A Major Misconception About China

Many well-known China experts have expressed the notion that the Chinese middle class, having experienced years of steady economic growth, will suddenly demand rights, freedom, and democracy, resulting in a revolution and toppling of the Communist Party. It is also widely believed that people will care less about official statistics (which in many cases appear fictional) and more about the quality of their lives and the type of government they have. Such a prognostication has been circulating for 20 years now, at least with respect to China. Meanwhile, the Chinese middle class (which can alternatively be called bourgeoisie) remains quiet, barely showing any visible intention to demand political reforms from below. No doubt, it would be great if the ruling party sooner or later realized the need for political reforms and started to incrementally introduce them. However, for the most part, the Chinese middle class has opted for wait-and-see tactics in anticipation of political reforms from above.

Here is why. The Chinese bourgeoisie encompasses well-educated and fairly well-off people (annual per capita GDP in Shanghai, for instance, was around $20,000 as of last year). They tend to carefully observe world trends and have witnessed examples of how so-called “democracies” work – both in neighboring countries such as Thailand, and in older “traditional” democracies such as the United States. To be more precise, in Thailand a “democratically elected” prime minister has finally been overthrown by the military. In Venezuela, the local middle class is also protesting against their “democratically elected” leaders. People are fed up with democracies that in reality bring populists like  Shinawatra and Maduro into power. As a result, the middle class goes out in the streets with the demand to undo a democratic voting system that benefits a parasitizing majority and exploits a working minority. The Chinese bourgeoisie looks at the United States and sees political leaders like Kilpatrick in Detroit, DeBlasio in New York, Baraka in Newark, who, although not as extreme as Shinawatra or Maduro, are quite populist. Essentially, America, a traditional democratic state, appears to be moving in the same populist direction, discrediting the idea of democracy in Chinese eyes..

In other words, the Chinese middle class can clearly observe what happens to democracies, populists systematically win elections, and thus they project potentially similar results for their country. With equality and “social justice” on their campaign banners, populist politicians promise to extract more money from the rich (who, by and large, earn the money) and then hand it out to the poor. As a result, those who work and earn money constitute a minority nowadays, whereas those who don’t work (including such categories as the unemployed, students, and retirees) have now become a majority. This majority, in turn, votes for more wealth expropriation and ever more generous handouts, demanding their “fair share,” often as reparations for prior oppression and exploitation. From the perspective of its domestic affairs, China itself is far from being perfectly calm and peaceful. Chinese peasants continue rioting against forceful confiscation of their lands by private and state actors. Chinese peasants revolt and demand higher wages too. Meanwhile, the Chinese bourgeoisie, however, does not seem to share their revolutionary sentiments, so far.

Hence the question – why would Chinese people fight for democracy as it is currently practiced (not merely as a theoretical construct)? Why would we expect that democracy in China will be any different from the aforementioned examples of both old and young democratic states? True, the ruling Communist party is obsolete and inefficient; true, the bureaucratic machine is cumbersome and hard to deal with; true, the regime overall is corrupt. Nevertheless, the Сhinese middle class believes that, for all its flaws, the current regime is stable; it is better to be ruled by the Chinese aristocracy, in the form of the Communist Party, than it is to be ruled by a crowd of hungry and illiterate peasants. Moreover, President Xi Jinping has made it clear that the country’s new administration is serious about leading China towards the market economy and has already taken notable steps in that direction. The bottom line of this story is clear: if you want to wreck 36 years of economic progress for rich and poor alike, let China’s 500 million peasants vote for another Mao.

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Why has Europe had difficulty imposing sanctions on Russia?

Annexation of Crimea, Russian military posturing along the border with Ukraine, demonstrations in Eastern Ukrainian cities, Donetsk’s declaration of its independence – all these sweeping revolutionary metamorphoses in Ukraine prompted the West to respond with a series of economic sanctions against Russia. The sanctions banned around 33 Russian and Ukrainian top officials and businessmen from traveling to Europe and the US, froze their foreign bank assets, and disabled processing Bank Rossiya and SMP Bank Visa and MasterCard transactions, and expelled Russia from G-8. Despite such pressure, so far, the Kremlin continues to dismiss the sanctions as inappropriate and shows no sign of giving in under pressure.

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On the contrary, Moscow increased its pressure on the interim Kiev government, which it views as illegitimate. Meanwhile, Russia’s major power – its energy resources and ability to export them – still remains untouched. Targeting this economic sector would seriously, if not fatally, hurt Russia, since 60% of its state revenue comes from oil and gas exports and constitutes more than a half of its federal budget. But would the gas export ban be only fatal for Russia?

Europe remains dependent on Russian energy
Russia is, by far, the largest supplier of energy to Europe. According to the Energy Information Administration (EIA), European countries import 84% of Russia’s oil exports, and about 76% of its natural gas. The degree of energy dependency on Russia varies across European countries. The Baltic States and Finland are 100% dependent on Gazprom, Bulgaria, Slovakia and Hungary– 80%, Slovenia, Austria, Poland, Turkey, the Czech Republic and Greece –50%. Obama suggests replacing Russian gas in Europe with Liquified Natural Gas (LNG) imports from North America, Australia and/or Papua New Guinea. So far, this idea is but an amusing fantasy for at least two reasons: first, neither European countries nor Ukraine are able to use American LNG because they lack essential terminals to regasify LNG. It might take at ten years or more to technically prepare European terminals to fully utilize American gas, including installation of new pumping systems and other expensive facilities to decompress and store gas. Second, the cost of the LNG gas will be markedly higher than traditional gas piped from Russia – accounting for both its transatlantic shipment and associated infrastructure. The project per se is plausible but unrealistic in the near-term. Given the size and scale of these projects, it will to take years before LNG begins moving from the Gulf coast in substantial volumes. Additionally, the United States is not ready to export sufficient amount of gas to Europe yet – largely accounting for its own needs. In 2013, the US used 736 billion cubic meters of gas (98% of its total) on its domestic consumption, whereas Russia domestically consumed only 456 billion cubic meters (68%). The domestic consumption level inevitably impacts the amount of gas slated for export. Over the past year, Russia exported 190 billion cubic meters of gas, while the US only 44 billion.

