Why Russia is not imperialist
—Breitman, 23 March 2014
It seems to me that the current discussion is at heart not simply one of different perceptions of what Russia is and how she can be best categorised, given the vast empirical data collected by all contributors. The debate is also one fundamentally about the method that is applied in understanding social reality. The terms “basket case” and “while picture” or “totality” are employed by those describing Russia today as an imperialist country the second most powerful capitalist country on the globe.
The key questions of the debate in my view are:
- How do Marxists analyse social phenomena including those of imperialism? How do they determine whether or not a country qualifies as imperialist?
- Why did the Bolsheviks see Russia in 1914 as imperialist and what was that view based on?
The Marxian notion of totality
As Marxists we strive to understand the world from a materialist perspective. Marx himself discussed his own theoretical development as follows:
“The first work which I undertook to dispel the doubts assailing me was a critical re-examination of the Hegelian philosophy of law; the introduction to this work being published in the Deutsch-Franzosische Jahrbucher issued in Paris in 1844. My inquiry led me to the conclusion that neither legal relations nor political forms could be comprehended whether by themselves or on the basis of a so-called general development of the human mind, but that on the contrary they originate in the material conditions of life, the totality of which Hegel, following the example of English and French thinkers of the eighteenth century, embraces within the term “civil society”; that the anatomy of this civil society, however, has to be sought in political economy. ”
When Riley and Lichtenberg discussed economic factors in detail and provided a lot of quantitative material they did not limit their contributions to simply that as Logan seems to suggest. The Marxian approach as – in my view perfectly well performed by Lichtenberg and Riley – does not simply discuss the totality of Russian society in itself as well as in the global context. No one amongst those arguing Russia is not an imperialist power has denied other factors in their analysis. Both for Hegel and for Marx totality was composed, driven and created by a variety of factors but both of them found one specific driving force behind social totality. For Hegel it was the human will, for Marx it was the political economy which we might also call the materialist foundation of humanity. Marx could only develop a “Critique of Political Economy” of capitalism on the basis of onopoliz this epoch in human development via its material foundations and the changes social reproduction had taken place since feudal and absolutist societies. In order to arrive at the conclusions drawn in Das Kapital Marx had in fact looked for over twenty years not only into already existing theories of economics, he had also reviewed extensively figures and the changes in these figures. The art which contributed to his analysis being a dialectical one was not to dismiss figures as empiricist – an argument made by comrades of the London local who think Russia is imperialist – but rather to see the historic tendencies underlying the figures he was dealing with. Marxists can never simply dismiss figures but have to be capable to account for them.
Lenin surely saw himself in that theoretical tradition and, as we all know, he specified imperialism as an epoch of capitalism. It only makes sense in this light to approach the question of imperialism in the same way Lenin did when he applied what he had studied and learned from Marx. Lenin did not stop at just declaring that capitalism had reached a new epoch that was somehow equally binding for all nations on the globe. He went on to specify which nations qualified as imperialist and stated “that a small number of financially ‘powerful’ states stand out among all the rest.” (V.I. Lenin, Imperialism – The Highest Stage of Capitalism, Chapter 3)
In his contributions Bill seems to believe that such an approach is too narrow:
“The comrades who argue against Russia’s imperialist status (most particularly Tom) tended to push on the question of economic development, reduced even to matter of organic composition of capital (which itself was used to frame what remained of the other subjects, e.g. finance capital). So the discussion became a bit narrow, as other comrades (most particularly Josh) responded by attacking the points on which the other side believed they were strongest. This was normal and understandable, and in fact quite useful, but the recent trajectory of the debate has taken us away from other factors that dialectically contribute to the whole picture.” [“Twenty points on the imperialism discussion”, 18 September 2013]
I think it would be worthwhile to confront such a view with a quote you might have seen in Tom’s first contribution last year from the Fourth Congress of the Comintern in 1922:
“The progress of indigenous productive forces in the colonies thus comes into sharp contradiction with the interests of world imperialism, since the essence of imperialism is its exploitation of the different levels of development of the productive forces in the different sectors of the world economy, in order to extract monopoly super-profits.”
