Business in Russia

Mechel bashing
Jul 31st 2008 | MOSCOW
From The Economist print edition

Vladimir Putin’s attack on a mining company shows that nothing has changed

Illustration by Claudio Munoz

EVER since Dmitry Medvedev became Russia’s president and Vladimir Putin assumed the role of prime minister, Russian businessmen and foreign investors have wondered who is really in charge and whether anything would change. Mr Putin visited factories and farms, chatted with workers and lambasted an odd minister, but he looked distinctly bored. Was he loosening his grip? In the past few days Mr Putin has delivered a thundering answer.

To assert his supremacy Mr Putin chose Mechel, a steel giant listed in New York, with a market value of $15.2 billion. On July 24th Mr Putin publicly accused Mechel and its main shareholder, Igor Zyuzin, of selling its coking coal abroad more cheaply than at home and dodging taxes. He was particularly irritated that Mr Zyuzin, who was summoned to a government meeting, was said to be ill. “Of course, illness is illness, but I think he should get well as soon as possible. Otherwise, we will have to send him a doctor and clean up all the problems,” said Mr Putin. Perhaps the prosecution office and anti-monopoly service should investigate, he added.

Mr Putin’s medical advice had an immediate effect: Mechel’s share price plummeted, wiping some $5 billion off the firm’s value and prompting a dramatic fall in Russia’s stockmarket. The episode stirred memories of Yukos, once Russia’s largest oil company, which was destroyed by crippling claims for back taxes. Mikhail Khodorkovsky, Yukos’s former boss, is still in jail and his assets are now part of Rosneft, a state-controlled oil firm chaired by Igor Sechin, Mr Putin’s trusted aide. The sense of déjà vu was enhanced by the fact that it was Mr Sechin who apparently briefed his boss about Mechel’s behaviour.

Mr Putin’s attack seemed to take Mr Medvedev and his circle by surprise. A senior adviser to Mr Medvedev tried to calm nerves, noting that Mechel was co-operating with the anti-monopoly investigation, which would strictly obey the rule of law. “We should be especially careful about our market, which is becoming important for ordinary people who invest their money in shares and bonds,” he said.

But Mr Putin would have none of it. A few hours later he told his ministers, in front of television cameras, that Mechel fixed prices, evaded taxes and pushed up inflation, harming the Russian people. This stirred memories of Stalin’s denunciations of “saboteurs” and knocked another third off the company’s value. The next day an explosion in one of Mechel’s mines injured 17 people, and the environmental agency launched an investigation.

Russian businessmen have been trying to work out what provoked Mr Putin. Unlike Mr Khodorkovsky, Mechel’s owner, a former miner, steered clear of politics and shunned publicity. “It shows that the Yukos case was not unique and it could happen to anyone,” says one observer.

The favourite theory so far is that the attack on Mechel was instigated by one of its customers or competitors, who complained to Mr Sechin that Mechel was abusing its monopoly position in coking coal. A second theory is that Mechel will be taken over by a state corporation run by one of Mr Putin’s former secret-service colleagues. Igor Shuvalov, Mr Putin’s deputy, has said that Mechel is unlikely to go down Yukos’s path, but acknowledged that “in life, no possibility can be excluded”.

Mechel’s story offers several lessons so far. It shows that the legacy of Yukos is strong, institutions are weak and Mr Putin’s whims take precedent over legal decisions. It demonstrates that Mr Putin feels invincible and nobody, including Russia’s new president, has any power over him. And it shows that Mr Putin has little interest in nurturing a good investment climate.

This may also explain the rough treatment BP, a British oil giant, has received in Russia. On the day Mechel was being castigated, Robert Dudley, the embattled chief executive of TNK-BP, BP’s joint venture in Russia, left the country citing “uncertainties surrounding the status of my work visa and the sustained harassment of the company and myself”. His visa has expired and so, say Russian shareholders who want him out, has his contract.

The conflict at TNK-BP remains a dispute between private shareholders. The Kremlin has not interfered directly, but it has not prevented the use of official agencies in the fight, nor has it done anything to help BP protect its investment. “Tread with caution,” was the advice of Tony Hayward, BP’s chief executive, to companies thinking of investing in Russia.

