Es sollte eigentlich ans baltische Meer gehen, doch dann sperrte die Fakultät in Riga kurzfristig ihre Tore. Wie wäre es mit der Ukraine, wurde ich gefragt: auch hier suchte man 1993, kurz nach dem Auseinanderbrechen der Sowjetunion, junge Leute mit Interesse daran, einer post-sowjetischen Generation westliche Wirtschaftslehre nahezubringen. So landete ich im Sommer 1993 in Czernowitz, im Grenzgebiet zu Rumänien und Moldau, Hauptstadt der nördlichen Bukowina.
Ich hielt Vorlesungen zur Volkswirtschaft und international political economy, vor dem Hintergrund von Hyperinflation und dem Zusammenbruch aller Strukturen. Und ich entdeckte dabei ein mir bis dahin vollkommen unbekanntes Land.
Da war die Armut, das Gefühl von Isolation gerade eine Tagesreise von Wien entfernt. Der Zusammenbruch von sowjetischer Infrastruktur und Industrie. Ein Jahr lang kein Warmwasser, manchmal tagelang keinen Strom. Die Kopiermaschine, die ich aus Wien mitgebracht hatte, gab ihren Geist auf, nachdem hungrige Mäuse in meinem Schlafzimmer alle Kabel durchgebissen hatten. Im Winter wurde der Unterricht abgesagt, denn die Räume der Universität konnten nicht mehr beheizt werden.
Czernowitz Herrengasse – A young Austrian teaching economics in 1993
Da war die Verzweiflung einer ex-sowjetischen Mittelklasse. Und die Entdeckung der Vergangenheit einer Region, die der Historiker Timothy Snyder als Bloodlands bezeichnete: Mittelosteuropa, das wie keine andere Region im frühen 20. Jahrhundert unter Besatzungen, Vertreibungen, Völkermord und totalitären Regimen gelitten hatte.
An die mitteleuropäische Vergangenheit erinnerte nicht nur die Architektur der Stadt – Universität, Herrengasse, Schlossplatz, Volksgarten – sondern vor allem zwei ältere jüdische Damen, noch in der k. u. k. Monarchie geboren. Zwei Freundinnen, Lydia Harnik und Rosa Zuckermann, die seit Jahrzehnten jeden Tag miteinander telefonierten. Ich besuchte sie mindestens einmal die Woche in ihren Wohnungen. Deutsch war ihre Muttersprache, Europa ihre geistige Heimat. Lydia hatte Mitleid mit der Ukraine, diesem “armen geschundenen Land”. Von ihrer Rente konnte sie nicht leben, und so unterrichtete sie weiterhin Sprachen; Französisch und Deutsch, in ihrer winzigen Wohnung neben dem Volksgarten. An der Wand das Portrait von Thomas Mann, im Regal die Romane der russischen Schriftsteller, die sie verehrte. Sie liebte die russische Literatur ebenso sehr wie die deutsche.
Beide hatten im zweiten Weltkrieg Angehörige in faschistischen Lagern verloren. Beide waren selbst nach Transnistrien verschleppt worden. Rosa und Lydia erinnerten sich allerdings auch an ein Europa mit offenen Grenzen, so wie jenes, in dem es einst ihren Eltern möglich war, bis zum Ersten Weltkrieg ohne großen Aufwand von Czernowitz nach Wien zu reisen. Damals war hier die östlichste Universtät des Habsburgerreiches, und ein junger Ökonom war damals ebenfalls auf die Idee gekommen es doch zunächst einmal in der Provinz zu versuchen (Joseph Schumpeter). Diese Zeit lag fern, die Bevölkerung jener Stadt war vertrieben oder ermordet. Lydia hoffte dennoch dass nun, mit dem Ende des Kommunismus’ und der Sowjetunion, eines Tages auch die Ukraine zu einem neuen freien, demokratischen Europa gehören würde.
Rosa Zuckermann, mentor in Czernowitz
Und so hatte jede Generation hier Erinnerungen an den Fall von grossen Reichen. Melancholie lag auf der Stadt. Die Industrie war zusammengebrochen. Der grosse jüdische Friedhof der Stadt oberhalb des Prut war überwachsen. In der Stadt kannte damals kaum jemand Westeuropa – kaum jemand konnte reisen. Wir befanden uns dabei weniger als eine Stunde Fahrt von der rumänischen Grenze entfernt, doch Rumänien zählte damals noch nicht zu Europa. Zu absurd die Grenze, zu arm das Land dahinter.
