MOSCOW BLOG: foreign agents and bank sector clean ups – the FSU still looks to Russia for ideas

MOSCOW BLOG: foreign agents and bank sector clean ups – the FSU still looks to Russia for ideas
It's been more than 30 years since the fall of the Soviet Union and many of the countries of the Former Soviet Union still look to Moscow for reforms ideas. That is bad news when it comes to LGBT or civil society, but on economic topics like banks and tax there have been successes. / bne IntelliNews
By Ben Aris in Berlin April 30, 2024

Georgian oligarch and éminence grise Bidzina Ivanishvili gave a very bonkers speech on April 29 at the pro-government rally in Tbilisi. He said a Western “Party of War” is behind all the troubles that his country has faced in the last 15 years and promised to use the mooted foreign agents law to “crack down” on former president Mikheil Saakashvili’s legitimate opposition United National Movement (UNM) ahead of the general election in October.

Ivanishvili is playing on all of the worst of Russia’s policies. There is also an “anti-gay” law, fully backed by the Orthodox church, that will persecute the LGBT community, which is already having a really hard time. The Party of War thing goes all the way back to the Protocols of the Elders of Zion which was introduced by the Tsarist secret police, the Okhrana, and is the origin of the international Jewish conspiracy idea. All this stuff still plays very well in the Former Soviet Union (FSU). There was a survey last week that found that most Russians rely more on tarot card readings than newspapers to make long-term decisions.

Ivanishvili is taking Georgia, once a poster boy for liberal Western-style market reforms, off the deep end. He didn’t even pretend to dress up his flagrantly illiberal agenda but presented an action plan of violence and repression using extremely inflammatory rhetoric.

As I have said, to me the whole situation looks pregnant with violence as the regular Georgians are clearly committed to a liberal, pro-EU path. The second vote on the foreign agent law is due in the next few days, which could be the next flashpoint. And Ivanishvili’s speech will go down like a lead balloon in Brussels, which remains very reluctant to eject Georgia from the EU accession process as they want it as a liberal toehold in the otherwise very illiberal and Russian-dominated region.

In general, you should not be surprised by Ivanishvili’s rhetoric and the fact that he is looking to Moscow for ideas. He made his money in Russia in the wild 90s, but he is not pro-Russian per se, although Russia is now Georgia’s biggest trade partner and the Kremlin has designated Georgia a “friendly country” despite its EU aspirations.

But one of the dirty little secrets of the FSU is that all the governments still look to Moscow for an intellectual lead. The Russians are coming up with lots of good ideas and many really bad ones, some of which the rest of the FSU is happily adopting.

Kyrgyzstan, another nominally liberal “coloured revolution” state, has also adopted the foreign agents law that targets the opposition press and civil society, and several other countries are thinking about it.

Deboning the judiciary is another popular one that Poland is guilty of, although this is not Russia’ fault. And even former Ukrainian president Petro Poroshenko actively sabotaged the same reforms in Ukraine, despite his pro-EU rhetoric. Current Ukrainian President Volodymyr Zelenskiy has made some progress on this one but it's going very slowly, as we have reported; corruption is the system throughout the FSU.

Anti LGBT laws are another popular one, as we have reported there is a values fault line that runs down the middle of Europe that contributes to leaders looking East rather than West. Ivanishvili is definitely in Putin's “traditional values” camp, as are many in Central Europe – with the possible exception of Czechia, the only Warsaw bloc country to have almost fully adopted the EU liberal model, in my opinion.

But not all the ideas are bad. The Prozorro electronic procurement system that was hailed as a big step in the fight against corruption when Ukraine adopted it, was originally a Russian idea (although the Kremlin regularly ignores it when handing out the biggest infrastructure projects, so it has not been a success) introduced about four years before Ukraine got its version.

Building up “rainy day” reserves funds, was also an innovation introduced by former finance minister Alexei Kudrin that has also been widely adopted by those countries that can afford it.

Inflation targeting is another Russian innovation in the East, which Uzbekistan, for example, has only recently adopted now it's trying to reform.

And the really big success pioneered by Russia is the clean-up of banking sectors. After taking over in 2013, CBR Governor Elvia Nabiullina launched a massive programme that went on until 2018 to clean up the financial sector that has been a huge success and contributed to Russia’s ability to withstand sanctions. Ukraine did an identical reform that has also been probably the best, and one of the only, successful reforms they have carried out, which in this case has meant the banking sector has been able to not only withstand the shock of the Russian invasion, but in December the government imposed a one-off 50% profit tax on banks to drain the sector of all the excess cash sloshing about and fund the budget. No one is keen to admit this Russian influence but it continues to both cause problems in the political sphere, but also brings benefits in the economic one, as we detailed in a blog on Planet Business vs Planet Politics.