Jim Rogers spoke recently in Kyiv. He has also turned cautiously optimistic about Russia:

Rogers, who last year joined the Russian state-controlled investment bank VTB Capital as an advisor after being negative on Russia for 46 years, also said he is bullish on the ruble.

Nevertheless, his essay, Across the Siberian Wastes, written in the late 90s is one of the best portrayals of post Soviet society I have read.

Here are my excerpts:

As I see it, that’s the big news out here: Very little that’s important to Moscow matters in Krasnoyarsk. Back when Moscow held dominion over the largest contiguous empire the world has ever known, back when a sea of goods and money streamed in from Poland, East Germany, the Ukraine, and other parts of the empire, there was money for the space program, the world’s best chess team, intercontinental missiles, and millions of well-armed soldiers. Today all that has changed. Like Chechnya, Dagestan will split off from Russia and so will dozens of other tribal and ethnic areas across what is now Russia but which will come to be a continent-wide checkerboard of new nations.

Since I came through here nine years ago a lot has changed. Back then there were no stores, no kiosks, no shops, and long queues for the few available goods. Today there are lots of shops and wonder of wonders, lots of goods—albeit often only locally produced and of poor quality. These new merchants must be selling a lot or they wouldn’t be in business, even if all they offer are shoddy goods. Compared to my last trip there are a lot more cars, and indeed here in a city of a million people there are nearly 5,000 Mercedes.

As befits a region much like our wild west, everywhere we see security. It’s not only usual to see police in bulletproof vests and AK-47s at highway checkpoints, but guards in stores are as formidably outfitted.

Every place we’ve been across Siberia—from Vladivostok to Khabarovsk, Svobodnyy, Chita, Ulan Ude, Ulaanbaatar in Mongolia, and Irkutsh to here in Krasnoyarsk—we find Russia falling apart. In every town, city, and village there are weeds, dust, mud, rust, peeling paint, and crumbling cement. Their balconies about to fall off, many buildings that in any second- or first-world country would be declared derelict by building officials are still in use.

. . . .

Hopelessness leads to drunkenness, and both lead to deaths in their late 50s for the average Russian man.

. . . .

As in many Russian cities, in Krasnoyarsk there are cheap restaurants and expensive restaurants, the expensive ones as usual filled by “New Russians.” This is the Russian breed of vulture capitalist who feasted off the collapse of the Soviet Union, who back home we’d call nouveau riche or rich trash. Indeed, the largest house built here in over 100 years has just been completed by a local politician, a house that would be impressive even in the U.S. All the New Russians are building big private houses that could not have been built after the Revolution.

How did these New Russians become so rich? Simple—for the most part they were the managers of state-owned enterprises under communism, and as the USSR collapsed, they grabbed the factories, inventories, and stockpiles of raw materials they controlled and used these assets for their own benefit. During the first years after the collapse, hundreds of billions of dollars in commodities were sold to the West in a gigantic fire sale, the proceeds of much of which stayed in the West in Swiss bank accounts. With their authority enforced by the bodyguards and troops they hired, these former managers ran their old enterprises as they saw fit and proclaimed themselves their emperors, and who was there to contradict them?

. . . .

We have visited several of these snatched plants–indeed there are no other kind. One was an aluminum smelter, and another a vodka factory, which despite its monopoly and the extraordinary demand for its product runs only one shift. Like so many factories here, the vodka factory was poorly laid out and inefficient. Certainly the demand for its product is here: we see drunks at night, drunks in the afternoon, and drunks in the morning.

We also visited a fur-coat factory, where coats are cut and sewn. Like other enterprises, it was owned by the group who ran it for the communists. The building reminded me of the old loft buildings in New York that turned out piece goods forty, fifty, eighty years ago; today no American owner could afford to move his raw materials and half-finished goods through his factory by means of inefficient elevators and narrow stairs.

