A tale of spies, money and power

I just completed reading Alex Goldfarb's Death of a Dissident. It chronicles the life and series of events leading to the dramatic poisoning of Alexander 'Sasha' Litvinenko, an ex-KGB Colonel who defected to the UK and sought asylum as part of the growing number of Russian emigres.

Sasha died of radioactive poisoning, the first such case of a "nuclear terrorist attack", when his food was allegedly tainted by a FSB (the new KGB in post-Soviet Russia) operative under the directives of Moscow. His death led to a public health scare when the British authorities had to retrace Sasha's route after the alleged poisoning, and sealed off large swathes of London pending fear of the spread of radioactive toxins to the public.

What is more controversial is that the book provided a number of insights into the murkey world of Russian politics, the modus operandi of the KGB and FSB, the personalities in Sasha's life, and the extent of persecution of dissidents pursued by the Russian state under former President Putin (who is now the current Prime Minister under President Dimitri Medvedev).

1. Admidst the chaos of the post-Soviet collapse, the cash-strapped KGB and other Russian intelligence services "sold" their services to the highest bidders - mostly oligarchs and bureaucrats who enriched themselves from the privatisation of state property - who engaged in high-level assasinations and intense tuft wars. This was the start of the erosion of the professionalism of the intelligence services and their unquestioned loyalty to their political masters.

2. Reformers and oligarchs (who had the financial backing), Communists (who retained popular support) and Conservatives (who had the support of the military and intelligence services) competed with each other for influence over Yeltsin, Russia's first post-Soviet President who was an avowed democrat and reformer. The battle lines blurred further as the reformers (under the leadership of Chubais, the chief architect of the privatisation programme) and oligarchs clashed over the role of the business community in the political leadership of Russia. They were supported at various times by factions within the Communists and intelligence services.

3. Through a series of round robin clashes and the rise and fall of many personalities who briefly warmed the seat of the Prime Minister, Putin emerged as the eventual successor of the ailing Yeltsin who favoured him for his loyalty and democratic tendencies. Putin won the 2000 elections handsomely, backed by oligarchs like Boris Berezovsky who campaigned endlessly for him and supported him with his vast and independent media empire. Boris became Putin's mentor and was convinced that Putin was the right successor to continue Yeltin's mission to democratize Russian politics.

4. However, Boris and the reformers were to be sorely disappointed as Putin turned out to be a hawk. He installed hardliners in his administration, centralised state control over the military, economy and intelligence services, persecuted the oligarchs and alleged opponents of the state, reversed Yeltsin's privatisation programme, and clamped down on independent media in Russia. Threatened by the regime, Boris and Sasha were forced to join the long list of emigres abroad as Putin consolidated his hold over Russia.

5. There were also allegations that the infamous Moscow apartment bombings in 1999 (dubbed Russia's 9'11) that sparked the second Chechen War - which helped cement Putin's popularity - was actually perpetuated by the FSB who wanted to see Chechnya brought into the fold of the old Russian empire. Other allegations included that the 2002 fateful siege of the Moscow theatre by Chechen militants that left almost 150 people dead, was actually planned by the FSB to cultivate a climate of fear and justify continued military involvement in Chechnya despite staggering losses suffered by the Russian military with little end to the war. The state also persecuted and assasinated Duma representatives, journalists and human-rights activitists who opposed the Chechen War.

6. Russian dissidents even accused the world of looking the other way as the Russians committed countless atrocities in Chechnya. For instance, the Bush administration was especially eager to cultivate relations with Putin, seeing in him "an ally who can be trusted", and dismissed the Chechen War as a domestic Russian campaign against "home-grown terrorism". Boris and his dissident counterparts attempted to tell "the truth" about the regime and waged an intense PR and media campaign against Putin. They were resisted by the Kremlin who engaged in their own counter-campaign of misinformation, and attempted unsuccessfully to repatriate Russian emigres whom they accused of subversion and disloyalty.

As the author pointed put, Sasha's death pointed to the extent of Russia's failed democratic experiment since the collapse of the Soviet Union, Putin's zealousness in eliminating his opponents with the domination that the FSB had over the Russian government. More importantly, it provided a glimpse of the intense power struggle behind the scenes of Russian politics, and the type of regime that the world has to deal with for the foreseeable future.

The future path of development in Russia and the accuracy of these insights are best left to readers to decide for themselves. However, one thing is certain: that the book will take you on a journey to see how deep the rabbit-hole really goes.

The Eroding Union (EU)?

When it came down to a test of wills, the Europeans blinked hard and fast - especially when their interests are at stake.

