The State of Affairs in Russia

[celedhring]

All the money in the world won't do you any good if the soldiers protecting you make common cause with street protestors demanding you leave office.

I just don't see where those will be coming from. His popularity remains extremely high, he controls Russian media with an iron grip, and he can easily pin down any duress to Russian-hating West.

[PJL]

I'd be very surprised if Putin wasn't still around in 2020, unless he resigns himself. The sort of economic pressure the sanctions and low oil prices puts on the economy takes years to filter through for people to really start feeling the pressure and blaming it on the regime.

[Martinus]

I don't worry about Putin.

Putin on a brave face, eh?

[The Brain]

Who will rid me of this meddlesome fag?

[Martinus]

I'd be very surprised if Putin wasn't still around in 2020, unless he resigns himself. The sort of economic pressure the sanctions and low oil prices puts on the economy takes years to filter through for people to really start feeling the pressure and blaming it on the regime.

He can also die.

[The Brain]

I'd be very surprised if Putin wasn't still around in 2020, unless he resigns himself. The sort of economic pressure the sanctions and low oil prices puts on the economy takes years to filter through for people to really start feeling the pressure and blaming it on the regime.

He can also die.

Something something something Dark Side. Something something something complete.

[Eddie Teach]

Something something something Dark Side. Something something something complete.

https://www.youtube.com/watch?v=J4Bl_VQ2inM

[The Brain]

Something something something Dark Side. Something something something complete.

https://www.youtube.com/watch?v=J4Bl_VQ2inM

I'm ready to let my love flow now.

[CountDeMoney]

Putin's Groundhog Day: The Russian people keep paying the price for their leaders' incompetence
Wonkblog
Washington Post

In the bad old days, Russia's facsimile of an economy would crash every time the price of oil did. The government would go broke, the currency would collapse, and ordinary people would see their standard of living evaporate. Now if all this sounds familiar, that's because the bad old days never went away under Vladimir Putin. He just got lucky until now.

So now, like they have for generations, the Russian people are paying the price for their government's economic illiteracy. And it's a miserable price to pay for the nation's 140 million people.

The Soviets knew this story well. The oil shocks of the 1970s filled the USSR's coffers with enough cash to not only mask the massive inefficiencies of its  centrally-planned economy, but also launch its own imperial quagmire in Afghanistan. It was enough to make Americans think they were losing the Cold War.

But then, like that, the USSR was gone. All it took was Saudi Arabia deciding to let oil prices fall, and the Soviet empire did too. The whole Marxist-Leninist thing didn't help either. Supermarkets went empty. People went hungry. And then nobody would lend them any more money. That's how the Cold War ended: Not with a bang, but a bailout. The West loaned the bankrupt Soviets $100 billion, and, in return, the USSR let its satellite states go.

The end of communism, though, didn't bring prosperity. The opposite, actually.

Russia didn't (and still doesn't) so much have an economy as an oil exporting business that subsidized everything else. And with oil prices averaging just $17.50-a-barrel in the 1990s, that business was in bad shape. Russian companies that were used to getting handouts from the oil-rich government had to get loans from the central bank instead. This created so much new money that inflation, which had already built up due to just-ended price controls, exploded to over 800 percent. The government was able to bring this down to merely painful levels of 10 to 20 percent, but only at the cost of a protracted slump. Unemployment climbed into the double digits, all while the cost of basic goods rose out of reach for even people who managed to keep their jobs. The result, as you can see below, was a lost decade for Russia.

Gross domestic product per capita, adjusted for local prices, actually fell in the eight years after the USSR did.

Russia was still basically bankrupt, but without the benefit of bankruptcy. It simply owed the West more money than it could reasonably pay back. That, as Jeff Sachs points out, was different from how the U.S. treated other post-communist states. Sachs, you might remember, was the economist who advised the former Iron Curtain countries on the, as he called it, "shock therapy" they needed to save their failing economies as they transitioned to capitalism. The U.S., he explains, helped ease Poland's inevitable pain by giving them $1 billion to stabilize their currency and forgiving much of their debt.

But the U.S. wasn't so magnanimous with Russia. It wasn't magnanimous at all. Russia was required to pay back everything it owed. And in the meantime, even more debt was piled onto its rotting husk of an economy in the form of emergency IMF loans. Because a nuclear-armed country would never be allowed to default, right?