Zwei Jahrzehnte sind seit damals vergangen. Ich besuchte Lydia noch einmal kurz vor ihrem Tod mit meiner zukünftigen Frau – Lydia hatte mir zur Hochzeit geraten, sie war die erste Person, der wir von einer Telefonzelle vom Hauptbahnhof in Rom aus nach dem Heiratsbeschluss von unseren Plänen erzählten. Unsere Tochter heißt, nach ihr, Fanny Lydia.
Rosa besuchte ich später auch zu ihrem neuzigsten Geburtstag, eine 28 stündige Zugreise war dazu notwendig, aus Wien mit Umsteigen in Lemberg. Sie kam zu jener Zeit durch einen wunderbaren Film – Herr Zwilling und Frau Zuckermann – in ihren letzten Lebensjahren zu einer gewissen Bekanntheit in Deutschland. Das amusierte sie sehr. Ich hatte sie und Herr Zwilling oft in ihrem kleinen Haus in der Klara Zetkin Straße besucht und tatsächlich sehe ich sie heute noch, winkend von ihrem Balkon beim Verabschieden, nach außen fröhlich und resolut, im Inneren melancholisch und besorgt.
Mittlerweile sind Lydia und Rosa beide auf dem überwachsenen jüdischen Friedhof von Czernowitz bestattet. Europa hat sich seit jenen Jahren dramatisch verändert.
Nicht nur Österreich, auch Polen und Rumänien sind der Europäischen Union beigetreten. Wer heute aus der Ukraine nach Polen blickt, kann die Veränderung dort oft kaum fassen. Ein Europa der offenen Grenzen, ohne politische Gefangene, kein Abholen von Kritikern des Nachts durch die Geheimpolizei, ohne Angst vor Kriegen, Revolutionen oder neuen Vertreibungen. Dieses Europa ist heute weniger als eine Stunde Fahrt von Czernowitz entfernt an der rumänischen Grenze, die zur Grenze der Europäischen Union geworden ist. Und doch hat sich eines nicht geändert: die Ukraine gehört weiterhin nicht dazu.
Die politische Hoffnung der beiden jüdischen Freundinnen, eine europäische, demokratische Ukraine, sie ist bislang nicht in Erfüllung gegangen.
Will man verstehen warum im November 2013 erst Tausende, dann Zehntausende Menschen aller sozialen Gruppen und Generationen in Kiew auf die Straße gingen, um mit europäischen Fahnen in der Hand für ein Assoziationsabkommen zu demonstrieren, das kaum einer von ihnen im Detail gelesen haben dürfte, dann muss man sich die Verschiebungen der politischen Grenzen in Europa vor Augen halten. Ich vermute es gab nicht viele Ukrainer, die davon motiviert waren sich von Russland abzugrenzen, ein Nachbar der hier – auch bei Rosa und Lydia – viel weniger als Bedrohung empfunden wurde als in den meisten Ländern Mitteleuropas. Daher gab es auch in Umfragen bis zu den Protesten nie Mehrheiten für eine NATO-Mitgliedschaft der Ukraine, ganz anders als in Polen, dem Baltikum oder Georgien.
Was es gab, vor allem bei der jungen Generation, war ein wachsender Konsens darüber, dass die Ukraine sich nicht noch einmal zwei Jahrzehnte auf der Suche nach einem Sonderweg leisten konnte. Die Plünderwirtschaft großer Oligarchen, ein von Korruption zersetztes politisches System, eine Gesellschaft ohne Perspektiven, das Gefühl, vor verschlossenen Grenzen zu stehen … all das trieb viele einer Generation, die zum Zeitpunkt des Zusammenbruchs der Sowjetunion oft noch gar nicht geboren war, auf die Straße. Auch die Enttäuschung über das Versagen der letzten Proteste, der Orangenen Revolution 2004.
