Examination of Witnesses (Questions 220
- 239)
MONDAY 19 NOVEMBER 2007
Sir Anthony Brenton
Q220 Lord Chidgey:
What does Russia see as a threat to restoring their sphere of
influence, of being successful in doing that?
Sir Anthony Brenton: As I have said, they are
very suspicious of what they see as Western attempts to undermine
them and weaken them. There is a very strong current of opinion,
not only in Russia as a whole but in the Russian administration,
that the West took advantage of Russia when it was weak and wants
to continue to do so, and therefore that the West works to undermine
Russian positions in places where Russia has an entirely legitimate
interest, such as in Ukraine and in Georgia.
Q221 Lord Anderson of Swansea:
Some critics with great hyperbole in the Sixties and Seventies
talked of the Soviet Union as a Third World power with nuclear
weapons. Now we understand that at a government-inspired seminar
in St Petersburg in the summer they talked of their ambition of
becoming one of the top five economies in the world by 2020. Is
this a pipedream? Is it feasible?
Sir Anthony Brenton: No, it is not a pipedream.
Their economy has been growing at about 7% a year over at least
the last six years, and this is not only oil and gas revenues
but the economy is growing across the board, nor is it only concentrated
in Moscow. When you come you will see that Moscow is now a boom
town, one of the most expensive, fastest-growing, most dynamic
economic centres, certainly in Europe and, arguably, in the world.
It extends well beyond Moscow now, to places like St Petersburg,
Yekaterinburg, out East. As I say, it is not just oil and gas
but they are growing both in their general minerals extraction,
in terms of industrial production and in all sorts of ways. On
present economic policies, if they can maintain a rather sensible
approach, there is every prospect of our dealing with an economically
much more significant Russia in a decade and then in another decade
after that.
Q222 Lord Anderson of Swansea:
But in the top five?
Sir Anthony Brenton: I would not like to predict.
There are so many imponderables there, including who else might
be in the top five.
Q223 Lord Anderson of Swansea:
Is it still a fairly unbalanced economy?
Sir Anthony Brenton: It is very unbalanced at
the moment. It is too much concentrated on oil and gas extraction
and on minerals extraction but they are as aware of that problem
as anyone. This is a highly educated people, a highly technologically
competent people, a people who are very capable of carrying themselves
forward with the right policies in other areas than purely mineral
extraction.
Q224 Lord Crickhowell:
Going back to the comment I made earlier about the population
problem, at the moment, in order to sustain growth, they need
a growing working population but they have in fact got a tiny
working population, and the oil and gas which you referred to
at the moment is a big problem area for them because they cannot
even supply their own domestic market. They have two major fields
which are beginning to see the end, they need to find a way of
developing their oil and gas, yet they have an organisation running
it which is notoriously inefficient, and so they have problems
on the oil and gas. In a lot of the rest of the situation do they
not require a considerable technological input to develop with
the West and Western investment? You express rather greater confidence
than some of our witnesses in their ability to maintain this growth
factor into the top league. Clearly, they will overcome a lot
of their problems but you seem to be rather more optimistic, I
think, than some who have identified some of the problems they
face.
Sir Anthony Brenton: On the demography side,
I do think this problem is overstated. Certainly their population
has been falling catastrophically and certainly it will continue
to fall for some time yet. It is very striking: I served in Russia
between 1994 and 1998 and the one thing you never saw then were
babies in prams in parks. Now you do. The other thing which has
changed is, of course, their openness to immigration. They have
recognized that they have a democratic demographic problem and
key skills they are willing to let in, and of course, there are
a lot of people out in the former Soviet Union who are keen to
get back to Russia to contribute to their growth. There is a problem
there but I do not think it is anything like as catastrophic as
some people like to assert. On the oil and gas, yes, they do have
problems. As you say, they are running into domestic shortages.
This is due to the fact that they have not done any serious exploration
for the last couple of decades and are living off the proceeds
of the exploration period which took place before that. That said,
I was very struck by a remark made to me by Lord Brown, the former
chairman of BP, who said in effect Russia, eastern Siberia, remains
the single large unexplored hydrocarbons province now in the world.
