Russia Between Oligarchs & Tycoons

Who were the oligarchs? The question may seem premature, while Russia's economic élite still exerts disproportionate influence over Russian society. Moscow actually has more dollar billionaires than New York. However, a drastic change has occurred during the Putin presidency. Whereas Boris Yeltsin's second presidential term was dominated by the oligarchs, Putin has largely succeeded in breaking away from their influence. Thus, the heydays of Russian business oligarchy seem to have passed, turning oligarchs into mere tycoons.

As Vladimir Putin seized power in Russia in 1999-2000, it was much thanks to the support of a few influential Russian businessmen. Their relations to the Kremlin, and above all president Yeltsin, were so close that Russians referred to them as the "family" - signifying a merger between the Yeltsin clan and the major Russian business tycoons of the 1990s. At the time, the tycoons wielded such influence and power over Russia that the country stood on the verge of oligarchy.

In contrast to Yeltsin, Putin at an early stage signalled that things were about to change. Such signals were initially incomprehensible for most oligarchs, as they were used to easy access to the president. However, access was soon denied with Putin in power - much to the fault of the oligarchs themselves. People like Berezovsky and Gusinsky had major fallouts with Putin already in early 1999, much because they treated him as a puppet on a chain. Hopes that they could control the new and inexperienced president were soon lost.

Instead, Putin formalised relations with major business by channeling contacts through the Russian Union of Industrialists and Entrepreneurs and by regular and more official meetings with leading businessmen. The message that gradually evolved during Putin's first presidency was becoming increasingly clear: Hands off politics! As long as business did not meddle into politics, the oligarchs were to be left alone in generating profits. However, if business ventured into threatening state interests, there would be hell to pay. So, who were the winners and losers of this transition?

The losers
The first victim of Putin's new policy was Russia's "capo di tutti capi" - Boris Berezovsky. His influence over Russia was so great by the end of the 1990s, that he was often called the "Grey Cardinal" of the Kremlin. With six major bank owners, Berezovsky in 1996 formed the "Big Seven" who were instrumental for the reelection of Boris Yeltsin. Seeing himself as a "kingmaker" Berezovsky was rewarded by Yeltsin in becoming first deputy secretary of the National Security Council, then secretary of the Commonwealth of Independent States (CIS). Winning a parliamentary seat in 1999, Berezovsky's luck started to turn. Having first brought Putin to power and then severely aggravated him, the methods of Berezovsky's business conquests - Aeroflot, Sibneft, aluminium industry, the ORT TV-channel etc - were turned against him. Only six months after the 1999 parliamentary elections, Berezovsky was forced to go into exile, on charges of fraud, money laundering and other financial crimes. After several demands for his extradition to Russia, Berezovsky was finally given political asylum in Great Britain.

Putin's second victim was media tycoon Vladimir Gusinsky - Russia's equivalent to Rupert Murdoch. Through his holding company Media Most, Gusinsky had great influence over Russian media, not least through the TV-channel NTV and the newspaper Segodnya. NTV and Segodnya were long regarded the nucleus of new independent media in Russia, even though it is obvious that Gusinsky at times used his media power for political purposes. The most flagrant example was the massive endorsement for Yeltin's reelection campaign in 1996. However, with Putin in power, Gusinsky's overinflated ego, a flamboyant lifestyle, and a propensity for unsound investment were factors that soon put him at loggerheads with the new master of the Kremlin. This all led to his eventual downfall. After a series of police raids and legal actions against himself and his companies, Gusinsky went into exile in Israel in 2001. In his absence, Gazprom and other companies seized the remainder of his business empire, and it its unlikely that the media tycoon will return to Russia, not least because legal authorities have long sought his extradition on fraud and embezzlement charges from several European countries.

The case that has perhaps been given most attention internationally is that of Mikhail Khodorkovsky. Regarded as a banking genius, Khodorkovsky in 2003 was Russia's wealthiest man. Back in 1990, he formed the Menatep bank, which provided credit to state enterprises, and participated in dealing with privatisation vouchers, thus gaining control of several large companies. He entered into chemical and textile industries, construction, mining and oil enterprises. In 1995, Khodorkovsky gained a controlling share of the oil giant Yukos, which soon became the jewel in the crown of his business empire. In the early 1990s, Khodorkovsky was known for his murky business deals in the privatisation of Russian economy. However, at the turn of the millenium he had transformed his public image to that of a protagonist of economic transparency, publicly crusading for stockholder and investor rights. Thus, Yukos was the first major Russian company to publish reliable quarterly reports. Still, economic influence was not enough for Khodorkovsky. He wanted political power as well. In supporting parties opposing Putin and the Kremlin, Khodorkovsky soon became the target of Kremlin's anti-oligarch crackdown. He not only posed a political threat. He also planned the construction of several strategic pipelines, which - if realised - would have given him a disproportionate influence over Russian business making him independent of political pressure. In addition to a political threat, Khodorkovsky thus also posed an economic threat to major interest groups within business and politics. It should therefore have come as little of a surprise when Khodorkovsky was arrested in October 2003. After a lengthy trial, displaying the Russian legal system as a travesty of justice, Khodorkovsky was sentenced to nine years imprisonment and his financial assets were gradually dismembered by his enemies within state and private business. At the time of his arrest, he was considered the most powerful of the Russian oligarchs. Now he has been passed to the sidelines serving his sentence in a Siberian prison camp.

