STEALING STEEL IN RUSSIA

MOSCOW – Andrei lllarionov is a coward, but President Vladimir Putin isn’t strong enough to say so. This makes the lllarionov case the very opposite of what Putin’s enemies in the media are claiming.

lllarionov is one of the leftovers of the laissez-faire, free-for-a-few economics of the Boris Yeltsin era (1991-99). Married to an American studying for a Harvard PhD, the combination of Harvard economics faculty and Russian privatization ought to have long ago disqualified lllarionov from any public office funded by the Russian taxpayer, let alone one at the invitation of the Kremlin. However, since lllarionov hasn’t been invited to speak to the president for a very long time, his function has been that of a cheap lightning rod – to deflect attacks on Putin himself; to unsettle Anatoly Chubais, the electricity boss and another leftover from Yeltsin privatization schemes still in office; and to confound the doctrinaire policymakers in Washington, who still have influence on American public opinion toward Putin.

Accordingly, lllarionov has served as the president’s official economic adviser, and also his emissary to the Group of Eight (G8) countries dominated by the US. These are sub-ministerial assignments in which protocol is more important than power. But without the protocol he has enjoyed, lllarionov would be one of dozens of Russian chatterers seeking a perch in the Western media. No one would pay him attention. In none of the governments of the other seven G8 countries would it be honorable for a man who advised the head of government to stay in his post if he opposed his leader. A ranking adviser in those seven governments who finds himself at odds with the policies and decisions of his superiors and colleagues would resign, lllarionov, who has repeatedly attacked President Putin’s policies, doesn’t have the gumption to do that.

After Putin’s end-of-the-year press conference, lllarionov gave several media interviews and took himself to a Moscow courtroom to watch proceedings in the trial of Yukos bosses Mikhail Khodorkovsky and Platon Lebedev. He was there, said Khodorkovsky’s lawyer, as an “ordinary visitor”. In his interviews, lllarionov did not cover much economic policy ground. Instead, he publicly condemned Putin’s handling of the oil company affair, calling Yukos “the best company in Russia”, and the dismantling of its shareholding and corporate structure the “swindle of the year”. He added: “This entire affair regrettably demonstrates that any of the official or semi-official explanations given to the public regarding the Yukos affair does not have a leg to stand on.” That remark included Putin; lllarionov knows only too well that it was the president who was the principal decision-maker in the Yukos case.

lllarionov even went on to encourage US intervention in the Yukos case. He endorsed what he called the “victorious revolution” of Ukrainian opposition leader Victor Yushchenko, warning that Putin’s policies are leading “unavoidably” to a comparable revolution in Russia itself, lllarionov said that on a Moscow radio station on December 30. On January 3, a presidential decree was released, announcing that lllarionov had been relieved of his position as Russia’s G8 emissary and replaced by presidential assistant Igor Shuvalov. There was no mention of lllarionov’s post as economic adviser, which he retains, by default.

For this performance, lllarionov has been treated as a hero in the anti-Putin press at home and abroad, not because he has enlightened anyone with the contents of his economic portfolio or said anything that hasn’t been said dozens of times before. Rather, he is the hero of the moment for having bitten the hand that feeds him. Ekho Moskvy, a radio station that used to be former US president Bill Clinton’s Moscow favorite, conducted a purported four-minute poll, in which 9,200 listeners called in -that’s 38 per second – indicating that 86% believe lllarionov should stay in his job to influence the president. The Anglo-American media then judged lllarionov’s removal as the G8 representative as a fresh example of Putin’s refusal to be influenced and of the president’s dictatorial tendency.

If 38 Muscovites per second believe lllarionov should keep his post, it would behoove lllarionov to expose a little more of his economics portfolio than the fistful of issues on which he has expressed himself so plainly. Why, for example, has he remained so conspicuously silent – why indeed has the entire Russian government, parliament, the judiciary, and the press – been so indifferent to the privatization auction of the state’s shares in Russia’s leading steelmaker, Magnitogorsk Metallurgical Combine (MMK), which took place the week before lllarionov launched himself on behalf of Yukos and Ukraine. Can lllarionov be a hero because he defends the corrupt privatization of Yukos but as an adviser to the president, has nothing to find fault in the mysteriously under-priced privatization of Magnitka?