Perhaps one reason why the Kremlin is so complacent about foreign investors is that it has never paid the price for destroying Yukos. Rising oil prices, strong global growth and booming capital inflows meant that investors soon forgot about the affair. BP itself happily took part in Rosneft’s initial public offering, which legitimised its murky and controversial takeover of Yukos’s assets.

Today the outlook is less radiant, argues Rory MacFarquhar, chief economist at Goldman Sachs in Russia. Economic growth is expected to slow, inflation is in double digits and oil production is falling. Last year imports grew almost four times as fast as exports in real terms. Russia still had a current-account surplus last year, but if oil prices continue their recent decline, the balance of payments will soon look less healthy and the need for foreign investment may become more urgent. It is not just foreigners who should be worried about Russia’s investment climate—so should Russians themselves.

Appease Iran?

by Daniel Pipes
Jerusalem Post
September 25, 2008
http://www.danielpipes.org/article/5912
Send
Comment
RSS
Share:    

After Hitler, the policy of appeasing dictators – ridiculed by Winston Churchill as feeding a crocodile, hoping it will eat one last – appeared to be permanently discredited. Yet the policy has enjoyed some successes and remains a live temptation today in dealing with the Islamic Republic of Iran.

Academics have long challenged the facile vilification of appeasement. Already in 1961, A.J.P. Taylor of Oxford justified Neville Chamberlain's efforts, while Christopher Layne of Texas A&M currently argues that Chamberlain "did the best that he could with the cards he was dealt." Daniel Treisman, a political scientist at UCLA, finds the common presumption against appeasement to be "far too strong," while his University of Florida colleague Ralph B.A. Dimuccio calls it "simplistic."


Neville Chamberlain mistakenly declared "peace in our time" on September 30, 1938.

In perhaps the most convincing treatment of the pro-appeasement thesis, Paul M. Kennedy, a British historian teaching at Yale University, established that appeasement has a long and credible history. In his 1976 article, "The Tradition of Appeasement in British Foreign Policy, 1865-1939," Kennedy defined appeasement as a method of settling quarrels "by admitting and satisfying grievances through rational negotiation and compromise," thereby avoiding the horrors of warfare. It is, he noted, an optimistic approach, presuming humans to be reasonable and peaceful.

From the prime ministry of William Gladstone until its discrediting in the late 1930s, appeasement was, in Kennedy's description, a "perfectly respectable" term and even "a particularly British form of diplomacy" well suited to the country's character and circumstances. Kennedy found the policy had four quasi-permanent bases, all of which apply especially well to the United States today:

Moral: After the Evangelical movement swept England in the early nineteenth century, British foreign policy contained a strong urge to settle disputes fairly and non-violently.
Economic: As the world's leading trader, the United Kingdom had a vital national interest in avoiding disruptions to commerce, from which it would disproportionately suffer.
Strategic: Britain's global empire meant it was over-extended (making it, in Joseph Chamberlain's term, a "weary titan"); accordingly, it had to choose its battles sparingly, making compromise an accepted and routine way of dealing with problems.
Domestic: The extension of the franchise made public opinion a growing factor in decisionmaking, and the public did not care for wars, especially expensive ones.

As a result, for over seven decades, London pursued, with rare exceptions, a foreign policy that was "pragmatic, conciliatory, and reasonable." Again and again, the authorities found that "the peaceful settlement of disputes was much more to Britain's advantage than recourse to war." In particular, appeasement steadily influenced British policy vis-à-vis the United States (in relation to, for example, the Panama Canal, Alaska's borders, Latin America as a U.S. sphere of influence) and Wilhelmine Germany (the "naval holiday" proposal, colonial concessions, restraint in relations with France).

Kennedy judges the policy positively, as serviceably guiding the foreign relations of the world's most powerful state for decades and "encapsulating many of the finer aspects of the British political tradition." If not a brilliant success, appeasement permitted London to accommodate the expanding influence of its non-ideological rivals such as the United States and Imperial Germany, which generally could be counted on to accept concessions without becoming inflamed. It thus slowed the UK's gentle decline.

