America's Oligarch Strategy

a.k.a. Empire in the Age of the 1%

At US behest, Austria arrested a Ukrainian oligarch named Dmytro Firtash in Vienna on some corruption and bribery charge that appears to be involved tangentially with the United States. 

 

Apparently, Firtash was small fry, 14^th on the Ukraine list, worth only $673 million.  Being an oligarch is, in itself, no crime in Ukraine.  Yulia Tymoshenko is an oligarch (the “Gas Queen); the new Ukrainian government openly appointed oligarchs Igor Kolomoisky and Serhiy Taruta as governors in two western provinces in order to keep a lid on pro-Russian sentiment; and the great white hope of the Maidan activists, the “good oligarch” Petro Poroshenko, a.k.a. “The Chocolate King” is the seventh-richest man in Ukraine, worth about $1 billion.

Firtash’s problem is that the US identified him with the Yanukovych camp and close to Russia because of his gas dealings.  It also looks like Firtash moved into Tymoshenko’s gas interests while she was in prison, which may account for the FBI obligingly dropping the hammer on him.

More importantly, I expect, Firtash’s arrest is meant to send a message to another oligarch-heavy area, Russia, in anticipation of Western sanctions for the Crimea referendum.

And, I think, the message is “Work with the US and against Putin if you want your Western assets to be protected and respected.”

This message is likely to be heeded.  After all, most oligarchs are laser focused on their personal wealth and their personal interest.  In an era of globalized finance, the dependence of the wealthy on the nation states that spawned their biological integument is less important than the matrix of trans-national institutions that sustain their finances and cater to their need for personal impunity.  Personal profit, in other words means more than patriotism or even national prosperity.

This state of affairs is magnificently illustrated by the story of a magnificent yacht currently docked in New York, courtesy of  the town herald of the globalized wealthy, CNBC:

New Yorkers have been tweeting, instagraming and posting countless photos of a gleaming blue megayacht docked off midtown Manhattan. It's called "Serene." At a staggering 436-feet, with five levels, several swimming pools, two helicopter pads and soaring chrome exhaust pipes at the top, it nearly outshines the Intrepid Museum next door. (Its best amenities are inside: the "underwater viewing room," an indoor climbing wall, children's playroom and cabins for 24 guests and 52 crew, according to the yacht builder.) Anyone doing a quick Google search learns that the owner of Serene is Yuri Scheffler, the vodka-and-spirits magnate behind the Stolichnaya brand. And with the turmoil in Ukraine and Russia , many have also speculated that Serene's sudden presence is a sign of the worried oligarchs-the Putin-connected, Russian super rich who now face a financial backlash from the West for Russia's actions. But they would be wrong. Scheffler is no Putin oligarch. And he has a surprising perspective on Ukraine.

In an email interview, Scheffler said he is in New York on business-hence the boat.

Although Scheffler's company, SPI Group, started in Russia, it's now based in Luxembourg. Scheffler is now a British citizen who spends much of his time abroad and hasn't been to Russia in 12 years. Scheffler has publicly battled President Vladimir Putin for years as the Russian government tried to seize the company and "renationalize" its assets. The government even issued a warrant for Scheffler's arrest in 2003 after he refused to hand over the company. So when asked about his views on Ukraine, Scheffler was highly critical of Russia's government.

One might think that, the feelings of a British citizen with a Luxembourg company about Russia might not be newsworthy, even if he is a rich fuck who owns a yacht longer than a football field.

Well, you’re wrong.  Oligarchs are not only rich guys and gals.  They also invest in media and politics to give their interests the greatest possible weight.  So they can bring down governments.

One of the most interesting takeaways of the Ukraine crisis was the report that Victoria Nuland had threatened sanctions against the Western interests of key Ukrainian oligarchs if violence was used against protesters…which erupted with suspicious alacrity.  Since the various oligarchs controlled dozens of deputies in the Ukrainian parliament, Yanukovych’s Party of Regions imploded and the rest is regime change history.

It is safe to say that the US has a similar strategy to pressure Russia’s 19 billionaires, first indirectly through sanctions against Russia and then, if British squeamishness over attacking one of the props of London’s prosperity are overcome, against the oligarchs’ personal wealth.

