EDITORIAL: The Putin Economy is Collapsing

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The Putin Economy is Collapsing

Less than a month ago, the Kremlin predicted that Russia would return to economic growth in 2010 after seeing what it had originally predicted would be a minor recession of 2% this year.  But then last week, after being forced to admit that this year’s recession would be massive (Russia’s economy shrank a breathtaking 9.5% in the first quarter of 2009, a ghastly 23% quarter-on-quarter from a year ago), the Kremlin revised its projection for 2010 from 3.8% growth to just 0.5% (the 3.8 figure was itself the result of slashing the original pie-eyed projection by nearly half).  Russia’s industrial output collapsed even more horrifyingly, by a truly stunning 16.9%.  Automobile production was down an amazing 55.9%.  Foreign trade with Russia’s major partners fell a jolting one-third or more.  Meanwhile Gazprom, Russia’s mightiest commercial institution,  has announced it will cut this year’s dividend from 2.66 rubles per share last year down to a mere 37 kopecks this year. That’s a drop of 87% for investors, in just one year.

The Putin economy, as any fool can see, is collapsing.

The Putin regime’s effort to jumpstart lending with a $100 billion stimulus package has failed miserably.  Bloomberg quoted Tatiana Orlova, a Moscow-based economist with ING Groep NV: “The big dip in industrial production jumps in your face. The government should be worried. It’s very easy to come up with headlines announcing bailout measures, but the situation shows that you have to adjust them. It’s hard to do these things fast.”   Russia’s GDP in the first quarter of this year was a shocking 23% smaller than it was in the first quarter of 2008.

Streetwise Professor warns  that the 23% quarter-on-quarter figure 

is an annualized rate, indicating that quarter on quarter, GDP fell about 5.7 percent.  That is, fell from 100 on December 31, to 94.3 on March 31.  Ouch.  This is horrid, even by the abysmal standard set by Germany (a 3.8 percent decline, or about 16 percent annualized) in the first quarter, or Japan’s 12.7 percent annualized decline in the fourth quarter of 2008.

Even Russian “president” Dima Medvedev was forced to admit the total failure of his government.  Planned stimulus measures have come to nothing and “there have been no significant changes in the technological level of our economy,” he said.  Productivity in Russia remains at a stunning one fourth that achieved by the United States.  The contraction in manufacturing dramatically increased in April compared to March, and a key industrial economist stated plainly:  “The situation didn’t improve at all.”

None of this can be the least bit surprising to anyone who understands that Putin is a proud KGB spy with no qualifications of any kind to run an economy.  All he understands is blind hatred and blunt trauma, hardly the tools necessary to manage a complex economic machine.

In any normal country, Medvedev would sack the prime minister, who is responsible for overseeing the implementation of the stimulus measures.  Under Putin and Yeltsin, the heads of prime ministers rolled like bowling balls.  Remember Mikhail Kasyanov?  But it doesn’t seem Vladimir Putin has anything to fear in terms of job security, now does it?

And Medvedev himself would face the same kind of scathing condemnation from the public that George Bush received when things went bad in the U.S. But Medvedev doesn’t. The sheep-like minions of his nation do nothing but chant approval and look the other way as he makes ever larger and more dangerous mistakes.

In fact, what seems far more likely is that the “prime minister” will sack the president, using him as a scapegoat for failure and failure as an excuse for utter dictatorship.  In fact, a cynic might even suggest Putin is delighted with all this failure.

20 responses to “EDITORIAL: The Putin Economy is Collapsing

  1. “The Putin economy, as any fool can see, is collapsing.”

    Never underestimate the raw delusionary power of the human mind.

  2. I have been attending your blog since December 08 and you have permanently wrote that Russian economic is collapsing. I live in Saint-Petersburg Russia and I have a good job and I do not see your hell-pictures. Yours poor predictions yours erroneous forecasts are failed time to time. May be enough to be like imbecile?

    • It still hasn’t penetrated your thick skull that this is the internet, you could be posting from mom’s basement in the Bronx for all we care or could verify.

      If you have a good job in St, Petersburg it’s probably because the FSB is your paymaster. You’ll be one of the last Russians to be unemployed. Pootie loves you.

    • Russia is an oligarchy and oligarchy never last forever.

  3. penny

    I repeat you are seemed a KGB spy under every tree or bush. Is your behavior normally , what do you think?