If there is any of this stuff to be found anywhere, it is out
there and they are pretty confident that it is there. Yes, it
is going to take lots of technology; yes, it is going to take
fantastic amounts of money; but just from that single remark,
from more than that single remark, I conclude that, if they get
their policies right, they have very rich prospects in that area.
Q225 Lord Swinfen:
Leaving aside oil and gas, are they exporting raw materials or
are they exporting finished goods rather than raw materials?
Sir Anthony Brenton: I have not studied their
export figures very closely but they obviously have large exports
still of things like nickel, iron ore and so on, of which they
have a large production. Do you call aluminium a raw material,
which of course it is not, or do you call it a finished good?
It is the product of an industrial process and they are the world's
largest producer of aluminium now.
Q226 Lord Swinfen:
That is a fair point. Bauxite originally. They also have massive
reserves resources in the way of timber.
Sir Anthony Brenton: Yes, that is absolutely
right. It is extraordinary how inefficient Communism was. The
scope simply with the present economy to produce things better
and to generate the sort of economic growth that we have been
talking about remains huge. A story which I do not want to bore
you with but I think it is a rather good story, which I regularly
tell in speeches that I give about Russian economic prospects.
I have a friend who, in the way of ambassadorial friends, owns
a forest out in Siberia, near the Chinese border. This is a working
forest; they cut down the trees and sell them to the Chinese for
construction purposes. When he took over this forest, which was
doing very badly, he looked into the books and he discovered that
one reason why it was doing very badly was because of its transport
fleet. He had this fleet of trucks which were using amazing amounts
of gasoline for no obvious purpose, the drivers kept on falling
sick, spare parts kept on going missing and so on. He called all
the drivers together and said, "Guys, I give you your trucks.
You are now subcontractors to me; you own the machine you drive."
Instantly, of course, the breakdown rate of the trucks fell close
to zero, the sickness rates of the drivers fell close to zero,
the disappearance of spare parts fell to close to zero and he
suddenly had a very profitable transport operation. The scope
to do that all over Russia remains huge as it makes the transition
out of Communism, and that is where a lot of the growth is coming
from.
Q227 Lord Truscott:
Of course, it is widely acknowledged that the Russian economy
is, relatively inefficient but can that not be overstated to a
certain extent? On the one hand Russia is already 20 in the world
in terms of the size of its economy, Gazprom is already the sixth
largest company in the world, and they have something like the
fourth-largest gold and currency reserves in the world. Do you
think, whilst it is relatively inefficient, you can overstate
the inefficiency of the Russian Federation?
Sir Anthony Brenton: Yes. Two points arise here.
First of all, Russian bureaucracy is horrendous. The corruption
constraints, which add huge additions to industrial costs, remain
very high. You can see, as you deal with Russian operations, just
how backward, in a way, they are. They operate like British industry
used to operate 10 or 20 years ago. But these are bright guys
running these things at the top now and they are very internationally
oriented and they are keen to make themselves internationally
competitive and respectable and, as they do so, so Russia's economy
will grow stronger.
Q228 Lord Jones:
Regarding Russia's relationships with the nations on the periphery,
on which you have briefly touched, do you think Russia's policy
is going to lead to difficult relations with the EU with regard
to how the EU approaches the periphery? Is there scope for problems
there?
Sir Anthony Brenton: I think there already are
problems. It depends who you are counting in but, of course, a
number of EU Member States to sit on the periphery of Russia and
do not have perfect relations with Russia. With Poland there is
a sort of ancestral tension there which has been imported wholesale
into the EU's general relations with Russia through the fact that
Poland is now holding up the Partnership and Co-operation Agreement
negotiation. Estonia had a very difficult passage with the Russians
earlier this year because they chose to move a war memorial from
one part of Tallinn to another. These are not external difficulties
for the EU; they are very much part of the EU's overall relations
with Russia.
Q229 Chairman:
Would you perhaps like to say something about the countries which
are on Russia's periphery like Ukraine, Georgia and Central Asia,
and how far the EU's policy towards these countries would perhaps
lead us into disagreements with Moscow?
