03/31/16 – Kenneth Rapoza – The Scott Horton Show

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All right, y'all.
Introducing Kenneth Raposa, formerly with The Wall Street Journal, now writing for Forbes magazine, Forbes.com.
And his latest is a very interesting one, kind of hopeful.
Are Russia and the U.S. starting to see eye-to-eye?
Welcome to the show.
How are you doing, Ken?
Thanks, Scott, for having me on.
Yeah, you know, every time I read about Russia, I always have to do this.
Sort of a...
You know, sort of a...
You get exasperated because you try to put out something.
You read something positive about Russia where Kerry and Lavrov are seeing eye-to-eye, and that seems to be the case.
And it has been for a few months now.
And then, you know, the next day comes and there's a steady news flow of just trash talk of Russia.
And, you know, I don't know where it ends.
All right, well, so let's talk about where it starts.
Putin is Hitler reincarnate, says Hillary Clinton.
And remember that time that Hitler went into Czechoslovakia?
Well, that's like what Vladimir Putin did to the Ukraine.
Yeah, these comparisons are a little silly.
I don't know.
I haven't been into the eastern part of Ukraine, so I can't tell you what it looks like on the ground there.
But to compare that to, you know, Soviet Russia invading other nations with tanks and, you know, sending people to the Gulag, it's just sort of a bastardization of history, wouldn't it be?
I would think so.
You know, we have to remember that Crimea was an autonomous republic of Ukraine, from what I know.
And I'm not a Ukrainian expert.
I'm not going to come on here and pretend like the Russia experts pretend they're Russia experts.
I'm not going to come on here and tell you that I know everything about Ukrainian history and know everything about Ukraine.
But it was an autonomous republic, almost in the way I think that Hong Kong is autonomous from China.
My wife is from Ukraine.
She says Crimea is Puerto Rico or something.
You know, yeah, it belongs to Ukraine or had belonged to Ukraine, but it was never really considered part of the country.
Okay, so then we have the six.
Well, you know, I did a story for Forbes a few months back.
Well, actually a year ago now.
God, time flies.
And it was about three polls.
I show that to you.
Gallup, Pew, and GFK did some polls on Crimea and what people thought about life after secession or annexation, as we say here in the West.
And overwhelming support for leaving the arms of Kiev, I can tell you.
So, you know, either you say the poll's rigged or you say the poll's true.
I think you trust Gallup in that.
Well, yeah.
And when you say overwhelming, you mean above 90 percent consensus there.
And it's not just, as you say, it's not just Gallup.
It's the Germans and all different polling companies have found the same results over and over again.
Yeah, I wouldn't say 90 percent.
It depends on the question.
I've seen it as low as like 65 percent, which is respectable.
I mean, if you're in a – yeah, I mean, it's respectable, right?
I mean, if you were – when did the U.S. president win, what, 60 percent of the public?
You know what I mean?
Anything over 60 percent, you could arguably say, is the vast majority of the population at that point.
Yeah, I mean, we'd call that a landslide, 67 percent.
Although when it comes to secession and joining another polity, I guess, you know, even 90 percent isn't really good enough.
But on the other hand, and it's important to point out because people really don't know this, and the term invasion is thrown around so often, that people assume that, you know, some number of hundreds of people must have died or something.
When, in fact, not one person was killed when the Russians, quote-unquote, invaded Crimea, which means they left their bases and went outside.
Right.
Not one person.
I never heard of anyone dying in Crimea.
So back to your question about Sergei and Kerry.
I read that entire transcript.
That was not in Moscow at the time.
I only go to Moscow once or twice a year, and it's usually in the fall.
One thing that did catch my eye was the end of the interview with Kerry, with the press, where Kerry is pushed on sanctions against Russia.
And this is the beginning of normal, returning to normal relations with Russia.
If you remember when Obama became president, it was the Russian reset.
And we could talk about that and what I think really kicked off the beginning of the end to the Russian reset, which was probably back in 2012, well before Ukraine.