It is also surprising to hear such arguments from comrades who raised no critique of the recent article on Greece which argued about the reason for Greece’s status as a dependent country:
“Labor productivity is relatively low compared to the imperialist core countries of the EU, not because of the supposed laziness of Greek workers, as bourgeois demagogues contend, but rather because of a lower organic composition of capital— that is, less advanced technology and a relatively underdeveloped infrastructure. Greek workers have in fact been working more than most others in the EU to enable their employers to realize a rate of profit comparable to that of their European counterparts.”
The Greek bourgeoisie commands a comparatively large army as we commented in the article and has investments in countries economically less developed than itself – primarily Bulgaria and Romania. These investments may even allow for the extraction of super-profits. In the bigger picture Greece remains a dependent country nonetheless, despite the fact that its GDP per head in 2013 (US$ 26,934) exceeds that of Russia’s (US$ 19,833) by a good US$7,000 and the massive economic decline Greece has been experiencing in the last few years. That of Spain (US$ 32,501), a weak imperialist country, is yet another US$6,000 higher than that of Greece. (see http://www.oecd-ilibrary.org/economics/country-statistical-profiles-key-tables-from-oecd_20752288)
If we understand that national wealth in international comparison under capitalism exists under similar conditions of economic rivalry that we find between individual enterprises within one national economy (if one ignores relatively but not fully mitigating factors such as protectionist measures) then we can usefully discuss how wealth is actually distributed and redistributed internationally. If we understand that then we can appreciate the position a country takes in the international competition for market shares. Why do market shares matter? They matter because they indicate how wealth is being continually distributed and redistributed around the globe. If we want to discuss imperialism as a theory capable to explain why countries are at where they are at then we need to look into the specifics of value transfers between various countries. Researching this will of course dig out and produce a lot of statistics and figures. But this is not purely an abstract game. If we understand in the concrete how global wealth is distributed on an ongoing basis we are capable to explain where countries stand, why certain countries have certain living standards and how they relate to each other on a whole range of matters. Such an approach has nothing to do with empiricism. Dialectics is the logic that does not deny the importance of figures and statistics but rather takes them one step further. It explains the underlying quality that produces according quantitative results.
Semi-Colonies in the Global Imperialist System
First we need to take one step back though. If we tried to explain imperialism in very general terms we could describe it as the international system of capitalism once it has reached a certain degree of onopolization and onopolization. Within that system there is a hierarchy between states created primarily by their economic exchange with each other. It is precisely the generation of imperialist extra-profits that only a certain bracket of countries can accrue internationally (and even amongst those there exists a certain hierarchy, partly dependent on the respective economic sector concerned) when entering into trade relations with a less developed national economy. Mobility between the categories of imperialist, dependent, semi-colonial and neo-colonial countries certainly exists to some extent, even though the extent is probably about as high as the social mobility between capitalists and proletarians. There can be the strangest situations of states that might not fit our assumptions. If we look at the example of Portugal this becomes clear: Portugal was a colonial empire at Lenin’s times and maintained its colonies into the mid-1970s. Nonetheless Lenin was less preoccupied with the amounts of countries Portugal might have oppressed and exploited at the time but rather he analysed where Portugal stood in the bigger picture. Unlike other colonial empires Lenin classified Portugal as trade colony of Britain and not as an imperialist country. This example is instructive since it illustrates that despite Portugal’s military superiority in relation to Angola and Mozambique it remained economically exploited overall. Today we find similar examples to that of Portugal in 1914 like Greece in 2014. A Bloomberg report on the trade relations between Bulgaria and Greece observed:
““Greece is uncompetitive within the euro zone and it’s evident that Greek companies are moving into Bulgaria to escape that overvalued currency and to seek lower costs,” said Stuart Thomson, a fund manager at Glasgow-based Ignis Asset Management, which oversees $120 billion. (…)
“Bulgaria remains at risk because the euro region’s financial instability may scuttle its economic recovery, analysts say. Almost a third of the country’s banks are owned by Greek parents such as Piraeus Bank SA (TPEIR) and Alpha Bank SA.”
A Bulgarian news service observed in addition:
“For the period 1996-2012, Geek investments in Bulgaria amounted to EUR 3.576 billion, which represents about 8.59% of the total investment for the period (EUR 41.637 billion). Greece ranks third in terms of the volume of investments in Bulgaria out of 182 countries for the 1996 – 2012 period after The Netherlands (EUR 6.601 billion) and Austria (5.638 billion).”
