Russia, Oligarchs, Greenwashing, and Rent
Look, this is not a war blog, and we do not pretend to understand international relations and centuries-old ethnic disputes around here. What may be of interest to readers of this newsletter is Russia’s large-scale propaganda operation, which is going about as well as its invasion of Ukraine:
That triumphal article appeared on the site of Ria Novosti, Russia’s main state online news agency, on February 26th. It declared: “Russia restoring its historical fullness, gathering the Russian world, the Russian people together—in its entirety of Great Russians, Belarusians and Little Russians [a pre-Soviet term for Ukrainians].” Ukraine, it said, has returned to Russia.
Presumably the publication of this screed was scheduled well in advance, on the assumption that Mr Putin’s forces would win a quick and easy victory, and someone forgot to cancel it.
Not to make light of an awful situation, but setting your declaration of a successful invasion of another country to auto-publish is serious chutzpah. Putin has gone to great lengths over the last couple decades to silence independent press and feed his people a steady stream of disinformation. His entire premise for the invasion of Ukraine is bunk:
Putin has long sought to falsely paint Ukraine as a Nazi hotbed, which is a particularly jarring accusation given that Ukrainian President Volodymyr Zelenskyy is Jewish and lost three family members in the Holocaust.
It is tempting to believe what may very well be, shall we say, optimistic information coming out of Ukraine. The Ukrainian government, has proven they can win the social media war, but it does seem that the Russian government may be high on its own supply:
The machine has been struggling to keep reality at bay, however. The Kremlin had done nothing to prepare the public or its armed forces for the largest war in Europe since 1945. For months it was telling them that Russia was not about to invade Ukraine, and the rumour that it was reflected Western scaremongering. Some captured Russian soldiers, indeed, have appeared to be under the impression that they were taking part in a military exercise, and were surprised to have found themselves in Ukraine.
It is important to draw a distinction between Putin’s authoritarian government and the Russian people, who have bravely protested in huge numbers across the country:
Unprepared for the scale of the war or its consequences, many Russians, especially middle-class and educated ones, are horrified. Despite the risk of being arrested or beaten with truncheons, anti-war protesters have massed and marched in several Russian cities.
Who knows how long Putin’s propaganda apparatus can keep feeding lies to the Russian people before it all falls apart, but as the war continues to go poorly the claims become increasingly outrageous, totally disconnected from the facts on the ground.
Shady Swiss banks asking investors to destroy loan documents for yachts and private jets owned by sanctioned Russian oligarchs? Now we’re talking:
Investors this week received letters from the Swiss bank requesting that they destroy the documents relating to a securitisation of loans backed by “jets, yachts, real estate and/or financial assets”, according to three people whose firm received the request.
Even before the invasion, many Russian oligarchs were under US sanctions, which made some banks nervous. In response, Credit Suisse got some hedge funds to take some oligarch loans off their hands, secured by yachts and jets. The loans were so dicey the bank offered an 11% interest rate, essentially junk bond level investments. Early last month the Financial Times got wind of it, and in response Credit Suisse, uh, told investors to start shredding:
“I don’t think we’ve ever had a request like this,” said one investor who received the letter, noting that his firm had only ever received similar notices when it had been sent confidential documents accidentally.
I want to briefly pause and point out that the other scenario envisioned here is quite funny. Do hedge funds often get confidential documents by accident? We’ve talked about Citibank accidentally paying off a loan before, so it seems plausible. That’s a bad day at the office for the bankers and lawyers involved. No one wants to ask their boss to send out a letter saying ‘hey, can you please destroy those documents we just sent you?’ Except in this case Credit Suisse thought it was a good idea to send out dozens of those emails?
We’ve talked about Credit Suisse before, when they got left holding the bag to the tune of billions by the Archegos fiasco, getting hoodwinked by fellow banks as they exited positions in the same trades. They got snookered by Greensill’s book of fake loans so badly they had to fire people.
So now the bank is securitizing (selling off) oligarch debt at crazy interest rates to help them avoid sanctions as recently as a couple months ago. Not a great look for a bank that claims it’s trying to clean up its image.
The Swiss have announced they are joining the EU’s sanctions on Russia, which could put Credit Suisse in a very awkward position, one they will hopefully not remedy by simply asking everyone to destroy the paperwork. Come on, guys!