And what concerned me was Kerry was asked about sanctions, and he seemed to know, he was in no hurry to remove them or even talk about the possibility of them being removed, because, as you know, those sanctions are dependent on full adherence, he said, to the Minsk 2 Accord, which requires both sides to abide by the Minsk 2 Accord.
And Ukraine's side is not interested in abiding by it, because, let's face it, if they were to allow East Ukraine to vote for autonomy, it would go the direction of Russia and not the direction of Kiev, and this is against the national interest of Ukraine, obviously.
So it's a very sticky situation, and it's a problem, because if you are hoping for a return of normalcy between these two countries, which is good for the world, right?
It's good for the world to have Russia and the United States not threatening to beat each other up over Syria or beat each other up anywhere.
It's good for the world.
That if you assume that Ukraine is going to abide by Minsk, and that Russia is going to just stop supporting separatists in Ukraine, in East Ukraine, then you could assume, therefore, that sanctions are pretty much permanent, because the EU is going to follow, I think, the EU is going to follow in Washington's footsteps.
Brussels isn't going to say, the U.S. is keeping sanctions, we're not going to keep sanctions.
I'd be pleasantly surprised if that was the case, but I don't think Brussels will remove sanctions if the U.S. does not remove sanctions.
And you're saying that Kerry is hiding behind, the Americans are hiding behind the excuse that Minsk 2 isn't fully implemented, when you're saying the hold-up is the Ukrainian government won't allow free elections in the East?
Yeah, I think so, I think so.
I mean, again, I'm not in Ukraine, I'm not talking to politicians in Ukraine, there are reporters out there that do that, and of course there are reporters over there who don't do that, and they're experts, but we'll save that for another day, Scott.
But if Ukraine is not willing to hold up to their bargain in the Minsk accord, which is to allow for a vote in the Donbass region for some level of autonomy, you know, these regions, some of the cities, they already consider themselves autonomous.
Some of them are even using the Russian ruble in business transactions.
So, if they're not going to hold up to that end, what incentive does it give Russia, that has openly admitted now for supporting the separatists in the Donbass, to stop supporting them?
Either logistically, or through money, or through weaponry, or even through Russian military going in there and working with them.
Coming in, coming out, coming in, coming out.
What incentive is them to stop doing that?
Because I would say the Russian government says, well, we're not going to get anywhere, because Ukraine's not holding up to their end of the bargain, sanctions are not going to be removed, why do I have to play nice?
It would be nice if Russia did that, it would be nice, I think, but I doubt it.
Yeah.
Well, you know, Doug Bandow wrote a thing earlier, your colleague there at Forbes, explaining basically to the Kiev government that America ain't coming, so you guys need to start making your tough decisions right now, I hope you hear me loud and clear.
And, of course, Obama more or less sort of kind of said that to the Atlantic, I mean, we know his government did the overthrow in the first place, and they have sent a lot of money and so-called non-lethal aid and that kind of thing, but there seems to be a limit on that, at least for now.
At least for now?
I don't think there's any appetite for that.
I don't think there's any appetite for that.
Does that reality have much purchase in Kiev?
I mean, do they not realize that, you know, look, the Americans aren't coming, so we're going to have to negotiate something here, I mean, or, you know, stick by at least their previously agreed to negotiation?
I think, Scott, realistically, from what I know, what was happening in the Ukrainian government now in the capital is that it's so much of a mess right now with not knowing what's going to happen with the prime minister, who's going to be the new prime minister, public support is eroding, the economy is still not going as well as people would like, the government is bleeding cash, that almost, in a way, Eastern Ukraine is, I don't want to say an afterthought, but it's not top priority.
The top priority for them right now is to get their government in order.
So, you know, I really don't know.
I think you're in a stalemate situation over there, which is bad, because I look at Russia through two lenses, right, because, again, I'm not writing for The Atlantic, I'm not writing politics stuff for The Daily Beast, so I'm writing from a business and finance lens, pretty much.
And, of course, geopolitics plays an important role in that, because Russia is, after all, a political animal, even more than it is an economic one, and politics, in this case, plays an important role, because you have businesses being sanctioned in Russia, which affects Russia's economy, which affects, you know, but let's say Wall Street investors who are investing in Russia, and so on, even companies like ExxonMobil, which was sanctioned from doing business with Rosneft in the Karachay, and they have a $700 million joint venture that's on ice because of sanctions.
