| Wed. December 11, 2024 | |
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Before Alexander Solzhenitsyn became a Russian nativist crank, his voice carried moral authority like few others in the Soviet Union.
The worst thing about living there in those days, he insisted, was the pervasiveness of lies: "The permanent lie becomes the only safe form of existence … every word if it does not have to be a direct lie, is nonetheless obliged not to contradict the general, common lie … And the lie has, in fact, led us so far away from a normal society that you cannot even orient yourself any longer." Solzhenitsyn's searing comment on the Gulag might today voice the identical lament of any CEO, politician or consortium dealing with Russia's post-Soviet government.
Backed by oil and gas reserves, Vladimir Putin's Russia is an object lesson of how policies based on global self-assertion can quickly turn very ugly. Skilled in the arts of brazen lying and feigned outrage, Russia plays international politics and finance like a tin drum. The Russian Bear well knows that pragmatic Western interests see profits, dividends and investment opportunities that far outweigh the indignities, injustices and lawlessness they confront along the way. Investment dollars keep coming, if not always accepted, and IPOs keep rolling out.
But has Russia overplayed her hand? By rejecting "environmental licenses" for Western-backed oil-and-gas projects on Sakhalin Island (involving Inter Alia, Shell and Exxon Mobil (nyse: XOM - news - people )), then forcing Shell to sell a majority interest to Gazprom, Russia makes clear it will break contracts and risk cooperation from investors with vital technological know-how (but who are prepared to play lackey to Russian nabobs) just for the fun of toasting one more "sticking it to the West" success.
Surely, the Kremlin cabal laughs all the way to the bank knowing that grabbing yet another chunk of gas-and-oil riches for Gazprom cost only a Natural Resources Ministry refusal to grant Westerners "environmental licenses."
Russian officials "strongly reject any notion that this decision has any political motivation." Of course it hasn’t. And Mr. Khorodovsky is in prison because he didn't pay taxes, Boris Berezovsky is in exile because of "money laundering." Russia does not interfere in the politics of the Ukraine or Belarus.
Imports of Georgian mineral water or wine are stopped only to protect the health of Russian citizens, and Georgian restaurants in Moscow are shut down because, curiously, they all happen not to meet certain health-inspection standards and permitting requirements. Inexplicable assassinations, preferably of critics of the Russian regime, merely confirm the growing belief that the rule of law is not for Russia.
No one may believe these overt lies, yet it is shocking how often they are repeated and only timidly questioned by the West. It may be bad taste to call a liar a liar (when the liar has something the West really wants, that is).
Yet markets operating under the edict of the State, with no transcendent commitment to objective law, leave business to be conducted on mood, hope, guesstimates and fear. Genuinely open markets quickly deflate such hype with just a few facts. As the late Milton Friedman reminded us earlier this year: "Sure, the state might come back. The only reason free markets have a ghost of a chance is that they are so much more efficient than any other form or organization."
We fast approach the conclusion that, in the 21st century, it is no longer possible to separate internal matters and external relations among states. Russia cannot forever be allowed to drift toward autocracy, the economy half state-run, half kleptocracy.
If investors find that profit margins--real or projected--no longer justify the risk of legal uncertainty, governmental and judicial corruption, and velvet blackmail, foreign direct investment into Russia will dwindle, Western expertise will drain away and Russia, for all its robust current cash flow, will learn that "law" is not merely what suits its current mood and consumption profile. Yes, that might be what Russia thinks it wants, right now (and isn't exactly shy about it). But it also happens to be what brought about the collapse of the Soviet Empire in the first place.
Jens F. Laurson is Editor-in-Chief of the International Affairs Forum. George A. Pieler is Senior Fellow with the Institute for Policy Innovation.
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