Examination of Witnesses (Questions 20-35)
MR EDWARD
LUCAS
24 FEBRUARY 2009
Q20 Mr Hancock: Well, I think the
use of cluster bombs is regrettable, to say the least, but it
was completely, in my opinion, a war crime to do what the Georgians
actually did, so I am interested to see what effect this has had
on NATO and the EU and their influence, not just in Georgia, but
in the area generally, in that Black Sea/Caspian region.
Mr Lucas: I think that the effect
on both the EU and NATO of the war in Georgia both before, during
and after has been very bad. We have been exposed as divided,
irresolute and ineffective. I think it started with the NATO Summit
in Bucharest in May where we gave a kind of blank cheque without
the money to honour it by promising Georgia that it would become
a member of NATO eventually, but not agreeing to any of the practical
steps that might make that either possible or desirable. I think
the EU's reaction after the war was deplorable. The Economist
put a picture of a jelly on its cover with the caption, "Europe
stands up to Russia". Yes, we can debate in detail, and I
would not want to do it now, the rights and wrongs of the course
of the war, but it seems to me there is no doubt that Russia went
well beyond any kind of peacekeeping or war-ending mandate by
pushing deep into Georgia and blowing up all sorts of infrastructure,
threatening civilians, ethnic-cleansing and all the rest of it,
and it failed. It was set some fairly light conditions by President
Sarkozy, fairly vague conditions, and then did not meet them.
The EU came out with the weakest possible sanction it possibly
could, which was to suspend partnership and co-operation agreement
talks, which was something Russia had already said it did not
really care about, and then was unable even to stick to that,
so I think both NATO and the EU have been shown up quite badly
and that sends quite a powerful message to the Kremlin or to the
Russian authorities. It says, "These two main security organisations
in Europe, one economic, security and political and one sort of
military, do not really know what to do when they are confronted
with a short, sharp threat, a whole series of provocations",
and this is a bad message to send.
Q21 Mr Hancock: Do you think that
part of the problem was that the EU in particular and NATO and
the Bush regime were propping up a busted flush? Once Saakashvili
had to call an election which he had to gerrymander to win, it
made him a spent force and he was then desperate to do anything
to instil some support for himself and his regime. Is that not
part of the reason as well, that Saakashvili had to do something
to show himself as being not just a busted flush?
Mr Lucas: The prospect of European
and Atlantic integration is the best magnet for good government.
The idea that you have to behave and you cannot do things that
you might like to do because you want to join our clubs has been
a great source of stability and prosperity across our continents,
and I think the real story with Georgia is that that magnet got
switched off, that we no longer seem to be offering a real prospect
that they were going to join our clubs with the result that the
conditionality that those clubs involved did not seem to apply,
and Medvedev actually thought he could get away with things that
he should not have been able to get away with.
Q22 Mr Hancock: Do you agree with
me then that their chances of joining NATO now are pretty remote?
Mr Lucas: I think they have certainly
gone backwards and I do not think they were that good to start
with. I think what the thinking of the Obama Administration is,
which is entirely right, is to focus on practicalities, so let
us not worry about headlines, let us worry about real changes,
so let us really get the Georgian Armed Forces sorted out, let
us really get all the other things sorted out, the administration
of justice, rule of law, anti-corruption, all the things that
go to making a country into a fit member for NATO, and then, when
we have done all that maybe in five years, maybe in 10 years,
then we will come back and revisit it and maybe by then Georgia
will be the sort of country we want to have in NATO, but I think
the Bush Administration had it the wrong way round. They said,
"Let's bring them into NATO and then we'll clean them up",
and of course that was the wrong way round.
Q23 Mr Hancock: But they have not
succeeded in the others they have brought in either.
Mr Lucas: Hang on, how do mean
they have not succeeded in the others?
Q24 Mr Hancock: Well, they have not
succeeded in cleaning up the corruption and bringing the rule
of law and democracy into some of the other countries that have
already been agreed for entry into NATO and the EU. What are the
consequences then for Russia and its immediate neighbours, particularly
countries like Ukraine and Azerbaijan, for example, and the consequences
for Georgia and Ukraine, where the two presidents are very close
to each other and Azerbaijan has a lot of wealth?