The winners
Among the winners of Russia's business oligarchs, Roman Abramovich must be counted as the one who got away scots free. A disciple of Boris Berezovsky, Abramovich benefitted from his patronage in making his way to the top of Russian business. As the Kremlin moved in on Berezovsky in 1999, Abramovich took over Sibneft - one of Russia's largest oil companies - from his patron along with Russia's largest television network. He then went on to expand his nascent business empire by going into aluminium production by forming Russian Aluminium - the world's second largest aluminium producer. He also went into politics, representing the impoverished Chukotka region of the Russian far east, first as Duma deputy and then as governor, making development of the region his pet project. In 2005, Abramovich sold off 72% of his shares in Sibneft to Gazprom - the Russian state energy company. He has also apparently been able to remain good relations with the Kremlin - both the Yeltsin and Putin administrations. Abramovich has, however, increasingly transferred his assets abroad, buying and investing in western business, most notably the purchase of the English soccer team Chelsea. Today, he spends most of his time in Britain, only occasionally visiting Chukotka, where he remains governor. In March this year, Abramovich was listed by Forbes Magazine as Russia's richest man and the 11th richest in the world.

Vladimir Potanin is the golden boy of the post-soviet establishment. The son of a Ministry of Foreign Trade official, Potanin attended the prestigious Foreign Ministry institute, the MGIMO, before going into business. He started out with trading in nonferrous metals with his Interros company in 1991, to be followed by two banks - Oneximbank and MFK. Being an architect of the loans for shares program, he benefitted greatly from being able to buy Russian companies much beneath market value. In 1996, Potanin was one the "Big Seven" who assured Yeltsin's reelection. As a token of appreciation, he was then appointed first deputy prime minister by Yeltsin. The August 1998 economic crisis took a heavy toll on Potanin's business empire, but he succeeded in securing crucial assets. His financial conglomerate holds major assets in Russian business such as Norilsk Nickel - the world's largest platinum and paladium producer - as well as media holdings such as Izvestiya and Komsomolskaya Pravda.

As many other successful Russian businessmen, Mikhail Fridman has kept a low profile throughout his career. Starting out with a plethora of various businesses in the late 1980s, he subsequently managed to finance the establishment of AlfaBank - now one of Russia's biggest banks. He then went into the lucrative oil business and acquired Tyumen Oil. Cooperating with British Petroleum, Tyumen Oil was transformed into TNK-BP, today the world's tenth largest private oil and gas company. Also Fridman belonged to the "Big Seven" endorsing Yeltsin in 1996. The pinnacle of his business empire is the AlfaGroup holding company.

Oleg Deripaska is one of Russia's youngest billionaires (only Abramovich is younger). As so many others, he started out with trading in metals. Together with Abramovich, he formed the Russian Aluminium (RusAl) - the world's second largest aluminium producer - in 2000, and now owns 75% of company shares. He has also major interests in power and car industries and he also owns Russia's largest insurance company. Although Deripaska has been careful to keep off the political arena, he is considered one of president Putin's major business allies. Along with his business partner - Abramovich - Deripaska is by some currently considered Russia's richest man.

Born in Baku, Vagit Alekperov was fostered into the oil business, landing his first job in the sector at 18 years' age. By his growing expertise, Alekperov in 1991 became first deputy minister of fuel and energy and then acting minister. His main political accomplishment was bringing Russia's three biggest oil companies together to form LukOil. Not surprisingly, Deripaska then became president of Lukoil, a position he has retained ever since. Today, Lukoil is one of the world's mightiest oil companies with energy reserves only equalled by Exxon. He is considered Russia's tenth richest and the 38th worldwide.

From managed democracy to managed oligarchy?
Russia during the 1990s has often been compared to the United States during the early 20th century, when Rockefeller, J.P. Morgan and other business tycoons succeeded in forming next to total monopolies in various areas of business. Thus, the Wild West of this era should be equalled to the Wild East of Russia during its first post-soviet decade. Those who seek similarities may today also compare US President Woodrow Wilson's measures to bring down Standard Oil and other monopolistic companies. Thus, today Putin would allegedly be trying to regulate the market after the necessary turmoil of the liberalisation of the 1990s. The Russian state would consequently be trying to regain its position as a macroecnomic arbitrator in order to regulate the market and set the rules of the game.

However, this argument falls flat as the Putin administration displays such a blatant disregard of basic property rights - the very nucleus of a working market economy. That the oligarchs may have done the same in the early 1990s is no excuse for a state to follow such conduct. Moreover, one may argue that one oligarchy today is replaced by another, while the spoils of state action against the oligarchs partly end up in the hands of Putin's entourage, thus effectively redistributing assets from private to private hands instead of to government control. Consequently, Putin's people enrich themselves by forcing parts of Russian business into their own hands. Of course, such behaviour is but a parallel to Putin's political agenda, gaining control over all relevant areas of society. Seeing similarities between Russia of the 1990s and the US of the 1910s becomes laughable if turning to president Wilson's credo of "making the world safe for democracy." It is quite apparent that Putin neither makes Russia safe for democracy nor makes Russia safe for market economy.