 

Europe is looking forward to breaking free from Russia’s dependence on fuel supplies and has enthusiastically started to explore its own potential shale gas reserves. Poland is estimated to possess 346-768 billion cubic meters of shale gas, Bulgaria may host 481 billion cubic meters, Germany has technically recoverable shale gas reserves of 481 billion cubic meters. According to U.S. EIA estimates, Europe could have as much as 13 trillion cubic meters of recoverable shale gas. However, due to regulations on fracking and the generally high cost of European Shale, by 2020, the total annual production of shale gas in Europe is only expected to be 4 billion cubic meters, according to energy consultancy IHS. Regardless of how optimistic or pessimistic one views Europe’s potential production in 2020,  2020 is still 6 years away. Where will Europe get gas to keep its houses warm and lit this coming winter? Another impediment with fracking gas in Europe is its possible impact on the local environment. Probe shafts drilled in Poland have suggested that Europe’s ground structure differs from that of America, making it harder to cost-effectively extract natural gas. Also, political pressure from environmental groups in countries like France and Bulgaria has resulted in the imposition of outright bans on fracking. As a result, Europe is unlikely to experience the sort of “shale gas revolution” that is transpiring in North America.

 

Another energy source that will replace some Russian gas is coal. The US has plenty of excessive reserves of coal and its producers are looking for foreign customers. Because of the low demand over the past three years, the prices on coal have fallen – from $130/ton in 2011 to $75/ton today. In 2014, America is expected to send 100 million tonnes of coal abroad, mainly to the EU. By 2015, Eni predicts, Germany will shut its gas stations that cumulatively produce 10 gigawatts and open coal stations with 7 gigawatts power. According to the EIA, to produce 1 gigawatt hour (GWh) of energy needs 225,000 cubic meters of gas or 490 tonnes of coal. By contrast, for 650 terawatts produced from Russian gas, Europe pays Gazprom $60 billion a year. The equivalent amount of coal (around 340 million tonnes) would cost Europe half as much- $30 billion. On the other hand, a coal plant is still a coal plant, producing roughly twice the CO2 emissions of a natural gas plant, regardless of how much is invested in its emissions control system. WWF estimates the new coal plant planned in Greifswald, Germany, will produce 6.9m tonnes of carbon emissions a year, an amount equivalent to the entire emissions of the country of Tanzania. Coal is not the environmentally-friendly energy source of the future.

Europe could step up imports of Middle Eastern energy, however, this is fraught with issues as well. First, Europe has never fully entrusted its energy security to the Middle East and has no plans to start now. Second, although increasing oil tanker shipments is straightforward, importing Middle Eastern and Caspian Zone natural gas would require construction of thousands of miles of additional natural gas infrastructure. Currently, many of the European refineries in Czech Republic, Poland, Slovakia and Germany still get their crude oil via the Soviet-era pipeline network “Drouzhba” running through Ukraine and Belarus to Europe. In the event of an embargo, those refineries wouldn’t be able function until the logistics are adjusted. Third, OPEC could potentially leverage Europe’s situation to gouge it on pricing. Obama is currently trying to manipulate world oil prices. He has paid visits to Saudi Arabia, to speak with its 80-year-old king about the development of Saudi facilities to extract gas and deliver it to Europe in exchange for reduced oil prices. The idea that jawboning Saudi Arabia into reducing prices will have any lasting impact on the world market is a complete farce.

The most draconian policy Europe could impose would be an embargo on imports of Russia’s oil and gas. However, even with such a policy, the embargo is not going to destroy Russia. There could be cuts (say, by 20% or by 50 million tons) in volume of oil imports by European states. In that case, Russia’s loss would be $35-40 billion a year. At the same time, once Europe introduces the embargo, Russia would look for new customers. Fortunately, there are many potential oil-importers out there – notably, Central Asia and China and oil itself is fungible. Russia will refocus both economically and strategically towards Asia, thereby strengthening China – obviously, to no great thrill to the West.

All of these facts indicate that Europe can’t simply ignore its energy relations with Russia and cut itself from Russian supplies. Energy security in Europe is quite a sensitive matter, which requires a delicate approach to its resolution; in an attempt to screw Russia over, Europe could be shooting itself in the foot.

How could Russia and Europe solve the dilemma?

Europe fears the repetition of the gas supply disruptions in 2006 and 2009 when Russia simply switched the gas flow off in response to Ukraine’s fail to pay its gas bills. Who was to blame in that – Russia’s supply or Ukrainian transit? European governments were collectively blaming Russia and its aggressive rulers, whereas German, Italian, and French leading energy firms were in agreement that it was primarily Ukrainian transit crisis. Who to trust? Well, governments do politics and employ much rhetoric to justify their deeds as well as to attract more votes, whereas companies do business. The current situation in Ukraine has put European countries under the threat again, and has repeatedly shown who has been the major hurdle on the road.
When then pro-Russian president of Ukraine Victor Yanukovich chose not to sign the association agreement with the EU, Putin graciously offered him a $15 billion package of loans plus a generous discount on gas supplies. Now, when Yanukovich fled the country and the new interim government (whose legitimacy Russian authorities refuse to recognize) is assertively anti-Russian and explicitly leaning toward the EU, Russia does no longer feel obliged to provide Ukraine with any subsidies. What’s more, Russia claims Ukraine has not settled its previous gas debts. Naftogaz, Ukrainian national gas company, still owes Russia its unpaid gas bills for March, thereby totaling the debt to $2.2 billion. If Russia suspends the gas supply, Ukraine will need to turn to Europe for loans to pay off its debt in order to continue the transit of gas from Russia to Europe. In other words, Europe will have to take care of Ukraine’s debt, which Ukraine herself can’t reimburse. “Russia is not obliged and no longer going to bail out the Ukrainian economy through discounts and gas and forgiving debts, and through the subsidies to pay off Ukraine’s trade deficit with the EU countries,” said Putin in his letter to the 18 European leaders on April 10. “According to the current contract, Gazprom will have to switch to the system of preliminary payments for gas supplies and in the event of violation of the payment obligations, will have the right to fully or partly suspend the supply of gas. In other words, Russia will provide gas as longas Ukraine pays a month ahead.”
Earlier in March, Alexey Miller, head of Russia’s Gazprom, announced that starting from April 1st, the gas price for Ukraine would be $385.50 per 1,000 cubic meters in the second quarter of 2014 as the conditions of payment had been violated. On April 3, Russia announced the raise of the gas price as high as $485 due to the cancellation of the discount that was included in an old agreement concerning the deployment of the Russian fleet in the Black Sea. To compare, the initial price Ukraine used to pay for Russia’s gas was $268.50 for 1,000 cubic meters of gas (as of December 2013). In addition, during an April 3rd meeting with Mr. Miller, prime minister Dmitry Medvedev announced the cancellation of the so called “zero tariff” on gas for Ukraine. The “zero tariff” was adopted after the signature of the 2010 Kharkiv agreements in exchange for the permit to keep Russia’s Black Sea fleet in Sevastopol after 2017. The agreement implied that if the gas market price is $333 and beyond per 1,000 cubic meters Ukraine is granted a discount of $100, if the price is below $333 – Ukraine gets 30% of that level. Russia authorized this discount through the “zero tariff” on the amounts of 40 billion of cubic meters a year in 2011-2019, which the prime minister has cancelled now after the annexation of Crimea and denunciation of the Kharkiv agreements. The Kremlin now is planning to charge Ukraine for the missing incomes from the exploitation of the “zero tariff”.
Whether Ukraine pays its debt off and buys Russia’s gas at the reviewed prices or it doesn’t, Russia is committed to its European relationships and long-term contract obligations to provide Europe with gas. So far, Russia can’t bypass Ukraine in terms of gas delivery to Europe. However, it is under Gazprom’s control to decide who are his clients. Once Ukraine refuses to pay the full price, Gazprom cuts it off from the gas supply. The way out of such a troublesome situation Ukraine sees in reverse gas supplies from Hungary and Poland. The European pipe-line system can potentially be upgraded so that it can stream gas in the opposite direction – from the West to the East. According to the Slovak gas-transmission operator Eustream, the pipeline will allow “the supply of gas to Ukraine in reverse flow mode already in October of this year, with a volume of 3.2 billion m3 a year. Later on, in March 2015, this capacity could be increased to as much as 8-10 billion cubic meters a year.”
To reverse gas flow from Europe to Ukraine the pipeline needs an interconnection that would connect the pipe in Slovakia with the one that Eustream and Ukrtransgaz are planning to set in reverse mode – in Ukraine. Thus, the gas should physically cross the border with Slovakia, otherwise Gazprom may legally appeal because during the pumping of gas in Ukraine Gazprom is still the owner of that gas and any manipulation with it can’t be done without Gazprom’s permission. Eustream suggests that Ukraine build this technical solution because in addition to its functional effectiveness it will also legitimize the reverse supply of gas. The cost of the project is expected to be €20 million. The construction can be finished by the beginning of this winter. However, the Ukrainian authorities criticize this project as overly time consuming and insist on immediate revers supplies, notwithstanding the warnings from the Eustream that such a deal could violate the contract with Gazprom.

