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Russia Faces Severe Economic Trouble as the Currency Sinks and Deficits Explode

August 15th, 2023 Comments off

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 

 

War is the province of uncertainty. When the ruler of Russia made the fateful decision to invade Ukraine, by all accounts he expected a blitzkrieg that would overrun the country in a matter of days. Now, one and a half years into a vicious war with no end in sight, the chickens are coming home to roost in terms of economics.

Apologists for Putin claimed that the sanctions imposed on Russia were not working, and pointed to the appreciation of the national currency, the rouble, as evidence. In the first months of the war, the rouble did indeed gain value, but for reasons largely ignored by pro-Putin aficionados. In the first place, the cut-off of Western exports to Russia, combined with initially strong oil sales abroad, did improve Moscow’s balance of payments for a period of time, at least on paper. Then there was the monetary tightening engaged in by Russia’s central bank.

The governor of the Russian central bank is Elvira Nabiullina. She is a Yale-trained economist and is widely regarded as an excellent central banker. According to some media reports at the time of Putin’s decision to attack Ukraine, Nabiullina was opposed to the invasion and submitted her resignation, but Putin refused to accept it. Besides being one of the very few women in a senior government position in the Russian Federation, Nabiullina is respected as highly professional by her foreign colleagues. In the wake of the invasion and the swift decline in value of the rouble, she undertook a massive increase in monetary tightening, raising interest rates for a period to as high as 20 percent. This halted the decline of the rouble, and brought about its subsequent appreciation. As the currency stabilized, Nabiullina gradually lowered interest rates.

However, the Russian central bank cannot control macroeconomic trends unleashed by the war. Western countries that were once major customers for Russia’s energy exports have, in a surprisingly short period of time, largely weaned themselves away from Russian oil and natural gas. To replace lost markets, Moscow has been forced to sell its energy exports to other countries, especially China and India, at a large discount. This has eroded revenue earned from Russia’s major export commodity. In addition, the war has added tens of billions of dollars in unanticipated annual military expenditures, while tightening the supply of labor due to army mobilization and the decision by hundreds of thousands of Russians, the majority being young men, to flee the country. Finally, the sanctions have reduced Moscow’s access to large sums of capital, including foreign currency reserves. All these steps have cumulatively had a negative impact on the Kremlin’s finances.

The government’s budget deficit is exploding, and the large current account surplus that existed in the early months of the invasion has been severely diminished. All these developments have eroded the value of the rouble, which dropped in value from around 70 to the U.S. dollar at the beginning of the year to about 100 to the dollar in August.

Predictably, the ultra-nationalist media and blogger community attacked Nabiullina, blaming the central bank for the collapse of the rouble. In part under pressure from the government, the central bank has sharply increased interest rates from 8.5 % to 12 percent, an increase of 350 basis points. This most recent act of monetary tightening has brought a modest appreciation in the rouble that is likely to be temporary. The fact is that Putin’s war has unleashed a torrent of negative macroeconomic trends. While Russia’s large energy and agricultural sector renders it immune to total economic collapse, the nation is likely to experience increasingly sluggish and even negative economic growth, combined with high inflation that will erode the already meager disposable income typical for the vast majority of Russians. This increasingly dire economic trend does not bode well for Russia’s future political stability.

Russia Faces Severe Economic Crisis: Putin, Oil and Ukraine

December 31st, 2014 Comments off

A perfect storm has ravaged Russia’s national economy. With the price of oil imploding, the impact of its decline is inflicting devastating pain on the Russian economy. Fiscally , oil and natural gas revenues account for half of the state budget. The fall in oil prices is compounded by economic sanctions imposed by the European Union and the United States and Canada in response to President Putin’s aggressive polices vis a vis Ukraine.

There is nothing Putin can do about oil prices, especially with stagnant global demand and rising domestic production in the United States due to advances in shale extraction technology. However, he could mitigate the economic crisis through a more restrained policy on Ukraine. I doubt that will happen; it appears that in Russia, as with many other countries, nationalism trumps rational economic considerations.

