The Tacitus Project

An extension of this morning's post: I just ran across an article (link to be provided later) by Thomas Powers in a back issue of the NY Review of Books, in which Powers dissects the Agency's troubles of late and speculates on Goss' gamble (Powers doesn't seem to think its going to end well for the CIA or for US national security).

So new CIA Director Porter Goss has asked a sixth senior official to step down, all part of a major Goss-led "restructuring" (not really, since the structure will remain the same, but it's bigger than a "housecleaning", in any case). The CIA is more resistant to change than most Washington institutions, and if we've learned anything over its 50-odd year history, it's that the CIA is not infallible. Far from it. So count me not among Goss' many detractors, for the moment.

But Goss is taking a huge risk, both personally (politically) and on behalf of our national security (that's my and your security he's messing with) and I am not sure he's fully conscious of it, since he's never come out and recognized that all of this transition at the top is going to filter down and affect the rank-and-file, and it's going to deprive the agency of a lot of its leadership capital -- people who understand the intelligence business, and particularly the nexus between intelligence and domestic politics.

I hope that Goss' handpicked crew is as good as he hopes, for the sake of our national security. But I'd like to see more of his crew in place before all these purges, rather than this rudderless period that the CIA is now experiencing.

The Washington Post seems to have its heart in the right place when it has come to the situation in Darfur, consistently calling for more international action to stem the violence. However, the paper -- perhaps fooling itself into thinking a more diplomatic position might influence American policy -- shows too much deference to the US position, which seems to be "speak loudly but put away that damn stick".

About six months ago, when US policy was about the same (speaking loudly, no real stick), and it looked like there might be some movement in the international community on Sudan (Annan's visit to the region, Colin Powell's visit, etc.), the WashPost penned this editorial on Darfur. To distill the message of the editorial down to a few lines: "nice job Bush administration, damn you Europeans for mucking it up based on your own self-interest. Oh, and the Bush administration shouldn't be afraid to go it alone here."

Today, after months of little movement on Darfur in the international arena, but plenty of preparations by the Sudanese parties for more violence, the Post has a new editorial line. The gist of today's Post position: "nice job Bush administration, damn you China and Russia for mucking it up based on your own self-interest. Oh, and the Bush administration shouldn't be afraid to go it alone here."

So, there is some admirable consistency in the Post position on the one hand: their unwillingness to concede that the Bush administration has done regrettably little to really address Darfur in the five months between the July and December editos. Instead, there was a US election, mounting troubles -- including an election to prepare for -- in Iraq, a busted election in Ukraine (prompting a mini-standoff with Russia), and a whole host of other issues that intervened to sap attention from the tragedy unfolding in Sudan.

But there is also a revealing inconsistency in the Post position. Six months ago, busting on Europe was still in vogue in the Bush administration, it seemed OK to blame Europe (and single out France, while you're at it, for bonus brownie points). Today, with no democratic candidate offering to repair relations with allies, the Bush administration has gone back to its neutral position of ignoring historic allies, so the Post has morphed its position from "Blame Europe" to a more timely "Blame Russia and China".

All of this is grand, but the problem is this: the positions of Europe, Russia and China have changed nary a bit in the past five months. NOR HAS THE POSITION OF THE UNITED STATES. There is plenty of blame to be passed around for the continuing disaster in Darfur. For the sake of logical consistency and objectivity, the Post would be better served by recognizing that the US government failed to heed its first call to act unilaterally on Sudan if the world community didn't. Instead, they've stuck with an editorial position on Sudan that makes it OK for the US to continue its policy of passive inaction (coupled with active rhetoric) while blaming the rest of the world for the inaction. That position neither pushes the Bush administration to change its policy, nor reflects the reality of the Sudan situation, which is that the whole of the international community is to blame, the US as much as anyone else (though the levels of culpability may be different -- ahh, nuance).

More news on the Yuganskneftegaz auction: Putin announced (if there was ever any doubt that all oil business flows throught the Kremlin, it has been dispelled by the fact that every major announcement about this sordid affair -- from hints of the identity of Baikal Finance Group to the latest news -- has come straight from Putin) that state oil company Rosneft had acquired YUKOS mystery bidder Baikal Finance Group. By extension, of course, this means that Rosneft has the rights to Yuganskneftegaz. The problem, as I see it, is that Rosneft most definitely on its own does not have the cash to complete payment on the $9 billion bid. So it's going to need partners. Enter Gazprom. And Surgut. But first, a little background.

There have long been rumors of a plan afoot to renationalize a large part of the Russian oil sector under a new national company. Rosneft didn't actually start acquiring strength in the market until the past three years. Prior to that, the Russian oil sector was dominated by large "private" oil holdings -- YUKOS, LUKoil, TNK and Sibneft, primarily. The state companies never got to catch up on the five-ten year head start those other oligarch-backed companies had.