Post-1917 and the Bolshevik Revolution, however, concessions failed to mollify the new kind of ideologically-driven enemy – Hitler in the 1930s, Brezhnev in the 1970s, Arafat and Kim Jong-Il in the 1990s, and now, Khamene'i and Ahmadinejad. These ideologues exploit concessions and deceitfully offer a quid pro quo that they do not intend to fulfill. Harboring aspirations to global hegemony, they cannot be appeased. Concessions to them truly amount to feeding the crocodile.

However dysfunctional these days, appeasement abidingly appeals to the modern Western psyche, ineluctably arising when democratic states face aggressive ideological enemies. With reference to Iran, for example, George W. Bush may bravely have denounced "the false comfort of appeasement, which has been repeatedly discredited by history," but Middle East Quarterly editor Michael Rubin rightly discerns in the realities of U.S. policy that "now Bush is appeasing Iran."

Summing up, the policy of appeasement goes back a century and a half, enjoyed some success, and ever remains alive. But with ideological enemies it must consciously be resisted, lest the tragic lessons of the 1930s, 1970s, and 1990s be ignored. And repeated.

Related Topics: History, Iran, US policy

In India, New Opportunities for Women Draw Anger and Abuse From Men
By Emily Wax
Washington Post Foreign Service
Monday, August 25, 2008; A11

NEW DELHI

Every morning, Gitanjali Chaudhry, 17, walks to her high school through a labyrinth of temples and vegetable markets. Along with her books, she carries an Indian version of Mace -- a bag of chili powder and a pouch of safety pins -- to fend off the often boorish men who loiter in the narrow passageways.

"We learned that women have to be brave," said Chaudhry, a loquacious, ponytailed girl who wants to be a lawyer. She has started attending increasingly popular neighborhood classes on self-defense for women.

Chaudhry is one of the brightest students in her working-class district. But since several local men started following her to class, she sometimes stays home now. She has friends who have been raped or are constant victims of "Eve teasing," when men on the street spew lewd comments or aggressively paw women's bodies.

"We thought opportunities were getting better for young Indian women. But the harassment only seems to be getting worse," Chaudhry said, as friends gathered at a recent "self-respect and self-esteem session" held by the nonprofit Smile Foundation.

For India's middle-class urban women, the past decade has brought unprecedented opportunities to advance in a social order long dominated by men. But a powerful male backlash has accompanied the women's revolution, an upwelling of resentment that has expressed itself in sexual violence and harassment.

In India today, women are working in lucrative retail and technology jobs, sometimes in cities far from their home towns. Economic independence has, in some cases, allowed them to delay marriage and early childbirth. Social mobility among India's young is also undermining the country's traditional joint-family system, in which couples are expected to move in with the husband's parents. The shift has empowered the modern Indian wife, freeing her from the scourge of the bossy, nosy mother-in-law.

At the same time, however, the number of reported instances of domestic violence, rape and dowry killings is spiking in South Asian cities, according to women's groups, demographers and sociologists.

Violence against women is the fastest-growing crime in India, a recent study concluded. Every 26 minutes a woman is molested, every 34 minutes a rape takes place, and every 43 minutes a woman is kidnapped, according to the Home Ministry's National Crime Records Bureau.

With about 19,000 reported rapes a year, India ranks fifth highest in that category out of 84 countries studied, according to a 2006 report by the U.N. Office on Drugs and Crime. But women's groups say fewer than 2 percent of women who have been sexually assaulted in India report the crime to police, largely because the social stigma attached to rape may undermine a woman's chance for marriage.

The United States, where the reporting of sexual attacks is more common, ranks highest in the world, with 95,000 reported rapes each year.

In the past few months, newspapers here have dubbed New Delhi the "rape capital" of South Asia, with more than 330 rape and molestation cases reported in the first four months of 2008, including one high-profile case in which a 12-year-old girl was allegedly gang-raped by a Delhi police constable and an accomplice. Experts predict that the number of sexual attacks in 2008 may exceed the total in 2007, when 544 rapes were reported in the city. "The latest statistics are terrifying. And it clearly points to male rage," said Shobhaa Dé, a novelist and popular social commentator. "Underneath our incredible social change, the Indian male is experiencing nothing short of a psychological frenzy."

