For a minute or two there, Vladimir Putin looked better on the world stage than Barack Obama. The agent for this image miracle -- one the Kremlin's highly paid Western PR firms have pursued for many years completely in vain -- was, of course, Edward Snowden.
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The gentleman geek leaker's flight to a Moscow transit lounge and the US administration's club-footed response to it, at once strident and impotent, handed Putin the unexpected role of reasonable, temperate world leader – and dare one say it, defender of free speech. Meanwhile Obama fans across the globe learned what drone-struck Pakistani villagers and massively deported aliens already knew: Their hero can be as harsh as any other American president when it comes to national security, or issues that the Beltway consensus defines as national security.
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Whatever one thinks of Putin, no one with an ironic, smart-alecky journalist's gene in their body could help relishing the topsy-turvy spectacle. It did not last long, however.
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Putin and the Russian regime showed their true colors flagrantly last week by convicting blogger-turned-activist Alexei Navalny on baseless corruption charges and sentencing him to five years in prison. Asked about a possible pardon for the popular Navalny, Putin spokesman Dmitry Peskov added a Dostoyevskian touch to the proceedings. "A convict must first admit his guilt," he remarked.
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Navalny will surely be blithely compared to Russia's most famous sitting political prisoner, former Yukos Oil CEO Mikhail Khodorkovsky, who has been in jail since 2004. But the current miscarriage of justice is much more blatant. Khodorkovsky was a buccaneer billionaire who, if he did not actually break the tax and fiduciary statutes on which he was tried, certainly bent them aggressively for enormous personal gain. He was the noisiest of a group of oligarchs who maintained absurdly low oil and natural resource taxes by more or less openly bribing parliament, depriving the state of funds legitimately needed for starving pensioners and teachers. Khodorkovsky boasted not long before his legal travail started that he personally controlled 20% of the Duma, Russia's legislature.
Navalny is a much more classic dissident. A lawyer by training, he started a blog several years ago focused on uncovering corruption in Russia's graft-ridden state-owned corporations. The site was a runaway success, turning Navalny into a sort of hipster celebrity for Russia's more market-savvy malcontents.
Tall and good-looking, the 37-year-old Navalny grasped for a bigger audience when middle-class Russians started marching en masse to protest heavily managed Duma elections in the summer of 2011. A not entirely likeable ego emerged at this stage, but the blogger did give a telegenic new face to the inchoate protest movement, and some hope that Russia might produce a different sort of leader at some point in the future. This, of course, was just what made him a marked man for the Kremlin incumbents, who launched a series of Mickey Mouse legal investigations according to a now familiar script.
So why should investors care? There is a school of thought, often persuasive, that authoritarian oppression in distant markets is unfortunate but irrelevant to the cold calculations of money men and women. India's democracy has not produced better economic results than China's goulash Communism. Russia has wonderful sovereign debt fundamentals, oil prices are rising again, and Russian stocks look chronically undervalued. Why worry about one meddlesome publisher?
That argument might hold water if Navalny were a traditional human rights campaigner dealing in issues that are far from the average citizen's bread and butter. But his focus is on state corruption, where politics increasingly meets economics, and not only in Russia. Ai Weiwei, the Chinese artist who is thought of as a campaigner for free expression, actually earned his jail term in the same territory, uncovering official thievery after an earthquake in Sichuan province.
Corruption is the great lead weight around the ankles of Russia and most other emerging markets, the essence perhaps of what keeps them emerging, and citizens increasingly understand it. A recent survey of Russians found freedom and human rights way down the list of popular concerns and worries, whereas corruption was No. 3 right behind inflation and unemployment.
If Putin were really acting in his nation's interest, as all leaders always insist they are, he would have embraced Navalny, and drafted him as a special prosecutor to muck out the Russian state's manure-choked stables, or at least detailed professional men and women of the law to follow up his printed allegations. But what Putin obviously cares about at this point is maintaining power, and power that rests upon the very layers of filth that are stifling his nation's development. Alas investors need to care about that.
The Kremlin did make one very interesting miscalculation in the Navalny case, though. It set the defendant free pending an appeal, which presumably will give him time to pursue his declared candidacy for mayor of Moscow. It looks like Putin's people may be arrogant enough to assume Navalny will get nowhere in the campaign, and the current colorless appointee Sergei Sobyanin will legitimize himself with a landslide. I wouldn't bet on it, though.