With Putin's rise to power, he brought with him a very influential advisor from Petersburg, Vladimir Litvinenko, the head of the St. Pete Institute of Oil and Gas. Litvinenko has been a strong advocate of the nationalization and strong state management of the oil and gas sector. (Litvinenko also has managed Putin's election campaigns in Petersburg, so you know their tight; oh, and I think he also advised his doctoral thesis, but you get the point). In any case, in Putin's cadre of insideres, there has long been a push for greater state influence in oil and gas.

Until the Yuganskneftegaz auction last week, it looked like Putin's team was planning to roll Rosneft and the newly acquired Yugansk unit into Gazprom's as-yet only-formed-on-paper oil production subsidiary, Gazpromneft. Shortly after the auction, won of course by BFG and distinctly lost by Gazprom, the sale of the Gazpromneft unit was announced. Gazprom said it was to avoid legal repercussions from YUKOS. I call bull%#it on that one. No legal repercussions for Gazprom if there was no sale to Gazprom. It simply doesn't make sense.

With Rosneft stepping in to take over BFG from Surgut, Rosneft Pres Sergey Bogdanchikov put himself right in a position to have his company gain a dominant role in the new state oil company. Gazprom will have to take orders in this regard from Rosneft. A strong move by Bogdanchikov. Surgut likely will retain a sizeable share in the Yugansk unit -- up to 20% I've heard -- while Putin has also mentioned that the Chinese will be involved in the project. And if we've learned anything over the course of his presendency, it's that when Putin "hints" or "suggests" that something might happen, it's _going to happen_. Bet on it.

So here's the way things are shaping up on Yugansk: Rosneft takes the lead role in the formation of a new state oil company, with Gazprom coming in to offer sizeable financial support. Regarding Yuganskneftegas specifically, Surgut stays in the background, profiting off of its timely assistance (through Baikal Finance Group) of the government to buy time after the US court ruling. And enter the dragon, China National Petroleum Company, which will snap up a nice-sized share in the Yugansk unit. I see the figures maybe breaking down this way: 15-20% Surgut, 25%-30% CNPC, 55% "Rosprom". The new national company probably retains operatorship, or if it doesn't want the hassle, retains a large enough share to veto any decisions by the operator.

All of this activity has been confused over the past week because there have been two dynamics at play. First, there has been the struggle within the Russian state oil and gas sector for control over the future of the new state oil company. For the moment, Rosneft has played that game deftly, while Gazprom has been outmaneuvered by both Surgut and Rosneft. On another level, there has been a conscious attempt by Gazprom and the Putin administration to "muddy the waters" to make legal pursuit of the final owners of Yuganskneftegaz impossible. This is one reason the Chinese are being brought in. China has plenty of cash to help fund the project, so there are no worries about Western banks and financing. Second, China represents almost infinite demand, so even the impact of a western boycott on Yugansk or Russian state oil company oil, if such a move were possible, would be lessened. Of course, such a move is next to impossible, as Putin's visit to Germany this week reminded us, because Gazprom holds the gas future of Europe in its palm. So not a great time to be a Group Menatep investor right now.

Here's an interesting take, comprehensive enough for the uninitiated, from leading Russian business paper (and fairly independent paper, to boot) Kommersant.

If the translation in this BBC story is accurate, we seem to be witnessing an increasingly paranoid and isolated Russian President.

Most eye-catching -- eye-popping even -- was this comment (after a discussion of his views of the democratic transitions taking place in Ukraine and Georgia):

"If you have permanent revolutions you risk plunging the post-Soviet space into
endless conflict," he said.
He said he hoped isolating Russia was not the
goal of US policy.
"If it's indeed so, then the position on Chechnya is
becoming more understandable. That means that there, as well, a policy aimed at
creating elements that would destabilise the Russian Federation is being
conducted," he added.

This quote is really revealing, insofar as Putin has been reluctant to come out and really espouse this anti-US view in the past, though we've long known that many of his KGB-shiki advisors hold it. Of course, US policy is not to "create elements that would destabilize the Russian Federation". Putin's administration, and the preceding Yeltsin administration, creates enough destabilizing forces in places like Chechnya through its own policies.

But coming just days after George Bush again defended "his friend" Vladimir, Putin has made himself look bad and made Bush look even worse.

Putin is isolated. His circle is tiny, and they're all paranoid. My fear is that Russia only looks stable right now. The only consolation, really, is that by pursuing a US-style tax cutting strategy over the past three years, Putin has effectively "starved the beast", as Paul Krugman would say, to the point where the Russian security services can no longer operate (at least, not in their present state) as a true authoritarian monolith.

