TBR News November 27, 2016

The Voice of the White House

 

Washington, D.C.  November 27, 2016:” When Vladimir Putin became n Acting President of Russia on December 31, 1999, when Yeltsin resigned, he was faced with long-term and pervasive corruption. Russia’s extensive natural resources were being sold off to foreign business entities and a gang of domestic crooked operators were clearly behind this. By putting a halt to these thefts, Putin earned the undying hatred of certain economic and ethnic groups, both in the United States and Israel and from that point on, Vladimir Putin is viewed as a man who cheated them out of billions of dollars. Given this, the constant attacks on Putin and Russia in the American media are fully understandable. It is surprising that, like Fiedl Castro, the CIA hasn’t made more attempts to assassinate Putin.”

The Rape of Russia: Russian Oligarchs and Oil 

• Russian and American Swindles: U.S. taxpayers and Oil companies lost billions
• Vladimir Putin as St. George Slaying the Dragon

November 27, 2016

by Brian Harring, Domestic Intelligence Reporter

In mid-1998, British officials investigating Russian organized criminal activities brought the attention of US authorities to a link between YBM Magnex, a front company for suspected Russian gangster Semyon Yukovich Mogilevich, and Benex, a firm owned by Peter Berlin, the husband of one of the subsequently-suspended Bank of New York (hereinafter ‘BNY’) vice-presidents. From October 1998 to March 1999, $4.2 billion in suspect money passed through the BNY accounts of Benex and other firms. Investigators allowed the account to remain open after March of 1999 as they continued their probe, and the total amount laundered eventually proved to be in excess of $10 billion. In August 1999, Swiss banks in Geneva discovered massive fraud involving Swiss banks and local prosecutors immediately froze 22 accounts of Russian individuals and corporate entities, worth a total of $15 million.

The growing evidence of  international criminal wrongdoing extended far beyond suspected organized crime figures like Mogilevich and point to high-level officials in the US and Russia. Investigators began to look into whether funds from the subsequently insolvent Russian bank, Menatep, were also involved in money laundering at BNY. Menatep was then owned by Russian oligarch Mikhail Khodorkovsky and employed, as a senior executive, Konstantin Kagalovsky.

Federal officials, in the main, the New York office of the FBI in conjunction with their counterparts in Britain and Switzerland, launched an in-depth an investigation of what later proved to be the largest money-laundering scheme in US history. The investigation revealed that billions of dollars from Russia, the bulk of it from Russian criminal elements, were channeled through accounts at the Bank of New York. Two BNY vice-presidents were initially suspended as a result of the probe.

Kagalovsky’s role in the money-laundering operation highlighted the criminal character of the nouveau riche in Russia, for the most part born of the old Stalinist bureaucracy, as well as the complicity of Western financial institutions, governments, and academic advisors. Kagalovsky was involved at the highest level of the Russian government, serving as an advisor and as its representative to the IMF before moving on to Menatep in 1994. Prominently displayed in his office at Menatep were photographs of his meetings with George Bush, John Major and other Western leaders.

He left Menatep to become the vice-chairman of the Lukos oil conglomerate. This company had been acquired by Menatep on the cheap in a “loans-for-shares” scheme in which the bank extended credit to the Russian government in exchange for shares in the company’s ownership. When the bank went under, Lukos picked up many of its assets, including its Moscow headquarters and a number of offshore holding companies, according to a report in a 1999 Wall Street Journal.

These holding companies are alleged to have been used to plunder a number of other Russian companies, also owned by Menatep. In a procedure known as tolling, the assets or products of manufacturing firms were sold to the holding companies at below-market prices. The offshore holding companies then sold the goods at normal prices, keeping the profits outside Russia. The Journal article cited one example of tolling in which $20 million was removed from a Russian titanium plant in just one year.

In essence, and there are literally two reams of emails, Xeroxed documents and discs on this matter, this is what happened. This is a very large story and one now being prepared as a book but the précis of it is this:

Boris Yeltsin, the Russian President, was not only a very corrupt drunk but also in the pocket of the American CIA. The CIA, and now the current Administration, has the best connections with the upper levels of American business. When the Soviet Union imploded, American oil interests looked with growing hunger at the enormous Russian oil and gas reserves.  They reasoned that if a compliant Yeltsin could be persuaded to privatize the former state oil holdings, American oil giants might be able to purchase controlling interests in these relatively untapped sources. This is exactly what happened. The prime mover in this buyout was a Russian gangster, one Semyon Yudkovich Mogilevich.

The name Semyon Mogilevich first came to public light in 1999 in connection with the Bank of New York (BoNY)-Russian money laundering scandal. Media reports described Mogilevich as one of the most powerful and dangerous “godfathers” in the world. US and UK intelligence agencies believe that his organization operates in Russia, Hungary, Ukraine, Belorussia, Lithuania, Israel, United States, Columbia, Pakistan, Lebanon, Germany, Austria and dozens of other countries. Mogilevich has his hand in narcotics and weapon trafficking, prostitution, money laundering, gambling and numerous other illicit trades. He is extremely clever – a quality that earned him the nick-name the “Brainy Don” – as he is callous and brutal, ruling his world-wide syndicate with an iron-fist and extraordinary sagacity. In the mid 90s Mogilevich acquired a secret interest in Russian bank Inkombank. He then used it to finance his ignoble trade, most notably drug smuggling through the Georgian port of Poti, and funnel the proceeds to his and his “banker”-partners’ offshore coffers. Mogilevich was de facto ruler of Inkombank when the BoNY – Inkombank relationship was at its peak.

Semyon Yudkovich Mogilevich was born into a middle-class Jewish family in Kiev on June 30, 1946, to Genya Tevevna Shepelskaya and Yudka Mogilevich. His early years are mist-shrouded. At the age of 22, Mogilevich earned an advance degree in economics from the prestigious University of Lvov. “He was a brilliant student” recalls one of his former professors – “he had a photographic memory and he could multiply, divide and add seven digit numbers in his head instantaneously.” Another former professor said that Mogilevich had a great interest in macroeconomics and “was able to see a panoramic picture of national and world economies, everybody believed he would become a great academician.”

An academic career however did not entice the future crime emperor. Russian police records reveal Mogilevich’s ties with a Moscow gang known as Lybretskaya in early 70s. At the time, the young Mogilevich was primarily involved in small time fraud and black market currency machinations. He was caught and twice served terms of three and four years in Russian prisons for “currency offenses.”

In the 1980s Mogilevich found a niche in the then emerging immigration of Russian Jews to Israel. After receiving “exit visas” from Russian authorities, Jewish families were often given only a few days to leave the country and allowed to take out only bare essentials. Mogilevich would persuade them to leave all their possessions with him promising to sell them and sent the proceeds to their new homes in Israel.

Many immigrating families at the time owned expensive art objects, jewelry and other valuable items, exportation of which was strictly forbidden by Soviet authorities. Thus Mogilevich’s proposition appeared quite alluring. Mogilevich made a small fortune selling the property of thousands of departing families. He sent nothing to them in Israel correctly calculating that these people would have absolutely no recourse.

In 1990 Mogilevich decided to immigrate to Israel himself. By that time he had parlayed his “Jewish proceeds” into a fortune by craftily investing in various illicit enterprises, including weapons trafficking and prostitution. He arrived in Israel a millionaire, highly respected in the emerging Russian underworld as a shrewd operator who was capable of putting together complex international schemes. Several of Mogilevich’s top lieutenants immigrated with him.

Mogilevich became an Israeli citizen and made contacts with top Russian-Israeli organized crime figures, expanding his international crime syndicate. Expert-economist Mogilevich continued to acutely invest in everything from night-clubs to precious metals and stones, to liquor distilleries. At the same time Mogilevich continued to develop his world-wide networks of prostitution, weapon-running and drug smuggling. Mogilevich always operated through a complex web of offshore companies which he created.

In 1991 Mogilevich married Katalin Papp, a Hungarian citizen and a year later he moved to Hungary and settled down in Budapest. Marrying a Hungarian accorded Mogilevich the opportunity to obtain a Hungarian passport and by 1992 he was simultaneously a citizen of 4 countries: Russia, Ukraine, Israel and Hungary. He likes to refer to himself as “a citizen of the world.”