In a dark TV ad aired in 1971, a jerk tosses a bag of trash from a moving car. The garbage spills onto the moccasins of a buckskin-clad Native American, played by Italian American actor Espera Oscar de Corti. He sheds a tear on camera, because his world has been defiled, uglied, and corrupted by trash. The poignant ad, which won awards for excellence in advertising, promotes the catchline “People Start Pollution. People can stop it.”
The author notes this ad was created by a nonprofit backed by beverage companies like Coca-Cola and Pepsi, who churn out billions of plastic bottles a year, which are extremely difficult to recycle. The piece discusses a term that has become part of our vocabulary about climate change: carbon footprint. That term of art was part of a PR campaign by oil giant British Petroleum in the 2000s. They brilliantly shifted responsibility - and blame - for climate change to the individual, implying that if we could just recycle, or turn the thermostat down at night or whatever, we could heal the planet together. Obviously this was nonsense, remains nonsense to this day, but it’s been a sticky idea, one that everyone from the EPA to the NY Times still buy into.
Nowadays companies like to throw around terms like “carbon neutral” when describing things that most definitely are not. We’ve talked about the global efforts to create carbon markets, as if we can use the same strategies that cause global financial meltdowns every few years to solve climate change. Let’s look at a couple examples of what companies are actually doing.
Maersk is the world’s largest shipping conglomerate. This piece in Quartz quotes the company saying they are ordering “carbon neutral” container ships:
The trouble is, Maersk isn’t sure if it can find enough green methanol to fuel its new green ships. Maersk will need over 450,000 tons of green methanol a year to run the 12 low-carbon ships it has on order. The current global output is 100 million metric tons per year.
Instead, Maersk may be forced to temporarily run some of its eco-friendly ships on regular, carbon-emitting fossil fuels.
Every article I found on this allegedly eco-friendly deal doesn’t offer much detail about how the company defines the term carbon neutral, which makes sense because they only seem to be claiming the fuel the ship uses will be neutral, because some of it comes from fermented landfill. Yes, it is a good thing that shipping companies are exploring alternative fuel sources for their boats, which produce an estimated 3% of all greenhouse gas emissions. But those ships are also made up of large amounts of raw materials - the biggest ships weigh an astonishing 165,000 tons. Then there’s the climate impact of what they carry - thanks to globalization, it’s often cheaper to make inexpensive goods overseas, and ship them tens of thousands of miles to ports in rich countries. Are we accounting for the carbon footprint of the 12,000 containers on a ship, or the goods inside them, or the fact that many canals and harbors are forced to dredge and reshape the earth and sea to accommodate these giants? When one shipbuilder puts out a press release saying they’re building eight “clean” ships while 700 others are still steaming around on bunker fuel, we should treat it with a little skepticism.
Some oil companies are attempting to greenwash their operations through “carbon capture” which claims to use science and technology to capture emissions and use them for other things, or hide them underground so they don’t contribute to global warming. How’s that going?
A first-of-its-kind “green” Shell facility in Alberta is emitting more greenhouse gases than it’s capturing, throwing into question whether taxpayers should be funding it, a new report has found.
Great! Shell built a carbon capture plant in the utterly filthy Alberta tar sands, and it didn’t work as intended. The company touted how much carbon the plant captured (5 million tonnes) but left out how much it emitted (7.5 million tonnes) for obvious reasons:
To put that in perspective, the “climate-forward” part of the Scotford plant alone has the same carbon footprint per year as 1.2 million fuel-powered cars, Global Witness said.
There is a lot of talk about reaching “net zero” emissions. Companies like Shell do not want to give up extracting oil from the dirtiest possible places on earth, so they are urgently seeking accounting and tech gimmicks to offset their polluting. Unfortunately for those of us who inhabit the planet, it is exceptionally difficult to do so!
Lastly, here is a study that came out last month showing just how much of the world’s carbon emissions come from wealthy countries, and more specifically the wealthy people who live there:
We found the highest country-average carbon footprints in high-income countries. Above all was Luxembourg, with an average carbon footprint of more than 30 t, followed by the United States with 14.5 t.
Taking a closer look at population deciles in the analysed countries, we found the highest carbon footprints in the top 10% of the population of Luxembourg, with 76.9 t, followed by the United States with 54.9 t Luxembourg’s was also the largest average carbon footprint of a region’s top 10% The next highest carbon footprints of the national top 10% can be found mostly in Europe, which results in an average regional carbon footprint of 16.8 t for the top 10%.