Russian Cathedral in Flames

Yesterday, the St. Petersburg Troitsky (Trinity) Cathedral was rampaged by a violent fire, destroying its main dome and severely damaging the entire church. Apparently, the blaze started in renovation scaffolding encircling the dome, and firefighters were helpless in their attempts to fight the raging fire due to lack of proper equipment. At least, the bulk of invaluable religious icons and artefacts was saved.

St. Petersburg has now been robbed of the landmark of the Troitsky Cathedral's blue dome. Overlooking one of St. Petersburg's central canals, the Troitsky Cathedral, since its constuction in 1835, was the church of the famous imperial Izmailovsky regiment. The church was renowned for its fine collection of icons, but after the revolution most of its treasures disappeared through looting, until Troitsky was finally closed in 1938.

For long the Cathedral was threatened by demolition by soviet authorities, but in the end it came to use as a warehouse. It was not until 1990 that Troitsky Cathedral was returned to the Russian Orthodox Church. Since then renovation has slowly been underway, which so tragically has now resulted in its partial destruction.

St. Petersburg authorities have already promised that Troitsky Cathedral will be reconstructed within 18 months. Official proclamations that Troitsky will be rebuilt in record time now provoke fears that such haste will put its important cultural and historical values in peril. Therefore, this is perhaps an opportunity for president Putin to show his true devotion to his native city of St. Petersburg by guaranting that Troitsky will really retain its role as a carrier of Russia's national heritage.

Ukraine: Lazarenko Gets 9 Years Jail

Former Ukrainian Prime Minister Pavel Lazarenko was sentenced to nine years' imprisonment by a Federal Court in San Fransisco on Friday, Washington Post reports. Lazarenko was found guilty of corruption, money laundering, fraud and extortion, and also received a $10 million fine in addition to the jail sentence.

Pavel Lazarenko was Prime Minister of Ukraine from 1996 to 1997 and became infamous for using his office to serve his own economic interests. The bulk of his multimillion corruption proceeds ended up in Swiss, US and offshore bank accounts. The victim of Lazarenko's crimes was the Ukrainian people, who at the time struggled for daily survival after the post-soviet economic collapse.

Lazarenko was appointed Prime Minister of Ukraine in May 1996, although his appointment was never considered by the Ukrainian parliament - the Verkhovna Rada. Controlling decisions on many lucrative business projects, Lazarenko is said to have demanded 50% of profits from businesses favoured by him. Lazarenko at the time had close political and economic ties with current Ukrainian politicians of prominence such as Yulia Timoshenko and Socialist leader Oleksandr Moroz.

In 1999, Lazarenko fled the Ukraine, awaiting a parliamentary decision to waive his parliamentary immunity. Within days of his escape, he was arrested in the United States and spent four years in custody pending trial, until his release on a $68 million bail in 2003. A year later he was found guilty on 29 out of 53 charges concerning money laundering, fraud and extortion, but the judge eventually dropped a majority of them, reducing the list to 14 offences. Despite being released on bail, Lazarenko was subject to house arrest until his final verdict on Friday. The former Ukrainian PM has already declared that he intends to appeal the verdict.

Throughout the trial, Lazarenko's defence has maintained his innocence and challenged US legal authority to alleged crimes not committed in the United States. Lazarenko has argued that his business transactions were normal to the prevailing conditions in the Ukraine in the 1990s. He thus claims that it was generally accepted for a Ukrainian politician to earn millions on the side in these years, and that such business formed a natural part of the transformation from soviet command economy to a liberal market economy.

In 2000, Ukraine sought Lazarenko's extradition. The charges brought against him by the Ukrainain Prosecutor General included, beside economic crimes, the instigation of two murders and several assassination attempts on high-ranking officials. The US, however, denied extradition on the grounds that Lazarenko was tried for crimes in the United States.

US federal prosecutors are far from satisfied with Friday's verdict. They had initially sought an 18 year prison term and confiscation of and fines to a total of $66 million. US authorities have claimed that Lazarenko transferred $118 million to US banks alone. Still, the sentence constitutes a milestone in the US battle against international crime. Lazarenko becomes the first former state leader to receive a US prison sentence after Manuel Noriega of Panama. Also, the Ukrainian people may give up a sigh of relief that at least one of their corrupt leaders now is punished for his crimes although by the United States and not by Ukraine itself.

Come Rob a Botanical Garden!

"Shut up! It's a hold-up, not a Botany lesson. Now, no false moves please. I want you to hand over all the lupins you've got." Thus said the highway-robber Dennis Moore in the absurd Monty Python sketch by the same name. Taking from the rich - giving to the poor, Moore contributes to socioeconomic redistribution by robbing lupins (la. Lupinus polyphyllus). The mere thought of robbing flowers is a masterpiece of absurdity, but what few know is that reality presents an even more absurd historical parallel.

