In this exclusive interview, German businessman Franz J. Sedelmayer discusses his decades-long dispute with the Russian government, challenging Russia’s sovereign immunity, and the link between state corruption and the current environment of civil unrest in Russia.

Q: Looking at the very long history of your dispute with the Kremlin, no one could say that you lack resilience in seeking recovery of your stolen property. So where did this all begin?

A: As the Eastern Block began to break down in 1989, we saw an opportunity to set up a company supplying law enforcement equipment to Russian executive organs of state helping with their modernization and training their personnel. Later on I also founded a security service to assist new foreign investors in navigating in a rather risky economy. We set up our joint venture, JSC Kamenny Ostrov, together with the Leningrad (St. Petersburg) Police Department, which offered the use of facilities on Stone Island for a 25-year lease. We ended up bringing in cash, equipment and renovating our company facilities, investing upwards of $4,000,000.

We began having political problems right away as the law changed, banning the police from participation in commercial activities, and creating a heated competition for the other 50% of our company between organs of the new federal government and the old property fund ran by the Supreme Soviet.

It was at this point that I developed a close working relationship with Vladimir Putin, who at the time was the head of the foreign relations department of the Mayor of Leningrad (St. Petersburg), Anatoly Sobchak. He came up with a solution to our problem – that the city government, through an executive order by Anatoly Chubais, could take the share in the joint venture, but what would they get out of it?

We agreed that if the city would take the share, then our company would form, fund, equip and train a FSB counter-terrorist team free of charge as St. Petersburg had to host the Goodwill Games, but the City’s law enforcement agencies lacked any counter-terrorism capability.

Q: At what point did your good relationship with Putin break down?

A: Well, trouble started in 1994, when President Boris Yeltsin had decided to confiscate our facilities, where we had more than 150 employees working at the time. We were in an awkward situation because we had invested a lot of money in the facilities and we had no alternative replacement. On behalf of the city, Vladimir Putin wanted to provide us with new facilities owned by the City, but had no money to compensate for our leasehold improvements. So instead, what Putin and I decided to do was to write a letter to Pavel Borodin, who at the time was the head of the Managing Department of the President of the Russian Federation, asking him to compensate us for our leasehold improvements for around US$800,000.

To our surprise, Borodin wrote back to us stating that the company had been established illegally, and thereby the Russian state had no duty to pay us any compensation, and that they would simply expropriate everything we had without any payment. Putin was unable to do anything about this raid, and that’s where our legal dispute begins. We had our last conversation in early 1996.

Q: So what has been your strategy to recover the investment taken in the expropriation?

A: Well, our strategy is very simple – we are trying to make the Russian Federation pay its debt, and this is a government that never wants to pay anyone. With all the domestic courts being absolutely useless in arbitrating a dispute for foreign investors, the only thing that we can do is search for assets wherever we can find them and attach them to our case.

Russia’s obstinacy on paying debts is not unique to my case, but rather it is a widespread practice of state policy. In principle, it is like fighting with a schoolyard bully who refuses to give in, and all you can do is hit them where it hurts. In our fight against Russia’s abuses of sovereign immunity, in some cases we were not very fortunate, while in others we were able to create case law.

Q: What are some of the issues that come up when you go after Russian assets in the West?

A: Well, when it comes to sovereign immunity, the fine line is always about whether or not the assets in question are being used for a sovereign purpose or for a commercial purpose. The worst case scenario, which always comes up in our case, is when the asset is claimed to be used for both.

The problem is that no one, since we’ve been around, has been trying to execute against a foreign sovereign in the Western world, so we are the first ones to develop real precedent and case law. There are instances in which the courts disagree. For example, the Supreme Court of Sweden decided last July that as soon as a government is using a facility for a mixed purpose, “sovereign and commercial purposes,” it can no longer be protected under immunity. This case concerned the former USSR trade mission in Stockholm.