On December 22, the government’s privatization agent, the Federal Property Fund, put up for auction the state’s 17.8% shareholding (equal to 24% of the voting shares) in the steel plant. Though there were 11 nominal bidders, there was, in fact, no competitive bidding and the auction was declared over as soon as it started, with a sale price of US$790.15 million – this was the government’s starting price. This can be estimated to represent a price of $0.42 per share. The winner of the stake was a company called UFGIS Structured Holdings Ltd, which represented the management of the steel plant, headed by its chief executive, Victor Rashnikov. The Rashnikov group already controlled about 57% of Magnitogorsk through a secretive web of onshore and offshore companies that also manages the trade of the plant’s annual production of 10 million tonnes of steel worth about $4 billion at current prices. A report to Prime Minister Mikhail Fradkov by the Tax Ministry in September indicated that Magnitogorsk paid just 12% its revenues in taxes in 2003, a fraction less than its steelmaking peers Severstal and Novolipetsk, but well below the tax rates of the major Russian oil companies. The report suggested that various tax minimization schemes, including transfer pricing between units of the same group, were at work.

Even if the Tax Ministry suspected Magnitogorsk of paying the state less in taxes than it should have, officials in other ministries thought the state should receive even less in value from the privatization than the balance sheet suggested. In July, for example, an official of the Ministry of Economic Development and Trade announced that the sale of the Magnitogorsk shareholding should fetch at least $275 million. At that time, the plant management was still trying to defer a date for the privatization to enable them to accumulate enough cash to ensure that they would be the highest bidder. In August, Putin signed a decree removing the plant from the list of strategic federal property barred from privatization without express Kremlin approval. Magnitogorsk had been thus listed as part of the delaying tactics; its de-listing signaled that Rashnikov was ready to bid. Then on September 30, Prime Minister Fradkov signed a decree, adding the sale of the Magnitogorsk stake to the privatization schedule for 2004.his was the sign that Rashnikov was keen to get the sale over with as quickly as possible, before his rivals had time to raise the cash for a counter-bid. After years of red tape, the paperwork was rushed through to fix the auction date on December 22.

There was one last question the federal government had to decide. That was the valuation of Magnitogorsk, and the reserve price for the sale. It seemed that $275 million was a visibly small number and had to be increased, not least to keep it out of the hands of Rashnikov’s rivals. The price would have to be just enough to deter speculators, but not too high to create financing problems for the Rashnikov group. On November 20, the Federal Property Fund announced that the auction would start at $790.15 million. This was small enough: for the first six months of 2004, Magnitogorsk had declared a pre-tax profit of $710 million on revenues of $2.1 billion; after-tax income for the period was $524 million. Most Russian investment banks and brokers believed that rival bidding would drive the auction to a figure of not less than $950 million and perhaps as much as $1.5 billion.

What happened next is the tale of how Rashnikov’s rival, the Mechel Steel Group controlled by Igor Zyuzin and Vladimir lorikh, was persuaded to abandon a challenge it had been publicly preparing for more than a year. Mechel, whose principal steelmaking asset is the Chelyabinsk steel mill, but which also controls rich iron ore and coal mines, generated $2.1 billion in revenues in 2003 and $1.6 billion in the first half of 2004. Its annual steel output is just under 6 million tonnes.

Though the Rashnikov group was favored to win the Magnitogorsk sale because it already held a controlling interest that others were reluctant to challenge, Mechel -which had acquired a 17.1% stake for itself – announced that it intended to bid against Rashnikov, either alone or with another Russian steelmaker. But a challenger, Iskander Makhmudov’s Ural Mining and Metallurgy group, claimed that it could break up Rashnikov’s shareholding control in court and then buy up the pieces to achieve control with the state stake. But Makhmudov’s bid failed. Mechel pressed on and in October, Zyuzin and lorikh sold almost 12% of their own stock on Wall Street in the form of American Depositary Shares (ADS) to raise just over $330 million. “In our view,” reported Rob Edwards, steel analyst for the Moscow investment bank Renaissance Capital, “Mechel is gathering as much cash as possible to take part in the auction for a 17.8% stake in Magnitogorsk Iron and Steel Works.”

It was obvious that by itself, Mechel didn’t have enough cash to make the government’s reserve price, let alone compete against the heftier cash pile of the Rashnikov group. If Mechel were serious, then it would have to recruit a more powerful partner than itself. Various alliances between Russian steelmakers were rumored. The Evraz group, with three Russian steel mills, commands the largest steel production and earns the largest revenues; but it decided to bow out of the Magnitogorsk bidding when the Makhmudov challenge failed. Severstal, ranked third in output after Evraz and Magnitogorsk, had ample cash to buy the Magnitogorsk stake from the government. But the priority for Severstal’s spending, according to Alexei Mordashov, the controlling shareholder, was pursuit of foreign steel assets far from the reach of the Kremlin or the Tax Ministry in Eastern Europe and North America. Just one cash-rich Russian steelmaker was left -Vladimir Lisin, who controls the Novolipetsk Metallurgical Combine. For much of 2004, he had been spending an estimated $1.5 billion in free cash to take control of strategically vital assets such as coking coal supplies to his plant and ports that handle his steel exports.