Gazprom to renegotiate the prices

It is not only Ukraine and Europe who have found themselves in an uneasy situation with Russia, Gazprom too has to reconsider its policy in response to the changing gas market reality. European market has been in stagnation since the 2008 crisis and the demand for gas has been relatively low. Hans-Peter Floren of the Austria’s OMV AG board of directors is speaking about oversupply of natural gas in Europe for the next couple of years. He expects the demand on gas in Europe to stagnate till 2020, thus, he suggests the provisions of the long-term contracts should be reviewed, the gas-suppliers should cut the price in order to restore the competitiveness of gas in the energy market. Energy Information Agency (EIA) says that the demand in Europe fell by 7.5% in 2010, and by 3.5% more in 2012.
Despite the tensions and hostile political environment between Russia and the West, European companies still view Russia as their business partner, particularly with regard to its energy sector. In the past two months alone, three major energy deals have been negotiated or signed between European and Russian companies. On April 1st, Hungary signed a 10 billion Euro credit agreement with Russia for an upgrade of its nuclear plant in Paks.
Russia’s Lukoil holds talks with France’s Total regarding the exploration of shale gas in Russia. Italy’s Saipem has signed a $2.8 billion contract to build Gazprom’s new South Stream pipeline. In March, Germany’s RWE sold its oil and gas exploration and production unit to Russian oligarchs for $7.1 billion.
Gazprom now is in a position when it can literally save the situation from rolling further downhill and maintain trust and good partnership with the West. For that it needs to become more flexible and willing to renegotiate its long-term contracts with European clients. Gazprom’s long-term contracts’ price formation mechanism is based on oil indexation. According to Sergei Komlev of Gazprom Export, such a mechanism lays down fair trading conditions in which neither supplier nor costumer can manipulate the price. The gas price is determined by the energy market. Another reason Gazprom does not want to abandon its long-term contract system is that it guarantees minimum annual purchase of gas (“take-or-pay” contract) by a client given the falling demand for energy due to the crisis in the Eurozone. However, being known for its legendary sturdiness, Gazprom has actually started reconsidering its policy: the long-term contracts are no longer unchangeable throughout decades, they are reviewed every 2-3 years and as a result have become framework agreements rather than a decade-long contracts. Eventually, Gazprom has brought its gas prices close to spot prices. If we look at a chart drafted by Thierry Bros of Societe Generale, we will see that in early 2013 the Gazprom prices were different from the NBP (gas hub in the UK, with the highest liquidity in Europe) prices by no more than 5-6%.Moving Gazprom towards market-based pricing and contract terms has served to depoliticize, to an extent, Russian-European energy trading.

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Energy-supply routes diversification

Given that this is not the first time when relations between Ukraine and Russia achieve a boiling point, Russia is seeking to avoid Ukrainian transit in its energy supplies to Europe by all means. The most feasible way out of this conundrum for Russia would be to move gas westwards using routes bypassing Ukraine, whereas for Europe it is both to diversify the pipeline routes and its energy sources.
In 2003, then-President Putin signed an agreement with the German government to construct the Nord Stream pipeline. The two pipelines of the project run almost parallel to one another through the Baltic Sea and provide Russian natural gas to Germany – from Russia’s Vyborg to German port at Greifswald. The lines were completed and set online in 2011. While the construction of a pipeline along the seabed is over three times as expensive as the construction of a similar overland pipeline, Russia benefits immensely from its investment, as Nord Stream bypasses Ukraine, Belarus, and Poland, reducing transit costs and consolidating Russian control over the energy supply to Germany and the center of Europe.