Despite Greece’s significant investments in economically weaker countries than itself we classified it as a dependent country and observed in our article on Greece in 1917 No.35:
“While Greek capitalists have important investments in banks, shipyards and industrial plants in Central and Eastern Europe— particularly in Bulgaria and Romania—on balance the Greek bourgeoisie remains dependent on its more powerful “partners” in the EU. This is reflected in the ownership structure of its financial sector. Deutsche Bank holds 10 percent of EFG Eurobank Ergasias, half of Greece’s Geniki Bank is owned by France’s Société Générale, while 67 percent of the Emporiki Bank belongs to another French institution, Crédit Agricole.”
Dependent countries and semi-colonies cover a very broad spectrum of the globe. While we have countries with almost defunct capitalist economies like many sub-Saharan African countries Greece and Portugal certainly exist on the higher end of the spectrum – as does Russia.
Russia’s global trade portfolio
Russia has been subject to value outflows since 1991. According to the OECD’s quarterly FDI report for the last five years (we should keep in mind that Russia’s economy reached its peak in 2008) Russia has always had a smaller amount of foreign direct investment (US $387.2 billion) compared to US $497.8 whereas all major imperialist powers (there are a few exceptions such as New Zealand and Belgium) clearly showed a trend in the opposite direction. It is notable, however, that the outflows of FDI from Russia have been marginally bigger than the inflows for the same period. It is worthwhile quoting a research paper by Alexej V. Kuznetsov, Professor of Economics at the Russian Academy of Sciences in Moscow who observed that Russia’s FDI was fairly insignificant amounting to no more than 1.3 percent of the global FDI stock:
“Illegal forms of capital flight was more common in the first decade of the difficult post-communist transformation. At the end of 2000, the Russian outward foreign direct investment (FDI) stock was only $20.1 billion and accounted for mere 0.3% of the global outward FDI stock (UNCTAD, 2010, pp. 172, 176). The real boom in Russian FDI began in 2003 and its peak was reached in 2007. During the current global economic crisis, market capitalization of companies worldwide fell. This process led to a significant reduction in the value of Russian foreign assets although instances of large divestments by Russian TNCs were rare. As a result, the Russian FDI outward stock, which reached $370.2 billion at the end of 2007, decreased to $205.6 billion at the end of 2008. Then it reached $318.7 billion at the end of 2009 (Bank of Russia, 2010a). Nevertheless, Russia now ranks 15th in terms of outward FDI stock and accounts for 1.3% of the world total (UNCTAD, 2010, pp. 172–176).”
Russia’s foreign investment is interesting because a mere 6.1% is invested in former Soviet republics whereas 26.9% is invested in countries that are either economically on a par with Russian technology or way more advanced (22.8% of those are invested in countries we are agreed on being imperialist). Russia’s dependency on oil and gas, two commodities at the lower end of the value chain, is expressed in its export portfolio. A paper called “Modelling Russian outward FDI” for the United Nation Conference on Trade and Development named the most important Russian Transnational Corporations (TNCs) as being active in the following sectors:
“The largest, and probably most important, ones are in the oil and gas industry, with Gazprom, and Lukoil as examples of full- fledged international players, while Novatek, Rosneft, Tatneft and TNK-BP have more limited foreign activities. A second group is in metal processing, including Severstal, UC Rusal, Norilsk Nickel and Evraz. The third group is in telecommunications, with Sistema (including its affiliate Mobile TeleSystems) and VimpelCom being both important TNCs.”
Unlike TNCs from imperialist countries who invest in order to reap extra-profits investment strategies of Russian TNCs focus on management techniques and familiarity with local markets, inherited from Soviet times:
“However with the distinction that has been introduced between ‘Oa’ advantages, consisting of property rights and intangible assets and advantages of common governance, learning experiences and organizational competence (Ot), which can be gained also in relatively less advanced firms that do not seemingly have technological advantages, or even have disadvantages in that area (Dunning and Lundan, 2008). Large Russian TNCs base their international expansion on those newly described ownership advantages, which are less technology and more organization and management based (Ot). They possess remarkable Ot advantage in the iron and steel industry in turning around ailing facilities. In addition, the fact that the outward investing firms are significantly more profitable than firms with no foreign expansion (Table 4) can be taken as an additional indirect proof of organizational and common governance-type ownership advantages being used for international expansion.”