Update: more of Putin's enlightened thoughts can be found in this AP piece.

With theYUKOS/Baikal Finance Group story still developing, I thought I'd point you all to an interesting side story -- the jury conviction of Harvard Professor Andrei Schleifer for using insider information to cash in on the Russian securities market he was helping develop in the mid-1990s. Schleifer has long claimed he wasn't limited by the conflict-of-interest rules that typically constrain such advisors -- a claim that was belied by his own actions (putting the money in accounts in his wife's father's name or some such machination, if I recall correctly). In any case, I've long considered Schleifer a case study in American hubris in dealing with Russia in the 1990s: we'd go over, rightfully lecture them on corruption, but those delivering the lectures were from one of the most "corrupt" (in the American sense: that is, rife with favoratism and insiderism, not replete with bribery and cruder forms of corruption exhibited in other nations) bodies in the American bureaucracy -- the foreign aid department USAID.

Let me be clear: a lot of good people work for USAID. But in my experience, a lot of unqualified people do too, and moreover it is consistently one of the most mismanaged agencies in goverenment. For an example of how seriously we take management in international development. Andrew Natsios, head of USAID, once oversaw the "Big Dig" in Boston -- a project whose expense inflated about 10-fold after cost-overruns and various contracting scandals. Natsios was dispatched from that job after allegedly signing off on one-too-many sweetheart arrangements with the engineering and construction firm Bechtel. That did not stop the Bush adminstration from tapping Natsios to head USAID. And once he arrived at USAID, the first big deal Natsios had to handle was the "reconstruction" of Iraqi infrastructure. And who got the biggest, fattest construction contract -- when bidding was essentially restricted to American companies only (some Brits need apply as well)? Bechtel. This of course isn't proof positive that it was a bad deal, but those early Iraq contracts weren't the paragon of transparent governance either. And USAID is, along with the State Department, the one agency in American government that is constantly hectoring foreign governments on transparency. You can see how this looks bad for us.

So back to Schleifer -- he seems like a creep, and he got his due. But what was Harvard doing defending him to last?

So Baikal Finance Group, a heretofore unknown entity, bids $9.3 billion, to buy the main production unit of YUKOS in the state-run auction yesterday. They beat out Gazprom, who lost its western bank financing after a Houston court cast doubt upon the legality of the firesale. And BFG slapped down a $1.3 billion non-refundable down payment. So who is BFG?

This Washington Post piece provides one interesting tidbit of circumstantial evidence. BFG lists its offices in Tver, just down the street from a subsidiary of Surgutneftegas, the only Russian company that I've heard of that was 1) interested in bidding on the Yugansk unit and 2) had some $8 billion in spare cash lying around (from what, it's unclear). So we can't rule out Surgut involvement.

Interestingly, if BFG somehow finds itself unable to pay the remainder of its bid in the next 14 days, then the stake in Yugansk get transferred back to the state, and it's up for auction again, probably.

So what happens from here? My best guess: BFG (we'll just assume its Surgut) "offers" to sell Gazprom part of its share, either before or after closing in 14 days. Surgut makes a little money, gets a nice little piece of this big producer (as big a producer as Qatar) and Gazprom gets control of the asset everyone assumes it will get in the end anyway. In this scenario, Surgut is acting as a sort of "white knight"; it steps in and bails out the Russian government and Gazprom from a sticky situation with western creditors, and yet allows their preferred outcome to prevail. Surgut wins, Gazprom wins, the Government wins, and YUKOS still loses.

Another possibility: BFG defaults, but the 14-day window gives Gazprom and whoever else (Surgut or Rosneft could play a role here) time to organize their finances to make a new bid in round 2.

Two things are clear: 1) this couldn't have happened without the Kremlin OKing it. And 2) whoever is behind BFG just acquired a whole, potentially lucrative, chunk of goodwill from the Kremlin.

Update: according to this article in the the NY Times, either one of my scenarios could be right. Chris Weafer of Alfa Bank, whose opinion I would trust highly in these matters, has this to say:

"The surprise winning bidder in today's auction, Baikal Finance Group, is either a front for Gazprom or a state-friendly company like Surgutneftegaz or Sibneft or a combination of state and state-friendly interests."

...there's still a crisis in Darfur. And it's apparently about to get worse.

Now, I don't place a whole lot of faith in the "international community" to do the right thing by humanity in general. Let's face it, the "international community" is no more than the nation-state equivalent of a high school class: a bunch of personalities, thrown together, all working on similar assignments, but fundamentally mostly at odds with each other and driven to petty disputes. Sure, most people pretend to be friends in the yearbook, but on a day-to-day basis, it's dog-eat-dog.