As with all goods here, the quality of these coats is poor and the price amazingly low. Back in the old Soviet Union, quality didn’t matter. It was enough to produce the product. If the boots were poorly stitched or the bucket had a hole in it, a Russian or a Pole would make it do. That mentality is still here, and that attitude will cripple Russia’s attempts to capture a share of the world’s markets for decades to come.

In fact, we see business opportunities everywhere. A Western competitor to the vodka factory or the fur-coat factory would do wonderfully well—until his business was taxed away, inflated away, or simply taken away–or he was shot dead, a fate which has befallen hundreds of domestic and foreign businessmen. Here they don’t fight over cattle and horses as in our Old West, but over franchises and business territories; all the same it’s a frontier mentality, the only law being that of the AK-47. Investing here’s like the cockroach motel; you can put your money in, all right, but how do you get yourself and your money out?

. . . .

To give another example, we sailed from Japan to Vladivostok via FESCO, the Far Eastern Shipping Company, a Russian transport company. FESCO was once owned by the communists. After the collapse its managers grabbed it and have run it reasonably well, although a Western competitor would run circles around them. In fact a Western investor has even bought into the company. However, he has now been approached by the government of eastern Siberia for a piece of the action, to be given, say, a fifth of his holdings, a fate he is resisting. However, if he is not careful the government—that is to say the governor of the far-east region—will simply take the company away by means of some ruse.

. . . .

It’s hard enough to call out from your hotel room here, and forget e-mail. Indeed, often the only way we can communicate with our folks back home is via e-mail—but it means we have to pay a physical, not a virtual, visit to the local Internet Service Provider.

It turns out that every decent-sized town in Russia today has an ISP, a battered office jammed with half-a-dozen aging computers and half-a-dozen roughly dressed youths staring into their screens. (I’ve never been able to fathomed exactly what they stare at for so long.) We descend on them, and they’re shocked and delighted to see visitors from the exotic west.

“How much to plug into your lines?” we ask, brandishing our laptops. It’s clear when they say a dollar an hour they think they’re wildly overcharging us, but we’re overjoyed to download and transmit our e-mail.

. . . .

Even in the fanciest hotels there’s rarely soap, towels, or toilet paper—and just as it was nine years ago, there are no toilet seats. In fact, we have our own toilet seat which we carry in our trunk. I don’t know what Russians do with the seats from their public toilets, but I don’t think there’s a single seat left from one end of this 7,000-mile-wide country to the other.

. . . .

Here in Krasnoyarsk the Russians complain that the Chinese have stolen everything from them. What they mean is that the Chinese have crossed the border, spied opportunities, bought low-priced goods to sell abroad, and opened businesses, to which they bring their usual long hours and business acumen. To me this is a natural trade-off, for basically the Chinese need natural resources and a market, while the Russians need people to work their abundant resources. Indeed, in many cities we find a “Chinese” market, that is, a market of mainly Chinese merchants and their goods, selling to the Russians.

. . . .

In 1990 it looked to me that the pressures from so many different ethnic groups would cause the USSR to split into dozens of parts as the post-communist era unfolded. The USSR indeed split into 15 states, and the same fate awaits Russia. I know it’s hard to imagine, but if the U. S. Federal government were to collapse, isn’t it plausible that the Latin citizens of Miami might declare themselves a state and run their region to suit themselves? Well, with varying degrees of speed that’s what’s happening all over Russia.

Further east the Buriat Mongols are a major ethnic group. While they certainly aren’t ready to secede from Russia, the local newspapers keep mentioning that the Russians took their province in the not-so-distant past, making sure no one forgets that their province wasn’t always a part of Russia. Ghengis Kahn, a Mongol, is often cited as the greatest emperor of his time, a ruler whose regime covered more peoples and countries than any other of his era.

The Chinese who are pouring into the vacuum developing in Siberia constantly remind everyone that the area north of the Amur was historically China until the 19th century. Lake Baikal was settled by the Chinese before there was a Russia. In fact, the name Baikal originated with two Chinese characters—bai and kal—which mean ‘holy lake’ in Chinese.