The article concludes that, unlike most imperialist TNCs who invest abroad in order to push weaker local competitors out of the market – one might remember for example Western European investment in the former deformed workers states of Eastern Europe dominating up to 90 percent of the banking sector – Russian TNCs had other priorities:
“In terms of main variables explaining Russian OFDI, home-country market size has been found as a particularly important factor, confirming the need for focusing future paradigms of emerging-market TNCs on separate home-country related factors.
Market size of the host countries and equally importantly, host-country natural resources have also been found to be important drivers of Russian OFDI, in contrast to a lack of asset-seeking investments.”
Other forms of investment include the political funding of friendly regimes such as that of Assad (see Riley’s reply to Dorn on the nature of Russian investment posted on 03/03/2014) and the Ukraine (as laid out by Lichtenberg in his piece from 12/03/2014). The fundamental issue behind Russia’s overall economic weakness compared to imperialist countries lies in its dependence on selling raw materials such as oil and gas. It is in this light that we need to look at Russia’s status when entering definite trade relationships with other countries. When we look into the destinations of Russia’s foreign investment we see that the investment was largely directed at imperialist countries. The United Kingdom, Sweden, Canada and the US are the countries that Russian foreign investment is primarily directed at. The only semi-colonial countries that receive an amount worth mentioning outside Russia are the Ukraine and Turkey. Almost 60 percent of this amount flows into petroleum, mining and quarrying. As for Russia’s general position in global economic competition Tom quoted a document by the EU on Russia’s role in the WTO states:
“A number of recent studies show that Russia enjoys Revealed Comparative Advantage (RCA) in only a few industrial activities (Cooper, 2006; Connolly, 2008, 2012b).17 Apart from hydrocarbons and some other raw materials (such as precious metals and timber), Russia only exhibits a comparative advantage in a few medium- and high-technology products, such as military equipment, nuclear reactors and other power generating machinery. These are traditional Soviet manufactured products, presently exported by Russia to the markets that were developed in the Soviet era. The only industrial activity in which Russia has managed to achieve RCA during the post-Soviet period is in microscopes. Here, NT-MDT, a company that specialises in scanning probe microscopes, is ranked second in terms of sales volumes on the world market (Connolly, 2011b). Russia’s low levels of competitiveness in higher value-added industrial activities compares unfavourably with many other large low- and middle-income economies, including Brazil, China, India, and Turkey. Moreover, with the exception of Information Technology (IT) and some financial sector activity in the former Soviet states, Russia is not competitive in international services trade, either (Figure 6).”
—“The Economic Significance of Russia’s Accession to the WTO,” p26
In Russia’s key export sector, the oil and gas industry, which makes up for 75 to 80 percent of Russia’s exports Russia is a key player albeit dependent on Western technology to advance with the exploration and maintenance of energy infrastructure and drilling equipment:
“The boom of the 2000s had less to do with the energies of new entrepreneurs than with the accumulated inheritance of the Soviet era: fields, pipelines, geological knowledge and drilling techniques remain largely the same. The surge in production since the late 1990s seems impressive only because of the slump that immediately preceded it; Russian oil output has not matched its 1987 peak even today. In Gustafson’s view, ‘the Soviet legacy assets have acted as an anaesthetic, delaying the adaptation of the Russian oil industry to modern management and technology, allowing it to remain relatively isolated and poorly equipped to compete globally.’ Post-Soviet oil companies have done relatively little exploration of their own: most of the fields brought online since 1991 were found by Soviet geologists, and only one major new field discovered since 1988 has entered production – Vankor, in the far north of the Krasnoyarsk region, operated by Rosneft since 2009. (..) The hopes of the Russian oil industry are increasingly focused on the offshore ‘bluefields’ of the Arctic and Sakhalin, but these require huge levels of capital investment as well as forms of expertise the Russian companies generally lack. Hence the series of partnerships Rosneft has recently formed with international oil companies: with ExxonMobil and Eni last April, with Norway’s Statoil in August and with BP in October, all of them geared to joint explorations of the Arctic shelf in the Barents and Kara Seas.”
