Louis Proyect: The Unrepentant Marxist

June 24, 2014

Addendum to “Is Russia Imperialist” — what to make of state ownership of Gazprom

Filed under: corruption,oil,Russia,state capitalism — louisproyect @ 7:12 pm

In Roger Annis’s article there is a problematic reference to state ownership that I want to address:

It’s the state, not finance capital, which plays the overriding, directing role in Russia’s economy. The state happens to own much of the vaunted oil and gas industries; so too in finance and much of manufacturing. The CIA Factbook explains some of the consequences thusly: “The protection of property rights is still weak and the private sector remains subject to heavy state interference.

But before attending to that, there are a couple of other matters requiring attention. Annis claimed that since Russia’s GDP per capita is only about half of South Korea’s, it ruled out the possibility that it can be imperialist. I am not sure whether that statistic can in and of itself be used to establish a nation’s place in the capitalist food chain since Ireland ranks higher than Germany.

Consider the example of Czarist Russia, a nation that was both imperialist and underdeveloped according to Leon Trotsky, a thinker who had some influence on Annis in his youth. According to Vitali A. Meliantsev, a Russia economist, the GDP per capita in Russia on the eve of WWI was a third that of the West (page 13 of a paper linked here). Per capita GDP in Russia ran between 18-22 % that of the United States. Despite this, Lenin had no problem referring to Russia as imperialist in 1917, just before the Bolsheviks seized power.

The other thing that strikes the eye to anybody familiar with Ukrainian history is the image at the top of Annis’s article:

It has the caption “People’s Friendship Arch: This steel rainbow was erected in 1983 to commemorate the unification of Ukraine and Russia in 1653 and is meant to symbolize friendship and mutual respect between the two nations.”

I wonder if Annis has any inkling of what that “unification” means to Ukrainian nationalists. Ukraine and Czarist Russia signed an agreement in the town of Pereislav not on the basis of “mutual respect” but mostly on the basis of Ukraine’s need to find a military ally against Polish domination. Throughout the 16th and 17th centuries Ukrainian Cossacks were locked in battles against the Poles, finally making an alliance with the Crimean Tatars in the 1650s that only achieved a stalemate. Led by Bohdan Khmelnytsky, the Cossacks viewed the Czar as a lesser evil.

Paul Robert Magosci sums up the treaty in his “History of Ukraine” as follows:

Aside from the debates among legal scholars and historians, Pereiaslav and its reputed architect, Bohdan Khmel’nyts’kyi, have taken on a symbolic force in the story of Ukraine’s relationship with Russia and have become the focus of either praise or blame. For instance, in the nineteenth century the Ukrainian national bard, Taras Shevchenko, designated Khmel’nyts’kyi the person responsible for his people’s ‘enslavement’ under Russia. The government of Tsar Alexander III (reigned 1881-1894), however, erected in the center of historic Kiev a large equestrian statue of Khmel’nyts’kyi, his outstreched arm pointing northward as an indication of Ukraine’s supposed desire to be linked with Russia. After World War II, the Pereiaslav myth was resurrected, this time by Soviet ideologists, who, on the occasion of the 300th anniversary of the agreement in 1954, transformed the event into the ultimate symbol of Ukraine’s ‘reunification’ with Russia, from whom it had been forcibly separated by foreign occupation since the fall of Kievan Rus’.

Whatever writers subsequently have speculated about Pereiaslav, one thing is certain: after 1654, the tsardom of Muscovy — which within seventy-five years would be transformed into the Russian Empire — considered Malorossiia (Little Russia, i.e., Ukraine) its legal patrimony. Since the tsar considered Little Russia part of his Kievan Rus’ inheritance, whatever rights or liberties he granted the Cossacks at Pereiaslav were gifts he could take back whenever he wished.

From what I have seen from Roger Annis to this point, I am afraid that his intentions of using this photo was to help propagate the Pereiaslav myth favored by Soviet ideologues.

