal went all the way up to the Russian IT and Communications Minister Leonid Reiman.

A Swiss tribunal in May last year, found that Mr. Reiman was the “sole beneficial owner” of the Fund. The tribunal stated that the close ally of President Vladimir Putin had amassed great personal wealth in the IPOC Fund by taking advantage of his role in public office.
Puisne Judge Ian Kawaley later upheld the ruling in a related case in the Bermuda Supreme Court.
It was alleged in Zurich that money skimmed during the privatisation of the Russian telecommunications industry during the early 1990s was laundered through the Bermuda-based fund.

IPOC has consistently claimed that Danish lawyer Jeffrey Galmond is the Fund’s owner. Mr. Galmond did not respond to our call yesterday.

KPMG Advisory Services was commissioned by the Ministry of Finance in 2004 to carry out an investigation of IPOC. The findings were passed on to Government in June last year.

Technorati Tags: Corruption, Reiman vs Alfa, Russia

I read them so you don't have to.

It seems that Russian fishermen are trying hard to keep the demographic profile plunging this year.  The latest attempt to prove Darwin would have been just as likely to discover his theories of natural selection in Russia as the Galapgos sees "hundreds" of fishermen rescued, finally, from a lump of ice in the sea of Okhotsk.  Not before many of them had consumed 50 grams or so of the national brew.

Apparently many of those rescued were in a state of "heavy alcoholic intoxication".

Russia anglers saved in ice drama

Technorati Tags: Darwin, Russia

Which is as much of a lie as VVP denying using energy as a political tool.  And they should be as well (dyevs and VVP.)  At the risk of sounding slightly dated; if you've got it, flaunt it.  And the last time I looked the dyevs aren't shy about flaunting it.  I also had not noticed the USA hiding its economic and political might under a bushel.  Russia has energy, energy and maybe an education system - time to pull on the low-cut top, high-cut skirt and killer-stilettos.  Shout it from the roof tops.  We have energy, listen to us idle old-Europe if you want to stay warm, or cool.

I believe a certain ex-Pole by the name of Brezinski would call it Real Politik.

Putin shrugs off criticism that Russia deploys its vast energy resources as political weapon.:

Russian President Vladimir Putin rejected Western criticism that Russia has been using its vast energy resources as a political weapon. " We are always told that Russia is using its...economic resources to achieve its foreign policy aims. This is not the case", said Putin at a news conference Thursday. "Russia has been meeting all of its obligations in full, and will continue to do so in the future", however "…we're not obliged to subsidize the economies of other countries. Nobody does that, so why are they demanding it of us?", said the Russian President who noted that everything Russia does as part of own energy strategy, as well as its accords with transit countries are aimed to better meet the needs of major consumers of the Russian energy.

Technorati Tags: dyev, Energy, Putin, Russia

Given the option of reviewing comments on Mem & Arts or scribbling some thoughts on staff - the blog wins.

By way of a long explanation:

Last night we were fortunate enough to get a freebie meal from one of Moscow's soon-to-be high-end restaurants courtesy of Eric, previously of Carre Blanc.  If it has a name it passed me by. I'll link to it when it opens. The creme brulee would win the Moscow creme brulee competition - not that the competition is stiff.

Anyhow to the point (finally).  The restaurant should have opened a year ago but complicated building works, including keeping the river Neglinka out of the basement, has kept it shuttered. Now they are mostly ready to launch but for the fact that they need to hire 20 kitchen and wait staff.  Currently they are adding them at 1-a-day.  Should be ready for a cash opening in 3 weeks time.  Fortunately the owner won't miss the cash he is currently losing.

It is fairly unusual to use the restaurant business as a proxy for business in general.  In this case it works.  Businesses are looking for qualified and experienced marketing, finance etc etc etc staff.  At a price which reflects their value to the business and on the off chance that they might stay in the business for more than 18 months. I would go as far as to say that they are not available.

As anyone with the barest understanding of supply and demand will know that high demand and low supply will theoretically drive prices up to bring more people in to the industry and suppress demand.  Anecdotal evidence (from my credit card statement) would suggest that restaurants are not passing on cost increases to consumers, or I am drinking less.  But costs are definitely on the rise.  Staff costs are rising everywhere, in every business.

There is a gap between published inflation and real inflation.

On a tangential note; Cantinetta Antinori is Eric's favourite restaurant in Moscow.  That's depressing - nice enough restaurant, good enough food.  But that's about as far as it goes.  Plenty of new restaurants - still no good food.

Technorati Tags: inflation, Russia

This reported by UFG, sorry that should be Deutsche UFG, via BNE (also my browser but I can't share that).  This on the same day that it was reported via Kommersant that Itera intends to return its gas assets to GAZP, continuing noise on Kovytka.  Not to mention the less-than-white Gutseriev and Russneft.

Maybe more importantly the definition of a strategic gas field was set at 50bcm (~300mn BOE).  Which is close to saying that my sock draw contains a strategic number of the global sock population.

Somewhere, easy enough to fathom - the Kremlin, a bunch of people are fighting battles; the end game of which is not entirely clear.  Please, please, please VVP can you put a lid on this.

6. Government sees increasing role of independent gas producers
Deutsche UFG, Russia
Wednesday, January 31, 2007

According to Kommersant, the Minister of Industry and Energy, Victor Khristenko, has said that by 2015-2020, independent gas producers will start to dominate the domestic gas market. We expect independents' share to grow from below 20% last year to 35% in 2015 and 45% in 2020. The changing structure of the domestic gas market is due to the fact that Gazprom's exports are increasing faster than its production, resulting in it losing its market share of domestic customers.

We note, however, that if Gazprom continues to acquire independent gas producers (previous examples include Northgas, Sibneftegaz, Sakhalin-2), its monopoly status will only strengthen. We expect further consolidation on the domestic gas market around three key independent gas producers/oil companies: Novatek, LUKoil and Rosneft. According to our estimates, they have a combined potential production capacity of 180 bcma, compared with Gazprom's 550 bcm last year.

Yesterday, Khristenko reiterated the key principles of the domestic gas market liberalisation, which will make this operating segment increasingly attractive.

Technorati Tags: Energy, Gas, GAZP, Russia