Dispatch

Bears in a Honey Trap

The sex scandal that's rocking the Russian opposition.

The phone call came in the middle of the night. The tape, the caller said, was already online. It was past two, but Viktor Shenderovich, Russia's pre-eminent political satirist, knew he had to move, to get his side of the story out before Moscow awoke to watch video of him, naked, hairy, and vulnerable, having sex with a young woman named Katya, already infamous for luring a who's-who of the Russian opposition to her bugged apartment for kinky sex and drugs. Shenderovich had been anticipating this moment and now it had arrived, two days before his daughter's wedding day.

Shenderovich, who says he is happily married, fessed up.

Yes, he wrote on his blog, "I fucked Katya."

In any other country, the confession would have hit like a thunderclap. Sure, the first wave of the kompromat had already broken in March, when Mikhail Fishman, the editor-in-chief of the liberal Russian Newsweek, was caught on a clumsy Internet video cutting lines with a half-naked Katya, who apparently also went by Moomoo. The revelation prompted Ilya Yashin, an up-and-coming young opposition politician, and other opposition members to preemptively post their stories of being seduced by the same woman. Yashin, Fishman, and Dmitry Oreshkin, a liberal commentator, were also shown attempting to bribe traffic cops. But the resultant scandal -- if one can call collective eye-rolling a scandal -- focused entirely on the sloppy, dirty tactics used to entrap the young men, not on their behavior.  

With Shenderovich, however, it might have been a different story. Shenderovich is, after all, nothing short of a Russian household name. For well over a decade, he has been speaking truth to power in the best traditions of political comedy. His political TV show Kukly (or "puppets," for the dolls representing the country's elite), running from 1994 to 2002, first needled Boris Yeltsin, then Vladimir Putin. It earned Shenderovich two indictments and the show's cancellation, and contributed to the state's takeover of the show's host channel, NTV. Shenderovich is Russia's Jon Stewart, if Jon Stewart had been on the air longer -- and if the Bush era had never ended.

And here was Shenderovich, on tape and in the lewdest, most embarrassing way possible -- "Well, I guess I'm not hopeless if I'm still a little bit appealing to girls," he says in the tape, as he undresses for the waiting Moomoo -- cheating on his wife with a girl his daughter's age. In a fedora.

Yet nothing much happened that Thursday morning: For the most part, the story sank like a stone. In fact, the main thing people wondered about was why Russia's opposition -- a splintered, leaderless scrum already so effectively neutered by the Kremlin that they don't have a single seat in the Duma -- would be the focus of such an elaborate hit job. There are no elections coming up, and none of those targeted have made a bid for power recently -- because they know they're hopeless. Even Shenderovich is no longer the star he used to be. He lost his television platform when NTV was wrested away by the government, and he has been effectively blacklisted ever since.

Moreover, Russians have always loved womanizers. It is central to the concept of muzhik, the manly salt-of-the-earth man. Whenever a rumor of another Yeltsin woman surfaced, his ratings spiked instantly. When Alina Kabaeva, the rhythmic gymnast with R-rated flexibility, was said to be the new Mrs. Putin -- and mother of his only son -- it did not hurt the prime minister one bit. Even the most recent sex tape scandal -- in 1999, prosecutor Yuri Skuratov, who antagonized both Yeltsin and Putin, was filmed in bed with two young women -- had no serious ramifications. Skuratov was already in trouble for exposing government graft, but the sex tape, promoted by Putin on national TV, just made the Kremlin look bad, and the person deemed responsible for making it was quickly fired.

In typical muzhik fashion, Shenderovich and the two other opposition figures caught on the tape blew the whole thing off with a bravado that seemed to hold only a bit of defensiveness. "I possessed Katya without any particular enjoyment," Shenderovich wrote on his blog. "In the process, my colleague was boring, like all you vile Gestapovites." ("I would have been better off had I gone to the gym," he told me later. "I would have burnt more calories. It would have been better for my health in every sense.")

