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Sunday, July 16, 2006

Putin Alienates Entire World, Iron Curtain Descends Once More Across the Continent

Once again in Russia, it is clear that the regime couldn't care less about the Russian people. Just as in the time of the Tsars and the Bolsheviks, the New Russian Corporatists are perfectly happy to create a bipolar state, with a vast majority of starving peasants ruled over by a rich class of oligarchs who cut off contact with the outside world and and live in a fantasyland doomed to come crashing down, as over and over it has done in Russia.

After lobbing arrogant, provocative insults at Tony Blair and George Bush, even a major Russophile has turned on the Kremlin, as reported in his own words in the Telegraph:

Speaking personally, this weekend's G8 summit should be a cause of celebration. The fact that the meeting of "the world's richest democracies" is taking place in St Petersburg - with Russia a signed-up member of the club - should fill me with unbridled joy.

Having lived in Russia from 1994 to 1996 - during the post-Soviet economic meltdown - I feel a particular affection for the country. Back then, I argued strongly - amid much scoffing from journalistic rivals - that Russia would soon shed its "basket case" status and emerge as a genuine economic power.

On the surface, that process is well under way. With growth of 6 per cent, inflation down below 10 per cent and $250bn (£135bn) of foreign exchange reserves, Russia looks like a functioning market economy.

Share prices have soared - up threefold in the past two years. This Russian-hosted G8, which formally opens today, is the icing on that capitalist cake.

Yet, even for a Russophile like me, this summit is a cause for concern. For one thing, Russia's suitability for G8 membership is highly questionable.

A major reason is the Yukos affair. To many, this seems like a faraway and incomprehensible skirmish between President Vladimir Putin and "oligarch" Mikhail Khodorkovsky. As one City wag tried to tell me: "It's just a row over some ageing Siberian oil stations and some bags stuffed with dodgy cash".

If only. Yukos is about nothing less than the West's ability to sound credible when preaching to the rest of the world about upholding the rule of law. It also casts a huge shadow over Russia's claim to be a "liberal democracy" and thus a legitimate G8 member.

As is well known, the assets of Yukos, a large Russian oil company, were transferred, via a rigged auction, to a Kremlin-backed company called Rosneft. Khodorkovsky, who ran Yukos, was charged with tax evasion and thrown in prison for eight years. Thousands of shareholders - including UK pension funds - lost their shirts.

On Friday, with great fanfare and in time for the G8 summit, Rosneft was floated on the London stock market. The IPO raised $10bn - the sixth biggest in history. Western banks and PR firms made a killing. And the bosses of the London Stock Exchange could be happy that, with the Big Apple still hobbled by tight "post-Enron" regulation, the issue helped them steal a march on New York.

But this IPO was a disgrace. The Council of Europe, Europe's oldest multilateral body, dedicated to human rights, has heavily criticised the Kremlin's treatment of Khodorkovsky. "Intimidating action," said the council, "by different law enforcement agencies against Yukos… and the careful preparation of this action in terms of public relations, taken together, give a picture of a co-ordinated attack by the state". And yet, despite several Yukos-related lawsuits still hanging over Rosneft, the London listing went ahead.

Other aspects of Russia's behaviour are not consistent with G8 membership. Putin is an increasingly authoritarian leader. He has muzzled Russia's independent media, particularly television news. Elections for regional governors have been scrapped. He has also suppressed "civil society" - reining in critical charities and other pressure groups.

It would seem, though, that any Western qualms over Yukos or corporate governance - or press freedom for that matter - have been washed away by a flood of Rosneft-related money. Russia has been granted access to Western capital and - on the same weekend - gets to host the G8 summit as well.

The reason, of course, is "energy security" - two words firmly on the St Petersburg agenda. The reality is that sky-high energy prices are really hurting the big Western economies. And with global oil demand outstripping supply, Western voters are getting angry that their fuel bills are 20 per cent up on last year.

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