Russia Debate 2010 Official Transcript

RUSSIA DEBATE LSE 19 MARCH 2010

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Participants (in the order of speaking):

Konstantin Shlykov, First Secretary, Embassy of the Russian Federation to the UK

Deirdre Brown, Head of Russia Team, Foreign and Commonwealth Office, UK

Margot Light, Professor Emeritus, LSE

Roger Munnings, UK Special Trade Envoy to Russia, former KPMG Russia CEO and Chairman

Alex Bertolotti, Chairman, City Russia-UK Committee, partner, PWC

Sam Greene, Deputy Director, Moscow Carnegie Centre

Jonathan Stern, Director Gas programme, Oxford Institute for Energy Studies

Mary Dejevsky, Chief Editorial Writer and Columnist, The Independent

Edward Lucas, Deputy Editor, The Economist

Chair: Natalia Leshchenko, Head of Research, INSTID

Key Questions:

Are Russia’s proposals for new European security framework feasible?

Is Russia a global player?

How to do business in Russia?

Is there civil society in Russia?

Are Russia’s new proposed gas pipelines (Nord and South Stream) a threat to Europe?

Is Russia’s image in the UK true to reality?

Chair: Welcome to Russia Debate. This is a unique event. It is not an investor forum, not an academic conference, not a workshop. It is not designated for any particular professional audience, with the view of helping them solve clear-cut questions. Rather, it recognises that in any profession, and at any seniority level, people remain human beings, and more often than not follow their intuition, their gut feeling, their hunch when making decisions. The purpose of tonight’s debate is to help the audience form and hone their own attitude towards Russia. On the stage, we have an impressive array of top-level experts on Russia in the fields of diplomacy, academia, business, civil society, energy, and the media. In the audience, we have city professionals, policy advisors, members of the diplomatic corps, members of think tanks, and also students – in other words, today’s and tomorrow’s decision-makers. Let’s begin.

Chair: Is Russia a global player?

Margot Light: In many ways, Russia is a global player. It is a permanent member of the UN Security Council, it is a member of G8, or G20, it is a nuclear power, it is a member of the Middle East Quartet Process. It is a key producer and exporter of energy, which gives it tremendous leverage over transit countries and over consumer countries. So in all those ways you can say Russia is already a global player. Many of those rows were acquired by virtue of the sensitivity of the Western states to the perceived humiliation of Russia’s loss of status after 1991. Moreover, Russia has tremendous demographic problems which are likely to become more acute. Russia is leading to a situation where areas like the Russian Far East become very scarcely populated and therefore at risk. It has a very small GDP compared to other global players in the world, it is heavily dependent on the export of raw materials, mainly energy and it therefore has an economy that resembles more a third-world economy than the economy one might expect of a global players. It has no reliable friends in the international system. In fact, it strikes me as significant that not even its near abroad states have followed Russia in recognising Abkhazia and South Ossetia, and that I think signifies that it cannot rely on any of its allies to support it in any international endeavour.  Russia lacks soft power, particularly in terms of being able to offer an attractive mode of development to other countries. It has conflictual relations with many of its neighbours, an overt conflict with Georgia but also tense relations with the Baltic states and sometimes with Poland. Many of the social indices in Russia, for example the mortality rate, the infant mortality rate, the proportion of the population living on subsistence and sub-subsistence levels are far higher than one expects from a global player. So we have a peculiar situation here.  I was at a seminar for the last two days where Russia was called both a rising and a declining power, and I think this is a very good characterisation. What it needs to do to become a truly global player in the fullest meaning of that term is that it needs to address these deficiencies which at the moment make it a global player more in form than in substance.

Chair: What should Russia do to acquire soft power?

Margot Light: What it can do is turn itself into a more transparent country, in which the government is more accountable and in so doing it will immediately become more attractive to the people if not the governments of the successor states to the Soviet Union. It could participate more actively and productively in international fora and become a more cooperative player, and by becoming a more cooperative player it would have a greater ability to influence the international outcomes rules and norms.

Chair: Is it possible for a country to be global player whilst having considerable economic problems?

Margot Light: I think they can. As Edward has pointed out we know countries like Britain that have enormous economic problems and yet still a considerable international clout. The problem is that I am not sure Russia will be content with the amount of clout that Britain has.  What is terribly important in relation to Russia however is that it needs to diversify its economy so that it is not so reliant on raw resources and the rents that can be achieved from those raw resources because it is only that it has a better-rounded economy that it can have the economic strength to turn it into a real global power.