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In 2007, the Kremlin and the Italian government signed a memorandum of understanding regarding the construction of a Russian pipeline to supply natural gas to Italy. South Stream, scheduled to begin transport of gas in 2015, will travel from Russia across the Black Sea, Bulgaria, Serbia, Hungary, Slovenia, and finally to Italy. Its capacity is estimated to be 63 billion cubic meters. It is over 930 km long and 2 km deep. The pipeline is in its early phase of construction as Gazprom is laying down pipe in Russia, Bulgaria, and Serbia. The European Parliament is looking to use the South Stream as a tool to put pressure on Russia and freezes talks on its further construction. This is clearly rhetoric, yet who knows how far this rhetoric might go. Once the Nabucco project turned a failure, Europe might also want to make stake on Azerbaijan’s Southern Gas Corridor, which is underway and designed to pump gas via Georgia and Turkey to the Balkans. Once its construction is completed, the 1,250-mile pipeline will supply gas to Bulgaria, Montenegro, Bosnia and Herzegovina, Croatia, and Albania. As a result, it will make this part of Europe far less dependent on Russia.

Bottom line

No matter how desperately Europe would like to punish Russia for its truculent actions in Ukraine, European countries are to varying degrees dependent on Russia’s energy supplies. Thus, sooner or later, Europe will have to get back to the negotiating table. The interdependence between Russia and the European Union means that crippling economic measures against Russia’s key sectors may turn out a double-edged sword – strongly impacting both Russia and Europe.  Even before the outbreak with Ukraine, the Kremlin’s energy policy in Europe was aggressive and ruthless rather than cooperative and respectful of its costumers. Throughout the years Russia has systematically acquired a significant amount of influence over the countries of Eurasia and the European Union, benefiting from their dependence on Russian natural gas. As a result, it has been hard to find economic sanctions that would harm Russia without hurting other states’ economies. For example, Cutting off European imports of natural gas from Russia would leave them scrambling for other resources. Now, however, the Western states’ desperate eagerness to switch to non-Russian sources of energy strongly suggests that Russia’s energy hegemony won’t last much longer. If Russia remains in a political confrontation with Europe, Europeans will diversify their energy supply away from Russian fossil fuels, either by switching fuel sources (e.g. coal) or by country of origin (e.g. U.S. LNG)  rendering Russia’s most potent source of leverage impotent. Taking a long-term perspective, European states will need to reconsider their energy security priorities and develop them into a more coherent and harmonized policy, which will reduce Europe’s vulnerability in the event of a broken relationship with Russia.

Afghanistan at Crossroads

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2014 will be looked at as an important year for the history of US-Afghan and Russian-Afghan relations. In February, Russia commemorated the 25th anniversary of the final departure of Soviet forces from Afghanistan. For the Afghani, 2014 marks the end of the Karzai era. A new president will be elected on April 5th. The fate of the country remains anything but certain. The upcoming elections are perceived by most to be of critical importance to the future of the Afghan state. For the United States, 2014 marks the end of the official military operation in Afghanistan that began in 2001.
Russia’s reaction to the US and NATO military presence in the region over the past decade has been rather ambivalent. On one hand, Moscow welcomed the post-9/11 “Global War on Terrorism” and the intervention of American forces in Afghanistan. Russia sought to lend legitimacy to its own “war on terrorism” in the North Caucuses, where it had for many years been waging a brutal counter-insurgency battle against Chechen Islamists and extremist groups. On the other hand, Moscow has grown even more concerned that the ever-expanding Western security presence in Afghanistan is ultimately an attempt to keep Russia “in check” in Central Asia. In September of 2012, the Obama administration announced the withdrawal of the 47,000 strong International Security Assistance Force (ISAF) from Afghanistan by the end of 2014. However, negotiations surrounding the bilateral security agreement (BSA), the agreement that will govern U.S.-Afghan relations following the drawdown of U.S. troops, have recently stalled. The BSA would permit the U.S. to keep a small residual force of about 8,000 U.S. military personnel in Afghanistan beyond 2014 to support and train local forces and conduct limited counterterrorism activities. There is still hope for a favorable resolution of the issue as a result of Afghanistan’s April 5th presidential elections.
However, Russian officials have expressed deep concerns about Washington’s decision. Russian Defense authorities recently said that the ISAF “has been too hasty about making the final decision to pull out in 2014.” Sergey Lavrov, Russia’s Minister of Foreign Affairs, pointed out that the ISAF’s mission had not yet been fully accomplished. He also voiced his concerns about potential spill-over of violence and infiltration of terrorists over Russia’s southern border. In fact, both Russian experts and Russian officials paint a pessimistic future for Afghanistan and its surrounding region following the ISAF’s departure. Among the top concerns for Russia: reemergence of local extremist groups and their attempts to regain power over Afghanistan; well-trained terrorists from the Afghanistan conflict moving across Russia’s southern border; the local army and police being unable to carry out counterterrorism and counterinsurgency operations without foreign assistance; the political structure of the state becoming more fragmented and thus even more fragile; and finally, a rise in drug production and trafficking following the anticipated decrease in foreign aid. Russian officials believe that presence of the numerous, well-trained and well-equipped NATO forces has been a key factor deterring a full-scale bloody conflict in the country. If Afghanistan had a stable political environment, it could potentially serve as a bulwark to protect Russia’s southern borders from drug trafficking and Islamic extremism. Therefore, Russia’s interest in restoring stability in the region stretches well beyond the end of the NATO military operations.

