By Gilbert Doctorow, Website, 10/3/23

To those who are totally ignorant of Russia, meaning all of the American political elites and most of the foreign policy expert community, Russia is easy to comprehend, an easy target for labels like “autocracy” and “imperialist.” But then these folks don’t care much about the peculiarities of friends and allies abroad, so long as they are totally subservient to Washington. Why should they bother themselves with the realities of a country that stretches across 11 time zones, accounts for nearly 15% of the Earth’s land mass and has 145 million people drawn from a multitude of ethnic groups or “nationalities”?

Sunday night’s edition of the Vladimir Solovyov talk show gave an unequivocal negative answer to both questions in my title thanks to some extraordinary statements by one panelist, deputy chairman of the State Duma Aleksandr Mikhailovich Babakov.

Leaders and representatives of the Duma parties outside the governing United Russia group have been a permanent fixture of the Solovyov show going back years. Communist Party chief Gennady Zyuganov used to be an invitee, but he was not a good conversationalist and has disappeared from view. Instead, the Communist parliamentarian and chair of the Duma committee on relations with the Community of Independent States [former Soviet Union republics] Leonid Kalashnikov is a regular panelist. He and Solovyov engage in sparring, the one standing for Communism in general and a full war economy today, the other for the free market. Their contests are as predictable as televised American wrestling used to be.

The founder and leader of the right wing Liberal Democrats (LDPR), Vladimir Zhirinovsky, was a frequent guest on the Solovyov show till his death in the midst of the Covid pandemic. Solovyov shared many of Zhirinovsky’s nationalist, anti-Western views and allowed him to verbally whiplash other panelists. I know this from the receiving end when I was denounced by Zhirinovsky as a spy during my one invitation to the show back in 2016. But then again, most any Western visitor was a spy in Zhirinovsky’s lexicon and it always would draw a laugh from the audience. 

Zhirinovsky’s serious contributions to the panels were often in connection with his expert knowledge of Turkish affairs as a speaker of the language. He also roundly criticized the Putin government for its gently-gently approach to foreign relations. If Zhirinovsky had his way, the Russians would have bombed Berlin long ago. As for foreign aid, Zhirinovsky did not believe in the way it was practiced in the past by the Soviet Union with blank checks to the friends of Russia. Instead he called upon the government to use its diplomatic efforts to establish relations abroad that brought net revenues to Moscow, in emulation of the United States. As you will see below, I think this part of Zhirinovsky’s policy platform has influenced the Putin government. However, it would be better if Russia’s senior statesmen did not openly show their intentions.

 Zhirinovsky’s successor as chair of the party bloc in the Duma, Leonid Slutsky, is dull as dull can be and never appears on the talk show. However, a fellow LDPR deputy, former KGB operative Andrei Lugovoy, who is wanted by UK police on suspicion of the murder of Litvinenko, is invited fairly frequently by Solovyov and adds some spice to the discussions of relations with the West. He is no friend of London and is pushing a much more aggressive line than the Russian Ministry of Foreign Affairs.

Now I turn to the panelist last night who so impressed me: Babakov. Let us begin with what he said.

The main topic he pursued was a very harsh critique of the work of the head of the Central Bank, Elvira Nabiullina, who is one of the relatively few survivors of the Liberal group of economic advisers at the center of power for well more than a decade. She worked under Finance Minister Alexei Kudrin. She worked under minister, later Sberbank chief executive German Gref. Both were/are Putin protégés. And, most importantly, she clearly enjoys the protection of Vladimir Putin today. In that regard, Babakov’s criticism of her is ….a direct criticism of Putin himself. And since what Babakov was saying is also being said by many ordinary Russians, its airing on state television is politically important.

Babakov told us that Nabiullina is leading the economy into the desert by its current policy of very high interest rates to combat inflation, all of which results in falling investments and stagnating production that, in turn, will set off a new round of inflation as output does not keep pace with buying power and demand. Babakov has every right to challenge the country’s financial management: he holds a Ph.D. in Economics from Moscow State University and is a successful entrepreneur who made his fortune by companies he co-founded in Ukraine in the energy sector and diverse interests including a major hotel in Kiev.

Babakov explained at length last night why Russia should look more closely at the Chinese model of economic and financial management, wherein the equivalent of Russia’s Central Bank, the Bank of China, is not an independent actor but works in close coordination with the government to support its growth plans and sets out different interest rates and conditions for the different levels of business, from small enterprises to medium and very large enterprises. Moreover, Babakov praised the Chinese rules on currency management and especially the controls on currency transfers abroad. Whereas in Russia anyone with the funds in his account can transfer up to one million dollars abroad each month, in China the limit is a thousand times less.

These remarks by Babakov are in direct contradiction with Nabiullina’s public rejection of the Chinese model as unsuitable to Russia last week at a meeting on finance at which other heavy hitters in the field, including the chairman of VTB bank (the former Foreign Trade Bank) Andrei Kostin also spoke. Kostin, by the way, had been advocating for a Chinese like bifurcation of the foreign exchange market between domestic and foreign transaction exchange rates.