Chair: Can one do business in Russia? What are the Russian ways of doing business and how different are they from the Western rules?

You are both smiling.

Roger Munnings: The method of governance is very different in Russia, and all us Westerners who moved down there learned very quickly that all the things that a Western company does a Russian company does as well, but in a different way. We had to understand the effects of those different ways on the company, in terms whether they were properly managed and controlled, and of course big companies in Russia are properly managed and controlled. Maybe it’s a hangover from the former system, but instructions are generally given in writing, and people are supposed to sign off everything that feeds through the hierarchy. While it’s quite possible to manage business either way, the Western model fosters responsibility, it fosters accountability, so my own view is that although I can see the value of the Russian system as a way of getting things done effectively, I think the Western system at the end of the day produces a cadre of well-trained management people and some entrepreneurial ability, so in overall it is better for the economy.

Alex Bertolotti: It’s a very big question that Roger and I can spend next two days talking about. The quality of people in the business I saw in Russia was as high as the quality of people in the comparable areas in this country.  When it comes to corruption, I had an interesting thought the other day. I took some clients to rugby the other week, and I thought: How is that different from somebody in Russia for example paying 50% of the insurance premium to someone in charge of the insurance company to get that premium for that company? So I think it’s different. There is corruption, there is bureaucracy. There is also increased transparency. My time, when I was there in 2003 to 2008, was the time for capital markets, the growth of consumer lending, fuelled by Eurobonds, by securitisation, and what comes with capital markets is increased transparency and reporting and challenge. So the concepts of audit committees, of non-executive directors that do provide challenge to an oligarch, or a strong dominant individual, are starting to get there.  Having said that, I’ve audited companies down there, and I’ve seen what goes inside those companies, and you need to keep an eye on it. As a big 4 accounting firm, you have to take on clients who do want to be more transparent and less in the grey economy and do want to conform more to Western needs.

Chair:  How susceptible are Russian people to working according to Western values?

Roger Munnings: To me this is an enormously complex issue and for me lies at the bottom of some of the issues between Russia and the West at the moment. To move Russia from where it was in the mid1980s to where the leading people want to take it is an enormously complex question. It is clear that the president and the prime-minister want to modernise and to diversify and ultimately, to my belief, have a system of modern democracy in their country. But all of those things take an enormous amount of time, and that’s because you are dealing with people. Some of those people will adopt new ideas quickly, others will always yearn for the old system. Moving that bloc of people from paternalism and hierarchy to some sort of a market economy with a changed type of governance is just unbelievably complex. The West often does not give the time to get that change done. Yes, there are some things that we find unpleasant. But there is a very positive force to move the country from one state to another state. To give an example, when we started in Russia we had about 130 staff 50% of whom were Russian. When I handed over the business we hand some 3500 staff, of whom 90% were Russian in the age of 21 to 38. Those people are amongst our best people anywhere  in the world, in terms of performance, in terms of motivation, in terms of what we in our business call the green agenda, in terms of social conscience and working with charities, they are absolutely among top quality people. But I don’t think that it excuses that fact that it is going to take a long time to move from one state to the other.  To say a couple of words on corruption,  yes there is pretty deep bureaucratic corruption. I was speaking to president’s  economic advisor Arkady Dvorkovich and I said what were your top three issues, and I said, first, corruption, second, human capital, and third, investment in the future. Corruption is an issue that holds the country back for sure. It legislates against taking responsibility, accountability, entrepreneurialism, and efficiency, because there is leakage. It is absolutely the thing that has to be solved. Yet the president has said very clearly that he is being against corruption, and I think it is very important that the West supports that and the Western businesses do.

Alex Bertolotti: I did get a phone call some years back from my secretary saying: Alex, there is armed police outside your office, what shall I do? And I did toy with an idea of saying: Don’t let them in, but that was probably wrong. That’s a very good episode to illustrate doing business in Russia. Like KMPG, PWC business has grown substantially over the years, and we are doing very well, but it’s not always easy and you have hiccups on the way. The generic point I struggled to get for some time there is that you get there at the end of the day. Whether it’s tax, doing business, the law and you’ve already been thrown out twice and you have to come back the third time. At the end of the day, you do get to the right answer, and the right answer is good for business. Where I’d like Russia to be personally, is to get to the right answer without the struggle in the meantime, whether it’s law, tax, police, getting stopped driving by the GAI, whatever it might be.