Well, no. It's hard to say whether Russia was the victim of bad leadership and worse luck or bad luck and worse leadership. The government's incompetence, you see, was only matched by its corruption. Economic reforms were always a day away. And behind closed doors, state-owned monopolies turned into privately-owned monopolies thanks to sweetheart deals that made government officials rich and the new oligarchs regally so. Russia, in other words, traded one gangster state for another. And its economy, so far as it had one, was still entirely based on extracting natural resources. That's why, when oil prices tumbled from their already-low levels in 1998, Russia found itself back where it'd been a decade before: bankrupt. Under pressure from markets, it devalued the ruble and defaulted on its debt.

Then a miracle happened: oil prices started rising. Okay, it was more China's miracle than Russia's, but, after two decades of decline and fall and even more declining, that was more than good enough for Putin. He'd become president in 1999, when oil prices averaged just under $18-a-barrel, and watched as China's insatiable demand for raw materials helped push the price up into the triple digits over the next decade. That gave Russia so much money that even after the oligarchs—Putin's real political base—took their cut, there was still enough left over for ordinary people's living standards to improve.

But despite this, Russia's economy didn't really improve. Putin didn't diversify it at all, not if you don't include braggadocio. It's still all about digging things up out of the ground and selling them. That, of course, was all Putin needed to do what Russia's rulers have always done—invade a neighboring country or two—when they're feeling flush with petrodollars. But it left Russia vulnerable to the same kind of crisis that's always hit it when oil prices have unexpectedly fallen.

This time, at least, the government has built up a war chest of dollars to keep the ruble from falling too much. But Russia's companies became the epicenters of economic doom instead. They borrowed a lot of dollars, in part, as Paul Krugman points out, because the ruble's rise the years before had made these debts look smaller than they actually were. It didn't help that Western sanctions over Putin's incursion into Ukraine kept Russian companies from rolling over what they owed by shutting them out of international credit markets. So now that the ruble is plummeting, those dollar debts are harder to pay back, and it's sucking the economy into a death spiral.

This is Russia's version of Groundhog Day. Oil crashes, so does the ruble, and then unemployment balloons. Sometimes the government goes broke. Other times companies do. In any case, it's the ordinary people who suffer. They get hit by the double whammy of unemployment and inflation. So even if they're lucky enough to keep their jobs, their budgets still get squeezed by the rising cost of everyday essentials. It's even worse for imports, which make up a big chunk of the manufactured goods they buy, and have suddenly become twice as expensive now that the ruble has fallen by almost half. That's why shoppers are stampeding to buy whatever foreign products they can get their hands on—luxury cars, Apple products, or even Ikea furniture—before the ruble loses any more value.

Russia's winter of discontent, though, is about to get even more bleak. Its central bank just jacked up interest rates to 17 percent to try to prop up the ruble, which is so high that nobody will want to borrow. But even if they did, nobody will be able to get a loan on anything less than punitive terms when banks are so scared that they won't even lend to each other. This credit crunch will turn Russia's already-nasty recession—GDP is projected to shrink 4.7 percent if oil stays at $60-a-barrel—into a full-on depression. In a worst-case scenario, the economy could contract as much as 10 percent next year, even as inflation flirts with double digit territory.

It shouldn't be this way. The one thing Russia doesn't have a shortage of, after all, are brilliant scientists, programmers, and mathematicians. By all rights, it should have a booming high-tech economy. A Silicon Valley-on-the-steppes. But that would require giving people the freedom to challenge authority, which is far too much for Putin when he thinks that any opposition amounts to a "fifth column." It's safer just to dole out the old Soviet monopolies to his cronies, and let the plebes shop in the meantime. Putinism, in other words, is communism minus the pretense that all animals are equal.

Every happy economy might be alike, but in Russia, at least, the unhappy ones are too.

Link to the article with all the links in the article:
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/12/21/putins-groundhog-day-the-russian-people-keep-paying-the-price-for-their-leaders-incompetence/?tid=pm_business_pop

[Norgy]

As the article mentions, Russia has the means to at least produce their own high tech consumer products. But it doesn't happen. Rather, it's a country where taking a photo or writing a blog post makes people wary of being on balconies or near windows. (By the way, I think Near Windows would be the bug-filled Russian OS of choice, if they did try to make one - no photo sharing or word processor included).

[Syt]

All propaganda!

http://itar-tass.com/en/russia/768289

Putin says no-one will succeed in Russia's intimidation, isolation

MOSCOW, December 20. /TASS/. Russian President Vladimir Putin is confident that no-one will succeed in intimidating and isolating Russia.

