Monday, 1 August 2011

Дайте, пожалуйста self-aggrandising bullcrap?

Veteran readers will remember this post from a while back, in which I took issue with people spreading baseless rumours about a proposed EUR40bn Russian bailout of Greece, no strings attached and at a bargain 4% interest rate.

I must admit I spoke too soon. The story was not made up by one of Troktiko’s readers (who only embellished it with his/her own fantasy). Rather, it was made up in Russia itself and its main proponent, Ivan Savvidis, has been making the rounds of the Greek press recently, even making it into the left-most of the ‘mainstream’ dailies, Eleutherotypia.

In this latest instance, the interviewer relating Savvidis’ story is not an Eleutherotypia regular but rather one Thanasis Augerinos, of ellada-russia.gr [Greece-Russia.gr for foreign readers], a Russian-based publication (profile in Greek here) with reasonable ties to the Russian elite. They boast that their Quarterly Review is printed in luxury paper by the Presidential printers, who formerly ran the Pravda print runs. Mmmm. The high life. Their purpose appears to be to help connect Greek interests to influential people in Russia, and they have a commercial interest in propagating such things as a Russian bailout story. 

First, it is important to take the measure of the man at the heart of the rumours himself. Savvidis is not, by any means, and certainly not by Russian standards, a fringe element. A member of the Duma, in 2008 he was decorated by Putin for services to “the adoption of legislation, consolidation and development of the Russian state institutions.” Now MPs don’t usually get decorated for helping implement laws (least they can do, y’know?) so this über-vague accolade basically means that Putin personally approves of him.

He is also an active politician rather than a silent partner: he is currently serving as vice-president of the Budget and Tax Committee and head of the Joint Parliamentary Cooperation Committee with the Hellenic Parliament.

Savvidis has made a second career out of being the voice of Greeks in Russia. He is regional co-ordinator of the World Council of Hellenes Abroad, the Greek Diaspora organisation, for the former Soviet republics and was briefly president of the International Confederation of Pontian Greeks before resigning because the whole thing wasn’t going anywhere.

Readers may not be entirely surprised to hear that he made Forbes’ list of the richest men in Russia in 2005 and owns a football club. He even tried to buy into one our major football clubs a few years ago. Oh, and did I mention he is sometimes referred to as ‘The Czar of Rostov’?

We have many names for these people here in London – prime real estate investors; Guy Ritchie movie material; scary Dubai holidaymakers; MUHFXING OLIGARCHS. To be fair to the man, he seems to be cleaner than most, but that’s not a high bar to clear.

Now I don’t know about you, dear reader, but it appears to me that when a Russian Greece-monger and a Greek Russia-monger meet, the result can be a tad oversold.

Now for the facts. Savvidis claimed back in February 2010 that Putin and Papandreou met on 15 February and Yorgo was offered a loan of 25bn at 4.7%, with no austerity programme attached – presumably the Russians trusted us to spend that money in Russia’s best interests. Putin, Savvidis goes on to say, was enraged in the aftermath of the meeting as G-Pap failed to request any such loan and only appeared to want to talk about the environment. The Russian Prime Minister was reportedly so affronted he called for the Russian consul’s head on a platter. 

In his second interview this year, Savvidis added that a second loan was proposed, to help execute the stalled deal for Greece to buy Russian armoured vehicles. This would have been backed by state guarantees and clearing exchanges of agricultural products (!). Yup.

You see, originally we were going to buy 1000 BMP-3 armored vehicles, which was revised up from 400, and then cancelled altogether as Greece entered its current state of crisis. The state of Greece’s public finances was cited as a reason and Russia-lovers are convinced that this was a higher order from Yorgo’s American masters, but more to the point there are serious problems with the BMP-3. In the words of the Russian Deputy Defence Minister, Armaments Chief Vladimir Popovkin: 
“everyone rides on top of the BMP because no one wants to ride in this ‘coffin.’  We need to make a different vehicle.”
While I don’t doubt the BMP-3 financing story, I am extremely sceptical of Savvidis’ version of events with regards to the 25bn bailout for a number of reasons.

