EDITORIAL: Here we Go Again

EDITORIAL

Here we Go Again

Russia’s foreign currency reserves are back in freefall, and Russia’s largest company, Gazprom, is withering like a raisin in the sun.  Welcome to the horror that is government by KGB spy.

In the third week of April, Russia’s central bank spent more than $4 billion repaying foreign debt, and it announced that it had spent an additional $3 billion purchasing the national currency to artificially inflate its value and halt its depreciation.  This left Russia’s foreign exchange reserves at $380 billion. Another $130 billion in foreign debt must be repaid by the end of this year, leading analysts to predict that Russia’s FOREX account will plummet below $300 billion, half what it was a year ago, by early 2010.  That’s a massive loss of 20% in value and it doesn’t include the possiblity of serious currency interventions to further bolster the flagging ruble.

As our readers already know, Finance Minister Alexei Kudrin has warned that Russia’s other reserve fund, the budgetary emergency cash, will be exhausted by the end of next year as Russia is crushed by flagging revenues that will force the Kremlin into prolonged deficit spending and begging for foreign loans, exactly the same situation that destroyed the USSR.

And Gazprom has just announced that its production last quarter fell by a stunning 25% to its lowest level in more than ten years, the result of plummeting demand in Europe caused by the global economic crisis.  Russians are learning a brutally frank lesson, that their economy is hopelessly dependent on the Western democracies for whose demise so many crazed Russian nationalists have been hoping for so long.  Their bizarre notion that Russia can simply sell fossil fuels to China as a replacement for Europe has finally been exposed for the abject nonsense it always was.

Russia faces another massive downturn in its economy as the reality of dependence on market prices set by other countries sets in.  Unemployment and inflation are soaring, and popular unrest is growing.  Incapable of actually solving Russia’s economic crisis, the government will respond with the only option it has, blunt trauma to silence dissent — just as in Soviet times.

History is repeating itself in Russia, and the craven denizens of the country are standing idly by watching it happen.

6 responses to “EDITORIAL: Here we Go Again

  1. The worst part for GAZPROM is that sales are falling because its customers are waiting for prices to drop. Sales will go up, but by then they will be getting roughly a third of what they are getting now. It is truly one of these damned if they do, damned if they don’t propositions for GAZPROM. Also, GAZPROM had $60 billion or so in debt (maybe more by now) and has to find a couple hundred billions dollars to invest to ensure that they can maintain (not increase, just maintain) production.

  2. “and it announced that it had spent an additional $3 billion purchasing the national currency to artificially inflate its value and halt its depreciation.”

    Hey Rocky! Watch me pull a rabbit out of my hat!

  3. You know what *always* alleviates financial collapse caused by fiscal incompetence and mismanagement? A good old fashioned cold war, complete with an arms race with countries who have vastly more financial resources (not to mention a sound economy)! Team Putin wants to turn the clock back to 1952, but it seems they’re only going to get as far as 1989-92.

  4. “We have to be honest here: direct [Russian] government intervention into financial markets didn’t bring any results”.

    Who said that? La Russophobe? Wrong! Correct answer is Medvedev himself.

    Oops!

  5. this is shocking,people will suffer a lot if it continues.

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