But Germany, with the most recent decision in December, decided exactly the other way around. The court concluded that if an asset is used for even a partial sovereign purpose, it cannot be attached.

Q: What was the reasoning for the German court’s ruling?

A: Well, first of all, the court did not examine the merit of the case, but rather issued a decision on the grounds of whether or not to accept the case. That means that the case subject will continue coming back to that German court until that question has been handled and is finally ruled upon! Basically, they have now concluded that it was OK for a foreign government to use commercial activities to fund sovereign activities in the same building– which is, quite simply, ridiculous. In practically any other country, a commercial activity is considered a commercial activity, full stop. It doesn’t matter what a government claims is going to be done with the money it earns from this business.

In our case, this concerned the Berlin-based House of Russian Science and Culture. Actually 90% of the building there is leased to companies and to retailers, and the Russians have claimed that this is not a commercial activity, as they use the profits from these leases to fund the representation of Russia in Germany.

But bullied into the corner, the Germans have been excessively lenient with Russia on this ruling, requiring us to take the case to the final point before the European Court of Human Rights. It reminds me of the Yukos case before the ECHR, when the Tribunal seriously decided the persecution and expropriation conducted against Mikhail Khodorkovsky and his partners was not politically motivated. Frankly, I really fail to see what we as Europeans stand to gain, if our courts permanently give in to Russian pressure. This practice must stop! Why would we even want Russia to remain a member in the Council of Europe, if today’s Russian administration willfully ignores the very human rights it once had promised to observe and to protect? Should we Europeans lower our standards?

Q: How much have you been able to recover so far?

A: So far we have recovered about 1.2 million euros, and we are owed about 4.5 million euros more, including all the legal fees – Russia has a very bad habit of refusing to pay legal fees when they lose. For example, we are engaged in at least 60 ongoing lawsuits as we speak, most of them connected with the execution of Russian assets.

What is interesting is that instead of just paying us the relatively small amount to make the problem go away, they instead allowed the case law to develop in court, and this is going to help anybody else in the future who has money to collect from Russia. And quite frankly, now they are standing there with these results, and they look actually pretty foolish, as what they have done was not at all necessary, and was not helpful to their image.

Q: So why have the Russians been so foolish when it would have been so much less damaging just to settle your case?

A: Well, back when I was working in Russia, we had this term we called “nachalnik syndrome”: if an official has reached a certain level in his career, he cannot ever be wrong again, so whatever decision he makes, it is like an edict from the pope. It cannot be reversed or reconsidered in light of new evidence.

And this is how they are pursuing their legal affairs – and I don’t see any way that they will change their attitudes, because at the moment they are surviving. Even though 50% of the country’s income coming from oil and gas and rare metals, and only 1 million people actually benefit from that by being employed in those sectors, I don’t think that they actually think they absolutely need the foreign investments.

Russia has a very short-term attitude, Putin himself included. They know that the system as it stands now cannot last more than 3-5 years, but they think, “who cares what happens after I am gone.”

Q: Do you think your experience represents a horror story for foreign investors in Russia, or a more unique experience?

A: Look, the truth is that Russia’s image as a destination for foreign investment is terrible, and I don’t care about all the positive things that any Western government, including the United States, has to say about how great the country is, how it is moving in the right direction, etc. And the American “reset policy” in particular has failed miserably in bringing any progress to Russia that continues to fail to protect people’s property and freedom.

A normal businessperson today would not invest a dime in Russia. The only companies that are able to invest are multinational corporations of the size that they don’t care if they lose their investment. On the one hand, the investment is either relatively small in the terms of the company’s overall portfolio, and on the other, they don’t care if they lose the money because it is not their money but rather that of the shareholders. These guys can go out there and take all the risks, and then worry about handling the disputes among shareholders and auctioneers in the event that they lose the investment, but in no case are they making any investment that would cause the end of company. It seems strange some shareholders have not woken up to that reality, yet! But when you talk about small and mid-sized companies, there is no way they would take the risk to invest in Russia when there is no way to recover debts.

