Russia's Road to Serfdom

Apparently, the Russian president is on a roll today. This interesting article in the Beeb got me to get in touch with Eric Kraus, the Chief Investment Strategist of Sovlink, quoted there. Here is our little exchange (with permission):

Dear Mr. Kraus,

you are quoted by the BBC as saying that the Russian government cannot be sued because of its sovereign immunity. I wonder what makes you say that?

It may well be the self-conception of the neo-tsarist government with its "dictatorship of the law" that you are reflecting, but in the conventional conception of the rule of law, any government may be sued concerning its dealings within the commercial domain, and rightly so. However, if your argument re sovereign immunity aims at the effective re-nationalisation, then you would be right if the operation had been done openly, based on a formal act of parliament, following due process, and not in the cloak and dagger style which has effectively destroyed any pretence of the rule of law in Russia.

The reason for this email is my personal interest in the matter as a CFA Charterholder and a (former & potential) investor in Russia. I think it is wrong for financial market agents to accomodate the Russian governments actions, as you seem to be doing, which are clearly very damaging in the long term view.

After a lifetime in finance I have no indications that Western practices are substantially different from Russian ones. Simply, the West is rather better at sugar coating it - spin management has not made much of an impact here, yet.

As for whether or not the West wishes to tolerate such things, they do not have much choice in the matter. They may chose to stop importing gazprom gas, and freeze in the dark, or stop importing Rosneft oil, but the chinese, indians etc. are screaming for a chance to supplant the Wester offtakers, so, as always, this will be settled as a matter of interests, not one of abstract principal.

thank you for your quick and honest reply, which opens the "realist's" perspective to your BBC statement, which is an attempt at sugar coating on your side, I guess.

I do not agree with your position, however. The rule of law is more than just sugar coating, and the continued evasive action taken after the US court's judgment proves that.

More generally speaking, I do not understand why Russia has abandoned the road to freedom, to rephrase Charles Popper a bit. The only conceivable motive for that is the narrow self-interest of the ruling group of people. Your insight would be highly appreciated!

Russia has not abandonned the road to Freedom. It has abandonned a neo-liberal approach which has led to disaster once already, in the 1990s.

I am a great fan of Popper's but I find the applicability of his thoughts to be far greater in the developed world. Pluralism in countries where you have a small coterie of extremely rich and vicious men who can buy the entire political system leads to the worst excesses. Government of by and for the oligarchs.

The Russian political system looked far better to the West 6 years ago, but the people were starving. They are now living much better - Russia is not yet a happy place, but it is certainly a happier one - and for this, I thank Vladimir Putin.

I do not sugar coat anything. This is Russia. We are foreigners. If we wish to play here, we play by Russian rules. If not, nothing (save, perhaps, the fear of boredom) prevents us from returning to from whence we came!

Interesting! What way to Freedom is there other than the liberal one? Surely not the autocratic one - or do you honestly believe in the benevolent dictator (Putin)? I don't - and neither did Popper.

The road to freedom that Russia is on from your point of view looks like a very big detour to me ... and I still do not know the reason why it should be taken in the first place. Definitely not because of the starving people - that is a cynical pretence from a position subscribing to realpolitik.