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Vol. 30 No. 22 · 20 November 2008

Watching the Rouble Go Down

Keith Gessen

The financial crisis – or, as we like to call it here, ‘the effects of the American and European financial crisis on Russia’ – has taken a little while to get going, but it’s going now. Yesterday my grandmother sat me down for a serious conversation: she wanted to know if she should take her rouble-denominated life savings out of the Sberbank and put them into dollars. Everyone’s a financial adviser now. Or rather, I’m a financial adviser now. This is not good.

What should we do? My grandmother’s life savings are not very substantial. In fact she said as much: ‘Should we take my pathetic life savings out of the bank?’ My grandmother worked in Soviet publishing for fifty years, and then worked for another ten on her own as a translator. Towards the end of her translating career, when she turned 80, she had trouble sitting at the desk for too long at a time, so would lie on the couch, read a page of manuscript in the original, and then get up and translate the page from memory at her typewriter – in my opinion an excellent way of avoiding an excessively literal and lifeless reproduction. Anyway, as far as I can tell, she’s already lost her savings a few times thanks to various devaluations – in 1990 and 1998 – and to one early 1990s pyramid scheme. So it’s a miracle she has any money to lose at all, but she does, and now she’s worried about it. The Sberbank is around the corner. The question is: do we start a run on it?

I’m in Moscow for the year to keep my grandmother company and be generally helpful – go to the vegetable market, close the windows at night, that sort of thing – though I didn’t expect to be spending quite this much time checking the status of rouble futures on the Chicago Mercantile Exchange. When I left the States, in early September, the Dow was going into free fall; when I got here, the Russian stock exchanges were falling too, but aside from that the situation was calm. Earlier in the year, Russia’s finance minister, Alexei Kudrin, had called the country ‘an island of stability in the worldwide turmoil’. This soon proved unrealistic, though many clung stubbornly to the notion. In late September the pro-Kremlin political analyst Vyacheslav Nikonov explained the world crisis (and its effects on Russia) on an evening news show; why, he was asked, can’t Russia break away from the failing global financial system? Nikonov, the grandson of Vyacheslav Molotov, Stalin’s foreign minister, smiled indulgently. ‘In the age of globalisation, everyone is connected to everyone,’ he said. His interlocutor, the host of the show, was not going to be put off by this pabulum. ‘Then why can’t we lead and they follow?’ he demanded. Nikonov’s smile froze on his lips; it was one of those moments in the life of a pro-Kremlin analyst when he has to say something against his intellectual conscience. Which was: ‘For that to happen . . . we’d have to become a global financial centre.’ Even the host could tell that Nikonov didn’t think a country whose inscrutable laws were so liberally interpreted by corrupt bureaucrats stood very much chance of becoming a global financial centre. ‘But,’ the host pursued, ‘when last year we proposed a new’ – he meant non-Nato – ‘European security arrangement, people laughed. Now we’re proposing it again and it’s being taken quite seriously.’ ‘Yes,’ Nikonov readily agreed, moving onto the more solid ground of nationalist propaganda. ‘The August events in Georgia solidified our standing in Europe. We are more respected now.’

This has been the nature of the Russian reaction to the crisis: a combination of denial, bluff assertion and split consciousness. The split consciousness is institutionalised in the media. It’s not as though the crisis has been a secret: the Moscow Times, an English-language daily and longtime flagship of the Anglo-American business and diplomatic community, has been writing about nothing else since I got here, and Kommersant and Vedemosti, the country’s two best business papers, as well as the two best papers full stop, have been covering it carefully. A few weeks ago Kommersant reported that someone had been unable to withdraw money from a Globex cashpoint in Moscow, causing, at the very least, panic among journalists who went out on the town to find other people having similar trouble (they couldn’t). The influential website has been running online chats with highly placed financial people, among them the very angry president of the Association of Russian Banks. Question: ‘I’ve transferred all my savings to Sberbank. Was that the right thing to do?’ Answer: ‘While you’re at it you should take all your furniture down to the train station and stick it in left luggage.’ (Sberbank, being government-owned, is not liked by the Association of Russian Banks.)

The guys I play hockey with, a number of whom are bankers, know about the crisis. ‘We could start farming,’ one of them suggested a while ago as we sat in the locker room after another loss to our rivals.

‘I have a balcony. We can raise a goat.’

‘Or mushrooms. We could grow psychedelic mushrooms.’

‘No, the FSB controls that market. The minute you came out with your mushrooms they’d be visiting you.’

‘Gentlemen!’ Our captain wanted us to get back to business. ‘There is a financial crisis. But we are also in a hockey crisis.’

‘We’re better off with a goat,’ the first banker continued. ‘It will give you milk – and progeny!’