Chair:  Would you still do business in Russia?

Alex Bertolotti: Yes, of course.

Roger Munnings: Yes, of course. In fact, it wouldn’t be so much fun in fact if all those obstacles were not there.  It’s been great for all our businesses. There is that kind of strange issue, in which all Western businesses there seem to be doing pretty well. Our business there is among best performing in the world in KPMG, I am sure it’s the same for PWC – and yet there is reticence to invest in Russia, for all the reasons we hear in the media and press.

Edward Lucas: If the idea is to say to Russians that Western audits are a good thing and have some abstract moral value in which there is some real information on which people can base their decisions, that this episode with YUKOS is really quite scandalous. We have an audit that had to be removed for political reasons, or acknowledged political reasons.

Alex Bertolotti: The YUKOS case is incredibly complex, I would not say we withdrew our report for political reasons.

Chair:  For the Carnegie Endowment, which government is easier to influence?

Sam Greene: The US government is infinitely easier to influence for Carnegie, if only because there is a policy process in the US, as in Britain, in Brussels, in corporations that we can tap into. They are used to listening, they are used to analysis,  to trying on ideas from a broad spectrum of analysts and outsiders, so there is a way into the policy process . There is no way in into the Russian policy process – number one. Number two, there is no policy process.  In a lot of cases, we are seeing black boxes, in which a challenge comes in, a policy comes out, we do not know how. But we  look at policy decisions that are taken in the same field over a number of years, it becomes incredibly difficult to discern logic.

Chair:  What does Carnegie Centre do in Moscow?

Sam Greene: We try to have an impact on the debate, on the discourse, by bringing our point of view, international point of view, into the policy debate such as it is. There is a policy debate, the question is the connection between the policy debate and the policy process. Every once in a while, something happens. The crisis has been wonderful as it has raised the cost of mistakes. Some institutions, the Duma, some ministers suddenly became  more aware and afraid of what happens if they make a mistake, so there is more outreach, a bit more back and forth.

Chair:  How would you characterise civil society in Russia?

Sam Greene: If you look for traditional civil society you are not going to find it. There are NGOs, ourselves included, who receive funding from foundations, Western, Russian, – they are difficult to qualify as civil society. They are not providing the function of a mediator between citizens and the state. They are not aggravating grievances and transmitting them and turning them into results. Not that it is not happening, but it is not happening in the human rights community. We had earlier this year 10 000 people in the streets in Kaliningrad. We have had a thousand people elsewhere. United Russia lost mayoral elections in Irkutsk last week. There is movement, there is grievance, but the problem is not that there is not enough support for it or too much repression, there is, but that’s not the problem. The problem is the application.  Most people in Russia tend to look toward the government and fail to see the use. Activists fail to see the use of mobilisation, of the government. You have a very high level of surface level support to Putin and Medvedev, but that is not tied to much in a way of expectations.

Mary Dejevsky: I am Mary Dejevsky, I write for Independent, and I wanted to comment on one particular point. United Russia lost in Irkutsk to Communists. Outside Russia it is generally believed that the threat to United Russia comes from the reformists, that’s how we’d like to think. Actually, that has never been true, and it is not true now.

Sam Greene: That is absolutely correct, but it is also important not to over interpret the word Communists. It’s not the old Communist party of the Soviet Union, it’s the only other party in Russia that has the infrastructure throughout the country.

Chair: Is US-Russia dialogue still defining for international relations?

Sam Greene: The crux of the problem for the Russia-US relations is that Russia does need to work with the United States to face the problems it faces. American cooperation is needed in terms of security issues, in terms of NATO  expansion, the WTO entry.  The flipside of this is that the US does not need much from Russia. The US agenda towards Russia consists of a number of points: one is to replace the START treaty if possible so that they can move forward with a bigger agenda on nuclear disarmament, and second, to keep Russia as much as possible out of the way. There is a large degree of recognition that Russia cannot be all that useful in Iran,  it can be marginally useful on North Korea,  it can provide some opportunities in terms of helping out with Afghanistan, but maybe not as much as has been thought. But Russia can cause problems on a global scale, so the agenda is to keep Russia out of the way.

Chair:  Are Russian pipelines a threat to Europe?