It was Lisin, then, whom lorikh meant when he announced on December 9: “It is most likely that we will join up with someone.” Without saying exactly who, he had added: “We expect to conclude an agreement on joint participation in the auction in the very near future.” Over the next 10 days, Lisin made his own moves, securing permission from the Federal Anti-Monopoly Service to attempt to acquire up to 42% of Magnitogorsk’s shares with up to $2.5 billion in cash. If this was the partnership lorikh had unveiled, it appeared that Mechel was very much the junior player, if at all. According to the detailed prospectus Mechel had presented to US investors in October, the company’s strategy included a plan to expand its steel production by up to 40% in the next three years. Among the asset acquisitions planned, Mechel said it wanted to “make selective acquisitions of coal and other mining enterprises”, and “to continue to selectively acquire value-added downstream businesses such as hardware, stampings and forgings producers to help us reach our customer base, including in new markets”. Not a word was said about Mechel’s bid for control of Magnitogorsk. Was lorikh putting up a smokescreen for Lisin? Or was Lisin trying to soften up Rashnikov on Mechel’s behalf?

According to Mechel, during the weekend of December 4-5 and for several days that followed, its offices in Moscow were the target of an investigation by officers from the Ministry of Interior. The federal Tax Ministry said it wasn’t involved and so did the federal headquarters of the Interior Ministry. Regional officials in Chelyabinsk added to the denials. According to Mechel spokesman Alexei Sotskov, the purpose was obvious: “Somebody is insisting on checks at Mechel Trade House to prevent its bid for Magnitogorsk Metallurgical Combine,” he said. A few days later, Edwards of Renaissance Capital reported that Mechel had been hit with a fresh charge that the valuation of the company’s key assets – the Chelyabinsk steel mill, Beloretsk Metallurgical Plant, and Yuzhuralnickel – had been intentionally understated in order to limit the amount of cash subsidiary companies were obliged to subscribe to the group’s capital. “We believe that the likely source of this allegation is one of Mechel’s main competitors in the auction for the government stake in Magnitogorsk steel mill,” said Edwards. “We also think Mechel still has a good chance of winning.”

Mechel had already admitted in its October 4 ADS prospectus that it could face tax problems. The company’s lawyers had warned US investors that Mechel might face “significant losses” if the Russian tax authorities “challenge our prices and propose adjustments”. According to the consolidated financial data presented in the prospectus, the Mechel group paid income taxes of $74 million in the first half of 2004, reflecting a rate of 4.5% of revenues totaling $1.6 billion. In 2003, according to the US data release, the income tax payment rate was 2.3%, and in 2002, 0.2%. According to the prospectus, there was a risk that the financial statements might be subject to revision. Mechel’s accountant, Ernst & Young, the prospectus stated, “reported material weaknesses in our internal control and we may not be able to remedy these material weaknesses or prevent future weaknesses … We may not be able to accurately report our financial results or prevent fraud.”

In a listing of risk factors associated with the offer of the group’s shares, Mechel said that Russian transfer pricing rules, which took effect in 1999, empower the tax authorities to impose additional tax on companies when transfer pricing between related entities or in foreign-trade transactions is found to differ from market pricing by more than 20%. The rules, according to Mechel, “are vaguely drafted, leaving wide scope for interpretation by the Russian tax authorities”. Acknowledging the risk of a challenge, the prospectus said: “If such price adjustments are upheld by the Russian courts and implemented, our future financial results could be adversely affected. In addition, we could face significant losses associated with the assessed amount of prior tax under-paid and related interest and penalties.” According to the prospectus, “widespread tax evasion” is noted as a general factor in Russia’s economic instability. Mechel also suggested that the Tax Ministry’s “crackdown on certain Russian companies’ use of tax optimization schemes” may be “selective”.

But when the crunch came, and officers of an anonymous government agency fanned out through the Moscow offices of its trading subsidiary, Mechel claimed it was Rashnikov, not the Tax Ministry, at work. As the value of his newly minted ADSs started falling in New York, lorikh announced that he would fight off the challenge with a heavyweight for a partner. This corrected the fall in the value of Mechel’s shares and led the Russian market to anticipate a fierce and expensive bidding contest on December 22.

But they were mistaken. On December 21, Mechel announced that it had sold its 17.1% stake to the Rashnikov group. Lisin’s bid evaporated as if it had never been, and by the time the sun came up on auction day, there was no longer any competition for Magnitogorsk. Rashnikov, according to the Mechel disclosures, had paid lorikh and Zyuzin $870 million, which amounted to a price of $0.52 per share. This was 10 cents, or 24%, higher than the government’s starting price for its stake – a small premium for Rashnikov to avoid what industry analysts had been expecting to be a final price of at least $300 million more.

