EDITORIAL: The Foundering Putin Economy


The Foundering Putin Economy

Last week saw another epic tidal wave of bad economic news sweep over the helpless shores of Vladimir Putin’s Russia.

It was announced that Russia had lost a whopping $30 billion in capital flight last year, a stunning four times more than the Kremlin had predicted would occur.  The bloodletting continued in shocking fashion this year, when capital outflow in January alone reached $13 billion despite a rising oil prices that should have redirected foreign money towards Russian assets.  At this rate, capital flight in 2011 will be even higher than it was last year.

Then the world learned that Russia has the lowest foreign investment rate of any emerging economy on the planet. Major retailers like Wal-mart and Carrefour have rejected the Russian market entirely, while others like Ikea have ceased further investment.  Foreign banks too, it was reported, are fleeing the Russian market, lest their capital be stolen by the so-called “government” they find there.

Bloomberg reports:

Vonnell Martinez, founder and chief executive officer of Vim Resources, a Miami-based investment firm, put a plan on hold in November to set up a $100-million equity fund in Russia because he decided he couldn’t risk investing other people’s money in the country. “All the uncertainty and political threats that are constantly attacking you, it crushes investment,” he said. “If you grow too big, you’re speculating and then you put yourself under the whim of people who can destroy your business from one day to the next.”

As if to prove him right, it was reported that McDonalds is so horrified by the Russian market that it refuses to sell franchises to any Russian owners, fearing its brand would be contaminated by corruption. Instead, unlike almost any other country on the globe, McDonalds itself owns all its Russian restaurants.

And as we report in another editorial in today’s issue, Russia stands to lose billions in defense industry income as its gallery of rogue “allies” around the world fall like dominoes, one by one.

Finally, a story from Reuters informed us that despite horrific risks to health and safety, as well as appalling weather and gloomy darkness, young Russians are flocking to the godforsaken city of Norilsk because the mines there pay wages that seem like a fortune to Russians — $15 per hour!

All this is nothing more, of course, than the reflection of the rabid hatred of foreigners that pervades Russia, hatred which is shameless encouraged by the Putin regime to Russia’s lasting detriment.  Even as Russia’s domestic economy implodes, Russians smugly thumb their noses at the world that might invest and save Russians from themselves — just as was done in Soviet times.

How will Russia’s fate, then be any different from that of the USSR?

6 responses to “EDITORIAL: The Foundering Putin Economy

  1. Foreign banks too, it was reported, are fleeing the Russian market, lest their capital be stolen by the so-called “government” they find there.

    Just starting to laugh.
    Foreign bank are “fleeing” — because they *completely lost competition* to russian banks.

    Sberbank and VTB, both state-run and Russia’s top two banks by assets, are gaining clout. Sberbank has almost 20,000 retail branches and is plotting a move into investment banking. VTB, once the Soviet foreign trade bank, has more than 530 branches nationwide, and its investment banking unit is the biggest underwriter of bond and equity sales. On Feb. 22, VTB agreed to buy the Moscow government’s shares in Bank of Moscow for $3.5 billion—the biggest acquisition by a lender in the country.

    As domestic banks bulk up they are squeezing out foreign rivals.

    In other words, the foreign banks are *total loosers* in russian market, weeping and crying about it.

    • In other words, you illiterate idiot, Russia’s tiny economy is too puny to support the presence of foreign banks? Do you think AT ALL before you write?

      Did it occur to you to wonder whether domestic banks are bulking up and squeezing out because of fraud and corruption in their favor by the Russian state?

      If Sberbank is really such a great operation, how come it doesn’t compete in Western markets, Mr. Monkey? Can you think AT ALL?

      Do you REALLY think it’s a good thing for Russia that the West’s biggest banks are leaving? Are you that hysterically insane?

      But wait, let us guess: Russia already has so much money, it doesn’t need or want any more, right?

      With “friends” like you, Russia needs no enemies.

      • “Do you REALLY think it’s a good thing for Russia that the West’s biggest banks are leaving? Are you that hysterically insane?”

        Are you really *that* stupid?
        The western bank are leving, because they are loosers, and can’t stand competition. If some loosers are leaving, this is neither good nor bad for Russia. I don’t even think Russia even bothered to notice. This is entirely *their* problem, not *ours*.

        (BTW, your abysmal ignorance and clinical cretinism is entirely you problem, too.)

  2. Hey! Russophobe!You are Russophile in reality! You are crying about Russia loosing Western investments and streaming to peril is the crys of all Russian nationalists from Pobedonostsev to Kvatchcov! Yes the great Empire is in the past and todays Russia is fighting with its imperial past. This fighters are the mixture of “patriotic intelligentcia”,retired militaries, commies and lumpens of all sourts.Todays Russia is the country of the Third World but the country happy with its great natural resourses. The plans of creating “liberal Empire” are ruined,but there are some light before.

  3. Foreign banks fleeing the Russian Market?
    Because of corruption? Because of bureaucracy? Because it’s a tough market to work in? Because the conditions are getting tougher? Or is it simply because there is no need for their presence. Let’s face it; With $ 30 billion dollars capital flight in 2010 from Russia, there is really no need for any foreign bank to be present in Russia. The Russians are bringing the money across the border themselves

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