The Putin Economy, on the Verge of Collapse

Anders Aslund, writing in the Moscow Times:

When Russian leaders review the country’s economic development in 2010, they can only be disappointed. There were no great economic disasters, but Russia has clearly underperformed its peers.

Until 2008, the favorite Russian measuring mark was other BRIC countries, but that is no longer so. In 2009, Russia did worse than all other Group of 20 countries with gross domestic product plunging 7.9 percent. This year, growth will be about 4 percent, less than half of India’s and China’s.

Two years ago, Russia’s GDP per capita at current exchange rates was four times as large as China’s, but now it is only twice as large. From Moscow’s horizon, China looks increasingly like a threat rather than a peer.

Putin: What is wrong with Russia

Anders Aslund, writing in the Moscow Times:

Some advice to a young Russian woman: “It is better to marry a top state official than an oligarch. The money is the same, but job security is so much greater.”

All surveys show that Russia’s pervasive corruption is increasingly concentrated to the top. What is the cost of Prime Minister Vladimir Putin? The stock market discount of Russia in relation to Brazil is 45 percent, almost $1 trillion. The Russia risk equals the cost of Putin. It reflects Yukos and other confiscations, as well as Putin’s interference in private business. For example, two years ago, Mechel’s stock price fell by half in the days after Putin’s reckless attack on its main owner.

Vladimir Putin: Lonely and Weak

Anders Aslund, writing in the Moscow Times:

Russia’s relations with its neighbors are worse than ever, and this is particularly true among the former Soviet republics. On Oct. 9, the Commonwealth of Independent States held its annual summit in Chisinau. The Nezavisimaya Gazeta headline said it all: “Summit in 30 Minutes. CIS Leaders Had Nothing to Tell One Another.”

Georgia left the alliance on Aug. 18. Among the remaining 11 members, only six presidents arrived — from Russia, Belarus, Ukraine, Armenia, Azerbaijan, and Kyrgyzstan, while the host country, Moldova, temporarily has no president. Even the strongest proponent of multilateral cooperation in the post-Soviet region, Kazakh President Nursultan Nazarbayev, chose to stay at home. Needless to say, nothing was accomplished.

To aggravate things further, President Dmitry Medvedev refused to meet Ukrainian President Viktor Yushchenko and Belarussian President Alexander Lukashenko. Will Lukashenko attend another CIS meeting after that insult? Everybody left quickly after their half-hour meeting and even skipped the planned gala dinner. The CIS is Russia’s baby, and its failure is also Russia’s.

Aslund on Appalling Russian Hubris

Anders Aslund, writing in the Moscow Times, on the horrifying scope of Russian arrogance:

Do you remember the Kremlin hubris of the summer of 2008? Forget it! The ruble cannot possibly become a reserve currency for the next half-century. To become a major financial center, Moscow needs many years of serious reforms, not even contemplated today.

In June 2008, Prime Minister Vladimir Putin proclaimed, “We have no crisis.” Also President Dmitry Medvedev thought that Russia would escape the crisis and said, “Russia has not yet carried out a number of reforms … and has thereby managed to avoid some serious mistakes.”

Medvedev’s speech to the St. Petersburg International Economic Forum on June 7, 2008, marked the peak of hubris. “We have set ourselves the not very easy goal of setting Russia on an innovative development track and becoming one of the world’s five biggest economies by 2020,” he said. “The transformation of Moscow into a powerful financial center and the transformation of the ruble into one of the leading regional reserve currencies are the key ingredients to ensure the competitiveness of our financial system.” Dreams can be useful if they help people doing the right things, but these mirages were a pure distraction.

Aslund says Russia is the Black Sheep of BRIC

Anders Aslund, writing in the Moscow Times:

First-half results are arriving, presenting many countries with shocking declines, but the record is quite varied. Whatever standard we choose, Russia is underperforming.

The country’s natural comparison is with the BRIC countries — Brazil, Russia, India and China. According to JP Morgan’s current forecast, this year the gross domestic product of China is expected to grow by 8.4 percent, India — 6.2 percent, while that of Brazil is expected to shrink by 1.0 percent, and Russia — 8.5 percent. During the first half of 2009, China and India have been forging ahead, while Russia’s GDP plunged by 10 percent.

Gazprom on its Knees

“In their excellent book, Putin and Gazprom, former Deputy Prime Minister Boris Nemtsov and former Deputy Energy Minister Vladimir Milov clarify the real purpose of Gazprom: to transfer assets out of the company to government officials.”

Anders Aslund, praising Nemtsov’s attack on Gazprom (which we translated) and writing in the Moscow Times:

Gazprom has gone from being a great commercial hope to an ailing giant. Gazprom’s owners need to face up to the crisis and institute reforms.

A year ago, Gazprom was the third-most valuable company in the world with a market capitalization of over $350 billion. It has shrunk by two-thirds to about $120 billion, declining to the world’s 40th-largest company, even though it still accounts for about 20 percent of Russia’s market capitalization and roughly 10 percent of its gross domestic product.