In the 1930s, the racist Nazi ideology transformed all walks of German life - and so also biology. When historians today speak about racial biology, they usually refer to the absurd idea of purifying human races, motivated by a belief in the superiority of their own race, as for example the Aryan race in Nazi Germany in the 1930s and 1940s. What we today often fail to realise is though the full meaning of racial biology in Nazi totalitarianism. As the word indicates, totalitarianism signifies the full ideological control of a society in all respects. Therefore, even flowers and plants fell victim to Nazi ambitions of racial and genetic purification.

The idea was to genetically develop grain, vegetables and fruit, so that they would yield increasingly larger crops to feed a growing population in the ever-expanding Lebensraum of the German people. Consequently, as the Nazi army prepared to conquer the East - the Soviet Union - an expert team of racial biologists was assembled to form the "botanisches Sammelkommando der Waffen-SS" - the SS-Commando for botanical collection. Its task - to rob botanical gardens!

With botanist Nikolai Vavilov, Soviet botany became world leading in the field from the 1920s up till just before the Second World War. Vavilov organised botanical expedtions that were sent all over the world to collect samples, the results of which laid the foundation for his various botanical theories. Extensive research was done at the genetic institute in Leningrad that today carries his name. Botanical plant stations were built up throughout the Soviet Union to test and develop genetically modified plants. In 1940, the Vavilov institute held the world's largest botanical collections - seeds of plants, flowers, fruit etc. However, everything was not as bright as it seemed. Enter villain!

Trofim Lysenko was the Soviet biologist of the times who came to say what power and ideology wanted most - a theory on the inheritance of acquired qualities. In its most absurd versions, knowledge and skills were passed on to new generations, which fitted the image of building a new Soviet Man - Homo Sovieticus. Coming from poor circumstances, Lysenko was just the "barefoot scientist" that the Communists needed to clamp down on and discredit "bourgeois science." Being a biologist, the obvious first target was genetics. Consequently, Lysenko started a campaign to eradicate genetical science in the Soviet Union, leading to a policy of political extermination of scientific opponents. Thus, in 1940, Nikolai Vavilov - as the most prominent geneticist of his time - was imprisoned for "bourgeois pseudoscience" and eventually died of malnutrition in jail in 1943.

Then, what about the SS-Commando for botanical collection? During Operation Barbarossa, the Nazi invasion of the Soviet Union, the SS-Commando was deployed to collect as much as possible of the plant samples from plant stations of the Vavilov institute throughout the USSR. Its mission resulted in the greatest theft in history of the genetic inheritance from a single nation. Samples were collected and brought back to the Third Reich for cultivation. Led by German botanist Heinz Brücher, who had long experience from expeditions to China and Central Asia, the Commando succeeded in gathering samples from most Vavilov plant stations in the USSR, though never being able to conquer the Vavilov institute itself in besieged Leningrad.

After the war, Brücher escaped to Latin America, where he continued his research. As the Cold War began, focus turned away from Nazi crimes and Brücher could gradually regain his position as a revered scholar. In secrecy, he returned to Europe to collect the samples he had robbed from the Soviet Union and recultivated in Austria. In 1972, Brücher even became an expert on agriculture and biology for UNESCO. Rumour even has it that he visited the USSR and that the KGB then extorted him into handing over some of his research results along with plant samples he had once robbed the Soviet Union of.

As in many other cases with Nazi crimes, apologists have tried to belittle also this massive theft of genetic resources. Thus, Brücher is said to have saved the Soviet genetic heritage from certain destruction, as Lysenko's policy eventually would have been sure to eradicate the majority of genetic collections in the USSR regardless of the war. However, such speculations do not change the question of guilt. Brücher therefore goes down in history as the greatest genetical robber yet.

Perhaps as a sign of remorse, he used the last years of his life to develop the virus estalla - a virus that was intended to hit the coca plant, and thus cocaine production in Latin America. In 1991, Brücher was brutally murdered in his home in Argentina. There have been speculations that the murder was ordered by Colombian drug barons, fearing that his research results would threaten cocaine production.

Although the image of robbers carrying off entire botanical gardens, seems ludicruous at first thought, the Brücher SS-Commando was the first recorded case of "biopiracy" in history, and to this day also remains the largest.

In 1993, the United Nations adopted the Convention of Biological Diversity for the protection of the genetic heritage of all nations. To this day, however, drug and agricultural companies explore nature to find plants, which they can put to commercial use, developing new drugs or crops. Of course, the biggest unexploited genetic depositories are in developing countries, which themselves are candidly bereft of their resources. Some things never seem to change.

Perhaps, the Monty Python hero of Dennis Moore has greater relevance today than ever - "taking from the rich - giving to the poor" - the genetic heritage that history and present has taken from the poor and helpless. This is equally true for the peoples of the Soviet Union in history as it is for the peoples of developing countries today. So, hand over the lupins!

Reading recommendations:

"Potatisens genetiske revolutionär" Svenska Dagbladet, 1 December 2008.

"Sovjetisk frösamling hett krigsbyte", Svenska Dagbladet, 2 December 2008.