Few seriously expected the Germans to resist the call to bail-out Greece for long. Even though Chancellor Angela Merkel's fragile coalition faced intense opposition from the electorate against sending billions of taxpayers dollars to Greece without proper guarantees of repayment, the value of the Euro was sliding fast.

The pan-European currency slipped to $1.321 on Monday, down from $1.331 on Friday and $1.512 on Dec 3, with prospects of further depreciation as investors shorted the Euro.

Hence, Germany's cabinet agreed on Monday to lend Greece 22.4 billion euros over three years. The IMF agreed to lend Greece 110 billion euros, tied to austerity pledges that could bring Greece's annual deficit below 3% from 13.6% in 2009.

Wither the Euro zone?

While it is true that no one could predict this crisis from happening because many EU countries were running high public debts and no one expected Greece to cook its books for years, there were inherent issues tying the different European economies to a single currency from the start.

Firstly, the monetary integration of the economies of the Euro countries meant that they will also be at risk so long as one country risks defaulting on its debt obligations, which will lead to speculative attacks on the Euro and send it into a tailspin since its debt is denominated in Euros, as the Greek crisis showed. A monetary union like the Euro zone is only as strong as its weakest link.

Secondly, having a single currency limits the scope of policy actions in a debt crisis. The automatic response for countries facing such a situation would be to depreciate their currencies to export their way out and meet their debt obligations. As a member of the Euro zone, Greece did not have such tools at its disposal and this limited its response, except for fiscal and monetary policies.

Thirdly, there is no powerful central bank to act as a lender of the last resort. The European Central Bank (ECB) remains a stump since the real authority to lend credit lies with Paris and Berlin, while the EU has not set aside any reserves to deal with a fiscal crisis of this magnitude. This meant that Greece had to sit out for weeks and wait to be bailed-out since their ratings were cut in December, while European central bankers and politicians, tied to electorate concerns, dragged their feet on this issue.

Finally, the historically high value of the Euro (dubbed the 'French & German currency' given their economic domination of the EU) has helped make poorer countries like Greece, Spain, Italy and Portugal economically uncompetitive. While imports are cheaper, their exports are more expensive, with traditional manufacturing industries being eroded by competition from low-cost alternatives from countries like China.

Critics of the Euro zone, like the UK, have high-lighted these weaknesses for years. Countries considering joining the Euro zone might think twice ahead.

However, to be fair, the Euro has proven to be a balk ward of stability against currency manipulation and fluctuation, facilitating trade and giving the EU much economic stability for years.

But as the Greek crisis has shown, a system that allows the EU to prosper in good times may not have the same capacity to do so during the bad times.

Going beyond the Greek crisis

While EU pundits have lauded the bailout as a "timely and effective" response to a "modern Greek tragedy", the EU indeed has its work cut out for it. There has been calls to strengthen the ECB as a mechanism to provide fast credit in future crises.

Meanwhile, brickbats have been thrown at international rating agencies like S&P for "irresponsible downgrading" of Greece's ratings, with people like Michel Barnier, the EU internal market commissioner, and Christine Lagarde, the French Finance Minister advocating the establishing of a "separate and independent" European central rating agency.

However, that misses the whole point of this crisis.

For years, Greece has embraced the Eurocentric model of welfare-states, spending billions on social assistance support schemes, and allowing itself to be at the mercy of its vocal, vote-rich constituents like the trade unions at the expense of responsible fiscal policy. The week-long protests by workers, teachers and civil servants however showed popular anger among ordinary Greeks who feel they are made to pay the price of their country's crisis while tax evasion and corruption go unpunished.

In any case, while Greece revamps its tax and fiscal policies in the coming months, it has to rethink the merits of its welfare state policies together with many countries in the Euro zone that has for years sheltered its workers with 35-hr work days, tax breaks, lavish expenditure and other benefits, which is inhibiting their economic competitiveness.

I remember an instance when I brought a visiting French professor on an SMU campus tour. The conversation touched on the working culture in Singapore where she was adamant that working anything more than 45 hours a week was simply "inhumane" and "crazy". She went on to harp on the superior quality of life in the EU and the high standards of living of its people.

This example showed that once a mentality is fixed, it is difficult to change, especially when they have introduced a policy for years and people have come to accept it as their right (or what political scientists call "path dependency").

But that path leads to a bleak future for the EU in a world where millions of young Chinese and Indians are upwardly mobile and eager to compete for jobs and opportunities. Now, it remains to be seen if the EU can wake up from its dream of continental bliss and revamp their economies - medicine that is bitter but essential for recovery.