Putin Spending Russia Toward Desperate Times

Russia is running out of money. President Vladimir Putin is taking a strategic gamble, depleting the Kremlin’s last reserve funds to cover the budget and to pay for an escalating war in Syria at the same time.

“GDP was $2.3 trillion at the peak. It is now $1.2 trillion, and I fear we are going back to the level of 1998 when it was $700bn,” he said.

This would be smaller than Holland ($850bn) or half the size of Texas ($1.4 trillion), a remarkable state of affairs for a country vying for superpower military status in Europe and the Middle East.

__ Source

Russia’s GDP in $US terms has been cut almost in half over the past 2 years. It continues to fall as the Putin recession deepens and Russia becomes more and more over-extended.

Poverty is descending upon the Russian people, from the periphery inward to Moscow and St. Petersburg. Russia has about one more year of reserves left, before the excrement hits the rotating ventilation blades.

The Kremlin is launching a radical plan to slash imports across twenty key sectors within five years, ranging from heavy machinery to electrical engineering, photonics, cars, tractors, chemicals, pharmaceuticals, and food.

The targets are drastic. Reliance on foreign farm and forestry machinery is to be cut by 56pc, food processing by 53pc, and engineering equipment by 34pc. State procurement contracts will be steered to companies that produce in the country, whether or not they compete on quality.

But the switch-over costs money that the government does not have… Vladislav Inozemtsev, from the Center for Post-Industrial Studies in Moscow, said the likely outcome is a retreat into autarky and pauperised decline, ending in withdrawal from the global trading system. “This way leads us towards a quasi-Soviet economy detached from the world and, at the same time, proud of its autarky; towards a deteriorating economy which compensates for the drop in living standards with pervasive propaganda,” he wrote. __ Russia Retreats as Poverty Looms

Russia under Putin is now officially screwed.

… Putin’s geopolitical maneuvering is undercut by the deepening recession in Russia’s economy, which he tries to talk away by asserting that the “peak of the crisis” has already passed (Novaya Gazeta, October 16). The government has revised downwards its forecast for the contraction six times this year, and will likely have to continue this search for the bottom as the decline continues into next year (Rbc.ru, October 16). Manipulations of macro-statistics can camouflage the dynamics of the downfall, but there is no way around the fact that the state budget is shrinking fast, and the social programs suffer the most (Moscow Echo, October 16). The hopes for a strong recovery of oil prices are fading and giving way to fears that Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) are pushing Russia away from its traditional European market (Meduza.io, October 16). Even the politically privileged Gazprom has sunk deep enough into inefficiency and negative profitability that the government appears ready to consider a plan for splitting up this unhealthy monopoly (Newsru.com, October 16). __ Putin’s Desperation Hurts Russia

Power in Russia wielded from the shadows — A government like Stalin’s.

Every Russian citizen is considered expendable by Putin’s crony regime. Putin must destroy Russia in order to save it.

The unspoken agreement between Russian leaders and citizens consists of a readiness to deceive and to be deceived. One is impossible without the other. The Kremlin very openly admits that it cannot influence key factors affecting Russia’s economic well-being: the prices for oil, gas and metals as well as the interests of politicians and investors in both the East and the West. __ Workings of a Propaganda State

One expects Russians inside Russia to voluntarily swallow the Koolaid. What is surprising is how many outsiders in the west willingly chugalug the vile mix.

The failures of Russian cruise missiles and the lack of Russian “smart bombs” are becoming an embarrassment to a nation that aspires to superpower status. This is 1960’s technology, and Russian industry cannot keep up with that. China has easily outpaced its Russian counter-parts — which is very bad news for Russian ambitions in the global arms sales business.

Putin has added hundreds of $billions in costs to the Russian budget, at the same time that government incomes have plummeted — and at the same time that the ability of Russia to borrow hard currencies and western expertise have been blocked by western sanctions.

Saudi Arabia is not letting up on oil production, forcing Russia to come up with more significant budget cuts for the near future.

A REAL EYE-OPENER: The Long-Term Systemic Roots of Russia’s Ongoing Recession


For Putin, Showing Off is Worth More than the Long-Term Survival and Well-Being of Russia

Some analysts have drawn comparisons to the Soviet war in Afghanistan. But the Soviet Union had cash to spare when it sent its army into Afghanistan in 1979. Oil prices were high, and plentiful export revenues from crude could be funneled into the conflict.

Russia’s intervention in Syria comes at the opposite end of the cycle. The price of oil is at its lowest in more than a decade, and the country is in a fiscal crisis.

The move also comes amid a wider increase in Russian deployments abroad. Moscow is expanding its bases in Syria, the Arctic and former Soviet republics, particularly in Central Asia, where it warns of a rising threat of terrorism spilling over from Afghanistan.

Social spending, in the meantime, is being reined in. The government is poised to abandon a pledge to raise pensions in line with inflation: Prices are set to rise by about 12 percent this year, but the Finance Ministry says it can afford to raise pensions by only 4 percent.

… Russia has not yet seen the kind of military-commercial cross fertilization that led to the development of inventions like the Internet in the U.S., and with 20 percent of state spending going to defense, some analysts have said an unproductive military sector is squandering too many resources that should be invested in education and health care.

… More immediately, cuts to pension payouts and public sector wages will also only exacerbate a slump in consumer spending that is contracting the economy.

__ The Suicidal Cost of Vulgar Brashness

But this is Russia. Most of the shadowy new spending on military upgrades will likely end up in the Swiss and Maltese bank accounts of Putin insiders and military officials. Any new spending initiative in Russia — no matter what the putative purpose — is only an excuse for more graft, under Putin’s rule.

Perhaps the airlines should have requested re-routing away from the conflict zone, or perhaps Putin should have closed commercial overflight routes over areas where his anti-aircraft missiles were positioned on a hairtrigger. But that is all second-guessing. Who would have imagined the Russian missilemen would have been such barbarians or incompetents? Who indeed?

Ukraine joins the UN security council with the assent of China

Since Russia’s annexation of Crimea, China has expanded its commercial links with Ukraine, which this year surpassed the United States as the largest importer of Ukrainian corn, according to the Financial Times. In the end, Ukraine – which ran uncontested — secured a respectable 177 votes for its Security Council bid from the 193-member General Assembly.

… Putin, he said, is desperately in need of friends and has been seeking to cultivate closer relations with China. But China, he said, has remained uncommitted and uneasy because of Russia’s military actions in Ukraine and Syria.

Why oil prices are likely to remain low

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2 Responses to Putin Spending Russia Toward Desperate Times

  1. Matt Musson says:

    Mark Levin seems to think that Putin’s end game is to invade or intimidate Saudi Arabia into raising the price of oil. It could be true.

    • alfin2101 says:

      Putin has been trying everything he could think of to push oil prices higher — except to lower production. He cannot afford to do that and lose even more market share to Saudi Arabia.

      Russia is stretched to its limits, invasion-wise. It had to pull its best troops out of Donbass to go into Syria. Just keeping the Kremlin propaganda machine going and the Potemkin military facade from collapsing is almost more than Russia’s battered economy can do.

      Granted, it can do a few more of the Crimea-style “little green men” type invasions, as special training for particular units of the military and internal security forces. But only one at a time.

      Al Fin’s advisors were some of the few who had been expecting the Soviet Union to overextend itself and fall apart more than 5 years before it happened. They are beginning to get the same feeling about Putin’s Russia.

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