The waste dominating Russia’s oil extraction which often is combined with gas extraction can be exemplified when looking at a method called flaring was documented by Simon Pirani who observed:
“Putin said in 2007 that Russia was flaring 20 billion cubic meters (bcm) a year, and had to stop. But things could be even worse. A research group that measured flaring with satellite imaging reported that Russia had probably overtaken Nigeria as the world’s biggest flarer, and in 2004 may have flared up to 50 bcm of gas, more than France’s consumption.”
—Simon Pirani, Change in Putin’s Russia, 2010, p.58
Russian manufacturing remains weak and is insignificant on a global level. Marshall Goldman observed in Oilopoly in view of full WTO integration of Russia’s economy:
“According to Izvestia, today Russia’s share of the world’s high market is only .5 percent and its machinery exports total only .3 percent of world exports. Steep tariffs or import protection barriers compete against foreign imports, but the strong ruble complicates whatever efforts are made to foster domestic manufacturing. Because of tariff protection, a large number of foreign automobile manufacturers have opened assembly plants in Russia to take advantage of the increase in Russian consumers’ disposable income. But if and when those tariff barriers are lowered as a condition for Russia’s entry into the World Trade Organization, that is bound to hurt such efforts.”
—Marshall Goldman, Oilopoly, p.202
Who is exploiting Russia?
In the cause of our discussion those who believe Russia is not imperialist have been repeatedly asked who is actually exploiting Russia. In order to respond to that question we need to take a look at the foreign investors in Russia and in which sectors they are investing. According to the OECD FDI sheet from February 2014 the stock of foreign direct investment held in the Russian economy stood at US $497.8 billion, compared to Russia’s FDI stocks abroad of US $387.2. The gulf between the numbers is not a recent development but one that has sped up – both stocks have been on the rise but that of foreign investment in Russia moderately faster than Russia’s investments abroad.
It is worthwhile to eliminate a certain group of investors before looking into this issue in order to not be perplexed by the numbers. The UNCTAD World Investment report noted round-tripping as an important element which is at best investment within Russia’s own economy via a detour over various tax havens, not dissimilar in percentage to overall FDI of roughly two Thirds of Brazil (see Tom’s Is Russia Imperialist?):
“A large part of FDI in the Russian Federation is accounted for by “round-tripping”. In addition to the usual sources of FDI, a distinctive feature of FDI patterns in the Russian Federation is the phenomenon of “round-tripping”, implied by a very high correlation of inward and outward investment flows between the country and financial hubs such as Cyprus and the British Virgin Islands. These two economies are persistently among the major source countries for inward FDI and also the major destination of Russian investments. A closer look at the FDI stock in and from the Russian Federation, for example, reveals that the three largest investors – Cyprus, the Netherlands and the British Virgin Islands – are also the largest recipients of FDI stock, with roughly the same amounts in both directions (figure II.7). Together, they account for about 60 per cent of both inward and outward FDI stock.”
—UNCTAD, World Investment Report 2013, p.65 (compare also p.16 of the same document)
Having detracted the 60 percent of round-tripping that might account for direct investment, but certainly not foreign direct investment, we are left with figures that are a lot closer to those of other BRIC countries such India and South Korea.
But who are the investors in Russia if we leave out the tax havens? In terms of capital influx into Russia it is the most developed countries, particularly Germany, Sweden and France, that can easily compete with local businesses who are the main investors:
“Foreign investors continued to be motivated by the growing domestic market, as shown by relatively high investments in the automotive and financial industries through reinvestment. The Russian Federation’s accession to the World Trade Organization (WTO) also had an impact on investors’ decision-making for certain projects. Developed economies, mainly European Union members, remained the largest sources of inward FDI for the Russian Federation.”
The World Investment Report notes:
“Foreign investors were motivated by the growing domestic market, as reflected by high reinvestments in the automotive and financial industries. The Russian Federation’s accession to the World Trade Organization (WTO) has also had an impact on investors’ decision-making for certain projects, such as the acquisition of Global Ports by the Dutch company APM Terminals. Developed economies, mainly EU members, remained the largest sources of inward FDI in the country.”
The Bank of Finland study from 2008, introduced into the debate by Decker and Dorn last year observed in terms of foreign ownership that especially the larger companies are becoming increasingly under foreign control:
“Foreign equity participation was reported by one in ten business companies in our 2009 sample. More than half of these companies said the controlling foreign owner held a stake of over 50 %. Though the total share of foreign investors in the sample is relatively low by international standards (averaging just 6 % of total equity), foreign owners in Russia tended to hold large stakes. In companies with multiple foreign co-owners, this interest exceeded 60 %. Foreign investors tended to hold large stakes in companies employing more than a thousand people.