Mr Lucas: I think the whole context
has changed since the oil price crashed. The Georgian war happened
at a time when we had oil at $140 a barrel or something colossal,
so Russia was bursting with money and it was very easy for the
regime, the Kremlin, to have very grandiose ideas about what it
could do, and that has changed. We are now in a situation where
we do not have much money and they do not have much money which
does not mean that they cannot still pursue their geopolitical
agenda, but they cannot do it in quite the same way as they did
before. It seems to me that we have got a tough tussle in Belarus
and in Ukraine and in Kirghizia, the Kirghiz Republic, right now
where Russia is using a mixture of energy and cash to try and
squeeze these countries away from any Western orientation and
they may have been pursuing them close towards Moscow, so we see
the Americans being pushed out of the Manas airbase in Kirghizia,
Russia pressing the Belarusians very hard to recognise South Ossetia
and Abkhazia, and the offer of a bilateral loan to Ukraine if
it tears up its IMF deal which was very much an American Bank/IMF
deal, so I think the competition is still going on and I would
not say that we are winning.
Q25 Mr Hancock: My final question
on this round is about South Ossetia and Abkhazia and where they
are. My personal view is that, if I were living in South Ossetia,
I would not vote to go back to Georgia having been bombed by them,
so what is your view?
Mr Lucas: Well, you have to remember
that the population of South Ossetia and Abkhazia is not the same
as the people who are living there now. You have a lot of people
who have been bombed out in previous wars, so I think one would
have to ask the entire population as it was at some point in the
past rather than just asking the people who are living there now.
I think that it remains the case that Georgia's only chance of
getting these territories back ever is through soft power and,
if Russia becomes less attractive and Georgia becomes more attractive
and perhaps we have a different leader in Georgia, one who does
not arouse the same negative emotions as Saakashvili does and
if Georgia in 15 years' time were about to join the EU, I think
you might well have Abkhazia and South Ossetia saying, "We
would actually quite like to be in the EU and let's see if we
can work out some kind of loose confederal arrangement with Georgia
where we can get on to that bandwagon and we do not want to be
stuck along with the rest of the North Caucasus". That is
optimistic, but I do not think it is impossible.
Q26 Linda Gilroy: You said you started
as an optimist, but you have turned into a pessimist. Are there
any aspects of what is going on in Russia which we should look
to build future optimism on partnership? What are the building
blocks towards a more constructive relationship with both the
UK and NATO?
Mr Lucas: There is one optimistic
view which I do not share, but which is quite coherent, which
says that economic pressure is going to make the regime back down
in its most confrontational positions, so you get the theory that
we are going to see a lot more of Mr Medvedev and a lot less of
Mr Putin and they will be able to afford a lot of this stuff that
we do not like and, therefore, this icy blast of economic reality
is going to blow them into a different direction. I just do not
think that is true.
Q27 Linda Gilroy: I think Robert
Key is going to ask some questions in a moment on the economics
of it, but in terms of shared values and the sort of work which
the OSCE, for instance, was set up to promote, do you see any
prospect there?
Mr Lucas: It is quite hard to
see. In theory, we ought to be able to co-operate in Afghanistan
because it is not in their interest to have a Taliban victory
in Afghanistan, to put an extreme case, but maybe their interests
are in seeing NATO in trouble, and there must be some room for
co-operation there, but we are not seeing it. They are closing
down effectively an airbase that is very useful to us, the American
airbase in Kyrgystan. The main reason I see for any kind of optimism
is that we do have a business class in Russia, I would not yet
call it a middle class, but a business class of people who are
living their lives fairly independently from the State and who
are fairly fed up with it and, if you look at opinion polls and
you ask people about corruption, the rule of law, good governance,
infrastructure, public services, all these things, there is quite
a chunk of people who are pretty fed up. At the same time, if
you say, "Do you like Mr Putin?", they say yes, and
that, I guess what the psychologists would call "cognitive
dissonance", is something that we can perhaps be optimistic
about in the long run and it is not as if "Putinomics"
has been a fantastic success and everybody liked every aspect
of it, and there are people who are rich enough to complain. The
small and medium sized enterprises, of whom there are not very
many for an economy the size of Russia, but they are there, they
are people who have a voice and perhaps one day they will exercise
it.
Q28 Linda Gilroy: One reading of
what is going on in Russia is that they are posturing on the foreign
policy near neighbourhood stage in order to distract from the
very serious problems internally.
Mr Lucas: I totally agree. I think
that is the danger. That is why I do not believe that optimistic
scenario I sketched out because I think that, when the regime
is in trouble, it needs to find enemies and it can find the enemies
maybe by persecuting migrant workers, maybe it can claim it is
the Ukrainians' fault for stealing the gas or it can just start
another war in the North Caucasus, pick another fight with Georgia,
whatever. The overwhelming lesson of the last two decades is that,
when politics is going badly, you look for external scapegoats
and pick a fight with them.
