Here’s a novel tactic: three copies of the following nasty little piece of political insinuation and lack of understanding got caught in my spam filter (from spoofed or hijacked sender addresses twila962victoria@basf.com, wun_jou3vittorio@barbourville.com, vilma2tracy@tppa.com, full long headers available). Only mad Russophiles would deem illegal spam activities an appropriate response to political campaigning. Here is my translation:

Subject: The Americans are Preparing a Revolution in Russia

Election day is soon and these elections are fateful. As the day approaches, the citizens of our country are reacting with the utmost sensitivity to political news and are being bombarded with information including the use of dirty PR technologies. Special note should be made of the use of this means to worsen the situation and artificially heighten social tensions.

During the last two months, the most outstanding example of this in view of its level of activity, power, and professionalism [Essel: the compliment is unintended; professionalism is a rude word to a genuine Russophile] has been carried out in the Pushkin District of the Moscow Region. The whole – sadly quite wide – range of dirty information technologies [Essel: what about your own political spamming, is it it all right if you do it?], including the use of rent-a-crowd meetings and pickets that get shown on television, mud-slinging campaigns in federal, regional, and district newspapers, Internet-poisoning [Essel: can I have some please?] and so on and so forth has been deployed.

Strange as it may seem, the source of this information campaign and its funding is located far away from the Pushkin District in foggy London, the place which welcomes those who wish Russia ill.

Well-known Russian émigrés possessing vast shadowy capital have called on the services of a company with a hitherto untainted reputation, Ogilvy Public Relations Worldwide, founded some 25 years ago by David Ogilvy, the advertising business guru. It is strange that a respectable American corporation whose clients include big names such as LG Electronics, Pfizer, Unilever, Sun Microsystems, BP should not consider it beneath it to accept money of dubious provenence and enthusiastically undertake to organise rent-a-crowds, fake hunger-strikes, and sink so low as to engage in direct and fairly evident slander. Maybe the powerful corporations’s excecutives in New York are not aware of what its distant Moscow office is doing or maybe – this cannot be excluded – the American corporation is carrying out a trial before a full-scale incursion into the Russian electoral process in order to organise yet another “colour”, “democratic”, revolution.

An answer to this question must be provided by the organs responsible for our country’s security of state [Essel: let’s get the threats in, nice and slimy]. It can already be said, however, that what we are seeing here is rude interference in Russia’s internal affairs by an American corporation working for the shadowy money of Russian émigré circles in London.

Ogilvy Public Relations Worldwide is the largest international communications money in the WPP Group and was founded over 25 years ago by David Ogilvy, a guru of the advertising business. Its representative offices in over 60 regional markets on every continent and run from headquarters in New York. Its clients include big names such as LG Electronics, Pfizer, Unilever, Sun Microsystems, and others [Essel: this is getting repetitive rather quickly!]. Who would have thought that the Moscow office of this well-known company – SPN Ogilvy PR – would stoop so low as to engage in the dirty tricks often used by dishonest businesses and politicians [Essel: now that’s the pot calling the kettle black!].

In September 2007, a mass media campaign was deployed against Vladimir Bashkirtsev, the head of the Pushkin Municipal District. More surprising still was the use of every possible, and more importantly – expensive, media: federal and local press, television, the internet. Employees of SPN Ogilvy PR pay for the organisation of regular public meetings. A fair amount has already been spent. By a conservative reckoning, organising these activities has already cost several tens of millions of roubles.

It’s only fair to ask why does such a large agency need to make itself this sort of reputation?

It would seem that this electoral PR campaign is biting and that the Russian powers don’t like it one little bit when things don’t go 100% their way. All I can say is “Right on, Ogilvy Public Relations Worldwide!” but I do think that it’s rather brave of you, given the way things are in Russia today. It’s time to start preparing for raids of your Moscow office by masked SWAT “tax police”, confiscation of your computers, harrassment and arrest of local and maybe expat staff, balcony “falls” in a state of depression brought on by three people on your landing...

The Moscow Times reports:

It's a miracle a gunfight didn't break out.

On Oct. 1, a group of heavily armed officers from the Federal Security Service and the Investigative Committee were waiting at Domodedovo Airport for a senior drug police officer to arrive. They had orders to arrest him. But a group of Federal Drug Control Service officers standing nearby had orders to protect him. A scuffle broke out, but the arresting officers eventually walked away with Alexander Bulbov and two of his colleagues in custody. "We nearly had a fight between two security agencies," said a former security services officer familiar with the situation. "This time, the agents were able to keep their cool, and there was no gunfight. But if this battle continues, you can be sure they will start shooting at each other. And it would be difficult to stop."

Bulbov's arrest has brought to the surface one of the numerous behind-the-scenes battles between two Kremlin clans that form the bedrock of President Vladimir Putin's team. Speaking on condition of anonymity because of the sensitivity of the issue, three former security services agents with intimate knowledge of the power struggle said the infighting had its roots in commerce, not politics or prestige. The fight is primarily over control of smuggling and money-laundering operations, and Putin is merely a referee trying to prevent one group from prevailing over the other, they said. "On top of their suspicious commercial activities, each clan wants to have the president -- and the power he enjoys -- in its hands. And the only way for Putin to preserve his independence is to keep the balance between the two groups," the former officer said. "Putin understands that if one group takes over, he will completely fall into the hands of a single group. And he doesn't want that."

Such intrigues have long characterized Putin's Kremlin, but the battles are intensifying with Putin's repeated promises to step down when his second term ends next year, as required by the Constitution. "Putin has chosen a very dangerous scheme to transfer his power," said another former officer, a veteran of the KGB and FSB. "He should have changed the Constitution to stay at the helm. This would have been a clear move, and the clans would have been assured stability. We wouldn't have this public fight going on now." A lot is at stake, and the clans don't understand what is going to happen from one day to the next, he said. "They are very nervous."

Eight days after Bulbov's arrest, his boss, Federal Drug Control Service chief Viktor Cherkesov, wrote in an article in Kommersant that the security services were embroiled in internecine feuding over power and influence. "You cannot be a trader and a warrior at the same time," he wrote. "It does not work." Bulbov stands accused of ordering illegal wiretaps and accepting bribes from private firms in exchange for official protection. But Bulbov said his arrest was revenge by the FSB for his investigation into Tri Kita, a Moscow furniture store accused of evading million of dollars in import duties and smuggling Chinese goods through FSB storage facilities. Media reports have linked senior FSB officials to the business. Bulbov's wife, Galina Bulbova, said at a news conference Thursday that "very famous surnames were involved" in her husband arrest, Reuters reported. She would not elaborate. The drug control agency had an active role in the Tri Kita investigation, which last year led to the ouster of several high-ranking officials in the FSB and the Prosecutor General's Office. But the sources interviewed for this article said Bulbov's arrest was not about revenge. "This is a fight," the first former security services officer said. "You don't have good guys and bad guys here. You have a lot of financial interests."