When we met for coffee the day after the tape hit the Internet, however, Shenderovich admitted that the exposure stung. "I have a reputation, and I treasure it," he said. "Imagine knowing that all those people, everyone you know, have seen this tape." But for the most part he played the unrepentant swinger: "I have never written anywhere that I am a saint. I have never announced anywhere that I am monogamous. If I had and then got tangled up in this, then they could say, like with Clinton, ‘Guys, turns out he's lying!'" Moreover, the brainy, stocky Shenderovich joked, the tape in no way discredits him. "If anything, I'd say I dispatched my male duties satisfactorily."

The cultural difference between Shenderovich and his American counterparts is striking. Caught in embarrassing moments, American public figures prostrate themselves before the public, and before their families -- in public. Russians, however, lack what they see as this deeply Puritanical impulse, so they swagger and mock, or yawn.

"People who expect this response" -- that the opposition should wither in contrition -- "are not getting the particularities of the Russian mentality," Yashin, who also shook off his tryst with Moomoo, saying he'd weathered far worse political storms, told me. "It's a reason for impeachment in America. Here it's ‘big props.' Even when they see Shenderovich in this tape, they say, ‘Not bad! The guy's already 70 and he's so energetic!'" (Shenderovich is 51, but much of the Russian blogosphere was similarly congratulatory.)

Echoing pretty much everyone else I spoke to, Yashin added that Shenderovich may be a public figure, but his private life is inviolate. "What does this have to do with anything? You can also install a camera in the bathroom and catch him pooping, if you want! The only people who can ask him about this are his wife and his daughter. Everyone else -- it's not your fucking business, okay?" (Yashin also noted that getting caught with Moomoo wasn't as bad as the alternative. "What would be political murder is if they published someone with boys," he said. "And they didn't find any gays among the opposition in two years [of trolling for dirt].")

When I asked Shenderovich if, as a prominent critic of the government, he should be held to a rigorous standard of behavior, his response echoed Yashin's. "I do behave myself," Shenderovich told me. "I behave myself in the sense that I pay for myself in any group, with any millionaires and billionaires. I try to at least cover my half. I never take money for my publications, except for honorariums. I am completely transparent in my taxes. And I behave myself. In everything that allows me to walk down the street and look my fellow citizens in the eye. Because I really am a public figure."

As for the rest? Irrelevant and forgivable -- even by his wife, at least according to Shenderovich. "My wife reacted completely wonderfully," he said. "I have this habit when traveling of taking the shampoo from the hotel as a memento of the trip. It always really irritated my wife. Yesterday, she said, ‘See, I told you: You should never take free shampoo.'" Not only did she forgive him, she calmed down Shenderovich's 80-year-old mother. His daughter laughed it off and went on with her wedding planning. Fishman's wife got a T-shirt saying, "Smile! You're on camera!"

Tracing the goopy trail of the honey trap, the victims and their sympathizers saw all the overeager, sycophantic clumsiness of the Kremlin youth group, Nashi. On Monday, Yashin filed a complaint with the State Prosecutor's office for invasion of privacy and distribution of pornography, citing Vladislav Surkov, the Kremlin's Karl Rove, and Vasily Yakimenko, a federal official who curates all things youth-related and who was once in charge of Nashi. Oreshkin, who was also targeted by Katya but managed to decline her invitation to see her new apartment, wrote that his sources inside the government said Yakimenko was behind the campaign, with the Kremlin's approval and financing.

It's not a far-fetched conclusion, given that real police cars were used in the traffic cop-bribing video. The Interior Ministry denies it was their policemen or their car; but, as Shenderovich quipped, "What service can rent a police car, stuff it with electronics and surveillance equipment? Who can do this? I don't think these are students of the Conservatory."

Robert Schlegel, a 25 year-old Duma deputy and federal commissar of the Nashi movement, maintained to me that his organization was not involved, although he seemed to know a disconcerting amount of detail about the smear campaign and had extremely well-thought-out opinions on the matter. "It's because this group of journalists has turned into a gang that doesn't betray its own," he said, his voice rising angrily. "They really have a strong sense of complete righteousness, that's one. Two, they are not ready to live according to the law -- that is 100 percent true. That the law isn't written for them. They see themselves as a separate political force. That's crazy."

And he, too, explained why Russians didn't find anything shocking in the tapes. "Russia has a significantly freer culture," he claimed. "For us, cheating on your wife, for the majority, is not something unusual. Moreover, for us, snorting cocaine -- what's unusual about that? Everyone snorts it." Especially, he said, "all journalists. And if they don't snort, they drink. Or huff."