Als ich im Winter 2013 nach Kiew kam, bemerkte ich bei jungen ukrainischen Studenten großes Interesse an den Erfahrungen ihrer westlichen Nachbarn, Interesse selbst für die arme, kleine Republik Moldau, die die Ukraine auf dem Weg zum Erlangen der begehrten Visafreiheit für Schengen-Staaten überholt hatte. Und auch Angst, dass die Ukraine erneut den Anschluss zu verlieren drohte. Als schließlich Ende des Jahres auf russischen Druck hin ein schon zu diesem Zeitpunkt enorm unbeliebter, weil korrupter Präsident das Assoziationsabkommen mit der EU verweigerte, schien eine weitere Hoffnung auf ein irgendwann besseres Leben zu schwinden.
Tatsächlich waren die meisten der Demonstranten auf dem Maidan vor allem für eine andere Ukraine, eine europäische, ähnlich dem heutigen Litauen oder Polen, auf die Strasse gegangen (Von westukrainischen extremen Nationalisten, die niemals die Mehrheit stellten, einmal abgesehen). Was war auch die alternative Vision der Herren im Kreml, und ihrer ukrainischen Verbündeten? Warnungen vor einem dekadenten Westen, der ehrbaren Slawen die Homosexuellenehe aufzwingen wollte? Zumindest in dieser Frage stimmten Putin und ukrainische Nationalisten überein.
Der Kreml verhöhnte die EU, von der politischen Klasse in Moskau schon lange als impotent, künstliches Konstrukt, machtlos, dekadent, abgeschrieben. Doch bot Russland selbst keine Hoffnung. Mit einer Wirtschaft, deren wertvolle Rohstoffe Europa zwar auf dem Weg durch die Ukraine erreichten, deren Nutznießer ihren Reichtum dann allerdings sofort nach London, Paris, Wien oder Nikosia überwiesen. Dieser im westlichen Europa gelagerte Reichtum ist heute die Achillesverse, aber auch ein Machtinstrument des Kremls. Denn nun, nach der Besetzung der Krim, nach Ultimaten, Drohungen mit Einmarsch und Krieg und der Verletzung aller eingegangenen internationalen Verpflichtungen, die Souveränität der Ukraine zu respektieren, sind es auch wirtschaftliche Interessen, russische Milliarden, die Europa davon abhalten, auf das russische Verhalten entsprechend zu reagieren. Und das hieße: Druck auch auf die persönlichen Interessen der Herren im Kreml. Die von einer Wiederherstellung eines eurasischen Großreiches träumen, ihre Reichtum und ihre Familien aber in London oder Paris vor einem räuberischen Staat in Sicherheit bringen.
So kommt es heute in der Ukraine zu einem Aufeinandertreffen zweier Visionen. Da Herrscher, die unbeliebte Grenzen unter vorgeschobenen Argumenten mit Gewalt neu ziehen. Dort die Erfahrung von Integration und offenen Grenzen. Es geht um die Frage was die Werte der Europäischen Menschenrechtskonvention, später auch von Russland bei seinem Beitritt in den Europarat akzeptiert, heutigen Demokratien noch wert sind. Die heutige russische Elite fürchte – trotz ihrer Rhetorik – weniger die NATO als die Möglichkeit den eigenen Reichtum zu riskieren. Oder fürchtet gerade dies eben auch nicht: denn nicht nur ehemalige deutsche Bundeskanzler sind heute auf der Gehaltsliste kremlnaher Betriebe, sondern auch internationale Organisationen, wie der ebengenannte Europarat, wurden in den letzten Jahren von den Autokratien des Ostens unterwandert.
Dass es bei der Bewahrung dieser Werte letztlich um Zivilisation geht, um Sicherheit nicht nur für Ukrainer sondern für ganz Europa; das hätten Lydia Harnik und Rosa Zuckermann jedem jungen Europäer glaubwürdig dargelegt.
In October 1935 the Italian army invaded Abyssinia. In the same month the Abyssinians appealed to the League of Nations for help. The League condemned the attack. All League members were ordered to impose economic sanctions on Mussolini’s Italy. Then all resolve faltered.
Sanctions were half-hearted. They did not include vital materials such as oil. Britain kept open the Suez Canal, crucial as Italy supplied her armed forces. In December 1935 the British Foreign Secretary and the French Prime Minister met and presented a plan that gave large areas of Abyssinia to Italy. Mussolini accepted the plan.