Mogilevich decided to make Budapest the home of his growing criminal empire, which by that time operated on five continents. In Hungary he continued investing in legitimate enterprises, night clubs, restaurants and other liquor establishments. His major acquisition was a so-called Army Co-Op, a military plant producing anti-aircraft guns and surface-to-air missiles. His criminal organization was emerging as one of the world’s largest and most feared international organized crime groups.  Mogilevich fashioned it after the Sicilian Cosa Nostra but added “a unique Russian touch”, according to one Hungarian intelligence official. Mogilevich befriended many Hungarian politicians and law enforcement officials thanks to payoffs and his charismatic personality.

Under their protection, Mogilevich’s organization flourished and expanded. He had de facto his own private army of enforcers numbering in the hundreds. Mogilevich preferred to recruit veterans of Soviet special forces who fought in the USSR war in Afghanistan and were known for their extreme viciousness. Mogilevich’s highly trained killers carried out his nefarious orders in over thirty countries, including Israel, Germany, Canada and the United States. Anyone standing in his way was tortured and murdered, his body conspicuously left gruesomely mutilated “for educational purposes,” as one of his top enforcers, the infamous and universally feared Igor Tkachenko, once said. When Tkachenko was himself murdered in Budapest, Mogilevich’s “enforcement department” was headed by two brothers, Igor and Sergei Korolev, whose particular brand of brutality made them somewhat of a legend.

In 1993, Mogilevich joined forces with the Solntsevo crime syndicate, one of Moscow’s dominant crime families. Together the Mogilevich and Solntsevo syndicates invested in a joint venture which purchased antiques, precious stones and art stolen from churches and museums in Russia and Eastern Europe.

Mogilevich’s wife died in December of 1994. Initially he considered returning to Russia but decided to remain in Budapest. A year later he married his long time mistress, Russian-Israeli, Galina Alexeyevna Telesh-Jambulskaya. Apparently the relationship between Mogilevich and Telesh started long before their marriage, as their son was born in September of 1990. Mogilevich also has children from his prior marriages: a daughter Mila, born in 1972 and a son Yuly born in 1983.

Mogilevich continued to expand his armament cartel. To complement the Army Co-OP, he also acquired Magnex 2000, a large magnet manufacturer and defense contractor, and the Digep General Machine Works which manufacturs artillery shells and mortar. These acquisitions gave Mogilevich virtual control of the Hungarian war industry.

Simultaneously Mogilevich developed powerful contacts in the Muslim Middle East, including with top officials in Iraq, Pakistan, Iran and Afghanistan. These countries became the primary market for his weapon sales – both “legal” and illegal. Mogilevich structured a deal selling $20 million worth of armaments stolen from East Germany to an Iranian buyer. The weapons included ground-to-air missiles and a dozen armored personnel carriers, according to a Mossad officer, who spoke on condition of anonymity.

By the mid-90s, Mogilevich’s ever growing illicit international multimillion dollar transactions required extensive banking contacts. Hiding behind a web of offshore shell companies became progressively more difficult as banks around the world were adopting a more cautious approach to Mogilevich-style “banking” and money movement. Mogilevich could no longer afford to be just a bank “customer.” A need arose for an “equity partnership” with a bank that would be able and willing to both finance large international schemes and funnel the proceeds through his shell corporation world-wide. Mogilevich set his eye on Inkombank, by then one of Moscow’s largest privately owned banks with $3 billion in assets. What made Inkombank especially attractive to Mogilevich was its vast network of correspondent accounts, which Inkombank maintained with banks around the globe, including with such major banks as Bank of China, Union Bank of Switzerland, Swiss Bank Corp., and Deutchebank. In the US, Inkombank maintained its largest correspondent relationship with the Bank of New York. This was particularly crucial to the Brainy Don’s empire, as most of the world trade, legal and illegal, was effected in US dollars.

Because of its rapid expansion, Inkombank was short on liquidity and Mogilevich offered to “help.” A secret deal was struck between Inkombank’s then chairman, Vladimir Vinogradov and Mogilevich’s representatives, whereby in exchange for $65 million, and a promise to help gain Inkombank’s entree into the world’s arms market (which Vinogradov desperately sought,) Mogilevich’s front entities were given 23% in Inkombank’s equity. This gave the “latter day Don” de facto control over Inkombank.

The don kept his part of the bargain. In late 1996 he used his connections and muscle to help Inkombank’s bid for 25% of the common stock of the Sukhoy, maker of the coveted Russian SU fighter jets. Arguably the world’s most advanced military aircraft, of which some are capable of carrying nuclear weapons. Countries like Iraq, Iran, India and Libya have gladly paid $30 to 50 million per aircraft and Sukhoy had generated $1 billion in sales in the three year period after Inkombank became its largest shareholder, accordingly to Russian intelligence sources. The proceeds were largely funneled from the Inkombank-Cyprus branch through BoNY correspondent accounts – to various offshore firms, including Brasset, Footnote and Bridge Investments, controlled by Vinogradov and Mogilevich.

Having Inkombank as a player in his multifaceted empire, propelled Mogilevich to the very top of global organized crime networks. He had now entered “the big time” and was able to participate in major deals. Running conventional arms around the world no longer fitted the don’s newly found “stature” and he attempted to move into the nuclear weapons black market. He financed the 1997 theft of six thousand pounds of enriched uranium from a Warsaw Pact storage facility intending to sell it to a Middle East buyer and deliver it through the former Soviet republic of Tajikistan. The deal was negotiated in the Czech resort of Karlovy Vary but Czech intelligence and security forces were able to stop it days before the fissile material was to be shipped to the Middle East. The uranium was safely recovered and Mogilevich’s partners in crime, J. Vagner, a nuclear physicist, Z. Sindlauer, a Prague police official and A. Sczerbinian, a Tadjik entrepreneur, were arrested. Mogilevich however was able to buy his way out with large bribes and by arranging for the disappearance of key witnesses. Intelligence sources said that this was the largest known theft of nuclear material ever.

According to filings in Federal court in New York, in mid-1998, The Bank of New York security personnel raised concerns to BoNY CEO Thomas Renyi about the association and apparent close ties between Mogilevich and Konstantin Kagalovsky, the husband of Natasha Kagalovsky, BoNY’s senior vice president in charge of its Eastern European Division. Renyi personally “interviewed” Kagalovsky about the matter but no action was taken. Court documents also show that BoNY was linked to at least two Hungarian banks, MKB Bank and CIB Bank,that have been the subject of FBI investigations concerning their ties to Semyon Mogilevich. Both MKB Bank and CIB Bank were involved in circular transactions for substantial amounts that were listed on Inkombank’s statement for its BoNY accounts in November and December 1993. In addition, law enforcement authorities in Latin America have investigated transactions whereby Mogilevich, or persons under his control, gave Kagalovsky wire transfer instructions to move funds through BoNY for the Cali drug cartel through Brazilian banks to offshore companies.

The FBI “wanted” alert warned that Mogilevich may be armed and dangerous and asks anyone with information about him was asked to contact his local FBI office or the nearest US embassy

Business oligarch, a synonym of “business magnate”, describes wealthy people that significantly influence the life of a state. The term came into wide circulation after the collapse of the Soviet Union in application to the people that became extremely wealthy in some post-Soviet republics. In particular, the term Russian oligarch describes Russian businessmen who came to prominence during the presidency of Boris Yeltsin.

The oligarchs started under Gorbachev during his period of market liberalization. Under the market liberalization, many smuggled rare goods into the country, such as PCs, and jeans, for a hefty profit margin, an unforeseen consequence of partial market liberalization with still excessive trade restrictions, and the willingness of some, less savory characters, to smuggle goods into the country and sell them on the black market.

Post-Soviet business oligarchs tended to achieve vast wealth by acquiring state assets very cheaply during the privatization process started by the Yeltsin government. Specific blame for their ascent to power is often levied on Anatoly Chubais and Yegor Gaidar, two of the ‘Young Reformers’ chiefly responsible for ‘shock therapy’ privatization in the early 1990’s. According to David Satter, author of Darkness at Dawn, “what drove the process was not the determination to create a system based on universal values but rather the will to introduce a system of private ownership, which, in the absence of law, opened the way for the criminal pursuit of money and power.”