Sir Anthony Brenton: It varies from case to
case, of course. Ukraine is the biggest and most important case,
without doubt, and I am a very firm advocate of the EU moving
as fast and as clearly as it can to getting a very close relationship
with Ukraine—not because that disadvantages Russia particularly.
Indeed, President Putin is on record as having said he would not
oppose Ukrainian membership of the EU—but because the surest
way of giving Ukraine the economic boost and the self-confidence
to get over its own internal difficulties and to stabilise the
democratic system, which is still developing there, is precisely
to draw it into the EU embrace in exactly the same way as we did
with Estonia, Latvia, Lithuania, the Czech Republic and so on.
Georgia similarly, although Georgia is a little bit further back
down the development track, and Georgia is a sensitive and complicated
case for a number of other reasons, because there are these enclaves
in Georgia which Russia is helping to protect from forcible reincorporation
into Georgia. There is no doubt that they do not want to rejoin
Georgia. But again, part of the answer to Georgian-Russian tensions
is for Georgia itself to become a prosperous, successful nation,
without a lot of the hang-ups which currently preoccupy its relationship
with Russia and to the extent that the EU opening its doors and
helping Georgia to develop economically, we will help that process.
Going further east, as you look at Uzbekistan and the "stans",
there are major problems there of governance, apart from anything
else, but I do think it is important that the EU stand firm in
its view on governance. With regard to Uzbekistan, for example,
where there was an appalling massacre a couple of years ago, I
think it is important for the prospects of development there that
we be very clear on maintaining our democratic values.
Q230 Lord Anderson of Swansea:
What is it that they expect from countries like Ukraine and Georgia?
Is it respect? Is it some form of political suzerainty, or at
least a readiness to look to Russia for leadership, or is it a
degree of economic dependence?
Sir Anthony Brenton: They rightly say they have
historic links with these countries, there are a lot of Russians
living in them, there are a lot of real Russian economic interests
there. They are in no doubt that they are now independent countries.
There is no move at all towards trying to reincorporate them in
some form into the Russian empire, but there is a feeling that
they have legitimate interests there which they want to see respected
and taken into account as those countries themselves develop.
Q231 Lord Swinfen:
Is Ukraine still the bread basket of Russia?
Sir Anthony Brenton: I do not think so. I am
not an expert on where they are getting their food from. What
is surprising is that Russia is not the bread basket of Russia.
If there is one bit of the Russian economy which really does need
to develop or redevelop, it is agriculture, the black earth; they
have some of the richest farmland in Europe which is scandalously
underused at the moment.
Q232 Lord Anderson of Swansea:
How fraught are the current bilateral relations between the UK
and Russia? You have had an interesting time yourself, including
the Litvinenko affair. Does that still rumble on?
Sir Anthony Brenton: As I talk about bilateral
affairs, I think it is quite important to distinguish between
the economic relationship and the political relationship because
the economic relationship remains very strong and very positive.
Our exports are rising by about 20% a year, in last year's figures
we were the largest investor into Russia in various sectors, the
economic links are strong and growing stronger—Russian industry
looks to the City of London, for example, for all of its financial
services. I am going to invent this number but I think it is approximately
right: something like 40% of the City of London's IPO activity
last year was Russian. So there is a very strong mutual dependence
in the economic relationship which neither side has any interest
in undoing. The political relationship is undoubtedly very difficult
at the moment and the two key reasons for that are the presence
of Boris Berezovsky here in London who the Russian regime would
very dearly like to get back and try in Russia, and the murder
of Litvinenko here in London, which, as you all know, was an appalling
murder which endangered a lot of other people as well. We have
identified a suspect for that crime, Mr Lugovoi, we have sought
extradition, which has been refused, and we have exhibited our
dissatisfaction with that conclusion with the expulsions and the
other measures we took in July. That affair remains alive and
we still remain very keen to extradite Mr Lugovoi but, in pursuing
that, we also recognize that there is a lot of serious international
business which it is important that we be able to speak to each
other about. I have mentioned Iran. I have mentioned Kosovo. Climate
change is another example of a subject where Russia has a major
role to play, where we need to be talking to them. I think ministers
are inclined to divide the subject matter. Yes, Litvinenko remains
a real problem for us. We cannot have British citizens murdered
on British streets in the way that happened in that case, but
Russia is a big, central country in the international system and
we need to do business with them on a lot of other issues as well.
