Selling Authoritarianism: Azerbaijan's Atletico Madrid Bonanza

Azeri petrodollars bankroll the mighty Atleti.

Football and authoritarianism have a longstanding history. One of this year's Champions League finalists, Real Madrid, received much favoritism during the reign of Generalisimo Francisco Franco. The obvious attraction with authoritarianism in sport is that these regimes pony up wads of cash without giving a damn about political opposition complaining about human rights and all that goody two shoes stuff. Witness, for instance, Qatar hosting the 2022 World Cup despite endless accusations of bidding irregularities--let's see the world's top footballers deal with Middle East hear at the height of summer--and exploitation of migrant workers who are literally dying by the dozens to build the stadiums for that event. 478 Indian workers have died over the past two years, but Qatari authorities call this "normal." Meanwhile, Dubai literally funds European football--see the Pele/Ronaldo Emirates commercial if you haven't already..

The latest energy-rich country to sponsor football to help improve its global image (hopefully) is Azerbaijan. Chronologically speaking, of course, oil was discovered much, much earlier in Azerbaijan than in the Middle East. (Also consult Daniel Yergin's epic history The Prize.) However, its eventual absorption into the Soviet Union ruled out  its commercial presence in the West until the USSR's collapse.

Taking the playbook from the Qataris and Emiratis, Azerbaijan has become a sponsor of world football (read: Europe's top teams) in a really big way. Indeed, they recently hit a gusher with Real Madrid's intercity rivals Atletico Madrid thumping Russian oligarch Roman Abramovich's Chelsea (AKA Chelksi) in the Champions League semifinals to reach the main event in Lisbon. Showing once more that you don't need to go far for IPE-relevant material, from the Associated Press c/o Yahoo:

Atletico Madrid's stunning run to the Champions League final also announced another new player on European football's biggest stages. Atletico's players will walk out to face Real Madrid — and an expected global television audience of 175 million — with "Azerbaijan Land of Fire" on their shirts in Lisbon on May 24. For Azerbaijan, that's a jackpot payoff for a sponsorship deal that's part of a wide-ranging effort by the oil- and gas-rich former Soviet Union republic to become more visible to global football audiences...

Expect to see a lot more of it at future UEFA [European football] matches. From Sept. 7, the name SOCAR (State Oil Company of Azerbaijan Republic) will feature on pitch-side advertising at most 2016 European Championship and 2018 World Cup qualifiers in Europe. Its brand will also appear at all 51 Euro 2016 matches in France after signing up as a top-tier sponsor with UEFA. And Azerbaijan's top aim could be achieved on Sept. 19 if UEFA chooses Baku among 13 host cities for Euro 2020.

The ultimate aim is to rehabilitate Azerbaijan's image and even burnish it via the catchy "Land of Fire" slogan. You see, Azerbaijan has similar problems over using its energy wealth to silence opposition. For starters, try abolishing term limits to possibly make yourself president for life:

Like Qatar before it, greater exposure for Azerbaijan from spending sovereign wealth to project a softer image through football will also bring more scrutiny. The country of 9.5 million people nestling next to the Caspian Sea, bordering Russia and Iran, has long been criticized by human rights and anti-censorship groups. The long-term football project in Azerbaijan was requested by President Ilham Aliyev, who succeeded his father in 2003 and later abolished term limits.

Sports organizers often crave for predictability, hence the appeal of Azerbaijan like the Middle Easterners:

The sports world's faith in Azerbaijan is not shared by activists alleging restrictions on free speech and elections, plus corruption levels that are among the worst in Europe, according to Transparency International. [Azeri sports commissioner] Mammadov pointed to financial and political stability, suggesting: "I don't see any reasons for some of the people to consider us as a negative."

In case you were wondering, Azerbaijan ranks 127th in the world in the Transparency International corruption index. Just as FC Barcelona claims to be "more than a club," Azerbaijan and Atletico Madrid extending their deal is now being styled "much more than a sponsorship." [They've inspired my next IPE Zone description, "so  much more than a blog."] The Guardian also has a story on the Azeri sponsorship deal that mistakenly classifies Azerbaijan as a noveau riche country.. From the Middle East to the Caspian, it's the same story repeated with a slightly different cast of characters. 

Media Slant

Click here to read my column in Sunday's NY Times.

VHA Revisited

Advocates of government-run healthcare often point to the veterans health system as a prototype.  For example, Paul Krugman wrote a while back:

that brings me to Mitt Romney’s latest really bad idea, unveiled on Veterans Day: to partially privatize the Veterans Health Administration (V.H.A.).  What Mr. Romney and everyone else should know is that the V.H.A. is a huge policy success story, which offers important lessons for future health reform.