And the stock market – boy, the stock market. The two Moscow stock exchanges, the Moscow Interbank Currency Exchange, which deals in roubles (MICEX), and the Russian Trading Stock Exchange, which deals in dollars (RTS), began losing value over the summer, after international investors got nervous: first there was a conflict over the future of a BP joint venture in Russia; then there was the war with Georgia; and finally Putin’s Putinesque suggestion that the recalcitrant owner of Russia’s largest mining company should watch his health, ha ha. But since the collapse of the American stock indices the Russian exchanges have been plummeting. In fact over the past few weeks they’ve been shut down more often than they’ve been working: trading is suspended whenever either exchange moves 10 per cent up or down. Naturally, this doesn’t make anyone any calmer. Every time the regulators open the markets, they start falling again.

The tiny anti-Kremlin parties are doing their bit to address the crisis: the National Bolshevik Party has been putting fliers on cashpoints around Moscow: ‘Take your money, citizen, before it’s too late!’ But television doesn’t know it exists – or, as Vedomosti politely put it, ‘doesn’t wish to worry the populace unnecessarily’. Television knows about the perfidious pro-Western president of Ukraine, Viktor Yushchenko, who’s been selling weapons, it turns out, to anyone who asks (including Georgia and Somali pirates). Television knows about the important work of Prime Minister Putin, who visits factories, and President Medvedev, who meets political figures in the Kremlin. And television knows about the crisis abroad: the troubles in the US, the troubles in Europe, the troubles in Iceland (which wants to borrow money from the Russians). It knows that whatever effect all these things may have on Russia, Putin and Medvedev are on the case.

Medvedev is shown a lot on television, about as much as Putin, and usually just before him in each newscast. He is young, in his early forties, but surprisingly lethargic. He’s managed to pick up the Putin manner of seeming annoyed when he has to explain anything, but he talks in a sleepy way, often ducking his head into his chin at the end of a sentence. It’s as if he’s worried the batteries placed in him at the beginning of the day by Putin’s people might run out. He was supposed to give his first State of the Union address two weeks ago but the address was postponed to give him time to ‘work on a new draft’. It’s hard to imagine Putin – who, in the grand tradition of the Soviet nomenklatura, submitted a plagiarised thesis for his master’s degree – working on a draft of anything, but the Kremlin likes to show photos of Medvedev at his computer. So it’s easy enough to imagine him being sent to his room to improve his State of the Union address while serious men take care of serious business.

To be fair to Putin-Medvedev, this may be for the best, at least as far as my grandmother’s life savings go. The Russians get to worry about other countries in crisis (the way they worried about Americans after 11 September, despite having a much more serious domestic terrorism problem), and meanwhile keep their money in the bank, and, most important of all, keep it in roubles. Because the rouble, for the moment, is the biggest problem facing the government. If oil prices fall too low and the rouble fails, as it did in 1986 (though this was kept secret) and in 1998, and if the coal miners go on strike again because they haven’t been paid and block the trans-Siberian Railway, savings will be wiped out. This would be a national humiliation – something more destabilising to regimes, as the Putinists know, than mere economic collapse. A few weekends ago there were rumours that the rouble’s collapse was imminent, and the dollar started climbing away from the official rate at the independent currency exchange kiosks around town. Reporting on the rumours the next day, Kommersant quoted a banker saying that Russians had a ‘genetic’ memory of 1998, and were being told, by their genes, to go and buy dollars. Except the truth is that Russians have an actual memory of 1998. Even I have an actual memory of 1998. The collapse of a national economy is not a pretty thing, and it was at this point – the end of the Yeltsin era – that the American commentariat began wondering ‘who lost Russia?’ as if Russia was a hat someone had left at a party or a child who’d wandered off at the fair.

Kudrin has been insisting that the government will do everything it can to keep the rouble steady, and I want to believe him. December rouble futures on the CME have the rouble at 28 to the dollar – it’s currently at 27. And inflation is temporarily under control. A few weeks ago my grandmother noticed that the price of the poppy-seed pie she likes had gone up 12 roubles (50 cents); then, having forgotten this, she proceeded to notice it again and again for the next week. It was hyperinflation! But in fact the price of the poppy-seed pie had gone up, once, to 95 roubles, and stayed there.

By now information on the crisis is just about everywhere. The other night I saw a subway worker reading Moskovsky Komsomolets. ‘Oy, chto budet!’ said the front page of the tabloid. ‘No ne defolt’ – ‘OMG! But no default.’ Meanwhile, in the Moscow Times, a melancholy item from the Bloomsberg wire service: Russian oligarchs have lost $237 billion, or 62 per cent of their wealth, on the Russian stock exchange in the past five months. It’s a lot of money, but it’s also a psychological blow. Russians are proud of their oligarchs. In September, Roman Abramovich’s girlfriend set up a large retrospective for the conceptualist artists Ilya and Emilia Kabakov at her new exhibition space, Garage. Pyotr Aven, the president of Alpha Bank, made news with a controversial book review of Zakhar Prilepin’s Sankya, a fictionalised account of the anti-Kremlin National Bolshevik Party. And Mikhail Prokhorov, the former Norilsk nickel magnate, launched the first issue of a new magazine for the transcontinental Russian elite, called Snob. It comes in a sort of box, which unzips in front like an expensive dress, and costs $20.

