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By John Helmer, Moscow

When cynical and unscrupulous men are desperate, they become as predictable as if they were principled. The difference between such men is hard to tell.

Not since the Alaska Purchase of 1867 have the rulers of Moscow and Washington been as desperate to sell something to each other for a price the press and public opinion on both sides are unprepared to calculate or accept. When President Vladimir Putin (lead image, left) and President Donald Trump (right) meet in a fortnight, this price will be a secret both of them will agree to keep to protect themselves from adversaries at home more powerful than they are themselves.

With two weeks still to go for preparations, so far only the terms the US side intends to table are in the public domain. No Russian government official, think-tank expert, or reporter has published an account of what the Russian terms will be.

During the Kremlin meeting last week between Putin and Trump’s national security advisor, John Bolton, one clue was visible. This was the appearance of the Defence Minister Sergei Shoigu on the Russian side of table, alongside the president’s foreign affairs advisor Yury Ushakov and Foreign Minister Sergei Lavrov. Shoigu wasn’t matched by a military officer or Pentagon counterpart on the American side of the table. So Shoigu wasn’t present to speak. He was there to listen, and to report to the General Staff what the US side is proposing – and not less significant, what Putin had to say. Shoigu’s presence was a signal that on the Russian side, the military do not quite trust the president — their own, not the other one.

Tsar Alexander II’s decision to sell the Alaskan colony to the US started with the military defeat the Russians suffered during the Crimean War, which ended in 1856. The military weren’t to recover against the Ottoman Turks for another twenty years. In the interval, the tsar had debts to cover from his Crimean losses, as well as from the indemnity Alexander paid to Russian landowners for their loss of serfs in the emancipation of 1861.

Developers of eastern Siberia believed that if Alaska were sold, they could divert its state cashflow into investment schemes in the Amur territory. Also, the imperial treasury could ill afford the subsidies required for the Russian American Company, which had failed to turn otters, seals and whales into profit-making for Alaska. So the assessment in St. Petersburg was that if gold were to be discovered in Alaska, as it had been already in California, the American rush would overwhelm the Russian defences and the territory would be lost. Selling before the forfeit seemed prudent at the time.

A decade was required to raise the price from $5 million the Americans offered to $7.2 million, the figure which the Russians accepted; about $110 million in current money. In the process, the Russian Ambassador in Washington arranged bribes for US officials and journalists, as well as kickbacks for himself, and so encouraged a policy of a sale at any price; US Secretary of State William Seward was also on the give and take. As was the Russian custom then and now, the proceeds of the Alaska deal were shared among those closest to the sell-out.

For the Putin-Trump meeting the only non-negotiable point on the Russian side is Crimea; its status as a Russian territory will not be discussed. Concessions are negotiable on the other warfronts.

The Kremlin’s position on the war in the Donbass is to play for time enough to gauge what Petro Poroshenko’s successor (Yulia Timoshenko) as Ukrainian president will settle for after the election next March. If the US does not back an escalation of operations by the Ukrainian military, including the use of the newly supplied US Javelin anti-tank missile, then the Russian offer will be to secure the Novorussian forces in place and exchange non-offensive undertakings.

On the Syrian front, Putin has already demonstrated his readiness to withdraw Russian air and ground forces – before the US and its allies have made a reciprocal move.

“Comrades,” Putin told a Kremlin ceremony for graduating cadets last week “over the past years a great deal has been done to develop the Russian Armed Forces. The Russian Army demonstrated its increased potential and coordination when it fought terrorists in Syria. It is now up to you and your comrades-in-arms to make full use of this operation in your military training. As you know, we started the withdrawal of our forces during my visit to Khmeimim. The withdrawal carries on as we speak: 13 aircraft, 14 helicopters, and 1,140 personnel were withdrawn over the past few days. All these people were tested in combat. You and your comrades-in-arms will have to make full use of this experience…”



Right to left: Defense Minister Shoigu and President Putin meet military officers at the academies’ graduation ceremony on June 28; for the record, click. The official transcript concludes with this toast by Major-General Alexander Maksimentsev, commander of Russian air operations in Syria: “Let us drink to the Supreme Commander-in-Chief of the Russian Federation Vladimir Putin, to Russia, and to its glorious Armed Forces and the unconquerable Russian soldier!”

The problem for the Russian military is that they believe US military undertakings at the field level, and at the political level, cannot be trusted. Consequently, they doubt Trump or his White House staff can command, even if they wish to control, the operations in Syria of the CIA or the Israelis. In such a situation, Shoigu’s post at the meeting with Bolton was to ensure that Putin left no opening for a US offer that may lead to Russian casualties in the field.