Part of the problem is also that men's expectations of women have not kept pace with the changes women are experiencing at home and at work. Many matrimonial ads in India's Sunday newspapers -- often written by parents -- include descriptions of potential brides as "economically independent, but homely." That's code for a working woman who can happily organize a proper 10-course Indian dinner even after a long day at the office. It's a fantasy that many urbanized Indian women are rejecting, much to the dismay of many men.

Despite recent growth, unemployment remains high in India, topping 7 percent. Sixty percent of those who do work are self-employed farmers and often very poor, according to World Bank data. Men who earn little or are unable to find work can be resentful when they see women finding well-paid office jobs, women's groups say.

The change in power has been too fast for some Indian men, whose intense curiosity about women can often be traced back to a segregated youth. Some boys hanging out in Chaudhry's neighborhood said they had spent more time looking at photographs of women in magazines then with girls they knew and were interested in.

"I was never really taught how to act around a girl," said Raja Kumar, 21, who works odd jobs on Chaudhry's block. "I thought teasing was the way to get them to notice me."

Standing nearby was Ram Swarup, 70, the neighborhood elder, a graying retired laundry worker who has six children, four of them boys. He said that whenever his wife had a girl, he asked her to try again for a son.

Because of the traditional custom of paying high dowries to a groom's parents, he said, girls were seen in the past as a heavy burden. "No one was happy about their birth," he said. "They therefore got little respect in India."

"When we were growing up, girls were never sent to school. Usually they were married off right away," Swarup added. "I liked being the breadwinner and king of my house. But India is changing now. My daughters-in-law work and think they can therefore be bosses and queens of the house. Some men find it a struggle. We are trying to adjust to the new ways of girls venturing forth. It may be better in the end, since the women now earn money."

In South Asia, the contrast between the achievements of female political leaders and the lowly status of ordinary women has its roots in dynastic traditions. Professions here are inherited, in politics as in industry. In India, former prime minister Indira Gandhi came into politics through family connections, as did former prime minister Khaleda Zia in Bangladesh. In Pakistan, Benazir Bhutto inherited her station in politics from her father and mentor, Zulfiqar Ali Bhutto.

In India, women were urged by men to take to the streets during the country's struggle for independence from Britain. But despite the relative abundance of female leaders in South Asia, many women in the region suffer from profound inequalities in access to education and health care, women's advocates say.

According to a study published in the British medical journal the Lancet in 2006, almost 10 million female fetuses were aborted in India in the preceding 20 years.

The practice -- outlawed, though the law is seldom enforced -- is on the rise partly because more people can afford sonograms.

"If India is really going to become a world superpower, it has to stop killing its girls in the womb," said Divya Kulshreshtha, who runs a Smile Foundation mobile women's health clinic. "If India wants to shine, then its women should be allowed to shine."

Bangladesh, where more than half a million women have gained employment in the garment industry, has also seen a startling increase in violence against women -- a development some attribute to working women's increased willingness to report attacks.

"In many ways, the South Asian woman is out of the oven and into the frying pan," said Ayesha Khanam, president of the Bangladesh Women's Council, which tracks violence against women across the subcontinent. "They bring home money, they share in power in the society. But they are also doing something very powerful that may enrage men: toppling the old family structure."

With South Asian society in transition, the Smile Foundation decided to reach out to men with humorous neighborhood plays and education programs.

On a recent Saturday afternoon in New Delhi, shopkeepers leaned out their windows and groups of boys gathered on rooftops to watch a street-theater skit, along with Chaudhry and her friends fresh from an empowerment session.

Wearing a droopy mustache and rubbing his fake potbelly, a man pretended to lean lecherously against a graceful young woman riding a public bus. The audience exploded with laughter as she moved away.

In a more somber skit, a man tried to buy his niece's affection with biscuits. Then he raped her.

The audience stood silent, stunned. Some women started to cry.

Afterward, Divya Yadav, 20, the female lead, complained that she herself is harassed daily during her bus trips home from her performances.

"Talking directly to the men is the first step," she said, turning to one of her fans, Lalit Kumar, an 18-year-old high school student who had formed a youth group for boys who wanted to help.