Q: So given that you worked so closely with Putin in the past, what are your impressions of him now?

A: Well there is a nice phrase that describes what happened to Putin: “power corrupts, and absolute power corrupts absolutely.”

When I worked with Putin, he was known for two things: being honest and being loyal to his boss, who at that time was Mayor Sobchak. Putin would do absolutely anything for Sobchak, including covering up his corruption – and it was incredible, he did a very good job at it. It was this type of display of loyalty that eventually landed him his first top job in Moscow, and I think essentially that was the role he was originally expected to play by Yeltsin and his family.

If Putin would really be reelected as president in March 2012 he will, in order to stay in control for the whole duration of his term, restrict the freedom of the Russian people even more harsh; possibly to rival the situation as it has existed under the communists in the 1970’s. The Russian people are fully aware of that danger!

Q: But if Putin were to exit the political scene, would foreign investors find an improved environment?

A: No, not right away. The crisis in Russia is not just limited to Putin the person, but the people who work around him. By nature, a dominant and charismatic personality like Putin is not going to surround himself with very capable people. That actually describes the whole situation in Russia today, whether you are talking about the FSB, the bureaucracy, or the nachalniki that control the cities and regions. These are not exactly the brain surgeons and rocket scientists of Russia – these are people who jumped on the bandwagon of Putin’s party, just like the same type of people who jumped on the bandwagon of the Communist Party for decades.

Q: Do you see a connection between the hostile environment for foreign investment in Russia and the current wave of protests seizing Moscow?

A: Well the motivations of the protesters are complex – I think that if you interviewed ten different people demonstrating, you would get ten different answers. But it is precisely this diversity that indicates all the makings of a genuine popular movement, and that’s particularly dangerous for Russia’s current administration.

What started everything, I believe, were two core features of the current system in Russia: 1) the lack of fair distribution of wealth, and 2) the display of absolute power. You have this immense wealth generated from the oil, gas, and minerals sector going to a very select few, along with the immense wealth generated by corruption going to members of the bureaucracy, judiciary, and the executive organ of the state. Take this along with the brazen display of power during the last Duma election, when it was clear that nobody even took the vote seriously enough to even bother concealing the rigging of the elections, and you have a recipe for trouble. The lack of opportunities combined with the open gestures of power, and many Russian people finally understood that they were being treated as though they didn’t exist by their leaders.

Q: Putin’s main campaign slogan this year appeals to stability, arguing that without his guiding hand, Russia will fall into chaos. Do you buy it?

A: It’s a complete myth that Putin’s Russia is stable. The lack of control over the country is the same as back in the Czar’s days – “the heavens are high and Moscow is far.” It is sheer logistics that do not allow a vertical line of power from the Kremlin to all the cities and the villages in the faraway regions, requiring Moscow to relinquish wide ranging discretion to locals.

What Putin has done essentially is to strike a deal with anybody in the regions that doesn’t step on his feet and or on the feet of the federal government, and then this or that governor or mayor is allowed to fill his own pockets without any oversight from the federal government. But the moment that they mount an opposition to the center, no matter how small it might be, Putin and his people will do anything possible to break it up.

Back in the 1990s, one of my business activities was to help Western investors to deal with the local mobs who tried to take away their business or a chunk of the business. And one thing we learned is that mobsters don’t fight each other. They distribute their market share, making an agreement and they stick by it. And that’s exactly how Putin and his cronies have organized their arrangement with other people in the country that serve in public and bureaucratic functions.

Putin is not the reason for the corruption, but under Putin, corruption became an accepted structure, and if you don’t have ways to break up this structure, such as a fiercely independent judiciary, then nothing will change.

Q: If you were a Russian protester, what approach would you take?