Russia’s and America’s views of the withdrawal and policy recommendations

American experts on Afghanistan both in and out of government have a diverse range of outlooks on the situation. The U.S. commanders in the field and Pentagon are largely opposed to a hasty departure of the troops fearing the resurgence of the Taliban and Afghanistan’s rapid descent into chaos. Government officials, to the contrary, argue that the American combat mission has been successfully completed in a sense that it contributed to the formation of a credible and self-sustained Afghan army and decreased chances for al-Qaeda to “reestablish a foothold in the country where the Sept. 11 attacks were plotted.”
American think-tanks experts mostly agree with the planned withdrawal of forces, but at the same time, they appeal to U.S. politicians to provide an enduring military presence in Afghanistan after 2014 to better coordinate civil aid during the transition period and to prevent the terrorist groups from regaining control over the region. Some predict the resurrection of foreign terrorist groups (such as those of Pakistan, Yemen, Syria, or Iraq) putting “down roots again in Afghanistan if the country were to fall to the Taliban after NATO’s departure,” as Michael E.O’Hanlon of the Brookings Institution writes.
Anthony Cordesman of the Center of Strategic and International Studies (CSIS) suggests that the most important issue in the debate over Afghanistan has been overlooked. Instead of debating the issues with Afghan president, the American government should first weight the value of keeping its forces in Afghanistan. He essentially questions the necessity to maintaining an American presence in a region whose strategic importance to the United States has diminished. Mr. Cordesman concludes by suggesting,  “Why not leave the task of dealing with unrest and extremism in Central Asia to Russia and China? Why can’t the United States do the best job of winning the new Great Game by ceasing to play it?”
Pauline Baker of the American Interest predicts a “terminal meltdown” of the Afghan state, “with the insurgency spiraling upward” and increased political fragmentation following the withdrawal of international forces. Despite certain achievements by the ISAF, she sees no viable rationale behind the idea of continuation of the previous military policy in the region. Until the policy is reviewed, the further presence of American troops in Afghanistan would mean further waste of both human and financial resources. To put a finer point on it, she states “Thus far, the war has cost the United States at least $500 billion over the past ten years (some say as much as $1 trillion), with spending close to $100 billion in 2013 alone.”
As soon as the American forces leave the country, international aid will be cut significantly as well. “Without continued international military and economic support, Afghanistan risks falling back into civil war, with the attendant rise in extremist groups, outflow of refugees and disruptions in commerce that would threaten the region as a whole,” stated Ambassador James Dobbins, U.S. Special Representative for Afghanistan and Pakistan, during his testimony before the U.S. Senate Foreign Relations Committee.
According to the World Bank, currently 95% of the Afghan GDP is funded by foreign taxpayers of donor’s nations. Where will their post-2014 budget come from? The answer appears self-evident – from Afghanistan’s prior sources of cash: poppies, opium production, and the narcotics trade. Recently, the presence of foreign troops and controls introduced by the Karzai government suppressed but never eliminated such sources of cash. Thus, another fatal risk – narco-trafficking – is rising. At an event on the Middle East recently hosted by the National Committee on American Foreign Policy, Ambassador Thomas R. Pickering expressed regret about the ISAF withdrawal from Afghanistan. In addition to the departure of well-equipped and trained foreign forces, the withdrawal implies the loss of “extensive funding for the Afghan national security forces.” “One of the things that I think is the most important,” said the Ambassador, “is to see if we can push India and Pakistan to begin to talk about their interests in and their future roles in Afghanistan.” Summing up his observations of the broader Middle East, Mr. Pickering said that “our effort has to be to help build balances in the region rather than to pick winners and losers.”
Russian foreign policy and Afghanistan experts outline numerous scenarios for the post-2014 Afghanistan. Omar Nessar, Director of the Center for Contemporary Afghan Studies (CISA), points out that “The Taliban interprets the drawdown of the Western forces as its own victory. So now they certainly are not going to accept any concessions. They believe that the timing is playing into their hands, and as the withdrawal of U.S. forces from Afghanistan approaches, their positions are being only strengthened.” Mr.Nessar in his correspondence with IMR said that even in the situation when a small military contingent is present (such as of 8,000 troops) it still will not be enough to detain possible terrorist assaults. Thus, resumes Mr.Nessar, the task of counter-terrorism will be placed on the local police, whose combatant ability is insufficient. He also warns of the outcome of the April election. “Absence of security in the southern and eastern parts of Afghanistan, low voter turnout in the election – all that contributes to the victory of a non-Pashtun candidate at the presidential election-2014, which will inevitably cause unrest among the Pashtuns. On the other hand, the current situation of insecurity in the region increases chances of the Taliban and other opposition groups to win the election,” predicts Mr.Nessar.

Nikolai Pakhomov of Afghanistan.ru believes that “the total departure of the ISAF from Afghanistan does not correspond with Russia’s strategic interests.” He emphasizes that the problems with drugs production and drugs trafficking, terrorism that existed before and that were under some sort of control during the presence of the Western forces, have not gone away completely and that they are still enduring, which poses a serious threat to Russia. “ So,” warns Mr.Pakhomov,  “if Moscow does not assist its neighbor-countries in the security building measures she is going to be the next to fall victim to the belligerent and stiffened Islamic fundamentalism.”
Some experts envision Russia splitting along the Volga and the Ural Mountains as a result of potential conflicts to the south of the Russian border. “Additional impact will have the escalating conflicts in North Caucasus and the Volga region,” says Vladimir Souvorov, head of the Department of Governance and National Security at Russia’s Military Academy.“In the future, these threats will aim to split our country along the lines of Afghanistan-Tajikistan-Kyrgyzstan-Kazakhstan – on one hand, and “driving a wedge” from North Caucasus along Volga – on the other hand. This will eventually separate the Ural and Siberia from the European part of Russia and disintegrate the country’s territory overall.”
In light of the shifting landscape in the Central Asia, Russia might consider the introduction of visa regime with the Asian republics, suggests Artyom Vit of Voennoye Obozrenie. The customs control regime on the border with Kazakhstan might also be restored in the coming years. In this respect, the drug trade may become an obstacle for Kyrgyzstan and Tajikistan to join the Customs Union.
Another scenario drafted by experts could be summoned as a fatalistic prediction that as soon as the American/NATO troops leave the country the Islamist extremists will rise against Hamid Karzai. The president then might turn to Russia for protection, which will inevitably drag Russia into another war in Afghanistan.
            Following the Soviet Union’s withdrawal in 1989, Afghanistan is the last thing Russia wishes to be involved with again. Russian Foreign Minister Sergei Lavrov says that it is now up to the Afghans to decide what type of state they want, how to increase security and build stability in the country – they should do it on their own, whereas other states are in no position to dictate them what to do. So peaceful, prosperous, friendly, neutral, but it will not come by itself. The efforts of all of us – the friends of Afghanistan – is required to make this happen and will be strongly supporting the government of Afghanistan and the people of Afghanistan on the road to this bright future.” In other words, Russian foreign policy authorities in their policy recommendations for the post-2014 Afghanistan refer to the diplomatic principle of “respect of other people’s right for self-identification and no foreign interference with their right to shape their own future.”
Russian experts believe that America’s imminent departure makes a strong case for Russia’s leadership on anti-drugs measures in Central Asia. They suggest that Russia should focus on its southern border’s security, increase the control and prevention of drugs production and drugs trafficking. Dmitri Trenin of Carnegie Moscow Center recommends Russia should do a careful assessment of the current Afghan realities, seriously consider the importance of the Pashtun factor, and soberly assess the actual capabilities of the Taliban. “It needs to cooperate with Afghanistan’s neighbors but stay away from their competition. It absolutely needs to avoid any military involvement of its own in Afghanistan, and engage economically only when this makes sense in economic terms,” deems the Carnegie expert. Omar Nessar of the Center for Contemporary Afghan Studies (CISA) hopes that the uneasy situation will induce the Central Asian leaders to start seeking “new forms of collaboration in their attempts to fight the terrorist groups as well as new mechanisms to maintain regional security without relying on the NATO and the U.S. support”.
American experts as well as their Russian counterparts advise that the remaining combat regiments should now train, advise and assist Afghan local forces to make sure that Afghanistan is able to further maintain its security on its own, without heavy foreign support in the future. The remaining international contingent should also be tasked to conduct strikes against terrorists. The problem of fragility of the Afghan state should be specifically addressed. Pauline Baker writes, “The April election is critical to the transition, but we should ensure that we are helping to establish the constitutional and electoral foundations for all future balloting, not just the next one.” She suggests that the international community should assist Afghanistan in building good governance through such means as promotion of tough anti-corruption laws, cultivating civilian control over the military to avoid the situation where the latter seized the power. The international peacemakers should also promote an all-inclusive peace negotiation process where the Afghan politicians would sit at one negotiating table with Islamic Movement of Uzbekistan, the Haqqani network and the Northern Alliance, among others and discuss the peaceful resolution to the conflict.