Kremlin and FSB officials deny any battle is going on between security services. "The fight is only happening in journalists' imaginations," an FSB official said on condition of anonymity because he was not authorized to talk to the media. "Believe me, no war is going on." Kremlin spokesman Dmitry Peskov said talk of an ongoing fight was only "fantasy." "I cannot comment on an issue that does not exist," Peskov said. "We don't have clans."

The Clans

The former security services agents interviewed for this article said two clans were battling to control the Kremlin and take over contraband and money-laundering operations. The first, they said, is led by Igor Sechin, Putin's powerful deputy chief of staff and includes FSB head Nikolai Patrushev, FSB deputy chief Alexander Bortnikov, Putin aide Viktor Ivanov, and Alexander Bastrykin, head of the newly created Investigative Committee, a semi-autonomous agency under the auspices of the Prosecutor General's Office The second clan, they said, is led by Cherkesov and Viktor Zolotov, head of the president's personal security service. Prosecutor General Yury Chaika also belongs to this group, which enjoys good relations with First Deputy Prime Ministers Dmitry Medvedev and Sergei Ivanov, they said. "Both groups are on good terms with Putin and the new prime minister, Viktor Zubkov," a third former intelligence agent said. "But because of the many commercial interests they have in common, they cannot live together. Each of them dreams about getting rid of the other."

The fiercest battle is over control of customs, the former security services agents said. Each group controls certain checkpoints where goods imported by firms they protect are given a free pass at the border, saving the firms millions of dollars in duties, they said. The money the firms pay for the protection and service is subsequently laundered through reputable banks, the former agents said. "There were cases when trucks full of Chinese goods were escorted by FSB special forces," the first former security services officer said. There have also been cases of shootouts between security agencies after one group nabbed smugglers protected by the other group, the former agents said.

The current danger, they said, is that the situation could spin of control.

"We are talking about people with lots of weapons," the first former security services officer said. "They have a lot of security units working for them. And on top of that, the businesses they protect have their own security services." FSB and Investigative Committee officers tried to search Bulbov's dacha days before his arrest but were held off by Federal Drug Control Service officers, the former officer said. "I know that for about five hours they were shooting at each other," he said. "Can you imagine that? Two special services from the same country shooting at each other like criminals."

A Balancing Act

Putin's response to the infighting has been one of mixed signals that the former security services agents say are meant to maintain equilibrium between the clans and prevent either of them from becoming to powerful. One week after Bulbov's arrest, Putin paid a visit to the FSB headquarters in what some interpreted as a show of support for the agency. But on Oct. 20 he created a new state committee to fight illegal drugs and named Cherkesov as its chief. The move came a day after Putin publicly scolded Cherkesov on the pages of Kommersant for publicly airing dirty laundry. "It is wrong to take these kind of problems to the media," Putin told Kommersant. "When someone behaves that way and ... claims that a war among security agencies [is going on], he should, first of all, be spotless."

In an attempt to keep the Prosecutor General's Office in check, Putin backed the creation of the Investigative Committee, which took over investigative powers from prosecutors, though formally it works alongside them. Putin then nominated Bastrykin, an associate of his from St. Petersburg, to head the new committee. "When Bastrykin was appointed as the 'main inquisitor,' Chaika was really upset," said Vladimir Pribylovsky, the head of the Panorama think tank. Chaika, a Cherkesov ally, was appointed to replace Prosecutor General Vladimir Ustinov in June 2006. Ustinov is close to Patrushev, and his son is married to Sechin's daughter. Media reports said last year that Cherkesov backed Chaika's appointment, while Patrushev was irked. "All these moves are intended to balance these two groups," the third former intelligence agent said. "If one of them takes over, it would spell the end of Putin's authority."

Political analysts concur. "Putin doesn't want any of the sides to win the fight," said Stanislav Belkovsky, head of the National Strategy Institute. "He needs to have a bit of peace and quiet in the last months of his presidency." While Putin keeps the clans on their toes with reshuffles, security services bombard Putin with reports of terrorist attacks and plots to assassinate him, the former agents said. On Oct. 10, Patrushev said the FSB had thwarted terrorist attacks at international summits in Sochi, St. Petersburg and Samara. Patrushev said the FSB prevented 300 attacks last year -- twice the number the agency prevented in 2005. Security services recently warned of a purported plot to assassinate Putin during his trip to Iran on Oct. 16. "The president is not completely convinced, but he thinks: What if they are right?'" the first former security services officer said. "Our political life is full of provocations. This is the only way these people can work. They are not public politicians. They are Chekists. In our corporation, people were used to fight against dissidents, to arrest or kill people."

Security services have another bargaining chip with Putin, the former agents said: money and assistance in case of a political crisis. Security services gather compromising material that can be used to blackmail anyone in the country, including governors, mayors, the opposition and anyone they believe could destabilize the political situation, the agents said. With his article in Kommersant, Cherkesov broke the Chekists' guiding principle, experts said: silence. "There is a rule in the security services that dirty laundry should be washed at home," said Olga Kryshtanovskaya, a sociologist who tracks the political elite. But in the current fight, "normal rules do not apply," the first former security services officer said. "All means and weapons are allowed," he said. Cherkesov's article wasn't his debut in the print media. In December 2004, he wrote an article published in Komsomolskaya Pravda that proclaimed the fundamental role Chekists have played in Russia's rebirth.

Spokespeople for the Federal Drug Control Service, the Investigative Committee and the Prosecutor General's Office declined to comment for this report. Written requests for comment sent last week went unanswered as of Sunday.

Writing in the New York Times ace Russia commentator Leon Aron of the American Enterprise Institute opines that becoming prime minister in a sham transaction won't be enough to satisfy Russian dictator Vladimir Putin even for a four-year interregnum:

President Bush said last week of his erstwhile "friend" Vladimir Putin, "I have no idea what he's going to do." Mr. Bush is not alone: no one but Mr. Putin knows whether the Russian president will relinquish power next year. Still, after Mr. Putin's announcement that he would not be averse to becoming the next prime minister, the prevailing guess is that after the March 2 presidential election Mr. Putin will head the Russian government under a new president.

Yet before the Bush administration and the leading contenders for the White House begin to design a Russia policy based on this, its plausibility has to be examined. In the light of what we know about Mr. Putin and the political and economic system he has forged, he is more likely to find a way to continue in office as President Putin.

To begin, Vladimir Putin has done the opposite of what he publicly said he would do with regard to some major policy issues. In November 2003, he declared that "the state should not really seek to destroy" Yukos--at the time Russia's largest, most modern and most transparent private company--and then methodically did just that through a palpably fraudulent prosecution.

He has repeatedly averred that Russia needs a robust party system--and then proceeded to make participation in parliamentary elections arduous and subject to unchallenged management by an election commission that is subservient to the Kremlin. No party may hope even to get on the ballot in Russia without the Kremlin's approval.

The president has extolled democracy in virtually every one of his annual state-of-Russia addresses since 2000--and then canceled the election of regional governors, who are now all but directly appointed by Moscow. He correctly identified independent mass media as the main weapon against corruption--and then brought under the Kremlin's control practically all nationwide print, radio and television outlets.