It appears that bleak times are ahead for Moscow, and Russia’s nascent middle class. Just in the past 24 hours, the ruble dropped in value another five percent, all this in the wake of its earlier freefall when oil prices began to plummet. The erratic actions by Russia’s central bank only point to the inability by Russia’s rulers to arrest what will likely be a long-term period of economic recession and stagnation.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

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Hillary Clinton Nude

 

Malaysian Airlines Massacre: Vladimir Putin and Katyn Forest Version 2.0 Massacre: Vladimir Putin and Katyn Forest Version 2.0

July 22nd, 2014 Comments off

The horrific destruction of Malaysian Airlines flight MH17 is one of those rare events that shocks the conscience of the entire world. While an objective investigation has been rightly called for to uncover the full truth behind this horrific crime, is it unlikely that such truth will be easily discoverable. The President of the Russian Federation, Vladimir Putin, simultaneously  condemned as a rush to judgment finger-pointing at his government, called for a full investigation and simultaneously stated for the record that-without a doubt-the Ukrainian government was responsible.  Meanwhile, Putin’s Russian militias in Eastern Ukraine, suspected by most of the world of being behind the anti-aircraft missile firing that doomed MH17, have seized control of the debris field, where dead bodies, many of them fragmented, lay amid a million shattered metallic pieces of the destroyed Boeing 777. The allegations and observations made by journalists on the scene that these militias have shown disrespect for the human remains of the victims, engaged in theft, evidence tampering and appeared often to be drunk has presented the world with an unedited as well as unflattering portrait of Vladimir Putin’s Ukrainian policy as executed on the ground by the Kremlin.

In a previous blog pierce, written after Putin seized control of the Crimean peninsula from Ukraine, I warned of the dangerous path the Russian president appeared to be pursuing, and suggested a better alternative for serving Russia’s legitimate security and cultural interests in Ukraine, namely  replicating a modern version of Soviet dictator Joseph Stalin’s policy towards Finland after World War II, what became known as Finlandization. Instead, Putin appears to have chosen a different model, one that was created by the CIA in the 1980s when it launched a covert war against Nicaragua with armed militias known as the Contras. In effect, Putin’s Russian militias operating in Eastern Ukraine bear stark resemblance to the Contras in form and substance.

The deliberate stifling of initial attempts to effect a proper investigation of the MH17 crash scene has aroused deep horror and indignation around the world, but especially in the Netherlands-of the 298 passengers and crew murdered in this atrocity, 193 were citizens of that small country. All this suggests that Mr. Putin has drawn the wrong lessons from Stalin. Instead of Finlandization, he appears to be implementing an updated version of the Katyn Forest episode, one of the darkest chapters in Russian history.

Katyn Forest outside Smolensk, Russia was the site where thousands of Polish prisoners of war, officers and NCOs, were murdered in cold blood  by the Soviet secret police, the NKVD, in 1940. In 1939 these men were captured by the Russians when Stalin signed his infamous pact with Hitler, which included a secret protocol for dividing  Poland between the two dictatorships. Stalin had the Polish officers shot to eliminate a potential obstacle towards imposing communism on the part of Poland occupied by the Soviet Union. In 1943, two years after Germany stabbed Stalin in the back and invaded Russia, Katyn Forest, which was then occupied by the German army, became the site of a major excavation. The Nazis had learned about the executions, leading them to uncover the mass graves. The Germans of course were committing the equivalent of many Katyn massacres themselves at that time; they cynically exploited the discovery  of Stalin’s crime to drive a wedge between the Allied nations confronting Hitler though a massive propaganda campaign. However, in the fall of 1943, the Russian army reoccupied Katyn Forest, and from that time on, the Soviets engaged in a large-scale cover-up program, involving the creation of fraudulent documents, phony forensic examinations and sham witnesses. The cover-up was very elaborate, though practically no one in Poland believed the official Soviet line about the massacre. In 1990, in the dying moments of the Soviet Union, President Mikhail Gorbachev officially admitted that the Katyn massacre was the responsibility of the Soviet secret police, and was carried out on Stalin’s orders.  Putin’s predecessor, Boris Yeltsin, released archives pertaining to the Katyn massacre, including a document bearing Stalin’s signature authorizing the mass executions.

Unlike the Katyn Forest massacre, the slaughter of the innocent victims of MH17 was unlikely due to deliberate intent. If it was Russian militias that shot down the plane with missiles supplied on Putin’s orders, perhaps with direct assistance from Russian army personnel, it is most likely the culprits thought they were targeting a Ukrainian military transport plane rather than a civil aviation aircraft. From this point on, however, the similarities with Katyn became haunting and profane. Putin’s media outlets are already claiming that a Ukrainian fighter jet shot down MH17, believing it was a Russian aircraft carrying President Putin himself. It appears that the early stages of the cover-up are being engineered in Moscow.