Notably, the trend to increased foreign ownership of Russian companies was across-the-board. There were no signs of concentration in individual sectors, although foreign ownership was more prominent in the chemicals industry, manufacturing of transport vehicles and equipment, and the metals sector. (…)
Firms with foreign interest by and large demonstrated more proactive innovation behavior. Over 60 % offered new products, and over 50 % developed new technologies. Half of the firms classified as most innovative in our study were firms with foreign participation. ”
—Bank of Finland Institute for Economies in Transition, Russian Manufacturing Revisited, 2008, p.15
German businesses profited handsomely from their investment in Russia. The German Auswärtiges Amt (Ministry for Foreign Affairs) notes on its website:
“With an 8.7 per cent share in Russia’s foreign trade, Germany is Russia’s third most important trading partner worldwide. In the first ten months of 2013, however, bilateral trade shrank by 5 per cent, with German imports from Russia falling by 6 per cent and German exports to Russia declining by 4 per cent. Russia’s principal exports to Germany were raw materials, in particular oil and natural gas, as well as metal goods and petrochemical products. Germany’s main exports to Russia were mechanical engineering products (18 per cent), vehicles and vehicle parts (18 per cent) and chemical products (8 per cent).
As of October 2013, investment by German companies in the Russian Federation amounted to an aggregate USD 22 billion. There are currently some 6,100 companies with German capital participation in Russia, operating in 81 out of 83 federal subjects (administrative units) and with a turnover of around EUR 40 billion in 2012 and a total workforce of some 270,000.”
German imperialism is fairly keen on opening Russia’s market up to further investment which would allow German capital to increase profits. According to a survey conducted amongst 135 German capitalists in spring 2013 by the Ost-Ausschuss (a German economic institution interested in furthering imperialist interests in Eastern Europe and Asia) 76 percent were enthusiastic about Russia’s WTO ascension whereas only two percent expected a negative impact on their business (http://www.ost-ausschuss.de/russland). Unlike imperialist countries Russia’s state plays a significant part in the economy.
Russia’s economy is coming increasingly under foreign control, despite the still fairly modest levels of foreign investment, hindered by uncertainties of ownership, taxes and tariffs and high levels of corruption. Any further implementation of WTO trading standards will allow for a rapid inflow of EU capital and continue to subordinate Russia’s economy more seriously to EU capital. This has sparked fears especially amongst state employees who fear they might lose their jobs should state departments be sold off to private capital:
“The bureaucrats have little interest in fostering competition that might cost them their jobs.
This is particularly true of the security services and prosecutors who have been among the main beneficiaries of Mr Putin’s rule. Alexander Bastrykin, a faithful chief investigator, recently told a Russian state newspaper that “privatisation is a threat that could finish off the Russian economy.”
The economic dependence on raw materials and manufactured goods at the lower end of the value chain such as steel rather than high-end manufactured goods has been referred to by Putin in December 2013 as having a negative impact rather than representing strength. He addressed the critical issue of economic stagnation along the lines that those comrades believing Russia to be imperialist described as too narrow an approach:
“Putin called for action to improve the business climate and said that low labor productivity was a major drag on Russia’s economy, ranked by the World Bank as the fifth biggest in the world by purchasing power parity.
“Russia is among the top-five global economies,” Putin said. “However, we lag developed countries by two-thirds to three- quarters on such a key indicator as labor productivity. We must act resolutely to overcome this gap.”
A recent Reuters article described Russia’s critical dependency on a rising world oil price as the main stimulant for economic growth :
“With the ministry expecting global economic growth to average 3.4-3.5 percent, the outlook threatens to make a mockery of Putin’s oft-repeated pledge to lift Russia into the world’s top-five economies by the end of this decade.
And it is still based on an oil price forecast many analysts view as over-optimistic, showing just how much Putin’s Russia, the world’s largest oil producer, relies on not only high, but rising, oil prices to prosper.”