Q29 Robert Key: Russia is not immune
from the global financial crisis. How will the state of the Russian
economy, which is very bad now, impact on their foreign and defence
policy or will it not at all, given that we are regularly told
that the problem with Russia's foreign policy is that it is still
stuck in the 19th Century?
Mr Lucas: Well, I think the 19th
Century would be quite nice compared with what we have got now.
I do not want to sound too nostalgic, but I think that this is
actually a hybrid of 19th and 20th Century thinking which is perhaps
even less appealing. They do have less money to play with. Even
when they had a lot of money, they spent it very effectively,
so, in a way, the difference is not so great, there is less to
be spent. The idea that they are going to carry on expanding defence
spending at 30% a year or whatever, and eventually become a real
military power, I guess, is even more fanciful than it was before,
although we should still pay attention to the advanced weapons
that they are developing and also to the advanced weapons that
they are selling, and it is possible that, because of a shortage
of money, they may sell more sensitive weapons than they have
sold in the past, and we should particularly look there at air
defence systems, such as the S-400 and who they sell that to.
I think there is still enough money for them to do the sort of
geopolitical mischief-making that should cause us trouble, and
I have mentioned the Ukraine, Kirghizia and Belarus already, but
there are examples closer to home. I think the way in which they
bought the Serbian energy company, NIS, at what seems to be a
remarkably low price for a company of that size is quite troubling.
The whole pipeline politics of South Stream and North Stream is
troubling. They have successfully kyboshed the European Union's
plan, which is putting it rather grandly to call it a "plan",
a line on a map to build the Nabucco pipeline, which would be
the only way that Europe could get gas from central Asia and the
Caucasus going through Turkey and the Balkans, this would be the
only east-west gas pipeline not controlled by Russia. We have
been faffing around, I suppose one could say, for years on this
and it is still no nearer, I think, getting built and in the meantime
they are pushing ahead with their pipeline plans and making ours
look less likely, so I think that the scale of the problem changes
slightly because of less money, but I do not think that the nature
of it does.
Q30 Robert Key: In your very forthright
memorandum, you make it pretty clear that the West is at fault
for having colluded in the corruption endemic in the Russian system,
and you actually say that the West's biggest weakness is our greed
and you say, "It is not surprising that Russians have become
cynical about our talk of `values' when they see our financial
and professional elite at work, turning stolen property into respectable
assets, and laundering the ill-gotten gains of the ex-KGB officers
who now rule Russia", and, "We need a sharp confrontation
with dodgy financiers and their clients". That is pretty
strong meat. Do you think that the professional elite in this
country and other Western countries, whom you describe as doing
this, are aware that we are playing into Russia's hands?
Mr Lucas: Certainly some of them
are because they come and talk to me about it, and they do not
want their names mentioned because they do not want to endanger
their careers, but I know lawyers, accountants and bankers who
are disgusted by what their companies have got up to in, chiefly,
Russia, but also in Ukraine and other countries. To take one very
clear example, the listing of Rosneft on the London Stock Exchange,
this was described by, I think, Andrei Illarionov, a former Kremlin
economic adviser, as a "crime against the Russian people".
This is an oil company that existed only because another oil company
had been expropriated and it had been expropriated with $8 billion
of Western shareholders' money disappearing, so that is our pensions,
public sector pensions maybe not, but it will be private sector
pensions tied up in that, and yet the London Stock Exchange saw
nothing wrong in taking a roadshow to Moscow to highlight what
they described as their "more flexible listing requirements"
at a time when Rosneft was not able to list on the New York Stock
Exchange. We are a bit of a bargain basement when it comes to
foreign companies wanting to list and I think that is scandalous
and it is not just the capital markets, it is the way we tolerate
anonymous companies in the British Virgin Islands. Why is it that
we tolerate the ability of the British Virgin Islands to shelter
companies behind a brass plate when we have absolutely no idea
who owns them? That is an absolute invitation to money-laundering,
yet these companies, companies which are registered in the British
Virgin Islands, where we know, maybe from gossip or maybe from
intelligence or whatever, that behind them are rich and powerful
Russians who are stealing the oil and gas flows and laundering
through these companies, these companies are allowed to come and
take up syndicated loans and open accounts with our banks and
we do not see anything wrong with that.