Lukashenko No Rocket Scientist

Yesterday, a Russian space rocket carrying 18 satellites crashed shortly after takeoff from Baikonur spacebase in Kazakhstan, as reported by international media. The accident presents a serious setback for Belarus new and proud space-programme. The rocket was carrying Belka - Belarus' first to be human-made object in space. As it now appears, this dream was never realised.

Since Kazakhstan became independent in 1991, Russia has kept on to its spacebase in Baikonur by a bilateral lease agreement, which runs until 2050. Baikonur has since been used as a launching-pad for numerous satellites, mainly for commercial purposes. One pleasant twist to activities at the spacebase is that Russia uses converted intercontinental ballistic missiles (ICBMs) for these peaceful purposes, thus literally turning swords into ploughshares. Working on a commercial basis, Baikonur has also allowed other countries to enter the space age, as should have become the case also for Belarus on Wednesday.

Thus, it was with great pride that Belarus president Alyaksandr Lukashenka yesterday stood watching how the country's first satellite took off from Baikonur space-centre in Kazakhstan. As the rocket rose to the skies, it was to become a short-lived joy for Lukashenka. But 86 seconds after take-off, the rocket started twirling to the ground to eventually explode in a burst of fire. Regretfully, no media reported Lukashenka's reaction to the crash. Let us however assume that it would not have been his one and a half minute of glory.

Of course, had Lukashenka himself been a rocket-scientist, the accident would never have happened. One cannot but pause to wonder, why this very gifted man does not master also rocket science, but perhaps not even Lukashenka can be omnipotent. Therefore, someone else has to take the blame for failure. Yesterday, Belarus opposition leader Milinkevich was arrested by police. It will be interesting to see whether he will be charged for sabotaging Belarus glorious space programme. After all, the motto of the regime is: "Together towards a strong and prosperous Belarus!" Then some insignificant little opposition leader should not be allowed to sabotage Belarus' glorious and bright future under the wise leadership of president Lukashenka. Or should he?

Russia Convicted by Court of Europe

On Thursday, the European Court of Human Rights made its first ruling on Russia's war in Chechnya, BBC reports. The verdict, which rules Russia guilty of the disappearance of a Chechen man in 1999, is a landmark in dealing with human rights violations in Chechnya. Above all, it sets a precedent for the some 200 similar cases that are pending ruling by the Court of Europe.

In 1999, 25-year-old Khadzhi-Murat Yandiyev disappeared in Chechnya after being detained by Russian troops. In 2000, his mother, Fatima Bazorkina, was shocked by seeing her disappeared son on television. The footage shows how Russian troops have detained her son in the village of Alkhan-Kala, and how a Russian general questions him. In the end, the general shouts: "Take him away, finish him off, shoot him, damn it!" Since then, there are no reports of Yandiyev's destiny, and he is supposed dead. The general giving the order, Alexander Baranov, has later been promoted and awarded the order Hero of Russia.

In 2001, Yandiyev's mother filed a complaint against Russia to the the Court of Europe. As many other relatives of the estimated 5000 people who have disappeared in Chechnya since 1999, Bazorkina has fought a long and arduous legal battle to find out what happened to her son. Even if the European Court ruling will not reveal this, the verdict still serves to recognise the tragic deaths of individuals bereft of their human rights in Chechnya.

The ruling thus signifies the rehabilitation of human value in the face of extensive Russian war crimes in Chechnya. Above all, however, it comes as a welcome sign that Chechnya has not been forgotten, and that law eventually will prevail - this at a time when both the EU and the US have remained silent on Chechnya since 2001.

Russkoe Bistro vs. McDonald's

Great fortunes are made by catering to the basic needs of people. This is a fundamental economic fact. What all people need is what all people buy. This is why potatoes during famines have been more expensive than meat. People buy first what they think is most needed, even if better alternatives are cheaper. Alternatively, if there is a choice, subjective factors such as taste and image play an important role in consumer behaviour. The company that succeeds in combining needs and tastes truly sits on a money making machine.

Fast food is perhaps not the first thing that comes to mind when thinking of basic needs, but today the industry generates massive profit worldwide, because an increasing number of people find the relative price in time of fast food lower than that of home-cooking. The niche of fast food manufacturers has broadened to such an extent in many industrialised countries, that the industry is on the verge of catering to the basic needs of people.

One has only to think of the McDonald's saga to realise the enormity of potential revenues if one succeeds in getting a cut of the fast food market. McDonald's success relies on great sensitivity in forming and doctoring a positive trademark for its consumer target group by a common and dynamic concept worldwide. This is McDonald's success story no matter what one may think of how the food chain generates profits. In big-busines, morality has no place when it comes to making money.

So, are McDonald's products significantly superior to those of all other fast food chains as to earn it the market share it has. No, certainly not. What McDonald's offers is simply a well-tuned concept - balancing pricing and trademark - to make customers prefer their products. One always knows what one gets at McDonald's. It is a safe bet. Objectively, though, there are certainly many other better alternatives for consumers. What most alternatives however lack is the concept that continuously draws new generations of customers.

In 1995, Russkoe Bistro was founded as Russia's first fast food chain. The concept was simple and elegant, namely providing high-quality traditional Russian cuisine in a fast food package at lower prices than its competitors. The products on offer were what customers in Western Europe and the US paid several dollars more for at more up-market restaurants than what they would if having a hamburger at McDonald's. Russkoe Bistro simply offered better products at lower prices - real food and not the junk offered by most fast food chains.