Kumar and his friends offered to escort the actress home. Things still weren't safe, they agreed

Evolution
Praying for health
Jul 31st 2008
From The Economist print edition

Religious diversity may be caused by disease

SOME people, notably Richard Dawkins, an evolutionary biologist at Oxford University, regard religion as a disease. It spreads, they suggest, like a virus, except that the “viruses” are similar to those infecting computers—bits of cultural software that take over the hardware of the brain and make it do irrational things.

Corey Fincher, of the University of New Mexico, has a different hypothesis for the origin of religious diversity. He thinks not that religions are like disease but that they are responses to disease—or, rather, to the threat of disease. If he is right, then people who believe that their religion protects them from harm may be correct, although the protection is of a different sort from the supernatural one they perceive.


Mr Fincher is not arguing that disease-protection is religion’s main function. Biologists have different hypotheses for that. Not all follow Dr Dawkins in thinking it pathological. Some see it either as a way of promoting group solidarity in a hostile world, or as an accidental consequence of the predisposition to such solidarity. This solidarity-promotion is one of Mr Fincher’s starting points. The other is that bacteria, viruses and other parasites are powerful drivers of evolution. Many biologists think that sex, for example, is a response to parasitism. The continual mixing of genes that it promotes means that at least some offspring of any pair of parents are likely to be immune to a given disease.

Mr Fincher and his colleague Randy Thornhill wondered if disease might be driving important aspects of human social behaviour, too. Their hypothesis is that in places where disease is rampant, it behoves groups not to mix with one another more than is strictly necessary, in order to reduce the risk of contagion. They therefore predict that patterns of behaviour which promote group exclusivity will be stronger in disease-ridden areas. Since religious differences are certainly in that category, they specifically predict that the number of different religions in a place will vary with the disease load. Which is, as they report in the Proceedings of the Royal Society, the case.

Proving the point involved collating a lot of previous research. Even defining what constitutes a religion is fraught with difficulty. But using accepted definitions of uniqueness, exclusivity, autonomy and superiority to other religions they calculated that the average number of religions per country is 31. The range, though, is enormous—from 3 to 643. Côte d’Ivoire, for example, has 76 while Norway has 13, and Brazil has 159 while Canada has 15. They then did the same thing for the number of parasitic diseases found in each country. The average here was 200, with a range from 178 to 248.

Obviously, some of the differences between countries are caused by differences in their areas and populations. But these can be accounted for statistically. When they have been, the correlation between the number of religions in a place and how disease-ridden it is looks impressive. There is less than one chance in 10,000 that it has come about accidentally.

The two researchers also looked at anthropological data on how much people in “traditional” (ie, non-urban) societies move around in different parts of the world. They found that in more religiously diverse (and more disease-ridden) places people move shorter distances than in healthier, religiously monotonous societies. The implication is that religious diversity causes people to keep themselves to themselves, and thus makes it harder for them to catch germs from infidels.

Of course, correlation is not causation. But religion is not the only cultural phenomenon that stops groups of people from mixing. Language has the same effect, and in another, as yet unpublished study Mr Fincher and Dr Thornhill found a similar relationship there too. Moreover, their search of the literature turned up work which suggests that xenophobia is linked psychologically with fear of disease (the dirty foreigner…). Perhaps, then, the underlying reason why there is so much hostility between ethnic groups is nothing to do with the groups themselves, but instead with the diseases they may bring.

IRAQ: ELECTION LAW GRIDLOCK ENDS

Summary
The Iraqi Parliament on Sept. 24 approved a provincial election law allowing elections to be held by Jan. 31, 2009. As with a number of previous pieces of legislation, this law made it through the legislature because of a compromise involving deferral on a gridlocked issue -- in this case, the status of the northern oil-rich Kirkuk region. The most significant aspect of the upcoming provincial elections will be their outcome in the Sunni areas (where elections largely were boycotted the last time), which could trigger a new sectarian struggle.

