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George Friedman of Stratfor was in Russia recently and his observations start some items on Russia.
I thought the economic problems of Russia would be foremost on people’s minds. The plunge of the ruble, the decline in oil prices, a general slowdown in the economy and the effect of Western sanctions all appear in the West to be hammering the Russian economy. Yet this was not the conversation I was having. The decline in the ruble has affected foreign travel plans, but the public has only recently begun feeling the real impact of these factors, particularly through inflation.
But there was another reason given for the relative calm over the financial situation, and it came not only from government officials but also from private individuals and should be considered very seriously. The Russians pointed out that economic shambles was the norm for Russia, and prosperity the exception. There is always the expectation that prosperity will end and the normal constrictions of Russian poverty return.
The Russians suffered terribly during the 1990s under Boris Yeltsin but also under previous governments stretching back to the czars. In spite of this, several pointed out, they had won the wars they needed to win and had managed to live lives worth living. The golden age of the previous 10 years was coming to an end. That was to be expected, and it would be endured. The government officials meant this as a warning, and I do not think it was a bluff. The pivot of the conversation was about sanctions, and the intent was to show that they would not cause Russia to change its policy toward Ukraine.
Russians’ strength is that they can endure things that would break other nations. It was also pointed out that they tend to support the government regardless of competence when Russia feels threatened. Therefore, the Russians argued, no one should expect that sanctions, no matter how harsh, would cause Moscow to capitulate. Instead the Russians would respond with their own sanctions, which were not specified but which I assume would mean seizing the assets of Western companies in Russia and curtailing agricultural imports from Europe. There was no talk of cutting off natural gas supplies to Europe.
If this is so, then the Americans and Europeans are deluding themselves on the effects of sanctions. …
… There was much more toughness on Ukraine. There is acceptance that events in Ukraine were a reversal for Russia and resentment that the Obama administration mounted what Russians regard as a propaganda campaign to try to make it appear that Russia was the aggressor. Two points were regularly made. The first was that Crimea was historically part of Russia and that it was already dominated by the Russian military under treaty. There was no invasion but merely the assertion of reality. Second, there was heated insistence that eastern Ukraine is populated by Russians and that as in other countries, those Russians must be given a high degree of autonomy. One scholar pointed to the Canadian model and Quebec to show that the West normally has no problem with regional autonomy for ethnically different regions but is shocked that the Russians might want to practice a form of regionalism commonplace in the West. …
… I came away with two senses. One was that Putin was more secure than I thought. In the scheme of things, that does not mean much. Presidents come and go. But it is a reminder that things that would bring down a Western leader may leave a Russian leader untouched. Second, the Russians do not plan a campaign of aggression. Here I am more troubled – not because they want to invade anyone, but because nations frequently are not aware of what is about to happen, and they might react in ways that will surprise them. That is the most dangerous thing about the situation. It is not what is intended, which seems genuinely benign. What is dangerous is the action that is unanticipated, both by others and by Russia.
At the same time, my general analysis remains intact. Whatever Russia might do elsewhere, Ukraine is of fundamental strategic importance to Russia. Even if the east received a degree of autonomy, Russia would remain deeply concerned about the relationship of the rest of Ukraine to the West. As difficult as this is for Westerners to fathom, Russian history is a tale of buffers. Buffer states save Russia from Western invaders. Russia wants an arrangement that leaves Ukraine at least neutral. …
… The United States and Europe have trouble understanding Russia’s fears. Russia has trouble understanding particularly American fears. The fears of both are real and legitimate. This is not a matter of misunderstanding between countries but of incompatible imperatives. All of the good will in the world – and there is precious little of that – cannot solve the problem of two major countries that are compelled to protect their interests and in doing so must make the other feel threatened. I learned much in my visit. I did not learn how to solve this problem, save that at the very least each must understand the fears of the other, even if they can’t calm them.
John Fund posts on Putin’s presser.