So this story from CNN (hardly a right-wing news source) caught my eye:

At least 40 U.S. veterans died waiting for appointments at the Phoenix Veterans Affairs Health Care system, many of whom were placed on a secret waiting list.  The secret list was part of an elaborate scheme designed by Veterans Affairs managers in Phoenix who were trying to hide that 1,400 to 1,600 sick veterans were forced to wait months to see a doctor, according to a recently retired top VA doctor and several high-level sources. For six months, CNN has been reporting on extended delays in health care appointments suffered by veterans across the country and who died while waiting for appointments and care.

Maybe privatization would solve the problem.  If veterans had vouchers that they could take to competing healthcare providers, they would likely not have had to wait as long.

Send Lawyers: Russia Sues EU at WTO on Energy Law

So Gazprom avoids Ukraine, but not the long arm of the EU.

In their ongoing tussle with Western Europeans, the Russians have already deployed lots of guns and money, so I guess it was only a matter of time before they sent lawyers, too. To be sure, the Russians have been quite active as both complainants and respondents at the WTO since officially joining in 2012. With so many special interests to serve, you would expect as much. However, ongoing mudslinging  and the application of more Western sanctions has now prompted Russia to secure its cash cow. Namely, commercial rights for the distribution of gas in Western Europe going forward (no matter how thorny EU-Russian politics become).

The center of attention is the so-called South Stream pipeline that Gazprom is building to various European customers that will not only enhance deliverable volumes but also bypass Ukraine for obvious reasons. Having addressed Ukraine as a geopolitical impediment by avoiding it altogether, the Russians were then hit by another impediment with the EU passing its "Third Energy Package" in 2009 designed to encourage competition in the energy industry. The European Commission states that "[a] competitive and integrated energy market allows European consumers to choose between different suppliers and all suppliers, irrespective of their size, to access the market."

Being a 50% investor in the project, Gazprom has long expressed displeasure in having to accommodate other gas suppliers in a pipeline that is costing a fortune to build. How does Gazprom guarantee rents in the face of EU competition law when Russia is now a WTO member? Well of course you take the EU to court, but you need to be crafty about what to complain about. Hence Russia's gambit of claiming that the EU should not retroactively apply the "Third Energy Package" to an energy distribution deal struck with Gazprom before the law came into effect in 2009. In other words, it's an appeal against "grandfathering":

At the heart of the Russian complaint are expected to be EU provisions which prevent a single company from both owning and operating a gas pipeline. EU lawmakers agreed the rules, known as 'ownership unbundling', as part of its Energy Package on rules governing the bloc's gas and electricity market. The new framework, which was agreed in 2009, is aimed at stimulating competition in the EU's gas market and lower prices.

For its part, Russia claims that its state-owned energy giant Gazprom is the only company with the right to export gas and that the EU rules should not be backdated to cover contracts signed before 2009. "These and other elements of the Third Energy Package, in the opinion of Russia, contradict the obligations of the EU in WTO on basic principles of non-discrimination and market access," Maksim Medvedkov, a trade spokesman in Russia's Economic development ministry, told local news agencies.

Unfortunately for Russia, there is precedent at the WTO ruling that retroactively applied laws are acceptable. Moreover, I doubt whether a neoliberal institution like the WTO would gladly approve of monopoly-preserving practices. That said, who exactly are the other potential gas providers that Russia fears? It would have to be one of the transit countries. Bordering the Black Sea, Bulgaria is mostly a transit point. Romania OTOH has shale gas reserves, but protests there over foreign firms exploiting them are holding back development.

So I guess it's Russia being proactive on both fronts to decouple ownership from operation as well as forestall the rise of other energy suppliers who could capitalize on the pipeline once it's built. Unless Russia could build South Stream in such a way that circumnavigates central Europe altogether, it had to deal with this issue sooner or later. While I doubt its case, the legal challenge has now been made.

If Russia and the EU cannot resolve this matter in 60 days during bilateral talks, a panel will be formed to adjudicate this case as per WTO dispute settlement mechanism practice. I will update the particulars of this case once they are posted on the WTO site.

Meanwhile, here is Gazprom's description of the South Stream pipeline:

The South Stream gas pipeline is Gazprom's global infrastructure project aimed at constructing a gas pipeline with a capacity of 63 billion cubic meters across the Black Sea to Southern and Central Europe for the purpose of diversifying the natural gas export routes and eliminating transit risks [that's you, Ukraine]. The first gas will be supplied via South Stream in late 2015. The gas pipeline will reach its full capacity in 2018.

South Stream's offshore section will run under the Black Sea from the Russian coast to Bulgaria [to avoid Ukraine]. The total length of the Black Sea section will exceed 930 kilometers and its maximum depth will be more than two kilometers. A 1,455-kilometer onshore section will cross Bulgaria, Serbia, Hungary, Slovenia and will end in Italy. Gas branches from the main pipeline route will be built to Croatia and to Republika Srpska.

