#6536 #6537 #6538
#16 - JRL 6536
RFE/RL Business Watch
Vol. 2, No. 33, 5 November 2002
RFE/RL Business Watch" is edited by Daniel Kimmage (DK).
THE FOG BEFORE THE WAR
Nothing brings business, economics, and politics together in quite as passionate an embrace as war. With conditions for conflict in Iraq ripening by the day, the paucity of analytical attention to the potential consequences of this perilous menage a trois for Russia's economy is striking. The implications for Russia's future, and future role in the international community, are immense.
Support for this bold assertion comes from a markedly timid source. The World Bank's October 2002 "Report on the Russian Economy" tries very hard to stay bland. Its staid opening sentence politely remarks that the "Russian economy, on the whole, continues to function well, maintaining stable growth against a backdrop of events in the world that could render growth a rarity." Indeed, the Russian economy has been growing for some time now, and the authors have clearly decided to begin with this bit of good news. The peril, however, rears its head in the second sentence: "Prices for oil are high." The 27-page report trundles on with substantial detail on wages, production, investment, and reform -- finding cause for cautious optimism and rather less-cautious pessimism across the board -- but its true import is that exports of oil and gas make the money that keeps the Russian economy afloat. What progress has been made in other areas is not enough to change the fact of this crude dependence. Period.
The World Bank report appeared on 29 October amid the noisome aftermath of the Moscow hostage crisis. Reactions were understandably limited, but odd nonetheless. "Vedomosti" wrote in a 31 October editorial that the report "proves the Russian economy's increased dependence on natural-resources exports. This means that as soon as world market conditions deteriorate, we will again be threatened with a default." "Default" is a word with a brief and bitter history in Russian, and might tempt some writers to examine more closely any "world market conditions" capable of bringing about a recurrence. Yet the editorial blithely glides on through four paragraphs of neutral puffery without further discussion of this mysterious world and its precarious conditions.
Those who are less circumspect help to explain why silence is so prevalent. In a 15 October column in "Vremya MN," commentator Leonid Radzikhovskii rages at the "nonsense" that fills newspapers "while our fate, without exaggeration, is being decided in Washington and Baghdad." If Saddam falls and cheap Iraqi oil flows to world markets, "all of the 'accursed Russian questions' will come down to one -- how much will prices drop?" If the U.S. is able to keep oil prices low, Radzikhovskii sees "permanent crisis and collapse for our oil-dependent economy." What to do? Here, things get fuzzy. Radzikhovskii admits that Russia has no means of influencing American policy, and that an American victory would be "politically disadvantageous...and economically ruinous." But something more important "unites us with these dangerous and unpleasant cowboys" -- saving Christendom. "If Iraq and its allies achieve a moral victory, tomorrow a wave will rise that will wash away flaccid Christian civilization.... War in Iraq will be ruinous for us. But this is only the first payment we must make for our survival in the 21st century," Radzikhovskii concludes.
Radzikhovskii's economic logic has its merits, yet it is almost impossible to image a position less likely to garner support, either in Russia, where the Putin administration has quietly encouraged a willing recrudescence of great-power rhetoric, or the West, where the slightest whisper of clashing civilizations is sufficient for intellectual ostracism (as Oriana Fallaci will attest).
Similar confusions bedevil Western commentary on Iraq. In an article unambiguously entitled "Our Enemies, the Saudis" in the July-August issue of "Commentary," Victor Davis Hanson urges the U.S. to "recalibrate" its oil policy in favor of Russia and the former Soviet Union. "Not only would such suppliers increase the pool of the world's oil and gas, and thereby lessen Saudi influence, but at least in the case of Russia we would be buying from a struggling democracy rather than from a small elite already as rich as many of its silenced people are poor." Hanson concludes that "a new Iraq might start the fall of dominoes in the Gulf that could wipe away the entire foul nest behind 11 September." Leaving aside the questionable contrast Hanson draws between Saudi Arabia and Russia, what effect might this increased pool of oil and gas have on Russia's economy, and struggling democracy? Might not other dominoes fall elsewhere?
In a widely noted antiwar article entitled "Bush and Iraq" that appeared in the 7 November issue of the "New York Review of Books," Anthony Lewis hints darkly that "American business leaders and economists have started to express their fears about the effect of rising oil prices resulting from a war on Iraq." Now oil prices are going up, assuming their familiar American guise of economic bugbear.
Paul Klebnikov, who has written extensively on Russian business and authored a biography of Boris Berezovskii, somehow manages to avoid all mention of Russia in an optimistic piece on Iraqi oil in the 28 October issue of "Forbes." He does, however, sketch out what must certainly be the Russian nightmare scenario. "If a U.S.-led force succeeds in ousting Saddam," Klebnikov writes, "it's a good bet that [big American] companies will come in as soon as the fighting has died down." He then quotes Fadhil Chalabi, a former Iraqi Oil Ministry official turned emigre energy pundit: "I could see the price for West Texas Intermediate going from $30 today to $15...." Klebnikov's conclusion: "Saddam's fall would...be bad news for some of his rival regimes in oil-rich lands. But for the rest of the world, a gusher."
It's not as though the question of Iraqi oil has elicited purely unambiguous commentary. A sobering survey of the complexities by Serge Schmemann appeared in "The New York Times" on 3 November. He notes Iraq's debts to Russia, the multibillion-dollar deals Russian oil companies have inked with Saddam Hussein's regime, the possible effects of a war, and the conundrum this poses for Russia. But his is a survey, not a contribution to the debate, and he leaves it at that.
Viewing the debate over war in Iraq through the admittedly parochial lens of the Russian economy has the distinct virtue of revealing the illusions behind the polemics. For Radzikhovskii, who accepts as axiomatic both Russia's inability to influence American foreign policy and the momentous implications of a U.S. victory in Iraq, the illusion is that of a grand historical narrative restored, with Russia resuming its place on the front lines of Christendom's struggle against the Mohammedan hordes. For Hanson, the illusion is that what is bad for our enemies, the Saudis, is good for the struggling, democratic Russians. For Klebnikov, the illusion is that American companies pumping cheap oil out of Iraq will unleash such a gusher of good that its effects on Russia merit no mention.
The first shot has not yet been fired in Iraq. But the fog of war seems to have settled over us already. DK
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