The menu was meticulously elaborated by the All-Russian Food Institute and little effort was spared to present customers with an appetising assortment of cheap but tasty traditional Russian dishes made entirely out of high-quailty domestic products. The simple and wholesome menu seemed a sure recipe for success.

Furthermore, Russkoe Bistro's trademark was carefully chosen to align with an image susceptible to Russian tastes also on the subjective level. The company logotype portrayed a cossack, which in combination with its name - Russkoe Bistro - conveyed positive historical connotations to consumers.

There is a well-known popular story on how the Russian troops that defeated Napoleon in the 19th century, sat about the Paris cafés and restaurants urging the waiters for food by shouting "быстро, быстро!" (fast, fast!). Thus, the world-renowned Paris "bistros" would have originated from Russian troops in Paris celebrating one of their country's greatest historical victories. This was the positive image Russkoe Bistro exploited. Russia was simply the origin of fast food, so why not reconquer it?

The backside of the logo, some people argued, was however that portraying a cossack in full uniform also brought forth visions of extreme Russian nationalism. Still, having a military as symbol is not unique to Russkoe Bistro. The well-known logotype of Kentucky Fried Chicken (KFC) portrays an image of its founder - Colonel Harland Sanders. Even if his title was honorific, many Americans still refer to him simply as "the colonel" without thinking the least about the propriety of a military man being the symbol of a fast food chain. It thus seems that the choice of symbol for Russkoe Bistro was truly ingenious, while most consumers would associate the image with the historical pride of how Russian culture once set a postive landmark far beyond the country's borders.

So, did the company owners realise that they were sitting on a potential gold mine? Regretfully not, by all appearance. Originating as a pet project of Moscow mayor Yuri Luzhkov, Russkoe Bistro had a grand opening intended to score political points for its founder. Its commercially viable trademark was used for political purposes to the degradation of its worth. In a few years, the fast food chain - based on franchising as McDonald's - grew from a mere three to 37 restaurants only in Moscow. This was not least because of massive financial backing from Moscow City. The financial feasibility of the project was a completely different matter as it was run as a quasi-public service.

Instead of generating the big profits that the Russkoe Bistro concept might have vouched for, little effort was made either to exploit the company's true potential or bring in the revenues that were so close at hand. Russkoe Bistro was simply mismanaged. This became evident by the August 1998 financial crisis, when the company quickly found itself on the verge of bankruptcy. Trying to respond to crisis, the company management - in contradiction to sound economic judgement - vastly expanded the menu, making it even more difficult for franchisers to break even financially.

The very concept of the fast food industry is to offer an easy-to-make menu with a limited quantity of dishes at low prices for as many customers as possible. The opposite is tantamount to increased costs, higher prices, and much more complex logistics. Expanding the menu is simply a textbook recipe for failure for a fast food company facing crisis. It is no wonder that the turnover of Russkoe Bistro and its franchisers alike dropped even more drastically than was the case for competing fast food chains.

As the company attracted increasing losses after the 1998 crisis, questions started to amass why Moscow City should keep on funding a defunct enterprise on the verge of collapse. It seemed clear to all, that if Moscow withdrew its support, the company would fall apart within days. Still, the City continued its support in contradiction to financial soundness. Soon, however, other dark clouds started to gather over the company. Thus, the Interior Ministry started an investigation on the imbestlement of Moscow public funds to the amount of $1,3 million. Apparently, large funds had been transferred via the company in a complex string of financial transactions to foreign bank accounts. The case of Russkoe Bistro soon became part of the 1999 fraud and money laundering investigation that came to be known as the Chase Manhattan Bank scandal. To this day, many of the financial irregularities surrounding the scandal remains buried by politicians and businessmen that have no interest in the truth being made public. Needless to say, mayor Luzhkov assumed no responsibility for the Russkoe Bistro part of the scandal and came out of the affaire scots free.

Still, somehow Russkoe Bistro managed to survive. The company brand had however become strongly tarnished and the fact that it was so heavily associated with public services and handouts, resulted in consumers never feeling that there was something special about the company. Instead of prouding themselves of a food chain that in objective terms was far superior to McDonald's, Muscovites regarded Russkoe Bistro as an improved version of the traditional Russian stolovaya - poor quality workplace restaurants. In 2005, the company was sold by public auction at a bargain price. The restaurant chain still exists and is highly recommendable for its good and cheap food. However, the very real chance of creating a contender to McDonald's in Russia was lost, and the value of the company both financially and as a trademark does not vouch for any rapid expansion.

What is perhaps the most tragic element of the Russkoe Bistro saga is that Russian business for once had a winning concept on their hands, which did not involve the usual easy-to-get profits emanating from natural resources. Russian entrepreneurs stood to gain the great fortunes associated with catering to basic needs. The Russkoe Bistro concept was not only competitive on the domestic market, but could also have been exported with great succees to Western consumers longing for higher-quality fast food. The paradox is perhaps that a concept so well-tuned to consumer preferences in the West, was not valued highly enough by Russians themselves.