The recent events around the Crimea and Ukraine show an interesting image of Russia, one that does not quite live up to the seemingly boisterous occupation of the Crimea in military terms. The German minister for foreign affairs, Ursula von der Leyen, stated in view of sanctions as a serious weapon in its conflict with Russia’s assertiveness about Sevastopol:
“The minister admitted: “sanctions hurt both sides, that is obvious. But if one has a look at the figures: Russia has 15 per cent of its GDP that depend on trade with Europe. Europe only 1 per cent. That means, Russia’s dependency on a working business relationship with Europe is much higher.”
—http://www.faz.net/aktuell/politik/krise-in-der-ukraine-merkel-fordert-putin-zu-gespraech-und-verstaendigung-auf- 12839936.htmlhttp://www.faz.net/aktuell/politik/krise-in-der-ukraine-merkel-fordert-putin-zu-gespraech-und-verstaendigung- auf-12839936.html
A Financial Times article from Friday addressed the impact of the EU and US sanctions threatened on Russia since the beginning of March:
“Russia’s respected former finance minister has delivered a stark warning that the country could soon face capital outflows as high as $50 billion a quarter and no economic growth, should western countries press forward with proposed sanctions against Moscow. (…) Russia’s stock market has tumbled 13.6 per cent since March 3, while Sberbank and VTB, its two biggest state banks have fallen23.4 per cent and 24.7 per cent respectively. The stocks are two of Russia’s well-traded blue- chips and are seen as proxies for the country’s overall economy.”
—Financial Times Europe, 14/03/2014
Russia – the bigger picture
Now that we have discussed Russia’s international connections and its role in power relations based on value it is useful to consider Russia’s role both in the world today vis-a-vis other imperialist countries but also in the historical milieu in which the Bolsheviks described Russia as imperialist. Russia’s economy remains globally uncompetitive except for its energy sector which creates income in ways comparable to those of Saudi Arabia and other energy-exporting nations. Energy exports account for 80 per cent of Russia’s overall exports which is why it has been designated by many economists as a petro-state. While Russia remains amongst the militarily most powerful countries on the globe its economy is nowhere near where it was in 1914 compared to other countries. Despite crucial dependence on French, British and German capital – the Bolsheviks occasionally went as far as describing Russia as France’s colony – Russia in 1914 was a very different player on the global scene than in 2014. Paul Kennedy notes in The Rise and Fall of Great Powers:
“Its [Russia’s] steel production on the eve of the First World War had overtaken France’s and Austria-Hungary’s, and was well ahead of Italy’s and Japan’s. Its coal output was rising even faster, from 6 million tons in 1890 to 36 million tons in 1914. It was the world’s second largest oil producer. (…) Foreign trade stabilized Russia’s going onto the gold standard in 1892, nearly tripled between 1890 and 1914, when Russia became the world’s sixth largest trading nation. (…) By 1914, as many histories have pointed out, Russia had become the fourth industrial power in the world.”
—Paul Kennedy, The Rise and Fall of Great Powers, p.233
The author of the book observed that this trend continued somewhat during the First World War:
“But the impressive rise in Russian arms output, and indeed in overall industrial and agricultural production, during the first one-and-a-half years of the war greatly strained the transport system, which in any case was finding it hard to cope with the shipment of troops, fodder for the cavalry and so on.”
Just like in 1914 Russia remains the second biggest oil exporter. In 1914 Russia’s advanced sectors of the economy could provide important leverage internationally. One also needs to bear in mind that the production of steel was at a comparatively higher level in the value chain than it is today. Let us briefly compare Portugal’s standing in the world back then to that of Russia. I think this is enlightening since Portugal was classified as Britain’s trade colony by Lenin and it has been asserted that Russia’s global moves today are those of an imperialist power. Malwyn Newitt remarked about Portugal and its colonial empire:
“In 1884 Portugal was the only European power with any settlements in the interior of central Africa and it was the only country which had extensive commercial ties with the African states of the interior. No other Europeans had a presence that came anywhere near to that of the Portuguese. Portuguese claims to territory were, therefore, far stronger than those of other Europeans. (…) Portugal’s determination to compete in Africa at the level of the great powers had mixed consequences. In 1892 Portugal defaulted on its international debt and faced the prospect of losing its empire almost as soon as it had been acquired. That it did not do so was in part the result of the flow of wealth from the empire – the re-exports of colonial produce, the hard currency earned by the ports and railways and the remittances of the migrant labourers who kept the Rand mines working.”