As Yeltsin’s power weakened, oligarchs became increasingly influential in politics and played a significant role in financing the re-election of Yeltsin in 1996. The 1998 financial crisis hit the oligarchs hard, however, and those whose holdings were based on banking lost much of their fortunes. In the Putin era, the remaining oligarchs have come under fire for various alleged and real illegal activities, particularly the underpayment of taxes in the businesses they acquired. Vladimir Gusinsky (MediaMost) and Boris Berezovsky were both effectively exiled, and the most prominent, Mikhail Khodorkovsky (Yukos oil), was arrested in October 2003, and subsequently sentenced to 8 years in prison

Their defenders (often associated with Chubais’s party—the Union of Right Forces) argue the companies they acquired were not highly valued at the time because they were still run on Soviet principles, with non-existent stock controls, huge payrolls, no financial reporting and scant regard for profit. They turned the businesses—often vast—around and made them deliver value for shareholders. They obtain little sympathy from the Russian public, though, due to resentment over the economic disparity they represent aggravated by the fact that many prominent oligarchs are of Jewish descent.

In 2004, Russian Forbes listed 36 billionaires of Russian citizenship, with an interesting note: “this list includes businessmen of Russian citizenship who acquired the major share of their wealth privately, while not holding a governmental position”. In 2005, the number of billionaires dropped to 30, mostly because of the Yukos case, with Khodorkovsky dropping from #1 ($15.2 bln) to #21 ($2.0 bln)

Russian oligarchs

From Russian Forbes, May 2005. Wealth in 1,000,000,000 U.S. Dollars

1. Roman Abramovich 14.7 (Роман Абрамович, Sold Sibneft Oil and owns Chelsea Football Club)
2. Vladimir Lisin 7.0 (Владимир Лисин, metallurgy)
3. Viktor Vekselberg 6.1 (Виктор Вексельберг, petroleum, color metals)
4. Oleg Deripaska 5.8 (Олег Дерипаска, Russian Aluminium)
5. Mikhail Fridman 5.8 (Alfa Group)
6. Vladimir Evtushenkov 5.1 (Владимир Евтушенков, telecommunications, finance, real estate)
7. Aleksey Mordashov 5.1 (Алексей Мордашов, black metallurgy)
8. Vladimir Potanin 4.7 (Владимир Потанин, Norilsk Nickel).
9. Mikhail Prokhorov 4.7 (Михаил Прохоров, color metals)
10. Vagit Alekperov 4.1 (Вагит Алекперов, petroleum (LUKoil))
11. Viktor Rashnikov 3.6 (Виктор Рашников, black metallurgy)
12. German Khan 3.5 (Герман Хан, petroleum, finances, telecom)
13. Boris Ivanishvili 3.0 (Борис Иванишвили, metellurgy, finances)
14. Alexamder Abramov 2.9 (Александр Абрамов, black metallurgy)
15. Aleksei Kuzmichev 2.7 (Алексей Кузьмичев, petroleum, finances, telecom)
16. Suleiman Kerimov 2.6 (Сулейман Керимов, investor)
17. Vladimir Bogdanov 2.3 (Владимир Богданов, petroleum (Surgutneftegaz))
18. Iskander Makhmudov 2.2 (Искандер Махмудов, color metals)
19. Nickolay Tsvetkov 2.2 (Николай Цветков, petroleum, finances)
20. Alisher Usmanov 2.0 (Алишер Усманов, black metallurgy)
21. Mikhail Khodorkovsky 2.0 (Михаил Ходорковский, Yukos oil)

Other notable oligarchs

• Boris Berezovsky 0.73 (Борис Березовский)
• Vladimir Gusinsky 0.35 (Владимир Гусинский, MediaMost)
• Anatoly Chubais (Анатолий Чубайс, Unified Energy System)
• Yuri Luzhkov

 

March 26, 1996 Arco and Lukoil, one of Russia’s largest independent oil companies, form a joint venture to develop oil and gas reserves in Russia and other former Soviet republics. Total investment could reach $3 billion over a three year period. Arco will contribute almost all of the projected capital needs, even though it has a 54 percent stake in the venture. In September 1995, Arco purchased $250 million worth of convertible bonds in Lukoil, giving it a 6 percent stake in the Russian company. (FT, WSJ)

May 29, 1996 In Russia, Mobil and Texaco sign a production sharing agreement (PSA) for the Sakhalin III venture. Located offshore Sakhalin Island in Russia’s Far East, Sakhalin III is one of three large oil and gas developments being planned by foreign oil companies. In the deal, both companies agree to spend $150 million in exploration activities over a six year period. Since last year, many foreign oil companies have been waiting for revisions to Russia’s new PSA law, which is widely viewed as not offering adequate -legal protection for foreign investment in the country’s oil and gas sectors. (DJ, PON)

June 11, 1996 Exxon states that it will soon begin work on its $15-billion Sakhalin I oil and natural gas development in Russia’s Far East. The Sakhalin I project will develop an estimated 5 billion barrels of oil and 15 trillion cubic feet (Tcf) of gas located in three offshore hydrocarbon fields. The $300 million appraisal program will include drilling one exploration well and conducting a 3-D seismic survey. The U.S. company says that it will start working despite ongoing differences with the Russian government over the country’s new production sharing law, which is widely viewed as not offering adequate legal protection for foreign investment in the country’s oil and gas sectors. (FT)

August 8, 1996 U.S.-based Unocal and the government of Turkmenistan sign a deal to build a $2-billion, 900-mile long pipeline to carry gas from Turkmenistan=s 45-trillion cubic foot Dauletabad gas field through Afghanistan to markets in Pakistan. The proposed pipeline will carry 1.9 billion cubic feet (Bcf/d) initially and 3.8 Bcf/d after final completion in 2002. Unocal and Saudi Arabia-based Delta Oil will hold an 85 percent stake in the project, with the Gazprom (10%) and Turkmenrusgaz (5%) holding the remainder. (DJ)

September 20, 1996 In Russia, Arco signs several agreements with Lukoil to jointly invest $5-billion in energy projects over the next 18 years. The deals also create a new company, LukArco, which will be held jointly by Lukoil (54%) and Arco (46%). In late 1995, Arco bought an 8 percent stake in Lukoil. The recent moves will provide Arco with a prominent position in Russian upstream activities. (DMN)

February 10, 1997 Lukoil, Russia’s largest oil company, and the U.S. energy company Arco enter a $5 billion, 18-year joint venture to prospect for and develop oil in the former Soviet Union. Lukoil’s share is 54 percent and Arco’s is 46 percent. The venture, called Lukarko, plans investment of $400 million in 1997. Initial projects include a 12-percent stake in the Caspian Pipeline Consortium and a 5-percent share of the Tengiz field in Kazakstan. (HOH)

April 24, 1997 Russian President Boris Yeltsin names reformist First Deputy Prime Minister Boris Nemtsov to the additional post of minister of fuel and energy. Nemtsov, who has called for radical liberalization of the energy sector, replaces Pyotr Rodionov, who resigned in March. (DJ)

April 28, 1997 Russian President Boris Yeltsin signs a decree ordering sweeping reforms in the country’s natural gas, electric, rail and telecommunications sectors aimed at reducing rates and stimulating investment. At a news conference announcing the decree, First Deputy Prime Minister Boris Nemtsov explains that the state will retain control over these key natural monopolies and will not break up their national supply networks. With respect to natural gas, the government will retain its 40-percent equity stake in the monopoly RAO Gazprom indefinitely and work to strengthen Gazprom’s international position and boost its share price. Gazprom will lose its monopoly right to develop new gas deposits (which instead will be allocated at tenders open to competitors), will offer equal access and competitive rates on its national pipeline network to all producers (giving oil and other companies the opportunity to compete in the gas business), and will be required to ensure transparency of its finances with detailed annual financial reports. (DJ)

May 13, 1997 Russian President Boris Yeltsin signs a decree substantially increasing the state’s role in managing natural gas giant RAO Gazprom. The order names First Deputy Prime Minister Boris Nemtsov to head a special commission charged with setting government policy at the 40-percent state¬owned company (Russia’s largest) and calls on the government to draft new regulations on foreign investment in Gazprom shares. (DJ)

June 5, 1997 Russia’s Deputy Prime Minister Alfred Kokh announces plans to sell an additional 15 percent share of state-owned oil producer AO Lukoil. No details are provided. (WSJ)