Jonathan Stern: It is a very British way of phrasing the question.  It is a very British media way of looking at the question. Of course there is nothing new in that. If you go back to 1920s, you can find articles on Red Oil menace to Europe – it has always been seen as a threat. One way of looking of this is that over the post-soviet period we have seen problems with Russian mostly gas, and to some extend oil deliveries to Western Europe. Many policy experts, IR experts, media journalists have cashed this in terms of Russia threatening its former Soviet satellites and Western European states with an energy weapon. There has been a small number of us, energy specialists, and we analyse this from an energy, contractual perspective, and we look at a lot of this largely ideological work with some scepticism. Not that we discount the political element in Russian energy trade, there is definitely a political element. However, when you look at the importance of energy for Russian foreign earnings, it is really one of the more worrying things for the Russian economy.  That dependence has made Russians, and before them the soviets, very cautious about jeopardising what I think is about 80% of their foreign currency earnings.

The event you will recall even if you know nothing about energy is the January 2009 Russia-Ukraine gas crisis. Most of you will have read this described as a proof that Russia uses this as a weapon against Ukraine and Europe and everybody else. We’ve done a lot of work on this subject, and published books on it, so let me try and give you a slightly more nuanced view. Undoubtedly, in the former Communist countries of Europe, the dependence on Russian energy, in particularly gas, has been viewed as a threat and something that should be lessened. The reality, and I speak as somebody who has worked on Russian energy for over 40 years, there has been very little lessening of that dependence in the last 20 years, because it is actually very difficult for these countries to get alternative gas supplies- and very expensive. They may do so, some are showing signs of doing so, but it’s very problematic. Obviously, Russia is not keen to see these countries diversify, but Russians, and this is based on discussions with Gazprom and elsewhere, being not stupid people, know perfectly well that if these countries can buy energy and gas from somewhere else, they will.  It is very clear that if the Nabucco pipeline is a reality, Russians cannot stop it.

The key thing about January 2009 episode is that in much of the European press it was hailed as Russia waging an energy war against Europe and everybody else. In Russian press, this was seen as proof that Ukraine was a completely unreliable transit country and the need to diversify from Ukraine that carries 80% of Russian gas transit to Europe, in order to secure reliable gas supply to Europe.

The Nord Stream pipelines, of first of which went into financial closing this week and will be with us in 2011 according to prime-minister Putin; personally, I think that 2012 is more likely. That will ensure that the largely big concern as we come to the end of the year, will dissipate.  Just one of these pipelines will mean that even if the transit is interrupted through Ukraine, unless it is interrupted for months, Europe ought to be able to manage with its alternative supplies. I also think that Nord Stream II will go. I also think that South Stream will eventually go, too. Interestingly how you phrase the question if these should be seen as a threat. Undoubtedly, some people, see this as a way, for example, to isolate Poland. But I think  most countries, especially in the old member states, see these pipelines as removing the principal threat to security of Russian gas supply in Europe, which is transit arguments with Ukraine.

Couple of final comments. There is a serious lack of appreciation of January 2009 of the huge financial and reputational losses that Russia has suffered. Gazprom lost conservatively in the region of US$ 100 million a day for at least seventeen days. It also because highly predictably most public opinion took the Ukraine side-as in poor little Ukraine, nasty horrible Russia-people in Moscow were and remain tremendously irritated that nobody in Europe saw it as they see fairly. Transit CIS countries know they hold a huge amount of power as they know that foreign public opinion would almost certainly take their side despite whatever the objective facts of contracts and prices and debts. None of that really matters. What I think is important is that European countries and the EU Commission in particular have got to pay much more attention to these transit countries particularly Ukraine, and also Belarus and Moldova. The situation in Ukraine is tremendously serious and it is not clear how it is going to be resolved. Finally, it is very unfortunate casualty of January 2009 and January 2006 is the Energy Charter Treaty and its transit protocol. These could have provided a very useful way of resolving some of these problems. But again, and this is the Russian view, with not a single voice raised against Ukraine’s blatant violation of the basic principle of Energy Charter treaty, this of course lost all credibility. The YUKOS affair is also important here. I am reasonably confident that the Streams will assist energy security of Europe, although in many European capitals, especially the new member states, they will be viewed the opposite way.

Chair: Is the image of Russia in Britain true to reality?