So there's a lot of business and investment interest in what happens with sanctions.
Of course, what happens with sanctions all depends on the geopolitical picture.
And then when you have the U.S. and its allies basically saying that Russia is still a threat or that Russia is not abiding by the Minsk two and not even hinting that Ukraine could do better, it doesn't bode well for the removal of sanctions, which a lot of people thought would happen by July.
I think, you know, if you were betting on sanctions disappearing by July, now I think you've got to take some chips off the table.
You've got no one to fold them on that.
You could walk away on that one.
Yeah.
All right.
Now, so as far as Lavrov and Kerry getting along, it seems like they really have struck up some kind of friendship, not just a professional relationship, over the Iran deal or, you know, during the time that they were negotiating the Iran deal, which, of course, as you point out in the article, the Russians really helped America get the Iranians on board for, you know, the Americans' plan for what the deal was supposed to carry out here.
Russian pressure was everything in this negotiation, not that they get any credit for helping us on that.
But so does the fact that the foreign ministers are friends really mean anything?
I guess not.
As you're saying over the sanctions here, maybe it can in some instances.
Yeah.
You know, these guys can only do so much, right, because they're not totally in charge of policy, I suppose.
I don't really know the machinations of how that works, to be honest with you, Scott.
But I think it's good to see, look, it's good to see John Kerry cooperating, talking, smiling, shaking hands, open gestures, not closed, with Sergei Lavrov.
It's good to see that, because, again, as I said at the beginning of the conversation, you want to see Russia and the United States get along.
They don't have to be best friends.
They have to be best friends.
But they have to be open to discussion.
They have to be open to not painting the other one as our favorite enemy.
Everybody that we hate is Hitler.
It's good to throw a bucket of cold water on that.
And when you see Kerry and Lavrov seeing eye to eye, discussing things, not calling each other names, not smirking and saying, you know, I can't get through to this guy, it's a positive.
It's a positive.
It makes you think that Russia and the United States can reset, which has been dead now probably since 2012.
Yeah.
By the way, you said you wanted to talk about what you think was the beginning of the end of the reset.
It must have been something that villain Putin did.
Well, absolutely.
It was something that the villain Putin did.
What happened was, and I think I might get my ears screwed up, so I think it was 2012 when it began.
And it was a push by a Russian fund manager named Bill Browder, who is very well known now.
He's written a book about his experience in Russia.
He was one of the first American investors to go to Russia after the fall of the Soviet Union, open up a hedge fund, and made a lot of money.
Long story short, we had some problems with Browder and his accountant, who was arrested and the Russian government was bearing down on Browder's hermitage capital.
And Browder's friend, Sergei Magnitsky, was basically, he wasn't tortured, but he wasn't treated well in Russian prisons and died there.
So Bill Browder, this is his friend Sergei Magnitsky, was poorly treated by the Russian government, and Bill Browder basically goes on a mission.
I don't want to say the word revenge, but for lack of a better word at this moment, we'll say that.
He basically was a one-man lobbying machine, went to Washington, talked to a lot of guys who hate Russia, like McCain, John McCain and other congressmen, and created this thing called the Magnitsky Act.
The Magnitsky Act banned Russians who were involved in the poor treatment and the death of Sergei Magnitsky from having money and traveling to the United States.
Once that list came out, once that came out and Congress approved that, Russia did not like that because it made them look like they, of course, killed Magnitsky, and that's not what Russia's ever going to admit to.
So they basically retaliated by doing their own, which Russia does best, they retaliated by doing their own American blacklist, which Cheney's on, by the way.
And he was blamed for the Afghan war, the Iraq war, and so on, the illegalities of those wars.
And so that's when we really had this tit-for-tat retaliatory politics between Washington and Moscow.
Once that Magnitsky Act passed in 2012, the Russian reset was over.
Well, but then again, like we talked about a minute ago, they sure did help with the Iran deal, which was in their interest.
I mean, it's not like it was just a favor for the U.S. or anything.
