The only… option is to leave the country — but where to go? The closest and simplest destination is Europe, but there terrorists have killed the editors of Charlie Hebdo, and the euro costs more than most Russians can afford. It seems that a very difficult year has begun, and not only for Russia. __ Russia Sliding Into Chaos Pulling the World Along With It
The Misery Begins in Russia and Spreads Out from There
Russian authorities are calling for calm, as the misery of economic decline sets in. Purchasing power of Russian savings has been cut in half. Inflation is headed toward 20%. Interest rates are likewise heading toward 20% and perhaps much higher. Unemployment is rising in lockstep. Misery inside Russia was already high, but thanks to Putin it is spreading rapidly.
Russian wallets: This year could see the first decline in real incomes in Russia since Putin came to power with a social contract that promised rising wealth at the expense of full political participation. According to PISM, GDP per capita will fall to $8,000-$10,000 in 2015, down from $14,000 in 2013. That, added to rising inflation, will mean ordinary Russians start feeling an undeniable pinch in their own pocket.
Public resentment of sanctions: So far, Putin appears to be winning the propaganda war. Since March last year, the number of Russians saying that they care about the country’s western isolation has fallen from around 57 per cent to just over 30 per cent in August. Over the same period, the proportion saying that the were not afraid of the consequences of sanctions rose from around 32 per cent to almost 70 per cent, according to the PISM report. “Sanctions appear to be helping Putin. But lifting sanctions would help him more,” says Secrieru’s colleague Piotr Koscinski.
Putin’s cult of personality: Puiblic approval of Mr Putin;s policies was above 80 per cent in the last quarter of last year, according to the report. That’s the highest level in five years, underscoring sanctions’ use as a blunt object to hurt MR Putin’s standing at home. “Expect more T-shirts with Putin’s face on them being sold on the streets of Moscow,” said Mr Secreiru.
Travel agents: It has not been a good nine months for Russia’s travel industry. Moscow has “advised” officials not to travel abroad, and in July banned public servants from travelling overseas on tickets paid for by foreign entities. As a result, demand for foreign travel fell 50 per cent, an estimated 4-5m foreign journeys by government employees have been cancelled, and 14 Russian travel agencies have gone bankrupt, according to the report. Holidaying in Crimea has been suggested by the Kremlin as an alternative.
How Did Putin Become So Wealthy and Powerful?
Putin’s path to the top of a corrupt oligarchy was a long and tortuous one. Here are a few highlights along the way:
1. The food that never came. During his time as Deputy Mayor of St. Petersburg, the city faced a food shortage. A program allowed the selling of raw materials abroad and the money made would be used to purchase food. Putin promised tons of food. Literally. Two thousand tons of butter and milk for example. But the food never came. City councilor Marina Salye investigated what happened. She says $124 million disappeared. The tons of food never showed up on the shelves. Putin denied the charges and blamed others for it.
2. The vacation villas in Spain. Putin had registered an economic relations committee called Twentieth Trust. The government gave the company 2.5 billion rubles for a construction project. Nothing was constructed. Instead, former police investigator Andrey Zykov says the money went to vacation villas in Spain for Putin and his cronies. No one punished Deputy Mayor Putin.
3. Saving his associates. Putin served as Deputy Mayor under Anatoly Sobchak. In 1996, Sobchak lost his bid for another term as mayor. Corruption investigations followed. But during questioning, Sobchak had a heart attack. He showed up in Paris several weeks later, looking great. Sobchak’s window, Lyudmila Narusova, says Putin helped get her husband out of the country, escaping the corruption charges. This loyalty is also thought to be the reason former President Boris Yeltsin hand-picked Putin as his successor. Yeltsin didn’t want any investigations into his time as president. When Putin came to power, he gave Yeltsin immunity.
4. Putin’s retirement home. Putin has a complicated way of funneling money to pet projects, like a vacation home outside Sochi. Exiled businessman Sergei Kolesnikov says money travels from one organization to another and ends up in a business where Putin owns the majority stake. This helped him build his dream home, a $250 million pad worthy of a modern day czar. Putin says the pad isn’t his.
5. Putin’s getting rich. The various moneymaking schemes have been good to Putin. Back in 2007, Putin controlled assets worth $40 billion. The CIA confirmed this estimate in 2014. He’s one of the world’s richest individuals. So the past couple decades have been good for the former, unemployed KGB agent. __ Little Big Man Realpolitik
10% Budget Cuts Across the Board — Except for Propaganda, Spying, Hacking, and Warmongering
Essential services in Russia had already been cut to the bone. Further cuts are going to hurt at the grass roots, mom & pop level. With rising unemployment, skyrocketing inflation, downgrading of the currency, and a rising sense of what was already a suicidal despair, misery levels are heading well past the red line.
Russia’s economic model for the past 15 years has been based on export of the country’s vast raw materials, primarily energy, by big state-owned and Kremlin-friendly businesses. Then the proceeds are used to buy back Western consumer goods and foodstuffs favored by the population. Those business tycoons, known as oligarchs, made money coming and going on that cycle, but didn’t bother to plow much of it back into domestic industry or agriculture.