We even have a “good” oligarch, Mikhael Khodorkosky, the oil tycoon who was imprisoned by Putin ten years ago on the well-founded suspicion that he was ready and willing to serve as the vehicle for American interests and mischief in Russian politics and the strategic Russian oil industry.  

Khodorkovsky, although he had promised to eschew politics in return for a pre-Sochi Olympics pardon, emerged in Maidan Square recently with an impassioned attack on the Russian adventure in Crimea, and on Putin personally.  Khodorkovsky, prior to his imprisonment, had spent lavishly on think tank funding and PR in the West and he apparently still has his soft power mojo; his remarks were recorded and broadcast to the world by a small army of prestige media scribes.

Apparently the Forbes list of the world’s richest people had 424 billionaires on it with $1.1 trillion worth of wealth ($2.5 billion per capita and about 3% of global world product) in 1996;  now it’s 1,565 billionaires with $6.5 trillion ($4 billion per capita and around 10% of the global nut).  In case you’re wondering, the growth in billionaires and their wealth is outrunning inflation (about 50% since 1996), real GWP  (about 40%), and my 401K (don’t ask). All I can say is, “Waiter!  I’ll have what they’re having!”

I suppose it’s good that the United States is keeping up with global economic trends and has a strategy to exploit the proliferation of oligarchs who view national governments as just another item in their portfolios of assets and interests, to be rebalanced as pressure from the United States indicates.

Even though the PRC has largely maintained the Communist Party’s political and media monopoly, China has an oligarch problem, too, and has been aggressive in making sure that rich people with reformist inclinations and large followings on social media are cut down to size.  The PRC also cares about rich people who have evaded capital controls and stashed their ill-gotten gains in the West, making them vulnerable to US and EU extortion.  The PRC has to tread carefully in its anti-corruption drive, since the threat of local prosecution will drive the rich to put more of their money overseas and out of the Party’s reach and within range of US sanctions.  I expect some thought is being given to identifying and cultivating a safe overseas haven for cash and investments, to deal with the headache that the West is still the most attractive destination for investment, liquidity, and the free movement of capital.  

In passing, I might note that for lefty liberals it is one of those inconvenient truths that the countries that occasionally attempt to subordinate the interests of the wealthy to those of the state (and possibly to the occasional benefit of the huddled masses of the 99%) are often, by a funny coincidence, America’s most detested enemies, i.e. Russia, China, Cuba, and Venezuela.

The United States also has an oligarch problem.  Rich guy Michael Bloomberg ran New York for several years.  We’ve got the Koch brothers lavishly funding political candidates at the state and national level, and turning Wisconsin into a petri dish for their economic agenda.  A California billionaire, Tim Draper, is engaging in the oligarch version of nation building, funding a ballot initiative to split California into six states.  And of course Tom Perkins came straight out and said it: it should be one dollar not one person one vote.  I suppose we should be grateful that some oligarchs are still interested in restructuring the balky United States operation instead of just “going Galt” and abandoning it outright.

Maybe you haven’t noticed the oligarch problem because the rather dubious decision has been made to shield the identities of the malefactors of great wealth behind the anonymizing “1%” tag, allowing their defenders to deploy the “class warfare” trope and talk about economic growth and tweaks to the minimum wage as a solution for the “income inequality” crisis.  

I doubt that giving burger flippers an extra two dollars an hour will restore prosperity and dignity to the working poor.  But there is no mainstream constituency for redistributing oligarch wealth to solve our problems, on the valid basis that any attempt to mess with the oligarchs will simply send them and their billions scampering to a more amenable jurisdiction.  

When Bill Clinton went whole hog on globalization, we pretty much let the oligarch cat out of the bag.  Now the national government of the United States has committed to globalization with the idea that the America’s globalization-related problems of employment and investment can be solved…with more globalization, a rather dubious assertion that resembles the voodoo-economics mantra of Republican conservatives that the problems encountered in cutting taxes will be solved by…cutting more taxes.

