The Duranty phenomenon, the Khodorkovsky arrest

MOSCOW - There’s nothing more ungainly than newspapers, when their sanctimoniousness is aroused, and they try walking with their feet in their mouths. Call this the Duranty phenomenon.

Walter Duranty was the New York Times journalist who won a Pulitzer prize, journalism’s highest award in the US, for his reporting on Russia in 1931. Duranty died in 1957, and his editors at the Times, plus his Pulitzer board judges, have all joined him in the grave, so they are easy targets for critics. They believe that Duranty’s Pulitzer should be rescinded on the ground that he failed at the time to exercise the same judgment the critics have rendered in retrospect. More than one attempt has been made to oblige the Pulitzer board to yank the prize; another one is under way at the moment. Ukrainian-Americans are reported to be the most vocal in demanding punishment for Duranty, because they allege he failed to report on the lethal 1932-33 famine they blame on Moscow and Stalin.

“A lack of balance and uncritical acceptance”, claims a history professor engaged by the Times to review Duranty’s work, “was a disservice to the American readers of The New York Times and the liberal values they subscribe to.” The professor says publicly Duranty’s prize is a disgrace, and for the honor of the newspaper, it should be surrendered.

A letter to the Pulitzer board by the Times publisher, Arthur Sulzberger Jr., let the cat out of the bag. He conceded that “Duranty’s slovenly work should have been recognized for what it was by his editors and by his Pulitzer judges seven decades ago.” But at the same time, Sulzberger told the board, there are two good reasons for not rescinding the prize now, seventy years later. Rewriting history like this is a Stalinist practice, he argued. And more important, once you start, where do you stop? “The board would be setting a precedent for revisiting its judgments over many decades,” Sulzberger wrote.

Whoa! That really would test the limits of journalism’s elasticity, stretched as it always is between what the history professor calls the liberal values Americans subscribe to, and what reporters identify as the objective truth.

In Russia, the Moscow Times was an English-language newspaper that was created in 1992 from financial sources that remain mysterious, and then twice rescued from financial collapse by Russian oligarchs. The first was Mikhail Khodorkovsky, the Menatep Bank and Yukos shareholder, who was jailed in Moscow on serious criminal charges over the weekend. The second, and more recent rescuer was Vladimir Potanin, the controlling shareholder of Norilsk Nickel, Russia’s largest mining company. Potanin’s control of the newspaper is far larger than Khodorkovsky’s was, and includes not only a sizeable shareholding, but also a lien on the newspaper company’s accumulated debts.

In the Russian revolution that started in 1991, and continued over the past weekend, the Moscow Times has always been on the side of those into whose hands the country’s wealth has been taken. Power to the people! has meant electricity for Oleg Deripaska and Anatoly Chubais. Bread to the hungry! is the slogan of Vladimir Potanin’s agro-industrial holding. Land to the peasants! has meant oilfields for Khodorkovsky and Mikhail Fridman. The Times has also backed a series of US government policies meant to dismantle the Russian military-industrial base to prevent it from ever again posing the superpower threat the Soviet Union had represented. Washington wanted a Saudi Arabia without rockets. The Times thought that was just dandy.

But now that the jailing of the Yukos shareholders coincides with a parliamentary and a presidential election, Russians can vote for the first time on the fundamental direction they think the slogans of the revolution should take. And despite the fact that men like Khodorkovsky and Potanin can bend the media, the political parties, the cabinet of ministers, and the parliament to their will, the combination of president and popular sentiment makes for a fresh shift of property that is on course to win both elections as democratically as Russia under Yeltsin ever managed. With a crucial difference: Putin isn’t making the election choice the phony one of himself versus the red tide, as Yeltsin tried three times, and still required a 10% fraud to win. Putin is silent, and the choice is thunderingly obvious.

According to the Times editorial, however, Putin’s silence is “unbecoming”. Not for the first time, the Times quotes Chubais - the real US ambassador to Moscow - in demanding that Putin justify Khodorkovsky’s arrest or release him. According to the Times, Chubais also threatened force, if Putin doesn’t reply. “There will be a conflict of such an extent that it will bring in the entire society, and it could turn out to be uncontrollable,” Chubais threatened. Those are fighting words for a man who no longer controls an army the way he did during Yeltsin’s time in office - and whose test run for president (in the poll of 2008) is currently drawing him voter approval of around 3.5%.

For the first time since 1991, the Russian president has called into question the policy of the oligarchs in turning over the economy’s resource assets to foreign enterprises, and taking the multi-billion dollar concession fees for themselves. No civilized country in the oil world - not even Saudi Arabia - allows foreign corporations to control the rate of their oil production and the risk of reserve depletion. If Russia must depend on oil for the short term, then Khodorkovsky was warned - in July - that neither he, nor Yukos, will decide this question of national strategy. And yet, he has continued to negotiate a sale to ChevronTexaco and ExxonMobil. As I have reported many times since July, it was the asset sale, not Khodorkovsky’s political manipulations, that crossed the Kremlin, and led to his current fate. The slow shift in the public positions of the economic policy ministers like German Gref and Victor Khristenko - toward decelerating oil output growth, increasing investment in reserve replacement, diversifying away from oil - demonstrated how difficult it was for the president to pull his own government behind his resource policy, instead of the oligarchs. Nonetheless, Putin has put up the greatest show of resistance to bad policy in the modern history of Russia. His reward has been a Moody’s rerating of sovereign debt, and the massive support of the silent Russian majority, which will get its big chance on December 7, Election Day.

But discrediting the English language as a platform of wealthy reaction, the Moscow Times reports the president is silent. That’s because the newspaper’s proprietor, like everyone else in Russia right now, can hear the message all too audibly. Power to the people! Bread for the hungry! Land for the peasants! If the Times is doing today what Duranty is accused of doing so long ago, then it will only be a matter of weeks, not decades, before we can judge for ourselves where the truth in the Russian revolution is really heading.

Rewriting history may be a Stalinist practice, but setting the record straight on Duranty is not re-writing history but writing history honestly and portraying it in its proper context. This is something that Sulzberger, the quintessance of NYTimes go-along and get-along with totalitarian dictators, seemingly cannot stomach.

The NYTimes, which has published such fellow travellers as Duranty, Mathews, and Kinzer, to name three, is the "newspaper of record" only in an Orwellian sense.

The writer makes an error when he says that "No civilized country in the oil world - not even Saudi Arabia - allows foreign corporations to control the rate of their oil production and the risk of reserve depletion." Actually, there is one; the US.

The US does not have a national oil company, mineral and oil assets are owned by private persons. The companies that operate in the US are private companies, including foreign companies. There is no prohibition against foreign ownership of US assets at all. Nothing, for example, would prohibit Yukos from buying an American company, or an American oilfield, and operating it freely.

The risk of reserve depletion is not an issue, because US companies operate in every country on the globe. The idea that oil must come from your own territory is mercantilist economics, and is not the way we, at least, think and operate. Whether oil comes from Siberia or Nigeria or Oklahoma is immaterial once it is out of the ground. It is a single unified oil market worldwide, and once oil is in the pipe it is fungible, it matters not where it came from or where it goes. It all ultimately goes where it needs to go.

If there is a shortage the price goes up and you spend more on new development. You explore more, you drill more, and you pump more. If there is too much on the market the price drops like a stone and you back off on new production for a while, until the price recovers. Big deal. It does not require a government genius to tell you how much to pump and how much to explore and drill. And nothing says that a Russian should only drill in Russia and a Mexican must only drill in Mexico, and a Canadian must only operate in Canada. We figured that out a long time ago, and slowly, bit by bit, the rest of the world is starting to get it. Its amazing, though, that there are still people and companies out there that don't get it.

US government not mind if oil corporations come in and suck everything out to last drop, leaving no strategic reserve in ground?

Since there is no national oil policy, there is nothing in law to prevent that. We have a "strategic oil reserve", which consists of some underground salt caverns. The US government buys oil on the market and stores it underground, releasing it to the market if the Saudis withhold production. They don't withhold production, though, because we have this reserve.

We had a major oilfield that was dedicated as a reserve, but it was sold during the Clinton administration to the company that is closely aligned with the Vice President's family. Not too cool. I have no problem with the privatization as such, but the apparent corruption went mostly without comment in the press.

Otherwise, the only "strategic reserve" is inadvertant. There are fields that are off-limits due to environmental concerns, such as the rather large fields in Alaska that Bush is trying to open up, but which the political opposition will not permit because the area is virgin wilderness. In an emergency, environmental concerns could fall by the wayside, and that oil would be available.

And there are some offshore deposits which are off-limits for the same reason, the rich folk who live along the coast don't want to look at oil rigs, so drilling off the Florida coast, and new drilling off the California coast is prohibited, again, for environmental reasons.

So in a sense, we do have a kind of strategic reserve, but its inadvertant.

Russian oil, though, is never going to be cheap to produce. It is too far from there to anywhere, the cost of pipeline construction is always going to be a drag on production. Russia has more oil than Saudi Arabia, and theirs is easy to produce. They will run out long before you do.

That not quite true. Russia has infrastructure for shipping and new add on pipeline building now. Russian oil harder to process but this more then off set by fact that Murmansk to US is 2 weeks on ship...Saudi Arabia to US is 6 weeks.

Unlike US, Russia at moment very dependent on oil, so it need national oil strategy.

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