The Kremlin meeting on June 27 with the US delegation: in foreground, left to right, Fiona Hill, a Russian speaker on the staff of the US National Security Council; Bolton; and US Ambassador to Russia, John Huntsman. In the rear, the Russian delegation from left to right: Shoigu, Lavrov, Putin, interpreter, and Ushakov. Source: http://en.kremlin.ru/events/president/news/57866

Bolton himself conceded after the meeting that in Syria the US is looking to reduction of Russian support for Iranian operations, not Syrian ones. “There are possibilities,” Bolton claimed on television on Sunday, “for doing a larger negotiation on helping to get Iranian forces out of Syria and back into Iran which would be a significant step forward… I don’t think Assad is the strategic issue. I think Iran is the strategic issue. It’s not just their continuing nuclear weapons program, it’s their massive support for international terrorism and their conventional forces in the Middle East and I would say there – this is something that the two presidents will want to discuss at length because I think President Trump’s decision to withdraw from the misbegotten Iran nuclear deal, reimpose our sanctions begin to put much more pressure on Iran is having an effect on their decision making.”

Denuclearisation of the Middle East is an impossibility. Although Putin has committed Russia to continuing the Joint Comprehensive Plan of Action (JPCOA) for cutting Iran’s capacity to defend itself with nuclear weapons, there is no Russian commitment to denuclearising Israel, or restricting US nuclear-armed operations from the Persian Gulf to the Mediterranean, targeted at Iran and Syria. What is left for Putin to negotiate are short-term expedients to limit the likelihood of US-backed Israeli, Saudi or other attacks on Iranian territory. Again, the problem for the Stavka – as the Russian military command is known – is that political undertakings by the US and its allies are consistently proved to be worthless. Political concessions by Putin are therefore regarded as letting down Russia’s guard, with the risk of escalating adversary operations and Russian losses, tactically now, strategically for the future. From the point of view of the Stavka, deterring the Americans with ready military force is the only effective position from which Putin can negotiate.

“It is important”, a Kremlin-financed think-tank, the Valdai Discussion Club, cautioned last week, “that the decisions taken at the summit are to be exercised, not sabotaged, as the American side has done a number of times. This is the only way to lay the foundation for future Russian-American relations, where not only Washington, but also Moscow will benefit.”

Disengagement of forces to reduce the likelihood of accidental clashes and fatalities is easier to announce than to implement if there continues to be a steady advance of US naval missile and ground-based Aegis missile batteries in the Black Sea and the Baltic. What then can be negotiated between Trump and Putin on this; on NATO readiness exercises and forward force deployments; and on the eroding limits of the Intermediate-Range Nuclear Forces Treaty (INF) for the positions of the two sides?

Naturally, it’s not for the Stavka to discuss in public the price they are planning to inflict on the Americans and their allies if they keep moving forward. Instead, military and security analysts in Moscow were asked what terms of a military or security type, in any operational theatre around the world, they think Putin can offer the Americans at the summit. They were also asked to say what they believe are the priorities Putin will want to negotiate in exchange with Trump. If they know, they won’t answer. One source went so far as to say he isn’t going to make any comments at the moment — and requested this be off the record.

The Trump attack on NATO allies for failing to spend more of their domestic budgets on military undertakings is read in Moscow as an opening to less costly escalation by the European powers, especially Germany and France. Relegating the British is also a tactical objective on the Russian side; Moscow sources believe this is best left to the British themselves to accomplish as they have been doing. Undermining Germany’s control of the European Union is a tactical objective on the American side. Moscow sources think Trump is too incompetent to match Putin on this score; the smaller European powers are all moving in a less Russia- threatening direction, they note. Those which remain hostile are within a stone’s throw of Russian forces – much too close to survive an engagement if they push too provocatively.

The conclusion, according to the state news agency Tass reporting an editorial of Nezavisimaya Gazeta: “Moscow and Washington won’t be able to resolve their key military differences on Syria and Europe in the near future. The forthcoming meeting between Putin and Trump will be apparently devoted to searching for some insignificant compromises and concessions…”

Popular support for Putin is sustainable so long as the military confrontation with the US is acute. For Trump, it’s the reverse – if he appears to be reducing the risks of war with Russia, China, or North Korea, his domestic support rises. Putin’s domestic support evaporates on the widespread voter perception that he and the officials he appoints run the economy for the benefit of the oligarchs, and are rewarded corruptly for this policy.



Source: http://www.pewglobal.org/

It is also the near-universal Russian conviction that there is no policy which the government has decided which is not pursued for corrupt reasons. This is what has made the recently announced decisions to increase value-added tax from 18% to 20%, and to extend the retirement age from 60 to 65 (for women from 55 to 63) bellwether issues for the president and the voters. Putin’s support among voters is the default position — if not Putin, the alternative would be worse — except in the war conditions which the Americans have created.