Vladimir Putin was his usual overbearing self today at his annual three-hour news conference in Moscow, swatting away questions he didn’t like and hyperventilating against the West to excuse his economic failures. However, there was a tense moment when a prominent anti-Putin activist and television journalist, Ksenia Sobchak, asked the Russian president whether he was fomenting hatred against others among Russians using state television propaganda. She specifically asked him why the state media hasn’t retracted a July story it ran falsely accusing the Ukrainian military of torturing and crucifying a three-year-old Russian boy in a public square.
“Why did you give her the floor?” Putin snapped at the moderator. He then proceeded to ignore the question. …
… On the issue of his control of the Russian media, Putin denied any “campaign” was being conducted against his opponents in the Russian media. Instead he turned the question around, claiming the West was persecuting allies of Russia. His prime local example was Latvia’s ban on some pro-Kremlin pop stars who often use offensive lyrics. He then attacked the U.S. for “legalizing” torture of its opponents after the 9/11 attacks.
Never let it be said that Vladimir Putin’s favorite defense isn’t a strong offense.
Huffington Post with an article on Russia written in the expectation the current troubles will bring hardship for the government. Expectations George Friedman in the first item above, thinks are overblown.
Russian consumers flocked to the stores Wednesday, frantically buying a range of big-ticket items to pre-empt the price rises kicked off by the staggering fall in the value of the ruble in recent days.
As the Russian authorities announced a series of measures to ease the pressure on the ruble, which slid 15 percent in the previous two days and raised fears of a bank run, many Russians were buying cars and home appliances — in some cases in record numbers — before prices for these imported goods shoot higher.
The Swedish furniture giant IKEA already warned Russian consumers that its prices will rise Thursday, which resulted in weekend-like crowds at a Moscow store on a Wednesday afternoon. …
… Should the current attempts to shore up the ruble fail, then the Russian authorities could be imposing capital controls.
However, Russia’s Economic Development Minister Alexei Ulyukayev has denied the government is considering doing so. While easing pressure on the ruble, the move would shatter Russia’s already tarnished reputation to investors.
Russian officials, meanwhile, have sought to project a message of confidence on state television, dwelling on the advantages of ruble devaluation, such as a boost to domestic manufacturing.
There are fears that the ruble could come under further pressure this week as President Barack Obama is expected to sign legislation authorizing new economic sanctions against Russia.
Whatever happens with the ruble, the Russian economy is set to shrink next year by 0.8 percent, even if oil prices stay above $80 per barrel. If oil prices stay at the current level of around $60, the Central Bank said the Russian economy could contract by nearly 5 percent. …
Megan McArdle posts on what different oil producing countries can expect if the price continues to sag.
… Outside the Middle East, Venezuela is already well into a long economic crisis. The Hugo Chavez regime diverted investment funds from the state-owned oil company into social spending, which caused production to decline. That was a workable trade-off when prices were rising, but now that they’re falling fast, so is Venezuela’s economy, along with political stability.
Last week, I noted that this meant the risk of serious geopolitical repercussions. (The last time oil prices experienced this kind of run-up and decline, the Soviet Union fell.) In the modern global economy, it also means the risk of financial crisis, as problems in Russia and other oil-rich nations reverberate outward through our tightly interlaced networks of finance and trade. China is already fragile, the euro zone is struggling to hold everything together, and while U.S. growth finally seems to be back on track, we will not be immune if the rest of the world is reeling.
Bershidsky suggests that capital controls may well be next for Russia, though the central bank governor denies that they are being considered. Whatever Russia does next, we’d better hope it works. Because if not, the rest of us may be using our newly cheaper gasoline to fuel up for a very bumpy ride.
The Why File reports on the return of large carnivores to Europe. And they aren’t talking about the Russians.
A surprising new study shows that four big carnivores (brown bear, lynx, wolverine and wolf) are doing quite nicely in Europe, thank you very much, even without the wilderness protection that benefits some large predators in the United States.
“We find that in Europe we have twice as many wolves as in the lower 48 (American) states, on half the land area, with two times the human population density,” says Guillaume Chapron of the Swedish University of Agricultural Sciences, the corresponding author of the new study.
In Europe, as in North America, large carnivores face ingrained hostility. It’s not just their ferocity, but also their need for a large range and lots of meat that makes them natural competitors. …