The League’s involvement was a total failure.The capital, Addis Ababa, fell in May 1936 and Haile Selassie was replaced by the king of Italy. Somaliland, Eritrea and Abyssinia became Italian East Africa. The League of Nations was a corpse even before it perished. It had no more legitimacy.
The Crimea crisis and events in Ukraine today pose a similar threat to the credibility of other European organisations … created, like the League, in the wake of a devastating war with high hopes of launching a new era. And one organisation already in the crosshair of the dictator’s assault, already reeling, which Russia was able to join under false pretext and then proceeded to capture with the support of other autocrats in the East and accomplices from the West is the Council of Europe.
Until a few weeks ago one could fear that the Azerbaijani presidency of the Council of Europe, set to begin a few weeks from now in Strasbourg, would mark the low-point in the history of this once proud organisation. And one might have hoped that, perhaps, it was still possible that the sight of a dictator at the helm of this club of democracies might produce a long overdue shock; wake up democrats across Europe, to pay attention to an institution once created to embody the values of post-war Europe (stated in the European Convention on Human Rights) and recently captured by autocrats from Europe’s east.
Until a few weeks ago I thought there was time to rescue these institutions. Certainly, that it was worth it Today there is good cause to wonder whether the Abyssinia moment has not now also come for Strasbourg.
Unless the Council of Europe reacts to the dramatic illegal occupation of one member state by another member state; unless PACE – the Parliamentary Assembly – issues a strong and unequivocal declaration; unless member states in the Committee of Ministers now take effective actions against Russia; it is hard to see how this “spiritual union” of European democracies can survive as more than a bureaucratic corpse.
It is not hard to envisage a future for the OSCE in this new, harsher, Europe: it will return to being a forum for debates between dictatorships and democracies, similar to the CSCE after the Helsinki Accords were ratified in the 1970s. It has long been obvious that countries such as Uzbekistan, Belarus, Russia or Azerbaijan are not democracies. The notion that they should participate in setting high standards for European democracies – which need these standards as much now as ever – debases everyone. Instead let diplomats meet in Vienna and talk (and exchange insults) about peace and common interests. Such a forum is useful as long as it does not serve to legitimize dictatorial rule as “democratic.”
The same is not true for the Council of Europe. Between the OSCE and the EU it has no future if it does not credibly defend the highest values of democracy. The demise of its credibility creates a void that also needs to be filled: most probably by the European Union, now called upon to define its own human rights acquis more explicitly.
The EU should make human rights central to its association agreements. It should spell out its “political criteria” much clearer, both for accession candidates and for its own members. It should find ways to cooperate with other genuine democracies, from Switzerland to Norway to Moldova in the East.
Of course it would be preferable to preserve the Council of Europe and see dictators such as Putin and Aliyev censured instead, until their countries change their ways. But this looks increasingly unlikely. Instead we will have an Azerbaijani presidency and not even symbolic sanctions against Russia after its aggression.
The Palace of Europe in Strasbourg
It is hard to see is how the Council of Europe can function much longer as a hostage of dictatorial and aggressive members. They pay an important share of its budget. They are bent on destroying the values it once stood for. And for some time now they have imposed their vision of the world with impunity.
It should also be noted that there would still be a lot worth rescuing from the burning house of the Palace of Europe, the Council of Europe’s headquarter in Strasbourg. Conventions, agreements, commissions, initiatives (such as the Venice Commission), all serving their members , all worthy of being preserved … but outside of the clutch of dictators. (The same is less obvious in the case of PACE, which appears increasingly superfluous next to the European Parliament on the one hand and the OSCE Parliamentary Assembly on the other).
The thread does not stop here, unfortunately. Other proud institutions might soon face a similar challenge: one is the OSCE’s Office of Democratic Institutions and Human Rights in Warsaw. It has so far stood up, valiantly, to pressure from the East over its professional work on election monitoring. Why would Putin or Aliyev want credible election observation any more than rulers in Tashkent or Minsk? It is fighting tough battles over its budget. It soon faces a crucial choice over its future leadership. ODIHR’s independence and professionalism must be defended at all costs. In fact, should ODIHR be at risk of losing its credibility as a result of an ongoing Russian and Azerbaijani campaign, or should it be paralysed – then the EU and democracies like Switzerland should stand ready to fund it directly. To rescue valuable experience. To preserve it as the preeminent European election monitoring organisation, open to other European democracies.