Q31 Mr Crausby: Cyber attacks—I
heard a presentation recently on cyber terrorism that started
to make me really worried about Internet banking, so to what extent
should we be concerned about this from a NATO point of view, particularly
as state cyber attacks must be more serious than that, so how
much should we worry about Russia's ability to conduct cyber attacks,
as in the instance of Estonia, for instance, and, more importantly,
how should we respond to that? Should we be prepared to respond
in kind?
Mr Lucas: I strongly recommend
that the Committee asks the MoD for a classified briefing on this
because some of the stuff that is going on is really alarming,
but I think the people who follow this do not want it talked about
in public because they do not want to let the other side know
how much we know about what they are doing, but there is a NATO
Cyber Centre of Excellence in Tallinn which is now being visited
from all over the world by people who want to learn the lessons
of the cyber attack on Estonia and to see what measures can be
taken against them. We tend to have the wrong idea about cyber
attacks. We think it is a kind of crude attack on a website which
means the website does not work anymore, but it is much more subtle
than that. There is one virus which is being investigated at the
moment which lives on memory sticks. The memory stick can be dropped
outside a building that the other side, whoever they are, want
to get access to and people pick it up and think, "That's
a nice memory stick", and they put it in their computer and
see if there is anything on it, and there does not seem to be
anything on it, it seems to be empty, but actually there is a
virus which then goes on to the computer and it copies everything
from the trash can and all the recently opened documents and then,
the next time a memory stick is put into the computer, the virus
takes that information, encrypts it and puts it invisibly on that
memory stick. Then someone takes the memory stick away, maybe
takes it home, puts it into their computer at home, and the information
disappears and we do not know where. That sounds like science
fiction, but it is not. That is a real, live virus and it is causing
problems right now in NATO countries, and we are not really set
up to deal with it.
Q32 Mr Crausby: Do not accept free
memory sticks then!
Mr Lucas: Well, as we wrote in
The Economist recently, some security-conscious banks have
actually gone round every computer in the bank putting glue in
the socket where you might put a memory stick, so you physically
cannot put the memory stick into the computer, in order to try
and keep the network secure. But the other side, whoever they
are, and that may be cyber criminals, it may be China, it may
be Russia, it may be all sorts of people, it is quite hard to
tell, the other side are ahead of us at the moment. They are inventing
viruses faster than we are inventing ways to deal with them, and
stealing data is only one thing, but then there is the question
of getting into the computer and modifying its contents.
Q33 Mr Jenkin: At the Bucharest Summit,
we were all given a free memory stick!
Mr Lucas: That was one of ours!
Q34 Mr Jenkin: One hopes! How much
is this cyber activity directly authorised by the Russian State
and how much do you think it is people in the system just trying
it on? It is sort of semi-official, even unofficial aggressive
cyber activity, so how confident are we that it is all coming
from Russia?
Mr Lucas: Well, it is certainly
not all coming from Russia, but what we can say with great confidence
is that the Russian authorities are not co-operating in the way
we would like in dealing with it. We have companies, and there
was one which we wrote about in The Economist under the
headline "Baddest of the bad", called RBM, which is
based in St. Petersburg and seemed to have the enthusiastic support
of some people in authority there, to put it no more strongly
than that, and there was a major American investigation into this
company and big attempts to close it down. You get individual
Russian law enforcement officials who are very enthusiastic, but
the Russian State does not seem to take this seriously and one
has to ask why.
Q35 Linda Gilroy: You touched on
energy politics in Russia just now. What are the implications
of that for the EU countries and what are Britain's energy security
interests arising from that?
Mr Lucas: I think, to be fair,
we need another hour for that, but I will try and do it in a minute.
What the European Union needs is an energy market which is robust
enough that outsiders cannot manipulate it, but that means lots
of different kinds of energy coming from lots of different places
in lots of different ways. What we have at the moment is not that.
We have much too much of our dependence particularly in Germany
and countries further east because of gas and almost all that
gas coming from, not from Germany, but from further east and an
awful lot of that gas coming from this Russian east-west pipeline
monopoly. The one thing we could do about this very straightforwardly
is to treat Gazprom the way we treated Microsoft. Microsoft did
not take the EU seriously and then the fines started ratcheting
up because of their monopolistic practices and after a bit they
did take the EU seriously, and now all the American companies
take the EU Competition Directorate very seriously. Why can we
not apply the same competition law to Gazprom that we did to Microsoft?
They probably would not take it seriously at the beginning, they
would probably get the Germans to complain on their behalf, but
we can do it, the legal framework is there.
Chairman: Mr Lucas, thank you very much
indeed. That was a fascinating evidence session as our first public
session in this inquiry.
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