Russia Crashes another Party
In another editorial in today’s issue, we highlight the fact that Russia has just been revealed by Transparency International to be the very most corrupt nation in the G-20 organization.
Now it turns out that both Brazil and India, fellow members of the so-called “BRIC” group that includes Russia as well as the G-20, are already disgusted with the organization and are spurning it. This was, of course, supposed to be Russia’s great coming-out party, a new group of independent countries looking to Russia for leadership and acting as a bulwark against a unipolar world dominated by the United States. It is turning out to be another classic Russian boondoggle, an illusion rather than a reality.
Once again, in other words, we see Russia being revealed as a totally isolated country, unsuitable and unqualified for membership in any civilized group of countries and unable to establish a leadership role in any organization. Russia imagines itself a leader, but in fact it is not even a follower.
Streetwise Professor reports:
La Russophobe pointed me to this interesting post from the Conde Nast MarketMakers blog. The post discusses credit spreads for BRIC countries (Brazil, Russia, India, China). These credit spreads measure the creditworthiness of the sovereign debt on each of these countries. The higher the spread, the bigger the market’s estimate of a default (and/or the greater the market’s estimate of the loss conditional on default.)
You will note that as the credit crisis has exploded since late-August, all of these spreads have blown out, meaning that the market estimates that their risks of default have exploded. And surprise, surprise, surprise (cue Gomer Pyle voice), guess whose risk exploded most? Your favorite country and mine, Vlad’s paradise, that island of tranquility in troubled economic times.
In a nutshell, the market has deemed Russia the junkiest of the junky BRIC sovereign credits. And to think, this is the spread on government debt, the government that is sitting on $500 billion. Think of the market’s assessment of the credit risk of the “private” borrowers, eg Deripaska, Fridman/Alfa, Gazprom, Rosneft who are queuing up hat-in-hand to get charity from that government. Well, perhaps one reason for the wide spread is that market participants estimate that the $500 billion will be largely blown bailing out the oligarchs to keep strategic “crown jewels” out of the hands of the cursed foreigners.