Babakov also had his spear out for Finance Minister Siluanov. He repeated Siluanov’s stupid sounding advice to the two hundred parliamentarians from most Latin American countries who gathered in Moscow last week as guests of the Russian State Duma. Per Babakov, who as Duma deputy chair took part in all the proceedings, the visitors included many speakers of their national parliaments and all had made the trip to Moscow in defiance of heavy lobbying by the U.S. embassy in their country to keep them away from Russia’s embrace. What impressed him most was that the Latin Americans all expressed their support for Russia, their correct understanding of the causes of the war in Ukraine and their rejection of any sanctions against Moscow. They enthusiastically embraced Putin’s speech to them.

Of course, implied Babakov, during their stay the visitors hoped to hear about Russian investment plans in their region. Instead, Siluanov told them that money is not the essential thing in life, that what you need is to be smart and to have good hands so that you can get along on less money. To Babakov’s thinking, Siluanov was singing from the wrong scores in the wrong opera.

Will the attacks on the government’s bank chief and finance minister by Babakov and others like him bring them down? Quite possibly. The ruble’s slipping below 100 to the dollar yesterday has unnerved middle class Russians. If they listened to Kostin’s projection that in the coming year the ruble’s value in dollar terms may fall further by half, then they will be an unstoppable force against Nabiullina and the other free market defenders in Putin’s circle.

I have watched Babakov on the Solovyov show many times and he always was dapperly dressed. His demeanor is avuncular. You understand at once that he is not in anyone’s pocket. He has changed his party affiliations several times over the years. For a time he headed the very patriotic Rodina (Homeland) party that was founded by the maverick politician Dmitry Rogozin. Then he spent several years in the left-of-center A Just Russia party headed by Sergei Mironov. He quit that and took a position in a public activism organization under the aegis of the governing United Russia party. Next he was a founder of the Za pravdu (For truth) party which eventually formed an alliance with Mironov in a hyphenated joint organization.

From 2003 to 2016 Babakov was an elected member of the Duma. From 2016 to 2020, he served in the upper chamber of the Russian legislature with the title of Senator. But that was an appointive position. Next he took what is nominally a step down to run again for a seat in the State Duma, won and rose to deputy speaker there. Meanwhile, he has served on a number of Presidential missions, including responsibility for relations with organizations of compatriots abroad and on a council overseeing implementation of the country’s National Projects.

Clearly Babakov is an insider in the Russian power elite while always having freedom of movement, and as Sunday night indicated, freedom of expression. Notwithstanding his financial declarations before standing for election to the Duma showing that he owns almost nothing and has annual revenues of perhaps $20,000 per year, his Wikipedia entry tells us that he owns an estate in France said to be worth $16 million and an apartment on the Rue de l’Université in Paris. Since he is on the EU sanctions list, it is doubtful he gets much pleasure from these properties today.

To understand the complexity of Russia’s power structure, it pays to take a look at the pre-political biography of Babakov. He was born in 1963 and grew up in the capital, Kishinev (today’s Chișinău), of what is today the poorest state in Europe, Moldova (then the Moldavian SSR). So how did this boy from the far provinces get into Moscow State University and then make his way to the top of Russian-Ukrainian business and political elites?

First, it happened because Soviet society and now Russian society was and is very mobile, with many social ladders for kids with brains and talent. To those who doubt this because it does not jibe with the concept of a corrupt, autocratic regime, I say: rethink the latter, not the former.

Secondly, it happened because at the time when young Babakov was ready to enroll in a university Moldova was doing very well. It was home base of party leader Leonid Brezhnev and received priority investment into its agrarian economy and also into industry. It was closely linked to Moscow by many daily flights, more, for example than to Soviet Georgia. I know: I was there at the time. In 1978 I visited the orchards and vegetable farms of Moldova in the company of Castle & Cooke Inc. top management for furtherance of their plans to grow iceberg lettuce in the USSR. I wrote about this in my Memoirs of a Russianist, Volume I.

The agricultural machinery company FMC had very extensive farm projects in Moldova at the time to grow tomatoes and process them for puree. In another domain, the American pharmaceutical company Abbott Labs built the first infant formula factory (Similac) in the Soviet Union in Moldova in the mid-1970s. I saw that the shops in Kishinev were better stocked than those in Moscow. It was this Moldova that was the launching pad for Mr. Babakov.

Surely it was this personal experience of how a distant and formerly poor land can become prosperous under state planning and then revert to dire poverty under free market management and adverse geopolitical developments that shapes Mr. Babakov’s beliefs on the benefits of state dirigisme today. There are many others with similar experience and critical views of the now inappropriate Liberal economic policies being pursued under Vladimir Putin. They will probably win out.