For Mr. Putin, taking on the job of prime minister would be not just "stepping down" but wallowing in self-abnegation. The prime ministers under Mr. Putin have been appointed by the president and have served at his pleasure. They have been little more than figureheads who cannot even pick their own cabinets. This year, Mr. Putin deprived the prime minister of supervision over the so-called state corporations, into which the president's administration had earlier merged some of Russia's vital, and often most profitable, industrial enterprises--like missile production and nuclear power.

Of course, with Mr. Putin's party, United Russia, poised to take two-thirds of the seats in Parliament, its approval of constitutional amendments emaciating the presidency and fashioning a more powerful "executive" role for the prime minister is assured (as is the constitutionally mandated endorsement of the two-thirds of the regional legislatures now also firmly in the Kremlin's hand).

Still, while Ukraine has profited from a similar devolution of presidential authority, Russia would have to go much further to make the job of prime minister palatable for Mr. Putin. In addition to giving the Parliament, and not the president, the right to form the government, the prime minister may have to be made commander-in-chief as well.

Yet power in Russia today grows not only from the barrel of a gun, but also from a barrel of oil. And here, too, everything has been done to ensure that the president's administration, not the prime minister's office, be in charge of the daily export of seven million barrels of crude oil and oil products (like fuel oil and diesel fuel). With natural gas, these fuel exports fetched $190 billion last year.

Never before in Russian history have so few exercised such tight control over a national wealth that is so vast and liquid, in more ways than one. The stakes of relinquishing power have grown commensurately for Mr. Putin. If he becomes prime minister, a vast network of informal arrangements that made the president and his entourage the managers of Russia's most lucrative natural resources will have to be dismantled--redirected away from the Kremlin and toward the prime minister.

For a man who declared the demise of the Soviet Union to be "the greatest geopolitical catastrophe of the 20th century," even the most "executive" of prime-ministerships may not be enough. The Russian president is the symbol of the nation, its above-the-fray father. He is now also in complete control of the election and of much of the economy. Mr. Putin must consider moving out, like some silly American president vacating the White House, to be downright humiliating--not to mention bad for the country and the people who like him so much.

Staying in the Kremlin without violating the letter of the 1993 Constitution (the spirit went out of it several years ago) could be accomplished by Mr. Putin in several ways. The easiest method would be for Parliament to pass a constitutional amendment eliminating term limits. The problem with this solution is that it would make Russia look like Belarus or Kazakhstan, ruled by a president-for-life. For all the popularity that Mr. Putin enjoys, the national embarrassment (never mind the international outcry) might be acute and widespread enough to carry significant political risks.

But at least two other solutions could be found. Both possess the significant advantage of avoiding a constitutional amendment that President Putin seems reluctant to bless. In one possibility, Mr. Putin could become prime minister and then become acting president should the new officeholder find himself incapable of carrying out his duties. Viktor Zubkov, plucked by Mr. Putin from obscurity a few weeks ago to be made prime minister, is 66, six years past the retirement age for men in Russia (and 11 years older than Mr. Putin). Should Mr. Zubkov, with Mr. Putin's endorsement, be elected president, he may quickly find the burdens of power too hard to sustain after only a few months in office. And then a new presidential election, which must be held within three months and which Mr. Putin would be certain to win, would give Mr. Putin another full term in office, without formally violating the constitutional limit of two consecutive terms.

The other option would not require Mr. Putin to move out of the Kremlin even for a short time. According to the Russian Constitution, the president may declare martial law in the case of aggression or "direct threat of aggression." A subsequent "martial law regime" could be easily fashioned by the Parliament to include the cancellation of elections until the "threat" is over.

The "threat" could be found to emanate from Estonia, which has been sharply denounced by Russia's official propaganda this year. Estonia's ambassador in Moscow has been harassed by a government-organized youth group and its Web sites have been subject to cyberattacks. Or it could be Georgia, which borders on Russia's volatile North Caucasus and is in a de facto state of war with Abkhazia and South Ossetia, its two breakaway provinces. In Abkhazia, a majority of the population holds Russian passports, and the leaders of South Ossetia have repeatedly expressed the desire to join the Russian Federation.

During a state of emergency, Russians could be counted on to rally around the flag, at least initially. In a longer run, the prolonged presidency would have to be legalized somehow. But, as Lenin wrote, quoting a maxim often attributed to Napoleon, "on s'engage et puis on voit": you get in a fight and then you see what to do next.

Apart from Nicholas II, who resigned in a revolution, only two Russian leaders have walked away from power: Mikhail Gorbachev and Boris Yeltsin. But these two men were remarkable in a larger sense: they presided over a proto-democracy that made Russia the freest it has ever been, save for the eight months from February to November 1917. Proto-autocracies--even "softer" ones that, for the moment, enjoy popular allegiance--are harder, and more dangerous, to leave behind.

The Moscow Times reports on yet another nail in Russia's neo-Soviet coffin, yet another step down the slippery slope from which, falling, there is no return. Today debtors can't leave. Tomorrow, who knows.

The authorities appear to be cracking down on debtors, barring thousands of people from leaving the country, the Federal Court Marshals Service said Monday. Over the first nine months of this year, 8,366 people were hit with travel bans because they had not fulfilled court orders to repay debts, a statement posted on the service's web site said. This figure is more than 40 times higher than that for last year, when only 187 people were refused exit for this reason, RIA-Novosti reported. Igor Komissarov, a spokesman for the service, said Monday that news of the tighter ban on travel had prompted debtors to settle up with creditors to the tune of 1.4 billion rubles (about $56.5 million). He said the total debt covered by existing court judgments was 12 billion rubles. "Foreigners are affected too, of course," Komissarov said, adding that a Greek citizen ordered by a court to clear his debts with a major bank had only recently had his ban lifted after paying off the entire sum.

The practice of refusing debtors the right to leave the country is a troubling one for some Western legal experts, who say the measure contradicts international law. "In most EU countries, creditors and debtors have to deal with each other according to civil law, and not criminal law," Helga Springeneer, a lawyer with the Federation of German Consumer Organizations, said by telephone from Berlin. "A court can order the search of homes or offices to impound property, but it can never infringe on the right of free movement." But Svetlana Ganushkina, of the human rights group Memorial, said the travel ban did not limit human rights. "The way things work in this country, it is easy to hide from creditors and banks," Ganushkina said. "Therefore, any mechanism to help make people repay this money and, most importantly, to dissuade them from leaving their debts to law-abiding family members and fleeing the country should be welcome." Sergei Melnikov, an attorney with the Moscow-based firm Your Lawyer, also said the authorities' actions were legal. "The law was examined in 2005 to see if there was any contradiction between it and basic human rights, and no contradiction was found," he said. Melnikov added that the key factor keeping the measure within the law was that the travel ban was "temporary, lasting only until the debt is paid or agreement is reached between debtors and creditors or one party and the court." The marshal service's Komissarov said the service was not trying to stop people from leaving the country for good but was simply using the only tool it had to make sure people paid up. "This is a system that really works," Komissarov said. "We can't kill people, or put them in prison, but we can stop them crossing the border."

