Russia's Auto Wreck

Two years ago, Russia was one of the ­fastest-­growing auto markets in the world--but few Western carmakers were willing to risk a partnership there. Then, in 2007, Renault purchased a 25 percent stake in AvtoVaz, whose Lada brand was famous for the wrong reasons: its plants were fitted with ­Soviet-era production equipment and its 100,000 employees produced just 130,000 cars annually. Now, as Russian car sales tank in the wake of the financial crisis, it looks like Renault's gamble hasn't paid off. Prime Minister Vladimir Putin has warned that Renault's stake could be diluted if it doesn't put in more ­money--but at the same time he wants to minimize redundancies. The Kremlin has promised $1 billion in subsidies, but without a ­major management overhaul the company risks becoming a walking corpse. So far, ­Renault remains committed. "We do not regret the deal for a moment," says the company's Oksana Nazarova. ...

Hermitage and Russia's Vulture Capitalism

Last month Dmitry Medvedev set out his bold new vision of a "more civilized" Russia, no longer prone to the "legal nihilism" that has rotted the fabric of Russian capitalism and turned the courts and police into tools for settling private business disputes. Many hoped that such a powerful signal from the president would set Russia on course to establish the rule of law. Now, a high-profile test case will show who runs Russia—crooks with official connections, or the state itself. This week a criminal suit filed in a Moscow court details a scam in which senior bureaucrats, judges, and police defrauded the Russian taxpayer of half a billion dollars—and then used the courts to persecute the scam's victims when they tried to blow the whistle.Right now the nihilists appear to have the upper hand. The plaintiff, American money manager Bill Browder, who once defended Vladimir Putin for playing hardball with Russia's business oligarchs, now lives in London, barred from Russia in 2005 as "a...

Turkey and Armenia Use Tourism to Heal Old Rifts

The ruins of the ancient Armenian capital of Ani are haunting, and haunted. On what is now a windblown patch of grassland enclosed in colossal walls and dotted with ancient cathedrals, there was once a great city. You can still see the ghosts of its streets outlined in the turf, and inside the granite churches you can make out the fading faces of saints and kings painted on the ceilings more than a millennium ago. On one side of the city, a dramatic single-span bridge, now ruined, brought the Silk Road across the gorge of the Akhurian River. On the other, the road wound on across the Anatolian plains to Constantinople and the great trading cities of the Mediterranean. Once, Ani was close to the center of the world. Today, it feels like the end of the earth.Only a few determined tourists make it to this remote patch of borderland on Turkey's frontier with Armenia (it's just four years since it became possible to visit the site without special permission from the military). In its...

Russia's Headed For a Long Economic Winter

Don't be fooled: Russia's still reeling from the commodities crash, and things are poised to get worse before they get better. Putin's oil fund will be "practically exhausted" by the end of 2010, says Finance Minister Alexei Kudrin. By the Russian government's own estimate, the economy will shrink by up to 8.5 percent in 2009. Worse, many Russian businesses appear to be all but insolvent. They face a $200 billion mountain of debt, much of which comes due this fall. With Russia's indebted businesses expected to net a mere $70 billion in profits this year, that leaves a potential $130 billion private-sector shortfall. Putin has tried to help by capping interest rates charged to private borrowers, but that means the pricing of risky loans has become artificially reduced. Overleveraged banks and corporations aren't just a Russian phenomenon, but no other economy is as dangerously dependent on the boom-and-bust cycles of the world's energy ma...

New Khodorkovsky Trial Tests Medvedev's Power

How serious is President Dmitry Medvedev about repairing Russia's corrupt courts? A trial opening this week in Moscow could be a key test. Former Yukos oil tycoon Mikhail Khodorkovsky, who was jailed in 2004 on tax-evasion charges after vexing the Kremlin by supporting opposition groups, faces new charges of stealing 350 million tons of oil—an amount, his lawyers point out, that's greater than Yukos's entire production. If convicted, he could get 22 years tacked onto the eight-year term he's serving in Siberia. The latest trial is a Putin-era legacy (it's been two years coming) and some Kremlinites fear Khodorkovsky could still be a rallying point for opposition if released.The new trial will be a bellwether of how much influence Medvedev really wields. While he's avoided comment on the case for fear of seeming to criticize Putin, Medvedev's steadily projected a liberal message of judicial independence and the rule of law. A fresh conviction for Khodorkovsky would be catastrophic...

Will Russia Help With Iran?

To judge from the mating signals coming from both sides, you'd think a major thaw in U.S.-Russia relations was imminent. Barack Obama backpedaled on his predecessor's vow to put a missile defense system near the Russian border, and Vice President Joe Biden recently called for "pushing the reset button" in dealings with Moscow, which had also been strained by America's support of NATO expansion into Georgia and Ukraine. For his part, in a possible sign of good will, Russian President Dmitry Medvedev agreed to suspend efforts to place Iskander short-range missiles in the Russian Baltic enclave of Kaliningrad.Why the sudden turnaround? The main reason is that Washington, along with the European Union, wants Russia's help on Iran. They see Russia as a vital player in preventing Tehran from getting nuclear weapons. "It is up to Russia to decide which face it wants to show," French President Nicolas Sarkozy said earlier this month. "If it wants to be a global player, it should help us...

Simon Montefiore's Gripping Novel 'Sashenka'

Sashenka is the rich, spirited daughter of a Jewish industrialist, growing up in Petrograd during the First World War. She's also a revolutionary who reads Marx after lights-out at the Smolny Institute for Young Noblewomen."Sashenka," Simon Sebag Montefiore's first novel, begins on the last day of winter term, as Sashenka hurries out of classes to her waiting nanny—and to the secret police who are there to arrest her as a subversive. As the revolution unfolds, Sashenka plunges into its intrigues and sheds her past like dead skin. Two decades later, we find her married to a Soviet party boss and living in splendor near the Kremlin. But the choices she made in the heady days of the revolution come back to haunt her, and her friendship with Stalin cannot protect her family when it's their turn to be plunged into the secret police's "meat grinder."Montefiore paints Russia in bold colors, from Rasputin's sordid salon to parties at the dachas of Stalin's cronies. He draws on rich material...

Turkey Signals A Shift Towards Arab Radicals

Is Turkey shifting away from the United States and Israel, and toward Arab radicals? For years, its military has had close ties with Israel's, and Ankara has acted as a gobetween for Jerusalem and Arab capitals. But after Israel's Gaza campaign, Turkey is taking a strong anti-Israel and anti-Western stance. Prime Minister Recep Tayyip Erdogan has called the assault a "crime against humanity," and last week stormed out of a Davos meeting after accusing Israel's President Shimon Peres of having a "guilt complex" for "killing people." He also blasted the West for remaining "spectators." Ordinary Turks seem to share the sentiments and greeted Erdogan like a hero on his return to Istanbul. Large crowds in dozens of Turkish cities have also recently burned American and Israeli flags and shouted anti-Semitic slogans.Other signs of a shift have Washington worried. Turkey is strengthening ties with Iran, including intelligence-sharing on Kurdish insurgents. And last fall, Erdogan told a...

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