What the researchers are saying, basically, is that the wealthiest people in the wealthiest nations pollute exponentially more than even the wealthy-ish people in poor countries. It’s even worse when they break it out by the emissions of the top 1%:
The top 10% account for one half of all the carbon emissions, and the top 1% have a carbon footprint nearly five times the size of the next wealthiest group. How does this happen? Well, things like yachts and private jets generate a lot of emissions, as you’d expect. The irony that the term BP created to absolve itself is now being used by scientists to pin the world’s carbon problems on rich nations and the ultrawealthy (who run companies like BP) is not lost on me.
We aren’t going to convince rich people to stop flying in jets or sailing their yachts - even if we take some of them away - and rich nations aren’t going to force their citizens to live like poor nations. I guess we’re going to have to try to greenwash our way out of the climate crisis, but it’s important to scrutinize what companies and governments are saying they’re doing versus what they’re actually doing.
If you are a renter, you probably think you’re paying too much rent. It may feel like rents are going up for no real reason, because we aren’t allowed to call housing cost increase inflation. But as I have been saying, as more private homeowners become landlords, and fewer rental properties are being built by developers still stinging from the most recent housing crisis, rents are indeed going up, a lot:
In the 50 largest U.S. metro areas, median rent rose an astounding 19.3 percent from December 2020 to December 2021, according to a Realtor.com analysis of properties with two or fewer bedrooms. And nowhere was the jump bigger than in the Miami metro area, where the median rent exploded to $2,850, 49.8 percent higher than the previous year.
Rent is part of the consumer price index (40%!) and rising rents may very well be contributing to the inflation narrative, which sucks for people who are sick of hearing the term as a stand-in for price gouging, and also sucks for renters whose landlords are jacking up rents as much as fifty percent while their mortgage costs have not gone up a penny. Remember: a mortgage is thirty years, and the interest rate is typically locked in, so even if their home has appreciated in value 50%, their monthly payment is the same as it was yesterday, or ten years ago. But, what do the “experts” say?
Experts say many factors are responsible for astronomical rents, including a nationwide housing shortage, extremely low rental vacancies and unrelenting demand as young adults continue to enter the crowded market.
“Without a lot of rental vacancy that landlords are accustomed to having, that gives them some pricing power because they’re not sitting on empty units that they need to fill,” said Danielle Hale, Realtor.com’s chief economist.
There it is. Pricing power. The same pricing power meat processing companies used to extract record profits by jacking up prices of groceries during the pandemic. Most states do not have rent controls of any kind:
Most investors aren’t tied down by rent control. Only two states, California and Oregon, have statewide rent control laws, while three others – New York, New Jersey and Maryland – have laws allowing local governments to pass rent control ordinances, according to the National Multifamily Housing Council.
And some places take rent seeking to comical extremes:
And laws in some states like Arizona actually restrict local jurisdictions from limiting what landlords can charge tenants.
Yes, cities in Arizona are prevented by law from limiting how badly landlords can gouge their tenants. And landlords are well aware of this:
In Tucson, Arizona, the mayor’s office said it has been deluged with calls from residents worried about rent hikes after a California developer recently bought an apartment complex that catered to older people and raised rents by more than 50 percent, forcing out many on fixed incomes.
Rent is a hyper-localized issue, and one that can and must be dealt with at a municipal level, because while states can pass laws restricting these things, local officials are always going to be the ones tasked with enforcement. In the mean time, landlords around the country are taking advantage of the pandemic and a tight housing market to line their pockets with sweet renter cash, extracting maximum rent from others even as their property wealth appreciates at a crazy rate.
Bloomberg - “The nature of the deal was that Debernardi would use Huang to buy difficult-to-secure artworks. Huang would purchase the pieces in his own name, then quietly resell them to Debernardi for a 10% commission.”
The Appeal - “The Riders scandal was a national embarrassment for the Oakland Police Department. But rather than accept full responsibility—including financial responsibility—police officials pressed the city council to do away with RMIP, claiming they’d be unable to pay their share of the settlement without risking public safety.”
CFPB - “A compliance bulletin issued today reveals conduct observed during CFPB examinations and enforcement actions, including the illegal seizure of cars, sloppy record keeping, unreliable balance statements, and ransom for personal property.”
NY Post - “The indicted founder of crypto trading platform BitConnect has gone off the grid – leaving federal officials unable to formally serve him with a lawsuit in connection to an alleged $2.4 billion Ponzi scheme, according to a court filing.”
Tips, thoughts, or seized yachts to firstname.lastname@example.org