Renaissance Capital, which has been an adviser to Lisin in the past, said it smelled a rat. According to analyst Edwards, “The recent probings by government organs into Mechel may have caused the sudden transformation of Mechel from a keen buyer of MMK, seemingly at any price, to a willing and happy seller”.No one spoke up for the Russian government, which had every reason to believe that if the price Mechel had received for its shares on December 21 was a fair one, the Federal Property Fund had been badly short-changed by the failure of the December 22 auction to raise any money above the minimum price. Had lllarionov the hero been focusing on his portfolio, he might have advised the president or told the media that by elementary calculation the privatization of Russia’s most famous steelmaker had failed to realize a fair market price. All the extra value in the Magnitogorsk shares had been quietly transferred to the Rashnikov group, without a murmur.

And who benefits? According to a report by Alfa-Bank’s Moscow brokerage after the share sale, “We expect Magnitogorsk to consider the listing and sale of its shares on a foreign exchange (New York or London) as soon as 2005.” It has been difficult enough for Putin to manage the process of retrieving the ill-gotten proceeds of the Yukos privatization. Had Khodorkovsky not challenged Putin early in 2004 by proposing to sell a large stake of his company to the US, he might just have got away with it. If lllarionov remains the economic adviser, the process by which Magnitogorsk has just been privatized and is about to be sold to Wall Street will be just dandy – so long as Putin doesn’t learn what happened and doesn’t interfere once again.

AFTERSHOCK OF NORD STREAM EXPLOSIONS RUMBLES WARSAW — POLISH POLITICIANS GO “NUTTERS”

By John Helmer, Moscow
  @bears_with

The Polish government in Warsaw, facing re-election in less than a year, wants all the credit from Washington for their joint operation to sabotage the Nord Stream gas pipelines on the Baltic seabed.

It also wants to intimidate the German chancellor in Berlin, and deter both American and German officials from plotting a takeover by the Polish opposition party, Civic Platform, next year.

Blaming the Russians for the attack is their cover story. Attacking anyone who doesn’t believe it, including Poles and Germans, Warsaw officials and their supporting media claim they are dupes or agents of Russian disinformation.

Their rivals, Civic Platform (PO) politicians trailing the PiS in the polls by seven percentage points,   want Polish voters to think that no credit for the Nord Stream attack should be earned by the ruling Law and Justice (PiS) party. They also want to divert  the Russian counter-attack from Warsaw to Washington.

“Thank you USA” was the first Polish political declaration tweeted hours after the blasts by Radoslaw Sikorski (lead image, left), the PO’s former defence and foreign minister, now a European Parliament deputy. In support and justification,  his old friend and PO ministerial colleague, Roman Giertych, warned Sikorski’s critics: “Would you nutters prefer that the Russians find us guilty?”

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THE BORNHOLM BLOW-UP REPEATS THE BORNHOLM BASH — POLAND ATTACKS GERMANY AND BLAMES RUSSIA

By John Helmer, Moscow
  @bears_with

The military operation on Monday night which fired munitions to blow holes in the Nord Stream I and Nord Stream II pipelines on the Baltic Sea floor, near Bornholm Island,  was executed by the Polish Navy and special forces.

It was aided by the Danish and Swedish military; planned and coordinated with US intelligence and technical support; and approved by the Polish Prime Minister Mateusz Morawiecki.

The operation is a repeat of the Bornholm Bash operation of April 2021, which attempted to sabotage Russian vessels laying the gas pipes, but ended in ignominious retreat by the Polish forces. That was a direct attack on Russia. This time the attack is targeting the Germans, especially the business and union lobby and the East German voters, with a scheme to blame Moscow for the troubles they already have — and their troubles to come with winter.

Morawiecki is bluffing. “It is a very strange coincidence,” he has announced, “that on the same day that the Baltic Gas Pipeline  opens, someone is most likely committing an act of sabotage. This shows what means the Russians can resort to in order to destabilize Europe. They are to blame for the very high gas prices”.   The truth bubbling up from the seabed at Bornholm is the opposite of what Morawiecki says.

But the political value to Morawiecki, already running for the Polish election in eleven months’ time, is his government’s claim to have solved all of Poland’s needs for gas and electricity through the winter — when he knows that won’t come true.  

