EDITORIAL: Russia, Land of Morons


Russia, Land of Morons

There is an old saying that “in the land of the blind, the one-eyed man is king.” This expression never had any greater applicabilty to any land than it does to Russia, which explains the only reason why foreigners ever go to Russia — washed up though they may be abroad, in Russia even the most idiotic foreigner seems somewhat sensible.

Russia watchers may remember that back in June 2008, Gazprom CEO Alexei Miller boldly stated: 

Russia’s Gazprom, the supplier of a quarter of Europe’s natural gas, expects the price of crude oil to almost double within 18 months and to take gas prices higher with it. “We think it will reach $250 a barrel in the foreseeable future,” Chief Executive Alexei Miller told reporters at a presentation in France, adding high demand rather than speculation was the primary factor for high hydrocarbon prices. A spokesman said the company, which is also one of Russia’s largest crude producers, expected the price to hit the $250/barrel level sometime in 2009.

Even someone who knew nothing about Russia or the oil industry but merely possessed rudimentary critical reading skills would see the anomaly: Gazprom sells gas, and its CEO is making public predictions about the price of oil.  Maybe not such a wise move.

In the event, of course, oil prices went rapidly in the other direction, over the course of the next six months dropping by over 70%, and the Russian stock market went right down with them, plunging by an even larger amount.  Gas prices are just about to follow.  Russia will be lucky to see a per-barrel oil price of $50 as the 2009 average, one-quarter in other words of what the Gazprom CEO predicted.

And Gazprom’s CEO? Think he has made a public apology or been taken to the woodshed by the Kremlin? Think again.

Do you dare to imagine, dear reader, what other “decisions” Gazprom’s CEO is making that we don’t even know about?  Given that Gazprom is run by such a person, is the catastrophic collapse of the company’s stock price, despite its being one of the world’s largest natural resources concerns, even a little bit surprising?

Streetwise Professor refers to Russia as being a “natural state.” He analogizes

the Russian state to a cartel of violence specialists.  Both approaches emphasize the vital role of rents in maintaining the stability of the system.  Competing cliques (or clans) of violence specialists maintain an uneasy peace only because this allows them to divide rents, rents that in Russia derive primarily from natural resources, especially oil and gas.  I noted that both theories predict that the stability of this type of system is quite precarious.  More specifically, declines in rents eliminate the “glue” that holds the system together.  Thus, even when oil was going from $80 to $100 to $140, I made the conditional predictions that when prices fall, the system would be subject to stress; that the stress would be greater, the greater the fall in resource rents; and that there was inherently a large probability that the system would collapse in a flurry of infighting in the event of a large decline of rents.  

In other words, Russia under Putin is doomed because it is being run by a clan of barbarically stupid, unqualified quasi-criminals no more capable of managing a complex economy for the benefit of the citizens than of defying gravity.

13 responses to “EDITORIAL: Russia, Land of Morons

  1. To give Miller his due, he wasn’t the only one predicting huge rises in the oil price: plenty in the West were saying the same thing. It’s not that he’s a brainless thug (although this may be true, I’m in no position to judge), more a reflection on the over-confident dimwits (Masters-of-the-Universe-types) who pontificate on financial matters with no insight into their own limitations.


    It’s outrageous that you would claim others made this same $250/barrel prediction without sourcing your claim. If you don’t do so immediately, your comment will be deleted. We are not aware of any Western figure with status comparable to Miller’s who made such a prediction.

  2. Have a look at http://news.bbc.co.uk/1/hi/business/7387203.stm. Many predictions from 6-9 months ago look pretty sick now. Admittedly Goldman Sachs only predicted the price to top $200, not reach $250. There were others, it was all part of the feverish, over-excited atmosphere opf the time, but a bottle of red beckons…


    If you don’t understand the difference between an obscure analyst at Goldman and the CEO of one of the world’s largest energy congolmerates, you need to go back to business school. If you actually take the time to read our post, you will see that we are not criticizing obscure Russian analysts but rather the CEO of Gazprom. Did the CEO of ExxonMobile predict $250/barrel? You also seem totally oblivous to the main thrust, which is that Miller is a mere agent of the Kremlin, which by making this statement was seeking to destabilize world markets, jack up prices and inflate Russian power through terror.

    Your comment is utterly without merit, a silly distraction from the actual point and as such rather annoying.