It now seems only a matter of months before post-Maidan Europe will see a broader debate on the institutional architecture needed to preserve core values and safeguard the lessons from the 1930s and 40s. And we had better prepare for it. For it now seems increasingly likely that Russian troops in Crimea and Ukraine might have a similar effect on European institutions as Mussolini’s troops had when they embarked on their aggression in East Africa many decades ago.
Council of Europe
ESI background analysis: how the Council of Europe is losing credibility
What would it take for the vision of a Europe without political prisoners to become a reality in the 21st century?
The Congress of Europe, held in The Hague and presided over by Winston Churchill, proclaimed in 1948 the need for “a Charter of Human Rights guaranteeing liberty of thought, assembly, and expression as well as the right to form a political opposition”:
“The Movement for European Unity must be a positive force, deriving its strength from our sense of common spiritual values. It is a dynamic expression of democratic faith based upon moral conceptions and inspired by a sense of mission. In the centre of our movement stands the idea of a Charter of Human Rights, guarded by freedom and sustained by law … To rebuild Europe from its ruins and make its light shine forth again upon the world, we must first of all conquer ourselves.”
The Statutes of the Council of Europe, signed at St. James Palace in London in May 1949, committed all members of this new organization to respect “the spiritual and moral values which are the common heritage of their people and the true source of individual freedom, political liberty and the rule of law.”
Repression of liberty of thought and of political opposition in Europe did not end with the creation of the Council of Europe and the adoption of the Convention, however. Hearing about two Portuguese students in Lisbon, sentenced to seven years imprisonment for raising their glasses in a toast to freedom motivated the British human rights lawyer Peter Benenson to write an article in the Observer about “forgotten prisoners” in 1961. He started:
“Open your newspaper any day of the week and you will find areport from somewhere in the world of someone being imprisoned, tortured or executed because his opinions or religion are unacceptable to his government. There are several million such people in prison—by no means all of them behind the Iron and Bamboo Curtains—and their numbers are growing. The newspaper reader feels a sickening sense of impotence. Yet if these feelings of disgust all oer the world could be united into common action, something effective could be done.”
At the time five of Benenson’s eight “forgotten prisoners” were Europeans: a Romanian philosopher, a Spanish lawyer, a Greek trade unionist, a Hungarian Cardinal and the archbishop of Prague. Benenson of course went on to set up an innovative and new organisation in the wake of his successful camapaign: Amnesty International.
However, neither Portugal nor Spain, neither Romania nor Hungary nor Czechoslovakia were then members of the Council of Europe (Greece would withdraw from it in 1969 following its military coup). None of them had accepted and ratified the European Convention for the Protection of Human Rights. More than half a century has since passed. The Council of Europe has expanded dramatically so that today 47 countries with a total population of 800 million people have pledged to respect the fundamental rights of the European Convention. But today there is again a challenge to its core values, and this time it is one that has emerged within the very institutions that were meant to protect them.
In October 2012 the Parliamentary Assembly of the Council of Europe adopted a definition of “political prisoner”. This definition was first developed by eminent European human rights lawyers working for the secretary general of the Council of Europe as independent experts. The adoption of this definition, following a heated and controversial debate, came at a moment of growing concern that in a number of Council of Europe member states we see a new wave of trials for political motives. In some countries, one sees the re-emergence of the phenomenon familiar from an earlier period of European history: dissidents, sent to jail for speaking out loud.
There are many wider policy questions raised by all this –which ESI together with the Jarl Hjalmarson Foundation explores this week at a seminar in Stockholm: What should and could be done by the institutions of the Council of Europe to operationalize the definition of political prisoner that has just been adopted? Is the current system of monitors capable of confronting systemic violations? Are other member states, who are committed to defend the European Convention of Human Rights, able to define red lines that must not be crossed by Council of Europe members with impunity? How can European civil society do even more to use existing institutions and commitments to resist a rising authoritarian temptation?
The October 2012 PACE resolution sets concrete criteria for what defines a “political prisoner.”. According to Resolution 1900, adopted in a 100-64 vote, a person shall be regarded as a political prisoner if he or she has been deprived of personal liberty in violation of guarantees set forth by the European Convention on Human Rights and its Protocols, including freedom of thought, conscience, and religion; freedom of expression and information; and freedom of assembly and association. Additional criteria include detention imposed for purely political reasons without connection to any offense; the length or conditions of detention being clearly out of proportion to the offense; a clearly discriminatory manner of the detention; and unfair, politically motivated proceedings leading to the imprisonment.