April elections and three options
            Lying on the crossroads of three strategically important geographic regions – Central Asia, South Asia, and the Middle East – Afghanistan has always been that “player” one would inevitably have to deal with if they wanted to pursue their interests in the region. Not an easy task. Russia treated the region as a sphere of interest in the 19th century, when, together with Britain, she was actively engaged in the so-called “Great Game”, and in the late 1970s when the Soviet troops invaded the country and were tied down for a decade. The United States has historically been involved in the region owing to its role in energy production and transportation, but following 9/11 and the “War on Terrorism” Afghanistan has been a major focal point for America’s national security policy. However, the geostrategic situation has drastically changed over the past 25 years. Whereas Russia learned a bitter lesson from the 1979-1989 invasion, Obama is entirely reconsidering America’s foreign policy priorities – America is no longer the world’s policeman and the greater Middle East is no longer the top foreign policy priority for the country. “We would like to get out of there, thank you very much,” as Ian Bremmer stated in his recent talk at the Carnegie Council.
While the Middle East region is geographically remote and strategically less important for the United States, it still remains a tangible threat to Russian security, primarily due to the fact that it borders the region. Not surprising then that Russian authorities criticize Washington’s decision to exit as being “too hasty” and point out that the task of eliminating terrorism and building stability in the country has not been accomplished. Given the escalating threat from a NATO-free Afghanistan and deteriorating relations with the West (mainly a result of the Ukrainian crisis), Russia has to seriously assess its security concerns – first and foremost, terrorism and narco-trafficking – and weigh potential losses and gains from preserving cooperative relations with the United States. When the international forces are withdrawn, given the persistent instability, failure to eradicate terrorism or drug trafficking, weak and corrupt military and police, the likelihood of the Taliban guerillas regaining power is quite high. In the given context, the outcome of the April presidential election remains critical. It basically bears three options: 1. The new leader signs the Bilateral Security Agreement with the US for continuing presence of its troop 2. The new leader is powerful and determined enough to build more efficient and accountable governance in Afghanistan. 3. Turn back to the profound misgovernance and corruption, which only strengthens the Taliban and increases chances of another civil war.

 

Some remarks on “Historical Justice”

One of the driving forces behind Putin’s determination to annex Crimea was a mission to restore so-called “historical justice,” as I mentioned in the previous post. What is “historical justice?” one can contemplate the term as far as  his/her awareness of history, education, etc. stretches. Why would it be “historically just” to attach Crimea back to Russia and not to Greece or Turkey? Crimea was a Greek colony for over 400 years and then part of the Ottoman Empire for 300 years. Neither Greece, nor Turkey, today claim their territorial rights for the peninsula. By and large, revision of borders over disputable territories looks redundant and nonsensical in the modern world. Rivers of blood are spilled for only to move a border a few meters further. Thus, to restore the infamous “historical justice,” Putin could have come up with better idea how to do it in the 21st century. Meantime, what Putin just did was a surreptitious theft of Ukrainian territory  in the midst of revolutionary turmoil. Putin pragmatically seized the momentum and grabbed a piece of another sovereign state. In other words, rather than any basis in fact, “historical justice” is merely an emotional and relative category, used by politicians as a rhetorical device.

Putin and Ukraine: Small gains at the price of irrevocable loss

Here in America, people often ask me to comment on the situation in Ukraine, Russia’s military occupation of Crimea, Euro-Maidan, and Putin. Some are even curious if I, as well as other Russians, believe that Putin is somewhat psychologically or mentally deviant. I’m not a psychiatrist, so I can’t confidently set a diagnosis. Nonetheless, I believe such outrageous comparisons of Putin to Hitler or Saddam Hussein are unacceptable. There is a good article by Aaron David Miller in which he also criticizes such hyperbolic statements.

By and large, to my great disappointment, the Western media appears disturbingly hostile towards Russia and Putin. I understand the healthy nature of criticism and exquisite reproach, but what I see in the American press is just a torrent of blind hatred with the ultimate and the only aim to defeat and, rather than an attempt to try objectively analyzing Putin’s decision-making process. People got particularly excited about Angela Merkel’s remarks on Putin such as her claim that Putin was “in another world” and not really in touch with reality.
Now, let us try to look at the situation from Putin’s perspective, the perspective of a leader who is power-hungry, who has been driven by imperialistic ambitions, who desires to restore Russia’s former glory, and who wishes to halt Western meddling within its sphere of influence. As a reminder, he once declared the fall of the Soviet Union, “the greatest geopolitical catastrophe of the century.” A strong and powerful Russia is his ideology. To me, that a leader feels so strongly about his state is quite reasonable. Especially, keeping in mind that we are speaking of an autocratic leader who is used to making critical decisions on his own, who does not act inline with the commitments his country has with a variety of international organizations and councils. Putin keeps entertaining the idea that the former Soviet states are still under Russia’s umbrella, and Moscow may do whatever it wishes to do there. This is how Putin is programmed. We should take this framework as a given and use it to understand Russia’s state of affairs in and the mind of its leader. Whether or not it is a democratic, internationally legitimate, or strategically far-sighted policy is another question. I will elaborate on those ideas further in the text.