Mary Dejevsky: The British image of Russia is extremely negative, unfairly negative, and in many respects quite inaccurate and distorted. First, the British are very fond of stereotypes and they find it very difficult to depart from them. So things like big bear, backward country, they concentrate on the negative aspects of the country, on disasters, on things that are of minority interest, ignoring what is happening in the country at large. The second thing is that British coverage of the country invariably lacks historical context, especially with the 1950s to 1980s. If anybody draws historical parallels, they tend to be drawn with the 1990s by intellectuals or people with high level of education who all say: “The 1990s were wonderful because the ideological sphere was free, despite the fact that major media channels were owned by the oligarchs who used them as their own political platforms. What people do not do, especially in the British media, is to compare what it is like living in the country now with what it was in the 1970s and 1980s when it was absolutely horrendous. I was a British exchange student in Russia in the 1970s in the provinces, and life was extremely difficult, materially, but also it was extremely deprived in the ideological sphere. There were very few dissidents, living mainly in Moscow and Leningrad, and they communicated through samizdat, and everybody else was living on whatever Pravda or Izvestia gave them on that particular day courtesy of the Kremlin.

There are several specific topics that I think British media have given a particularly distorted view. One of them is Chechnya, where suddenly independence for Chechnya became a celebrity cause in the UK. I came back to UK from America in 2001 to discover that almost the whole view of Russia was dominated by a particular view of Chechnya. Second thing is Litvinenko case. I take a different view on the Litvinenko case than the official British view. I think it was extremely convenient that the killing of Litvinenko seemed to fit so many categories of the British stereotypes about Russia and was deemed to confirm them. I agree on reporting that the Russia-Ukraine pipeline dispute was extremely one-sided in the British press, and the same applies to the Georgia war. Another particular topic is the subject of history in Russia. The coverage of the introduction of the new history school books was done solely from the point of view that Stalin seems to have been rehabilitated, and the crimes and repressions of Gulag were being skipped over. There was almost no mention that Solzhenitsin’s works were becoming compulsory read in the Russian schools, and these awkward periods in Russian history were covered in the Russian schools for the first time. In December 2008, there was a poll among Russians to find their most loved historical figure. The whole British media concentrated on the fact that Stalin came among winners. Stalin in fact came at number three, and the winner was Alexander Nevsky, and number two was Piotr Stolypin, the author of economic reforms in the last government before the Bolshevik revolution.

Is British coverage of Russia particularly bad, particularly negative? I think it is. I am aware of the French, German coverage, and I think that British is particularly defective. Among the reasons I think is the very ideological nature of the British media and the British press in particular, the fact that there has been so many cut backs on foreign bureaus so there are very few staff correspondents in Moscow left and even fewer who speak Russian and are familiar with Russia. Also, the British press being as it is is extremely bad at covering the news that are not disasters, and we are particularly bad at covering what you call processes. The fact that so many Russians today are so much better off materially, and also in terms of free speech than they were 10 years ago is something that happened gradually, and therefore is quite difficult to notice and report for the British press.

The final thing I would like to say is that I don’t think that Russia has been particularly well-served, with respect to the representative of Embassy here, by its diplomats, not just in Britain. Russian embassies, and media generally, could make much greater response to what is happening in the British media. When positive things happen, or when there is negative reporting, they do not come out there and say “this is wrong”, or “there is a different view”. Where were the Russian diplomats during the crisis with Ukraine or the war with Georgia, presenting their view, defending their position when these stories were absolutely hot news? It took them days, weeks even, to come after. In fact I found that I was going on BBC trying to give some sort of perspective that wasn’t a complete damning account of the dispute. In fact one can find oneself a little bit awkward coming out as it were the only spokesmen for the Russian position.

There are positive things about Russia which I think they don’t capitalise on well enough. The Eurovision song victory and, last week, we had a Russian dog coming second at Crufts. I don’t know how many of you knew it was a Russian dog coming second at Crufts, but I think the Russian embassy could have made a lot more of it, at least something of it.  That’s where I would like to rest my case.

Edward Lucas: I want to start by coming back to what was earlier said that Russia does not have any soft power. I think it is not true. I think the regime is very bad, and it is not quite possible to make chekism look good. But I am struck by the deep resources Russia has in other respects, particularly in high culture. If you say to an average educated Brit: what does Russia mean to you? And they say “Tchaikovsky or Kandinsky, or any of the great literary figures. I think Russia starts from a very good position.  And I don’t know if it happened this year, but in previous Januaries we used to have Russian Winter festival in Trafalgar square, which tells us about another strong position about Britain, that is that it’s fun.  No matter how hard life in Russia is, it is never dull, and it is often tremendous fun. No matter what kind of regime there is always some joie de vivre about doing things in Russia which is a very strong selling point.  I am not sure if you can ever get the Russian embassy selling Russian joie de vivre. I do think there are some very very big positives.