The Kremlin, its revenues buoyed by expanding oil prices, redistributed much of that through higher pensions and public sector salaries, leading to a fourfold increase in popular living standards that is still the basis of President Vladimir Putin’s stratospheric public approval ratings. The Kremlin also invested huge sums into grand projects like the Sochi Olympics and an ambitious rearmament program.
That model has been showing strains for some time. But with oil prices plummeting and Western sanctions biting, it is facing its toughest test since the 1990s. __CSM
The military budget has long been a pipeline for diversion of funds to the private accounts of Putin and other oligarchs. Corruption will be the last thing to be cut in Putin’s Russia of misery.
Many parts of the economy, which relies heavily on public spending, will be affected, though Russia’s vast military modernization program and spending on infrastructure reforms will remain untouched as the country tries to reassert its power in the face of the West. ___ Source
Is Russia’s Military Doctrine All Bark and No Bite? Probably not. But given the levels of corruption and incompetence inside the military and the military industrial complex, Russia will get nowhere near the bite that it nominally pays for.
Should Russia fear these American weapons of war? To some extent, perhaps. But Russia should fear what China is doing behind its back far more.
Putin is making the same mistake as [deposed President] Viktor Yanukovych did in Ukraine, giving ever more to his friends and very little to the others. Putin has been very good previously at distributing widely, but now he has tightened it so that it only goes to his close friends, and that is not likely to be popular.
The elite [who aren’t part of his inner circle] are utterly alienated from Putin now. I don’t think they will rise in any way against Putin, but they will take money out of the country as fast as they can, so it will further destabilize the country.
The question is what will happen in the big industrial cities outside the most wealthy cities — Moscow and St. Petersburg. It would be surprising if we don’t see some social unrest down the road, because these are big blows to ordinary people. __PBS
The extremity of the Kremlin’s position shows that Russian leaders have literally “blown a fuse.” Their ability to reflect upon their own words and deeds has given way to knee-jerk reactions that, in contrast to Putin’s rule from 2003 to 2011, provide for no rational end to the current escalation of tensions. __Putinism Threatens the End of Russia
Putin promised the Russian people that the “Russian World” could be reconstituted with no economic costs and loss of Russian lives. The Russian people, thanks to his propaganda, have not yet fully understood this is a lie. When they do, his regime will be at risk.
“Current events in Ukraine… thrillingly avenge everything that was thought impossible … Unrecognized Tiraspol is preparing for a referendum and Russia is hinting that it can officially recognize the breakaway state. And then there will be a Novorossiya – from Lugansk to Tiraspol – like Crimea, ours, regardless of whether there is global recognition and irrespective of the opinions of people in Luhanks and Donetsk. it will exist to counter existing enemies, foreign and domestic. It will cut off Ukraine from the sea … It’s not just revenge – its a national idea. One does not refuse such a chance.”
This is the type of magical thinking that Hitler indulged in, before the fateful decision to war. It is the type of madness that results in ever expanding misery.
Mr. Putin is “the ultimate sugar daddy,” offering protection to his cronies while making young Russian girls swoon with his shirtless photos. No one can stop striving because no one has property rights. As aluminum billionaire Oleg Deripaska puts it: “All that I have belongs to the state.” __ Karen Dawisha
Russians are exhibiting the classic traits of people who are trapped in abusive relationships. And many are still in denial about the nature of their relationship with their leader, even as the abuse intensifies. Harking back to the tsars and Lenin and Stalin, Pomerantsev notes: “The country seems transfixed in adoration of abusive leaders.” __Russians Addicted to Abuse
The Russian government denies they have troops in Donbas but it is an open secret in Russia that they do and too many parents of Russian soldiers killed in Donbas are demonstrating their anger at government efforts to keep them quiet about where their sons died and how. In addition to the parents there is also the problem of Russian soldiers ignoring orders and posting their exploits in Ukraine on Facebook and other social networking sites. There aren’t many secrets in this secret war.
While the angry and Internet savvy parents are annoying the economic problems accompanying the secret war are very public and increasingly terrifying. The government is desperate to deal with the economic problems. For example the government is coercing Russian companies and wealthy individuals to move foreign cash back to Russia. Hundreds of billions of dollars were moved out of Russia by Russian citizens once the Western sanctions began a year ago and that hurt the economy (by depriving Russian businesses of capital). While the state-controlled Russian media is ignoring the impact of the sanctions and the declining oil price most Russians can’t help but notice (and personally suffer from) the high inflation, shortage of foreign goods and rising unemployment.
… the Putin centralization of government power has prevented the economy from growing and becoming competitive. The cost of grabbing Donbas is rising and if too many Russians decide it is not worth it, even the newly rebuilt Russian police state will be in danger. It happened to the czars, then to the communists and it can happen to the next lot of delusional megalomaniacs.
The misery in Russia grows, and spreads outward. There is no reason to believe that the current regime — or any likely future regime that ordinary vodka-drinking Russians might choose — will do anything to reduce this misery that now has a global reach.
France is hurting from Russian sanctions. France is over-invested in Russia, and will pay a price.
Vladimir Putin: International Man of Misery