Posted on 10/13/2011 3:39:04 PM PDT by bruinbirdman
The crucial economic signal for Russia last week was the price slide for the Urals oil blend below the $100 per barrel level, which is not only a symbolic watershed but also an inflection mark on which the Russian budget goes into red (Kommersant-FM, www.gazeta.ru, October 5). Prime Minister Vladimir Putin boldly dismissed this minor dip, asserting that oil prices remain at “acceptable levels” so that the real question for his government was how to distribute the surplus revenues (RIA Novosti, 5 October 5). Speaking at an investment forum, he took the argument one step further insisting that Russia was “emerging from the crisis” and not sinking into a new one while also offering reassurance that “Russia is prepared to deal with any scenario better than in 2008” (Kommersant, October 7). This pep-talk departs radically from the south-bound direction of all key economic indicators, particularly from the panicky stock exchange, which has lost nearly half its value in the last six months (www.gazeta.ru, www.newsru.com, October 7). What is even more striking about Putin’s positive thinking is that in recent weeks troubles have spread to the businesses in which he takes keen personal interest.
Perhaps the most irritating were the surprise raids on Gazprom’s offices in ten EU countries ordered by the European Commission in connection with an antitrust probe (Vedomosti, October 3). Putin could have shrugged it off as petty vindictiveness by Brussels bureaucrats, but the “hostile” investigation is centered on Gazprom’s ties with German companies, first of all E.ON, which have become seriously strained. Earlier this summer, Germany firmly refused to consider Putin’s idea for adding another trunk to the Nord Stream pipeline that is due to become operational in November (www.bmf.ru, October 5). Then E.ON, which had sold most of its shares in Gazprom, took the Russian behemoth to arbitration over the dispute on prices (www.newsru.com, August 1). The German partners expressed no interest in entering the off-shore Shtokman project in the Barents Sea and replacing French Total, which is re-orienting toward cooperation with Novatek on the Yamal projects (www.gazeta.ru, September 7). The latest episode in this estrangement involves well-known German expert Hans-Henning Schroeder, who was refused entry into Russia last week and attested as a “security threat” (www.newsru.com, October 6).
Another source of disagreeable news is Turkey where Putin has invested much effort in cultivating personal ties with Prime Minister Recep Tayyip Erdogan. Last week Gazprom was notified by its Turkish partner Botas that the contract from 1986 on annually importing six billion cubic meters (bcm) of gas through the Ukrainian route would not be renewed due to disagreement on prices (Ekspert, October 4). The volume is not that significant, and Turkey – charting a more pro-active course in the Middle East – probably expects to increase imports of LNG from Egypt and Libya. For Gazprom, however, the blow to the policy of relying on long-term contracts is aggravated by the Turkish procrastination on granting permission to lay the South Stream pipeline across its exclusive economic zone in the Black Sea (Nezavisimaya Gazeta, September 30).
Yet another ugly problem on Putin’s plate is Ukraine, where the economic crisis is deepening fast so its political behavior becomes desperate. President Viktor Yanukovych was the first leader to meet Putin after the announcement of the friendly rotation in the Russian duumvirate, and he exploited to the maximum the fact that Moscow could not afford a third gas war. Putin wants to stick to the letter of the agreement that he signed in January 2009 with Prime Minister Yulia Timoshenko (she was sentenced to seven years in prison for striking that deal) but has to accept a revision of the price formula and to provide a guarantee for transit, while the control over the Ukrainian gas pipelines remains elusive (Nezavisimaya Gazeta, October 3). The issue, however, is larger than the usual bargaining as Putin presented last week his grand vision of transforming the Customs Union with Belarus and Kazakhstan into an economic alliance on par with the EU (Izvestiya, October 5). Such integration could gain dynamism and make economic sense if Ukraine opts to join, but the deepening resentment in this major European state of Russia’s greed and arrogance makes it impossible for any leader to contemplate such a choice (www.gazeta.ru, Moskovskiy Novosti, October 6).