No default = no problem, at least for the moment. My local Coffee Bean still serves its $4 cappuccino to a packed house, and down the street Coffee Mania is filled with people drinking $9 cappuccinos. And if some of the absurdly overpriced restaurants and boutiques that have continued opening in Moscow over the past decade close, we’ll get over it.

It helps too that this time Russia is not in it alone. Watching Putin these past few weeks has been unpleasant but riveting. The other day he was talking to the Chinese, arguing that Russia and China (and Vietnam and Belarus) should consider conducting their transactions in roubles. (The Chinese said they’d think about it.) In early October, he held a meeting with a group of Communist politicians and gave them, as is his wont, a hectoring speech. He has a high, screechy voice, with the slightly lazy pronunciation that is the hallmark of the Russian bureaucratic-criminal class, and every time I’ve seen him on television recently he’s been leaning forward in a threatening way and enunciating every syllable as if he were speaking to idiots. He brushed aside the Communists’ demands and then, warming up to things, began to talk about the United States. ‘There is no question that the age of American power is finished,’ he said. ‘The time when they were a model of democracy, and a leader of the world, is over.’ And you began to think that if the Russian stock market had to all but disappear; if Putin’s friends the oligarchs had to lose 230 billion dollars; if eventually this meant that certain supply chains were going to be disrupted and people might have trouble finding food a few months down the line – well that would be a pretty small price to pay if only we could stop listening to those self-righteous fucking Americans.

What would it take for this regime to stumble? People have been saying for a long time that Putin will not be tested until oil prices fall. Now oil prices are falling, and Putin-Medvedev are mostly blaming the United States and stoking up anger at Ukraine’s president. If oil prices keep falling, their magnificent cash reserves – $500 billion before the current crisis – could, in a country of 140 million people, turn out to be less handy than they’d thought. There is right now no movement and certainly no political party that could challenge the Kremlin – the Kremlin has spared no money or effort in making sure of that. This week Eduard Limonov, the charismatic poet and cult-like leader of the National Bolshevik Party, wrote up his impressions of a party held to celebrate the courageous radio station Ekho Moskvy. Across the crowded hall at the Prague restaurant, he saw his old friend and nemesis Vladimir Zhirinovsky, the long-time leader of the fake opposition party LDPR:

Seeing each other, we grinned, and, Vladimir Volfovich pushing aside his dinner, and I handing my glass of wine to my bodyguard, stepped towards one another and embraced.

Zhirinovsky: So your time has finally come!

Me: And yours also, Vladimir Volfovich, don’t you think?

Zhirinovsky: Yes, ours too, but you’ll precede us to the barricades . . .

Me: And you’ll follow . . .

Zhirinovsky: Yes. And you’ll all die on the barricades, and we’ll seize power.

   Me: Except we won’t all die, and we’ll seize power.

Clown, meet clown. In fact, it’s more likely that Zhirinovsky will continue meeting Limonov in the Prague restaurant while the regime does whatever it has to do.

And yet. If things are going to fall apart, Moscow could well be the place they fall apart most quickly. What happened in the years of extremely high energy prices was something more familiar than a yearning for the ‘strong hand’. The Russian people were offered a bribe and they took it. Why not? But now the bribe is running out, and anything could happen. What you realise under the giant vaulted ceilings of Garage, or simply on the streets, in the alleyways, where an ancient metropolis was once rearranged to serve the people, is that it’s happened here before.

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Vol. 31 No. 2 · 29 January 2009

Just before New Year, I went to the Sberbank and transferred my grandmother’s life savings out of roubles and into a new account denominated in dollars, as I threatened to do in my Diary (LRB, 20 November 2008). It took a while, because the Sberbank clerk wasn’t satisfied with the forms I brought authorising me to use the account: she kept calling someone at headquarters and saying, ‘I have someone here whose forms are filled out wrong. Are the forms filled out wrong?’ In the end, though, it all worked out. Since then the rouble has continued to fall, and I no longer worry about it; in truth, we should have taken my grandmother’s money out of the bank much sooner. Which reminds me. While I was standing at the window arguing with the clerk about my forms a young police officer with a Kalashnikov rushed into the bank. ‘You rang your alarm!’ he said. The clerk did not recall ringing any alarms, and certainly since I’d been there no one had tried to rob us. ‘Well,’ the officer conceded, a little sheepishly, ‘you rang it a while ago. But the traffic was very bad.’

Keith Gessen

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