—Malwyn Newitt, Portugal in European and World History, p.195
It seems to me that the Bolsheviks were well aware of the fact that not every country benefiting from its colonies was imperialist. Russia played a different role in 1914 than Portugal did, even though Portugal’s role is much more akin to that of Russia today – and that despite the modest outflow of super-profits from Portugal’s African colonies.
Russia shares some similarities with Portugal in 1914, even though it does not have colonies as such and the main inflow of funds are certainly not imperialist extra-profits but oil and gas sales to imperialist countries. Russia’s industry is not modernising in a way that could allow for stable economic growth as that a hundred years earlier, resting on more pillars than just one economic sector:
“Diversification of the economy away from oil and gas is not happening. January 2013 saw a monthly decline in industrial output for the first time since 2009. Capital flight amounted to $76 billion in 2011 and $46 billion in 2012. The business climate is still poor—the World Bank ranks Russia at 112 out of 185 in its ease of business rating for 2013,21 while the World Economic Forum Global Competitiveness report places them at 67 out of 144 countries surveyed.”
Nowadays even its most promising industries, oil and gas, rely on foreign investment in order to carry out the job. The impressive growth between 2001 and 2008 was possible because of growing global energy prices and still working but increasingly brittle Soviet infrastructure. Modernisation of the economy is, as Putin himself admits, very unlikely. While Brazil has three banks listed in the top 100 of the Forbes 500 list of important TNS (see Tom’s document Is Russia Imperialist? in the appendix) with one of them being listed as major bank and the other two as “regional” Russia has only one, Sberbank, listed on rank 61 and as a regional bank. The New York Times wrote in regards to Russia’s financial industry:
“But the Global Financial Center Index, published in March by Z/Yen, a consulting agency, placed Moscow 65th out of 79 cities studied. London was first, followed by New York and Hong Kong. The ranking placed Moscow between Bahrain and Mumbai. A survey by the World Bank and the International Finance Corporation even ranked Moscow No. 30 out of 30 Russian cities for ease of doing business.
“Moscow was never going to be an international financial center,” a Western banker working here, who was not authorized to speak for his employer on the matter, said of the effort. “That was a joke.”
So Moscow is setting its sights a little lower. Its biggest problem is to be taken seriously even as a regional center.”
According to a study by the British government on global manufacturing Russia ranks 15th behind semi-colonial countries such as South Korea, Brazil, India, Taiwan and Mexico (www.parliament.uk/briefing-papers/SN05809.pdf ). Documents of other comrades who have done research on Russian investments in the two countries often found in recent news reports, Ukraine and Syria, have shown that there is hardly any profitable investment but a lot of attempts to either stabilise regimes seen as strategic partners.
Russia is not imperialist
Overall Russia is not only a net importer of imperialist investment – it is also far behind other imperialist powers in terms of the variety of competitive economic branches, manufacturing or finance. We have not seen any evidence of the extraction of imperialist extra-profits by Russian companies to an extent that would be substantially more significant than that of Greece vis-a-vis Bulgaria or Portugal vis-a-vis Angola or Mozambique in 1914. Its current global standing suggests that even compared to 1914 Russia is relatively weaker in 2014 and much closer to the likes of Brazil. If we were to call Russia imperialist we would have to do the same for Greece, Brazil, Iran and many others. The programmatic category of imperialism which is aimed at understanding how the global power system works, based on the extraction of imperialist super-profits, would become a useless shell which would not allow for revolutionaries today to understand who is on top and why. Despite Russia’s military strength Russia cannot be described as an imperialist country. As Engels once observed:
“Force, nowadays, is the army and navy, and both, as we all know to our cost, are “devilishly expensive”. Force, however, cannot make any money; at most it can take away money that has already been made—and this does not help much either— as we have seen, also to our cost, in the case of the French milliards. In the last analysis, therefore, money must be provided through the medium of economic production; and so once more force is conditioned by the economic situation, which furnishes the means for the equipment and maintenance of the instruments of force. But even that is not all. Nothing is more dependent on economic prerequisites than precisely army and navy. Armament, composition, organisation, tactics and strategy depend above all on the stage reached at the time in production and on communications.”
—Friedrich Engels, Anti-Dühring, III. The Theory of Force, 1877