Dec

29

Russia's economy is deteriorating at a very fast pace. The Stabilization fund — a giant $450 billion savings account — has been depleted by a quarter since September as Russia tried to defend its currency. Despite that attempt, the ruble still declined.

Russian companies are facing $170 billion of debt rollover next year. Since the rest of the world is not willing to finance companies in stable political regime, getting financing for Russian companies will be a problem. Mr. Medvedev and his boss (Mr. Putin) will have to spend another quarter of the reserve fund Russian corporations. According to the FT, as the Russian economy is starring into a deep abyss and Russians suddenly start waking up to realization that almighty Mrs. Oil and Mr. Natural Gas were responsible for (temporary) resurrection of Mother Russia, not Mr. Putin, people are already whispering for Mr. Putin's resignation.

These whispers will magnify as things get worse. But what concerns me is the likely response. I visited Russia in September for the first time since I left in 1991, and even though at the time Russia was still prospering (and economic crisis was weeks away) I still felt this broad anti-American attitude.

Now that things are getting worse every minute, Mr. Putin will likely redirect the attention and shift the blame to — you guessed it — the United of States, the mother of all evil. The United States will be responsible for the global crisis, for manipulating oil markets, and anything bad that happens in Russia, the US will be the culprit. I don't think this brings the US to war with Russia, but the relationship with Russia will likely get a lot worse.


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4 Comments so far

  1. Andrew McCauley on December 29, 2008 11:22 pm

    An article from the Wall St Journal Online (December 29, 2008) –

    As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S.

    MOSCOW — For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument — that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. — very seriously. Now he's found an eager audience: Russian state media.

  2. 2009 Global Market Forecast : Murdock Global Insight on December 31, 2008 2:28 pm

    […] Russia Russia appears to be in for a bad time economically. Russia has been on a path towards significant anti-Western, anti-American nationalism for some time and has shown itself willing to take international military action to bolster its self-image and interests. Vladimir Putin enjoyed wide popularity as President when the standard of living was growing and oil revenues were high. Now, as Prime Minister he is facing his first real test in an economic crisis and is being found wanting. Doubts arose during last summer’s oil price spike that Russian oil output had peaked largely due to poor maintenance and lack of investment. Russia’s joint venture with BP is a shambles of political infighting, which has, on occasion, dragged in the Russian and UK governments directly. Russia has devalued the Rouble in incremental steps multiple times since the crisis began (after Putin stated that there was no crisis) and is expected to continue devaluations in the New Year. The government’s “rainy day” fund built up from oil receipts has been drained by over 25% in three months in attempts to shore-up the ruble. Unemployment is rising. Anecdotal evidence that the whisper mill has started vis. Putin has to go. Last week there were demonstrations in Vladivostok against a luxury car tax. The shipyards there handle the imports. Of significance is that it was riot police from Moscow, as opposed to the local authorities, that came to “restore” order. Former Soviet President Gorbachev in a rare public statement said that meant the locals were not following orders. Investors also need to keep in mind that Russia has a demographic time bomb ticking. Their population is dropping. It is projected that within about 10 years they will no longer have the conscripts to fill their army. Finally, we see almost weekly evidence surfacing of a continued assault on democracy and the rule of law. […]

  3. Sam Bonner on December 31, 2008 7:51 pm

    Blah, blah, blah. Of course, the blessed U.S. would never have done anything to deserve such animosity. Putin has every right to be afraid of the U.S. administrations frothing at the mouth bellicose towards Russia. The U.S. propaganda machine seems hell bent on continuously reminding all Amercians how horrible Russians and Putin are. I wonder why.

    And this statement by a fellow comment poster about Russia:

    Finally, we see almost weekly evidence surfacing of a continued assault on democracy and the rule of law.

    That sure isn't happening in the United States … is it?

  4. Dan Skiy on January 3, 2009 7:51 pm

    really strange comments…

    why can't our dear american partners just leave us alone?

    don't they have enough own problems?

    we can manage our country ourselves, we can build democracy, if we decide to do so, without assistance of the country with only two parties that play a mockery every election season, and where governors sell senator's seats, army occupies other countries, and intelligence finds WMD in countries with sufficient oil reserves…

    well, russia is not ideal, and mr.putin is not an angel…but, dear american policy makers, it is not your business…probably you shall try to inspire by example - but it looks like, after all the wars, corruption, nationalisations and turn to socialism, you can't any more be a role model for the world..

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