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Tuesday, 9 April 2013

Russian president Putin in Germany and The Netherlands: why all three countries are in it for the money.

‘We’re only in it for the money’

The last two days have brought the longawaited moment, that President Vladimir Vladimirovich Putin of Russia visited Germany and The Netherlands, for a flash meeting with a.o. Chancellor Angela Merkel of Germany and Queen Beatrix and PM Mark Rutte of The Netherlands.

The omens for this visit had not been very favourable in the eyes of the objective, Dutch and German spectators:
  • From a bright, young and well-informed president, who brought to the Kremlin the unspoken promise of a new breed of leaders for Russia, Putin has turned into a grumpy, rude, ‘mucho macho’, power politician over the years, who collected a bunch of (sometimes) dubious henchmen around him and did seemingly everything to remain in charge:
    • Putin extended the serving time for a Russian president from 4 years to 6 years; 
    • He pulled a fast-change trick with his friend, the previous President Dmitriy Medvedev, in order to be able to become Russian president for a third and fourth time;
    •  Putin has been ‘Flying with the birds’, ‘diving for treasures’ and ‘riding like a cowboy on horseback with a naked torso’, to display his physical prowess, while leaving his western counterparts flabbergasted, not knowing whether they should laugh or cry;
  • Putin’s credit in the west had slowly, but surely vanished as a consequence of:
    • The ever tighter grip of Putin on the State Duma (Russian Parliament) and on Russian politics in general, through two parties he founded over the years (Our Home Russia and United Russia) and a movement of youngsters, which sometimes operated like a bunch of strong-arm boys against Putin’s political adversaries; 
    • Putin’s general disdain for serious opposition parties and the way that he makes their opposition virtually impossible; 
    • The two gas wars with the Ukrain; 
    • The corruption of some members of Putin’s Russian goverment and the Russian officials in general; 
    • The dubious expropriations of the Western share of energy joint-ventures, between Russian companies and (a.o.) BP and Shell, in favour of the Russian state; 
    • The dubious role of Putin’s government in the death of former spy Aleksandr Litvinenko, due to polonium poisoning; 
    • The outrageous punishment of the harmless ladies’ punk band Pussy Riot; 
Russia had also its reasons to be angry with the west. Until 2009, the most important reason had been the designated missile shield that ought to be installed in Poland and the Czech Republic: officially aimed against Iranian missiles, but – peculiarly enough – in fact perfectly positioned to stop Russian missiles, when these would be fired at Western countries.

Also, the overtures made by the NATO towards Ukrain and Georgia (Russia’s backyard), upon a possible Nato-membership for these countries, outraged Putin’s government.

Besides that, there had been an increasing usage of Cold War-rhetorics against Russia in the West during the last decade, with Western politicians calling the country a.o. ‘a corrupted mafia state’ and other platitudes and unpleasant words. Often the West seems to forget, what a snake pit Russian politics can be. If you show weakness in any kind, you’re gone in Russia! This should not be seen as an excuse for Putin’s sometimes erratic behaviour, but it might help to explain it.

The ‘latest nail in the coffin’ of Russia had been the treatment of Russian savers at the Cypriot banks Laiki Bank and Bank of Cyprus, a few weeks ago. These savers lost a considerable share of their savings in the nationalization process of these two banks. This process had been spurred by the Euro-group, chaired by Dutch finance minister Jeroen Dijsselbloem.

In the aftermath of the Cypriot events, the former Russian president and current PM Dmitriy Medvedev had spoken some strong words and threats against Germany and German companies in Russia. Russia blamed especially Germany for the fact that the Cypriot banks had not been covered by the ESM (European Stability Mechanism, the emergency fund for Euro-zone countries and banks in need), while earlier rescue attempts of banks within the Euro-zone had been fully backed by the member states.

Nevertheless, although it seemed that the visit of Russian president Vladimir Putin to Germany and The Netherlands would offer a significant chance for unpleasant failure and animosity, this is not what happened.

There is probably one simple reason for this: Russia needs Germany and The Netherlands just as hard, as Germany and Holland need Russia. There is no way of denying this.

Currently, Russia suffers from the phenomena, formerly known as the ‘Dutch Disease’: due to the enormous exploration of oil, natural gas, diamonds, gold and minerals, the country has been flooded with money.