All things that come out of Russia must not be grandiose. Even small things can be great. Regretfully, lack of vision, self-confidence and entrepreneurship remain hallmarks of Russian business to this day. It is true, that the aftermath of the 1998 financial crisis was an eye-opener for the ability of domestic high-quality production of consumption goods. Still, Russia is far from realising that its businesses may be internationally competitive also when it comes to areas beyond exports of natural resources.

With Russkoe Bistro, Russia had a potential McDonald's on their hands, but lost it due to lack of vision and sound management. If Russia had believed in itself, Russkoe Bistro might well have reconquered the boulevards of Paris - or for that sake the streets of London, Berlin or New York. Still, just like the cossacks in Paris in 1814 felt ill at ease in a foreign sorrounding, Russian entrepreneurs today may feel that the international market is foreign to them. The question is also if hypothetical current "business cossacks" would bring back unwelcome ideas of reform to Russia as their predecessors once did after the Napoleonic wars. Perhaps Russia will never be ready for the international business battle bringing back ideas for the transformation of economy, society and politics. Or is this what is gradually happening as western-educated Russians now are increasingly returning to do business on their home-turf? Only future can tell.

Ukraine: No Juice in Orange Coalition

Earlier this week, Ukrainian Socialist leader Moroz again proclaimed the death of the Orange Coalition and the formation of a new coalition between the Socialist, the Communists and the Party of Regions. Together, the three parties control 239 out of the total of 450 seats in the Ukrainian parliament - the Verkhovna Rada. Thereby, it now definitely seems as if the last juice has been squeezed out of the orange coalition.

By his action, Moroz has abandoned his allies of the Orange Revolution and turned to the inheritants of the old regime. On Tuesday, the so called anti-crisis coalition nominated Yanukovich for Prime Minister, and the parliamentary committee chairmanships were divivded between the parties in the Rada.

The political turmoil in Ukraine since the March parliamentary elections have left the leaders of the 2004 Orange Revolution totally discredited. A recent poll, by the the Kyiv International Sociology Institute and the Kyiv Political and Conflict Studies Center, shows that Ukrainians now have more confidence in Viktor Yanukovych, leader of the Party of Regions, than they have in President Viktor Yushchenko and political bloc leader Yulia Tymoshenko.

Thus, since February, the confidence for the president has shrunk from 37% to 20% in July, whereas the support for his opponents has increased from 35% to 43% during the same period. Being previously portrayed as a scoundrel during the Orange Revolution, opposition against Party of Regions' leader Yanukovich has shrunk from 42% to a mere 35%.

Due to the political crisis in the country, there have been widespread speculations that president Yushchenko would use his constitutional right to proclaim new elections. However, support for such a measure is low among the population. Thus, 54% of Ukrainians oppose such an option whereas new elections are supported by not more than 26%.

What is evident is that the ideals of the orange revolution now have been permanently buried in Ukrainian politics. Events during spring instead show how cynic realist politics once again stands as victor over the will of the people for democratic change. The heroes from Maidan are now pilloried and exposed to a public ridicule they certainly deserve. Still, politics is distant from popular sentiment.

Then, were the Ukrainians too naïve in their belief in change and reforms? The answer must be an unequivocal no. The people rose to the challenge. It was their leaders who were not equal to the task of transformning Ukraine. Thus, the people has been robbed of its beliefs - if not by its ideals - due to the petty self-interest of its leaders. Still, for the children of the Orange Revolution something has fundamentally changed. Even though there is little trust in their erstwhile leaders, they have experienced that they may take their destiny into their own hands and form a new Ukraine. This will take time, but the time will also come when a new generation with new ideals will reach power to conquer Ukraine's rightful place in European politics.

Latvia: Will Riga Allow 2006 Pride Parade?

The 2006 Riga Pride Parade, planned for tomorrow, seems to become a repetition of last year's chaos and homophobic protests in the Latvian capital. On Tuesday, the Riga City Council decided to ban the parade referring to threats of violence, the Baltic Times reports.

The organisers - Latvia’s Mozaika gay rights group - yesterday appealed the decision in court, but will not go through with the parade if authorities decline to grant permission.

The Pride Parade is very controversial in Latvia. The country's LGBT-movement right to public assembly is backed by the Latvian President, but Christian leaders, conservative politicians, and a large part of the public opposes the the Pride Parade on moral and religious grounds.

Last September, the Latvian parliament - the Saeima - initiated a process towards a constitutional ban on same-sex marriage. However, in contrast to Latvian populist politicians, Latvian president, Vaira Vike-Freiberga, is adamant in her support to civil rights also including gay people:

The refusal to authorize this parade is unacceptable in a democratic country because Latvia's priorities are those articles of the Constitution, which enable people to express their opinion and the state should make it possible for them.

Last summer, Latvia's first gay pride parade was arranged, provoking violent protests from rightist groups throwing eggs and tomatoes at gay demonstrators. Then, some 30 people participated in the march, whereas several thousands had gathered to protest against it or to watch it as a freak event. In contrast to last year's low turnout, some 500 people are now expected to participate in Saturday's march.