A: Well, my advice, welcome or unwelcome, coming from a foreigner with some experience dealing with Putin, is that his biggest weak spot is that he hates comedy. If anybody wanted to destabilize Putin, comedy is the best weapon they have. You cannot insult the man, you cannot pressure the man, but you can ridicule the man.

Have you ever heard Putin tell a joke? The very first thing he did as Prime Minister was to cancel the most popular political satire show. I would describe these as delusions of grandeur, but he cannot live with the idea that people out there are not taking him seriously. Putin does not break out into rage unless it is issues like that – it’s his Achilles heel.

Q: Last time we spoke, you said that you saw Grigory Yavlinsky as the only candidate independent from Putin. Now he is not being allowed to run.

A: Well, it’s a great pity, because now all that leaves us with is Prokhorov and the Communists, who are both of course connected to Putin.

The banning of Yavlinsky’s candidacy illustrates Putin’s general fear of him and fear of risk, as no matter low the popularity of a competitor, his party is not going to be able to pull the same level of electoral fraud as last time, so almost anybody not under his control represents a risk in his eyes.

And we shouldn’t overestimate the appearance of people like Mironov and Kudrin at the protest rallies, because as far as Putin is concerned, the more the merrier. All that matters is that the only people actually allowed to run in the election pose no threat and are under control. So now, the problem is that the Russian opposition needs to decide whom to support – and that will be a choice of the lesser evil.

Q: So you believe Putin will become the next president and remain in power for many years to come?

A: Well, never forget that Russia can also surprise you, and no one can absolutely be sure of what happens from today to Election Day. But as I have said before, it is not a wise move for Putin to run for President, as he will be poison for the country. The people are disgruntled, and he knows that they are disgruntled, requiring an even heavier level of control over sources of influence. When Putin comes back as president, I believe we will see the flight of more people, more brains, and more money leaving the country without a return ticket.

But it is interesting: out of all the people that I continue to speak with, Russians both inside and outside the country, even the most pessimistic, all of them have plans. They are all planning for a future, a future without Putin.

It is common knowledge that education is a pillar of infrastructural stability, allowing a nation and its respective citizenry to develop and thrive. Education turns aspiration to talent, fosters it and allows it to give back through implementing an acquired skill at home, ultimately equating to a nation sustainably developing.

Yet after the turmoil of 2008, one would have all but written off the former breadbasket of Africa regarding its developmental potential. David Coltart is out to prove those naysayers wrong.

Aside from an unprecedented 15 million textbook initiative brought about with support of UNICEF to Zimbabwe’s students, allowing the ratio of student to textbook to hit 1:1, he champions the push to increase teacher salaries at the incremental level. This applies to a specific funding initiative for those working in remote areas of Zimbabwe, understanding that talent doesn’t necessary only reside in Harare, Bulawayo, Hwange or Victoria Falls and that one should honor their sacrifice to work in remote areas.

With regard to sport, it is understood to have a particularly profound ‘binding’ effect on a populous and to further promote pride and lure back those who seek greener pastures overseas, the Minister aims to return test cricket (particularly England v. Zim at home), soccer and rugby in full to the nation.

Minister Coltart will be speaking over the course of the next few days at the African Brains summit in Victoria Falls. We will be reporting live from the scene, as the event undoubtedly will shine a spotlight on a continent abundant with opportunity (7 out of the top 10 countries projected to grow significantly this year are in Africa) and even moreso on a generation that will turn opportunity in to tangible progression.

The following contains excerpts of a recent article published by Financial Times correspondent Joe Leahy, based in São Paulo:

The Brazilian ministry of development, trade and industry is investigating claims by Brazilian cellphone producers that their Chinese counterparts are dumping cheap handsets on the market. The intense rate of importation of what the Ministry believes are substandard telecommunications products is having adverse effect on the domestic opportunity for sustainable production.

“These are being sold here below the cost of production,” said Abinee, the Brazilian association of electrical and electronics industries. “We can’t compete.”

