Russian Economic Reform

Past Articles on the work of each of the 21 Expert Groups can be accessed here:

Litvinenko, Borodin and Pugachev in London, and the Yukos $US50bn

Published on February 08 2015
Posted by: jeff

In the week beginning 1 February, I emailed a survey to 1,750 of my Russian connections on LinkedIn (about 1,500 are “finance executives”). It should be borne-in-mind that these people will be much more “Western”-orientated than the general Russian population – a fact attested to by the extensive use of English in their profiles. You can see the profiles of the 1,750 here:

https://www.linkedin.com/profile/view?id=330346389

I also emailed the same survey to about 200 academics and journalists living outside Russia, but whom I knew had an interest in Russian issues.

The questions covered the Alexander Litvinenko murder Inquiry, the situations of ex-Russian bankers Andrei Borodin and Sergei Pugachev, and the Hague-based Permanent Court of Arbitration award of $US50bn to former Yukos shareholders.

Most of the questions asked could be answered within a “yes”, “no” or “don’t know” format. Not surprisingly, given the politically-charged nature of the issues, both Russians and those living outside Russia gave a hefty dose of “don’t know” to many of the questions. So, I will focus first on those questions where there were the fewest of such answers – and, I will provide some of my own views!

I asked whether former Russian bankers Andrei Borodin (formerly Bank of Moscow) and Sergei Pugachev (formerly of Mezhprombank), who now live in the UK, were criminals guilty of fraud. In Borodin’s case, 46% of Russian respondents said he was guilty, 11% said no, and 37% answered “don’t know”. In Pugachev’s case the corresponding numbers were 46%, 8% and 38%.

I do not claim to know a great deal about the Pugachev case, but in my view Borodin in clearly a crook – so, I was surprised that the “yes” vote was not much higher. But then, to my additional surprise, not one of the non-Russian respondent answered “yes”!

I drew two conclusions from the Borodin results. Firstly, financially savvy Russians themselves often do not know whom to believe – thus the high proportion of “don’t know” answers – because of a considerable distrust of the government, and that this can more generally distort good thinking. Secondly, many non-Russians either know very little about Russian financial issues, or they have a bias against the Russian authorities – indeed, how else could I explain the fact that Borodin has been granted political asylum in the UK!!

Ever since I first visited Russia in 1991, I have felt that the British (including most of its mass media) are generally quite unsophisticated when considering Russian issues – and the same goes for British economists (see left hand column entitled 1992 Article: “Russian Reformers and the IMF Get It Wrong.”).

In the survey, I asked “why does the British government allow people like Borodin and Pugachev to live in the UK”? Not being able to think of any decent reason for this, I gave only somewhat negative choices: “ignorance about what happens inside Russia”; “wants Russian money even if it comes from criminals”; “wants to cause damage to Russia in any way it can”.

The Russian responses to this question were: “ignorance” (26%); “money” (31%); “damage to Russia” (32%). My own view is that “ignorance” and “money” predominate (indeed, all of the non-Russian respondents nominated “money”). However, the “damage to Russia” from this generally quite pro-”Western” survey base (ie LinkedIn) should give cause for thought in the UK (and the “West”)! Imagine what the response would be from other sections of the Russian population!

The issue of Yukos was a surprise to me. Nearly half (49%) of the Russians said that Russia should pay the compensation of $US50bn, with 34% saying “no”. As to the reasons for the Permanent Court of Arbitration decision, 43% of Russians said decision was “correct (or right) and fair” while 40% said that it was due to “political pressure from countries like the UK and the US”. All (100%) responses from non-Russians were that it was “correct (or right) and fair”.

My own view is that Mikhail Khodorkovsky and his cronies (and share-holder successors) are crooks and that the decision was mainly due to “political pressure”! If I was in charge of the Russian government, I would not pay and I would get give a good hefty punch in the face to any-one who tried to make me pay!

Now, getting on to the Litvinenko murder Inquiry issue!

There was massive Russian respondent support (74% said “yes”) for the Inquiry to “hear all evidence in public (ie so everyone knows) and present all its findings in public”. This is despite the fact that 29% of the Russian respondents think that the “Russian government ordered the killing of Litvinenko” and 35% say “don’t know”.

In contrast, only 33% off non-Russian observers think that the evidence and findings should be “public”.

What are the non-Russian observers afraid of?

Only 23% of Russians “believe the British Government when it says that some evidence should be secret because of “national security” and only 26% trust the Inquiry to “report the truth”. The corresponding numbers for non-Russians were 66% and 40%.

In my view, if Britain really wants to boost its “national security” it should consider being more open with Russians about issues. It would help reduce suspicion among Russians at all levels about British (and “Western”) attitudes to Russia.

Overall, Britain (and the “West” more generally) need to lift their game to a more honest and intelligent level in order to sensibly engage with Russia. This does not mean that Russia has no faults, but some basic brain-power at home would help a lot.