Inaugurating the 21-year old Baltic Pipe project from the Norwegian and Danish gas networks, Morawiecki announced: “This gas pipeline is the end of the era of dependence on Russian gas. It is also a gas pipeline of security, sovereignty and freedom not only for Polish, but in the future, also for others…[Opposition Civic Platform leader Donald] Tusk’s government preferred Russian gas. They wanted to conclude a deal with the Russians even by 2045…thanks to the Baltic Pipe, extraction from Polish deposits,  LNG supply from the USA and Qatar, as well as interconnection with its neighbours, Poland is now secured in terms of gas supplies.”

Civic Platform’s former defence and foreign minister Radek Sikorski also celebrated the Bornholm Blow-up. “As we say in Polish, a small thing, but so much joy”.  “Thank you USA,” Sikorski added,   diverting the credit for the operation, away from domestic rival Morawiecki to President Joseph Biden; he had publicly threatened to sabotage the line in February.  Biden’s ambassador in Warsaw is also backing Sikorski’s Civic Platform party to replace  Morawiecki next year.  

The attack not only escalates the Polish election campaign. It also continues the Morawiecki government’s plan to attack Germany, first by reviving the reparations claim for the invasion and occupation of 1939-45;  and second, by targeting alleged German complicity, corruption,  and appeasement in the Russian scheme to rule Europe at Poland’s expense. .

“The appeasement policy towards Putin”, announced PISM, the official government think tank in Warsaw in June,  “is part of an American attempt to free itself from its obligations of maintaining peace in Europe. The bargain is that Americans will allow Putin to finish building the Nord Stream 2 pipeline in exchange for Putin’s commitment not use it to blackmail Eastern Europe. Sounds convincing? Sounds like something you heard before? It’s not without reason that Winston Churchill commented on the American decision-making process: ‘Americans can always be trusted to do the right thing, once all other possibilities have been exhausted.’ However, by pursuing such a policy now, the Biden administration takes even more responsibility for the security of Europe, including Ukraine, which is the stake for subsequent American mistakes.”

“Where does this place Poland? Almost 18 years ago the Federal Republic of Germany, our European ally, decided to prioritize its own business interests with Putin’s Russia over solidarity and cooperation with allies in Central Europe. It was a wrong decision to make and all Polish governments – regardless of political differences – communicated this clearly and forcefully to Berlin. But since Putin succeeded in corrupting the German elite and already decided to pay the price of infamy, ignoring the Polish objections was the only strategy Germany was left with.”

The explosions at Bornholm are the new Polish strike for war in Europe against Chancellor Olaf Scholz. So far the Chancellery in Berlin is silent, tellingly.

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LEMONS, MIMOSAS, AND STALIN’S SHOVEL

By John Helmer, Moscow
  @bears_with

The only Russian leader in a thousand years who was a genuine gardener and who allowed himself to be recorded with a shovel in his hand was Joseph Stalin (lead image, mid-1930s). Compared to Stalin, the honouring of the new British king Charles III as a gardener pales into imitativeness and pretension.   

Stalin cultivated lemon trees and flowering mimosas at his Gagra dacha  by the Black Sea in Abkhazia.  Growing mimosas (acacias) is tricky. No plantsman serving the monarchs in London or at Versailles has made a go of it in four hundred years. Even in the most favourable climates, mimosas – there are almost six hundred varieties of them — are short-lived. They can revive after bushfires; they can go into sudden death for no apparent reason. Russians know nothing of this – they love them for their blossom and scent, and give bouquets of them to celebrate the arrival of spring.

Stalin didn’t attempt the near-impossible, to grow lemons and other fruit in the Moscow climate. That was the sort of thing which the Kremlin noblemen did to impress the tsar and compete in conspicuous affluence with each other. At Kuskovo, now in the eastern district of Moscow, Count Pyotr Sheremetyev built a heated orangerie between 1761 and 1762, where he protected his lemons, pomegranates, peaches, olives, and almonds, baskets of which he would present in mid-winter to the Empress Catherine the Great and many others. The spade work was done by serfs. Sheremetyev beat the French king Louis XIV to the punch – his first orangerie at Versailles wasn’t built until 1763.

Stalin also had a dacha at Kuskovo But he cultivated his lemons and mimosas seventeen hundred  kilometres to the south where they reminded him of home in Georgia. Doing his own spade work wasn’t Stalin showing off, as Charles III does in his gardens, like Louis XIV before him. Stalin’s spade work was what he had done in his youth. It also illustrated his message – “I’m showing you how to work”, he would tell visitors surprised to see him with the shovel.  As to his mimosas, Stalin’s Abkhazian confidante, Akaki Mgeladze, claimed in his memoirs that Stalin intended them as another lesson. “How Muscovites love mimosas, they stand in queues for them” he reportedly told him.  “Think how to grow more to make the Muscovites happy!”

