Russia Applying the Lessons of Capitalism

A couple of weeks ago my wife noticed that a grocery store that sells organic food was selling orange juice for $5.99, while Cub (a store that usually has lower prices) was selling exactly the same thing for $7.99. I wondered if the dreaded orange juice price increase that has been predicted for the last year or so had kicked in.

But the other night she went to Cub and found that same orange juice "on sale" for $5.99, $2.00 off the "regular" price. So the price increase was only made so that they could have a sale. This is now standard practice for all retailers, especially around the holidays, when bargain-hungry shoppers snap up anything that promises big savings, even if those savings are total lies.

It has been more than 20 years since communism collapsed in the Soviet Union, and the unbreakable union -- союз нерушимый are literally the first two words of the Soviet-era anthem -- splintered into 15 different countries. The Russians have adopted capitalism with total abandon, and they've been spending billions of dollars on foreign real estate, primarily to convert their ill-gotten gains into tangible assets that the notoriously fickle Russian government can't touch. This has annoyed to no end people in places like New York, London and Paris, who hate how Russian billionaires have jacked up real estate prices while paying nothing in taxes.

Now there's some other real estate that the Russians want: Ukraine.

Ukraine has been undergoing massive protests while the country has been debating whether to join the European Union or side with Russia. The EU has made Ukrainian membership contingent on cleaning up their act: no more political prisoners. In particular, the EU demanded the release of Yulia Timoshenko, the former prime minister who was jailed on trumped-up charges of embezzlement in a natural gas deal made with Russian company Gazprom.

Russia has been jerking Ukraine around over natural gas prices for years, cutting them off completely in the middle of winter in 2006. But now Vladimir Putin, the former communist KGB official, has totally embraced the capitalist spirit: like American retailers on Black Friday, Putin is offering Ukraine a Christmas sale on natural gas, plus $15 billion worth of holiday cheer. All for the low, low price of renouncing their freedom and submitting to the Russian yoke once more.

Why does Russia want Ukraine? The country has some natural resources. Ukraine was called the "bread basket" of the Soviet Union. Some of it is pride: Russia has lost its empire, and the influence and economic power that goes with empires, and they want it back. They're setting up their own customs union, and they don't want to lose Ukraine to the EU.

Some of it is history: Kiev was the original capital of Kievan Rus', the original Slavic state founded by the Viking Rurik. Some of it is family: there are many ethnic Russians still living in Ukraine. About a sixth of Ukrainians are Russia, and another sixth are Ukrainians who speak Russian. This Washington Post article describes the ethnic split.

After independence, ethnic Russians lost their lock on political control of  Ukraine. Power has been shifting back and forth between ethnic Ukrainians and ethnic Russians. That split between ethnic Ukrainians who wish to remain independent of Russian hegemony and ethnic or cultural Russians who want the security of big brother standing behind them is the basic source of the current fight.

Viktor Yushchenko: before and after poisoning

And ethnic Ukrainians have good reason to fear Russia: the Kremlin doesn't mind getting its hand dirty. Viktor Yushchenko, the leader of the Orange Revolution, was the victim of an apparent assassination attempt during an election in 2004. He was poisoned by dioxin that left him disfigured but alive. He managed to beat his Kremlin-backed opponent.

Ethnic Russian Ukrainians are making a deal with the devil: instead of opting for a free and fair country run by the rule of law, with equal protections for all, they're opting for an oligarchy backed by naked Russian power. Some day the Russians will be busy with their own problems, and ethnic Russian Ukrainians will find themselves outnumbered two-to-one by angry ethnic Ukrainians unfettered by the niceties of EU human rights policies.

I suppose Putin using capitalist tricks to ensnare Ukraine is better than a tank invasion or assassination. But I'm guessing this is just posturing during the delicate time before the Winter Olympics in Sochi. I'm afraid the former KGB man will revert to form once the Olympic torch has gone out.