    • Famous quotation from the Vladimir Putin’s speech at the Chekist Day party at the FSB headquarters in
      December 1999 was: “I want to report to you that the mission of the group of FSB officers sent undercover
      to work at the government is being accomplished successfully.”

  4. Top Western billionaire bankers are buying Russian stocks and think it’s rebounding.
    Who’re you gonna believe, the billionaires who put their real names and money behind their words, or “Kim Zigfield,” pseudonym project of some PR firm?

    • From your link

      For Aberdeen Asset Management’s Mark Gordon-James, many corporate executives aren’t trustworthy enough for him to buy shares. The country makes up just 2.5 percent of Aberdeen’s emerging-market fund, compared with the nation’s 6.7 percent weighting in the benchmark MSCI Emerging Markets Index.

      Corruption a Problem

      Russia ranks 147th among 180 countries in Berlin-based Transparency International’s 2008 Corruption Perceptions Index, which collects data on bribes from surveys of local business leaders, international aid organizations and country risk experts. China ranks 72nd, Brazil is 80th and India is 85th.

      “Reforms take a long time, and we don’t see any signs of positive momentum on this front,” Gordon-James said in an interview. State intervention into markets also makes Russia unattractive, according to the London-based money manager. Aberdeen oversees about $138 billion worldwide.

    • But that does not change the fact that Russia is an oligarchy. So what”s your point? Roman Abramovich and Oleg Deripaska invest alot of money into the west. Russian oligarchs also invest to Great Britain, Germany and France.

    • Woland, either you have reading comprehension problems or you are too dumb to think anyone would check the link.


      Blackrock alone rather than “(t)op Western billionaire bankers” which is grossly misleading, is buying Russian commodity stocks along with other emerging market stocks. How much of that fund is allocated to Russia it doesn’t say. They’ll sell as fast when they hit their target prices and leave as Russia isn’t long term investment worthy or did you miss the part about their corruption ranking.

      You missed this too:

      Investors fled last year, taking capital outflows to a record $132.7 billion, as the country’s main export blend of oil declined as much as 77 percent from a July peak. A five-day war with Georgia in August increased speculation that overseas companies would reduce investments, after the conflict was condemned by the U.S.

      Blackrock’s investment, amount of the $20 billion unknown, is peanuts compared to what has left the country. It’s no big deal nor an endorsement of your Uncle Pootie’s fabulous economic skills.

      And as far as speculating on Kim Zigfield just who the h*ll are you?

      You need to try harder, Woland, your post didn’t work out so well for you.

  5. The Putin Economy is Collapsing, Collapsing, Collapsing, Collapsing.Violence, corruption and mismanagement reign in Russia. It is absolute evil in the Kremlin.

    I have got a question to put to La Russophobe experts – When the final collapse and final solution to the Russian problem might be expected? We are a bit tired of waiting, aren’t we?


    Read a little Russian history, dork. It took the USSR 70 years to collapse. A hearbeat in historical time, but perhaps a bit longer than a tiny little mind like yours can handle. Had action been taken long before the collapse, the collapse could have been avoided and massive suffering as well.

    • Color me anti-Russian all you want, but, Putin will survive as there is no unified opposition in any social strata there to throw him out. The Russian capacity for misery and willful ignorance defies the western imagination.

      The real question for the west is how to contain the Russian menace as it as decays as a society slowly.

      Unfortunately oil will rebound in time and Putin just has to make it to there. All will be forgiven and made whole again for the masses. An alternative vision of an enduring democracy that would require risk and delayed gratification doesn’t exist with the majority of Russians.

    • Kremlin oligarchs have all the money and rest of people live in poverty. Of course not all people live in poverty but millions do.
      Putin will rule Russia with the oligarchs . Putin learned from the KGB to Divide and conquer.

  6. How is this website anything like Novaya Gazeta in English? What original investigative reporting have you ever done? I suspect you are trying to capitalize on the reputation of a real publication to further that of this site. And why do you say it in Russian? Are you trying to be cool? I’d withdraw that claim, it’s an insult to the potapovsky heroes.

    No problem of course with having a website with certain views, but don’t claim to be like Novaya Gazeta, you’re not.


    Your comment is hilariliously funny for its audacious ignorance and hypocrisy. If you simply Google the it, you will see that the statement in question its copied FROM THE RUSSIAN BLOGOSPHERE. Hence its language of choice. And the Russian who said it meant not that we do investigative reporting but that we criticize the Kremlin relentlessly. Novaya Gazeta is hardly the one-dimensional instititution you claim. For the 70% of Russians who support Vladimir Putin, being like NG is an insult, not a compliment. So it’s clear your hardly one to talk about investigative reporting, dimwit.

