Where’s the shock and awe?
The ruble plunged 3.8% on Wednesday and another 2.8 on Thursday to a new all-time low of 83.85 to the dollar, at 5:30 PM Moscow time, blowing through the previous catastrophic panic low of December 2014. At the time, the Ministry of Finance and the Central Bank deployed desperate, and ultimately very costly shock-and-awe measures to stop the ruble from spiraling out of control. And it triggered all kinds of drama.
On December 16, 2014, the Central Bank announced that it increased its benchmark rate by a brutal 6.5 percentage points to a dizzying 17%, after having already jacked up rates in the prior week to 10.5%. And the Ministry of Finance announced it would begin selling Russia’s crown jewels, its dwindling foreign currency reserves, and with the proceeds mop up rubles.
It seemed to put a floor under the ruble for a few blinks of an eye, but then the ruble crashed 20% in no time, hitting 80 rubles to the dollar for a few moments, and it was going to be the end of the world, but then the ruble reversed course and spiked higher.
Today, there’s no such drama. The ruble is now lower than it had ever been. It has plunged 26% against the dollar in just three months. It’s also down 25% against the euro, 27% against the yen, and 23% against the yuan. This is an all-out ruble crash, not a “strong dollar” problem.
And it’s down 63% against the dollar since early 2013. Back then, it took 29 rubles to buy a dollar. It took 62 rubles three months ago. It takes nearly 84 rubles now:
But there were no big announcements and no shock-and-awe moments. Instead, the Ministry of Finance and the Central Bank sat on their hands and let it happen. But Central Bank Governor Elvira Nabiullina did show up on TV in an interview to soothe her compatriots’ rattled nerves. After all, it was their money that was getting destroyed, and she owed them a few mollifying words.
The ruble is close to its “fundamental levels,” she said. “We will intervene only if we see risks to financial stability. There aren’t such risks now.”
The ruble doesn’t matter, it seems. She’s talking about the banks. Some of them already got bailed out. During the ruble crash in December 2014, it was National Bank Trust, which had been toppled by panic buying of foreign currency and a surge in deposit withdrawals. The state-owned Deposit Insurance Agency took over the bank with funds provided by the Central Bank.
No one wants to see another bank topple. But that bailout was likely a lot cheaper than propping up the ruble for months or years. It’s easy to run down a currency. It’s expensive to prop it up after it started crashing.
So they won’t intervene. Let the ruble go where it wants. Russia has too many other problems. The foreign currency reserves could be used for more useful things than propping up the ruble for a little while. And hiking interest rates brutally, like last time, would be suicidal for the economy.
During the three months that the ruble plunged 26%, the price of Brent oil plunged 40%. This ongoing collapse of oil along with the decline of the price of natural gas in Russia’s key markets has whacked the economy. The sanctions haven’t exactly helped. The national budget, which relies to a large extent on oil and gas revenues, is on the chopping block. The economy shrank for five quarters straight, and more shrinkage is expected in Q4.
In its World Economic Outlook, released on Tuesday, the IMF estimates that Russia, “which continues to adjust to low oil prices and Western sanctions,” is going to remain in recession in 2016. It estimates that GDP fell 3.7% in 2015 year-over-year and is going to fall another 1% in 2016. That would be 2.5 years straight of recession!
But the IMF is always optimistic in its economic projections, and as reality gets closer it adjusts its views downward. For instance, in its World Economic Outlook released six months ago, the IMF estimated that the economy would shrink 3.4% in 2015 and grow 0.2% in 2016. So its current projection of a 1% GDP decline in 2016 may well be a rosy scenario.
Inflation was 12.9% in December. Russian consumers are groaning. But the swooning ruble means that imported consumer goods, and that’s a lot of them, will get even more expensive for them. Hence, inflation will get worse. A deep, long recession even as inflation is raging is a toxic mix.
To repress inflation, the Central Bank would normally jack up rates at every meeting. And to prop up the ruble, it would normally raise rates unexpectedly. Shock and awe! But the Russian economy can hardly digest shock-and-awe measures.
The benchmark one-week repo rate has been at 11% since August. At the last meeting on December 11, the Central Bank indicated it might cut rates at the next meetings (one is coming up on January 29) if inflation softens in line with forecasts.
Those forecasts have been obviated by events. Now the ruble is plunging, and inflation might take a big jump. Given these risks, First Deputy Governor Yudaeva already said she couldn’t “completely” rule out a rate increase.
