Eric Kraus of Otkritie Financial Corporation -

T&B is continually awed by the volume of tightly argued, academically sound nonsense that's regularly produced as regards Russia, in particular from American academia. We have just finished reading two articles recently published in the National Interest, confirming our view that some folk just do not learn from their mistakes.

The first paper was by Gaddy and Ickes, they who still struggle to repeat their early success - the seminal 1998 piece "Russia's Virtual Economy." Perhaps tenure caused ossification, and over the ensuing decade they have released a series of weakly argued, tendentious and illogical sequelae, bereft of the novel analytical framework which rendered their Virtual Economy piece so very useful. Their subsequent work has been characterized by wildly inaccurate predictions and, apparently, the settling of old grudges.

A second article by Peter Reddaway revolves primarily about the supposed untenability of the current power split between the president and the PM, a view already familiar to readers of the popular press. Predictably, the main thrust of the commentariat has been the "growing rift" between Mssrs Putin and Medvedev; must they persist in taking their wishes for realities? What seems extraordinary is that, like a subset of prominent journalists, these "impartial experts" are still taken seriously, despite a track record that would be the kiss of death for any fund manager.

The most recent example was the run-up to last year's presidential elections. The reader will certainly remember the dire warnings of "bulldogs fighting it out under thick carpets," of power factions engaged in a murderous battle for political and economic control, of Siloviki about to seize power to protect their supposedly huge fortunes. Perhaps he will also remember the outturn - an election which rivalled any PTA meeting for courteous predictability. What he will not remember is having read any retraction or admission of error by the commentators, who glibly moved on to their next flight of fancy: the imaginary conflict between Putin and Medvedev.

The commentariat reliably makes the same mistakes - inter alia interviewing any Russian pundit who happens to support their particular bias. The problem with Russian pundits is that they tend to address a domestic audience that's come to expect some degree of hyperbole - Russian maximalism.

In the Russian intellectual space, "problems," "difficulties" or even "challenges" are scorned as not worthy of serious consideration - the spectrum of misfortunes begins with impending "disasters," continues through "catastrophes," terminating in veritable "apocalypses." The opposition press reliably shouts "fire" every Monday - with even the mainstream press full of dire warnings. One can substantiate absolutely anything one wishes to by an afternoon on the phone with Moscow: from the 3rd Jerusalem to the Cities of the Plain. Translated back to English, they reliably provide scary reading for the uninitiated.

Russia is of course, faced with some serious problems - oddly, most foreign commentators, able to judge Russia only from their own cramped and alien perspectives, reliably miss the real issues. Thus, we long ago ceased debating with them and would happily ignore their tiresome rants did we not receive constant queries from clients and readers asking us when is the Russian political system going to blow up? The short answer is, of course, that it won't.

Perhaps one reason why Westerners reliably get the Medvedev-Putin relationship wrong is that they fail to understand the fundamentals of Russian social relations. Possibly due to the Soviet experience, where one wanted to be rather careful of whom one trusted, Russians tend to have a small circle of intimates with whom they would trust their lives - and build personal relations over decades. By and large, Russians most trust people they have known since their childhoods. Relations are generally slower to develop and more durable than in the West. Thus, concepts of mentorship and personal loyalty go a great deal deeper than anything we expect in our own countries.

Vladimir's choice

For the past 12 months, the media have been rife with warnings of the growing rift between Putin and Medvedev, at worst fantasising about Medvedev becoming some sort of a Russian version of Ukrainian President Viktor Yushchenko, delivering Russia to the West - which despite all of the available evidence, still considers itself as self-evidently the only model for Eastern Europe. Vladimir Putin is, of course, portrayed as the old Soviet stalagmite, repressing the youthful yearnings of his protégé. Why Mr Putin - who could have remained in the presidency for as long as he wished - chose instead to appoint a reformist as his successor we are not told.

Vladimir Putin has repeatedly shown himself to be an excellent judge of character and is known to prepare his moves slowly and carefully; his choice of Medvedev as his heir was well thought out, complete with the novel split power structure between White House and Kremlin.

Regardless of one's preferred narrative, given either Putin's extraordinary popularity (good) or his "control over the levers of power" (bad), the outgoing president could clearly have chosen anyone at all to be his successor - T&B, you the reader, his horse... Had he intended to leave while retaining his purported "stranglehold on power," he could have easily selected a hardline member of the security services - there was no shortage of candidates. Certainly, he had no need to recruit a relatively liberal professor of law unless he intended significant reform of Russian institutions.

Whatever his accomplishments (and they are huge, from preserving Russian statehood to taming the oligarchs and resurrecting the economy) Putin has been very frank about his failings: the failure of the struggle against corruption, judicial reform, and the fundamental modernization of Russian society. Having saved Russia from dissolution and ruin, the difficult task of reform still lies ahead, and Putin sought someone who would be able to take it forward - not by breaking with the "Putin system" (extremely popular in Russia, if not in the West) - nor by reflexively kowtowing to US foreign policy, but by difficult, stepwise reform.

To now imagine that Putin's handpicked successor is breaking with his wishes by attempting to further the reforms he has repeatedly promised suggests an ability for self-delusion not at all unusual amongst fat, comfortable and irrelevant Western academics. From the investor's standpoint, on the other hand, while there is much to worry about - in Russia and abroad - we would not waste much time on issues of political stability.

Eric Kraus is a strategist with Otkritie Financial Corporation

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