    Meanwhile, you’re oblivious of the fact that we alone have translated much NG content into English as well as much other Russian content, including Boris Nemtsov’s white paper on Putin — for which we were recognized by the prestigious New York Review of Books.

    Your laughable ignorance is emblematic of a much wider barbarism in Russia. With “friends” like you, Russia needs no enemies.

  7. Desperate Residents Seize Town Hall in Russian Town

    Economic tensions reached a zenith on Wednesday in Pikalevo, a small Russian town not far from St. Petersburg. Local residents, suffering after the town’s major employers shut their doors this past winter, stormed the town hall building with demands that the mayor’s office resolve the crisis problems plaguing the city. As the BFM.ru online newspaper and the TV100 channel report, nearly 200 demonstrators had gathered outside the town hall, protesting a city-wide shut-off of heat and hot water, as well as overdue back-pay. City officials, meanwhile, were holding a meeting inside in an effort to resolve some of the problems.

    The protestors, who were anxiously awaiting the result of the meeting, eventually rushed the building, pushing past militsiya officers and barging through the session’s closed doors. After speaking out concerns about unemployment and withheld wages, the group peacefully left the building and continued to wait outside.

    Pikalevo has seen sweeping unemployment as result of Russia’s economic crisis. Three mainstay employers in town – Basel Cement, Pikalevsky Glinozem and Metakhim – have shut down, and smaller companies have also reduced their workforces. The local heat and power station cut hot water and heat to the town a week ago, citing unpaid debts accrued by Basel Cement.

    Officially, 1500 people have been laid off, although another 2500 people are either on unpaid leave, or have had their work-week shortened. In a town of 22,000, around 50 percent of the working-age population is now without work.

    Svetlana Antropova, a trade union leader from the Basel Cement-Pikalevo factory, earlier described how locals had started foraging for food – cooking soup from green nettles, making salads from dandelions and chickweed, and even eating stray dogs.

    Locals also described a skyrocketing crime rate that made is dangerous to be outside at night.

    Valery Serdyukov, the governor of the Leningrad Oblast, has meanwhile downplayed the situation in Pikalevo as hysteria created by trade unions and the media. Serdyukov is expected to meet with city officials in the near future.

    “There is no hot water there in Pikalevo,” Serdyukov said. “Well, it happens. And not just there. It happens even in Moscow and St. Petersburg, that the water is turned of for a couple months. There is no tragedy here. As for heat, well, I don’t think it’s needed so much during the summer.”



    Dear rude Ape (who ignores our clearly posted comment rules and SPAMs our blog): We’ve humored you once by allowing you to SPAM our blog. Once is your limit. This post is not a vehicle to carry on a dialogue on topics wholly unrelated to this post, as the comment guidelines clearly posted in our header make plain. Hence, your inane gibberish has been deleted. If you’d like information about our blog, send us an e-mail as per our guidelines. If you attempt to SPAM our blog again, you’ll simply be banned from publishing any further comments about anything.

  9. russia is collapsing? what is new. the country has seen so many collapses in the past that this new crisis is just chiken feed. russia’s strength is not its ability to avoid a collapse but its endurance to survive collapse like a phoenix. since russia to some degree is connected to the world economy, it will recover once everybody recovers. people will always buy natural resources do they? besides everybody is hit by the crisis even richer countries not to mention the other former SU countries. the only difference is that some countries like the UK has huge credit line so they can pile debt all they want.

  10. I think the key problem some of the Anti-Anti-Russian mob have is that they expect this crisis to be the same as the previous crashes/default.

    It wont, many of you wont like this but in all honesty I’m hoping Russia doesnt collapse because if it does it’ll do the one thing it knows how to do, start a war with a weaker enemy. So for the sake of Ukraine, Georgia et al. War has been and most likely always will be a way of revitalising a failing economy, and with its back against the wall, Russia wouldnt even hesitate to wipe out some of its ‘non-compliant’ (read: dont suck up to the Kremlin cretins) neighbours .

    The macroeconomic factors show the opposite though, even Vladimir Mau, has stated that even if oil reaches 60 $/pb it wont be enough, Russia is being rushed by both internal and external factors and it wont be long before they start their next crusade, I just hope Old Europe has the balls this time round to do something about it.

    PS. I reside in a old europe country

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