How the Heartbleed Bug Got Its Own Logo & Website

Ah, fun with Photoshop and someone else's logo.

Something that's piqued my curiosity about the Heartbleed virus which is designed to, well, bleed through security layers is that it's always presented with a catchy logo in the media. Think about it for a moment: why would someone lend a corporate image to a thing as deplorable as a virus? Nobody ever thought of providing a catchy logo for, say, demented livestock for mad cow disease or virus-bestriding poultry for SARS. But there it is again and again for this computer virus: a heart whose edges are bleeding.

As it turns out, this is by design. Codenomicon, an Internet security firm whose services involve testing the robustness of security solutions for online transactions, has been behind it all. Indeed, I wasn't even aware that they've put up a heartbleed.com site describing the security vulnerabilities exploited by this virus. The kicker, though, is of course Codenomicon's freely distributed logo. It's sheer marketing genius! The virus's name matches the logo, and the alarm the firm has raised about the virus surely drives business their way from the street cred gained from discovering it in the first place.

So partly it's Codenomicon making money out of their discovery. Again, there's nothing essentially wrong with that. Yet there's also a public service component in warning the rest of the world about it. How did Codenomicon attract attention to the virus? Through naming and branding, of course:

The Heartbleed flaw is being fixed more quickly because of the decision to give the bug a memorable name and a cute logo, according to the firm that first identified it. The flaw was caused by a simple coding error which resulted in passwords and security credentials being leaked from affected websites. "I really believe that the name and the logo and the website helped fuel the community interest in this," says David Chartier, the CEO of Codenomicon, the security testing firm which found the bug on 3 April.

"The IT community and the press have been important players in getting the word out, and so many people affected have fixed their stuff already," Chartier added. "This went extremely quick, and I think that the fact that it it had a name, had a catchy logo that people remember, really helped fuel the speed with which people became aware of this." Others agree. "The Heartbleed logo is probably one of the highest ROI [return on investment] uses of [approximately] $200 in the history of software security," writes Patrick McKenzie, founder of Kalzumeus Software.

Again, marketing matters:

"Why spend the extra money for a logo? Because it suggests professionalism and dedicated effort, because it will be used exhaustively in media coverage of the vulnerability, because it further deepens the branding association of the vulnerability, the name, the logo, and the canonical web presence, and because it also suggests danger." The logo, as well as the accompanying website which explained in readable English exactly what Heartbleed entailed, were both created in the days between Codenomicon warning authorities of the bug and it being officially patched.

Readers with a background in business management will recognize the use of marketing concepts to encourage prosocial behavior: social marketing. What Codenomicon did was make Heartbleed seem even more of a threat than it may be by promoting awareness of its potentially dire effects, like SARS and MERS rolled into one for natural, not programming, analogies. Here's a short blurb describing social marketing in more detail from a health perspective:

Social marketing was "born" as a discipline in the 1970s, when Philip Kotler and Gerald Zaltman realized that the same marketing principles that were being used to sell products to consumers could be used to "sell" ideas, attitudes and behaviors. Kotler and Andreasen define social marketing as "differing from other areas of marketing only with respect to the objectives of the marketer and his or her organization. Social marketing seeks to influence social behaviors not to benefit the marketer, but to benefit the target audience and the general society." This technique has been used extensively in international health programs, especially for contraceptives and oral rehydration therapy (ORT), and is being used with more frequency in the United States for such diverse topics as drug abuse, heart disease and organ donation.

Like commercial marketing, the primary focus is on the consumer--on learning what people want and need rather than trying to persuade them to buy what we happen to be producing. Marketing talks to the consumer, not about the product. The planning process takes this consumer focus into account by addressing the elements of the "marketing mix." This refers to decisions about 1) the conception of a Product, 2) Price, 3) distribution (Place), and 4) Promotion. These are often called the "Four Ps" of marketing...

My takeway? Again, design matters in making your message heard. Hence my recent blog redesign. Perhaps I'd still retain some readers if the IPE Zone looked as amateurish as the Drudge Report, but I sincerely doubt the message would come across.

UPDATE: Eric Levenson of Atlantic's The Wire demurs, however, pointing out that ordinary users did not go out of their way to change passwords despite widespread awareness of this bug. Point taken: I think it's mostly enterprises that reacted. 

More Competition

Steve Cecchetti and Kim Schoenholtz are blogging, mainly on issues related to money and banking. 

The blog seems meant to complement and promote their textbook.  Who would ever think to use a blog for such a purpose?

British Healthcare Fact of the Day

"In Britain, even though they're already paying for the National Health Service, six million Brits—two-thirds of citizens earning more than $78,700—now buy private health insurance. Meanwhile, more than 50,000 travel out of the U.K. annually, spending more than $250 million, to receive treatment more readily than they can at home."

Source.