Putin cannot miss the gravitation of all these troubles toward Gazprom, which behaves as if the dawning “golden age” of gas delivers it from the need to modernize its archaic and wasteful business model. Its response to the problems in the key export markets was to increase the 2012 investment program by as much as 50 percent prioritizing new pipelines, which guarantees fat profits to the select few affiliated construction companies (Moskovskiy Novosti, September 28). The money that is destined to disappear in the networks of corruption must be borrowed, but Gazprom faces difficulties raising funds in the usual European sources (Vedomosti, October 6). Seeking to encourage Western partners Putin has sounded the idea of liberalizing Russian gas export, but it goes so much against his philosophy of tight central control that the only believable element in this vague proposition is that Novatek might be granted special privileges at some opportune moment (Kommersant, October 7).
Instead of being an asset for Russia’s foreign policy, energy export has become a liability that requires much political effort to court the consumers and reassure partners. Putin cannot believe that it is his “manual management” of the oil and gas business that has greatly amplified this trend, and he keeps enacting clever schemes like expanding ties with President Hugo Chavez in Venezuela (Kommersant, October 8). He may even think that the current economic mess provides a perfect background for his return to the Kremlin because a new spike in oil prices would calm the jitters and prove the indispensability of his leadership. Unpredictable oil prices might indeed oblige, but it will not eliminate the fact that the economic model of Putinism is exhausted, primarily by its inherent corruption. The elites are massively deserting the self-appointed leader by evacuating their money to the West, while tweeting the key-line from the hilarious flash-mob last week – SPASIBOPUTINUZAETO (Thanks to Putin for this).
Putin’s going to have a lot on his hands as Mother Russia breaks apart because Russia’s population becomes too old and enfeebled and too few to keep it all together.
At least Putin’s trying to save Russia. Our guy thinks he’s some kind of ‘citizen of the world’ or something stupid like that.
I agree. He knows Russia is dying and thinks becoming another Czar will be the answer Russia needs.
Just keep repeating, “only about 463 days to go.” :)
Sure Putin loves Putin, but he does love Russia too. The vast Russian expanse is vulnerable and he is very aware of it. The largest population areas of Russia are in the west near Europe, and the population of Russia is losing people at 1 million a year. What industry do they have besides oil? Sure they make weapons, but exporting them isn’t making them enough money in the world market due to all the competition. The real Russian money is in the oil and gas exports. If they lose out there, they are in bigger trouble. Putin is playing it down, but he is worried. Russia is fading, the once great people are no longer as productive as they were in the past. The Russian worker today isn’t as reliable as those of the past. Today they spend more time with a bottle of vodka than on a production line. (I had this conversation today, before I read this, with a couple of Russians who migrated here.)
...the price slide for the Urals oil blend below the $100 per barrel level, which is not only a symbolic watershed but also an inflection mark on which the Russian budget goes into red...s/b into reds, I think. ;')
ping
Vodka and russians go way way back. It is not something new for them to solve all of their problems with a bottle of vodka. But now it is more publicly displayed than it was in the 1920s (internet, mobile, 24/hr economic news coverage, etc).
I’m sure when the time comes they will demand another Lenin.
That is how socialism corrupts people. At first they are enthusiastic to work hard but as more and more people realize that system is flawed and gubmint benefits aren’t somehow related to as much and hard you are working productivity is shrinking.
Also Russia still has old Soviet labour codes in use making virtually impossible to fire incompetent and lazy employees without devastating lawsuits.
And as productivity is shrinking nationwide gubmint has lesser benefits to share with freeloaders and they starts to suffer too.
No surprise if everyone ends up drinking and an economy which half a century ago sent a man into space and mass-produced thousands Mach3 aircraft annually is now in ruins.
That is a Russian way to 3rd World and it seems like some other once great nations are about to follow for some reason.
And the reason is simple. As soon as people of that kind of menthality becomes government people adopting a volture policy they are finding out it is much easier to parasite on decomposing society. Lowlife freeloaders dumbed down by MSM are best vote base they may imagine. All you need is to make their number grow and to loot remaining productive population to pay for it.
They are living now and not busy to learn how it works longterm. Or maybe they learnt and don’t give a thing about it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.