Let’s now take a look at Annis’s observation that “The state happens to own much of the vaunted oil and gas industries”, which is obviously a reference to Gazprom. One is not quite sure what state ownership has to do with whether a nation is imperialist or not, especially in light of Lenin’s references to German state-capitalism. In his 1921 article “Tax in Kind”, Lenin makes the case for state-capitalism but under the control of the working class:

To make things even clearer, let us first of all take the most concrete example of state capitalism. Everybody knows what this example is. It is Germany. Here we have “the last word” in modern large-scale capitalist engineering and planned organisationsubordinated to Junker-bourgeois imperialism. Cross out the words in italics, and in place of the militarist, Junker, bourgeois, imperialist state put also a state, but of a different social type, of a different class content—a Soviet state, that is, a proletarian state, and you will have the sum total of the conditions necessary for socialism.

However, it would seem that Lenin was referring more to state control than state ownership. After all, wasn’t it the case that monopoly capitalism is pretty much based on a kind of planning done in conjunction with the state? I reject Tony Cliff’s use of the term to describe the USSR but it seems useful as a way of understanding the “military-industrial complex” referred to by President Eisenhower.

What I think is more important is the usefulness of a phrase like “The state happens to own much of the vaunted oil and gas industries”. It is safe to say that I own the Macbook that I am typing this article with but is there the same relationship between the state and Gazprom?

According to Wikipedia, the largest shareholder in Gazprom as of the end of 2006 was Gazprombank at 41.235%, a chunk of stock that would ensure corporate control. You, of course, would wonder what was going on when Gazprombank, a subsidiary of Gazprom, is the largest shareholder. That is like saying that BP Bank (if there was such a thing) owned the biggest bloc of shares in BP.

Since the Wikipedia article contains no new information after 2006, you have to do a bit of digging around. A Financial Times article from November 30, 2011 brings things relatively up to date:

When Gazprom transferred control in 2007 of Gazprombank, its banking arm and the country’s third biggest lender, to Gazfond, the gas giant’s $6bn pension fund, the deal was seen as so incremental that the investor community barely noticed.

But Gazfond was closely linked to Bank Rossiya – which owned Lider Asset Management, the company that managed Gazfond’s assets and held most of the latter’s stake in Gazprombank as a nominee shareholder.

Keeping up with me? Gazprom spawned Gazprombank, which became the largest shareholder in Gazprom. But then Gazfond took over Gazprombank that was partnered with Bank Rossiya, which owned Lider Asset. Is your head spinning at this point? Try a little Dramamine.

While it is obviously difficult to penetrate through the interlocking directorships and ownerships of all these corporate entities, one thing is clear. Gazprom exists to make a group of men wealthy beyond comprehension. The NY Times reported on March 1 2012:

Arkady R. Rotenberg, a former judo coach, is now a billionaire industrialist, having made a fortune selling pipe to the state-owned gas monopoly, Gazprom.

Yuri V. Kovalchuk owned a minority stake in a small bank in St. Petersburg that in recent years won control of a number of Gazprom subsidiaries. He is now worth $1.5 billion.

Gennady N. Timchenko, once the little-known sales manager of a local oil refinery, is now one of the world’s richest men, co-owner of a commodity trading company that moves about $70 billion of crude oil a year, much of it through major contracts with Rosneft, the Russian national oil company.

What these men share, besides staggering wealth and roots in St. Petersburg, is a connection to Prime Minister Vladimir V. Putin, who is poised to win a new six-year term as president in elections on Sunday. The three billionaires are members of a close circle of friends, relatives, associates, colleagues from the security services and longtime advisers who have grown fabulously wealthy during Mr. Putin’s 12 years as Russia’s paramount leader.

Critics say these relationships are evidence of deeply entrenched corruption, which they view as essentially government-sanctioned theft invariably connected to Russia’s abundant natural resources: gas, oil, minerals. This has become a persistent grievance of demonstrators who have staged four large street protests since December and are promising more after the election.

“The basic point is that these guys have benefited and made their fortunes through deals which involved state-controlled companies, which were operating under the direct control of government and the president,” said Vladimir S. Milov, a former deputy energy minister and now political opposition leader who has written several reports alleging corruption. “Certain personal close friends of Putin who were people of relatively moderate means before Putin came to power all of a sudden turned out to be billionaires.”

