Special Extra: Oil’s not well that Ends Well

Has anybody got a spare Viagra for the RTSI?

Has anybody got a spare Viagra for the RTSI?

On Monday, crude oil prices jumped 16%, the largest one-day spike in history.

On Tuesday, the Russian RTS oil and gas index closed down (yes, down) nearly 3.75%, and the overall market was down 2.85% to close at 1272.  The market is down more than 1,100 points — over 45% — since its May record high and down 400 points — nearly 25% — just in the past month alone.

Russia, of course, is one of the world leaders in crude oil production. But the price spike made Russia’s market go down in value.  That’s Russia in a nutshell. And we do mean nut.

After the truly sickening vertical growth recorded on September 18th (just look at the bizarre shape of that trend line!), following the closure of the market to stave off total collapse and a ferocious effort by the Kremlin to force the market to do its bidding, the chart clearly shows how the Potemkin recovery petered out and failed.  The Kremlin scrambled feverishly to deny it was purchasing shares to drive up the market artificially, but the data speaks for itself. Yulia Latynina reports: “Russia has allocated 3 trillion rubles ($127.7 billion) to support the country’s financial markets. During one Cabinet meeting on Sept. 18, the government decided to buy shares in Sberbank, VTB and Rosneft to the tune of 500 billion rubles ($21.3 billion).”  Signs of a banking collapse grew more and more ominous. The Kremlin was forced to admit that inflation and capital flight are accelerating dramatically.

What the Russophile minions have failed to notice is that the September 18th market spike, though impressive in percentage terms, occurred on a devastated base and therefore was penny ante in terms of dollars — and of course it was tragically short-lived. Anyone who thinks that a proud clan of KGB spies can manage a market economy needs to have his head examined.

6 responses to “Special Extra: Oil’s not well that Ends Well

  1. Putinomics is very amusing and a real tonic in the midst of a global financial crisis. I wonder how much last weeks Putin engineered dead bear bounce cost the Russian people. How long will he continue to believe he has more money at his disposal than the rest of the global market put together.

  2. Or was it just a convenient way of laundering even more money out of the hands of the state into the bank accounts of the friends of the regime? By all accounts, Russia has spent over $100 billion, directly or indirectly, buying stocks to boost prices. Much of this money certainly went to the stocks pilfered from GAZPROM and other companies by friends and associates of Putin and Medvedev. The stock market collapse provided the perfect cover to start emptying out the reserve funds and doling it out to friends and associates.

    LA RUSSOPHOBE RESPONDS: Good point! They do say Putin is setting some rather fabulous digs in various exotic locations and squirreling away a tidy sum for a rainy neo-Soviet day.

  3. I found a great video in Russian featuring Andey Illarionov “a Russian libertarian economist and former economic policy advisor to the President of Russia, Vladimir Putin. He currently works as a senior fellow in the Center for Global Liberty and Prosperity at the Cato Institute in Washington, DC.” (http://en.wikipedia.org/wiki/Andrei_Illarionov)

    This is a 50 minute long thorough analysis of the war, the events preceding the war and the parties involved. What is interesting, he notes one fact that I have not heard before. It appears that in order for the Russian fleet to get to shores of Abkhazia at the time and in numbers that they actually did, they had to leave Sevastopol on the evening of August the 7-th. He also uses South Ossetian and Russian sources to reconstruct the events, which adds even more credibility to his account.

    The video is here: http://video.google.com/videoplay?docid=2194082804891801399&hl=en

    And another link, where Georgian officials and military personnel talk about a war in South Ossetia and how unexpected it was.
    http://www.eurasianet.org/departments/insight/articles/eav091508.shtml

    Also, one can find a text of Micheil Saakashvili, addressing the UN General Assembly: http://www.un.org/ga/63/generaldebate/pdf/georgia_en.pdf

  4. Again, two great articles in Jerusalem Post:

    “Understanding the Georgia invasion” where author notes that “Moscow’s military intervention in Georgia must be understood through the prism of global strategy and energy politics. Moscow seeks to intimidate energy producing countries once part of the Soviet Union, such as Azerbaijan and Turkmenistan, and to develop a grand anti-American energy coalition that spans from Iran to Venezuela. This poses a significant challenge to the West, and may yet require muscular Western counteraction.”

    http://www.jpost.com/servlet/Satellite?cid=1222017359649&pagename=JPost/JPArticle/Printer

    In “Russia’s perception of reality” writer is asking a question “HOW MANY 9/11s does the Russian government expect to exploit? For America, one was more than enough.”

    http://www.jpost.com/servlet/Satellite?cid=1222017359698&pagename=JPost/JPArticle/Printer

  5. LA RUSSOPHOBE RESPONDS: You might want to read our comment policy before commenting.

  6. To get back on topic, I see that Yulia Latynina shares my opinion. In an opinion piece published in The Moscow Times, she writes:

    “Have you ever wondered what ‘government support for the stock market’ actually looks like? Here’s how it works. A government official owns an offshore company. That company has shares. The state buys those shares, sending the money offshore.

    The Kremlin calls these machinations government support for a functioning stock market. I call it money laundering. ”

    Source: http://www.moscowtimes.ru/article/1016/42/371162.htm

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