While lending to private individuals has only become relatively widespread over the last five years, banks have experienced enormous growth in the booming consumer-lending market. Recent court cases have highlighted controversial practices in lending like hidden charges for opening bank accounts. But Russians have one of the world's best records for repaying loans. Delinquent loans were only 1 percent of the total over the last two years -- about one-third of the average for emerging economies -- according to a Merrill Lynch report released earlier this year. Although not a direct comparison, the U.S. Census Bureau reported in 2003 that more than 12 percent of all households were carrying debt that they were unlikely to be able to repay. The rate for Germany was lower, at 8 percent in 2006, the number for Britain in 2004 was 7 percent, and the corresponding figure in France was closer to 3 percent, according to data collected by the Federation of German Consumer Organizations.

The Associated Press reports:

Russia announced Monday it is slashing the number of foreign election observers for upcoming parliamentary polls in a move likely to fuel claims that the authorities will prevent a fair vote. Vladimir Churov, head of the Central Election Commission, told journalists that between 300 and 400 observers would be allowed into Russia for the December 2 polls -- a quarter of the number who watched Russia's last legislative elections in 2003. Churov said the invitations would be sent Tuesday. He did not specify how many of the observers would be from the Organisation for Security and Cooperation in Europe (OSCE), which is the most authoritative election body in eastern Europe and has previously slammed Russia and other ex-Soviet countries for their conduct.

The ceiling of 400 observers suggested there would be a sharply reduced number of OSCE monitors, given that Churov said the total number would also include representatives from a string of other international bodies and countries. In the December 2003 elections -- which the OSCE said "failed to meet many... commitments for democratic elections" -- a total of about 1,200 observers fanned across the world's biggest country. Of those, some 400 were from the OSCE's election monitoring arm, the Office for Democratic Institutions and Human Rights (ODIHR). Many others were from Moscow-friendly organisations such as the Commonwealth of Independent States, which groups 12 ex-Soviet republics and systematically welcomes elections in countries accused by the West of being headed by authoritarian regimes. Moscow is stepping up a long-running diplomatic offensive against the 56-member state OSCE, of which it is a member but which it accuses of bias against Russian policies.

Russia last week said that it wants sharply to reduce the scope of OSCE observer missions, leading to accusations that the Kremlin is afraid of outside scrutiny in what critics say is a rigged election process. One aspect under attack, diplomatic sources say, is the OSCE's tradition of issuing a preliminary report at a press conference the day after elections -- a high profile occasion when journalists are given the organisation's broad-brush findings. Backing Russia's bid to change OSCE monitoring work are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, all countries that to different extents have seen criticized over recent elections.

OSCE officials have already complained that they are not being given enough time to prepare a monitoring mission ahead of Russia's parliamentary election in which President Vladimir Putin's United Russia party is expected to win a crushing victory. The election is followed on March 2 by a presidential poll to choose a successor to Putin, who has ruled since 2000. Although Putin, 55, says he will step down in line with the constitution, there is growing speculation that he will retain power in some other position. No heavyweight figure has yet declared a bid to for the Kremlin

(1) Another Original LR Translation: Big Brother is Watching

(2) Annals of Russian Human Rights: Now, the Cyber Attacks Begin

(3) When Russians Fight Back

(4) See it Now: Russian Prices Out of Control

(5) Annals of Commissars of the Internet

NOTE: La Russphobe is pleased to welcome yet another volunteer expert translator of Russian source material, Translator S.S., whose first installment appears today as the lead item. We look forward to many future items from Ms. S. Remember, you can find all our original translations on our special library blog, LR Translations, where Samantha's work will soon begin to appear as well.

NOTE: Today we bring you two horrifying stories (nos. 2 &5) detailing the efforts of the Kremlin to crack down on and seize control of the Internet. If they're doing this far now, imagine what they'll do after the next "election" cycle. Some said this would never happen and urged us not to worry. We warned you long ago it would -- and this is only the beginning.

La Russophobe is delighted to welcome yet a fourth expert translator of Russian into English to our blog, and for her first installment she opens another window into the Russian press, here by Yulia Latynina in Novaya Gazeta. This is exactly the type of column that Anna Politkovskaya got shot for writing, and but for the work of heroic translators like S.S. it would never see the light of day in English (as much of Anna's work failed to do). Ms. Latynina is a true Russian patriot.

Our “Separation of Powers” is a war of the Security Services. One lot whisper into the president’s left ear, the other into his right ear.

The main principle of the Special Forces is: if you’ve got something to say, say nothing. If you’ve got nothing to say, say even less. The main principle of the Kremlin clans is: never appeal to the public, appeal to the president. An appeal to the public is an admission of disloyalty and a sign that you can’t get to the president. General Cherkesov broke both these rules when he published an article in the newspaper Kommersant about the Security Services’ war. Why- God
only knows. Perhaps he hired Kharms [TN: Daniil Kharms 1905-1942. Russian absurdist writer] to write the letter, or, Shenderovich [TN: Victor Shenderovich b. 1958. Russian writer and satirist.] as a last resort. The postmodernists should frame this text on the “corporate soul” and “chekism” and hang it in place of Malevich’s Black Square.

I’ll venture to remind you of some events which preceded the creation of this philosophical text. It began with a clash between two powerful Kremlin clans -- one usually associated with the deputy head of the presidential administration, Igor Sechin (and the head of the FSB, Nikolai Patrushev) and the other with the head of the Federal Narcotics Control Service Viktor Cherkesov and the head of the presidential security service Viktor Zolotov-- over the planned appointment of Shamakhov, who was close to Cherkesov, as head of customs. Criminal cases were brought; the clans began to stop each other’s goods wagons and recapture the confiscated goods using the special police of the OMON. It was a terrible but completely quiet fight. Among the most noticeable episodes, which were widely debated in narrow circles, were: the seizure of a consignment of Chinese consumer goods in the Nakhodka port which were being sent directly to the address of a secret unit which was the FSB’s supplies section (An FSB employee received the consignment of goods with official certification) and a search of one of the biggest dealers at the customs office, during which diamonds were seized by weight. “They’re just presents!” said the aggrieved dealer.

It’s thought that during this turf war, the FSB obtained wire-tappping equipment which was used to record Sechin’s conversations with his powerful relation and ally Ustinov, the Prosecutor General. The recordings allegedly made their way to Putin, who, it’s said, was not particularly pleased by discussion of the president’s weakness, and the fact that Ustinov would make a better president. Ustinov was fired. Several FSB generals were also dismissed at the end of last year. However after a few months they went back to their posts, disregarding the presidential order. It was then that this bitter fight broke into the depths of the Ministry of Internal Affairs, between the head of the Economic Security Department Sergei Meshcheriakov (considered Sechin’s protégé) and deputy minister Novikov (considered Zolotov’s protégé). The details of this battle were not disclosed, but there are well-founded rumours that Meshcheriakov’s assistant, who was arrested during the fight, gave information under the influence of psychotropic drugs about the value of the department’s services. The result of the battle was that both figures were dismissed from their posts and both received other posts- prestigious but without influence.