Q233 Lord Anderson of Swansea:
Ambassador, the British Council. I see that at the Mafra EU-Russia
Summit on October 26 the Commission supported the UK about the
difficulties faced by the British Council in Russia, pressed Russia
to conclude cultural centres agreements which formalised the status
of organisations like the British Council quickly, routinely,
and without reference to wider issues. What is the current position
on the British Council and how likely is there to be some agreement
without the Russians trying to get a quid pro quo?
Sir Anthony Brenton: The current position on
the British Council is that they are under pressure. The Russians
do not like, in particular, their activities in the Russian provinces
and are pressing us in effect to close the British Council down
other than in Moscow.
Q234 Lord Anderson of Swansea:
And in St Petersburg?
Sir Anthony Brenton: No, they are also pressing
the British Council to close that. The British Council had a regional
network which was locally staffed, which in any case they have
now handed over to local owners because that is part of their
worldwide policy, to spend money on projects rather than people.
They still have three offices in Russia, in Yekaterinburg, Moscow
and St Petersburg, and the Russians are pressing them to get out
of Yekaterinburg and St Petersburg. As you have said, at Mafra,
and indeed separately, we have pointed out to the Russians that
under the Vienna Convention on Diplomatic Relations we have a
right to pursue cultural activities from our diplomatic representations,
which we have in Yekaterinburg, St Petersburg and Moscow, and
under a 1964 agreement between ourselves and the Russians the
British Council is our agent for that activity. So, in our view,
what the British Council is up to is right. It is actually good
for Russia. They have trained something like 200,000 English speakers
in Russia, to take one rather small example of the things they
are doing. It is right and is legally justified and we have been
very clear with them that we would take a pretty dim view of any
serious attempt to pursue their efforts to close down the British
Council in Yekaterinburg and St Petersburg.
Q235 Lord Anderson of Swansea:
What are the obstacles to the cultural centres agreement?
Sir Anthony Brenton: For the moment they have
frozen the negotiation of the cultural centres agreement in response
to our freezing the negotiation on the visa facilitation agreement,
which was one of the measures we took post Litvinenko but, in
any case, it was moving very slowly and the reason we think it
was moving very slowly was precisely because of Russian discomfort
with British Council activity.
Q236 Lord Swinfen:
What are the activities to which the Russians are actually objecting?
Sir Anthony Brenton: They have not been specific.
They just do not like the British Council.
Q237 Lord Truscott:
I understand one option would be for the British Council to withdraw
to operate from the British Embassy and the British consulates
in Russia. What would you think of that?
Sir Anthony Brenton: We are making every effort
to keep the British Council operating at the maximum possible
extent in Russia. If that requires them to operate out of my embassy,
then my embassy will open its doors to them.
Q238 Lord Chidgey:
Ambassador, you mentioned a moment ago that in the course of time
the British Council have trained 200,000 English speakers.
Sir Anthony Brenton: Yes, I need to be careful.
I made that number up but a lot, hundreds of thousands.
Q239 Lord Chidgey:
What I want to ask you about is that I understand the British
Council have trained a good number of teachers of English. Could
you tell us whether this has been a problem perceived by the Russians
in terms of the influence that teachers trained by the British
Council as English teachers might have an ulterior motive or another
agenda in terms of teaching in Russian schools or further education
or whatever? Is there an issue there?
Sir Anthony Brenton: I would be surprised. There
is certainly a narrow, nationalist stream running in Russia which
resents foreign languages and foreign links but that is actually
very much a minority view. The sensible people who are running
Russia at all levels know that Russia's future lies as an integrated
component of the world economy and they know too that one of the
key skills to doing that is having lots of people who speak English.
So the sensible people in the system have appreciated and continue
to deeply appreciate the work the British Council is doing helping
Russians to acquire that skill.
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