First, in his version of events the Russian Prime Minister never actually made an offer to Yorgo but apparently authorised Savvidis to tell G-Pap that he was ‘open to all requests’, then felt betrayed when such a request failed to materialise. This is strangely coy of Putin. Greece needed a certain amount of money and the entire world knew. Why bother with this bizarre costume drama courtship? Why not make the offer and let Greek public opinion pressure G-PAP into accepting?

Second, this version of events is not corroborated by any source not ultimately citing Savvidis himself. Now I know the Western media have their agenda and their ties to their respective governments but what about the Russian media? Russia Today and RIA Novosti have carried not a peep on the Russian loan. With our current bailout failing badly, the Russian media would at least get a kick out of reminding the world that there were other –better- options, so why keep this a secret?

The closest the Russian press got to this was the Pravda reporting what it acknowledged were rumours that Greece was going to ask for a EUR10bn loan from Russia, or a loan for the purposes of arms purchases – essentially Savvidis’ version with a smaller number.

Then there is a series of bizarre statements from the Kremlin, including the Deputy Finance Minister saying on 15 February (before the meeting Savvidis is referring to) that a loan to Greece was ‘not on the table’. Then you’ve got Savvidis himself saying that Russian President Medvedev had referred Greece to the IMF before the scheduled meeting between Yorgo and Putin. His defence is that ‘First of all, one proposal does not preclude the other. [...] And who said it was not possible for our President and Prime Minister to have different tactical approaches or opinions on a range of issues?”

Well *I* say so, Ivan the Man. Is it possible that Putin would have allowed this statement to come out, or that he would have decided to loan EUR10bn or more to an insolvent country without his own Prime Minister knowing? Was it going to be a birthday surprise, with Yorgo jumping out of cake in a bikini?

Note that, unlike the EU, Russia has negligible exposure to Greece. There is no reason for them to engage in the Ostrich Bluff and pretent no bailout was coming until it was. They could have just come out with it. Back then the EU was only saying ‘we have not yet received a bailout request.’

Then you’ve got Putin saying in May 2010 that the Greek crisis is temporary and will be overcome by the EU, then his Finance Minister telling the press that market trends indicate the Greek crisis is coming to a close as a result of the bailout. Guess they’ve got cool-aid dispensers in Russia too, and no hard feelings either.

Third, Russia itself still ran a substantial deficit even in a year of record oil prices and expected to run an even bigger one at the beginning of the year, so they would be lending us borrowed money and could lose money if they were to lend at a rate lower than the one they were paying. Now, Russia is currently paying 6% on its 10yr bonds, up from ca. 5% when the bailout was allegedly proposed. Either way, they would be losing money on this deal from the get go, even if we did not default on a single penny of it.

Fourth, as I’ve pointed out earlier, Russia’s sovereign wealth fund would not be able to finance this transaction because it a) doesn’t have enough money to cover our actual financing needs b) cannot buy Greek bonds, and c) cannot buy junk debt. Then there is the bailout fund that Russia has going with its Eurasian vassals but that too doesn’t have anywhere near enough money in it.

Finally, is it really possible the bond markets would have missed this? They seem to be very quick in picking up even the most ridiculous uncorroborated rumours.

With no sustainable official way of taking on our debt, I suspect that Russia could only lend any of this money to Greece off-balance-sheet, i.e. by concealing both the gains and losses from the loan from its citizens and taking them beyond any sembleance of democratic control. Essentially, they could load the debt onto state-owned companies and offer them a state guarantee, and Boris is your uncle. This could explain some of the secrecy involved and Savvidis’ claims that the Greek-Russian rapprochement was led by this REALLY savoury character. Still, given the amount of scrutiny Greece was under at the time it is unimaginable that they could have done this unnoticed. Plus it would have gone down like a lead balloon among the population.


The core argument made by Putin-lovers a propos of Savvidis’ ‘revelation’ is that Greece had an offer that represented an alternative to the IMF bailout, and that somehow a bilateral Russian bailout that would have come with no strings attached. Now that, dear readers, is the biggest load of bollocks ever to come out a Greek journalist’s mouth, not counting sexual favours to editors.