And now-- with the arrest of General Bulbov and Cherkesov’s letter-- the war has come to the surface for the first time.

What sticks out? Firstly, it’s the disparity of power. On one hand there is Igor Sechin--not the top man in the state, but not the least important either; on the other--some kind of collective leadership. Secondly, it’s impossible to talk directly about the subject of the dispute. It’s quite funny reading about Cherkesov’s “chekism” and “corporatism” when the dispute is over the control of contraband goods and who can better take in the president. Thirdly, it’s striking that the war would have finished long ago, if only the president hadn’t supported the weaker side every time. He is personally interested in the war as an instrument of mutual destruction. The war of the Security Services is what we have in place of a separation of powers. It’s a way for the president to stay informed. And moreover—and this is most important—it is difficult to wish victory on either side. Not because they are dividing up the customs department or fighting between themselves in secret; but because even before this war their departments were subject to a malignant regeneration. One clan concerns itself with the dividing up of YUKOS, the Gutseriyev trial [TN: ex-president of Rosneft, charged with illegal business practice and tax evasion in 2007], cheerful reports about the exposure of planned terrorist attacks in Sochi, Saint Petersburg and Samara. The other clan’s business will be dealt with in the next article. If one crocodile is weaker, it doesn’t mean you should get close to it. When two brigades of Orcs in Mordor fight over Frodo’s Mithril armour, which side are we on?

The criminal case of the contraband furniture which appeared in the shops “Grand” and “Three Whales” from October 2000 was investigated by the Ministry of Internal Affairs’ Inquiry Committee. Led by the investigator Pavel Zaitsev, the group conducted searches and questioning. In his evidence of November 2000, the witness Vladimir Burkov mentioned Evgenii Zhukov, the assistant to the deputy director of the FSB Iurii Zaostrovtsev. Zhukov was questioned and several hours later the case was transferred to the Prosecutor General. The investigator Popov suspended it on the 7th of May 2001 owing to lack of evidence of a crime being committed. The State Duma ordered the investigation to be resumed with Iurii Shchekochin, the Duma deputy and the deputy editor of Novaya Gazeta occupying an especially active role. However the case was resurrected only on the 26th of March 2002 after the personal intervention of President Putin. In April the case was taken over by an acquaintance of the President, the deputy head of the Leningrad region office of the public prosecutor, Vladimir Loskutov. However the first arrests took place only after a change of leadership in the General Prosecutor’s office in June 2006.

Case no 290724 of the contraband mass market goods to the address of military unit 54729 was begun in April 2005 by the Investigative Committee of the Ministry of Internal Affairs. Unit 54729 serves the central apparatus of the FSB. The contraband was received by an employee with official certificate no. 066631. On the 7th of April 2005 the General Prosecutor ordered the case to be transferred to the FSB. Only in August 2006 was the case returned to the General Prosecutor. Coincidentally, as the case reached its active phase, deputy director of the FSB Vladimir Anisimov, deputy director of the FSB Sergei Shishin and deputy head of the Economic Security Service Sergei Fomenko all retired.

Maidan, the Ukrainian human rights clearinghouse, reports via Andrei Blinushov that what's good for Estonia is good for Russian human rights organizations:

As already reported, since 21 October 2007, the website Human Rights in Russia at www.hro.org, the largest Russian-language Internet resource on human rights in the Russian Federation) has been subjected to a relentless and concentrated computer attack (a new form of DidoS attack***) with access to the site blocked. It would seem that HRO.org has become the first public resource in Russia to be confronted with an attack of such ferocity and persistence. The human rights resource has effectively become in the frontline of the newest stage of “cybernetic warfare”. It should be noted that this attack does not only involve a consistent flow of tens of thousands of requests. The perpetrators have also managed to penetrate the website’s extremely serious security system and insert virus infecting modules into the file system. These modules have been created in a very devious and professional manner – when deleted, they “come to live” in other directories. And they bring the server down from inside. Combined with the mass attack from outside, programmers believe that this fairly expensive attack was clearly professionally planned.

At present no one is protected from a mass-scale DDoS attack. It can take place with any server in any country, and at present there is no general remedy. Internet resources are advised to spread themselves out (the more the better) over different physical servers and on different domain addresses, making it harder and more expensive for the perpetrators to organize such an attack. There are, in my view, two main problems. The first is the fact that there are a huge number of unprotected computers without firewall**** and resident anti-virus programmes. The perpetrators infect such computers through remote control with special viruses and use them as distributed networks for attacks on “commissioned” Internet resources. The second problem is that police departments ignore computer security of hacker gangs who almost openly use the Internet to take commercial orders for criminal “cyber measures”. Some observers have expressed doubts as to whether such “agencies” may not be using hackers for their own purposes.

They refer, for example, to publications about how the “enforcement agencies” hired hackers to destroy the sites of separatists from the Caucuses during the first and second Chechen Wars. It is worthy of note that several months ago, one hacker, well-known in programming circles, was recognized by chekists [i.e. the FSB] for “patriotic work”, but instead of that gave an interview to the press. It is also known that in Russia DDoS attacks have been carried out on anti-fascist sites and sites of those fighting racial discrimination by neo-Nazi games. Besides computer attacks, some of them extended to publication in the Internet of home email addresses of democratic politicians, human rights defenders and journalists and to calls for violence against them. The Russian law enforcement authorities have refused to bring prosecutions over these cases. There is a wide scope for possible versions, only nobody has yet, it would seem, been able to expose those who commission such high-tech crimes as DDoS attacks.

We should point out that it is specifically in this year – spring and summer 2007 – that DDoS attacks have been attempted against the servers of the newspaper “Kommersant”, the radio station “Echo Moskvy”, and later the servers of “Memorial”, Kasparov, the United Civic Front”, the National Bolshevik Party {Limonov’s party}, and “liberals’” blogs on the Live Journal. We thus have an entirely specific civic and political spectrum which can be loosely defined as “opposition”. The author then ventured the suggestion that such criminal actions with respect to opponents, especially the opposition, might become a widespread “tool” for dealing with those who don’t buckle under. I rather fear that this gloomy prediction is coming true...

The New York Times reports:

Kirill Formanchuk [pictured, above], like almost everyone who drives in Russia, was used to being pulled over by the police and cited for seemingly trumped up infractions. Yet instead of resigning himself to paying a bribe, he turned traffic stops into roadside tribunals, interrogating officers about their grasp of the law, recording the events and filing formal complaints about them.

And so it was that Mr. Formanchuk became a leader of a budding movement to uphold motorists’ rights in the face of police corruption, making him a not unfamiliar face when he went to a police station here two weeks ago to register his car. The next time he was heard from, he was in the hospital with severe injuries from a beating, and the resulting outcry in Yekaterinburg has caused an unexpected burst of civic activism across the country at a time when such sentiments appeared to have otherwise withered.