This money enabled the Russian government to let the economy grow at a large rate, by throwing money around and totally refurbishing the most important cities of Moscow and St-Petersburg: miracles were ‘ready while you wait’ and the impossible took only a little bit longer, as the oil and gas paid all bills. The last fifteen years saw the emergence of a true middle-class in these most important cities: people that made an honest buck and became able to buy some luxury and leave their moderate past behind them.

Residential and Commercial Real Estate in Moscow and St-Petersburg skyrocketed, homeowners became rich on paper and supermarkets appeared at every corner of the street, during the last ten years. Millions of Lada and Volga cars got replaced by more expensive cars of Western brands.
At the same time, the rich Russians excelled in conspicuous consumerism and ‘showing off with their luxury’ at an unprecedented scale, making Rodeo Drive in Beverly Hills look like ‘da hood’.

At the same time, the Russian government stepped in the same trap as the Dutch government did before them in the sixties and seventies: it neglected Russia’s main manufacturing industries and other drivers for real jobs and real economic growth, in favour of the ‘easy rush’ that came from the oil and gas.

Russian car brands like Lada’s, Wolga’s and the Gaz minivans, which had been sold by the millions in earlier years, got replaced by their more sophisticated counterparts from Europe, the United States and the Far East. Other Russian products also became a ‘no-no’; not only for the rich, but also for normal Russians, who preferred ‘Europeisky Kadchestva’ (i.e. ‘European Quality’) above the Russian brands that their parents grew up with.

President Putin and PM Medvedev, who are anything, but stupid, understand extremely well that their country needs Western factories and plants as a steady, future driver for Russian jobs, as the ailing Russian manufacturing industries are not able to supply these jobs anymore. This is even more urgent, now that the American ‘shale gas revolution’ hangs above Gazprom’s and Rosneft’s heads, like Damocles’ sword, possibly deteriorating future profits.

German manufacturing companies for cars (Volkswagen, Mercedes and BMW) and other manufacturers of high-tec and labour-intensive products are indispensable for future Russian growth: not only for the products that these brands produce, but also for the jobs that they can offer to the still largely poor and disillusioned Russian population.

Also (partially) Dutch manufacturing companies, like DAF trucks, Shell, Unilever, Philips, VDL, ASML and many others could offer the desperately needed jobs and economic prosperity. These jobs are especially needed in the vast regions outside Moscow, St-Petersburg and the few other cities that really count in Russia. It is at the Russian countryside, where poverty, alcohol abuse, corruption and despair lurk at every corner.

Putin and Medvedev understand that the Russian people need jobs, better circumstances of living and a future without vodka, poverty, corruption and economic hardship, to remain loyal to their politics. Large social unrest could bring a quick end to their reign, perhaps even with fatal consequences for them.

Merkel and Rutte, on behalf of their countries Germany and The Netherlands, desperately need the exports to Russia to keep their economies running.

The Netherlands suffers from economic stagnation, an ailing financial industry that is in desperate need of recapitalization, soaring unemployment and a strongly diminished domestic demand and consumer confidence, leaving the country in a state of anemic and even negative economic growth. The Netherlands is in a state of depression that it can’t get out.

Although the economic situation in Germany is really not so desperate as in The Netherlands, it still seems that the country is at a path of extremely slow economic recovery, with lots of ups and downs. Every time, when it seems that the economic crisis is finally over, the next setback occurs.

The enormous Russian market and its growth potential for the coming decades is just too big to neglect by Germany and The Netherlands. Russia imports for billions and billions of Dutch and German products and agricultural produce.

So, when Vladimir Putin entered Germany and The Netherlands, the thousands of demonstrators protested, while Mark Rutte and Angela Merkel were ‘going through the motions’: both complained about the deteriorating human rights and gay rights and the poor constitutional state in Russia.  On top of that, Merkel gave a lecture against the Russian raids on Western (German) human rights organizations, like Amnesty International and others.

Putin accepted these sermons stoically, placed a few ‘much macho’ wisecracks against German and Dutch reporters and counted his blessings: having an argument is nice, but in the end it is business that counts. And that was exactly the way that Merkel and Rutte thought about this subject too.

So, everything in the end was hunkydory between Russia, Germany and The Netherlands: business is business, y’know! 

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