The move follows other measures by Brazil to curb cheap imports from China as one of the world’s newest and most important trading partnerships becomes more adversarial.

In one of its strongest moves, Brazil sharply increased a tax affecting imported cars produced outside of the South American Mercosur trade region and Mexico last year – a measure that followed a flood of Chinese-made vehicles into the country.

Abinee gave an interesting example when discussing the checks and balances coming in to place on said imports  – Brazil’s electrical and electronics sector expected sales last year to have reached nearly R$135bn (US$75bn) but about R$40bn of this was from imports, an increase of almost 15 per cent.

Imports of mobile phones were estimated to have more than doubled to 15m units last year and now comprised about 20 per cent of the market. These phones were entering Brazil with prices of between $10 and $15, a cost that the association described as “completely beyond reality” in Brazil.

For this reason, domestic production of cellphones had fallen since 2009 in spite of overall growth in the market.

According to a number of financial and political risk analysts interview by The Financial Times, the aggressive and “arrogant” moves by Anglo have prompted a certain level of “unquantifiable risk” that the company may have unleashed in their handling of the dispute with an unusually business-friendly like Chile.  The question remains:  was it worth $5.4 billion in value in terms of the heightened risk their operations will now face?

Institutional investors are also in favour of the sale on value grounds. “Nearly $6bn for a 25 per cent stake is a very big number,” says one investment executive. Chief executive Cynthia Carroll, another top investor adds, “is doing the right thing by her shareholders by trying to extract higher value; Mitsubishi is offering a 100 per cent premium”.

However, executives at rival mining companies have taken an opposite view that has little to do with valuation models.

Two senior executives have described Anglo’s move as “arrogant” in that it antagonises a powerful state company.

“[The mining industry’s] reputation through the 1980s was of arrogance, of doing whatever one liked with the resources under the ground,” says one executive at a leading multinational miner. “The whole industry has moved a lot since then to be more engaged with communities and politicians.”

“The problem now is that this stirs up all the worst memories of the mining industry at exactly the time when resource nationalism is on the rise,” he adds. “So, if next year we face more calls for tax increases, more strident labour demands, we cannot be surprised.”

But after a number of accidents, attacks by militants, and political scandals, is Shell’s honeymoon with Nigeria coming to an end?  Some recent events and transactions indicate a shift in the Dutch company’s strategy in the country, opening a window of opportunity for new operators.

The past year has battered and bruised Shell’s operations in Nigeria, with both environmental issues and political risk increasing.  Just this week, the company was forced to conduct emergency repairs on a sabotaged trunkline pipeline in Nembe Creek, Bayelsa State, where more than 200 barrels of oil were siphoned off by thieves, forcing Shell to cut production by 70,000 barrels a day during the repairs.  Sabotage and theft by militant gangs is currently on the rise following a brief lull since its height in 2005, while the company reportedly suffers the loss of between 70 to 200 barrels of oil stolen per day.

In December 2010, Shell also experienced its worst oil spill in Nigeria in the past decade, as more than 40,000 barrels of crude oil was spilled at the offshore Bonga Field (the accident being caused by tanker mishap instead of the usual sabotage).  According to a report in the Washington Post, “Some environmentalists say as much as 550 million gallons of oil poured into the delta during Shell’s roughly 50 years of production in Nigeria — a rate roughly comparable to one Exxon Valdez disaster per year.”

As a result, political pressure against Shell has also been mounting from civil society.  The Environmental Rights Action/Friends of the Earth (ERA/FoEN) has been on the offensive since the spill at Bonga Field, issuing statements demanding that the government secure independent verification of spillage data while enforcing clean-up payments.  The company’s environmental and human rights record has been under scrutiny at the highest levels, with the United Nations Environment Programme (UNEP) issuing a harsh report in August 2011 that examined the ecological and public health ramifications of oil spills in Ogoniland.  One of the UNEP report’s key findings included the following:  “Control and maintenance of oilfield infrastructure in Ogoniland has been and remains inadequate: the Shell Petroleum Development Company’s own procedures have not been applied, creating public health and safety issues.”

