TRUMP’S CODE: Making Money on Populist Disorder IV
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Author: Munir Podumljak

Referring to the previous article, the increase in US oil production was followed by another measure that affected the markets: in December 2015, Congress lifted its 40-year ban on oil exports for US-based producers, making the US oil production industry one of the most influential global suppliers. The Economist reported that, “Republicans championed the proposal, which is backed by the oil industry. Reluctant Democrats supported it because in exchange they were able to negotiate an additional five years of tax credits for wind and solar power… The deal showed a spirit of compromise often absent on Capitol Hill”.[1] One important factor that motivated this rare bi-partisan consensus in US Congress was the years-long push for energy security policy, backed by all western allies, NATO and US Security policy actors. During the run-up to lifting the ban, Reuters’ Emma Ashford commented, “Lifting the ban would also produce real benefits for U.S. foreign policy. […] Exporting U.S. oil and natural gas increases diversification within world energy production. […] That would reduce the income and influence of various authoritarian states, which have long been among the world’s biggest producers of oil, such as Venezuela or Russia.” [2]

In these years of crisis, while rocketing US oil production was transforming world markets, the EU remained heavily dependent on Russia’s energy supply (see Figures 8 and 9), even in some of the EU’s largest economies such as Germany and the Netherlands, where Russian oil imports account for more than 20%.[3] Yet while the volume of EU imports of energy products from Russia declined only by a few percentage points, the value of Russian energy imports to the EU declined by 52%.[4]

Source: Eurostat[5]

 

Source: Eurostat[6]

For Russia, the fall in the market value of oil exports combined with a slight decrease in demand for oil products from its largest energy trade partner (the EU), dealt a heavy blow to the economy in the 2013-16 period. In 2016, in comparison to its peak in 2013, Russian GDP contracted by nearly 58% (see Figure 10).

Source: Trading Economies[7]

US diplomacy was core to achieving this transformation in the balance of power. The design and implementation of the western response had begun after the Georgian crisis in 2007-08, and had suffered setbacks in certain periods, but by 2017, it had effectively weakened the Russian economy and changed the dynamics of world energy markets. The Iran deal or JCPOA played a significant part in this effort, and the cooperation of Germany, France and the UK was crucial for its success. When the US pulled out of JCPOA this year, it was an almighty slap in the face to its European allies.

Putin converts his KGB capital into political power

Donald Trump’s business links with Russia go back to the 1980’s, but the relationship has flourished and intensified in line with Putin’s rise. Before entering politics, Putin had served most of his career as a KGB agent, mastering an approach to managing business and political relationships that relied on intelligence ga-

thering. A key turning point in Putin’s career came in 1998, when he was appointed chief of the KGB successor agency, the FSB, during Boris Yeltsin’s presidency (see chronology from Business Insider, below).

Source: Business Insider[8]

As intelligence chief to Yeltsin, Putin demonstrated his capability as an intelligence operative, and showcased an emerging modus operandi of transforming knowledge gained through his intelligence infrastructure into political power. By March 1999, Yeltsin’s administration was under threat from allegations of systemic corruption[9] and of having captured the international financial aid and assistance (coming from US, World Bank, IMF)[10]. Russia’s Prosecutor General, Yuri Skuratov, was closing an investigation into Yeltsin’s closest inner circle of trusted allies. This had been triggered by another investigation, initiated in Switzerland, by Carla del Ponte, then the Swiss chief federal prosecutor. Yeltsin had begun to fear that he might end up in jail once his mandate was over.

Putin offered his boss an exchange of favors. He recognized that information was a powerful asset, particularly information about Yeltsin’s role in a vast portfolio of corrupt deals involving international companies (such as Lugano-based Mabetex[11]), the privatization[12] of key Russian assets to cronies, and the embezzlement of international aid. Soon after the investigators raided the offices of Yeltsin’s people, Putin made his move, releasing ‘kompromat’ video material on chief Russian prosecutor Yuri Skuratov that would effectively kill the investigation.[13]

Kompromat, a form of blackmail based on the threat of releasing incriminating or discrediting information, was an old KGB tactic invented under Stalin in order to control political opponents, or those that could pose any kind of challenge to the leader.[14] In the Soviet Union, kompromat had been commonly used as a weapon in inner political battles, or for the purposes of recruiting intelligence assets in other countries. In our times, it has evolved as a method for manipulating public opinion so as to destroy reputations and legitimacy, and ultimately to change the balance of political power.[15] In the case of Yuri Skuratov (prosecutor general from 1995 to 1999), the kompromat video that was released on television claimed to show him in a sexual encounter with two prostitutes, allegedly paid for by the company that Skuratov was investigating.[16] While the identity of the persons in the video could not be confirmed, Skuratov was nonetheless suspended.

However, Yeltsin’s order to dismiss Skuratov had to be confirmed by the Russian Duma, or parliament. Throughout 1999, the Duma stalled, meaning that Skuratov continued to pose a threat to Yeltsin and several powerful oligarchs at the time.[17] In these circumstances, Putin may have seen a chance to fulfil his political ambitions. If Yeltsin would agree to confer on him a formal political appointment and transfer political power into his hands, he could use his power to secure Yeltsin’s immunity from prosecution.