Analysis
Iraq's Parliament on Sept. 24 overwhelmingly approved a provincial elections law, overcoming months of gridlock. The provincial elections, which were supposed to be held by Oct. 1, are now to be held by Jan. 31, 2009. Polls are to be held in 14 of the country's 18 provinces, excluding three that are part of the northern autonomous Kurdistan federal zone and the province of Tamim -- whose capital, Kirkuk, is in an oil-rich region and is disputed territory. The law now goes to Iraq's three-member presidency council, headed by President Jalal Talabani, for approval. Talabani rejected an earlier version of the law that lawmakers approved in July.


All sides reportedly have made concessions on the Kirkuk issue, which means this law will make it through the council. The Kirkuk compromise entails having a separate law for dealing with elections there; voting will be held in the city after March 2009, after a power-sharing formula for Kirkuk's administration is devised. Kurdish, Shiite, Sunni and Turkomen legislators agreed to a U.N. compromise to form a parliamentary committee to review disputes regarding Kirkuk in coordination with the United Nations, the existing multi-communal provincial council and the central government. They will present a report by March 31, 2009.

The voting in the three Kurdish provinces of Dahuk, Arbil and Sulaymaniyah will be held only after Kurdistan's parliament adopts its own law. Provincial polls in the areas under the control of the Kurdistan Regional Government (KRG) were never really an issue, given the region's autonomous status, stability and security stemming from the power-sharing understanding between Talabani's Patriotic Union of Kurdistan and KRG President Massoud Barzani's Kurdistan Democratic Party. The problem is with this Kurdistani alliance's desire to include Tamim in its federal zone because of Kirkuk's value as an energy-rich region and because of the city's demographics, which have created a stalemate among the Kurdish, Arabian and Turkomen peoples. Kurdish parliament members have insisted that a new electoral register be compiled giving the vote only to those with a historic claim to residence in the province before elections are held in Kirkuk.


With the vote in Tamim delayed until next year, the provincial polls become more or less a Shiite and Sunni affair (the latter more so than the former). The provincial elections could reshape the intra-communal balance of power and trigger a fresh sectarian struggle. The situation in the Shiite south is not too precarious, however, since the Islamic Supreme Council of Iraq (ISCI) -- the country's most powerful Shiite political force -- has a hold over most of the provincial governments as well as the central government.

Furthermore, the ISCI's main rival -- the movement of radical Shiite leader Muqtada al-Sadr -- has decided not to directly participate in the election and instead back independents. There are several reasons for this decision. First, the new law prohibits groups with militias to take part in the vote. Second, the al-Sadrite movement is undergoing a massive reorganization, which only recently began and will take some time to be completed. Third, al-Sadr himself is on sabbatical in Iran, where he will remain for a number of years in an attempt to establish his clerical credentials. Fourth, the Iranians have used their influence to rein him in so that he does not create a problem for Tehran's main proxy, the ISCI. Thus the situation in the southern Shiite provinces bodes well for political continuity and even for the ISCI's plan for the creation of a southern Shiite autonomous zone.

The Sunni areas, in contrast, are quite likely to undergo a major change because of the struggle between those forces in the system (Vice-President Tariq al-Hashmi's Iraqi Islamic Party [IIP] and the wider coalition that it belongs to, the Tawafoq Iraqi Front [TIF]) and those that remain outside the post-Baathist Iraqi republic (the tribal forces known as the Awakening Councils).

In the previous elections, a massive Sunni boycott allowed the IIP and TIF to dominate the provincial and national legislatures. This time around, it is expected that the Awakening Council movement will take advantage of the fact that it has played a major role in establishing security in the Sunni provinces and the fact that Sunnis are expected to participate in far greater numbers than the last election.

An altering of the balance of power among the Sunnis at the provincial level could have serious implications for Iraq's delicate Shiite-Sunni balance. Shia-dominated Baghdad and its Iranian patrons would like to limit the inclusion of the Awakening Council forces into state security organs. This objective will be difficult if members of the Awakening Councils hold political office. The outcome of the provincial vote will have implications for the general elections slated for 2009 as well.

Thus far, U.S.-Iranian dealings have allowed things to move forward in Iraq. There are, however, a number of factors on the ground that neither Washington nor Tehran is in a position to influence. This provincial vote is a prime example of such a variable -- one capable of upsetting the balance in place right now.

Copyright 2008 Stratfor.