In the new war with the US and its allies in Europe, Stalin’s lessons of the shovel and the mimosas are being re-learned in conditions which Stalin never knew – how to fight the war for survival and at the same time keep everyone happy with flowers on the dining table.

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AND THEN THERE WERE NONE

By John Helmer, Moscow
  @bears_with

Agatha Christie’s whodunit entitled And Then There Were None – the concluding words of the children’s counting rhyme — is reputed to be the world’s best-selling mystery story.    

There’s no mystery now about the war of Europe and North America against Russia; it is the continuation of Germany’s war of 1939-45 and the war aims of the General Staff in Washington since 1943. Defense Minister Sergei Shoigu (left) and President Vladimir Putin (right) both said it plainly enough this week.

There is also no mystery in the decision-making in Moscow of the President and the Defense Minister, the General Staff, and the others; it is the continuation of the Stavka of 1941-45.  

Just because there is no mystery about this, it doesn’t follow that it should be reported publicly, debated in the State Duma, speculated and advertised by bloggers, podcasters, and twitterers.  In war what should not be said cannot be said. When the war ends, then there will be none.  

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RUSSIANS RAISE THEIR GLASSES – THE TOAST IS TO BEATING THE BLOCKADE OF MOSCOW



By John Helmer, Moscow
  @bears_with

Alas and alack for the Berlin Blockade of 1948-49 (Berliner Luftbrücke): those were the days when the Germans waved their salutes against the unification of Germany demilitarised and denazified; and cheered instead for their alliance with the US and British armies to fight another seventy years of war in order to achieve what they and Adolf Hitler hadn’t managed, but which they now hope to achieve under  Olaf Scholtz — the defeat of the Russian Army and the destruction of Russia.

How little the Germans have changed.

But alas and alack — the Blockade now is the one they and the NATO armies aim to enforce against Russia. “We are drawing up a new National Security Strategy,” according to Foreign Minister Annalena Baerbock. “We are taking even the most severe scenarios seriously.”  By severe Baerbock means nuclear. The new German generation — she has also declared “now these grandparents, mothers, fathers and their children sit at the kitchen table and discuss rearmament.”  

So, for Russia to survive the continuation of this war, the Germans and their army must be fought and defeated again. That’s the toast of Russian people as they salute the intrepid flyers who are beating the Moscow Blockade.  

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THE INTERNATIONAL ATOMIC ENERGY AGENCY GOES TO WAR — GORILLA RADIO GOES NUCLEAR

By John Helmer, Moscow
  @bears_with

Last week the International Atomic Energy Agency’s (IAEA) board of governors voted to go to war with Russia by a vote of 26 member countries against 9.

China, Vietnam, India, Pakistan, Egypt, Senegal and South Africa voted against war with Russia.  

The IAEA Secretary-General Rafael Grossi (lead image, left) has refused to tell the press whether a simple majority of votes (18) or a super-majority of two-thirds (23) was required by the agency charter for the vote; he also wouldn’t say which countries voted for or against. The United Nations Secretary-General Antonio Guterres then covered up for what had happened by telling the press: “I believe that [IAEA’s] independence that exists and must be preserved is essential. The IAEA cannot be the instrument of parties against other parties.” The IAEA vote for war made a liar of Guterres.

In the IAEA’s 65-year history, Resolution Number 58, the war vote of September 15, 2022,  is the first time the agency has taken one side in a war between member countries when nuclear reactors have either been attacked or threatened with attack. It is also the first time the IAEA has attacked one of its member states, Russia, when its military were attempting to protect and secure a nuclear reactor from attack by another member state, the Ukraine, and its war allies, the US, NATO and the European Union states. The vote followed the first-ever IAEA inspection of a nuclear reactor while it was under active artillery fire and troop assault.

There is a first time for everything but this is the end of the IAEA. On to the scrap heap of good intentions and international treaties, the IAEA is following the Organisation for the Prohibition of Chemical Weapons (OPCW), and the UN Secretary-General himself.  Listen to this discussion of the past history when the IAEA responded quite differently following the Iranian and Israeli air-bombing attacks on the Iraqi nuclear reactor known as Osirak, and later, the attacks on Pakistan’s nuclear weapons sites.

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INTERNATIONAL ATOMIC ENERGY AGENCY TAKES UKRAINE SIDE IN WAR IN SEPTEMBER 15 VOTE, MAKING UN SECRETARY-GENERAL GUTERRES EITHER A LIAR OR A FOOL

By John Helmer, Moscow
  @bears_with

The International Atomic Energy Agency (IAEA) decided this week to take the side of Ukraine in the current war; blame Russia for the shelling of the Zaporozhye Nuclear Power Plant (ZNPP); and issue a demand for Russia to surrender the plant to the Kiev regime “to regain full control over all nuclear facilities within Ukraine’s internationally recognized borders, including the Zaporizhzhya Nuclear Power Plant.”      