Even before all these issues came about, there were indications that Shell may be scaling back its exposure to Nigerian energy.  Shell is the 30% owner of the joint venture Shell Petroleum Development Company of Nigeria Limited (SPDC), which also features major stakeholders such as the state-owned NNPC with (55%), TotalFinaElf (10%) and Agip (5%), which together is responsible for a whopping 50% of all oil production in the country.  However in November 2011, Shell completed the sale of its shares in two major oil producing blocks (OML 26 and OML 42), while at the same time they are working to close ongoing deals to sell their stakes to three other blocks (OML 30, 34 and 40).

Continue reading the full version of this article on Nigeria Intel.

Today, Georgia stands at the doorway of that achievable ‘dream’ in that it seems clear tangible change is on the way. Such change is brought to us by Bidzina Ivanishvili and his newfound ‘Georgian Dream Movement’.

It’s been brought about to bring the one thing that has hindered the political landscape from being competitive. Resources have allowed a President, who many view as having visions of Putinism dancing in his head, to assume that the upcoming elections were his to landslide. And therefore it is resource that the Georgian Dream provides to facilitate free and fair elections, to assist two leading opposition parties in order to effectively compete – giving them the ball and asking them to run.

Many believe that the United National Movement (UNM) has lost touch with reality starting from the end of the 2008 Russia-Georgia war. That monopolization from the ruling party in every major financial sector has hindered foreign investment, which in turn trickles down to hinder quality of life.

Those who wish to join the movement online risk heavy consequences – most of the fans of the movement are avatars. But what is particularly ‘moving’ is that these avatars ‘add’ each other, chat, share and begin healthy debate as to where Georgia’s political priorities truly lie.

Irakli Alasania, chairman of the Free Democrats party and former Georgian Ambassador to the UN, believes that no President should seek office after two terms and believes the time is now to put a focus on economic reinvigoration, agriculture, territorial integrity through diplomacy and fostering the talent in Georgia to build a new shared future. The Georgian Dream is helping make these ideas a reality through the opportunity for parties like Alasania’s to compete. For if a dream is shared, from business to business, voter to voter, it could very well become a free and fair reality.

It has now been almost four years since the controversial ouster of former EFCC Chairman, Nuhu Ribadu, back when the anti-corruption unit held some level of international legitimacy, as well as a local reputation as a hammer used against Olusegun Obasanjo’s opponents.  Ever since then, with Farida Waziri serving as EFCC Chairperson, the agency has become at best a joke, and, at worst, a tool used to persecute some of Nigeria’s fledgling reformers.

But President Goodluck Jonathan’s abrupt firing of Waziri and appointment of Lamorde has given hope to some observers that the lost prestige could be regained.  Writing in Next Newspaper, columnist Stephen Davis argues that “Replacing Waziri is a bold step by President Jonathan. It clearly shows this is not a puppet President but a man who may yet be the leader Nigeria desperately needs to carry the nation through a dark and difficult time.”

For better or for worse – and sometimes such endorsements are actually unhelpful – Lamorde appears to have the backing of the United States.  In a statement published on the website for the US Mission to Nigeria, Ambassador Terence McCulley supported the new appointment:  “I applaud President Goodluck Jonathan’s recent move to change the leadership of the Economic and Financial Crimes Commission (EFCC), and his willingness to seek a strong candidate to lead the Independent Commission to Prevent Corruption and other related Offenses (ICPC).  The United States stands ready to help build these institutions to address corruption effectively and make impunity a thing of the past.”