I am also in an extraordinary position for me in which I find myself agreeing with Mary Dejevsky, perhaps we need to video this. But there is I point I do agree with which is that the simple quantity of writing about Russia has shrunk so much that I am not sure you can even talk about British press presence in Moscow. When Many and I were both there in 1990, the Independent alone had three staff correspondents in Moscow and further six in and around what you may call the former Soviet empire.  So nine staff correspondents between Berlin and Vladivostok. I am not even sure if the Independent have at least one staff correspondent in Moscow now?

Mary Dejevsky: We have a stringer in Moscow and a stringer in Berlin.

Edward Lucas: Enormous difference. Another point I want to make is that it is difficult to cover Russia as you are dealing with people who are extremely litigious, and sometimes quite dangerous.  I’ve spent most of the last year facing a libel case on the subject I can’t mention when we were sued by a person I can’t mention and a company which I also can’t mention. What I can say is that it cost us half a million pounds – and we won. The Economist is in an unusual position that we can spend half a million pounds winning a libel case. For a lot of newspapers, that is  not even worth thinking about, it’s an enormous amount of money. So there is a chilling effect, if you are thinking of investigating a Russian tycoon who you may or may not think may or may not have murdered someone who may or may not be active in politics or media or football or some other activity in Britain or in other European country – just a completely hypothetical example – and this person may or may not have some links with the Kremlin or may or may not have held some high position in Russia at some point in the past or in some other country – entirely hypothetical. If you decide that you have some evident of that person breaking the law in this country or in another country, or there are questions that need answers, and you go to your editor and say ‘I’d like to go after this person’ , hypothetically, your editor is quite likely to say ‘No, I am sorry – even if we print this story, and he sues us and we win, it is still going to cost us half a million pounds, we are better off going after someone else’. So I am not surprised that the British coverage of Russia is quite patchy, and very often done by people who don’t know very much and are often writing from London on the basis of recycled wire com.

Having said that, I simply can’t believe that you said that, Mary, and I am giving you a chance to rephrase yourself – would you say that Stalinism was an awkward period in Russian history? Would  you refer to the Nazi era as an awkward period in the German history?

Mary Dejevsky: I did not refer to Stalinism as an awkward period, but as one of many, and for Russians, not for us.

Edward Lucas: I think that the British media where I’ve criticised it is a bit behind the times. First thing, people tend to be simplified, and second, the impressions a bit out of date. The defining moment for the British writing about Russian foreign policy was Vladimir Putin’s  Munich speech in March 2007 that was an extraordinary anti-Western tirade, you can see it on YouTube or the famous press-conference where he appeared to defend the Molotov-Ribbentrop pact. There’ve been these dramatic incidents in the past years which have crystallised Western opinion.  I find people then a bit surprised when Putin turned out in Budapest in 2006 and apologised for the invasion of Hungary, and that he turned up in Prague and apologised for the invasion of Czechoslovakia, and that he invited the prime-minister of Poland Donald Tusk to Katyn and apparently is going to admit live on Russian television that Katyn was a Soviet crime and not a Nazi crime as official Russian newspaper Rossijskaya Gazeta has asserted in the past.  That is quite an interesting process that is also subtle and does not fit with the idea of Putin reviving Stalinism.

I would agree that the coverage of the Ukraine gas incident, and incidentally, I’ve written a book about this, called The New Cold War, and it’s on sale in the Economist book shop if you want to buy it – the gas story is really really complicated. The knee-jerk reaction was to see Putin ordering a halt to gas supplies and say that gas in Russia is an extremely political business, so we will side with Ukraine – so I agree that the reporting was quite simplistic. I do think that there is a quite serious problem with as Jonathan mentioned the inability of the CEE countries to diversify their gas supplies. I would not defend everything that the British press has ever written about Russia, I would defend what The Economist has written about Russia.

Questions from the Audience

Professor Light, you suggested that Russia has to be more cooperative with international agencies, and I wondering what you mean by that. Russia has quite good relations with many states. In fact, some 75% of the states vote with Russia and China in the United Nations. Everyone would agree that China is a global player, but it can hardly be called cooperative. The same is true of the United States. Why does Russia need to cooperate internationally even more?