Obviously, again, there's Russian interests involved here, but it sure was a favor to me when Putin bailed Obama out of his stupid red line and twisted Assad's arm and had him give up all of his chemical weapons after the Turkish-slash-al-Nusra sarin gas attack in eastern Syria in the summer of 2013 there.
So that was pretty good.
It seems like enough of a relationship to be built on.
It certainly isn't the Cold War days.
I agree.
I agree.
It is enough of a relationship to be built up on.
It should be built up on.
It's positive to be built up on.
When you look at the narrative of Russia, it's still, if you were to put it on a scale of one to ten, five being neutral, it's still probably seven, which would be leading, which is anti-Russia in that case.
So the storyline since probably 2012, since Magnitsky Act came out, was that Russia's, they're not so good.
They're bad guys again.
And I think that once you had, even though you had the Iran issue, Russia helped with Iran, that wasn't really a big story, was it?
You didn't hear CNN or any of the broadcasters or even, I'm sure the New York Times covered it, I'm sure the Journal of the World about it once or twice, but it was never a narrative that, whew, thank goodness the Russians came in and bailed us out.
Thank goodness the Russians were part of this.
It was never really part of the echo chamber, never really part of the story.
Right.
It was always the United States did it, Obama did it.
And again, the story was that it was a bad deal, right?
Iran, oh, it's a bad deal.
These guys are our enemies.
We still talk about that to this day.
Was the Iran deal good?
We're still discussing this.
So, yeah, Russia is important.
It's good.
It was important in Syria as well, as you mentioned.
And I think we're not in the Cold War days, even though, let's not forget, that Medvedev did say during the Munich Security Conference about a month ago or so, that we are on the cusp of war, or even in the middle of war.
I forgot his exact words, but he mentioned it.
He mentioned that it's possible that we could be in one or we could be moving towards one.
And then you had the British, I think he's the Foreign Affairs Secretary, something like this, Philip Hammond.
He was in Georgia the other day.
I don't know if you heard about this.
He was in Georgia the other day, not Georgia, the United States country, and where he called Russia one of the biggest security threats around, called it a security threat to the UK.
So these kind of things are just one step forward, one step back.
The U.S. isn't saying that, but you've got Hillary saying things like that.
So it's still a problem, and I don't know.
That's where it goes at the beginning of the conversation, where you get exasperated, because you just don't know.
You want to see things working better with Russia, but you don't see it really happening.
And this is why it was so interesting to see Kerry and Lavrov looking like they are moving closer on what to do in Syria, or even how to fight ISIS in general, right?
Right.
Well, now, I want to go back to something you said about business earlier.
I mean, the Syria thing is a – well, I mean, we can get back into Syria if you want.
But on the business angle, you mentioned about Exxon has some business that's being interrupted here.
And I thought of this great piece, and there are a few like this, but Andrew Coburn wrote up a great one in Harper's about, I guess, a big party in Crystal City or somewhere, where all the military industrial complex firms all got together to celebrate the dawn of the new Cold War.
And this is just great for them, and they're completely shameless about it.
This is just how democracy works.
This is how the system works.
If we can, you know, celebrate a Cold War, even help Gen 1 up maybe, put pressure on our politicians to really hawk it up over Russia, then this is how we get rid of big-ticket items, jet fighters and tanks and really expensive stuff.
And so, whoopee, and now it's up to the rest of the democracy to push back on all of that.
But so, it seemed as ridiculous as that sounds, I think there's hope in what you said about Exxon.
That, hey, wait a minute, maybe not all business in America is all wrapped up in Raytheon and Northrop Grumman and Lockheed and Boeing.
Maybe there's business, maybe there are powerful business interests in America who would like a return to normalcy and, you know, some peace and freedom to just do their business and make some money for a change.
And so, you know, could you elaborate on that?
Am I right that there's anybody with any political will who would push for a more, at least, so-called realist policy?
Well, Scott, okay, I did not see that article, but it sounds interesting.
You know, I'll have to look for it.
But who is the more powerful lobby, I guess you would say?
Who's more powerful?
Would it be the military-industrial complex, as you described it, or would it be the oil lobby?