But what can institutions like the Council of Europe do, going forward, to better defend the ideal of a Europe in which the values of the ECHR are fully respected and in which there would not be any political prisoners in the sense of the definition adopted by PACE in October 2012 (see below). Of course there is always the European Court of Human Rights for individual cases, but what if problems of political prisoners become systemic? It is important to put this debate in the current European context of challenges to the convention, including politically motivated arrests.
Situations are obviously different even among countries in which problems exist. Azerbaijan and Russia, along with several other post-Soviet states, are today members of the Council of Europe. Yet in recent years governments in these countries have become increasingly aggressive in challenging core values of the Convention – through legislation and through systematic arrests and intimidation of critics and possible political opposition. They have thus tested the instruments and institutions of today’s human rights regime in Europe and have found them to be weaker and easier to manipulate than anybody would have expected in the 1990s. Four decades after the rest of Europe learned about “dissidents” in former communist countries a new generation of dissidents is emerging in the European East … yet this time in countries which insist to be considered “like-minded members” of the club of European democracies.
Furthermore two other members of the Council of Europe, Turkey and Georgia, have also come into focus in this context, though
evidently the situation in both of these two countries are very different from that in Moscow and Baku, as well as very different from each other. In Turkey we have conceptually at least three different kinds of issues. There is a pattern – for decades – of a judiciary using repressive laws to attack free speech in the name of public morality; there are a range of cases on the basis of anti-terror legislation; and there are the recent high-profile cases against senior military officers and the “deep state”. There is noticeably a lot more freedom of speech than one decade ago, with competitive elections; yet there are also de facto more journalists in jail in Turkey than in any other countries in the world. The trials against many senior military members have been a key tool in a struggle by a civilian government to break the hold of power of the military; and yet there are many signs that they are also political trials, not too concerned about evidence and fairness. How promising then are current efforts to promote reforms of the legislation and the judiciary in Turkey to address such problems? Is the definition of political prisoners, is the Council of Europe a useful reference point in a Turkish context?
In contrast to its Caucasian neighbours, Georgia has seen a democratic election lead to a real change in power in October 2012; and there are strong and protective laws on freedom of speech. The Council of Europe definition on political prisoners has recently also been applied to set
people free from jail. At the same time there are growing concerns about prosecutions of former UNM members. A lingering question is whether these cases will turn into witch-hunts, whether the judiciary will be able to preserve credibility and fairness, and how to ensure that the behaviour of the executive and prosecutors remains within limits of rule of law.
The aim of the Conference is to have an open discussion on the issues of political prisoners and political persecution, rule of law and the role of the judiciary overall in the context of the cooperation within the Council of Europe, in particular in the member states mentioned. The discussions will also focus on how the Council and its member states should act in a consistent fashion in addressing these issues. And what options there are for different instruments available to in the Council of Europe framework to have more impact on the human rights situation in member states: the parliamentary assembly (PACE) and its monitors, the Commissioner for Human Rights, the Committee of Ministers and the office of the secretary general.
Some recommended reading:
Parliamentary Assembly of the Council of Europe, The Definition of Political Prisoner, 2012
PS: The Council of Europe definition of political prisoner states:
The Assembly declares that a person deprived of his or her personal liberty is to be regarded as a “political prisoner” :
a. if the detention has been imposed in violation of one of the fundamental guarantees set out in the European Convention on Human Rights and its Protocols (ECHR), in particular freedom of thought, conscience and religion, freedom of expression and information, freedom of assembly and association;
b. if the detention has been imposed for purely political reasons without connection to any offence;Those deprived of their personal liberty for terrorist crimes shall not be considered political prisoners for having been prosecuted and sentenced for such crimes according to national legislation and the European Convention on Human Rights.
c. if, for political motives, the length of the detention or its conditions are clearly out of proportion to the offence the person has been found guilty of or is suspected of;
d. if, for political motives, he or she is detained in a discriminatory manner as compared to other persons; or,
e. if the detention is the result of proceedings which were clearly unfair and this appears to be connected with political motives of the authorities.