  3. Yes, I understand the difference. Of course Miller was playing a different game, trying to extract the maximum from his cronies’ customers. But his predictions didn’t seem outlandish at the time. As you say, even minor Goldman Sachs analysts were jumping on the bandwagon. Nevertheless, not many in the Anglo-Saxon financial world have been seen eating humble pie either. I don’t disagree with you much as a rule, but this just seemed a poor example. Perhaps a slack day after the Nemtsov White Paper…

  4. Not “quasi-criminals” – simply, criminals.

  5. Miller’s statements were never taken seriously, even by the local sycophant Moscow foreign so-called financial “anal”-ysts. Of course, they masked their reservations in obfuscation (“very likely maybe could possibly …) .

    The macroeconomic truth is that these dick-cheesers never considered the most basic factor in this equation: demand from the major consumers of oil (and gas) — the USA and China.

    Case closed.

  6. Oh, never mind… in 1999 the venerable Economist magazine predicted that oil prices were “likely to remain low for the foreseeable future” and “$10 (a barrel) might actually be too optimistic. We may be heading for $5. :-) (http://www.casi.org.uk/discuss/1999/msg00181.html)
    It is human to err, isn’t it?

  7. For LR`s readers who did not still became a nasty bigots!



    Just to be clear, a “bigot” as this loathsome little creature defines it is anyone who dares to criticize Russia’s government or people or disagree with the creature itself.

  8. “Russia, Land of Morons”

    Hmm, I don’t know about that. Russians tend not to refer to Mexico’s language as “Mexican”. Russians seem to know that Brazil’s language is Portuguese not “Brazilian” or Spanish, that Germany is no longer Nazi, that Indians and Arabs are two completely different people, that neither their country or Belarus are Communist. In other words, they don’t uphold such a narrow and idiotic view of the world. Moreover, Russia wasn’t stupid enough to get pinned down in two losing wars taking a heavy toll on their economy.

    For I’m Russian:

    Don’t take this blog seriously. They’re just kids who watched Rambo and Red Dawn, and are desperate to relive the Cold War. I had the unfortunate agony of growing up around such narrow-mindedness.

    For LR:

    Did I miss any post you put up regarding crazy teachers in Russia? Because just today in the peaceful US of A, a Miami piano teacher Pablo Josue Amador just murdered his wife, his two daughters (14 and 13) before committing suicide.

    Russia may have a ruthless and corrupt system that leaches off its people. But I have yet to see a Russian educator or a children’s mascot turn into a homicidal maniac like in the USA. Wake up from your American Dream, and see the sickness of American society.

  9. @Tower Bolshevik
    Oh yeah? Those enlightened Russians have not managed and still fail to distinguish between three Baltic nations. They still call them Pribaltika and consider Riga to be capital of this obscure region. I don’t mind it, could not care less, however, coming after of 40 years of enforced cohabitation in a soviet “obshchaga” this fact hardly advertises wealth of Russian knowledge about world outside their borders :)

  10. 2Aidas: Russians do not need to distinguish between those tiny quasi-nations. Peter the Great has bought those territories from the Swedes in 1721 under the Nystadt peace treaty and their inhabitants were just a free bonus. I think i’ll live to see them return to their lawful owners as Pribaltiyskiy Federalyi Okrug.

  11. Some quotes from American “oracles”:
    “The Federal Government will not bail out lenders because that would only make a recurrence of the problem more likely.” George W. Bush, September 2007

    “The market impact of the U.S. subprime mortgage fallout is largely contained. The global economy is very healthy and robust.” U.S. Secretary of the Treasury Henry Paulson, January 2007

    “All the signs I look at show the housing market is at or near the bottom. The U.S. economy is is very healthy and robust.” Henry Paulson, April 2007

    “The impact on the broader economy and financial markets, of the problems in the subprime market, seems likely to be contained.” Federal Reserve Chairman Ben Bernanke, March 2007

    “The troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system.” Ben Bernanke, June 2007

    “It is not the responsibility of the Federal Reserve, nor would it be appropriate, to protect lenders and investors from the consequences of their financial decisions.” Ben Bernanke, October 2007

    “I believe there has been more alarm raised about potential unsafety and unsoundness that in fact exists.” Barney Frank, Chairman of the House Financial Services Committee, regarding Fannie Mae & Freddie Mac. June 2007

    “These institutions, Fannie Mae and Freddie Mac, are fundamentally sound and strong.” Christopher Dodd, Chairman of the Senate Senate Banking Committee, July 2008

    “Looking back, Fannie & Freddie haven’t been that sound. But looking forward, they look good from here.”
    Barney Frank, July 2008

  12. Aidas- Just because your “enlightened” language does not happen to have collective nouns, like Europe, Asia, the Caucasus, the Balkans or the Baltics doesn’t mean other languages shouldn’t have them. You may go on listing all countries in the world when wanting to say “the world” if it suits better your very enlightened mind.

  13. Eugene, you and Bobby truly are “Ara adamiani”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s