By His Own Shackles Bound

Putting all your honey in one jar is something no wise bear would ever do. By the same token, wise bears don’t shit where they eat. Perhaps this bear is not so wise after all.

As the bear grows hungry in these coming years, Russians should brace for being squeezed more tightly still and so too should Russia’s neighbours.

“There is the potential for much greater violence from the state against difficult people,” says Dr Besemeres, the ANU academic and former government official. “Unfortunately, European wars are no longer unthinkable.” …

… Russia’s central bank began forecasting a staggering 4.5 per cent contraction in GDP next year, and that was before the rouble currency fell through the floor. Last week, as the rouble collapsed, the central bank forestalled a financial crisis by hiking interest rates to 17 per cent, which has virtually guaranteed a recession even more savage than previously predicted.

The fall in oil prices to US$60 since has been so sudden, and so perfectly targeted against Putin’s potentially fatal weakness, that normally-sober commentators have presumed an act of geopolitical warfare. “The United States and Saudi Arabia decided to hurt Russia by driving down oil prices,” wrote The Guardian’s economic editor, Larry Elliott. __Great Expectations Dashed

Putin was warned over a decade ago that he needed to use Russia’s windfall oil & gas profits to diversify Russia’s economy. Instead, he behaved like a vulture capitalist, using the power of the state to steal Russia’s wealth from those who had developed it, stripping Russia’s economy to its bare bones in the process.

Russia had also planned for $100-per-barrel oil in its 2015 budget.

Now, we’re approaching almost half that price . . . and oil revenue accounts for roughly 45% of Russia’s income.

… investors should keep in mind that Russia is in serious trouble, and thus the markets are acting downright spooked. — http://www.trefis.com/stock/rsx/articles/271162/russia%E2%80%99s-influence-over-the-price-of-crude-oil/2014-12-22

Putin is making Russia suffer, but most of the suffering is well out of sight. Russia’s critical infrastructures are taking the brunt of this quickly escalating crisis.

How this man has an 80% approval rating in Russia is beyond me. It’s as if the fascist nightmare that set off World War II has escaped the collective memories of the Russian people. __ Can Putin Save Russia?

Putin “has an 80% approval rating in Russia” for two reasons: Stressed-out Russians are desperate for easy solutions to difficult problems that have been building for over a century, and nothing that comes out of Russia can be believed at this time. Putin’s “pep rally” ultranationalist rah! rah! “non est mea culpa” sermons to the captive choir can only be holding actions, as the tide turns.

Full-fledged economic crisis on the way

Both were in east Germany in 1989 – he as a KGB officer, she as a young scientist – and the lessons they drew were diametrically opposed. In domestic politics she can appear the perfect tactician, tacking this way and that, ruthless as Catherine the Great in seeing off challenges to her power. But in this European crisis, two profound, personal commitments of a Protestant east German of her generation have come to the fore: to peace and to freedom.

In a powerful speech delivered in Sydney last month, she excoriated what Putin has done in Ukraine, referring back to the shared experience from which the two leaders drew such different conclusions: “Who would have thought it possible that 25 years after the fall of the Berlin Wall … something like this could happen in the middle of Europe? Old thinking in terms of spheres of influence, whereby international law is trampled underfoot, must not be allowed to prevail.”

Earlier in the same speech, she reflected on the lessons of 1914. She has thought hard about the argument made by the historian Christopher Clark in The Sleepwalkers, his masterly account of how Europe stumbled into the first world war. If European leaders went sleepwalking 100 years ago, they must learn the lessons of history and wake up to the danger today. That is why she has talked to Putin more than any other world leader has: 35 phone calls in the first eight months of this year, according to figures released by the Kremlin. (Tellingly, she is also the world leader to whom the American president has spoken most often.)

As she never tires of repeating, her strategy has three prongs: support for Ukraine, diplomacy with Russia and sanctions to bring Putin to the negotiating table. To see Germany leading the way in economic sanctions against Russia is extraordinary. In the early 1990s, I wrote a history of West Germany’s Ostpolitik, culminating in German unification, and the first commandment of that Ostpolitik was that eastern trade should always go on. Sanctions were called for by the US and resisted by Germany. Today, Germany has more trade with Russia than any other European power. Its energy, machine-tool and other eastward–oriented businesses form a powerful lobby, not least within Merkel’s own Christian Democratic Union. Yet she has taken them down the path of sanctions.

Of course Putin and the Russian separatists in eastern Ukraine helped, especially with the shooting down of a Malaysian airliner in July. But, unlike in the eurozone crisis, she has led rather than followed German public opinion. She has faced down the so-called Putinversteher – those who show such “understanding” for Putin’s actions that they come close to excusing them. She has made the larger arguments, from history, about Europe, and they have resonated. I was particularly impressed by an interview I read with the boss of a German machine-tool company whose exports to Russia have been roughly halved following the imposition of sanctions. Yet this German industrialist said he fully supported them: “If [Neville] Chamberlain had imposed some sort of sanctions on Hitler, things would have been different. Both Hitler and Putin held their Olympics, and after his Olympics, Hitler went to war.” __ http://www.theguardian.com/commentisfree/2014/dec/22/angela-merkel-russian-europe-russia-german

I Tell Ya' It Ain't My Fault! http://www.bbc.com/news/magazine-30539355

I Tell Ya’ It Ain’t My Fault!
http://www.bbc.com/news/magazine-30539355

Vladimir Putin accused the US and EU of conspiring to weaken Russia at his end-of-year news conference on Thursday, but as the country’s economy tanks he has nobody to blame but himself… __ Is Putin Russia’s First Black President?