It is with reference to the 2005 events, that the Riga City Council this year argued that the city cannot safeguard the security of gay demonstrators. A similar decision to ban the 2005 pride parade was overturned by court, why organisers are confident that they will be able to carry through also with this year's event.

If organisers will not be able to go through with the 2006 Riga Pride parade, Latvia's international reputation seems destined to be tarnished. Riga has been chosen as the venue for the NATO-Summit in November, but if Latvian authorities fail to safeguard civil rights in the country - regardless of sexual preference - voices will inevitably be raised to move the Summit.

President Vike-Freiberga, along with several leading politicians, clearly realises that Latvia must shoulder its responsibility in becoming a concomitant part of European democratic culture also on this point, and will therefore most likely support the struggle for gay rights despite widespread popular resistance. Thus, the prospects for gay people in Latvia seem destined to improve gradually over coming years, even if the country will have a very long way to go before acceptance and tolerance of gay people will prevail.

Update:

On Friday, the Riga court of appeals ruled against allowing the 2006 Pride Parade, thus infringing civil rights for public order reasons. The ban on the Pride Parade effectively prevents the 2006 parade and leaves future events much in peril.

On Saturday, participants of the Riga Pride festival had to take refuge in buildings were remaining events of the festival took place. Thousands of homophobic demonstrators had turned out into the streets, throwing eggs and human excrements at the about 100 Pride participants.

Lithuania: End of the Brazauskas Era

Last Tuesday, Lithuania's Parliament - the Seimas - voted for Gediminas Kirkilas as new Prime Minister. This effectively marks the end of the Brazauskas era in Lithuanian politics, and possibly also a new climate on how to run state affairs. The Seimas' decision to elect Kirkilas as new PM comes after period of political crisis and scandals, which in the end ousted Brazauskas from power at the end of May.

Lithuania's new Prime Minister, Kirkilas, is a 54-year old professional Social-Democratic politician with a background in the Communist party - as was also the case of Brazauskas. Until chosen PM, he served as Defence Minister. In contrast to his predecessor, Kirkilas is considered a soft-spoken and EU-oriented politician with good knowledge of English. Furthermore, he still lives with his family in an old Vilnius flat, whereas most high-level Lithuanian politicians have acquired stately mansions on relatively low wages. However, rumours about Kirkilas have already started to surface. Apparently, he has a BA from a party school, which would not have granted him a place at Vilnius university, where he earned his MA. Even though this is comparatively little to form even the nucleus of a scandal, one cannot but wonder what will come in a few months, when this has been disclosed even before coming into office.

The appointment of Kirkilas as Prime Minister ends a lengthy political crisis in the country. Since Brazauskas resignation on 31 May, president Lithuania was edging towards early elections. However, only the Conservative Party wanted early elections, as the other parties feared being cast out of parliament by popular vote. So what remained was to patch up what could be saved and nominate a new PM. Just two weeks before Kirkilas appointment, the president's nomination for the Premiership, Zigmantas Balcytis, was rejected by the Seimas. This was just another proof of the political turmoil that has hit Lithuania this Spring.

In May, first the Social Liberals and then the Labour Party left the Brazauskas-led coalition government, making the PM's position impossible. The Labour Party was also under police investigation on suspicion of having received economic backing from Russian interests and for imbestlement of EU-funds. The Labour Party chairman, Viktor Uspaskich, who had gone into exile in Russia, then resigned the leadership of his party. One of the key scandal factors was the fight for control over the Mazeikiu Nafta oil refinery, which strong Russian interests were keen on buying. Without going too much into details, the heritage Brazauskas left behind was far from enviable.

All the same, it is indisputable that Brazauskas has made great services to his country. As first secretary in the Lithuanian Communist Party, Brazauskas made the party break away from Moscow in support of the Lithuanian independence movement. He transformed the party into a modern Social-Democratic party and led it to victory in the 1992 parliamentary elections, once Lithuania's independence had been regained. In 1993, he became Lithuanian president, which he served as until 1998, when he chose not to run for reelection. He was succeeded by present president Valdas Adamkus. Despite the fact that Brazauskas had declared his retirement, he had difficulties to keep out of state affairs, and eventually returned to politics to become Prime Minister in 2001.

As Brazauskas has now left the Premiership, many would feel that his retirement is long overdue. In fact, he has been speaking of retirement over the past year, but of course did not realise that it would be forced upon him. Brazauskas great role in the history of Lithuania is arguably also what eventually caught up with him.

During Soviet reign, Lithuania was relatively spared from Russification. Therefore, it was a national communist party in Lithuania that had to come to terms with perestroika in the late 1980s. As the leadership and political class of Soviet Lithuania were almost exclusively of Lithuanian origin, the choice to support independence and reform the party was closer at hand than in most other Soviet republics. However, this also meant that the country's political élite remained almost intact. The consequence was that independent Lithuania inherited the soviet political culture to a greater extent than other republics. It is the effects of this culture that now eventually has caught up with Brazauskas and sealed his fate in Lithuanian politics. Hopefully, Lithuanians will remember him as the leader that brought independence to them, and not for the many scandals that engulfed his last years in office.