George Soros on the Russian Problem: When Sour Grapes Turn Rancid

Dans un article publié hier M. Soros donne des instructions à l’Europe pour contrarier une Russie méchante à ses frontières orientales. Mais le bon professeur ne révèle pas dans son article ses péchés du spéculateur dans la période de capitalisme sauvage à Moscou.


Une Note par Gilbert Doctorow



Mis à jour et complété le 13.02.2009


George Soros on the Russian Problem: When Sour Grapes Turn Rancid


by Gilbert Doctorow, Ph.D.


Updated and supplemented on 13 February 2009





In an article entitled “An Alternative to Geopolitics: the Russian Problem” published yesterday in the Russian newspaper Vedomosti, local partner to The Wall Street Journal and the Financial Times, billionaire investor George Soros dons the professorial gown and reads Europe a lecture on how to deal with the troublesome Russians. The article is being circulating on the Project Syndicate, a shared media resource partly financed by Soros’s Open Society Institute. Because it does not appear to be readily available to the Belgian public I will summarize the points Soros makes first and then offer a critique of the man and his latest ideas.


A précis of the Soros article


How should Europe react to an unfriendly Russia on its eastern borders that is getting stronger all the time? As Soros sees it, the various European countries are reacting differently to this challenge in accordance with their own national experience of Russia in the past. However, what is needed, says Soros, is a common position, even if this goes against individual national interests. Otherwise Europe as a whole will fall prey to a Russian policy of ‘divide and conquer.’


Soros says that geopolitics is Russia’s strength while Europe is strong in the values and principles of an open, democratic, peaceful, flourishing and law-abiding society. The charm of Europe’s open society is a force that attracts the former republics of the USSR, and even Russia is susceptible given that its leadership does not want to return to the isolation of the Soviet past.


Russia is paying a heavy price for its geopolitical position, says Soros. The authoritarian political system chokes off private business and investment. There is no rule of law. Instead we see extortion and corruption. For these reasons even when oil prices were high the economy did not advance apace and now that oil prices are low the failures of the economy become very evident.


Soros piles up high the woes of Russia: its falling overall population, the shift in demography towards the Muslim minority, the possible threat from land-starved China on its long border in Asia.


In the face of Russia’s attempts to dominate the Continent, Soros advises Europe to pursue a dual strategy. First, to respond to geopolitics in kind. Second, to use soft power to encourage the strivings for democracy, for open society and for international cooperation in Russia at the expense of the rule of the strong.


A key policy for neutralizing Russia’s geopolitical advantage will be for Europe to agree on a united energy policy, including the creation of an EU energy regulator with powers above that of the national regulators and to establish a pan-European distribution grid. That will take away Russia’s ability to play off countries against one another by giving discounts to some.


As for soft power, Soros says the place to begin is in Ukraine, Russia’s neighbor. Ukraine urgently needs financial assistance to put in place public works programs that will employ the great many people in the metallurgical industry who are now being laid off. Secondly, Soros urges assistance to Georgia to help it recover from the effects of the Russian invasion.  Helping to support and strengthen these former republics of the USSR will prevent them from slipping back into the Russian orbit and will hold open for Europe future cooperation with these sources of energy resources.


The critique


Whoever wrote this article for Mr. Soros did not serve his master very well, because the logic is unpersuasive. All we have got here is some policy recommendations, all widely held in the mainstream of American politics, in search of some connective glue.


Let’s begin with what is easiest, the call for the EU to extend financial support to the Ukraine and Georgia lest they fall under Russian control. The notion that these countries are future ‘sources of energy resources’ for Europe is an impudent distortion. The Ukraine is an energy resource in coal for metallurgy and a black hole for energy otherwise. If that were not the case, there wouldn’t have been the great spat with Russia last month over natural gas supplies to Ukraine. Georgia itself has zero energy resources; it is just a transit point which the U.S. hopes to exploit against Russian interests – with scant chance of success for reasons that I have set out in previous blog articles on this portal.


The idea of using the Ukraine as a stick to keep Russia off balance can be traced straight back to the “civilizational” musings of Harvard professor Sam Huntington in the late 1990s. But why look to American ideologists? The Poles did what came naturally when they extended support to the Orange Revolution in Kiev as part of their hoped for restoration of the greater Polish sphere of influence, od morza do morza, from the Baltic to the Black Sea. And good old President Kaczinski demonstratively stood by his friend President Yushchenko when the going got tough last August over Ukrainian meddling in the Georgian crisis to the detriment of Russia’s security interests.


Why exactly are the Russians ‘hostile’ to Western Europe? Because of a ‘values gap’ separating authoritarian or autocratic Russia from democratic and squeaky clean Europe as Soros implies, repeating facile generalities that also go back to Huntington, Brzezinski, Kagan and the current Neocon literature? If he were engaged in anything other than propaganda, Soros might stop for a moment and try to address that question. The answer is ready to hand: to the extent that Russia harbors unfriendly feelings today it is because of people like him who deny Russia’s strategic interests and propose to peel away the former republics of the USSR and turn them into U.S. or Western European client states with defense infrastructures and weapons directed against…Russia.