As with Stalin’s cover-up of the mass murder at Katyn Forest, there are people who will believe Putin’s propaganda, no matter how ridiculously contrived. For example, the retired Cuban dictator, Fidel Castro, rushed off a pompous declaration in the form of a commentary, which appeared in the official Cuban Communist Party newspaper, Granma (http://www.granma.cu/idiomas/ingles/cuba-i/18julio-fidel.html). Seething with indignation, Castro denounced the “unheard of news that a Malaysia Airlines passenger plane had been hit at an altitude of 10,100 meters as it flew over Ukrainian territory, along a route controlled by the war-hungry government of chocolate king, Petro Poroshenko.”  The retired dictator wrote further that he  “cannot refrain from expressing our repudiation of the action of the anti-Russian, anti-Ukrainian and pro-imperialist government.” So in the eyes of Castro, the Ukrainian President shot down MH17. On the other hand, Venezuela’s Ministry of Foreign Affairs released an official statement declaring that the United States is responsible for the downing of MH17 (http://www.eluniversal.com/internacional/140718/venezuela-acusa-a-estados-unidos-y-la-otan-de-tragedia-de-malaysia-ari).

Those exceptions are overwhelmed by the near-universal revulsion at the emerging cobbling-up of a cover-up of Russia’s complicity in the Malaysian Airlines massacre. I don’t know if Putin is pursuing a Katyn Forest-style cover-up of his government’s complicity in the MH17 shoot down out of ignorance of the growing disgust being aroused throughout the world, or if he really believes this obstruction of the truth will somehow serve Russia’s geopolitical interests. If the Russian president were to truly analyze the situation objectively, he would come to realize that allowing the full truth to come out, even if it were to show that a bad policy decision was made in supplying advanced anti-aircraft missiles to the militias in Eastern Ukraine, would be far less injurious to Russian national interests and his nation’s standing in the world, than unleashing its state-sponsored propaganda machine to concoct a sinister remake of the Katyn massacre cover-up.

 

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

CLICK ON IMAGE TO VIEW VIDEO

Hillary Clinton Nude

Hillary Clinton Nude

Russia Ukraine Crisis Over Crimea Could Unleash New Round of Global Economic Crisis

March 28th, 2014 Comments off

The apparent relapse into a new Cold War between Russia and the Western nations over the annexation of Crimea by Moscow  will almost certainly have grave repercussions for the global economy. Starting with Russia, the tensions with Ukraine and her Western allies have resulted in economic sanctions, with more threatened. The World Bank has just released a report, suggesting that increased sanctions could result in capital outflows from Russia of $ 133 billion for 2014, with GDP contraction of 1.8 percent, resulting in a recession.

The tit-for-tat sanctions and increased tensions will also hammer Western economies, however. Europe is highly dependent on Russian-supplied oil and natural gas, Furthermore, the already fragile Eurozone will also be hurt by sanctions, either imposed  on Russia or by Russia. The politicians of the world it would seem are not satisfied with all their past blunders-they now want to start a new global crisis, which among other things, will likely exacerbate the still ongoing global economic crisis.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

Hillary Clinton Nude

Chilling video about Hillary Clinton and the 2016 presidential election from the author of the provocative book, “Hillary Clinton Nude: Naked Ambition, Hillary Clinton And America’s Demise.”

HILLARY CLINTON NUDE

Hillary Clinton Nude

 

 

 

 

 

 

 

Vladimir Putin Can Learn A Lesson From History Taught By Joseph Stalin

March 6th, 2014 Comments off

For the past fourteen years, Vladimir Putin has been at the center of Russian power politics, either as president or prime minister. When he succeeded his predecessor, Boris Yeltsin, Russia was economically in freefall, and on the verge of permanent anarchy in the wake of the chaotic dissolution of the Soviet Union. Mr. Putin brought stability to Russia, and to some extent has rebuilt the nation’s economy. However, there has been a darker side to Putin’s governance of the Russian federation. Political pluralism in Russia has been increasingly marginalized, and a raw edge to Moscow’s foreign policy has been in evidence, witnessed most deploringly by Putin’s indispensible support for the barbarous war Syria’s discredited president, Basher Assad, has been waging against his own people. All that, however, pales in comparison with what is now unfolding in Ukraine, which unless wisdom soon prevails, may spark a renewal of the Cold War.