Schlegel could not reconcile to me the apparent pointlessness of smearing someone with a charge that in Russia, usually works to build your reputation -- nor explain the use of smearing the feeble Russian opposition in the first place. The week since Shenderovich was awakened by the call has brought some clarity, however. For the most part, not much has changed. Shenderovich's daughter got married. His mother has calmed down. As expected, the authorities have yet to launch a real investigation, although the tenacious Yashin has gone on the offensive: With the help of some local journalists, he discovered Katya's now empty apartment (you can rent it for $1,200 a month) and her ex-boyfriend.

But then, on Tuesday, Nashi filed a court complaint against Yashin. It claimed "insult" and "false accusations," but also called for legal consequences for the crime caught on tape: bribing police officers. The tactic is a strange double-feint: Nashi is insisting it had nothing to do with the videos, while also drawing more attention to them and carrying out what now appears to have been the video's grand purpose all along, proving that opposition members are just common, petty criminals.

Shenderovich, meanwhile, is taking the apparent Kremlin attention as a "badge of honor." In the best traditions of Russian martyrdom he recounted to me all the ways he's needled the government over the years and the ways he'd been singled out before: break-ins, round-the-clock surveillance, blackmail. Last week, he said, they torched the St. Petersburg apartment of the man who organized his latest play. "I deserve a lot from them," he told me. "And I understand that I'm alive only because I am fairly famous and they understand that will be too costly for them, PR-wise."

When we had wrapped up our interview, a man came up to Shenderovich and fervently shook both his hands. He thanked him again and again for his work, and Shenderovich began to beam from behind his beard. "It's impossible to live in this country," the man said. Then he leaned in and whispered something: He worked for the state prosecutor.

MARTIN OESER/AFP/Getty Images

Dispatch

The Twilight of the Western Oil Majors

A deal in Brazil between China and Petrobras suggests that Western Big Oil may be on its way out.

Brazil is home to one of the last major oil frontiers in the world -- and a case study for how the balance of power in the international oil industry is shifting. In 2007, 10 years after the Brazilian government opened its oil industry to foreign investment, the state oil company Petrobras struck one of the richest oil veins in decades. Western oil companies such as Chevron, Total, and BP, thrilled by the rare prospect of a new exploration opportunity, lined up eagerly to invest.

But the outsiders have been stymied. Brazil, generally one of Latin America's most investment-friendly countries, is now boosting the state's role in developing its vast new oil reserves. And it's doing so with help from China, which has recently provided Petrobas with a massive loan, making the old titans of Big Oil increasingly superfluous.

This situation is not unique to Brazil. It's just the latest example of a new form of collaboration between China and other national governments with oil resources worldwide that is completely reshaping the industry.

Petrobras's discovery centered on the Tupi field, part of an enormous oil-rich zone called the presalt, which lies up to 10,000 feet below the sea's surface under a layer of salt thousands of feet deep. Petrobras refuses to put a figure on total reserves, but independent analysts estimate the presalt region holds roughly 50 billion to 70 billion barrels of reserves. The government reacted to the news by proposing major new reform legislation that won approval in the lower chamber of parliament earlier this year and is now making its way through the Senate.

The legislation would make Petrobras operator of all presalt oil fields, giving it control over day-to-day investment decisions, such as when and where to drill wells. Another measure would give veto power over investments in presalt blocks to Petrosal -- a new 100 percent state-owned oil company to be created alongside Petrobras, which is publicly traded on the Sao Paulo and New York stock exchanges.

Private oil companies with interests in Brazil are now voicing concern that the new regulatory model would render them passive investors in oil projects, devoid of power to make operational decisions. The oil majors argue that excluding their expertise and technology will delay development of the complicated oil fields. French oil firm Total, for example, boasted last year that its technical expertise could "bring something new" to presalt development. One oil executive in Brazil said recently that the proposed legislation "is not in the interest of the [state] company. It's not in the interest of the government recovering taxes or the industry as such."

This argument is based more on self-interest than fact. Petrobras, perhaps the most competent deepwater operator in the world, insists it has the technical and project management skills to develop the presalt singlehandedly. "Being operator in all presalt blocks will give Petrobras new strength," CFO Almir Barbassa recently told investors in New York.