It is positive that Lamorde is receiving such vocal support, which will hopefully boost his influence against the resistance he is likely to find within the agency and other structures of the administration, but what are the chances for his success?  Aside from the welcome feeling of seeing a familiar face (Lamorde served as EFCC Director of Operations during Ribadu’s tenure), what grounds do we have to assume that this government, which up until the moment has shown no willingness to fight corruption, will suddenly change its view?  Lastly, is it without meaning that Lamorde was present on the staff of the EFCC during the lost years of Waziri?

No one has the right to judge the performance of Lamorde before he is even given time to act, however it is time for observers of Nigerian public affairs and supporters among the anti-corruption community to open the debate on what kinds of technical steps are going to be required to reform the EFCC into a meaningful prosecutorial body with sufficient independence and powers to act as a check on corruption.

To finish reading the rest of this article, please jump over to Nigeria Intel.

“…We did so because we saw an important opportunity to give a fresh impetus to the OIC’s long-standing objectives of promoting modernization in the Muslim world in line with the values of Islam based on peace, tolerance and human dignity. As a country both in Europe and Asia, we do not believe in the Samuel Huntington theory of the “Clash of Civilizations.” Over the past 20 years the advance of globalization, the expansion of free markets and the rise of “emerging” economies from Asia to Latin America have created new linkages rather than the re-emergence of old divisions predicted by Prof. Huntington. Kazakhstan’s own experience as a predominantly Muslim nation with more than 100 ethnic groups and 40 religions and with no history of either inter-religious or inter-ethnic enmity or bloodshed is also a case in point.

Of course, there have been pronounced tensions between parts of the Islamic and Western worlds as a result of radicalization on both sides, most notably after the terrorist attacks of 9/11. Violence has no place in the Islamic tradition or any other great world religion and is condemned outright by true believers whatever their faith. So there is every reason to believe that extremists driven to violence will remain the marginal figures that they are, disowned by the religions that they falsely claim to represent.

The “Arab Spring” has thrown into sharp relief the lack of progress in parts of the Islamic world, underlined by the inability of a number of countries to address mounting economic and social problems. Addressing the root causes of these states’ stalled development and integrating them into the global mainstream is an urgent priority that will prevent potential radicalization of attitudes toward the West.

We believe that the OIC’s main focus should be on promoting economic development and competitiveness through trade and investment policies based on effective investment in education, science and technology. Average GDP per capita in OIC countries is $9,500 while in European Union countries it is over $24,000. There are also disproportionate imbalances of wealth among OIC countries with 10 out of the 57 member states producing 80 percent of combined economic output. Several leading economies in the Islamic world are too dependent on raw materials and need to diversify their development. History shows that countries that rely too heavily on natural resources end up with distorted economies that are vulnerable to swings in commodity prices. This is a challenge that Kazakhstan has known for some time it could face. To meet it effectively, we have been investing rapidly in industrial and innovation sectors while attracting foreign capital and upgrading our education system. We have made this a top priority even though we have been able to increase average incomes of the people of Kazakhstan by 17 times since independence in 1991.

The Islamic countries have a rich cultural, intellectual and scientific heritage that was a foundation for the development of the West. In the 10th century, Cordoba in southern Spain was the capital of the Caliphate of Cordoba, and Europe’s intellectual center. Baghdad, Toledo and Alexandria were also intellectual hubs for world civilization.

Islamic countries need to ask themselves how it is that the Islamic world has lost its previous intellectual pre-eminence and how it can restore it. To contribute to the process of gaining greater development of and recognition for the Islamic world Kazakhstan’s President Nursultan Nazarbayev has put forward a number of major initiatives, including the establishment of a dialogue platform for the 10 leading Islamic economies, the creation of an international center of innovations, support for small and medium-sized businesses in the Islamic world, and the development of a system of food security within the OIC.