It has been said by diplomats and foreign leaders who have met Putin that he harbors designs of rebuilding the territorial continuity that existed within the former Soviet Union. Ukraine was not only an integral part of the U.S.S.R., but for hundreds of years was the indispensible bread basket of the Russian Empire. Putin’s decision to intervene militarily  in the internal political phenomena unfolding in the sovereign Ukrainian nation arouses grave concern that Putin may be willing to risk global instability and possibly worse for the sake of forcing Ukraine to come again under Russian domination, either overtly or in more subtle forms. If that is Mr. Putin’s intention regarding Ukraine, he would be wise to learn from a previous Russian ruler, one far more ruthless and calculating than President Putin will ever be.

Joseph Stalin ruled the Soviet Union as dictator for nearly three decades with an iron grip. He was frequently ruthless, and merciless in purging his enemies. Yet, at times, he could display a surprising ability to learn from his mistakes and exercise restraint and wisdom in dealing with issues that touched on core Russian national interests.

When World War II broke out, Russia was in its early phases a neutral country, having signed a non-aggression pact with Nazi Germany. Stalin saw the distraction created by a new global war as an opportunity to recover territories that had formerly been part of the Russian Empire, but had slipped away after the Russian revolution of 1917. Making aggressive use of his military, Stalin seized part of Poland and Romania, and at gunpoint brought the three Baltic republics back under Russian control. There then remained Finland, another former part of the Russian Empire that became an independent nation after the Russian revolution. Convinced his massive army could easily overcome a country of only four million, Stalin launched an unprovoked attack on Finland. His official justification bares comparison to contemporary claims made by Putin to justify his interference in the Ukraine; an exiled Finnish communist was permitted to form a “government” on Russian soil, which Moscow promptly recognized as the legitimate government of Finland. That same rump regime then “requested” that Stalin “liberate” the suffering people of Finland, and restore them to the Soviet motherland.

The cynical political maneuver by Stalin could not cope, however, with the patriotism of the Finnish people, who tenaciously resisted the Russian invasion. In the early months of the war that followed Russia’s invasion, the tiny Finnish army inflicted a humiliating defeat on the much larger Soviet army. It was only after accumulating hundreds of thousands of casualties that Stalin’s army slowly began to penetrate Finnish defenses.

A treaty was signed, requiring Finland to surrender substantial territory to the Soviet Union. This left a deep feeling of bitterness and hatred towards Russia. When Nazi Germany broke its non-aggression pact and invaded Russia in 1941, Finland had the distinction of being the only democracy to ally itself with Hitler, hoping to reclaim its lost territories.

At an unimaginable human cost, the Russians eventually repelled the German invasion. As a German defeat became inevitable, the Soviets were in a position to conquer Finland or impose a communist government, as they were to do in Eastern Europe. However, based on the costly lesson he had learned earlier, Stalin chose a different track. He granted Finland a peace treaty with surprisingly lenient terms. The Finns did have to return to the original border that existed before the German invasion of Russia, and pay an indemnity. However, Finland was permitted to remain a free, sovereign nation, with the political and economic system determined by its own people, without interference from Moscow. The only requirement Stalin imposed on Finland was that the country adopt a neutral foreign policy, and not join any military alliance hostile to Russia.

The policy Stalin enacted towards Finland, which came to be known as Finlandization, served Russia’s supreme national interests well for decades, while preserving Finland as a sovereign, democratic country with an economy characterized by a strong private sector.

As Vladimir Putin ponders his next move in the potentially calamitous crisis over Ukraine’s political evolution, he would render a great service to his own country and world peace if he were to reflect on a costly lesson, well learned, by Russia’s greatest and most ruthless Tsar.

 

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

Hillary Clinton Nude

Chilling video about Hillary Clinton and the 2016 presidential election from the author of the provocative book, “Hillary Clinton Nude: Naked Ambition, Hillary Clinton And America’s Demise.”

HILLARY CLINTON NUDE

Hillary Clinton Nude