On the one hand, it would be fair to say that any state’s leader’s mission is to protect the interests of his nation and to struggle to the bitter end in any conflict or crisis situation that could potentially threaten the security of his state. And that is exactly what Putin does. What is insane about it? In situation with Ukraine, Putin’s political steps are pretty rational – again, from the authoritarian leader’s perspective. The main reason Russia is so concerned about Ukraine is NATO, the Cold War military alliance. NATO was formed to defeat an enemy – the Soviet Union, or to be more precise – the Eastern European members of the Warsaw Pact. It is first and foremost a military alliance. Although, its members claim its purpose is now merely political, as opposed to military, the evidence proves the opposite. Both Putin and the average Russian believe that the only reason for NATO to exist is the existence of an enemy. With the collapse of the Soviet Union, the Alliance found itself in a situation with no potential threat to the existence of its member-states. However, the Alliance does not want to disband. Or rather – the US (essentially it’s CEO) doesn’t want to shut the Organization down. Thus, NATO will simply invent enemies out of whole cloth to justify maintaining large military forces and adding new members. Russia is one of those mythical enemies. Thus, NATO is adamant in its desire to move anti-ballistic missile systems closer and closer to Russia’s borders, under the guise of targeting Iran and North Korea. From 1999 to 2009, NATO added 12 new member states, most of whom were former Warsaw Pact members, and is widely believed to have further expansion in mind. By “further” I mean as far as to “the Black Sea” – a region with enormous strategic value to Russia. Thus, Russia’s calculation is pretty simple: first, Ukraine joins the EU, then NATO, then NATO deploys forces to Sevastopol, blocking Russia’s sole southern seaport. Such a situation would be a strategic disaster for Russia. Thus, Putin was eager to pay any cost to keep Ukraine away from any kind of association with EU. Speaking of the currently deployed Russian troops in Crimea and the annexation of the Peninsula, Putin realized that with the abdication of Yanukovich – a pro-Kremlin leader – Putin lost his last grip on the country. At the same time, he can’t yield a strategically important region of Crimea which the feckless Khrushchev willingly gave to the Soviet Socialist Republic of Ukraine in 1954. As if the strategic rationale was not a strong enough justification, 60% of Crimea’s population are ethnic Russians bolstering Russia’s territorial claims.

Given internal consistency of Putin’s actions thus far, why would prominent Westerners aggressively parrot Merkel’s rumor? Putin’s behavior towards his neighbors is essentially identical to US actions worldwide, yet few called Bush or Obama insane when America invaded and bombed Yugoslavia and Iraq. Where were the calls to levy international sanctions against America back then? Why was there no world-wide hysteria as we are witnessing now? Why can America interfere in any part of the world and act as the world’s policeman, while at the same time Putin is expected to remain passive in the face of unfolding chaos right next to Russia’s immediate border? In other words, why are the West allowed to effectuate change whatever, whenever, and wherever they want and Russia is not? The questions are an attempt to picture reality the way Putin sees it. To this point, I want to remind readers that in the 20th century the borders of most Middle East states were drawn by the West in the ways the Western powers deemed it most convenient for them to operate in the region. Saudi Arabia, Jordan, Lebanon – all these states were created at the discretion of Western powers. In the 1940’s, during World War 2, these territories were not yet dominated by nationalists but rather were under the dominion of Axis and Allied armies.

On the other hand, had Putin acted more pragmatically, being internationally minded and strategically far-sighted, he would have had to assess the entire situation (even before Yanukovich fled Kyiv) with a strong consideration of number of problems piled up. These include declining Russian demographics, technological backwardness, insecurity of its southern borders, complex relations with China, etc. Considering all these long-term systemic issues Russia needs to maintain good relations with the West – US and EU – based on mutual trust and stability. The stabilization in Ukraine could have been achieved by different methods – acting collaboratively with other states within the Security Council, where Russia is a permanent member. Unilaterally intruding with military forces Russia violated all its previously established doctrines and international agreements (including the Budapest agreement) regarding sovereignty of other states. Thus far, Russia has not only damaged its relations with Ukraine, but also with the US and EU. Had Ukraine signed a major treaty with EU, it would have probably started moving towards EU membership. Accession to the EU, however, was never certain (look at Turkey), no doubt because it is in Ukraine’s interest to keep a balanced relationship with Russia. By abruptly disregarding international law and its commitments to various agreements, Russia has strengthened NATO’s hand, as Poland, Czech Republic, Lithuania will now feel very insecure and thus call on NATO to fortify their borders with Russia.

It remains unclear what Russia seeks to gain by absorbing Crimea. To protect Russian speaking population there? From whom? The Russians form a majority there and have never been oppressed by ethnic Ukrainians. To get more territory? Russia is a vast country – the largest in the world. An access to the Black Sea and its fleet there? Russia has been allowed to keep its naval forces in the Sevastopol harbor according to the agreement with Kyiv, and renewal of that agreement has never been in doubt. Despite the preceding, under Russian supervision, Crimeans held a referendum to secede from Ukraine and join Russia on March 16th, 2014. Although the official results are not ready, initial results suggest an overwhelming victory for joining Russia. Looking merely at the referendum misses the point. On the surface this appears to be a Wilsonian expression of self-determination, the Crimeans wanted to re-unite with Russia and the Russian government has favorably responded to their will and allowed a referendum. This is reminiscent of traditions from the Middle Ages when the Polyans and Drevlyans of ancient Russia invited the Varangians to come and rule them. Today’s rules are clearly different. We have certain norms and legislation that regulate territorial issues. Russian legislation clearly outlines the procedure of absorbing new territories. Russia may annex a state if that state sincerely asks to join Russia, note the term “state,” not “portion of a state.” Although autonomous, Crimea is still a part of Ukraine. Russia, therefore, cannot legally annex Crimea. The Ukrainian Constitution does not allow secession either. If Russia nevertheless obtains Crimea, in the long run, it will bring nothing but constant confrontations with Ukraine and the international community. Crimea will neither be recognized as either a new state, should it wish to follow in the footsteps of South Ossetia and Abkhazia, nor as a part of Russia. Furthermore, Crimea is a very poor region, with an average salary of $500 a month. Thus, Russia will gain just another dependency, again similar to South Ossetia and Abkhazia.