June 24, 1997 Russia’s State Duma (lower house) approves a long-awaited law that would allow production-sharing agreements for development of major natural resource deposits, including five oil fields (Samotlor, Krasnoleninsk, Romashkinskoye, Prirazlomnoye, North Sakhalin), the Kuranakhskoye gold field, and the Yakovlevskoye iron-ore deposit. Investment in these projects is expected to total $16 billion. The legislation now goes to the upper house for consideration, which is expected to consider the measure this fall. (DJ)

July 1, 1997 The Russian government begins offering many of its remaining oil-industry holdings in a series of auctions and investment tenders expected to raise $780 million by mid-December 1997. The privatizations, which are open to foreign bidders, include Russia’s stakes in AO Vostsibneftegaz (38 percent), AO Vostochnaya Neftyanaya (51 percent), AO Sibur (36.28 percent), AO Tyumenskaya Neftyanaya (48.68 percent), AO Komitek (27.1 percent), and AO Norsi-Oil (45.45 percent). (WSJ)

September 25, 1997 Russia’s State Property Committee approves a privatization plan for AO Rosneft. The approval clears the way for the sale of the Russian government’s last major holding in the oil industry. The sale will take place during the fourth quarter of 1997 and the first half of 1998 and will be open to foreign and domestic investors. (DJ)

October 1, 1997 Russian oil company AO Sidanko’s petition to settle a lengthy legal battle with the Russian government and state-owned AO Rosneft for control of the Siberian oil production company AO Purneftegaz is accepted by the Supreme Arbitration Court. The end of the lawsuit clears the final hurdle for the privatization of AO Rosneft. (DJ)

November 17, 1997 Royal Dutch/Shell announces that it will invest $1 billion in a joint venture with Russia’s Gazprom to produce crude oil, natural gas liquids, and natural gas in Russia and elsewhere. Shell and Gazprom will share equal ownership in the partnership. In a separate memorandum of understanding, Shell, Gazprom, and Russian oil company, Lukoil, announce that they will submit a joint bid for a stake in Russian oil company, Rosneft, when it becomes available for privatization in the near future. (NYT)

December 9, 1997 Russian oil company AO Yukos announces that it has acquired a controlling interest in Russia’s state owned Eastern Oil Company. Yukos won a 45 percent stake in the Siberian oil producer for $775 million, adding to the 9 percent that Yukos already held. The purchase secures Yukos’s position as Russia’s second largest oil producer behind AO Lukoil. (WSJ)

February 3, 1998 Russia’s RAO Gazprom has sold its 10 percent stake in Centgas, a consortium set up to construct a $2 billion Turkmenistan-Afghanistan-Pakistan natural gas pipeline. U.S.-based Unocal Corporation acquired 7 percent of Gazprom’s shares, bringing its total stake in the Centgas to 54 percent. The remaining 3 percent went to Japanese-owned Indonesia Petroleum and Itochu, South Korea’s Hyundai Engineering & Construction Company, and Pakistan’s Crescent Group. The 800-mile pipeline will extend from the Daulatabad gas field in southeastern Turkmenistan through Afghanistan to Pakistan. (DJ)

March 21, 1998 Russia announces plans for the sale of state-owned Rosneft, the Russian government’s last major holding in the oil industry. The government is offering a 75 percent stake in the firm at a starting price of $2.1 billion. Buyers will be required to invest $400 million in the company within three months of the sale. (WP)

July 27, 1998 Russia announces plans to sell a five percent stake in RAO Gazprom, the country’s largest company and the world’s largest natural gas company, with the Russian government retaining a 35 percent stake in the company. The five percent stake is valued at $500 million, although the government may get more if the shares are sold to foreign investors. The Royal Dutch/Shell Group and Italy’s ENI SpA are considered to be probable contenders for the shares. Gazprom holds nearly 40 percent of the world’s proven natural gas reserves. (WSJ)

August 13, 1998 As part of Russia’s continuing privatization program, the government announces that it will sell a five percent stake in Gazprom as a single lot, at a starting price of $1.65 billion. The sale will leave the government with a 35 percent stake in the natural gas monopoly. In other privatization news, Gazprom President Rem Vyakhirev announced on August 6, 1998, that Gazprom will not bid for a controlling stake in Rosneft, Russia’s only remaining state oil company. (DJ)

November 2, 1998 Russian President Boris Yeltsin approves the sale of an additional 5 percent stake in Gazprom, the national natural gas company. The decree will allow foreign ownership of Gazprom stock to increase from its former limit of 9 percent to 14 percent. (DJ)

December 21, 1998 Ruhrgas AG, a major German natural-gas distributor, buys a 2.5 percent stake in giant Russian gas monopoly RAO Gazprom for $660 million, strengthening the two companies’ cooperation. The successful tender of the Gazprom stake brings relief to the cash-strapped Russian government, which is battling a deep economic crisis and has $17.5 billion in foreign debt payments due in 1999. According to German press reports, Ruhrgas will eventually hold a 4 percent stake in Gazprom once both companies have set up a joint venture. (DJ)

September 10, 1999 Creditors of the Russian oil company Sidanco agree to liquidate the company, dealing a blow to BP Amoco’s efforts to keep Sidanco, in which it owns a 10 percent stake, united. BP Amoco alleges that the procedure used to make the decision to liquidate Sidanco was influenced by manipulation of the register of creditors by Sidanco’s Russian rivals. (DJ, WSJ, NYT)

November , 1999 The Russian government sells a 9 percent stake in Russia’s largest oil company, Lukoil, to a Cyprus-based firm, Reforma Investment. The Russian government had previously held a 27 percent stake in Lukoil. (WSJ)

December 21, 1999 The Export-Import Bank drops a proposed $500 million loan to Russia’s Tyumen Oil after Secretary of State Madeleine Albright exercises her statutory authority to block the transaction. The loan had been controversial in part because of Tyumen Oil’s dispute with BP Amoco over the bankruptcy of Russian oil firm Sidanko, in which BP Amoco owns a major stake. BP Amoco and Tyumen Oil later settled the dispute on December 23. (DJ)

March 23, 2000 Russia’s Lukoil announces the discovery of as much as 2.2 billion barrels of new oil reserves in the Russian sector of the Caspian Sea. (WSJ)

March 26, 2000 Vladimir Putin is elected president of Russia on the first ballot, winning 53 percent of the popular vote. Putin took office as acting president in December 1999 after the resignation of Boris Yeltsin. (DJ)

May 21, 2000 Russian President Vladimir Putin appoints Alexander Gavrin as Minister of Energy. Gavrin, a former Lukoil executive, replaces Victor Kalyuzhny. Putin also abolishes Russia’s State Committee on the Environment, transferring its functions to the Ministry of Natural Resources, which licenses oil and gas development. (WSJ, WP)

September 19, 2000 The Russian government sells off an 85 percent stake in the oil company Onanko for nearly $1.1 billion to a company affiliated with Tyumen Oil. The Tyumen bid beat a lower bid from a consortium including Yukos Oil and Sibneft. (DJ)

November 3, 2000 Russia’s Lukoil announces that it will purchase Getty Petroleum Marketing of the United States for $71 million. Lukoil eventually intends to switch Getty’s 1,300 retail outlets in the Northeastern and Middle Atlantic states to the Lukoil brand name. The purchase represents the first takeover of a publicly traded American company by a Russian firm. (DJ)

November 30, 2000 Russia’s Finance Minister Alexei Kudrin announces that an investigation by Russian tax officials has found widespread evidence of tax evasion by Russian oil companies, estimated to cost the Russian government $9 billion annually in lost revenues. Russian oil companies account for about 40 percent of Russia’s hard currency export revenues and 25 percent of the Russian government’s tax revenues. (NYT, WSJ, DJ)

April 22, 2002 Russia’s largest oil producer, OAO Lukoil, unveils a restructuring plan that aims to double the company’s output by 2010. In addition to investments in new fields, the company also plans to increase output by outsourcing its drilling and well-management to oil services companies. The company plans to increase production 20% this year alone, to 1.4 million barrels per day. (WSJ)

November 27, 2002 Officials of four of Russia’s largest oil companies, Lukoil, Yukos, Sibneft, and Tyumen, announce a preliminary agreement for a joint project to build a $1.5 billion dollar Arctic oil port near the town of Murmansk. This would enable Russia to expand ocean-going tanker exports. (WSJ)