Motorists’ groups have held demonstrations against the police in Moscow, St. Petersburg and Yekaterinburg, and an Internet posting in support of Mr. Formanchuk has received nearly 200,000 hits from around the country. Even the national television networks, which are under the Kremlin’s control and tend to ignore news that reflects poorly on the government, have begun to focus on what happened to Mr. Formanchuk on the night of Oct. 12 in an isolated jail cell. One channel called his treatment “outrageous.”

The affair, echoing the anger that erupted after the Rodney King case in the United States, suggests that resentment toward police misconduct is so widespread that the Russian government senses that it cannot immediately clamp down on the protests, as it usually does with the political opposition. Mr. Formanchuk has become a symbol for Russians who contend that the police are poorly educated, badly trained and allowed to operate with impunity. “Everyone understands that this can happen to them, too,” Mr. Formanchuk, 24, said in an interview at a hospital in Yekaterinburg, where he is to remain for at least a month with brain and skull injuries. “Because in this country, we have a problem with the law.”

The tensions over the police in Russia have soared with the enormous growth in car ownership. There are 28 million cars now, three to four times more than at the end of Communism in 1991, experts estimate. More cars mean more opportunities for the police to solicit bribes, in the view of motorists’ groups. The corruption also emboldens people to drive recklessly because they know they can skirt penalties by slipping money to an officer. (The typical bribe is $5 to $20.)

Police malfeasance has an especially corrosive effect on the public outlook toward government since here, as in most places, officers are among the most visible civil servants. The Kremlin, Parliament and the chief federal prosecutor regularly promise reforms, yet little has changed, as even those in government circles concede. “It’s time for the law enforcement services to understand that the driving public — it’s a force,” said a commentary in the Yekaterinburg edition of Rossiyskaya Gazeta, the official government newspaper. “To reject cooperation with it, is not wise. Kirill Formanchuk, as we can see, is not going to give up.”

The motorist movement in Yekaterinburg, an industrial center about 900 miles east of Moscow, is still relatively nascent, and only a few elected officials have aligned themselves with Mr. Formanchuk. But in an indication of the repercussions of his case, law enforcement officials called a news conference to defend their performance and to accuse his supporters of inciting the public.

The officials said they were investigating what happened to Mr. Formanchuk, but they denied any police involvement. They said that after he showed up at the station to register his car, he acted belligerently toward officers, and was arrested. In his jail cell, he picked a fight with other detainees, who set on him, the officials said. They said Mr. Formanchuk was a draft dodger with many serious traffic violations. “Mr. Formanchuk is provoking everybody — the organs of state power as well as ordinary citizens, as a result of which Formanchuk was beaten,” said a senior police official, Adam Bogdanovich. “In fact, he is not a law-abiding citizen.” Asked whether the police had meted out revenge, Mr. Bogdanovich said, “Unfortunately, that is not the case.” He then clarified this comment by saying that there was no reason for revenge. While Mr. Formanchuk had filed complaints against the police and then posted them on the Internet, such activities did not influence police conduct, he said.

From the hospital, Mr. Formanchuk said the police charges were ridiculous. He said the conflict began when he tried to use his cellphone to capture video of his interaction with the officers, infuriating them. He said he did not know the identities of those who attacked him, but whether or not they were police officers in plainclothes, it was clear that officers on duty allowed the violence by ignoring his cries for help.

The arrest this month was not the first for Mr. Formanchuk, who was a city bureaucrat until he began working full time with his activist group, the Committee to Protect the Rights of Motorists. Last year, he garnered attention in Yekaterinburg by placing a sign on his Land Rover that resembled a license plate and said “Medved 01,” which means bear in Russian. Officers detained him for the sign — which he said was legal because he had temporary registration and was waiting for a permanent one — and for not addressing many outstanding traffic violations. A judge ruled entirely in his favor, a remarkable verdict in a system that is typically stacked against defendants.

“After my first encounters with the police, I simply myself began to study the law, to read legal literature and court cases,” Mr. Formanchuk said. “And the more that I interacted with police officers, the more I understood that I knew more than them. They can oppose me, but they just don’t know anything. I go out and they stop me. O.K., I say, ‘Why are you stopping me? Let’s take out the law. Let’s look at the legal code. Let’s look at the orders that you need to follow. Let’s read them together. You will understand that you are not acting correctly.’”

Not everyone here approves of Mr. Formanchuk. The chairman of his activist group, Georgy Badyin, said some motorists for a time considered Mr. Formanchuk a showboat who courted controversy with the sign on his car. But Mr. Badyin added that now, people see Mr. Formanchuk in a different light. “It’s not just that the driving public supports Kirill in this situation, but that they oppose the lawlessness of the traffic police, realizing that any one of them could be in Kirill’s place,” Mr. Badyin said.

That seemed to be the feeling on the streets of Yekaterinburg. “Ask any driver, he will tell you many stories about police wrongdoing,” said Roman Belosheykin, owner of a van service. “They do not need a pretext. They say it’s a special action, and then they start making claims. They want money. And it’s that simple.”

We've previously written much about how Vladimir Putin's dirty little secret, inflation, is poised to bring down the Russia House. Now, the Romir Russian economics agency gives us a glimpse into the horror of inflation at ground zero in Russia, using the example of sunflower oil, Russia's basic cooking fat:

Analysis is based on data from 3 thousand households (about 8100 panelists) from 23 cities of Russia with 500+ population. Main method of data collection utilizes online barcode scanning.

AVERAGE PRICE FOR SUNFLOWER OIL, 1 L


Analysis of price dynamics for sunflower oil is based on data of 5 leading brands. It reveals considerable price growth for vegetable oil in Russia: in September 1 litre of Sloboda oil cost 38 Rbl, while in the first two weeks of October its price jumped up to 52 Rbl. The same is true with Milora brand: in September it cost about 39 while in October – 48 Rbl.


This trend is also true with private brands. Auchan sunflower oil has considerably risen in price during the period under consideration (September – 28 Rbl for 1 L, early October – about 43 Rbl). It is evident that in absolute terms private labels still lag behind federal brands.

If you choose to be governed by a crazed group of KGB spies with no training in business or economics, this is what's going to happen. 17% inflation in one quarter at minimum, up to a whopping 54%. This means that in the space of one year the prices of really good quality sunflower oil could increase by a factor of four in Russia, and that's just one commodity. The Moscow Times now reports that wealthy, resurgent Russia can't afford to leave tariffs in place on these commodities and is considering abolishing them for fear of making the basic staple unaffordable to the mass population.

As many of our readers will know, one of the more important translations we've offered was the "Commissars of the Internet" piece about how the Kremlin is seeking to seize control of the Russian Internet (RuNet). Now, the Washington Post adds a new chapter to the story:

After ignoring the Internet for years to focus on controlling traditional media such as television and newspapers, the Kremlin and its allies are turning their attention to cyberspace, which remains a haven for critical reporting and vibrant discussion in Russia's dwindling public sphere.

Allies of President Vladimir Putin are creating pro-government news and pop culture Web sites while purchasing some established online outlets known for independent journalism. They are nurturing a network of friendly bloggers ready to disseminate propaganda on command. And there is talk of creating a new Russian computer network -- one that would be separate from the Internet at large and, potentially, much easier for the authorities to control.
"The attractiveness of the Internet as a free platform for free people is already dimming," said Iosif Dzyaloshinsky, a mass media expert at the Higher School of Economics in Moscow.

