17:   Can Marx Help Us Understand the Russian Mess?

William Krehm

For all its endless muddling, Russia is becoming a very key country for the continued supremacy of the United States. For its oil wealth, even partly put into shape, already amounts to some 8 million barrels a day, nudging Saudi Arabia for first place in the world. The Saudis, moreover, have more than casual links both as targets and accomplices with the fanatical Islamic terror, that may blow its potential as supplier sky-high. Russia, too, is the source of much of the natural gas for Western Europe. The Lord was kinder in creating the geology of that vast land than its institutions. And that is why the new chapter in the incredible tale of the "oligarchs" – the fabulous barons who literally picked up the nation’s greatest assets for kopeks – has so rattled the Western world.

The oligarchs are like a mythical race of Titans, but sprung not from heaven, but from humble ranks of Russian society. They profited fabulously from the disarray when the Soviet regime collapsed. American pressure to denationalize on the quick and bring in capitalism at a fast-food tempo contributed to the corruption that engulfed the country after that breakdown. Since there were no capitalists around to take over, the assets of the state were left to Communist heavies and speculative adventurers. The official American view took over, that every human was created by the Lord as a potential Wall St. grabber and mega-crook. The Western experts who pocketed a significant part of the loans of the US government earned themselves a reputation back home as wizards for the execrable advice they handed out. But they had little curiosity about what made the Russian economy tick.

The whole transformation was conceived as power play rather than in social terms. There was, for example, a complete failure to recognize that in many instances those government firms they urged the instantaneous liquidation of, provided the infrastructure of the areas in which they operated – the schools, the roadways, the power, the food supply. Treated as mere "externalities," they soon disappeared. Shares were distributed to the population for the privatized concerns, but what would an underfed, underpaid Soviet citizen know about company stock, and where would he find the rubles to take advantage of these sudden "opportunities"? Especially since there was no reliable stock market – even by American terms – for the transactions? The result: a few keen-minded operators with black-market background acquired or improvised the semblance of banks, went in for currency speculation in a grand way, made killings in imports, acquired radio, TV stations or newspapers to fawn on politicians who were following not dissimilar improvisations in clambering up giddy political ladders. The result: billions of dollars of assets in oil and gas wells and mines were acquired for a song. Not infrequently, the new multi-billionaires had to dodge the bullets of gangsters; some of them ended up fleeing to Israel, Italy or Britain.

Nor was it wholly breaking the laws, for on many of these matters there simply were no relevant laws. And when the oligarchs achieved wealth running into 11 US digits, a need was felt for legal infrastructure that protected the new wealth and restrained the powers of the parallel political improvisation – the state. It all ended in a stand-off between the alumni of the dreaded Soviet secret service, and the new oligarchs whose wealth threatened to dwarf the financial fortunes of the West.

It had its precedent in what Marx called the "primitive accumulation of capital," where the British amassed fabulous fortunes by their rapine in India and other colonies, in the Chinese opium trade and the opium war, in slave-traffic, to say nothing of the commons enclosures at home. There, too, the looting was punctuated with at least one sensational trial – of Warren Hastings – in which the established legal bureaucracy – non-existent in post-Soviet Russia – tried to rein in the marauding of the proto-capitalists. However, the good fortune of the British that made possible their reputation for high morality, was that much of the pillage took place far from home in Asia and North America, and on the high seas.

The Russians had the added bad luck that the constellation of world power placed in the hands of Washington and Wall Street the design of this "Great Transformation" of Russian society. That has been a major cause of the drastic drop in the longevity and actual population in Russia since US-inspired "democracy" took over.

Nor is the "primitive accumulation of capital" in Russia without parallel in recent years in the West itself. The effects on the distribution of wealth and political power in the bail-out and subsequent deregulation of the world’s commercial banks is hardly of lesser dimensions than "oligarch" pillage of Russia. The take-over of the Western economy by finance capital with the abolition or downgrading of statutory reserves as a an alternative tool against real inflation, and the elevation of short-term interest rates to the role of sole "stabilizer" of the economy, had far-reaching effects throughout the world. Without it the oligarchs would have had a tougher time achieving their incredible wealth in Russia.

What was in the process of becoming a partnership of Western oil and gas conglomerates and the Russian oligarchs has now been shaken. A neglected aspect is that the Russian state is still in control of the pipelines built and to be built, and apparently has in mind to recover some of the wealth the oligarchs stole by upping pipeline rates to painful levels. That could undermine Washington’s reliance on Russian oil to replace its excessive dependence on Arab sources. That is a serious complication. It is bound to give rise to some bizarre alliances in the Russian madhouse.

Mark Mackinnon in The Globe and Mail (1/11/03, "Yukos CEO, politics a volatile mix") tells a strange tale. "Putin’s government, Mikhail Khodorkovsky broke protocol. The gathering was supposed to be a cordial chat about what was going right and wrong in the business world, but Mr. Khodorkovsky went on the attack, directly criticizing the President and suggesting his administration was corrupt. Mr. Putin, unused to be so openly chastised, gave Khodorkovsky his trademark steely gaze before responding. ‘If the people at the table were to start criticizing each other,’ he warned obliquely, ‘I, too, can criticize.’

"Many now see these as the opening shots in a very personal war that has rocked Russia’s business world and landed Mr. Khodorkovsky and other top Yukos shareholders behind bars.

"What drove the billionaire tycoon to step out of the shadows to confront the President is not known. His supporters say he grew tired of watching the creeping return of authoritarianism in Russia, and decided to use his resources to fight it, buying a newspaper, funding opposition parties and making a campaign-style speaking tour of the country.

"His detractors say that a man who had bought so much else thought that he could buy Russian democracy, too, and that he was cynically trying to use his billions to ensure Yukos’ interests would be well represented in the next parliament." But was that so far from the norm in the West, especially since the financial sector has taken over so completely, and the cost of TV time for political campaigns has become so staggering? What emerges is a struggle between the political power center, much of its personnel originating in the secret service of the old Soviet state, and the new oligarchs. That melds many of the aspects of primitive capital accumulation achieved centuries ago in the West with the contemporary preeminence of bank holding companies in the West.

William Krehm

— from Economic Reform, December 2003