Well, I would like to think that the oil lobby at least has some punch, right?
I mean, James Baker's there.
They have some punch, but apparently not as much punch.
So, you're looking at maybe Mike Tyson versus, I don't know, Sugar Ray Leonard.
I don't know any new boxers.
But, I mean, you know what I mean?
You're looking at, really, I mean, because Exxon has been shut out of that.
And in the meantime, and I don't know how this works, really.
I'm still trying to get to the bottom of this.
European oil firms are still making deals with Russians.
And Exxon's gone.
Exxon's out of there.
They're out.
So, you know, but like you said, and like that article said, and Harper's, where the military guy, the defense guy, this is a long story, Scott, because then you look at, you look at, it brings up all the conspiracy stuff of the shadow government, and even if a total independent president came in and on his first day he sits down, and he's got all these guys who weren't elected, they've just been there for years, and they're telling you, this is the bad guy, and this is how it's going to be, whether you like it or not.
No conspiracy about it, it's just called the state.
I think that they have a lot more say, perhaps, than we would like.
And if that is the case, and that article is true, insofar as they are celebratory about a new Cold War, and that certainly doesn't surprise me, because why wouldn't they be?
Because, you know, Scott, look at this.
My father worked for Raytheon.
Let me give you a personal story.
My father worked for Raytheon in the 80s, heyday, right?
Heyday.
This is a defense contract that, boom, right?
Cold War is coming to an end.
Reagan's like, I can't really justify all this money being spent anymore.
We've got to start coming back.
People get laid off.
Michael Douglas makes a popular movie called Falling Down.
Cities get, you know, pretty much not wiped out, but company towns lose their businesses and so on.
Big companies who are building nuclear submarines, they're all out of business, they're going down.
And people start losing their jobs.
My father lost his job.
So you look at these guys in, you know, Georgia or, you know, Southern California or even Connecticut where this business is big because it employs a lot of people.
I don't know, man.
It becomes really complicated, and so when I hear people talk about the military industrial guys and the defense contractors and the Pentagon and the CIA liking the Cold War, yeah, I think they do like it.
Military Keynesianism is exactly what it is.
It's a giant make-work program for a huge segment of the American economy and the American population.
Huge.
Huge.
People don't realize it.
And I remember because I'm a child.
I don't know how old you are, Scott.
You're probably around the same age as I am.
But like you, I grew up in the 80s.
I'm a child of the Cold War, right?
Red Dawn, Russians are coming.
But now I'm older, so I've been to Russia many times.
Well, not many.
Five times I've been to Russia, five or six times.
I have Russian friends.
I have one that's coming in May.
Going to hang out.
So, you know, I mean, I know Russians now.
So I don't – I've been to Moscow.
I've been to Red Square.
It's beautiful.
I don't want to see that place destroyed.
I don't want to see it destroyed.
Years ago, I wouldn't even know where it was.
I knew nothing about Russia.
I was like, hey, just get these guys away from me.
But I think that when you look at the defense guys and you ask at the beginning of the question was who you would think that somebody has more sway because Exxon, you would think this is big business.
They certainly wouldn't mind having the door open to Russia again.
They wouldn't mind having the door open to Russia again.
Of course, they would love having the door open to Russia because it's cheap.
Oil is cheap in Russia.
They've got a partner in Rosneft, one of the cheapest – you know, one of the low-cost producers in the world.
That's their guy.
And they're torn away from it.
But they're not as powerful as the people and the companies that we've discussed just now.
And that's the way it is.
And the entire Russian economy isn't sanctioned.
Just finance and oil and gas.
That's it.
All right.
Well, listen, man, I've got to move on because I've got a great – and speaking of Russia, I've got a great interview about nuclear weapons coming up.
In just one minute, I've got to record.
But I really appreciate you coming on the show.
It's been great talking with you, Kenneth.
Thanks, Scott.
Have a good day.
Good stuff.
All right, y'all.
That is Kenneth Raposa.
He writes about Russia for Forbes, Forbes.com.
And this one is called Are Russia and the U.S. Starting to See Eye to Eye?
Hey, I'm Scott Horton here.
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