Part one of Passport's guide to Moscow's favorite - Passport magazine

your nearest trading floor and ask the first wildebeest you
meet.
Professor Goldman gives an historical perspective to his
story, which is both interesting and important in revealing
the fictions of futurology. Back in the days when senior
people in Washington thought that money was power,
and laughed at those in the Soviet Union who thought
that rockets and bombs represented real power, the CIA
set to work to undermine the Communists’ chief cash cow,
Neftegas. President Reagan’s newly appointed Director of
the CIA, William Casey, believed that the Soviet Union was
the source of most of the world’s terrorism. The logic once
again was ineluctable: if the world were rid of the Soviet
Union, terrorism would decrease. The fact that the opposite
has happened must mean that, far from disappearing,
the Soviet Union has in fact expanded. Perhaps it has become
invisible. Or maybe it moved west and changed its
name to the European Union.
Be that as it may, the CIA’s efforts to undermine communism
were based on a careful study of the Soviet Union’s energy policy
and potential; the word “potential”, of course, implying another
excursion into the future. Casey based his approach on a research
paper produced in 1977 by a large and well-resourced team of CIA
experts who predicted that within a decade Soviet oil production
would fall sharply. By 1987, the USSR would be buying around 200
million tons of oil per year on the world market.
The outcome was not quite like that. Far from falling, Soviet
oil output actually rose over the period, from 545 million
tons per annum in 1977 to 625 million in 1987. (Oilopoly has
many informative tables and statistics.) In fact, it was only in
the early 1990s, when Russia began to enjoy the benefits of
the capitalism which the CIA had been so concerned to force
upon it, that oil production started falling sharply. By 1997, it
was down to 307 million tons, which would have been about
350 million on a comparable USSR basis – a drop of about
40% over the previous decade.
The reason for this drop was the one factor which never
appears to have occurred to the CIA: the owners of the
new private oil companies began behaving rationally.
Professor Goldman describes how they came to realize
that they could make more money by asset-stripping and
sending the plundered cash abroad than by producing oil.
It was only after the Casey plan to break the Soviet Union
by driving the oil price down to record laws had become
a distant memory, in the late 1990s that the price began
rising again and the oilogarchs re-thought their position
and concluded that there was potential for personal enrichment
within Russia.
They were helped in this by the incoming-President,
Vladimir Putin, who wrote a dissertation in 1997 for the St.
Petersburg Mining Institute in which he outlined his strategy
for recovering lost state influence by taking control of
the country’s natural resources and putting them in the
hands of companies which would be controlled either directly
or indirectly by the state. (Goldman says that a large
part of the dissertation was plagiarized from a 20-year-old
American study.)
Book Review
The result of the close “co-operation” between the state and
strategic industry has been that the owners of the companies
concerned have remained free to pay themselves “market
rates” for their daily labor, and to buy and sell shares and other
assets – in other words to get rich – while simultaneously being
protected from competitive pressures by a state which uses
the law, the courts, environmental inspectors and all the other
tools of bureaucracy to make sure that no outside companies
can face them on equal terms. The further result has been the
continual plunder of Russia’s resources by the few who found
themselves at the top of the heap when Putin came to power
and who wisely allowed him and his friends to join their game.
There is not enough space in a short article like this to give
details of how this was all done. Suffice it to say that words
like corruption, grease, persecution, lawlessness, stupidity,
violence, greed, servility, more grease, bullying, aggression,
illusion and even sometimes farce would be appropriate to
describe much of Professor Goldman’s narrative after 1991.
The reasons he gives are varied. One is that “the FSB is no
longer just a police organization, it is a business.” Another is
illustrated by the calculation of a Japanese economist who
noted that it takes Gasprom $3.3 million to construct a kilometer
of pipeline, when the world average cost is $1 million.
The missing $2.3 million is what finances the FSB, and its clients
in government and commerce.
Finally, and in my view most importantly, there is the observation
of a fellow Wellesley College academic who explains
much of the misallocation of resources, and also the declining
reputation of Russia as an international business partner, by
saying that, after the fall of communism, the country lacked an
adequate “moral infrastructure”. The result, Goldman writes,
is that “there are few of the firmly rooted commercial laws or
informal moral codes that are taken for granted in long-established
market economies. The ‘rule of law’ becomes the
‘law of the rulers’.”
Bob Dylan famously said, “Don’t follow leaders, watch your
parking meters.” The problem for Russia is that far too many
people follow leaders who are so deeply in love with money
that they seem to lack a moral compass. But maybe we should
sympathize rather than condemn. Russia is a country entirely
without parking meters. P
July 2009
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