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Russia has lost her “Deng Xiaoping.” She lost her chance at a “Jiang Zemin.” Instead, she got Putin.
Boris Yeltsin was China’s Deng Xiaoping. Like Deng, he introduced dramatic free-market reforms that opened up investment with the west. Yeltsin, like Deng, initailly worked but eventually eclipsed the party-line communists of a previous era (Liu Shaoqi and Mikheil Gorbechev). Yeltsin, like Deng, cleverly managed political reforms, at some times leaning towards democracy (to put pressure on unpopular political opponents) and at other times leaning towards authoritarianism (to prevent radicals from changing course).
Unfortunately for Russia, Yeltsin proved as physically frail as Deng was physically dynamic. Yeltsin’s alcoholism (an inherited condition) and a back injury (an environmental one) compounded each other, and led to a shift in political power a generation early. In China, Deng realized that change was a generational affair, and so an entire generation of successors was bypassed (such as Hu Yaobang) until a new one that had politically matured under the reform period was ready to assume power (such as Jiang Zemin). In Russia, by contrast, Yeltsin was too physically weak to hold on, and Russia got Putin instead.
Russia’s nationalistic energy policy after 2003 has stalled the development of major new energy investments (apart from the Sakhalin projects, which date back to the Boris Yeltsin era). Gazprom and Rosneft have financed themselves with foreign debt rather than with equity capital, accounting for almost one-fifth of Russia’s corporate foreign debt of $490 billion. Gazprom’s aggressive pricing and delivery disruptions have scared away customers, reducing the demand for its gas.
Huge public funds are being diverted to state corporations, which either hoard the money or siphon it off. In their new book “Putin and Gazprom,” Boris Nemtsov and Vladimir Milov have offered a staggering and credible account of how Putin and his friends pilfered assets of $80 billion from Gazprom during his second term as president. Investors have taken notice, slashing Gazprom’s market capitalization from $350 billion last spring to $70 billion at its nadir. Although Russia is the 46th-richest country in the world in per capita terms, it is ranked 147 out of 180 countries on Transparency International’s corruption perception index for 2008. Only Equatorial Guinea is both richer and more corrupt than Russia.
Under Putin, transparency has systematically been reduced, and we no longer dare to trust the government’s public statements on its currency reserves. Officially, they have declined by $163 billion, or 28 percent, from $598 billion in early August to $435 billion in early December. But when Vneshekonombank was given $50 billion of state reserves to help Russian oligarchs with refinancing, nothing was deducted from the official reserves as it should have been. In an article on Gazeta.ru on Oct. 24, Alexei Mikhailov plausibly claimed that another $100 billion or $110 billion of “other reserves” had been transferred to the banking system and were nothing but rubles. To my knowledge, no official denial has been issued. If that were correct, the reserves have fallen by more than half to less than $300 billion, but the government sheds no light on this.
Russia’s largest corporations have turned out to be much more leveraged than anybody had thought. The government has made clear that it will refinance their foreign loans to secure “strategic” ownership. So far, $13 billion has been paid, out of which United Company RusAl has received $4.5 billion and Altima $2 billion, but such private pledges are huge. Vneshekonombank has $37 billion left to spend, but it has already asked for $30 billion more from the government, and more is likely. Thus, Russia can swiftly lose more than $100 billion of reserves.
Putin has persistently denied that anything is wrong with the country’s economic policy, while everything but its fiscal policy has been wrong. Domestic and foreign businesspeople realize that he does not talk about reality, which undermines confidence in the Russian market. Without free public debate, rational policy decisions are unlikely.
Incredibly, the government is repeating its mistake from 1998 to maintain a pegged exchange rate in the face of falling commodity prices. Until this summer, this policy provoked speculative capital inflows that boosted the money supply excessively and propelled inflation to 15 percent. Now, the pegged exchange rate, which is probably overvalued by up to 25 percent, promotes speculative capital outflows, quickly reducing the currency reserves. Devaluations in very small steps only convince the market that a major depreciation is inevitable. The coming combination of loose fiscal policy, negative real interest rates, current and capital account deficits and an overvalued ruble is unsustainable. The incentives for capital flight are overwhelming.
The global economic crisis is testing Putin’s system. He has undermined the ground under the house Yeltsin built, transforming the country into a house of cards ready to tumble. He has wasted the oil wealth rather than investing it in infrastructure, health care, education and law enforcement reform. Russia needs fundamental change; above all, it needs to uproot — or at the very least contain — the country’s pervasive corruption, which has gotten markedly worse under Putin. Nothing would serve the country better than the retirement of the failed prime minister, but that is evidently not in the cards.
When Boris Yeltsin gave way to Vladimir Putin, Russia lost her chance to continue opening up to the world. Instead, she faded into the gap of the global economy, and is once again a country that produces nothing war, death, and vodka.
Russia threatens military response to US missile defence deal – Times Online
Russia threatened to retaliate by military means after a deal with the Czech Republic brought the US missile defence system in Europe a step closer.
The threat followed quickly on from the announcement that Condoleezza Rice signed a formal agreement with the Czech Republic to host the radar for the controversial project.