How can the West respond to Putin’s occupation of Ukraine? It could respond with economic sanctions, introducing bans on financial assets of certain people involved into the crisis, it could impose travel restrictions, and cooperation with Russia overall could be curtailed. Realistically speaking, however, I don’t think the West will impose draconian economic and financial sanctions on Russia. Europe, to a certain extent, is still dependent on Russian energy supplies. Russian gas accounts for 30% of Europe’s imports. Obviously, European states cannot suddenly give up on a key input to their economies. The biggest risks that Russia faces are not a momentary sanctions but rather the long-term threat of international ostracization. Such disengagement does not simply imply that the EU will leave Russia alone and ignore it. The consequences of such isolation and lack of respect and international recognition could be, in fact, catastrophic for Russia. The combined GDP of the Western countries (EU, USA, Canada, but not including Japan, Australia, and New Zealand) is 17 times bigger than Russia’s. Thus, simply by the massive economic superiority the West will start rendering Russia less and less competitive in the global market. While Russia’s energy resources are still essential, it is not the only supplier any more. Europe will gradually diversify its gas and oil imports towards liquefied natural gas (LNG) from the US and Qatar. Even Yanukovich, when he was still in power, declared that Ukraine was going to end dependency on Russia’s gas supplies by 2020, while together with Chevron they are starting shale gas exploration this year. Over the past five years, Ukraine’s gas imports from Russia have fallen by half. In addition, the West can facilitate the fall of oil and gas prices similarly to what President Reagan did after the military intrusion in Afghanistan, namely encouraging an increase in crude oil production both in the US and abroad. Thus Reagan explicitly demonstrated how a petrostate whose leader claims he is great, can wake up one beautiful morning and realize that it has confused superior leadership with high oil prices. At the same time, with the fracking proposed in Ukraine, and Poland, Russia risks losing its comfortable position in the European gas market as well.

Putin pursues policies unpopular in the West to prevent possible spillover effects from Ukraine’s revolution on Russia, to restore the so-called “historical justice” (i.e. reuniting with Crimea since it was always a part of Russia), and to restore his approval rating among the Russian population. These measures will benefit three groups in the short run: Putin and his closest oligarchs, the ethnic Russians in Crimea, and the new government of Ukraine (which can expect to be showered in Western aid money). Yes, looking a few years out, although Putin may well retain the reputation of a great leader who defended the Russian minority in Ukraine, who restored the “historical justice”, who secured access to the Black Sea, and who was able to stand up for Russian sovereignty. This glory will be short-lived. Looking forward, out years and decades, Russia loses Ukraine as a strategic partner and neighbor (a country whom Kissinger called a bridge between Russia and Europe), Russia loses trust and respect from the West, Russia becomes less resilient to China’s challenge in the Far East, and finally Russia becomes even more isolated and exposed to political disintegration.

Populist democracies and universal suffrage

Ukraine, Turkey, Argentina, and many more countries are undergoing turmoil moments these days. Waves of protest movements and mass indignation with the ruling “democratic” regimes have engulfed these countries. The protesters require to annul the results of the last elections and conduct the new. Why is it happening in more or less steadily developing countries, whose economies just yesterday were rated as promising and rapidly growing? Why is it happening in countries whose leaders were elected democratically – with some inevitable caveats in procedure of course (due to imperfection of any elections) yet based on the principle of majoritarian vote? To find it out let’s have a look at these randomly selected country-cases.

Thailand

The protest movements have been underway here since November 2013. The protesters require to introduce voting quota based on age, property and education. Until very recently, Thailand was a rapidly developing economy. As soon as the populists (Yingluck Shinawatra) came to power they immediately started crushing the economy. The country got entangled in a network of fraud ponzi schemes. The most fraudulent and notorious one was the so called “rice scheme.” The “rice scheme” was launched in 2011. Thailand is the largest rice exporter accounting for 70% of all rice exports in the world. Rice farmers constitute the bulk of voters. Prime-minister Yingluck figured that she could play the rice card to attract more votes and announced that the government would buy rice from farmers at a price that was twice as high as the spot market price at that time. Since Thailand was the major exporter of rice to the global market at that point, the government decided to artificially raise prices, monopolize the rice market and regulate prices at its will. What happened next was quite predictable: the neighboring countries such as Kambodia and Birma (also rice producers) began exporting their rice to Thailand at a higher price. Thus Thailand generously funded the Kambodian peasants. Meanwhile, part of the rice stocks in Thailand disappeared. To date, they have 18 million tons in storage with 4 million tons of rice stolen. India has been benefitting from the populist and myopic Thai policy. Thailand being swamped by its rice stocks has therefore yielded his status of the largest rice producer and exporter to the next large rice country – India. India increased its rice cultivation and flooded the world market with cheap rice. Consequently, the world price for rice has dropped by 20%. As a result, Thailand now stores 18 million tons of rice with no intention to sell it by the current market price. Thus, the government’s loss amounts to 9 billion dollars according to some moderate sources and 22 billion dollars according to other. The Thai farmers have not been paid since last October despite endless promises from the government to pay double for their crops. Educated urban upper-class people went out to the streets in Thailand in protest to such a policy and government. They request that “those wonderful people” who voted for these politicians and their schemes should be deprived of the right to vote.

Venezuela
President Maduro invaded the local stores with militants. He established the Ministry of Happiness [Notice, it’s not Orwell it’s real president Maduro in his real country]. Recently, all international airline companies cancelled their flights to the country because Venezuela operates on two exchange rates for bolivar – the official one (6,3 bolivars for 1 US dollar) and the black market that is 10-12 times different. Thus, foreign airlines had to sell the tickets for bolivars by the official rate. In the meantime, the Venezuelan government promised to exchange the bolivars back for dollars by the official rate. However, the government kept delaying the deal so that the debt for the companies has reached the point of 3 billion dollars. The companies had to shut their flights.

Argentina

President-populist Nestor Kirchner was elected two times, for the third term he elected his own wife – Kristina Kirchner, because the electoral system in Argentina (as in any other decent democratic country) prohibits one and the same politician to serve a term three times in a row. After his succession maneuver Nestor died and Kristina started ruling on its own. She turned on money printer which brought the country to inflation of around 26%. Commodity prices skyrocketed. Kristina adopted a regulation law to keep the prices “fair”. In addition, she initiated two different exchange rates for peso – one official, the other – created by the black market. The two rates are not even close. Kristina also took control over the national media banning newspapers from publishing advertisements thus depriving the publishers of income. Noticeable that a few years ago Argentina was a country with steadily growing GDP, and the presidents have always been elected by the majoritarian vote.

These few examples of failed and essentially disruptive populist policies have explicitly shown that the belief that universal suffrage (to be especially utilized in a poor country) will bring about freedom and free market – is entirely wrong. This statement will be wrong in wealthy western democracies too. The financial crisis in Europe proves that even well-off democracies don’t benefit from universal suffrage and politicians-populists, who just increase the number of people dependent on state. The situation where people being corrupted by generous welfare programs outnumber people who work and pay taxes – is not going to not end well.