Blaming others for one’s own problems is the mark of the incompetent, and those of low intelligence. Blaming others for one’s own inadequacies is the trademark of the American black community, and apparently of Putin as well.

Groundhog Day for Russia

More: Is Putin finally making some progress?

Details on Russian fallout from Putin’s failure to diversify Russian economy during the rich decade of windfall oil profits

Putin to Russians: Eat bread, drink vodka

Putin’s Eurasian Empire is a dud

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14 Responses to By His Own Shackles Bound

  1. A.B Prosper says:

    I have to agree on the Russian Oil Curse idea here. All resource states suffer from it and it takes a herculean effort to prevent it.

    I will say though, I wouldn’t count Putin or the Russians out. The leaders in the West can certainly hurt them but unlike us, Russians aren’t entirely economic creatures and in some respects thrive on bad conditions, I don’t think our efforts will change many minds or empower his foes too much.

    Also its not like we are great shape either, the oil price drop is none to good for our oil self sufficiency (or the bubble depending on how you see hydro- fracturing) and even the recent 30% decline in gas prices doesn’t create enough extra income to make the Western Economies grow for even a few months or even save Christmas in the US.

    We are as sickly and enervated as the Bear is and not much more of a recovery chance. Our TFR is actually lower.

    Also re: Cyber War. Seriously, we just lost a fight to North Korea. Seriously,one of the poorest and sickliest countries on Earth kicked our virtual butts and while we can replay by shutting of the Internet for them, they are not stupid, can and will work around it and assuming it actually is them, can and will repay the favor.

    I suspect that if push came to shove, many of those things North Korea threatened us with could be easily done by Russia. Heck they could at will assuming they already haven’t got the keys decrypt the Snowden documents and use them.

    Even if somehow his encryption is too hard to break I remind you of the old XKCD strip

    If they don’t feel like leveraging Snowden, his girlfriend is in Russia and if the US has no trouble getting people to do nasty things to people, I doubt Russia does,

    Simply, Russia doesn’t want to be like us and we can’t make them do it . So far, now they’ve mostly played nice outside the Ukraine anyway and even when provoked many times been pretty mellow. My though though is its most unwise to keep poking a bear, especially a hungry angry bear with a stick.

    • alfin2101 says:

      “Russia doesn’t want to be like us . . .”

      There is no such person as “Russia.” Some Russians very much want to be like westerners, and tens of thousands leave every year to do just that — generally among the young, the most ambitious and most fertile.

      Retired and active Russian civil servants along with mob bosses and political science majors at MU make up Putin’s most loyal constituencies. But in the background Russia’s crucial infrastructures are crumbling. They never show you that.

      The only one counting Putin out is Putin himself, and he is doing a good job of that. He is the Wanker of the Year.

      • A.B Prosper says:

        Agreed that some Russians would like to be like us. And also agreed about young and ambitious. Not sure about fertile. Russian expats probably don’t have an especially highly TFR. I’d also add well heeled since expatriation is often expensive and difficult.

        As for infrastructure, well sure but so is the Wests. The US is getting roughly a D+
        http://www.infrastructurereportcard.org/ as of 2013 and is no more functional than Russia.

        Europe is so wrapped in Cultural Marxism and Green whackjobbery that they will destroy their own industrial base soon enough and if kept up too long, some places like the UK will end up 2nd or 3rd tier societies with failing infrastructure, endemic sectarian violence and intermittent power. In other words about as well as Russia. Of course they may end up with nationalists in charge by violence anyway in which isn’t really that different.

        Also many of those same nationalists are pro Putin too.

        Heck one last example, 2/3 (65%) of all US youth are on assistance of one kind or another. 2 out of 3 suggests a highly dysfunctional economy . The normal solution would be to mitigate immigration, make economic reforms and so on. We will do none of these, we can no more do them than Putin can move away from being a petro-state.

        As such my argument isn’t that Russia is great, its not, but that it is in the long run not going to be that much worse off than the West. Given the Oligarchs and Cultural Marxists that run the West and the better than average chance of a civil war or martial law or whatever its plausible that a poorer, rougher Russia will outlast us.

        As you say though. never to late for a dangerous childhood

        • alfin2101 says:

          I know several Russian immigrants to the west, and they do indeed tend to be fertile — about twice as fertile as native westerners, or more.

        • alfin2101 says:

          As for the issue of decaying infrastructure, one must understand that the same words can mean different things when applied to different countries. Take the concept of “poverty” in Canada vs. “poverty” in Sierra Leone. The same word, completely different realities.

          The same thing applies to “infrastructure decay” in Russia vs. “infrastructure decay” in North America. The same words, different realities, not only in quantitative ways but in qualitative.

