EDITORIAL: Russia, Enslaved

EDITORIAL

Russia, Enslaved

Two weeks ago, investors began worrying that the Chinese government would raise interest rates in order to keep the reins on inflation as the Chinese money supply outstrips production.  If it happened, it would be a sign that China’s recovery from the global financial crisis was faltering, since increasing rates would reduce the amount of capital available for investment and growth.  That would mean reduced Chinese demand for many foreign imports, chief among them crude oil.

Immediately, the price of crude began to fall, between January 19th and January 29th shedding over 6% of its value.

Russian stocks immediately fell as well, dropping well over 5% of their value during the same span.  The Goldman brokerage house issued a warning to investors to abandon their Russian positions in order to avoid being caught in a wicked backlash.

Russia was revealed, once again, to be a helpless slave of the crude oil markets even though it is ranked as the 55th least globalized of 60 major world economies because of the relentless isolationist policies of Vladimir Putin.  That is a true testament to the pathetic weakness of the economy Putin has built.

Despite the fact that he constantly harangues the world about Russian independence, what Vladimir Putin’s policies have actually done is to enslave the country.  When the global economic crisis struck, Russia’s economy was instantly devastated, and suffered far more in fact that most other nations.  It’s stock market was almost literally wiped out, its currency imploded, and its savings were eviscerated.

All after ten long years of rule by Vladimir Putin, years during which Russia did exactly nothing to diversify its economy.  To have done so would have diverted all those precious funds that Putin needed to reignite the cold war and wipe out domestic civil society.

When the price of oil was high, Russia strutted and preened at the Davos international economic forum as if it owned the world.  This year, nobody cares about Russia, except those who are interested in hearing about how Russians steal the assets of foreign investors and murder their Russian allies.

The global economic crisis laid Russia bare.  The world now sees what Russia really is:  A pot of oil with a fat, lazy, clueless KGB spy sitting on top.  It’s not a pretty picture.

4 responses to “EDITORIAL: Russia, Enslaved

  1. Great website, a must-have in your bookmarks. Now I wait multimedia contents especially videos and flash games

  2. The Russian government spent over $200 billion, or 14% of GDP, supporting the Russian economy during the crisis, with much of that going to businesses and banks.
    But just how much of the money that was lent out was put to an effective use is debatable, and Garegin Tosunyan, head of the Association of Russian Banks, says the analysis is not comforting.

    “There are experts who estimate that 1 point of government anti-crisis aid provided 1 point of efficiency in countries like the US. In developing countries it was around 0.5 and in Russia it was even lower, at 0.01,” Tosunyan claims.

    It is hard to believe that Moscow’s aid was one-hundredth as effective as that handed out by Washington, but even with a more sympathetic assessment of Russian efficiency, many questions need to be answered. The most important of them is what the government can do to get more bang for its buck in the event anti-crisis measures are needed again, which could be all too soon if there is a double dip recession.

    With oil prices falling back to almost $70 per barrel (Russia needs $75 to meet budget requirements) plus an expected summer default on loans of over 12% compounded by a serious lack of economic diversity and foreign investment, the Russian state may well have to step in again to support its fragile economy. This time with a much reduced stabilisation fund, the signs are not good.

  3. The weaker they are, the better for the neighborhood.

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