Vladivostok was only settled at the end of the 19th century by Russians trying to consolidate their new possessions. The name Vladivostok literally means ‘to secure the east’–clearly against the Chinese who were being thrown out and the Japanese who wanted in.

. . . .

The western stereotype of Siberian prisons seemed true. The prisoners had less hope in their faces than any people I’ve seen in all my travels. Their cheekbones were sunken, their faces apathetic and lifeless, and their eyes hollow.

. . . .

All the tractors we passed were aging models, held together by baling wire, left over from the communist years, which of course yield little productivity. Factories are often so neglected that we cannot tell whether they are even producing goods.

. . . .

The mayor [of Moscow] is spending an estimated US$1.0 billion rebuilding the Cathedral of Christ the Savior although the books are secret. He spent US$12 million on icons, but no one has ever seen the icons.

. . . .

This, of course, assumes there will be a Russia. As we’ve come west we’ve found more and more signs of eventual disintegration. All the Moslems still in Russia want out. Mosques are being built everywhere. The Bashkirs around Ufa want their own government. The leader of Tatarstan is determined to take his region out of Russia, which would certainly be ironic. Why? In the sixteenth century, after centuries of warfare, the Russians finally defeated the Tartars. Over the next three centuries this victory led to the Russian conquest of the south and east as far as the Pacific Ocean. So it would be fitting and ironic if the empire’s disintegration was speeded up by a reversal from the Tartars, the Russians’ antagonists of several hundred years ago.

. . . .

Putin and the old KGB have quietly taken over from Yeltsin to try to stop all the public theft and prevent the country from spiraling further out of control. They are doing this undercover, to make the coup appear as if it’s Russian post-communism democracy as usual, because they still want Western money. I suspect their plan is then to get rid of Yeltsin in some way, both to avoid elections and to put themselves in power “legitimately.” As an indication, Putin just appointed a minister to deal with the media. That minister’s first statement was, “The press is a greater threat to the state than the state is to the press,” and he immediately started putting on the clamps. I do not expect any of this to succeed—rather the manipulation of the media will contribute to the downward spiral and to yet another collapse.

We’ve encountered two dishonest policemen so far, and we’re told we’re lucky to have encountered only two. Perhaps unwisely, we decided to report them to officialdom partly to see how seriously our charges would be taken, hoping to learn something. We found no official who would even accept our report about GAI 21-0269 and DPS MK 3438, the badge numbers of the two crooked cops. Every official instructed us to file our report some place else. Muscovites to whom we tell this story are richly amused that we even tried.

Every business has to pay for its “roof,” that is, its protection from the rain or some other more human catastrophe—whatever. We have also found that every business has to pay the police, too. Even a place like the high-profile, five-star Hotel Baltschug Kempinski in Moscow apparently is beholden to the police because it is afraid to rile them.

Read the whole thing here.

From my friend and teacher, Patrick Barron:

Here’s the bottom line: there is no benefit that a country can derive from EU membership that it cannot derive more cheaply and with no loss of sovereignty by simply adopting unilateral free trade.

(thanks, Ed)

ps- A case can be made that EU membership puts downward pressure on local corruption. That seems to have been the case in Romania and Poland, but I don’t think it’s worth the price of sovereignty and the official, legal corruption from Brussels.

The story:

Russia condemns ‘unfair’ Cyprus bank levy as bailout fears grow

On one hand, the economy of a government is their “sphere of exploitation” (to use Hoppe’s term from Austrian vs. Marxist Class Analysis). So why would Putin not welcome this action, which punishes those who dare escape his sphere of exploitation, and will likely discourage others from escaping?

Two reason:

1) Russia wants to improve itself by attraction rich, capable entrepreneurs from the west, like the Frenchman Depardieu.

2) In the twisted, counter intuitive world of post-Soviet economies, the exploiters are often trying to escape their own prison. I suspect most politicians of post-Soviet countries had money in Cyprus.

More: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/18_Sinclair_-_All_Hell_Is_Breaking_Loose_After_Cyprus_Catastrophe.html