Those street protesters that Kagarlitsky derided as effete liberal yuppies had it right. What you are seeing is government-sanctioned theft. This was alluded to, after a fashion, in the CIA Handbook that Annis cited: “the private sector remains subject to heavy state interference.” For Annis, “heavy state interference” must smack of St. Petersburg 1917 when in fact it has more in common with crony capitalism everywhere in the world, starting with those Middle East and North African countries that so often get included in the “anti-imperialist” bloc.

On December 23, 2011 Reuters published “Special Report: The Gaddafi oil papers” that will give you a strong sense of why the Kremlin and the toppled dictator found such an affinity:

MISSING OIL, MISSING CASH

In a separate report published in 2010, Ben Amer’s ministry said almost five million barrels of oil worth around half a billion dollars had disappeared from a particular field in 2008.

That report said its investigation was triggered by information from Beshti. Ghanem, the oil minister and head of the NOC [the state-owed National Oil Company]  at the time, said he did not know about the missing oil; he depended on departmental heads for information and the NOC could not control the activities of its subsidiaries. He believes Beshti was motivated by a personal grudge.

“When you are in charge of 45,000 people you are going to make enemies,” Ghanem said, adding that in Libya’s current climate, witch hunts are inevitable as individuals struggle for power. “People will come up with rubbish stories just to tarnish others for personal revenge.”

The 2010 report also found millions of dollars in payments for oil had been erratic and difficult to trace. This was partly because multiple bank accounts had been opened in the NOC’s name. On top of that, deals had been cut by individuals without authorization.

“The Director of the Crude Oil Department used to sell instant shipments on his own and without referring to … even his own superior officer,” the report says. The crude oil manager at the time, Khaled Nashnoush, is also the signatory of at least one of the allegedly backdated contracts. He could not be reached for comment, and no one at the NOC could say where he is now.

Ghanem said it would be unreasonable to expect him to monitor the activities of all individuals. “Otherwise what is the point of having a head of department?”

3 Comments »

  1. From the 1917 Lenin statement:

    “And the truth about annexations is that all capitalist governments, the Russian Provisional Government included, are deceiving the people with promises—they renounce the policy of annexations in words, but continue it in deeds. Any intelligent person can prove this truth for himself by simply making up a full list of the annexations of, say, only three countries: Germany, Russia, and Britain.

    Just try it, gentlemen!

    By refusing to do this, by whitewashing one’s own government and blackening others, one becomes in effect a defender of imperialism.”

    One can glean a number of things from this. First, any capitalist government is capable of being imperialist. Hence, there is nothing that currently precludes the Russian Republic and the BRICs from being imperialist (and they may be necessarily so, but that is a discussion for another time). Second, the existence of greater imperialist powers, in Lenin’s case, Germany and the UK, did not prevent Russia from being imperialist. Accordingly, in this instance, the existence of other, more financially powerful imperialist countries and blocs, such as, for example, the US, the EU, Japan and China, does not prevent the Russian Republic from being imperialist. Finally, one can turn the last sentence around and also accurately say that blackening one’s own government while whitewashing others makes one “in effect a defender of imperialism.”

    I believe that Steve D. asked for a definition of imperialism. I would say, from an anarchist infused perspective, that a country’s assertion of control over other peoples and cultures is imperialist, especially as such an assertion is an essential aspect of the accumulation of capital and the expansion of capitalism to the extent that it has become a near global social system. It is possible, I guess, to root around and find instances where such an assertion of control was separate from capitalist development, but it would be an irrelevant exercise as it relates to the present day actions of nation states and their economic interests.

    Comment by Richard Estes — June 25, 2014 @ 12:41 am

  2. A pro po of nothing this might be interesting to your American readers or indeed yourself:

    http://www.theguardian.com/commentisfree/2014/jun/24/guardian-us-opinion-pitch-guidelines

    Comment by David Ellis — June 25, 2014 @ 8:39 am

  3. I do not think that even Marx could have envisaged such a clear cut example of the state being the executive committee of the ruling class as today’s Russia with Putin as the chief executive running it like Al Capone.

    Comment by davidellis987 — June 25, 2014 @ 8:46 am


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