Putin’s Russia, Shooting Blanks
The latest breathtaking failure by the Putin regime was documented with a report revealing that Russian oil exports have fallen to 25% below their prior level. The cause of the plunge is quite clear: The Putin regime has failed to lower oil tarriffs in line with the plummeting price of crude oil on world markets, meaning that Russian producers cannot profitably export their stocks and prefer to hold them and await a price rise.
The Putin regime knows only too well that it cannot simply cut the tariffs, which consitute the Kremlin’s main funding source. Yet, it is between a rock and a very hard neo-Soviet place, because if it does not cut the tariffs it may drive the entire oil industry into oblivion.
And that was only the beginning of an avalanche of bad economic news for Russia as the week began.
The price of oil flirted with dropping through the $60/barrel level, and the Russian stock market plunged right along with it. On Tuesdya, the RTS exchange was shut down at noon as it approached 10% loss of value. It closed down 10.6% despite the closure and the Kremlin’s furious buying to create artificial demand. Gazprom, Rosneft and Sberbank shares were down even more than the market itself, a stunning 15%. The MICEX index experienced an even bigger drop than the RTS, losing over 12.5%, and was also shut down. If the price of oil sustains at this level, the Kremlin will be presented with the need for massive tax increases or even more massive deficit spending and the elimination of Russia’s reserve fund, which just a short time ago was one of the largest in the world.
Experts are now predicting up to a 30% devaluation of the Russian ruble, which means 30% consumer price inflation on imported goods, Russia’s lifeline to the outside world since Russia is incapable of producing a vast array of consumer products vital to people’s daily lives. The Fitch credit ratings agency has downgraded Russia’s currency outlook from “stable” to “negative.” Bloomburg quotes Anas El Maizi, who oversees $342 billion in fixed-income assets in Paris at Axa Investment Managers, a unit of Europe’s second- largest insurer: “When oil falls, capital runs out of Russia and the ruble weakens, it’s not justified to hold your positions. If oil stabilizes at this level, Russia will have some trouble.”
Proud KGB spy Vladmir Putin has run the Russian economy aground, and it is foundering. Inflation was already stratospherically high this year, and now looks to get much worse. The Russian stock market has fallen by 75% in just six months, the same type of drop that characterized the American Great Depression but which took the U.S. more than three years to achieve.
And yet, the people of Russia — like the lemmings they are — are turning a blind eye as Putin prepares to retake the reins of formal power as president for life, no different than a madman like Sadaam Hussein. Writing in the Moscow Times, the Carnegie Center’s Nikolai Petrov states:
President Dmitry Medvedev’s first — and perhaps last — state-of-the-nation speech on Wednesday did not adequately address the problems facing the country’s troubled economy. It was clear from his speech that the Kremlin does not realize the seriousness of the situation and lacks a plan for dealing with the financial crisis. There could be another explanation for this omission as well: the authorities are preoccupied with something they personally find much more important — planning out a change in leadership.
Russia’s governmental system is essentially a lifeless body, and Medvedev’s democratic “innovations” are nothing more than a cosmetic veneer on a political corpse. To make a bad situation even worse, the president made two very concrete suggestions: to extend the term for the president from four years to six and to increase the term for Duma deputies from four years to five. The reasons behind the increase in the presidential term are probably tied to a plan to return Prime Minister Vladimir Putin to the president’s post before Medvedev’s term expires in 2012, or else to pull off a presidential castling move that would place Putin back in the Kremlin. The reason behind the increase in Duma terms might stem from the deputies’ desire to safeguard their posts against the deepening crisis with the help of early elections.
It was also reported that Medvedev has given Russia’s stormtroopers carte blanche authority to crush any signs of civil unrest as the economy worsens, a fully realized neo-Soviet nightmare.
If this occurs, it will signal that the people of Russia are allowing their ship of state to go right over the falls of neo-Soviet destuction. Putin’s leadership has brought the nation to the brink of ruin in less than a decade, and now the benighted peasants of Russia intend to punish him for his transgressions by making him an absolute, formalized dictator.
If this occurs, it is the beginning of the end for Russia as we know it.
I fear that Russia will decline into a Weimar type state and that the social upheaval and despair will lead to a similar end.
Bring it on, Putin’s Saudi Arabianesque wealth in petrodollars falling into the mud is the best thing that can ever happen to Russia’s chance to throw him over and forge a civil society. But, will the typical Russian sheeple figure that out? Probably not, sadly. Forever expecting the state to feed and house them, their wrath will go wherever Putin directs it.
Risk averse, forever grovelling and perpetually begging for scraps from their czar in whatever form he takes, the lessons of Putin, I fear will be lost on them. It’s always someone elses fault with Russians. The global financial markets did them in this time. I’m betting he comes back very soon in messiah mode.
I knew that things would go down in Russia after Putin left the Presidency. Medvedev should get his constitutional reform enacted, to extend the presidential term to six years, and then Medvedev should resign (or else he’d be extending his own term, which wouldn’t be right). Putin would then be allowed to run in the new election, since the Russian constitution only prohibits a president from serving more than two consecutive terms. But a president can always stand for office again, as long as he’s been out of office with someone else in between.