Russia — What kind of Country?
After 2 pm on New Year’s eve, those whose hobby is following the activity of the Russian stock market will have to find a new way to amuse themselves for a while. The markets will shut down at that time and they will not reopen, per Kremlin order, until Sunday — yes, Sunday — January 11th.
Just what kind of crazy “country” are we dealing with here, anyway?
You might think that ten days is an absurdly long time to shut down the national economy, but in fact for Russians it’s not nearly enough. Last Wednesday the Moscow Times reported:
With investors preparing for the holidays and many international funds closed until January, Russia’s equity markets look set for a quiet last two weeks. But the state may also seek to use the Christmas lull to buy up domestic equities as a consolation boost to finish out 2008. The state’s main bailout vehicle, Vneshekonombank, or VEB, will likely take advantage of the low trading volume on the MICEX and RTS exchanges in the coming days to prop up prices, analysts said, which could mitigate — if briefly — what has been a particularly dismal year for Russian stocks.
So the Russians need two weeks to prepare for ten days of binge drinking and doing even less than usual, and the Kremlin is planning to take advantage of this pre-lull miasma to invade and manipulate the stock market, driving its prices up artificially so as to create the illusion of an end-of–year uptick. Ironically, even the MT itself is affected, and won’t publish another issue during Russia’s national orgy of drinking. Its next outing will not come until January 12th.
There’s only one word for all of this, and that words is: Yikes!
On Christmas Eve oil prices hit a four-year low in London, slipping under $38/barrel for the first time since 2004. The price of crude oil is down 78% since July, and the Russian stock market has followed it jot for jot. Finally unmasked, the world can now see that Russophile insistence that there was more to the Putin economy than the accident of world oil prices were nothing but hot air, smoke and mirrors.
In his decade in power, Vladimir Putin has built nothing, stood for nothing, and creating nothing. He has just been lucky to have reached power at the moment when oil prices took off, and he has squandered the opportunity those windfall revenues gave him to develop Russian infrastructure. Instead, Putin embarked upon a reckless course of provocation against the West, instituting a new cold war and arms race Russia can ill afford.
The result is that now the only “policy” available to Putin is to build Potemkin villages, desperately seeking to conceal the truth about his failure from the people of the country.
But the falling ruble does not lie, and Putin does not have the resources to keep the ruble inflated. After squandering more than a third of Russia’s cash reserves in a futile effort to defend the national currency, he has been forced to devalue, and the currency too has been unmasked as the helpless slave of oil prices. He has been forced to admit that his government lied shamelessly about civilian casualities in Georgia, overstating them by more than factor of ten (!). He has talked big about hanging the President of Georgia up by his privates, yet been forced to leave him in power after being repudiated as the aggressor in Georgia by every civilized nation on the planet. He has made ridiculous noises about joining OPEC and then been forced to eat his words. He has attacked the U.S. relentlessly, failing to realize that U.S. consumption was the only thing keeping his own nation out of the poor house.
He is a failure. But that is not surprising in Russia, which seems to want to be ruled by failures. What kind of nation are we dealing with here?
And more important, how long can we expect such a nation to survive. We have already seen Tsarist Russia and the USSR destroy themselves, both in the space of less than a century. How long before Russia follows right along?