Putin addressed the question of Internet censorship during a national call-in show broadcast live on radio and television this month. "In the Russian Federation, no control is being exercised over the World Wide Web, over the Russian segment of the Internet," Putin said. "I think that from the point of view of technological solutions, that would not make any sense.

"Naturally, in this sphere, as in other spheres, we should be thinking about adhering to Russian laws, about making sure that child pornography is not distributed, that financial crimes are not committed," he continued. "But that is a task for the law enforcement agencies. Total control and the work of the law enforcement agencies are two different things."

Many people here say they believe Putin didn't mind a free Internet as long as it had weak penetration in Russia. But with 25 percent of Russian adults now online, up from 8 percent in 2002, cyberspace has become an issue of increasing concern for the government.

Some Russian Internet experts say a turning point came in 2004, when blogs and uncensored online publications helped drive a popular uprising in Ukraine after a pro-Moscow candidate was declared the winner of a presidential election. Days of street protests in the capital, Kiev, led to a new vote that brought a pro-Western politician into the presidency.

Today, the Kremlin is ready with online forces of its own when street action begins.

On April 14, an opposition movement held a march in central Moscow that drew hundreds of people; police detained at least 170, including the leader of the march, chess star Garry Kasparov.

Pavel Danilin, a 30-year-old Putin supporter and blogger whose online icon is the fearsome robot of the "Terminator" movie, works for a political consulting company loyal to the Kremlin. He said he and his team, which included people from a youth movement called the Young Guard, quickly started blogging that day about a smaller, pro-Kremlin march held at the same time.

They linked to one another repeatedly and soon, Danilin said, posts about the pro-Kremlin march had crowded out all the items about the opposition march on the Yandex Web portal's coveted ranking of the top five Russian blog posts.

"We played it beautifully," Danilin said.

In a lengthy article published online last fall, three Russian rights activists argued that a strident, vulgar and uniform pro-Kremlin ideology had so permeated blogs and chat rooms that it could only be the result of a coordinated campaign.

Putin's allies in the online world acknowledge that the Internet represents a challenge to the status quo in Russia, which has, since Soviet times, relied on state-controlled television to influence public opinion across the country's 11 time zones.

"You watch the first channel or the second channel and you can only see good things happening in Russia," said Andrei Osipov, the 26-year-old editor of the Web site of Nashi, a pro-Kremlin youth group, referring to national stations that back the Kremlin. "The Internet is the freest mass media. . . . There is competition between state and opposition organizations."

The Kremlin is also increasingly allying itself with privately run online outlets that foster a new ideal for life in today's Russia, one that is consumerist and uncompromisingly pro-Putin.

The main champion of this ideal is 28-year-old businessman Konstantin Rykov. The pearl of Rykov's media empire is the two-year-old Vzglyad ("View") online newspaper, which features a serious-looking news section with stories toeing the Kremlin line and a lifestyle section that covers the latest in luxury cars and interior design. Surveys rank Vzglyad as one of Russia's five most-visited news sites.

"Rykov is a man who created a good business on the government's view that it has to invest in ideology," said Anton Nossik, an Internet pioneer in Russia now in charge of blog development for Sup, an online media company. Nossik said that Vladislav Surkov, Putin's domestic political adviser, organized private funding for Rykov's projects.

Kremlin officials deny any involvement. "It is a general habit of everyone to connect every popular occurrence and success with the Kremlin," deputy Kremlin spokesman Dmitri Peskov said when asked about Rykov. "In reality, it is not so."

In an interview, Rykov would not comment on his investors. A framed portrait of Surkov hung above his desk; Rykov is running for parliament on the list of the pro-Kremlin United Russia party in elections slated for December.

"The Vzglyad newspaper has created this appearance of a state publication for itself since the very beginning," Rykov said. "And from the perspective of business and selling ads, that's very good."

Allies of the Kremlin have also begun buying some of the companies that have helped make the Internet a bastion of free expression in Russia. Gazeta.ru, long the country's most respected online newspaper, was sold in December to a metals magnate and Putin loyalist.

And last October, Sup, which is owned by Alexander Mamut, a tycoon with ties to the Kremlin, bought the rights to develop the Russian-language segment of U.S.-based LiveJournal. The segment, with half a million users, is Russia's most popular blog portal.

"Mr. Rykov is pro-Kremlin. Mamut and Sup are pro-Kremlin. The social networks are all being bought by pro-Kremlin people," Ruslan Paushu, 30, a popular blogger who works for Rykov, said in an interview. "Everything's okay."

So far, Gazeta.ru has continued to publish articles critical of the Kremlin, and no widespread censorship has been reported on blogs run by Sup. But as the government wakes up to the Internet's potential, many of Putin's critics are growing nervous.

Prosecutors have begun to target postings on blogs or Internet chat sites, charging users with slander or extremism after they criticize Putin or other officials. Most such incidents have occurred outside Moscow, and federal officials deny that they signal any broader campaign to control the Internet.

"Personally, I am against developing and adopting a special law that would regulate the Internet," Leonid Reiman, minister of information technology and communications, said in a written response to questions. "The Internet has been always developing as a free medium, and it should remain as such."

But in July, Putin briefed his Security Council on plans to make Russia a global information leader by 2015. Russian news media reported that those plans included a new network apart from the global Internet and open only to former Soviet republics.

"To put it bluntly, we need to fight for the water mains," Gleb Pavlovsky, the Kremlin's foremost political consultant, said in an interview. "We need to fight for the central networks and for the audience segments that they reach."

Wolfgang Kleinwaechter, special adviser to the chairmen of the Internet Governance Forum, a group convened by the United Nations, said some Russian officials he has spoken to are considering a separate Internet, with Cyrillic domain names, and appear to be studying China's Internet controls.

Peskov, the deputy presidential spokesman, said in an interview that a Russia-only Internet was still in the "investigative phase," adding, "I don't know if it's more than thinking aloud."

"It's not meant to get rid of the global network," he said. "It's a discussion of creating an addition."

For now, supporters as well as critics of Putin see the Kremlin doing something atypical: competing on more or less equal terms with its opponents.

"Certainly, there's the dark segment that is still saying words like 'prohibit' and 'limit,' " said Marat Guelman, who worked as a political consultant for the Kremlin until 2004, when he broke with the administration. But "what is happening on the Web vis-a-vis the authorities is very good," he added. "That is, they're trying to play the game."

That strategy is in contrast to the way Putin brought the independent television network NTV to heel at the beginning of his term, using highly publicized court cases and raids by heavily armed security forces.

Marina Litvinovich, a blogger who used to work for Pavlovsky, the Kremlin consultant, and now works for Kasparov's United Civil Front, said she is satisfied with the government's approach to the Internet because it forces Putin's allies to respond to criticism rather than simply ignore it.

She also argued that as the Kremlin consolidates political power, it has less incentive to come up with sophisticated online propaganda. "They're not really in need of particular creativity right now," she said.