This is the most dramatic shift by the United Nations (UN) nuclear power regulator in the 65-year history of the organisation based in Vienna.

The terms of the IAEA Resolution Number 58, which were proposed early this week by the Polish and Canadian governors on the agency board, were known in advance by UN Secretary-General Antonio Guterres when he spoke by telephone with President Vladimir Putin in the late afternoon of September 14, before the vote was taken. Guterres did not reveal what he already knew would be the IAEA action the next day.  

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THE RUSSIAN SITUATION COMEDY IS NO LYING MATTER – THE JOKE IS ON THE OFFICE OF FOREIGN ASSETS CONTROL

By John Helmer, Moscow
  @bears_with

Never mind that King Solomon said proverbially three thousand years ago, “a merry heart doeth good like a medicine.”  

With seven hundred wives and three hundred concubines, Solomon realized he was the inventor of the situation comedy. If not for the sitcom as his medicine, the bodily and psychological stress Old Solly had to endure in the bedroom would have killed him long before he made it to his death bed at eighty years of age,  after ruling his kingdom for forty of them.

After the British sitcom died in the 1990s, the subsequent stress has not only killed very large numbers of ordinary people. It has culminated today in a system of rule according to which a comic king in Buckingham Palace must now manage the first prime minister in Westminster  history to be her own joke.

Even the Norwegians, the unfunniest people in Europe, have acknowledged that the only way to attract the British as tourists, was to pay John Cleese of Monty Python and Fawlty Towers to make them laugh at Norway itself.   This has been a bigger success for the locals than for the visitors, boosting the fjord boatman’s life expectancy several years ahead of the British tourist’s.  

In fact, Norwegian scientists studying a sample of 54,000 of their countrymen have proved that spending the state budget on public health and social welfare will only work effectively if the population is laughing all the way to the grave. “The cognitive component of the sense of humour is positively associated with survival from mortality related to CVD [cardio-vascular disease] and infections in women and with infection-related mortality in men” – Norwegian doctors reported in 2016. Never mind the Viking English:  the Norwegian point is the same as Solomon’s that “a sense of humour is a health-protecting cognitive coping resource” – especially if you’ve got cancer.  

The Russians understand this better than the Norwegians or the British.  Laughter is an antidote to the war propaganda coming from abroad, as Lexus and Vovan have been demonstrating.   The Russian sitcom is also surviving in its classic form to match the best of the British sitcoms, all now dead – Fawlty Towers (d. 1975), Black Adder (d. 1989), You Rang M’Lord? (d. 1988), Jeeves and Wooster (d. 1990), Oh Dr Beeching! (d.1995), and Thin Blue Line (d. 1996).

The Russian situation comedies, alive and well on TV screens and internet streaming devices across the country, are also increasingly profitable business for their production and broadcast companies – not despite the war but because of it. This has transformed the Russian media industry’s calculation of profitability by removing US and European-made films and television series, as well as advertising revenues from Nestlé, PepsiCo, Mars, and Bayer. In their place powerful  Russian video-on-demand (VOD) streaming platform companies like Yandex (KinoPoisk), MTS (Kion),  Mail.ru (VK), and Ivi (Leonid Boguslavsky, ProfMedia, Baring Vostok)  are now intensifying the competition for audience with traditional television channels and film studios for domestic audiences.  The revenue base of the VOD platforms is less vulnerable to advertisers, more dependent on telecommunications subscriptions.

Russian script writers, cameramen, actors, designers, and directors are now in shorter supply than ever before, and earning more money.  “It’s the Russian New Wave,” claims Olga Filipuk, head of media content for Yandex, the powerful leader of the new film production platforms; its  controlling shareholder and chief executive were sanctioned last year.  

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RUSSIAN AVIATION INDUSTRY CORRECTS YELTSIN YAW – BOEING, AIRBUS DITCHED



By Olga Samofalova, translated and introduced by John Helmer, Moscow
  @bears_with

It was the American humourist Mark Twain who didn’t die in 1897 when it was reported that he had. Twain had thirteen more lively years to go.

The death of the Russian aerospace and aviation industry in the present war is proving to be an even greater exaggeration – and the life to come will be much longer. From the Russian point of view, the death which the sanctions have inflicted is that of the US, European and British offensive against the Soviet-era industry which President Boris Yeltsin (lead image, left) and his advisers encouraged from 1991.