We also firmly believe that the Islamic world can begin to rebuild its influence by demonstrating leadership at the global level, addressing problems that Western countries cannot resolve on their own. In particular, we are encouraging the OIC to focus on Afghanistan and contribute to peace-building efforts, through educational and technical assistance programs to confront, especially the increasingly serious problem of drug trafficking. In August, the OIC proved its ability to react fast and effectively by creating a special assistance trust fund to provide humanitarian assistance to Somalia. $500 million has already been pledged in support. The OIC is an important player in Somalia and can help put this country back on its feet together with other international organizations, including the European Union. We have invited our European partners to discuss possible coordinated measures to assist Somalia.

As a country that unilaterally renounced its status as a nuclear weapon state, we are strongly committed to global nuclear disarmament. Kazakhstan dismantled the world’s fourth largest nuclear arsenal and was the first to unilaterally shut down one of the world’s largest nuclear test sites. Kazakhstan initiated a special OIC resolution urging further efforts to prevent proliferation of nuclear weapons. We have also given our backing to establishing within the OIC a conflict prevention and mediation capability.

Through concerted actions to solve global problems, OIC countries can do much to raise the profile of the Islamic world and address misperceptions in the West about the nature of Islam. Just as there should be no place for hatred of the West in the Islamic world, there should be no Islamophobia in the West. At the same time, key Islamic countries need to focus on solutions to their problems of political and socioeconomic development by raising the living standards of their citizens and creating stability. Leadership in the global arena begins at home.”

The answer used to be easy, but not any longer.  Mired in a lost decade kicked off by the attacks of 9/11, two long and devastatingly costly wars, and capped off by a sub-prime mortgage crisis of baffling greed and investment banking shell games, the United States has lost more than just its luster – it’s also lost it’s place as the undisputed champion of soft power.  When at one moment the iconic Abu Ghraib photos circulated, just a few years later the Chinese celebrated an impressive Olympics with panache and confidence, heralding an arrival of some sort to the next level of global presence. Tens of millions of Chinese citizens have been lifted out of poverty, while the economic growth of the country in the past few decades may be unprecedented in world history.

Although China has proliferated its relationships with a vast number of new countries from Africa to Latin America, their soft power remains constrained by an inflexible political system that resists competition and disagreement.  Looking into the benefits and limits of Chinese soft power, David Piling of the Financial Times takes note of a new Central Committee directive that has dedicated a new $174 billion fund not to industry, not to defense, and not to infrastructure – but rather to culture, so that famous chefs, filmmakers, artists, and musicians can take the world by storm and spread the core values and ideas of the Chinese nation.  But will this really work if those values and ideas are not allowed to be debated and negotiated in the public space?  From the FT:

What is the soft power that China seeks? Joseph Nye, the Harvard professor who invented the term, defines it as “the ability to use attraction and persuasion to get what you want without force or payment”. Thus, he says, neither Canada nor Mexico seek Chinese protection against the nearby US. But China’s neighbours, for all Beijing’s “smile diplomacy”, still want a US presence in the Pacific. (…)

By comparison, China has little to offer. To put the best gloss on it, China has a pragmatic model for digging people out of poverty and a guiding principle of non-interventionism. But it is unclear whether China’s success in economic lift-off – partly dependent on its massive labour pool – is exportable to other countries. The Beijing Consensus offers a combination of economic pragmatism and authoritarian government. But that is more likely to appeal to the world’s dictators than to its citizens.

Nor has China’s doctrine of non-interventionism done the soft-power trick. A search for China’s friendly neighbours will tell you as much. They are not to be found in Vietnam, Japan, India or Russia, all of which in their way fear China’s growing power. To find China’s diplomatic buddies one has to look to North Korea, Pakistan and Burma. (…)

The Communist party’s jealous monopoly on power and truth means China cannot match this cultural breadth. Naturally, it can produce dissenting art. Authoritarian states always do. But the harassment of Ai Weiwei, the dissident artist recently served with a huge tax bill, or of Liu Xiaobo, still in prison despite winning the Nobel Prize, shows the limits on expression. These are the people who could be carrying the flag of Chinese soft power. Instead, their treatment at the hands of the state reveals a much uglier side.