The Russian Federation is a Central Asian state, part of the Eastern Seam / New Core expanse that begins where the Near East becomes the Middle East, and extends to the China Seas. It’s somewhat unfortunate for everyone that Russia borders Europe — imagine how much more complicated the world would be if China shared a border with the European Union!
Still, the best approach is to ignore Russia when she starts making demands of Europeans, and get her to orient herself to the Shanghai Cooperation Organization, an organization of energy-exporting dictatorships (and the authoritarian-capitalist state they supply) that fits Russia’s political temperament well.
Tom Barnett and Jennifer Chou have a pair of great posts on the expanding influence of the great powers of the Core: the United States, the European Union, and China. While the posts and the articles they link to don’t address the reasons directly, an important one are the three factors of production: capital, land, and labor. While the US, the EU, and China are all well run economically, each has a special advantage: large-scale immigration increases the US pool of labor, the incorporation of new states increases the EU pool of land, and the continuing market reforms increases the Chinese pool of capital.
One formerly great power that doesn’t enjoy legitimate growth in these factors of production is Russia. While Russia has been trading land for cash for generations (losing influence in more and more countries in order to keep revenues up, most recently seen in Moscow’s squeezing of Belarus), she has been unable to create a productive economy. Even these days of high energy prices only further addict Russia to energy-export, a dead end for nearly every country that tries it.
The increase in land, in capital, and labor is vital for America to be not just a great power, but also a Super Power. Part of this is keeping a liberal economy. Part of this is comprehensive immigration reform which will increase the arrival of both high- and low- skilled labor. Part of this is adding new states.
I’m no fan of Belarus’s dictator, Alexander Lukashenko. He is a third-rate goon in the mold of Slovak strongman Vladimir Mecier. I’ve previously called for Lukashenko’s overthrow. However, while Belarus is a beach of authoritarianism to the island of democracy that is Europe
Democracies in Green. Belarus (dictatorship) in Pink and Russia (dictatorship) in Red
But Russia is much, much, much more dangerous than Belarus could ever be. Indeed, seen in the proper context, Belarus is infinitely more useful if she is a buffer to Russia than if she serves that Bear
Democracies in Green. Belarus (dictatorship) in Pink and Russia (dictatorship) in Red
Roll back Russia. Support Belarus.
Democracy can come to a Belarus free of Russia faster than it can come to a Belarus that belongs to Russia. Europe and the west must take Russia’s blackmailing of Belarus as the opportunity it is to splinter Moscow’s hold on the Eurasian Heartland.
“Landmark Civic Polls Start Today,” by Raid Qusti and Nasser Al-Salti, Arab News, http://www.arabnews.com/?page=1§ion=0&article=58768&d=10&m=2&y=2005&pix=kingdom.jpg&category=Kingdom, 10 February 2005.
In the first non-story, our near-ally Russia agrees to sell military equipment to our near-ally Saudi Arabia, building on a base of selling to near-allies China, India, and Morocco
Moscow is preparing its first major defense contract with Saudi Arabia, the world’s largest arms buyer that has traditionally spent its petrodollars on U.S.-made weapons.
The deal is part of a strategy aimed at diversifying Russia’s arms buyers away from China and India, Sergei Chemezov, general director of state-owned arms exporter Rosoboronexport, told reporters Wednesday.
Russia also signed an arms contract with Morocco last month, he said, the first since the breakup of the Soviet Union.
Make that, outdated military equipment.
Rosoboronexport has orders of $12 billion through 2007, but Chemezov said that this year Rosoboronexport can expect to make $1 billion less in revenues.
“The reason? Our companies cannot produce more modern weapons. [The industry] is in need of investment either from private companies or from the state,” he said. “Today we sell weapons that were designed in the late 1970s and early 1980s.”
By itself, this is a puny deal. It’s chump change for obsolete and useless rockets. It is notable because it shows Saudi displeasure about… something. This signals they don’t like something that is going on, or something that we are making them do. Now what could that be?
Saudi citizens are set to cast their first ballots in history when Riyadh region goes to the polls in the first of a landmark municipal elections.
Todayâ€™s polls in Riyadh and surrounding areas are the first of three rounds that will eventually see elected representatives take up half the seats on 178 municipal councils across Saudi Arabia.
The remaining seats will be filled by government appointees. The rest of the country will vote in March and April.
“Democractic-style” elections in Araby. This is the second non-story. It’s only for local councils, and only for half of local seats at that. I could care less about women not voting — heck, even a 10% suffrage would be an improvement. But a vote for half the seats on useless councils is the bare minimum. The bare minimum we are forcing them to do.
Asked about the reasons of the substantial differences between the total number of voters in the Riyadh region and of that in the Eastern Province, Prince Mansoor attributed the larger number in the Eastern Province to the efforts exerted by the local committeeâ€™s chairman Prince Abdul Aziz Al-Muqrin.
These elections are phony. But that the Eastern Province is a different polity is not. The Iraqi Shias have their country, and when the decrepit and cynical Tehran government is overthrown the Persians shall have theirs too. And with free Shia across the desert, and free Shia across the gulf, the Eastern Province Shia shall wake up. And from their dreamlands they will take their freedom and their oil from the Riyadhi Wahabis.
And that will be the story of the House of Saud.