Ask not for Whom the Bell Tolls, Putin
Is it the end of days for Vladimir Putin?
His government has made budgetary plans for the nation that depend on Urals Blend crude oil selling for $75/barrel abroad. But the Russian newspaper Vedemosti (Russian link) reported last week that the commodity was trading at just $58.35 — already 22% less than the Kremlin needs to sustain its budget.
All the Russian energy firms have taken massive hits to their share values, and the worst is yet to come. As Streetwise Professor observes:
High energy prices had masked the inefficiencies at these firms. It is easy to look smart when the price of your product is sky high. The real challenge of management is dealing with hard times. There is room for serious doubt as to whether the chekist cadres that run these companies are up to the task of navigating through such turbulent waters. They weren’t promoted for their management acumen, or their knowledge of the oil and gas business. Their skills are not the skills that are needed in current circumstances. High prices covered a multitude of sins, and those sins are about to be revealed in a big way. Which will only contribute to the backbiting and infighting.
Russia simply is not prepared, because its government has spent every waking moment trying to think of new ways to destroy the United States, to deal with this calamity. Just like the idiot farmer in the fairy tales, Putin has actively sought to kill Russia’s golden goose, the U.S. economy that funded the rising price of oil. Full of insane, haughty arrogance, Putin actually believed Russia had somehow become magically independent of the global economy, and could sell its oil to China if the U.S. could not pay.
SWP has documented the horror behind the horror. Russia has a massive concealed problem of poverty which it has left totally unaddressed in the frenzied pursuit of cold war glory. Now, as the economy turns sour, a huge swath of the population is exposed to unspeakable suffering.
Though Putin has blamed the U.S. government for mismanagement, Russia has its own housing bubble which is about to come crashing down around Putin’s neck.
And the only response the KGB regime of Putin has made is to cover the facts and prevent the flow of information regarding possible solutions. That’s the Soviet response, and it can only lead to disaster.
Putin is totally unqualified and unprepared to work on real economic and social issues. His talent is limited to strutting about like a macho man and issuing fiats and threats. As soon as he’s required to actually produce effective policy when faced with setbacks, he collapses in failure. In fairness, nothing else can be expected from a man who spent his whole life in the KGB. Ultimately, it is the people of Russia who are responsible for such reckless and incompetent governance.
And now the regime is between a rock and a neo-Soviet hard place. Putin cannot raise taxes to make up for losses in oil revenues, because the businesses that pay those taxes are already burdened with a staggering amount of debt due to the crippling effects of the stock market crash. He cannot cut services, because Russians are already living in dire poverty, barely surviving. His only choice is to massively scale back his cold war dreams, but just like his Soviet ancestors he is unable to take that step. Instead, he will barge heedlessly onward just as they did, grinding the hapless pathetic denizens of his country under his marching jackboot just as Brezhnev did. Russia, then, will meet the same fate as the USSR.
Ask not for whom the bell tolls, Putin. It tolls for thee.