First, as Savvidis readily admits, Russia is a paid-up member of the IMF and thus on the hock for part of Greece’s debt already. Russia also works with them on bailouts multilaterally, for instance in Georgia (subject to an adjustment programme), the Ukraine (with austerity conditions), or in Belarus (with privatisation conditions, which Russia later took on on its own; more on this later). While Orthodox Axis zealots like to suggest that Russia is hostile to the IMF, as with all things in international relationships Russia’s relationship with the Fund is much more complex than they seem capable of understanding.

Not to mention, Russia is no stranger to conditionalities, as people in Belarus know all too well. The latest bailout from Russia came on the condition that Belarus accept one of its own state-owned banks as manager of a forced $7.5bn privatisation programme, with Russian companies as the foremost bidders. All of this for a $3bn loan, mind you. Remind you of anything? Oh yes, the same tactics the IMF stands accused of employing in Greece. Here, incidentally, is a list of things Belarus would have to sell.

The world is a strange and repetitive place. Only unlike the IMF, Russia, which has no banks full of Greek debt to cater to, would probably deliver on its threats should we fail to meet our end of the bargain. Belarus for instance found out that not being able to pay Russia’s state-owned energy export company on time while waiting for a Russian-led bailout means having one’s electricity supply cut in half. Dobro!


I for one find it amazing that those of my fellow Greeks who would not believe a word coming out of the mouth of a Greek MP (probably with good cause) and would like to see them all hang regardless of evidence would nonetheless believe without reservation a Russian-Greek MP who also happens to be an oligarch, as long as he appears to confirm their delusions. The suspension of judgment is astounding.

Even if the EUR25bn loan had in fact been on the table, we now know all too well that it would have been a drop in the ocean, as the IMF and Europe found out for themselves. One could argue that austerity exacerbated our fiscal woes, thus adding to the debt burden, but as Greece is fundamentally insolvent Russia would have had to keep pouring money in. The total (to date) of $154bn in bailout money is equal to more than 10% of Russia’s GDP, or about a third of the Russian Government’s annual total tax revenue. This for a country that is still on track to run a deficit in 2011, even after soaring fuel revenues.

Furthermore, people sometimes seem to forget that Russia is not the best nation to owe wrath-of-god money to. It’s one thing to ask the well-to-do Germans to pay our way – the worst they can do is complain about how long our holidays are. But try telling the Russians to carry us on their broken backs. With nearly half of Greece’s PPP-adjusted per capita income and inflation running at a toasty 8%, the average Russian is much worse off than the average Greek.  At 4.6k Roubles, the Russian minimum wage is a quarter of the Greek minimum wage, even after our latest minimum wage cut, while the cost of living is not really any lower. These people would pay taxes to support our citizens in maintaining a standard of living they could only dream of. And at an interest rate of 4.7%, they would be making a loss as well, even if we never defaulted on any of our debt. My guess is that, in a society that is pretty much at home with ethnic violence, Savvidis’ constituents in the Greek diaspora would have much worse that sarcastic headlines to deal with.

And then there’s the small issue of borrowing from a country that is significantly more corrupt than even Greece (ranked 154 to our 78 by Transparency International), where the state actively controls the media (see also here), and which has a Wikipedia page dedicated to the journalists killed there, with only one in four murders leading to a trial. Bloggers don’t fare much better, either. Greek bloggers love to rail at the IMF and its e-bil plots but they’d have to be a little bit more cautious when talking about Russia if they were to provide our next bailout.

Be careful what you wish for folks.

DISCLOSURE: I wrote to both Savvidis' office and that of his interviewer for comment on this story. I have received no response - I didn't expect one but at least they had a chance to have their say. 

No comments:

Post a Comment

Please remember that I am not notified of any comments and will not respond via comments.

Try to keep your criticism constructive and if you don't like something, do tell me how to fix it. If I use any of your suggestions, you will be duly credited.

Although I'm happy to entertain criticism of myself in the comments section, I will not tolerate hate speech. You will be given a written warning and after that I will delete further offending comments.

I will also delete any comments that are clearly randomly generated by third parties for their own promotion.

Occasionally, your comments may land in the spam box, which may cause them to appear with a slight delay as I have to approve them myself.

Thanks in advance for your kind words... and your trolling, if you are so inclined.