So we have a solution for manipulating and exploiting oligarchs overseas.  Too bad we don’t have one for oligarchs at home.  Welcome to the 21^st century.

Is President Obama Trying to Break Vladimir Putin’s Political Back in Ukraine?

[For readers who have not done so already, I urge them to take 10 minutes and 49 seconds of their time to listen to the Paet/Ashton a.k.a. “snipergate” phone call.  It is not only a useful corrective to the laboriously constructed and misleading pushback now slowly working its way through the Western press, including the dubious accusation by the Ukrainian government that the snipers were Russian (which, perhaps inadvertently, supports the call’s contention that Yanyukovich was not responsible and, therefore, his ouster was improper); it also give a clear picture of the split between the Maidan activists and the rather unattractive cabal of pro-Western technocrats, oligarchs, and thugs who piggybacked on the Maidan demonstrations and vaulted into power with the help of the EU and the United States.  In particular, Ashton’s palpable impatience with the whole sniper issue and her single-minded focus on cobbling together the IMF package is worth noting.  The Maidan activist quoted by Paet is Olga Bogomolets, the “Mother Teresa of the Maidan” in the Daily Beast’s hyperbolic phrasing.  Subsequent to the release of the tape she has made a couple of equivocal statements that have been seized upon as rebuttals but, when more closely examined, fall somewhat short.  Bogomolets is perhaps unwilling to give aid and comfort to the Russian narrative on snipergate, especially while Russian is violating Ukrainian sovereignty in Crimea.  She is also a major political factor and has even been mentioned as presidential timber.  Indications are Bogomolets' preferred candidate, according to Paet--Petro Poroshenko, a.k.a. the “Chocolate King”, seventh richest man in Ukraine, and apparently a “clean” oligarch—will win the May 25 presidential election and try to steer the new government in a direction more to the liking of the Maidan activists.]

According to media reports, President Obama seems to be going all in on getting the Russians to back down over Crimea.

The White House readout of a recent telephone call between President Obama and China’s Xi Jinping recorded that the US president said that “preserving the sovereignty and territorial integrity” of Ukraine was his “overriding objective” [emphasis added].  

It is somewhat eyebrow raising that President Obama seems to have turned Crimea into his own personal crusade, especially since a large segment of world and informed opinion is ready to kiss off Crimea as Putin’s to take.

Perhaps President Obama is using Nixon’s “madman” theory i.e. communicate to the Russians that the president might do something crazy bad if they don’t negotiate.

Another possibility is that President Obama is genuinely eager to push Putin to the wall, confront him, humiliate him, and defeat him, and shatter Russian pretensions in Eurasia.

Maybe Obama believes this is his Kennedy moment, his Cuban missile crisis, his opportunity to face down the Russians, rebuke the geopolitical handwringers, and demonstrate the supremacy of American power.

Indeed, before the Crimea adventure it was Putin, not Obama, who looked weak in Ukraine. 

Persuasive reports indicate that Putin let Yanyukovich flounder, then urged him to sign the February 21 EU-brokered transition agreement that would have paved the way for an earlier presidential election, and then was completely wrongfooted by the sudden installation of a new regime totally free of Russian influence.

And Putin’s move into Crimea was largely defensive, in my opinion, recognizing that the new regime in Kiev, pro-US, anti-Russian, and with a strong Ukraine-chauvinist component, would probably try to consolidate its power and popularity by evicting the Russians from their naval base at Sebastopol.

The same elements that point to Russian determination over Crimea—the weakening of Russian power and Putin’s personal prestige if the Russians are humiliated—might also be incentives for the Obama administration to escalate the crisis.

After all, the direct costs to the United States of a catastrophic confrontation in the Ukraine are relatively minor, and I have a feeling that President Obama’s advisors are telling him that Russia is a paper tiger, and Putin’s power will crumble if the US pushes back.  Indeed, the idea that Russia is teetering toward political, economic, and social collapse and needs only a strong shove to push it into the abyss i.e. rebirth as a meek and tractable member of the global liberal-democratic camp seems to be an article of faith among US foreign policy poobahs.

And President Obama did make the rather interesting decision to put Victoria Nuland—a confrontational regime-changenik whose husband, Robert Kagan, is a hard-core neo-con—in charge of the Ukraine brief.