So I'm not surprised we can't get our $h!t together to save a lot of lives and ease a lot of suffering. But that doesn't mean I can't still be disappointed.

Much news coming out about the pending Yukos auction, just days away. The Financial Times offers this brief but important commentary, which is revealing as to the relative financial weakness of even such Russian big-name heavy-hitters as Gazprom, the relative financial strength of darkhorses like Surgutneftegaz, and the relative nervousness in the western financial community with regards to Russia.

When big-time Washington insider and neo-con pooh-bah Bill Kristol calls you out as a failure on the op-ed page of the Post, you know your days in the club might be numbered.

Fascinating article in Foreign Affairs from Selig Harrison, a guy who knows better than to f#$k around with threat assessment (unlike some other people I can think of). Yet Harrison's point reveals, better than they themselves can elucidate, the dilemma facing American policy-makers. A threat assessment should always include the worst-case scenario. To present that as a likely (as opposed to remote) possibility is of course the greatest flaw of the Bush administration's approach to foreign policy. However, to get other nations to take it seriously, the Bush administration needs to impress on them the need for proactive action (lest we end up with Bosnia-like results). It's long been clear that the dominant movement in international foreign policy is, in fact, inertia. Only when they are shamed (see, Bosnia), or provoked (see, Iraq circa 1991), are nations moved to collective action. The Bush administration is trying an extension of the shame route: alarm. It's not working so well. But it's the closest thing to a strategy that I can see from this administration in foreign policy as I've been able to glean.

Post-election 2004, much was made of blue-staters alleged disdain for "Middle American" values. Anyone who thinks that there is a major cultural divide in America (and I suspect it is as many red-staters as blue-staters), and anyone who thinks that their local values are somehow superior to those in another locality, should read this article in the NY Times.

Much of the liberal media (not the media in general, but the actual "liberal" or "progressive" media) has been astir because of Peter Beinart's recent challenge to liberals to toughen up on terrorism ("A Fighting Faith", the cover story in The New Republic last week). This has led to much internecine fighting among democratic pundits (atrios, Matt Yglesias, and Kevin Drum have all chipped in). That's cool. Good discussion guys. But I think they all should redirect their attention for a moment to men and women like Christian Engeldrum. Tough policy on terrorism (and the Republicans seem to understand this better than the Democracts right now) requires some human sacrifice. To date, the Republicans have successfully convinced the American people that the war on terrorism (which has now been hopelessly conflated with the war on Iraq, so to make a distinction is purely academic -- most people just don't follow you) is worth losing good men like Christian Engeldrum. It matters not a whit what position the "Democratic Party" takes on the war on terrorism/Iraq. There can be many. What matters is that the American people believe that the Democrats will handle business in matters of national security better than Republicans. At times, Beinart's "we need to get tougher" strategy will be appropriate. At other times, it won't. Democrats need to stop thinking in terms of political positioning, and start appealing to hearts and minds (or, as one of my favorite bloggers Publius calls it: pathos -- as opposed to logos). Because at the end of the day, its our friends, our family members who go off to die in these faraway lands. And we need to feel they're doing good for us; we don't need to know it.

I apologize for the recent absences. I was traveling over Thanksgiving and my law school exam period is just getting underway, so things will be a little light until around Christmas.

I have many thoughts about the Ukraine election, none of them terribly original, I'm afraid. It has been inspiring to see Ukrainians out in the streets of Kiev. I feel wonderful for them, and I am so happy to see a Soviet people seizing control of its own destiny. I hope that the Russian political opposition is taking notes.

Speaking of Russia, Putin's role in the denouement of the whole Ukrainian election has been scandalous, and should put to rest any further debate as to the man's democratic political skills. He has none. Any time he has tried to martial public opinion (in his own country or elsewhere) he has proven to be incredibly ham-handed. He is an organization-builder, but he's not a popular politician. And the Russian position on Ukraine has revealed the survival of the Russian cold war mentality that every international event boils down to a battle for primacy with the United States. Like France, Russia too often reflexively adopts the anti-American position solely for the reason that it is the anti-American position to be considered a true ally. That's not to say that Russia and the United States cannot or will not continue to work closely together on many issues. It's just that the possibility of any true alliance in the foreseeable future has been foreclosed by the clear lack of trust on the Russian side.

The Bush administration hasn't come out looking much better than Putin on this one. Here is one of their best chances to support a peaceful democratic transition in a corner of the world marked by autocracies, and given the chance to shout down the opponents of "freedom" and "democracy" rather than shoot them down, the United States has let its recently retired Secretary of State be its most forceful spokesperson. If we want the world to take our democracy and freedom rhetoric seriously, we have to be a bit more serious in our application of it -- even when it requires rebuking a sometimes-ally (Russia) we'd rather not rebuke.