December 4, 2002 The government of Russia sells off 5.9 percent of Lukoil for $775 million, further privatizing the oil company and giving the government additional funding to service the foreign debt. (Reuters)

February 11, 2003 BP invests $6.75 billion in Russia by creating a new joint venture company with TNK (Russia’s fourth largest oil company) and Sidanco, of which BP already held a 25% stake. BP will have a 50% stake in the new company. TNK’s shareholders, investment groups Alfa Group and Access-Renova, will hold the other 50% stake of the new firm, and board control will be balanced equally. The investment by BP is equivalent to almost 10% of Russian foreign exchange reserves and around 1.5% of Russian gross domestic product (GDP). (Reuters)

February 14, 2003 The lower house of the Russian Parliament (Duma) approves legislation that will allow the breakup of the Russian electricity monopoly, Unified Energy System. Although it is still unclear what will happen to shares after the breakup, eventually Russia’s electricity sector will be reorganized into groups of power producers, distributors, and sales units. The government will retain control of the grid itself. Unified Energy System’s grid is the largest in the world. (NYT)

April 17, 2003 The Russian government is instructed by Prime Minister Mikhail Kasyanov to begin preparing a feasibility study for the construction of a privately-owned $4.5 billion oil pipeline to Murmansk and an oil terminal there. The planned pipeline would carry about 2.4 million barrels per day of crude oil from the Urals oil production region. This would be the first privately-owned pipeline in Russia. (NYT)

April 22, 2003 Yukos Oil Company and Sibneft, Russia’s first and fifth largest oil companies, respectively, in terms of production, announce that they will merge in a deal in which Yukos will pay $13 billion in cash and stock for Sibneft. The new company will be the world’s fifth-largest publicly traded oil and gas company, with a production of 2.4 million barrels per day. The new company plans to become a major player outside of Russia as well. (NYT, WSJ)

April 28, 2003 Russian oil company Lukoil announces that its proven oil and natural gas reserves have risen 15% over the past year through acquisitions and discoveries and that its reserves are now the second-highest held by a non-state-owned company in the world. The company, as of January 2003, had proven reserves of 19.3 billion barrel of oil equivalent compared with 16.8 billion as of January 2002, including 15.3 billion barrels of crude oil and 24.2 trillion cubic feet of natural gas. (Reuters)

May 28, 2003 Yukos of Russia signs a $150 billion agreement with China National Petroleum Company (CNPC), wherein CNPC agrees to purchase 5.13 billion barrels of oil between 2005 and 2030 via a $2.5 billion pipeline from Russia’s Western Siberia fiel

August 14,2003 Russia approves a $13 billion merger between Yukos and Sibneft, creating “YukosSibneft,” Russia’s first “supermajor” and one of the world’s largest publicly traded oil companies. (WMRC)ds to China’s Daqing field. (Reuters)

Dow Jones (DJ), Energy Alert (EA), Energy Market Consultants (EMC), Herold’s Oil Headliner (HOH), New York Times (NYT), Platt’s Oilgram News (PON), Reuters (REU), the Wall Street Journal (WSJ), and the Washington Post (WP).

In the early 1990s the newly democratic Russian government conducted a number of privatization auctions to divest itself of the money losing and obsolete industrial factories, the State could no longer afford to run. In a characteristically Russian style the dinosaurs of the Soviet industrial era were sold in secretive auctions at fire sale prices to politically connected interest groups. The bidding involved time tested auction frauds, forbidden even on Ebay Internet bazaar: bid shielding, denial of access, sniping, collusion, closed-door political maneuvering, bribery and death threats.

From the winners of such auctions arose a unique social class of Russians, the oligarchs. The new Super-Russians were granted political and economic power, unprecedented in post-Soviet Russian history. They proceeded to siphon capital from the productive properties so generously gifted to them, directing hard currency away from Russia and into the Swiss banks, shady offshore companies, and Western investment management firms. The oligarchs made news buying Rolls Royce cars, sports teams and castles in Europe, and vacation homes all over the world.

The oligarchs also managed and operated their holdings, with varying degrees of success. By far the most triumphant of such ventures was the OAO NK YUKOS. One of the world’s largest non-state oil companies, Yukos had proven oil reserves of 14.7 billion barrels, employed 100,000 people, pumped 1.6 million barrels a day (2% of world output), and had shares listed in on stock exchanges in Russia, Germany, England and the USA.

MFO Group Menatep, an investment holding company created by Mikhail Khodorkovsky had controlling interest in the company and held 61% of its stock.

Group Menatep attracted top Western talent to reorganize, modernize and expand the company, increased production to 591 million barrels in 2003, secured financing from Societe Generale and other foreign banks, and created one of the world’s largest oil producers by completed the first merger of formerly State owned oil companies: Yukos and Sibneft. Western investors observed in wonder as Yukos achieved previously unseen in Russia standards for honorable business practices and financial transparency. Yukos published independently audited financial statements, issued securities in America and Europe, and even funded a private pension plan for its 100,000 employees.

Foreign investors lent over $1.2 billion to Yukos and bought up about 20% of the company’s common stock.

Like all good things in Russia, this era of wealth building came to an abrupt halt when the oligarchs broke the sacred covenant with the Russian government – the oath of loyalty. Wealth and politics are intimately intertwined in Russia, where capital is skillfully and secretively deployed to achieve political influence, which in turn is used to increase and perpetuate wealth. The oligarchs made a fatal mistake of threatening President Putin’s power by funding dissident political parties like the liberal Yabloko group lead by Grigory Yavlinksy, who has openly criticized the government.

Since the beginning of time the goal of perpetuating its power was of primary importance to the ruling party. Everything else, including effective administration of the government came secondary.

Putin declared war on its unfaithful Oligarchs with the July 2003 arrest of Group Menatep director Platon Lebedev. He was charged with defrauding the state in the 1994 privatization sale of Apatit fertilizer manufacturer. A week later KGB raided Yukos offices removing computers and documents. On October 25, 2003 masked gunmen arrested Yukos CEO Mikhail Khodorkovsky on a business trip to Siberia. He was charged with fraud and tax evasion and jailed in Moscow. In December 2003 the government demanded $3.5 billion in back taxes from Yukos. On March 4, 2004 Stephen Curtis, who replaced Platon Lebedev as Group Menatep director after Mr. Lebedev’s arrest on fraud and tax evasion charges are killed. Witnesses reported that a helicopter carrying Mr. Curtis from London exploded in midair. Prolonged imprisonment and brutal treatment of Mrs. Lebedev and Khodorkovsky brought about dramatic overseas flight of other Yukos managers.

With opposition on the run, the Russian government began to dismantle the oligarchic empire with nationalization of Yuganskneftegaz unit, which delivers 60% of Yukos’ oil production, in the best traditions of Cuba’s Fidel Castro.

On December 19 a previously unknown BaikalFinansGroup won Yuganskneftegaz in a circus-like state sponsored auction for about $9.3 billion. Why did BaikalFinansGroup win? Well, it was the only one bidding. State controlled oil and gas giant Gazprom declined to bid, while British Petroleum, Shell and ExxonMobil were not invited.

Three days later BaikalFinansGroup was purchased by State owned oil company Rosneft, which is being folded into Gazprom. The transaction effectively nationalized Yuganskneftegaz.

Very little is known about BaikalFinansGroup, but bits and pieces journalists did dig up create more questions than they answer. Operating out of a vodka bar located at Novotorzhskaya 12b, in the provincial town of Tver, BaikalFinansGroup was nevertheless able to quickly secure a $1.7 billion loan from the state-owned Sberbank Savings Bank as a down payment for participating in the auction. Meanwhile Russian government controlled gas giant Gazprom, the only other bidder permitted to attend the auction, was unable to secure financing from Societe Generale led group consortium of Western banks.

Surprising coincidence is that Russia’s fourth biggest energy supplier Surgutneftegaz, located directly across the Siberian River Ob from Yuganskneftegaz, has business interests in Tver. Rumor had it that Surgutneftegaz managers Igor Minibayev and Valentina Komarova represented BaikalFinansGroup at the Yuganskneftegaz auction.