I hope you had as good a transition from 2008 as I had, here in Istanbul. The weather was quite mild, the waters of the Bosporus still deep blue and the New Year’s party I attended, in a 19th century building hosting American teachers from Robert College (Istanbul’s most famous and most attractive private school) was reminiscent of what I imagine parties on the US East Coast were like in the early 1950s.
Put on the music of the film Mona Lisa’s Smile and you understand the mood I am referring to. The 1950s were also, of course, a time of personal optimism (for most households in the West) against a background of geopolitical fears (the Soviet Union had acquired the nuclear bomb and war had erupted in Korea).
I hope that the many warnings about the unfolding world economic crisis did not depress you. My personal strategy against too much pessimism is to take a walk and then to read a book or two about recent European history. This puts most things in perspective. Donald Rayfield’s Stalin and his Hangmen, for example … but more on that later.
On the other hand, there has been no shortage of bad economic news from around the world in recent days. Even Gazprom seems to be running out of money, as the NYT reports (“once the emblem of the pride and the menace of a resurgent Russia, Gazprom has become a symbol of the oil state’s rapid economic decline”)! The NYT quotes the strategist at a Russia-focused hedge fund, who says about Gazprom management that “they were as inebriated with their success as some of their investors were.” At the end the article notes that today a significant portion of the Russian corporate bailout fund is to be reserved for oil and natural gas companies. Quite a hang-over.
This is bad news for the Russian state and its oligarchs. It also turns some of my personal spending last year into a minor misallocation of resources. I had bought a whole stack of books about “resurgent Russia”, which I had not yet had any time to read. Starting one (Alexander Rahr’s Russland gibt Gas – Die Rueckkehr einer Weltmacht, 2008; Rahr has long been a leading advocate in Berlin of a strong German partnership with Russia) during these past days, I came across its bold thesis on page two:
“The West is afraid of the new Russian concentration of power, where money, resources and power are brought together. Yet anybody considering toppling this system will recognise: it is very stable. Energy prices will not decline in the coming years and the demand for Russian raw materials will rise. Its natural resources, linked to high energy prices, make Russia immune to economic crises.”
I put the book aside, to read some other time, perhaps. And I think back to the seminar I attended, at the invitation of Carl Bildt, on the island of Visby a few months ago. There, Boris Nemtsov and Mikhail Kasyanov had presented a rather different picture of Russia. They saw a country which had wasted the years of high oil prices; a political economy where both the state and public companies had underinvested; a situation where sources of previous high growth had been exhausted. They certainly did not see a stable system of power.
Nemtsov had published, in February 2008, a report on Putin’s Russia (The Bottom Line) on “the outcome of Vladimir Putin’s activities for the country – an outcome that is hidden from Russian eyes by a smokescreen of official propaganda.” Its conclusion was blunt: “The opportunities offered by the oil windfall have been missed. As under Brezhnev, super income from the export of oil and gas has to a large extent been frittered away and necessary reforms left undone.”
11 of the 18 members of Gazprom’s board are people who either worked with Putin in St. Petersburg or in the FSB in the 1990s; this, the report notes, is “not the typical way in which global energy companies are run … former small-time regional bureaucrats, port and building company managers, do not usually get given top management positions in major oil-and-gas corporations, especially in such numbers.”
The results of this management, from 2001 until today, “are pathetic”; it has “almost totally failed to make the corporation perform its main task – that of providing the Russian consumer with a reliable supply of gas.”
The paper gives many illustrations of this failure: gas extraction in 2007 fell back to nearly the 1999 level, while demand increased. The paper notes: “Bearing in mind that some of the old gas fields are drawing close to empty, gas extraction may actually go from not just stagnating to actually dropping like a stone.”
As a result of this Russia was forced in 2007 to get one third of its gas from non-Gazprom sources. This meant vastly increased imports of Central Asian gas (from just over 1 billion USD in 2005 to 11.7 billion USD in 2007).
This stagnation in domestic gas supplies is the result of systemic underinvestment in gas production. “Russia has proven gas deposits sufficient to last it 80 years at current extraction levels. However, many of these deposits are not being worked. A good proportion of these deposits are located in new areas that have not yet been fully explored, lack the necessary infrastructure, and present extreme difficulties.”
