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.
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?