Having won Yuganskneftegaz for $9.3 billion, about half the company’s estimated value, BaikalFinansGroup had 14 days to come up with the money. Wild speculations as to the source of funding include “The Chinese Connection”. Russians have a history of amazing generosity demonstrated by the sale of Alaska, packed with treasures of natural resources from oil to uranium. Why not sell Siberia to the Chinese: they need the raw materials and can afford to pay. According to Russia’s Finance Minister Mr. Alexei Kudrin, China, who had long-term delivery contract with Yuganskneftegaz, had put up $6 billion to help fund Rosneft’s purchase of the company. An unnamed consortium of Russian banks, likely consisting exclusively of the state-owned Sberbank Savings Bank funded the balance.

Dismantling of the oligarchy by Putin commenced, with the Russia’s second largest cell phone carrier, Vimpel Communications under attack. Defending the oligarchs position  was Mikhail Fridman’s Alfa Group Consortium, one of Russia’s largest holding companies with interests in oil and gas, banking, insurance, retail trade, telecommunications and technology assets.

President Putin’s stated goal has been to destroy “an economic empire which had certain strategic goals of political influence.” In so doing the Russian government effectively transformed Russia from an oligarchy into a monarchy with President Vladimir Putin sporting the crown.

Benefiting from skillful injection of Western capital and management talent, the failing State owned dinosaurs of soviet industry have evolved into well-functioning and profitable competitive business enterprises. With some oligarchs locked up in Moscow jail and others watching helplessly from abroad, Putin wasted no time in taking back control of mining and manufacturing, media communication and banking, as well as strategic energy resources. Hard currency revenues from exports of products as well as raw materials like oil and gas will further enhance the political power of the Russian government.

Western investors, having a blissfully short memory, failed to heed the painful lessons of 1998 Ruble devaluation and almost total default on Russia’s sovereign debt.

The investigation by police in several countries into alleged money-laundering by Russian organised crime through the Bank of New York (BoNY) and other big western banks has illuminated some important issues and obscured others.

Firstly, the scandal highlighted the desperation with which the grandest of the established western banks sought to lend money into Russia. The New York Times described how the BoNY “aggressively pursued relationships with Russia’s largest banks”, and came to dominate the “highly competitive market” in setting up cash and securities accounts for Russian banks in the US. In other words the impetus for the growth of Russian debt came not from Russia but from the heart of capitalism; it was a phenomenon intrinsic to capitalism, not an aberration.

Secondly, the scandal underlined just how direct was the connection between the high priests of US capitalism and the Russian financial oligarchy. For example Natasha Gurfinkel, who resigned as head of the BoNY’s Eastern European department, was appointed specifically because of her access to the Russian financial oligarchs, chiefly the empires of Mikhail Khodorkovsky (the now-collapsing Menatep bank group) and Vladimir Vinogradov (the Inkombank group, which collapsed last year). The fact that not only banks but also international financial institutions were attendant on the oligarchy’s birth is emphasised by the biography of Gurfinkel’s husband Konstantin Kogalovsky. In 1991 he was Russia’s representative to the International Monetary Fund, and a member of the “St Petersburg clan” headed by Anatoly Chubais, on whom the monetarist gurus of Harvard University relied to impose “shock therapy” on Russia. In 1993 he left the government and joined Khodorkovsky’s Menatep, the most parasitic of Russia’s parasite banks; when Menatep acquired control of Yukos, Russia’s second largest oil company, Kogalovsky became Yukos’s vice chairman. Kogalovsky “has been widely portrayed as a reformer who sold out his ideals to make his fortune”. Actually the making of fortunes by the oligarchy was very much in line with the “ideals” of “shock therapy” imparted to the “reformers” by Harvard. Those “ideals” well express the immorality and inhumanism of late 20th century capitalism; the way that the oligarchy made its fortunes – by playing tricks with money looted from the state, and leeching on Russia’s wealth of natural resources – is not an especially Russian phenomenon but one typical of capitalism at its present stage.

Of the issues obscured by the money laundering scandal, the most important is this: the specific criminal activity of money laundering is just one part of capital flight, which is a central aspect of the reintegration of the Russian economy into world capitalism. Capital flight, i.e. the flight of capital into assets denominated in foreign currencies and usually held abroad, is variously estimated at between $150 billion and $200 billion for the period since the collapse of the USSR in 1991. This is much more money than came into Russia in loans, for example, as John Odling-Smee, the senior IMF official in charge of Russia and Eastern Europe, admitted.

The West’s Media Delusions

November 23, 2016

by James W. Carden

Consortium News

In a wide ranging and necessary survey of Russian political programming, Dr. Gilbert Doctorow, observes that:

“The charges — that Russian media are only an instrument of state propaganda directed at the domestic population to keep Russian citizens in line and at foreign audiences to sow dissent among Russia’s neighbors and within the European Union — are taken as a matter of faith with almost no proofs adduced. Anyone who questions this ‘group think’ is immediately labeled a ‘tool of Putin’ or worse.”

Dr. Doctorow has launched an important conversation in light of the release of yet another alarmist media report, this time by a British neoconservative group named (oddly) after a long deceased Democratic Senator from Washington State (Henry “Scoop” Jackson), which seeks to stifle debate on Russia policy in the West by smearing dissenters from the Russia-bashing conventional wisdom as “Putin’s useful idiots.”

Doctorow’s experience with the Russian media therefore serves a double use: to combat willful Western misconceptions of the Russian media landscape as well as to serve as a useful point of comparison with U.S. media outlets and their coverage of Russia.

If we take the example of the purportedly liberal cable news outlet MSNBC, we find, paradoxically, that the hard-right neoconservative stance toward Russia goes virtually unopposed. Regarding Russia, in comparison with their principal center-left cable news rival CNN, which, to its credit occasionally makes room for the minority “detente” point of view, MSNBC leaves about as much room for dissent as the Soviet-era Pravda – actually, perhaps less.

New McCarthyism

As it happens, there was a similar disparity when it came to the way the two networks covered the U.S. presidential election. While CNN went about bringing much needed balance to its coverage, albeit in the most inept way possible – by hiring paid flacks from each of the campaigns to appear alongside actual journalists, MSNBC (like Republican rival FOX News) wholly dispensed with any pretense of objectivity and served as little more than as a mouth piece for the disastrous Clinton campaign.

As such, the “liberal” network found itself in the vanguard of the new McCarthyism which swept the 2016 campaign, but which has, in fact, been a feature of the American debate over Russia policy since at least the beginning of the Ukraine crisis in late 2013 – if not earlier.

Examples abound, but perhaps the most striking case of the neo-McCarthyite hysteria which MSNBC attempted to dress up as its legitimate concern over U.S. national security was a rant that Rachel Maddow unleashed on her audience in June when Maddow opened her show with a monologue dedicated to the proposition that Donald Trump was in league with Vladimir Putin.

Maddow, in her signature smarter-than-thou tone, informed readers that the “admiration” between Putin and Trump “really is mutual. I mean, look at this headline, ‘Putin praises Trump. He`s brilliant and talented person.’ ‘Putin praises bright and talented Trump.’ ‘Vladimir Putin praises outstanding and talented Trump.’ There was some controversy over how to exactly translate Putin`s remarks, but Putin took care to flatter Donald Trump publicly, exactly the way Donald Trump likes to be flattered, and that`s apparently enough for Donald Trump, that`s all he needs to hear, that`s all he needs to know, to tell him, how great Vladimir Putin is.

“Putin likes Trump, he must be smart, must be great. So, that is the very, very unusual context here, that you have a Republican presidential nominee who is very, very susceptible to flattery. It`s the most powerful thing in the world to him. If you compliment him, he will never forget it and that`s kind of all he needs to know about you.”

Maddow went on in this vein for quite a while longer (meaning: little actual content but lots of “very, very’s” and eye-rolling). But her central insight, such as it was, was little more than a regurgitation of Democratic National Committee talking points. To no one’s surprise, Maddow’s accusations were repeated almost verbatim in the press releases issued by the Clinton campaign which accused Trump of being little more than a Russian fifth columnist.

Maddow’s evidence-free, innuendo laden June rant took on an added importance because she was the messenger. After the risible, self-important sports journalist Keith Olbermann left the network in 2011, Maddow took over as the network’s house intellectual. So her words carry weight with its viewers in a way, say, Mika Brzezinki’s do not.