There is now no Russian business source in Moscow, London, Geneva or Berlin who doesn’t understand this, along with their western lawyers, bankers, insurers, and wealth managers. “So long as the oil price stays up and Trump makes enemies of the Germans and the Chinese,” a veteran international banker to Russian corporations acknowledges, “Putin has a margin for manoeuvre. His reappointments of exactly the same men as he’s trusted for years to govern the country show he doesn’t trust anyone else in Russia for the future. In the medium term this means sclerosis. But right now Putin must keep happy the two powers which, if they get angry, threaten him – the military and the oligarchs. It takes American and British stupidity, and of course their media, not to see this.”

Russian businessmen advertise in the press; their foreign advisors don’t talk publicly at all. What they agree among themselves is that they are expecting Putin to look for a way he and Trump can agree on a return to the business as usual in which they used to be comfortable. Foreign Minister Lavrov claimed on June 29 in an interview with a London television channel: “I have mentioned sanctions only in the context of the deterioration of relations. We are not pleading to remove them. It is not our business, it is for those, who introduced sanctions, to decide whether they want to continue or whether common sense would prevail.”

Lavrov also conceded: “we would not mind them lifted.”

Since the Kremlin assessment is that Trump is too weak politically to attempt this, and Putin is hard-pressed by the oligarchs to save their businesses in Russia and their fortunes abroad, the question that is being considered for a private exchange between Putin and Trump is a modern-day version of the Alaska Purchase. Today, the offshore Russian colony is of vastly greater wealth than Alaska ever was to the imperial tsar. Alaska fetched a small fraction of the value of Russia’s national income in 1867. The offshore Russian colony today is almost equal in value to the national income. This is how it looks on the map:

GROWTH OF THE RUSSIAN COLONY OF EL DORADO, 2000-2015

Types of Russian private wealth as a percentage of national income



Source: http://piketty.pse.ens.fr/files/NPZ2017WIDworld.pdf – Figure 4.

How this capital in cash, real estate, shareholdings, and other assets was first generated at the start of the Yeltsin administration, and then transferred offshore during the Putin administration, can be followed here:

RUSSIAN TAKE-OFF FOR THE TOP 10% INCOME-EARNERS, 1990-2015



Source: http://piketty.pse.ens.fr/files/NPZ2017WIDworld.pdf – Figure 11a.

Today’s offshore colony isn’t for sale to the Americans, for it’s already been bought and sold – not only to the US, but to the UK and the other capital havens of Europe and the Caribbean.

The US economic war against Russian finance and against the oligarchs and their interests is severing the flow of cash between the homeland and this colony, and between the colony and its host, the international capital market. This is not yet total war. The British have attacked Roman Abramovich’s residency permit for London, but welcomed the Otkritie Bank fraudsters Vadim Belyaev and Boris Mints. The US has barred Oleg Deripaska and Victor Vekselberg from their homes in New York, Washington, and Connecticut, but left Abramovich undisturbed at his addresses in Manhattan and Aspen. Last week the French abandoned all effort to prosecute Russians for money-laundering and released Suleiman Kerimov to move between Moscow and Cap D’Antibes as he pleases, along with his partner, German Gref, the chief executive of Sberbank.

“We would not mind,” says Lavrov, who has been particularly close in the past to Deripaska, and at present to Alexander Vinokurov, “to build up our own capacity in key sectors of economy, security and other areas on which an independent state depends. In the recent years, we have learned a lot, including the fact that in these issues you cannot rely on the West. You cannot rely on Western technologies, because they can be abruptly stopped at any moment. You cannot rely on the items, which are essential for the day-to-day living of the population, coming from the West, because this could also be stopped.”

An obvious option, the nationalization of these key sectors is not the Kremlin’s policy, not even when the banks have been looted and the manufacturers have lost their export markets. Also, despite repeated public commitments to deoffshorization, recovering Russia’s offshore wealth is not Putin’s policy.

How far Trump will withdraw on the economic warfare front and support Putin with the oligarchs on these points is certain to be tested, oligarch sources believe. They expect Putin to ask Trump what shareholding for Deripaska’s companies will satisfy him for the April 6 sanctions to be modified, and at least part of their business returned to normal. Trump’s conversation with Putin on the Deripaska sanctions will be kept secret at least until the US Treasury has agreed to rule on Deripaska’s application for sanctions relief in August for some of his companies, in October for others. In the interval, the market value of such inside information may be more difficult to keep secret in Moscow.

When cynical and unscrupulous men are desperate, they become as predictable as if they were principled. The difference between such men is hard to tell.

NOTE: the original of the lead image was an American newspaper caricature, published on May 25, 1867, showing the Russian tsar offering Secretary of State Seward an unequal trade – bears, seals, icebergs and Eskimos for more valuable American assets.

by Editor - Monday, July 2nd, 2018