The bigger concern, say Petrobras officials and analysts, is the company's ability to fund the massive project. Despite Petrobras's good credit rating and access to cheap loans through the Brazilian Development Bank, it remains unclear how the company will secure financing for such a large investment portfolio in the long term. In March, Petrobras announced a huge five-year investment plan of up to $220 billion. Petrobras is projecting 2010 capital expenditures of $47 billion -- some 60 percent higher than Exxon Mobil or Royal Dutch Shell, the biggest spenders among the major private oil firms.

Senior Petrobras executives have been traveling the globe, from New York to London, as part of a campaign aimed at assuring shareholders, bondholders, and credit analysts that investing in the company is a good long-term bet. Wall Street analysts, expressing skepticism about the energy reform legislation, have been unconvinced: They fear that an excess of government intervention could ruin investment opportunities.

Meanwhile, Chinese investors seem to have no such qualms and their deep pockets have helped keep Petrobras's spending plans on track. Last year, the state-owned China Development Bank agreed to lend Petrobras up to $10 billion -- over one-third of the total debt the company raised in 2009. The initial agreement between China and Brazil was formed during Chinese Vice President Xi Jinping's visit to South America last year and was finalized on April 15, when President Hu Jintao met with his Brazilian counterpart Luiz Inacio Lula da Silva. The loan can be repaid in cash but also included an "option to offset the debt with the export of oil ... in a volume to be defined in the future."

Petrobras simultaneously pledged to increase exports to China. It agreed to start delivering 150,000 barrels per day to Chinese state company Sinopec in 2009, an amount that will rise to 200,000 barrels daily over the next nine years. Imports of Brazilian crude have risen from an average of 81,500 barrels a day last year to 187,000 barrels a day in the first two months of 2010, according to Chinese customs data. The agreement also establishes a framework for further partnerships between Petrobras and Chinese companies in the oil industry, and for Chinese firms to supply services, materials, and equipment to Petrobras. Separately, Petrobras signed a deal with China National Petroleum Corp (CNPC), increasing oil exports to 40,000 to 60,000 barrels per day.

China's loan gives Petrobras some financial breathing room and reduces its need to seek private capital to develop Brazil's costly oil reserves. This further sidelines the U.S. and European companies that have traditionally dominated private investment in Brazil's oil industry. With financial support from China, Brazil has no need to hand its reserves over to international oil companies. "The government is keen to keep most of the presalt area in Petrobras's hands," notes an industry observer.

China is using all the tools at its disposal, including abundant cash and political influence, to secure long-term oil supplies around the world. In addition to Brazil, China offered a total of $50 billion in loan-for-oil deals last year to Venezuela, Angola, Russia, and Kazakhstan. The allure for China's partners is cash with no strings attached -- in the case of Brazil, China is not requesting an equity stake in the presalt oil blocks, as Western companies nearly always do. Rather than a straightforward business deal, these agreements represent broader political alliances among developing nations pursuing policies of state-led economic growth.

As a result, national oil companies like CNPC are unseating the Exxons and BPs of the world. The Chinese, awash with cash and keen to outbid competitors, have picked up a large share of Kazakhstan's onshore production. In Angola, loans have helped to lock in assets for its state oil companies. In 2004, for example, the Angolan government obstructed India's state-owned Oil and Natural Gas Corp.'s efforts to buy a 50 percent stake in an oil block and later awarded it to Sinopec.

China is not along in pursuing this strategy. Russia's government, for example, has negotiated bilateral energy deals that give its state companies access to oil reserves in politically friendly nations. As these countries spend big to drive profits, Big Oil may be forced to accept contract terms that would have once been considered unacceptable. In Iraq, another of the most important new oil frontiers in the world, majors like Exxon, Shell, and BP accepted service contracts rather than an equity stake for fees of $2 per barrel or lower -- terms that are unlikely to generate big cash returns -- in Iraq's postwar bid rounds.

Once the Brazilian government starts awarding new exploration licenses, most Western oil majors will still be able to grab a stake of the presalt resources. But that prize may be a pale substitute for the returns to which they have become accustomed.

David McNew/Getty Images