Nevertheless at no point at which I am aware did Maddow ever host a guest who pushed back against the still unproven charges that the Russian government had interfered in the U.S. election or that Donald Trump was, in the words of former CIA functionary Mike Morell, an “unwitting agent of the Kremlin” – never mind that as recently as Nov. 15, Senate Foreign Relations Committee Chairman Bob Corker admitted he had “no proof” of Moscow’s interference in the U.S. election.

While it is unclear whether MSNBC’s Joy Reid is seen as “serious” a voice as Maddow, it is unquestionable that she has emerged as the network’s most enthusiastic practitioner of the new McCarthyism.

Days before the election Reid hosted Newsweek’s increasingly unhinged Kurt Eichenwald and former Naval officer Malcolm Nance who has repeatedly and without evidence claimed the Wikileaks-Podesta emails were fake.

Why, asked Reid, are the Russians backing Trump? As if that assertion was beyond dispute. Well, said Eichenwald, “They hate Hillary Clinton…” Oh. Reid then went on to wonder why the FBI is down-playing the intelligence community’s allegedly deep concern that Russia was interfering in the election.

Putin-Bashing

Days later, right after the election, Reid re-assembled a panel featuring Nance, the reliable Putin critic Nina Khrushcheva and Esquire’s Charles Pierce to reinforce the message that MSNBC had been pushing since the summer: that the Russian government had its hand on the scale of the U.S. election. Pierce, in particular, was apoplectic.

That Reid’s roundtable featured Pierce made a good deal of sense. Throughout the campaign, Pierce has been determined to draw a direct link between the Trump campaign and Putin. A sample of his output helps tell the tale. On July 24, Pierce published “Donald Trump’s and Vladimir Putin’s Shared Agenda Should Alarm Anyone Concerned About Democracy” in which Pierce speculated that “Trump seems increasingly dependent on money from Russia and from the former Soviet republics within its increasingly active sphere of influence.”

In his offering of Sept. 9, Pierce protested that “It’s not ‘red-baiting’ to be concerned about Russian interference in our elections.” Pierce, perhaps moved to madness by The Nation editorial “Against Neo-McCarthyism,” sounded as though he were channeling the ghost of James Jesus Angleton, asking, “Are we supposed to believe that Donald Trump really went on RT television by accident? That nobody on his staff knew that the Russian government’s American network picks up Larry King’s podcast?”

About a month before the election, on Oct. 11, Pierce informed readers of the once-great Esquire, “Vladimir Putin Is Determined to See Trump in the Oval Office.” Still worse, according to Pierce, “There is little question now that Vladimir Putin is playing monkey-mischief with the 2016 presidential election, and that the Trump campaign is the primary beneficiary of that.”

All of the aforementioned is to demonstrate that the American media’s much touted pluralism is little more than a fiction when it comes to reporting on Russia. The diversity of Left-Right voices on the political spectrum that Doctorow has encountered in Moscow indicates that the widespread perception that Moscow’s political culture is monolithic compared to that of the Washington’s is, at the very least, challengeable.

The Science of Abrupt Climate Change: Should we be worried?

by Jeffrey Masters, Ph.D.

WU

Introduction

We generally consider climate changes as taking place on the scale of hundreds or even thousands of years. However, since the early 1990s, a radical shift in the scientific understanding of Earth’s climate history has occurred. We now know that that major regional and global climate shifts have occurred in just a few decades or even a single year. The most recent of these shifts occurred just 8200 years ago. If an abrupt climate change of similar magnitude happened today, it would have severe consequences for humans and natural ecosystems. Although scientists consider an abrupt climate change unlikely in the next 100 years, their understanding of the phenomena is still a work-in-progress, and such a change could be triggered instantly by natural processes or by human-caused global warming with little warning.

The National Academy of Sciences–the board of scientists established by Congress in 1863 to advise the federal government on scientific matters–compiled a comprehensive report in 2002 entitled, Abrupt Climate Change: Inevitable Surprises. The 244-page report, which contains over 500 references, was written by a team of 59 of the top researchers in climate, and represents the most authoritative source of information about abrupt climate change available. Most of the material that follows was taken from this report.

The Greenland Ice Sheet: The Key to Understanding Earth’s Climate Record

Ice cores hold an amazingly detailed record of Earth’s climate. Each year, snow falling on glacial areas accumulates, piling on top of thousands of years of past snow, compressing the snow into yearly layers of ice, like rings inside a tree trunk. Preserved in the ice are tiny bubbles of ancient air that tell us the composition of the atmosphere at that time. The amount of dust in the snow tells us how windy the climate was. The thickness of the layer tells how much precipitation fell that year. Most importantly, the amount of the “heavy” isotope of oxygen, 18O, lets us infer the average atmospheric temperature, since water vapor with “heavy” 18O molecules condenses out of clouds more readily at cold temperatures.

Accessing this treasure-trove of climatic information is a huge undertaking–cores of ice must be drilled miles deep in some of the most inhospitable places on Earth. In 1989 the National Science Foundation funded the $25 million Greenland Ice Sheet Project II (GISP2) to drill an ice core through the entire two mile depth of the Greenland ice sheet. At the same time, a separate European project (GRIP), drilled through the ice just 20 miles away, providing a crucial independent check of the GISP2 data. By 1993, both the GRIP and GISP2 drills had hit bedrock, and two miles of ice cores, preserving 110,000 years of climate history in year-by-year layers, were taken to laboratories for analysis.

What the scientists found was surprising and unnerving. They had known from previous ice core and ocean sediment core data that Earth’s climate had fluctuated significantly in the past. But what astonished them was the rapidity with which these changes occurred.

Ocean and lake sediment data from places such as California, Venezuela, and Antarctica have confirmed that these sudden climate changes affected not just Greenland, but the entire world. During the past 110,000 years, there have been at least 20 such abrupt climate changes. Only one period of stable climate has existed during the past 110,000 years–the 11,000 years of modern climate (the “Holocene” era). “Normal” climate for Earth is the climate of sudden extreme jumps–like a light switch flicking on and off.

Temperatures in Greenland over the past 100,000 years

Average Yearly Temperatures in Greenland over the past 100,000 Years as inferred from Oxygen isotope analysis of the GISP2 Greenland ice core. Source: Cuffey, K.M., and G.D. Clow, “Temperature, accumulation, and ice sheet elevation in central Greenland throughout the last deglacial transition”, Journal of Geophysical Research, 102, 383-396, 1997.

The ice core record showed frequent sudden warmings and coolings of 15°F (8°C) or more. Many of these changes happened in less than 10 years. In one case 11,600 years ago, when Earth emerged from the final phase of the most recent ice age (an event called the Younger Dryas), the Greenland ice core data showed that a 15°F (8°C) warming occurred in less than a decade, accompanied by a doubling of snow accumulation in 3 years. Most of this doubling occurred in a single year.

What causes abrupt climate change?

Current theories on the cause of abrupt climatic change focus on sudden shut downs and start-ups of the Meridional Overturning Circulation (MOC) (also referred to as the thermohaline circulation), which is a global network of density-driven ocean currents. The Meridional Overturning Circulation transports a tremendous amount of heat northward, keeping the North Atlantic and much of Europe up to 9°F (5°C) warmer, particularly in the winter. A sudden shut down of this current would have a ripple effect throughout the ocean-atmosphere system, forcing worldwide changes in ocean currents, and in the path of the atmospheric jet stream. Studies of North Atlantic Ocean sediments have revealed that the Meridional Overturning Circulation has shut down many times in the past, and that many of these shut downs coincide with the abrupt climate change events noted in the Greenland ice cores.

How does one shut down the Meridional Overturning Circulation? First, one must examine the MOC itself. The MOC, or Great Ocean Conveyor Belt , is a system of interconnected ocean currents that girdle the planet.

Great Ocean Conveyor Belt

The Great Ocean Conveyor Belt Source: IPCC

At the surface, warmer ocean currents are driven by the winds, and so move parallel to the wind direction, except where continental land masses block the way.

Water can also move vertically in the ocean. High density water sinks, and low density water rises. Salty water is more dense than fresh water, and cold water is more dense than warm water, so that wherever we find cold, salty water, it tends to sink. Colder currents are deeper and have higher salinity.