      • Imperator says:

        I disagree with your claim that “tens of thousands” of Russians are migrating to the west each year, in the first 10 months of 2014, total net migration to the US, Canada and Germany combined amounted to only around -2,000, in the same period for 2013 it was -400, hardly numbers which are a cause for concern. You can go and have a look on the Rosstat website yourself, look at “Demographics on 1st November”
        http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/population/demography/

  2. bob sykes says:

    Applying the usual cui bono criterion, the most likely suspect for the shoot-down is the Kiev junta or one of its Nazi allies, either Right Sector or Swoboda. They scored a propanganda coup. Russia and the separatists had nothing to gain and much to lose. That said, the shoot-down was likely a mistake.

    As to Russia, there will be not collapse. However, the very aggressive economic warfare now being conducted by US/EU against Russia will eventually lead to some sort of reprisals,hopefully economic and political only. The rerouting of the southern pipeline through Turkey and the growing economic and political ties between Turkey and Russia are omens of things to come. A large-scale restructuring of the world political system is underway, and the US/EU will have a diminished, albeit substantial, role in it. The center is moving to Asia, and Putin’s talk of a Eurasian bloc will almost certainly come about.

    Also, it is not just oil whose prices are falling, all commodity prices are falling because of declining demand. The world is plainly falling into recession, and some parts like the Middle East and southern Europe are in full-blown 1930’s style depression. We are likely in a deflationary spiral. The very large, unprecedented pump priming in both EU and US has had no effect on inflation, which is a sure sign of deflationary processes.

    Finally, one has to consider the very dirty, depraved policies of the current EU/US Ruling Class. Obama is literally a serial mass murderer with hundreds if not thousands of murders on his hands. The drones often if not usually miss their targets but they always kill dozens of bystanders. Combine that with the Ukrainian coup d’etat engineered by the US and US/EU/NATO foreign policies that amount to mere vandalisn with no apparent goal other than killing and destruction, and you have a very ugly picture indeed. The US/EU are terrorist states and the real Evil Empire.

    • alfin2101 says:

      At least we should agree on one thing — global demand is declining, and has been since for several years — since the big financial crash. All the global stimulus since 2008 has not been able to jack up legitimate and sustainable demand.

      The coming dysgenic idiocracy — something we at Al Fin have been warning about for over half a decade — is already showing early results.

  3. JRoy says:

    Applying the usual cui bono criterion, the most likely suspect for the shoot-down is the Kiev junta or one of its Nazi allies, either Right Sector or Swoboda.

    The evidence criterion is preferable if you are interested in the truth, which I doubt given that you STILL think Nazis are running Ukraine. (Russian definition of Nazi = Anyone who disagrees or ever disagreed with a Russian leader!)

    The overwhelming circumstantial evidence, virtually none of which came from any government, suggests the Russian rebels shot it down thinking it was Ukrainian. Their post-shootdown antics suggest they know so as well. Whether there should’ve been a moratorium on all flights over the area is a legitimate question but unfortunately it didn’t really get discussed as everyone was too busy promoting or debunking the dozens of (often contradictory) Russian conspiracy theories being spit out by their media and trolls every other hour. IOW with their decades (centuries?) old knee-jerk finger-pointing and inability to ever accept any responsibility for their actions (even accidents) the Russians missed a chance to put the Ukrainian government on the defensive. If they had done so MH17 might have been a politically neutral event in terms of Ukraine v Russia. Unfortunately it is not the only area in which Russians can’t seem to shake old habits.

    • alfin2101 says:

      Anyone who still admires Putin’s Russia must necessarily battle a great amount of cognitive dissonance. Much of it will be pushed into the subconscious, where it can be ignored — but it takes its toll out of sight.

      The internet is being flooded by paid Russian trolls posing as all kinds of ethnicities and nationalities — but they are usually very transparent. Some commenters here seem to really believe the Kremlin party line propaganda that they write. Sometimes I worry that the Kremlin may sue some of them for plagiarism. 😉

  4. Imperator says:

    I would just like to highlight that Russia’s oil revenues have not been affected by the drop in oil prices due to the fact that Russia’s oil revenues are based in Rubles and not dollars. The 2015 budget is based off a price of $96 at an exchange rate of 37.7, around 3,620 Rubles per barrel, current prices and rates: $60 x 55 yields 3,300 Rubles, only 9% below the 2015 budget target.

    • alfin2101 says:

      You are correct as far as that goes. And it doesn’t go very far, given the foreign indebtedness of Russian oil & gas companies, and their dependency upon the expertise of overseas oil cos and oil services cos.

      The Kremlin is whistling past the graveyard.

      BTW, after recent increases in expenditures for propaganda, spying, cyber-war activities, nuclear weapons upgrades, etc. 2015 breakeven costs are acknowledged generally felt to be above $105 bbl. Probably well above. In my opinion, point estimates for fiscal breakeven are always wrong. It is better to provide a range, eg $120 to $145 bbl, rather than a point estimate. Kremlin “estimates” for fiscal breakeven are pure fantasy.

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