(1) The Brilliant Robert Coalson on the KGB "Mind"

(2) Annals of Novaya Gazeta: Trouble in Samara

(3) Streetwise Professor on the Putin Price-Fixing Scam

(4) The Barbaric Neo-Soviet Crackdown on Information

(5) Annals of Russian Tennis disgrace


NOTE: Extremely interesting developments are unfolding on the legal front in Europe. Mikhail Khodorkovsky and his besieged team of executives from Yukos are finally starting to score major victories in the European Courts, pushing back the front lines on the battle for Russia's soul, handing Vladimir Putin's stormtroopers two major defeats in preliminary skirmishes. The big battles are yet to be fought, but the signs are very promising and present what must be a terrifying prospect to Putin's dictatorship: total international illegitimacy. Kim Zigfeld explores the events in her most recent installment on Pajamas Media. Check it out!

For La Russophobe's money, you can't get better, more insightful analysis of Russia than what comes from Robert Coalson, whose brilliant column in the Moscow Times was required reading and is much missed (ah, the days of Coalson and Felgenhaur -- those were the days!). Radio Free Europe carries his latest opus, dealing with the Chekist "mindset."

No one knows how many people were working for or with the KGB when the Soviet Union collapsed in 1991. That information was never revealed in a country where even rudimentary lustration never got off the ground.

Novaya Gazeta reports:

License to get to the discordant

Editor-in-chief of Novaya Gazeta in Samara has been made the accused. He’s had to give a written cognizance not to leave and now he cannot even come to see his father who is seriously ill.

Natalia Chernova

Robert Amsterdam interviews the Streetwise Professor:

Q: First, just the basics: Basic food staples such as bread, eggs, vegetable oil, milk and cheese have risen dramatically in recent years in Russia.

A: It is part of an overall inflationary trend in Russia, traceable directly to the rise in oil prices and the central bank’s response to that.

Q: When it was announced that food manufacturers had been pressured to voluntarily freeze prices, many journalists and observers immediately compared it to “Soviet-style” price controls. Is that a fair comparison or an exaggeration? How do the latest series of price controls differ from similar economic policies during Soviet rule?

A: Right now it appears it appears to be much less formal and more extemporaneous than the rigid and formalized price controls during the Soviet period. Furthermore it should be noted that very similar “voluntary” efforts to control prices and wages have been attempted in the United States in the 1970s with disastrous results. The latest price freeze on food by the Russian government an ad hoc policy, directed toward solving a political problem

However, from there, the question arises: what comes next? Is this a temporary, politically expedient move, or will there be an escalation to more formal restrictions, when, as is likely, these somewhat ad hoc measures don’t have the desired effect?

Q: In your recent blog post on the subject, you write that “the consequences of this move are drearily predictable: shortages, empty shelves, lines in stores, black markets in foodstuffs.” Is that a real possibility in just three months? What do you imagine will happen when the controls are lifted following the elections?

A: It all depends on whether or not the inflationary pressures continue on their current pace. There are plenty of reasons to believe that they will, as the economic factors causing inflation look to stay the same for a while. So if the price controls the Russians are about to institute really have some bite, if they are really going to dragoon the manufacturers into keeping prices artificially low, then yes, there will be shortages; it’s inevitable.

If and when the controls are lifted, you can expect a big spike in prices. Let’s imagine six or nine months down the line, after the political issues have been sorted out, the government will be faced with six months of suppressed food price inflation catching up overnight, which naturally may cause them to hesitate and keep the controls in place a bit longer, making the problem worse. Price controls are like a bad guest – it’s easy to invite them over, but sometimes it can be hard to get them to leave. Look at rent control in New York—it was initiated as a “temporary wartime measure” in the Second World War, but persisted for decades afterwards.

Q: Price controls of course aren’t the only way to try to force down food prices. Some countries also play with tariffs, slashing them for cheaper imports to come in, or raising them domestically to drive down prices. In fact, just a few weeks ago, Vladimir Putin promised to take action on high food prices by slashing tariffs for imported products. Does the fact that Russia is currently negotiating it accession to the WTO have anything to do with their choice of price controls over tariff adjustments?

A. The WTO issue could be part of it, but I have read that Putin has also put forward the idea of a new export tax on grains, so they might be moving in that direction as well. Also, they are still playing various import restriction games with meat imports from Poland, as well as food products from Georgia. Food politics in Russia plays into the larger gamesmanship that is going on in the near abroad. From the Kremlin’s perspective, the food prices issue is a policy trade off; letting in more food imports from Poland, for instance, undercuts the pressure Russia is trying to exert on the Poles to influence their policies on other issues. Also, even if Russia is able to restrict some exports to drive down prices, then those inflationary pressures are going to begin to be felt elsewhere.

Q: Many countries who face similar dilemmas of both inflation and a local currency appreciating against the dollar take on other strategies, generally known as the Sterilisation doctrine. We can see from Russia’s vast sovereign wealth fund, that the state is doing a fine job sucking up dollars, but why hasn’t the central bank taken the route preferred by Brazil, China, and India of issuing short-term paper to absorb rubles instead of freezing prices?

A: Russia is faced with a choice: it can either let the ruble appreciate more, or live with the inflation. What they have chosen is to have inflation in ruble terms, essentially to protect their competitiveness in trade markets for domestic industry. Up until now, they have been willing to let inflation continue. However, now that inflation has become more of a concern, I imagine they will change their policy and let their currency appreciate more.

Q: Price controls are widely acknowledged to cause dangerous distortions to the market, and even worse, they don’t work in the long run. Even Finance Minister Alexei Kudrin told RIA that controlling prices is impossible: “This is a market, and market prices do not freeze. It would be a mistake.” So why has the government selected this mechanism over other alternatives?

A: The food issue is perhaps the most politically sensitive and widespread manifestation of broad inflationary pressures in the Russian economy. Milton Friedman used to say that inflation is always and everywhere a monetary phenomena, so it needs to be addressed through monetary policy. The challenge they face is over the exchange rate. This is an illustration of the kinds of overall adjustments the economy needs to make when you have such an intense resource boom as Russia has experienced with 80 dollar oil. Their choice is inflation or Dutch disease. A large shock like the oil price boom necessarily forces adjustments in the rest of the economy. Some of these adjustments can be painful for large portions of the populace.

Q: Do you think that the price freeze tells part of a larger story of the way things are going for the future of the Russian economy?

A: To me, just in my opinion as an observer, these price controls are part of a broader pattern of interventionism in a wide array of policies with this government, so in some respects, it is really is “back to the future.”

Q: Are there any other considerations or lessons our readers should take away from this?

A: One thing I would say is that we must be aware that price controls have serious ramifications for corruption. What is happening right now in Russia represents another opportunity for those with the political and economic muscle to function above the law, and to thrive as a result. Corruption flourishes when markets are distorted, and Russia’s attempt to freeze food prices represents a potentially big distortion—and hence a potentially big opportunity for the country’s “corruption entrepreneurs.” As if more such opportunities were really needed.