For all these reasons 2007 saw an increase in sales turnover (plus 8 percent) and a drop in profits (minus 11 percent), against a background of rising gas prices. The reason was rising costs: much more imports, rising debts, rising spending on wages for a growing staff.
The economic rationale for many of the current Russian gas pipeline projects is dubious (more in the paper); and
There has been tremendous asset stripping from Gazprom in recent years by people well-connected to Putin in recent years.
So far, so disturbing. And surprising, if one looks at the larger picture – and the current investor flight – for one moment.
How, I wondered, first reading this paper a few months ago, could all of this have been news to any insiders? What were all the investors, who had driven up Gazprom’s stock (and who are now fleeing it), thinking about all of these problems? Did energy (or Russia) experts not know these trends unfolding since 2001, when they predicted the rise of a new Russia, powered by the rise of an awesome Gazprom? Was understanding these things – and paying for the best possible research to do so – not a central concern of investors in particular?
This brings me to a second article. I also read it recently, and recommend it strongly. It is another story of massive overconfidence, bordering on stupidity, by a whole class of highly paid experts, massively misallocating resources. Only this story is set in the US and instead of Putin’s cronies from St. Petersburg the villains are investment bankers from Wall Street. Its author is Michael Lewis and it is called, simply, The End.
Lewis tells the story of Steve Eisman and his hedge fund FrontPoint. Eisman had come to a conclusion early on which is today all too obvious: that the subprime mortgage bond market was one huge bubble; and that, as a result, the investment banking world on Wall Street was dealing in illusions. FrontPoint invested the funds it managed based on this insight; when the crisis came, it emerged vindicated.
There is no need for me to sum up Lewis’ article here. If you have any interest in the current economic crisis unfolding around us, you will probably read it yourself. But the most interesting issue the article raises goes beyond any assessment of the financial sector. It is the same question that is raised by the sudden need for most experts to reassess their analyses of the true state of Gazprom-Russia: how could such a large community of experts working in a certain sector be so mistaken?
In one of the seminal paragraphs in his article, Lewis describes the reactions of Eisman and his team when the Wall Street crisis did erupt in earnest in September 2008:
“This is what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning they wake up: ‘Holy Shit, I’m wrong!” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct.”
I sent the article also to a close friend, who first suffered through a PhD in economics and currently works in the financial sector in the City of London. He wrote back:
“I buy the basic point that the main problem for investment banking as for the scholastics is that – despite what would seem to be incredibly powerful incentives for the opposite to be the case – the culture of skepticism and genuine research in order to discover and continually reassess what is actually the case is remarkably underdeveloped.”
“Is not the City of London, or Wall Street, amongst other things a massive machine for generating research and knowledge on even the most far-flung parts of the world and the most esoteric economic activities? Well, yes – but also no. The more I think about it, the more I get the feeing that they are research machines in the way that scholastic universities must have been research machines: lots of resources and activities, but somehow missing the crucial ingredients, the crucial elements of the underlying philosophy, to actually make any use of it all – and to prevent egregious, and eventually ridiculous (or, as in the present case, tragic) errors.”
Here is the meta-question which all these myriad crises raise, and which is of more than passing interest to anybody in the business of analysis and research. It is a question about research, mental models, and the absence of critical questions.
It is daunting, even scary, to realise how not just a few experts, but whole communities of practitioners, with a huge supposed material interest to get things right, could get them so wrong. Of course, there were material incentives involved, and much of the story of understanding this failure must now focus on these: how it actually paid off to be wrong.
On the other hand, there was also a remarkable failure of understanding. Thus, all these stories amount to a very strong case for honest, empirical research. Thorough research, not simply opinions or commentary; research that at times might even be surprised by its own findings.
In January 2009 it is not only Gazprom managers and Russia experts but the best paid people in the most advanced economies that wake up with a terrible headache. And with the nagging question, which Eisman had asked himself before the crash: “The thing we could not figure out is: It’s so obvious. Why has not everyone else figured out that the machine is done?”
Now here is a good New Year’s resolution for anybody in the think tank business today: figuring out now what will be obvious three years later. And having the courage to state it, when nobody else does.
In last night’s BBC World Today programme, the Italian and Polish Foreign Ministers, Franco Frattini and Radek Sikorski, and I were interviewed on the recent crisis in Georgia and how it affects EU-Russian relations and EU foreign policy. You can listen to the full interview here: