The danger of “business as usual” with Moscow

Human rights researcher Tanya Lokshina tells how she was blackmailed over her pregnancy.

As Brussels prepares for the EU-Russia Summit on December 21, it’s worth recalling a recent UK Foreign Office statement indicating that all was “business as usual” in Russia, with the human rights situation given its perfunctory place.  But “business as usual” is the most counterproductive signal that can be sent by an EU member-state to Russia today.   

Last December Moscow was not buried in snow as it is now, but was rather drowning in slush. On 5 December a group of activists held a public gathering to protest violations during the parliamentary elections the day before.  They had anticipated a turnout of about 500. Instead, as many as 10,000 people showed up, shocking the organizers, the media, and the Kremlin.

That rally proved to be the beginning of massive public demonstrations in Russia’s capital, with tens of thousands of people taking to the streets to protest authoritarian rule and political stagnation. Surely, this voice of discontent was so strong the government could not possibly ignore it?

But although some electoral reforms followed early in 2012, the authorities only intensified harassment of their critics in the lead-up to the presidential elections in March and Vladimir Putin’s inauguration in May. They used punitive lawsuits and arbitrary detention, threats from state officials, and beatings to intimidate political and civic activists, and to interfere with independent news outlets.  After the inauguration, the parliament pushed through a raft of highly restrictive laws, tightening the screws on freedom of expression, association, and assembly and giving the government ample tools to prosecute peaceful dissent.

Working for the Human Rights Watch Russia Office, I could feel the repression tightening and realized it was unprecedented in contemporary Russian history. Some of the elements — especially the new treason legislation and the heightening anti-foreign hysteria –are frighteningly reminiscent of Soviet times.

Then one morning in September, I started to receive threatening text messages revolving around my advanced pregnancy and my unborn child.  I caught myself thinking: “Last year this would have been unthinkable — whoever’s doing this has lost all sense of limitations.”

In Russia a pregnant woman is still viewed as off-limits, and the idea that of threatening an unborn baby would disgust anyone. Still, the new laws and the aggressive rhetoric of the Kremlin apparently signaled to officials at all levels that anything goes when it comes to the campaign against international groups or “foreign agents” (even if they are Russian).  As a result, the climate in the country has become so hostile that blackmailing a human rights researcher over her pregnancy is an acceptable addition to the arsenal of tools used to hamper the work of advocacy organisations.

In seven short months, Russia feels like a different country.  A new and expanded definition of  treason — essentially criminalizing international advocacy -- requires foreign-funded human rights and advocacy groups to register and publicize themselves as “foreign agents” (in Russian this unambiguously is interpreted as “foreign spies”). Two large donors — USAID and UNICEF — have been kicked out. A group of demonstrators face mass riot charges that are, at the very least, disproportionate.  And two members of the Pussy Riot feminist punk band are serving serious prison sentences for a political stunt following  an absurd and unfair trial.

This is not how I want to see Russia. Hopefully, this is not how its international partners want to see it either. But governments that should care about developments in Russia seem to be passively watching the country slide over the abyss of repression.  They need to speak up to help end the Kremlin’s onslaught on civil society, making clear that infringing on basic rights in violation of international law has a cost globally.  You can’t be a member of the prestigious international clubs without strict adherence to the rules. 

Tanya Lokshina is a senior researcher at Human Rights Watch and deputy director of the Moscow office

Russian opposition supporters shout during a rally in central Moscow on 5 December 2011. Photograph: Getty Images

Tanya Lokshina is Deputy Director of Human Rights Watch's Moscow office. Having joined Human Rights Watch in January 2008, Lokshina authored reports on egregious rights abused in Chechnya and Ingushetia and co-authored a report on violations of international humanitarian law during the armed conflict in Georgia in the summer of 2008. Lokshina runs a column for the Russian current affairs website Polit.Ru. She is recipient of the 2006 Andrei Sakharov Award for Journalism as Civic Accomplishment.

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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