Since 2014, when the sanctions war began, the question of what Moscow would do when the supply of original aircraft components was first threatened, then prohibited, has been answered. The answer began at the Federal Aviation Administration (FAA) in 1947 when the first  Supplemental Type Certificate (STC) or Parts Manufacturing Approval (PMA) was issued by Washington officials for aircraft parts or components meeting the airworthiness standards but manufactured by sources which were not the original suppliers.   

China has been quicker to implement this practice; Chinese state and commercial enterprises have been producing PMA components for Boeing and Airbus aircraft in the Chinese airline fleets for many years.  The Russian Transport Ministry has followed suit; in its certification process and airworthiness regulations it has used the abbreviation RMA, Cyrillic for PMA. This process has been accelerating as the sanctions war has escalated.

So has the Russian process of replacing foreign imports entirely.

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FOR WANT OF A NAIL THE KINGDOM WAS LOST – ENGLISH PATHOLOGIST GUY RUTTY FACES CHALLENGE TO THE RELIABILITY OF HIS NOVICHOK EVIDENCE



By John Helmer, Moscow
  @bears_with

The weakest link in the British government’s four-year long story of Russian Novichok assassination operations in the UK – prelude to the current war – is an English medical expert by the name of Guy Rutty (lead image, standing).

A government-appointed pathologist advising the Home Office, police, and county coroners, Rutty is the head of the East Midlands Forensic Pathology Unit in Leicester,  he is the author of a post-mortem report, dated November 29, 2018,  claiming that the only fatality in the history of the Novichok nerve agent (lead image, document), Dawn Sturgess, had died of Novichok poisoning on July 8, 2018. Rutty’s finding was added four months after initial post-mortem results and a coroner’s cremation certificate stopped short of confirming that Novichok had been the cause of her death.

Rutty’s Novichok finding was a state secret for more than two years. It was revealed publicly   by the second government coroner to investigate Sturgess’s death, Dame Heather Hallett, at a public hearing in London on March 30, 2021. In written evidence it was reported that “on 17th July 2018, Professor Guy Rutty MBE, a Home Office Registered Forensic Pathologist conducted an independent post-mortem examination. He was accompanied by Dr Phillip Lumb, also an independent Home Office Registered Forensic Pathologist. Professor Rutty’s Post-Mortem Report of 29th November 2018 records the cause of death as Ia Post cardiac arrest hypoxic brain injury and intracerebral haemorrhage; Ib Novichok toxicity.”  

Hallett, Rutty, Lumb, and others engaged by the government to work on the Novichok case have refused to answer questions about the post-mortem investigations which followed immediately after Sturgess’s death was reported at Salisbury District Hospital; and a cause of death report signed by the Wiltshire Country coroner David Ridley, when Sturgess’s body was released to her family for funeral and cremation on July 30, 2018.  

After another three years, Ridley was replaced as coroner in the case by Hallett in March 2021. Hallett was replaced by Lord Anthony Hughes (lead image, sitting) in March 2022.

The cause-of-death documents remain state secrets. “As you have no formal role in the inquest proceedings,” Hallett’s and Rutty’s spokesman Martin Smith said on May 17, 2021, “it would not be appropriate to provide you with the information that you have requested.” 

Since then official leaks have revealed that Rutty had been despatched by the Home Office in London to take charge of the Sturgess post-mortem, and Lumb ordered not to undertake an autopsy or draw conclusions on the cause of Sturgess’s death until Rutty arrived. Why? The sources are not saying whether the two forensic professors differed in their interpretation of the evidence; and if so, whether the published excerpt of Rutty’s report of Novichok poisoning is the full story.   

New developments in the official investigation of Sturgess’s death, now directed by Hughes, have removed the state secrecy cover for Rutty, Lumb, and other medical specialists who attended the post-mortem on July 17, 2018. The appointment by Hughes of a London lawyer, Adam Chapman, to represent Sergei and Yulia Skripal, opens these post-mortem documents to the Skripals, along with the cremation certificate, and related hospital, ambulance and laboratory records. Chapman’s role is “appropriate” – Smith’s term – for the Skripals to cross-examine Rutty and Lumb and add independent expert evidence.

Hughes’s appointment of another lawyer, Emilie Pottle (lead image, top left), to act on behalf of the three Russian military officers accused of the Novichok attack exposes this evidence to testing at the same forensic standard. According to Hughes,  it is Pottle’s “responsibility for ensuring that the inquiry takes all reasonable steps to test the  evidence connecting those Russian nationals to Ms Sturgess’s death.” Pottle’s responsibility is to  cross-examine Rutty and Lumb.

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