Yeltsin appointed Vladimir Putin prime minister of Russia in August 1999. Later the same year, Yeltsin stepped down, naming Putin acting president on New Year’s Eve 1999. Putin subsequently won his first presidential election in March 2000.[18] His presidential campaign was highly controversial. He did not appear in any of the political debates, avoiding the risk that any of his statements might be publicly challenged. Rather, he tapped his former intelligence contacts to secure the full support of the state television channel (PBS) and of those private media companies which had national coverage. As soon as he won the elections, Putin pardoned Yeltsin for any possible misdeeds and granted him total immunity from prosecution – and even from being searched and questioned – for any and all actions committed while in office.[19]

Read more in the next article

 

This article was created with the support of the Fund for the Promotion of Pluralism and Diversity of Electronic Media within the project “Media Reality” – Developing and Encouraging the Media Literacy Programme

 

 

Connected articles: TRUMP’S CODE: Making Money on Populist Disorder IIITRUMP’S CODE: Making Money on Populist Disorder IITRUMP’S CODE: Making Money on Populist Disorder I

 

[1] The Economist (2015) America lifts its ban on oil exports. [online]. Available at: https://www.economist.com/news/finance-economics/21684531-light-sweet-compromise-puts-end-crude-market-distortions-america-lifts [Accessed 10 Jul. 2018].

[2] Ashford, E. (2015) Why lifting oil export ban can help U.S. foreign policy. Reuters, [online]. Available at: http://blogs.reuters.com/great-debate/2015/10/06/why-lifting-oil-export-ban-can-help-u-s-foreign-policy/ [Accessed 10 Jul. 2018].

[3] Eurostat (2018) EU imports of energy products – recent developments. [pdf]. Available at: http://ec.europa.eu/eurostat/statistics-explained/pdfscache/46126.pdf [Accessed 10 Jul. 2018].

[4] Authors’ own computation based on the Eurostat database.

[5] Eurostat (2018) Extra-EU imports total and from Russia, 2017 updated. [online]. Available at: http://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:Extra-EU_imports_total_and_from_Russia,_2017_updated.xlsx&oldid=380702 [Accessed 10 Jul. 2018].

[6] Eurostat (2018) Extra-EU imports total and from Russia, 2017 updated. [online]. Available at: http://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:Extra-EU_imports_total_and_from_Russia,_2017_updated.xlsx&oldid=380702 [Accessed 10 Jul. 2018].

[7] Trading Economies (2018) Russia GDP. [online]. Available at: https://tradingeconomics.com/russia/gdp [Accessed 10 Jul. 2018].

[8] Engel, P. (2017) How Vladimir Putin became one of the most feared leaders in the world. Business Insider, [online]. Available at: http://www.businessinsider.com/how-vladimir-putin-rose-to-power-2017-2 [Accessed 10 Jul. 2018].

[9] Bohlen, C. (1999) Yeltsin’s Inner Circle Under Investigation for Corruption. The New York Times, [online]. Available at: https://www.nytimes.com/1999/03/24/world/yeltsin-s-inner-circle-under-investigation-for-corruption.html [Accessed 10 Jul. 2018].

[10] Wedel, J. (1998) Aid to Russia. Foreign Policy in Focus, [online]. Available at: https://fpif.org/aid_to_russia/ [Accessed 10 Jul. 2018].

[11] Bohlen, C. (1999) Yeltsin’s Inner Circle Under Investigation for Corruption. The New York Times, [online]. Available at: https://www.nytimes.com/1999/03/24/world/yeltsin-s-inner-circle-under-investigation-for-corruption.html [Accessed 10 Jul. 2018].

[12] Man, M. (2009) Political Corruption in Russia: An Evaluation of Russia’s Anti-Corruption Strategies, 1991-2009. POLIS Journal Vol. 2, [pdf]. Available at: http://www.polis.leeds.ac.uk/assets/files/students/student-journal/ma-winter-09/michelle-man-winter-09.pdf

[13] Bohlen, C. (1999) Yeltsin’s Inner Circle Under Investigation for Corruption. The New York Times, [online]. Available at: https://www.nytimes.com/1999/03/24/world/yeltsin-s-inner-circle-under-investigation-for-corruption.html [Accessed 10 Jul. 2018].

[14] Hollander, P. (2008) Political violence: belief, behavior, and legitimation. New York: Palgrave Macmillan.

[15] Oates, S. (2016) Kompromat Goes Global?: Assessing a Russian Media Tool in the United States.  Cambridge Core, [online]. Available at: https://www.cambridge.org/core/journals/slavic-review/article/kompromat-goes-global-assessing-a-russian-media-tool-in-the-united-states/59AD1A16194913BF8A06299B885DE380/core-reader [Accessed 10 Jul. 2018].

[16] Cohen, A. (2000) Boris Yelstin: Corrupt or Courageous. The Heritage Foundation, [online]. Available at: https://www.heritage.org/europe/commentary/boris-yelstin-corrupt-or-courageous [Accessed 10 Jul. 2018].

[17] Hoffman, D. (1999) Russian Parliament Keeps Prosecutor; Nemesis Questions Yeltsin’s Motives. Washington post, [online]. Available at: http://www.washingtonpost.com/wp-srv/WPcap/1999-10/14/069r-101499-idx.html [Accessed 10 Jul. 2018].

[18] Engel, P. (2017) How Vladimir Putin became one of the most feared leaders in the world. Business Insider, [online]. Available at: http://www.businessinsider.com/how-vladimir-putin-rose-to-power-2017-2 [Accessed 10 Jul. 2018].

[19] Cohen, A. (2000) Boris Yelstin: Corrupt or Courageous. The Heritage Foundation, [online]. Available at: https://www.heritage.org/europe/commentary/boris-yelstin-corrupt-or-courageous [Accessed 10 Jul. 2018].

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