What about the Russians’ alleged ‘divide and conquer’ policy towards Europe? Here again the issue is one of properly identifying cause and effect. I insist that the cause of Russia’s concluding side deals over trade and investment with favored partners like Italy and Germany has been the realization, after years of trying to deal with the European Union as a bloc, that the positions with respect to Russia within the EU, particularly between the old core countries and the new Member States in Eastern Europe are so contradictory that no progress is possible acting all together. That is precisely why the Partnership Agreement between the EU and Russia could not be renegotiated when it came to term and why the resumption of talks for that purpose remains controversial and unproductive. Poland and the Baltic States have been the outstanding naysayers, putting a spanner in the works. Even the Scandinavian countries have not been above reproach, railing against EU deals with the Russians when the big neighbor has restricted their privileged access to its resources, such as timber. Meanwhile life must go on, and the Russians merely behaved pragmatically when they went back to their main economic partners and cut side deals on such key projects as the Nord Stream pipeline under the Baltic and plans for a South Stream pipeline to the Balkans and beyond into the European heartland. I would therefore describe Russian behavior as defensive in nature rather than offensive. It is for Europe to come to terms with the reality that there is no consensus on foreign policy in its midst and that such consensus is unlikely to appear until a generation of political leadership in Eastern Europe warped by the decades of Soviet domination passes from the scene. The logic issuing from this reality is that the late 1990s notion of a two-speed Europe should be resurrected.


With respect to the problems within Russian society and the external threats it faces, I will only comment that they are all well known to its political classes. Indeed, Soros is merely repeating issues that are dealt with daily in the Russian press, which to this day remains anything but submissive. The weaknesses of Russia’s political culture and their causes are something I have gone into at length in my article of January 19 “Is Russia headed for its own ‘Tiananmen Square’ Showdown in 2009.”


Now, allow me to take off the gloves and speak ad hominem. I do not intend to comment on Mr George Soros’s face or on his ancestry, but about his personal economic interests and the lack of disclaimer in his article that is expected from financial specialists like him.


Having made his fortune breaking the Bank of England in a speculative gamble on exchange rates that paid off handsomely, Soros lost some feathers while engaged in speculative ventures in the telecoms sector in Russia when he went into an enormous co-investment with Russian partners who were, to his surprise, both cleverer and more ruthless than he.


In his memoir on his Russian adventures “Who Lost Russia?” published in April, 2000, Soros. took the narrative guise of an altruistic boy scout arrived in a strange, crisis-hit land seeking to do good deeds, whether by making seed money grants so as to prove to Western governments that it was possible to efficiently administer aid and secure the political situation in Russia or by making enormous direct investments through his fund to show that real capitalism as opposed to robber capitalism was workable in Russia. He presented himself as the naïf, side-stepping corruption and ruin and at times fearing for his life when crossing the interests of Russian oligarchs.


I do not forget or under-appreciate Mr. Soros’s many charitable works in Russia going back to the cash awards he gave directly to Russian scientists in 1992 and some of the projects of his Open Society Foundation in Moscow before it became over-bureaucratized in the mid-1990s. However, it is no less true that for a paltry contribution of 20 million dollars in grants Soros had direct access to all the President’s men and to the grey eminences behind the throne who were stealing the country’s resources in exchange for fixing the elections. Put in the context of the $1 billion Soros eventually put down as his investment in Svyazinvest, his charitable contributions may be called a very modest broker’s fee. And with it came visibility, a sounding board to project his personal image onto the world stage in a positive and constructive role.


It was later reported that Soros lost as much as $2 billion in Russia on Svyazinvest and other holdings during the 1998 economic crisis. And yet he returned to the casino and put down money on further speculative investments there, finally selling out and leaving the market in 2005.


In “Who Lost Russia?” Soros blamed Russia’s failure to develop into a normal democracy on the meanness and indifference of the United States and Western Europe, whose leaders refused to provide the financial assistance that was so desperately needed following the collapse of the Soviet Union. Now all of that is forgotten. Soros is singing in the same chorus as Russia’s past despoilers, the former Russian oligarchs now sitting in London and plotting the overthrow of the legitimately elected government in Moscow.



All things considered, if he had a shred of good taste and decency, Mr George Soros would simply shut up about Russia…and about much else as well.


© Gilbert Doctorow 2009-2010


G. Doctorow is an occasional guest lecturer at St. Petersburg State University. His latest book  Stepping Out of Line: Collected (Nonconformist) Essays on Russian-American Relations, 2008-12 is scheduled for publication in April 2013 and will be available from Amazon in paperback and e-book editions.