Condoleezza Rice: Russia Really Just a Large Oil, Gas Syndicate

Former Secretary of State Condoleezza Rice received a warm welcome from a receptive audience at TD Ameritrade Institutional’s annual conference in San Diego on Thursday morning. Introduced by Kate Healy, the company’s managing director of institutional marketing, Rice began by noting the difference between working in the public and private sectors.

“When I left government, I realized I could get up in the morning, read the paper and say, ‘Gee, isn’t that interesting,’” she said. “It’s nice to read the paper and not have to be responsible for what’s actually in the paper.”

Acknowledging that the world is in a “chaotic” state, she noted three major shocks that occurred in our recent lifetime that still are influencing events.

The first is Sept. 11: for anyone holding a position of authority on that day, she said, every day feels like Sept. 12. The second shock was the 2008-2009 financial crisis. What Sept. 11 was to the country’s feelings about physical security, the financial crisis was to its sense of financial security. The last shock is what is happening in the Middle East.

Concentrating on the financial shock, she noted that the European Union has a common monetary policy but not a common fiscal policy.

“It makes it very hard to harmonize the two,” Rice explained. “There really isn’t any underlying political union either, which can cause tension. A newspaper in Germany recently suggested that Greece sell the Acropolis in order to help pay its debt. Greece said that if Germany wants the Acropolis they should come and get it, which was a not-so-nice reference to Germany’s recent past.”

Moving on to the so-called BRIC countries, she said she actually calls them the BIC countries, since she believes Russia’s economy is really an oil and gas syndicate. “It’s a 19th century economy,” she said.

“Fully 80% of the economy is oil, gas and minerals,” she said. “Vladimir Putin is the head of the syndicate.”

She related the story of a dinner she attended with a deputy minister of Russia. She noted she was once on the board of Chevron.  Her Russian counterpart asked her if she was still on the board of Chevron, to which she responded, “No, I am secretary of state.”

“He was a deputy minister while at the same time he was also a director of Gazprom, so things work a little different over there,” she said to laughter from the audience.

She added that Dimitry Medvedev once said Russia should lead the knowledge revolution because he claimed the country had the best mathematicians and engineers.

“I had to hold my tongue but thought to myself, ‘Yeah, they are all in Tel Aviv and Palo Alto,’” she said.

India and Brazil have a lot in common, she explained; some good and some bad. Both countries retain the moniker of “potential,” which is good. But they also suffer from extreme income inequality. India also resides in a neighborhood that isn’t particularly safe, especially with Pakistan on its border.

Turning to China, she noted that the country came through the financial shock very well. The issue is that India and Brazil are large multiethnic democracies, while China is not. China is experiencing one of the greatest social revolutions in history, she said. “They have moved millions of people out of poverty and will move 300 million more out of the villages and into the cities in the next few years; that equates to a new New York City every few months. But, she added, they don’t have the political system to accommodate that urban growth.

“They are having a lot of trouble with product safety; remember baby formula and bullet trains that are falling off the tracks,” she said. “Their solution was to execute the guy in charge of product safety, so they won’t have a lot of people lining up to take his place. Quite frankly, they don’t have legal resources in place for recourse. They understand that they need to release some of the pressure, but also are afraid if they do they will lose control. They’re afraid of a Gorbachev-type situation,” referring to when the Soviet leader allowed some free expression, which then led to the dissolution of the Soviet Union.

She argued that a country so afraid of the Internet and its own population will not be in position to lead the information revolution.