In the tropical Atlantic, the sun’s heat evaporates large amounts of water, creating relatively warm, salty ocean water. This warm, salty water flows westward toward North America, then up the East Coast of the U.S., then northeastward toward Europe, forming the mighty Gulf Stream current. As this warm, salty water reaches the ocean regions on either side of Greenland, cold winds blowing off of Canada and Greenland cool the water substantially  These cool, salty waters are now very dense compared to the surrounding waters, and sink to the bottom of the ocean. Thus, the oceanic areas by Greenland where this sinking occurs are called “deep-water formation areas”. This North Atlantic deep water flows southward toward Antarctica, eventually making it all the way to the Pacific Ocean, where it rises back to the surface to complete the Great Ocean Conveyor Belt. It takes about 1000 years for the water to make a complete circuit around the globe.

Since the Great Ocean Conveyor Belt is driven in part by differences in ocean water density, if one can pump enough fresh water into the ocean in the key areas on either side of Greenland where the Gulf Stream waters cool and sink, this will lower the ocean’s salinity (and therefore its density) enough so that the waters can no longer sink. As a result, the Atlantic conveyor belt and Gulf Stream current would shut down in just a few years, dramatically altering the climate.

How much fresh water is needed to shut down the MOC?

It is unknown precisely how much fresh water is needed to shut down the MOC. Scientists are fairly certain that the last two abrupt coolings seen the Greenland ice core, the “Younger Dryas” event and the “8200 years before present” event,both occurred when huge North American glacial melt-water lakes flooded down the St. Lawrence River into the North Atlantic when the ice dams restraining the lakes broke. The sudden addition of low-density fresh water presumably partially or totally stopped the sinking of ocean waters in the North Atlantic, slowing or completely stopping the Meridional Overturning Circulation. Once the fresh water got into the North Atlantic, it stayed, puddling on top of the ocean and freezing in winter. The Meridional Overturning Circulation stayed shut off for about 1100 years during the Younger Dryas event, then suddenly restarted, for reasons scientists don’t understand. Current computer models of the climate cannot reproduce the observed sudden shut-down or start-up of the Meridional Overturning Circulation at the beginning and end of the Younger Dryas period.

Other sudden shut downs of the Meridional Overturning Circulation observed in ice core and ocean sediment records are not thought to be due to sudden melt-water floods into the North Atlantic. These events may have happened simply because Earth’s climate system is chaotic, or perhaps because some critical threshold was crossed when increases in precipitation, river run-off, and ice melt put enough fresh water into the ocean to shut down the Meridional Overturning Circulation.

How likely is it that global warming will trigger abrupt climate change?

Global warming will increase precipitation, river run-off, melting of the Greenland ice sheet, and melting of polar sea ice, all of which will increase the amount of fresh water flowing into the critical deep-water formation areas by Greenland. In the 2007 IPCC Fourth Assessment Report Summary for Policymakers it states that, based on current model simulations, it is very likely (90-99% confidence) that the meridional overturning circulation (MOC) of the Atlantic Ocean will slow down during the 21st century. It also confirms the scientific consensus that is very unlikely the MOC will undergo a large abrupt transition during this century. Today’s science is such that any long-term assessments of the MOC cannot be made with confidence. A 2012 paper in Proceedings of the National Academy of Sciences used computer modeling to show that abrupt climate events in the past occurred as a result of a change in ocean currents due to the Bering Strait closing off because of low sea levels. The Bering Strait is the 50-mile-wide gap that separates Siberia from Alaska. “As long as the Bering Strait remains open,” said lead author Aixue Hu, a climate modeler at the National Center for Atmospheric Research (NCAR), in a telephone interview posted at Climate Central, “we will not see an abrupt climate event.” With global sea levels rising due to melting icecaps, closure of the Bering Strait is not likely in the forseeable future.

How would the climate change if the Meridional overturning circulation shut down?

A shut down of the Meridional overturning circulation would suddenly decrease the amount of heat in the North Atlantic, leading to much colder temperatures in Europe and North America. A 2003 report prepared for the Department of Defense outlines what would happen if an abrupt climatic change similar to the 8200 years before present event were to recur today:

• Annual average temperatures would drop up to 5° F in North America, and up to 6° F in northern Europe. This is not sufficient to trigger an ice age, which requires about a 10° F drop in temperature world-wide, but could bring about conditions like experienced in 1816–the famed “year without a summer”. In that year, volcanic ash from the mighty Tambora volcanic eruption in Indonesia blocked the sun’s rays, significantly cooling the globe. Snow fell in New England in June, and killing frosts in July and August caused widespread crop failures and famine in New England and northern Europe.
• Annual average temperatures would warm up to 4° F in many areas of the Southern Hemisphere.
• Multi-year droughts in regions unaccustomed to drought would affect critical agricultural and water resource regions world-wide, greatly straining food and water supplies.
• Winter storms and winds would strengthen over North America and Europe.

Dr. Wally Broecker of Columbia University, the scientist who first pointed out the link between the Atlantic’s conveyor circulation and abrupt climate change, wrote a letter in March 2004 to Science magazine, accusing the authors of the study of making exaggerated claims that “only intensify the existing polarization over global warming”. Broecker argued that a global-warming induced abrupt climate change is not likely to occur until 100 years or so into the future, by which time Earth’s temperature will have warmed sufficiently to offset much of the abrupt cooling a Meridional overturning circulation shut down would trigger. Broecker added: “What is needed is not more words but rather a means to shut down carbon dioxide emissions.” The authors of the study defend their scenario thusly: “We have created a climate change scenario that although not the likely, is plausible, and would challenge United States national security in ways that should be considered immediately”.

On the freezing of the UK and Europe

The possibility of the freezing of the UK and Europe will be determined by a “tug-of-war” of sorts, between the amount of greenhouse gases and the speed with which the MOC slows down. Greenhouse gases may have more of an impact than a slowing of the MOC, simply because they are more abundant today than ever in the earth’s record. (CO2 levels were at 380 ppm as of 2007, and were never above 300 ppm during the 400,000 years studied in Antarctic ice cores).

Ocean experts see the MOC as having three levels: “faster”, “slower”, or “off.” A 2005 comparison of eleven climate models showed that the MOC will likely be slowed by 10-50%, however, because the levels of carbon dioxide are so elevated, any cooling produced by the MOC slowing would be modest because the greenhouse gases would more than compensate. As a result, a net warming is still shown by these models for the UK and surrounding countries. Improving our measurements to monitor the MOC will allow for better predictions and reduce uncertainty of the amount of warming or cooling these areas of northern Europe will encounter.

What is being done about abrupt climate change?

The immediate obvious needs are for accurate, long-term measurements of the temperature, salinity, and flow rates of the major ocean currents in the North Atlantic Ocean. An expedition set sail from Great Britain on Feb. 13 2004, to provide just that. The voyage was part of a joint US/UK research project called Rapid Climate Change, which began in 2001. In the U.S., Senator Susan Collins (R-Maine) sponsored bill S.1164 to authorize $60 million for the National Oceanic and Atmospheric Administration (NOAA) to study abrupt climate change. On March 9, 2004, the Senate Commerce Committee approved the bill. It defines abrupt climate change as “a change in the climate that occurs so rapidly or unexpectedly that human or natural systems have difficulty adapting to the climate as changed.” The bill would create a research program within NOAA’s Office of Oceanic and Atmospheric Research to determine what causes sudden climate changes and using computer models to predict climate change events. This bill did not pass, and there is little chance for revival. The NTSC Joint Subcommittee On Ocean Science and Technology authored an Ocean Research Priorities Plan in January 2007, providing five key elements for reducing our vulnerability to abrupt climate change. These include: daily monitoring of ocean currents, temperature, and carbon, now-casting, model development, past-climate-change reconstructions, and additional climate-impact assessments.

Conclusion

The historical records shows us that abrupt climate change is not only possible–it is the normal state of affairs. The present warm, stable climate is a rare anomaly. It behooves us to learn as much as we can about the climate system so that we may be able to predict when the next abrupt shift in climate will come. Until we know better when this might happen, it would be wise to stop pouring so much carbon dioxide into the air. A nasty surprise might be lurking just around the corner. In the words of Dr. Wally Broecker, “the climate system is an angry beast, and we are poking it.”