Margot Light: I was answering a slightly different question to the one you thought I was. I was answering the question of how Russia could increase its soft power. I had in mind the institutions it could improve its relationship with, and with OSCE the relationship has been particularly sticky which led to the problem in which OSCE could fulfil its functions it was created to accomplish. I could refer as well to its relationship with NATO in the NATO-Russia council. It is a particularly prickly relationship, and Russia’s representative to NATO is a particularly prickly individual, and I can go on but I think I can rest my case here. I think the fact that so many countries vote with Russia and China in the UN on the issues to do with human rights is an interesting way of using soft power to using soft power.

Question: How do you reconcile attempts at modernisation with the creation of a strong hierarchical system of power?

Roger Munnings: In business terms, if you want to change something, you must first gain control over it to later release it.  You can’t do it if you are not in control, for example, across the regions of the country. Perhaps, that’s where the vertical of power comes in. When you have established that measure of control, and you’ve established the values and the vision of the future, then you can start to release control. At least from the business perspective.

Alan Riley, City University: I have an economic question. I work on Russia a lot, I have Russian friends. And the more I look at Russia, and the more I am told about its economy, the more concern I become. Despite all the high oil prices from 2000 to 2010, in 2000 there were 750 thousand km of road in Russia, and today, there are only 700 thousand. We are not talking nuclear power,  we are not talking broadband, just road. I think Russia is going to be in a deep trouble. The worry I have is this: what is the position for Russia, is there really going to be change.  Do you think Russian elites understand that the oil price will not always be high, there must be reform?

Sam Greene: The simple answer to your question is yes, the elite very clearly realise the problem. I was speaking not long ago to a very senior governmental advisor, not Mr. Dvorkovich, someone else, and they said that with the exception of one or two people, and I will let you guess who those one or two people are, the Russian government realise well that the way business was done over the last 10 years was not only ineffective back then, but untenable now.  There is even a broad consensus on what has to change. The problem is how to change everything without changing anything, because the governance structure in Russia exists primarily for the production of rents the way I see it. Until you find a way to alter this type of relations, it is difficult to see how fundamentally anything can be changed. But eventually control becomes impossible if you fail to deliver the rents, and that may be an answer to your question.

Alex Bertolotti: A quick comment. We had a lunch today with someone who advises Mr. Kudrin, and asked the same question – when is the dependence on the oil price going to stop, and when other sectors are going to grow? The Russian government say nanotechnology, loosely defined: medicine, technology, new silicone valley outside Moscow. Other areas – financial services, trying to develop Moscow as a financial centre, a hub for that part of the world as London is for the UK.  I am a bit worried that this is never going to happen. But I do agree with one thing they say: in the budget going three to five year, the percentage of oil as a proportion of GDP will shrink, not the production but the percentage, and if you take it further twenty, thirty years, they may eventually get there.

Roger Munnings: The first thing I’d say is do not knock off oil and gas too much, it is good to have them than not.  Do you use it to modernise and diversity though? There is a growing feeling, I have heard several governmental officials say that they are going to stop investing into infrastructure because there is so much leakage into rent. That’s a real problem for the Russian economy.

Question: Can you do business in Russia without knowing Russian?

Roger Munnings: I don’t speak Russian, I wish I did, but it is possible to do business without speaking the language, but less and less so. I think if you want to go there and do business, then learn Russian.

General Question to All Panelists:  Would advice would you give to the British public and to the Russian public on bilateral relations?

Roger Munnings: Be open-minded and try to understand the differences.

Sam Greene: I’d say it in Russian, надо чаще встречаться. More integration, more visits, more communication.

Alex Bertolotti: To the British: look at the way the Russian government said 750 million pounds. To the Russians: Sven-Goran Eriksson for their football team, they might get to the World Cup next time.

Mary Dejevsky: To the British: Get out there and learn Russian. To the Russians: get yourself the same PR company that the Georgians have.

Jonathan Stern: To the British: Avoid stereotypes. To the Russians:  Get better publicity.

Margot Light: To both: make it easier for visas to be obtained.

Edward Lucas: To the British: don’t allow the city of London to become the money-laundering machine for stolen assets. To the Russian regime: go to Northern Cyprus and stay there. To the Russian people: keep pushing, authoritarian croney capitalisms never worked in the past, it won’t work now.

Chair: Thank you

© INSTID
Photos by Milton Boyne