In my personal opinion, as his presidency inches towards its terminus, President Obama has decided to wipe that “You won the Nobel Peace Prize, wimp” sneer off the world’s face.

Maybe the president has decided to even scores in his last two years, and doesn’t want to see his antagonists like Assad, Putin, and Maduro smugly seeing him off with a condescending pat on the rump come Inauguration Day 2017.  Maybe his advisors are telling him that he can avoid lame duck humiliation only by being more aggressive in his foreign policy, by getting out front with more confrontational policies that force equivocal allies to line up behind the United States.

In any case, the US has been markedly more aggressive in its approach its biggest foreign policy botch of Obama’s second term, Syria.  In response to the chemical weapons red line humiliation, the United States seems to be more interested in imploding Syria by supporting insurrectionists than it is in pushing forward the increasingly ridiculous Geneva process.  

The United States has also become more pro-active in attempting to manage the cat-herding dynamic of empowered but less capable allies taking on China that it set in motion with the “pivot to Asia”.

And there’s Venezuela, where the United States is now openly supporting a Ukraine-style process by which it demands that the government bestow legitimacy and political traction on the protesters confronting it in the streets (and thereby void the election outcome that the United States found displeasing without the risk and inconvenience of a new election).

And in Ukraine, it looks to me that the United States and Victoria Nuland may have been instrumental in blowing up a transition process that would have conceded the lead to Angela Merkel and Vladimir Putin in the establishment of a new government.  The new Ukranian government might be deficient in key areas of legitimacy, finances, access to the good offices of Russia for trade, financial assistance, and favorable gas pricing, and terminally estranged from much  of its Russian-speaking minority, but as an effort in imperial crotch-hefting it served notice on the EU as well as Russia that the United States was more interested in calling the shots than behaving like a peer interlocutor of European bureaucrats and Russian authoritarians.  In passing, I might as well point out that the point of the F*ck the EU speech was that Victoria Nuland had no interest in seeing Angela Merkel’s preferred opposition leader, Vitali Klitschko, enter the government at the expense of her beloved “Yats”, Arsenyi Yatsenyuk.  And of course, after the EU-brokered agreement collapsed in a hail of bullets, Yats is in and “Klitsch” is out.

I am hoping that the truth behind President Obama’s confrontational posturing is a little more mundane: that Russia does not intend to annex Crimea, President Obama knows it, but wants the undeserved credit for resolutely entering the den of the Russian bear and giving his testicles a mighty twist.

According to the much-maligned but often interesting and informative RT (full disclosure: I was interviewed on an RT show a couple times), the speaker of Crimea’s Supreme Council stated that, even if the outcome of the March 16 referendum is pro-independence, Crimea would prefer to stay autonomous (the second choice on the referendum is to return to an early 1990s constitution that gave Crimea an even higher degree of autonomy in Ukraine than it enjoyed, well, until the current Russian shenanigans).

And the Europeans clearly have no interest in enlisting in a serious sanctions crusade against Russia, let alone a hot war.

So perhaps the West will content itself with half a loaf in Ukraine (actually, the 90% that isn’t Crimea) and Russia will exercise de facto suzerainty over Crimea while it ostensibly remains part of Ukraine.

And the United States, claiming victory over Russia in Ukraine, will be emboldened to make further mischief elsewhere.

Why the Paet/Ashton Phone Call Matters

As readers may know—a necessary caveat because the story has not received wall-to-wall play as, for instance, the resignation of Liz Wray from RT has attracted—the audio of an intercepted phone call between the Foreign Minister of Estonia, one Urmas Paet, and Baron Ashton, the EU poobah in charge of foreign relations and, by extension, the Ukraine mess, made its way onto the Internet.

Paet is reporting on what he saw and heard in Ukraine near the height of the crisis, shortly after the sniper attack of February 21 and the precipitous collapse of the Yanyukovich government.

The contents of the phone call are pretty damning.  