"The world situation is far from stable," Putin said in State Kremlin Palace at a gala night marking Day of Security Service Officers.

"A number of threats and risks are growing, the norms of international law are ignored and no stone is left unturned: blackmail, provocations, economic and informational pressure, stakes on radical elements and nationalist groups, as well as attempts to destabilize the internal situation and thus take under control the whole countries."

The head of state pointed out one could hear oftener more explicit statements that Russia "must pay a high cost for its independent policy, for its support of compatriots, for Crimea and for Sevastopol and it sometimes seems that even for the fact that we exist."

"Evidently, no-one will succeed in Russia's intimidation and isolation. It hasn't been done before and it's never going to happen," Putin said recalling that attempts like those had been repeatedly made for centuries and not once in the 20th century.

"Nothing has come out of it and nothing will," the Russian president said. "Along with this, we must be ready to go through certain difficulties and to give an adequate answer to any threats to our sovereignty, stability and unity of our society.".

"A number of threats and risks are growing, the norms of international law are ignored and no stone is left unturned: blackmail, provocations, economic and informational pressure, stakes on radical elements and nationalist groups, as well as attempts to destabilize the internal situation and thus take under control the whole countries."
=> Never expected Putin to speak so openly about the MO of his foreign policy.

[Norgy]

Rather hard to be completely isolated when you're bordering half of the planet, but allright.

[Razgovory]

As the article mentions, Russia has the means to at least produce their own high tech consumer products. But it doesn't happen. Rather, it's a country where taking a photo or writing a blog post makes people wary of being on balconies or near windows. (By the way, I think Near Windows would be the bug-filled Russian OS of choice, if they did try to make one - no photo sharing or word processor included).

Well they also suffer from acute dutch disease.

[garbon]

http://news.yahoo.com/russian-minister-talks-ruble-104459436--finance.html

Russia bails out bank following ruble slide

Russia has bailed out a mid-sized bank for about $500 million to save it from bankruptcy— a clear sign that the slide in the value of the ruble in the wake of sliding oil prices is straining the banking system.

The Central Bank said Monday it will give Trust Bank 30 billion rubles that will allow it to continue operating as normal.

It will also place Trust Bank under its own supervision until it finds an investor. Major Russian banks said they had no interest in acquiring Trust, a top 30 Russian bank with about $5 billion in assets.

The problems afflicting Trust Bank follow a tumultuous period for the ruble, which is one of the worst-performing currencies this year, along with the Ukrainian hryvnia. A respected former Russian finance minister warned that the country is headed for "a full-blown economic crisis."

It has fallen by a half this year as oil prices have fallen. Last week, its descent gathered pace, sparking a consumer boom as worried Russians flocked to shops to buy cars and durable goods before prices rose further.

Still, deputy Prime Minister Igor Shuvalov said Monday he expects the ruble to rally following some signs of stability over the past few trading sessions. Following moderate gains at the end of last week, the ruble surged 8 percent in early evening trading on Monday, at 54 against the U.S. dollar.

He also said the government is not planning to introduce currency controls on Russian companies. The ruble's collapse has stirred rumors that Russia could introduce capital and currency controls to keep the rate high.

The Russian currency has been battered by low oil prices, now around $60 a barrel, down from a June high of $107, as well as the sanctions that the West imposed on Russia for its involvement in Ukraine and the annexation of Crimea.

The fall in oil prices is one of the major reasons why Russia is expected to fall into recession next year.

Alexei Kudrin, a well-respected former Russian finance minister, said oil prices weren't the main reason why the ruble has suffered this year. In comments to reporters, he said low oil prices account for as little as a quarter of the ruble decline whereas the sanctions imposed on the country could be contributing up to 40 percent of the collapse.

Kudrin warned that Russia will enter recession even if oil prices are as high as $80.

"We are entering or have already entered a full-blown economic crisis, and we're going to feel it to the full next year," Kudrin said. "This is a serious challenge to the economy."

President Vladimir Putin has overseen a full decade of economic growth boosted by high oil prices and the expanding consumer market, but the collapse of the ruble and the rise of inflation could pose a threat to consumer expectations next year.

For the first time since 2000, according to Kudrin, disposable income in Russia is going to drop signifycantly, by about 4 percent.

[Admiral Yi]

372.5 billion in reserves left and counting.