I will turn to the notes on Paet's comments in the tape as posted by Moon of Alabama:

·  here is no trust of the people in the new government (2:35)

·  all of them in the new government have a dirty past (2:50)

·  the trust level (towards the new government) is absolutely low (3:20)

·  enormous pressure against (party of the region) members of parliament (3:40)

·  "uninvited visitors" enter in the night on party members (3:50)

·  journalists who were with me saw during the day that one member of parliament was just beaten in front of the parliament (4:00)

·  people will not leave the street before *real* reforms start, it is not enough that there is just change of government (4:20)

·  the same Olga (from a civil society group) told me that people killed by snipers on both sides, among policemen and people on the street, that they were the same snipers killing people from both sides, she showed me some photos and said she has a medical doctor and that it is the same handwriting and the same type of bullets and it is disturbing that the new coalition now don't want to investigate (8:25)

·  There is now stronger and stronger understanding that behind snipers it was not Yanukovich but it was somebody from the new coalition. (8:55)

·  it discredited itself from the very beginning this new coalition (9:20)

“The same Olga” is Olga Bogomolets, apparently a very nice, very idealist leader of the peaceful Maidan protesters, who was in charge of first aid and medical issues in the square.  Not just an anonymous do-gooder, she was a symbol of the protest hagiographized by The Daily Beast as “The Mother Teresa of the Maidan”.  At one point, the West and the new government were keen to lure her into the new regime as Health Minister, in order to claim some of that idealistic Maidan glow for the rather unappetizing collection of pro-IMF technocrats, refurbished oligarchs, and ultra-nationalist thugs currently calling the shots.  To date Bogomolets has declined, presumably for the reasons described above.

After the tape was released, the Daily Telegraph tracked down Bogomolets, who gave this rather parsed denial:

"Myself I saw only protesters. I do not know the type of wounds suffered by military people," "I think you can only say something like this on the basis of fact. It's not correct and its not good to do this. It should be based on fact."

She added that the new government in Kiev had assured her that a criminal investigation had begun although she had not direct contact with it so far.

"I was a doctor helping to save people on the square. There were 15 people killed on the first day by snipers. They were shot directly to the heart, brain and arteries. There were more than 40 the next day, 12 of them died in my arms," she concluded. 

In the Paet/Ashton tape, Paet told Ashton that Olga told him she had seen photos (apparently of shot policemen) and “as a doctor” it was the “same handwriting” and same type of bullets.  I would infer that by “handwriting” Paets meant “signature” i.e. the same pattern—accurate shots to vital parts of the body—characterized the wounded and dead on both sides.

So, by limiting herself in her reply to the Telegraph to what she had actually witnessed, Bogomolets was leaving out the issue of what she had seen in photographs and videos of the February 21 bloodshed, which exist in huge numbers, including HD video of the shootings and close-ups of the victims.

In other words, Bogomolets is hedging a bit here in retreating to a rather lawyerly “I can only vouch for what I personally witnessed”.

But she certainly wants an investigation, an investigation that the new government is apparently dragging its feet on.

The intercepted tape provides significant support for the thesis that the snipers were provocateurs.

As to why provocateurs might come in handy, I refer you to Victoria Nuland’s warning to pre-Yanyukovich oligarchs that their assets in the West would be at risk “if violence was used against protesters”.

After the shooting, Yanyukovich’s support in the parliament, presumably including the oligarch-backed deputies, evaporated, Yanyukovich fled, and the new government moved in and tried to put an EU-brokered transition agreement (which would have kept Yanyukovich in power until a new election) behind it.

Moral issues aside, one might say, so the new government shot its way into power, possession is nine-tenths of the law, suck on that, Vlad, etc.

There’s a little more to it, thanks to the Russian power play in Crimea.

Russia hopes to cast the shadow of illegitimacy over the Kiev regime, thereby legitimizing its own actions to protect ethnic Russians and Ukrainians in general.

Russia not only hopes to legitimize its actions, in my view, it wishes to legalize them.

And that brings us back to Kosovo, the Albanian enclave that was separated from pro-Russian Serbia.  Kosovo unilaterally declared independence in 2008, after Russia and its allies had dragged their feet on the new, foreign-drafted constitution that was intended to give a veneer of legality to Kosovo’s de facto and, after a decent interval, de jure independence.

All this happened while Kosovo was essentially a UN protectorate.

According to the West, since Yugoslavia had “dissolved”, all sovereign bets were off and there was no need to respect Serbia’s claims of sovereignty over Kosovo.  For bonus points, the Office for Security and Co-operation in Europe, the same OSCE now being bruited about as observers in Ukraine, observed the Kosovo elections to the parliament that unilaterally declared independence.

So Kosovo declared independence under rather dodgy circumstances in order to sidestep Russian attempts to influence the process on behalf of the Kosovar Serbs and brushing aside the UN mandate in the process.  The United States, the EU, and their allies promptly recognized the new government despite the apparent legal holes in the case, thereby considerably rankling the Russians.

In the matter of Ukraine, therefore, the Russian government is giving great weight to what it regards as the criminality inherent in the seizure of power in Kiev by the new leadership, as indicated by the Paets/Ashton tape.  

If the new government isn’t legitimate, then Russia has leeway to adopt the Kosovo formula—a legal reorganization of new republics out of a dissolved state—for its Crimea shenanigans.

And they are saying that the Crimean parliament has as much right to determine the region’s future with Russian support as Kosovo’s parliament did with the support of the West.

Unsurprisingly, the US government and prestige media, particularly in the United States, have shown little appetite for delving into the rather explosive accusation that the new Kiev regime climbed into power on a ladder of corpses they themselves created.

The Western powers, to their considerable discredit, are quite keen to sweep the revelations under the rug and prop up the oligarch-heavy, IMF-friendly current government as a legitimate expression of the democratic yearnings of the Ukrainian people, as somewhat metaphysically if not politically expressed by the Maidan demonstrators.  The gymnastics of Western diplomats and journalists to present the current Kiev outfit as anti-oligarch populists, in particular, I think has Putin rolling his eyes in some combination of exasperation and admiration.

At the same time, the Russians are ostentatiously refusing to any legitimacy-enhancing contacts with the Kiev regime even when Kiev representatives are brought along to a meeting, as Secretary of State Kerry did in Paris.

It may give heartburn to the neo-liberal quadrant, but the Russians are closer to the truth here.

Dissatisfaction of the Maidan activists with the new government is palpable, and it is no coincidence that, when the Crimea crisis emerged, government representatives visited Maidan and told the activists to please go home now, since the key issue now was national unity in the face of the Russian threat and not their picky problems about corruption and governance.

Putin, who I expect had heard the intercepted phone call prior to its release, repeatedly alluded in his press conference to the nobility of the Maidan demonstrators and sympathized with their clear distaste for the neo-oligarchical government (now with genuine oligarchs running the eastern provinces) as well as Yanyukovich (the relish with which Putin threw Yanyukovich under the bus was noteworthy.  Nothing irritates an imperial boss more than an inept proxy).

And I would not be surprised if accusations that the mysterious outburst of sniper fire (which instead of strengthening the purported perpetrator, Yanyukovich, actually catapulted the neo-oligarchical opposition into power) was a black job executed by extremist neo-nationalists gain traction among the genuinely reformist Maidan activists.

Activists such as Obomolets perhaps do not want to give Russia public aid and comfort by endorsing the sniper narrative, at least as long as Russia is threatening Ukrainian sovereignty.  But don’t expect the activist mood to improve if the new government, in addition to entrenching oligarchs instead of removing them, concludes an excruciating austerity agreement with the IMF.

Both the West and Russia have ample experience in delaying embarrassing investigations, and then producing long-after-the-fact whitewashes of their skullduggery—and the new Kiev regime has the added advantage of having ultranationalist thugs on tap to intimidate witnesses and nosy bureaucrats--so I don’t have any particular hope that justice will break out and the full story of “snipergate” will come to light.

But by the same token, I don’t expect the Russians to let up on the allegations, since they strike at the very heart of the new regime’s legitimacy.  The accusations—and demands that Ukraine return to the February 21 transition arrangement-- probably won’t go away, at least on the Russian side, until the Russians gain satisfactory international recognition of the status of Crimea, whatever that turns out to be.