But higher rates would be bad for the deeply troubled economy. So far they’re sitting on their hands, mumbling under their breath that there can’t be any shock-and-awe interest-rate hikes to prop up the ruble, and that the foreign exchange reserves are too valuable and scarce to blow on the ruble, and that the overall economy was more important than the currency or inflation, and so it seems, they’re saying, to heck with the ruble. Let it go. And the market has gotten the message.
Perhaps it is this sort of scenario that is worrying the Bank of Canada. The fear of “currency instability” is now cropping up in Canada after the loonie has plunged 33% in two years against the US dollar. Read… Canada Rebels against the Destruction of the Loonie
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I don’t know much about the Russian economy. But being sanguine about it is not a bad idea I would say.
The problem always is when governments borrow in foreign currencies, like the US dollar. They just have to bear the consequences. In Rubles they have no such concerns. They can’t go bankrupt in rubles.
The government can always buy imports in roubles and although the numbers may become daunting there’s no bankruptcy there. I’m sure they could swap oil for food directly avoiding the dollar trade. They would like that.
The citizens would have to get used to importing less and making do with more home grown stuff.
If the banks were looking shaky the government could deploy a debt jubilee and wipe out the private debts. It’s not so bad for banks, as they only lose what they created for free. The depositors etc can be safeguarded.
I agree. The government is going to let the ruble do its thing.
But Russia’s government controlled or owned enterprises (nearly all the big ones… oil, gas, railroad, defense, etc.) have a lot of dollar and euro debt. They’ve already applied for bailouts from one of Russia’s sovereign wealth funds. These corporations, being government controlled, carry many of the government’s responsibilities, including subsidies… Which makes this whole thing a lot more complex.
Yes, and what if history really does rhyme? Remember the 1998 Russian Financial Crisis?
“The inability of the Russian government to implement a coherent set of economic reforms led to a severe erosion in investor confidence and a chain reaction that can be likened to a run on the Central Bank. Investors fled the market by selling rubles and Russian assets (such as securities), which also put downward pressure on the ruble. This forced the Central Bank to spend its foreign reserves to defend Russia’s currency, which in turn further eroded investor confidence and undermined the ruble.”
Meanwhile, William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS), would probably claim that the failing state of the Russian economy was just E pluribus unum.
State sponsored enterprises they might be, but they did not sell bonds in London under the banner of the Russian government. Thus they may default or declare bankruptcy like any other company. The Russian government has very little debt.
Be careful what you wish for…
So who were the culprits? ObaMao and House of Saud who also happen to be ISIS backer and lest we forget Osama and ALL 9/11 terrorists were Saudis.
Currency wars lead to trade wars which often turn into REAL wars. And no country won the currency war as if on some kind of “competitive” currency wars to boost export.
Once BRICKS start their thing going, US$ will be less important for them and all this manipulation wouldn’t matter anymore.
Russia is not buying oil and gas, so they don’t have to borrow $US for it.
All trade with China and Brazil is done in Russian domestic currencies and these contracts were sealed for long term while ruble was trading high.
After all they can print currency to oblivion the same way we did it.
I am not concerned about Russians they have been through more difficult times in history.
I am worried what is next for us, because this Ferris wheel ride will stop eventually.
yeah…stop…..and fall face down! ……..how’s that for a visual of western financial collapse!
I have never been able to figure out how to value a fiat currency. Do I rate it by how many colors of ink were used to print it. By the size of the bill. How about by the BTU heat content. How about future collector value like postage stamps. Certainly, I cannot figure out how to value it by the productivity (GDP) of the issuing nation. I can figure out the value of an ounce of gold based on historical values against real commodities.
So, these articles about “crashing” currencies are meaningless to me. The sooner that the average Joe figures this out, the sooner the world gets back to using real money with inherent value (i.e. gold/silver with a 5000 year history).
Russia is not self sufficient in a huge number of areas- apart from aero-space and military stuff- but it still had France build two warships (ships seized, money refunded)
Amazingly, it isn’t even self- sufficient in oil and gas field equipment- this is why Rosneft asked the government for billions of $US (only got a fraction of it.)
This idea of doing everything internally is a characteristic of a primitive economy- e.g., Russia’s climate does not permit economic replacement of fruits and vegetables formerly supplied by Turkey.
This idea of Putin’s that the sanctions are actually a good thing so now Russia can be self- sufficient is propaganda almost as primitive as the policy.
Strange, you report these financial missteps and the consequences, Wolf, but it’s all like a dream. So distant. We give it the, “Oh well. Que Sera, Sera.” That is until we come face to face with it. My sound system crashed. I have three speeches that need to be finished. No big deal, just run out and buy a $100 hand held digital recorder. Right? Six stops, same results. “We no longer stock those, but we can order you one.” To which I replied a bit too nasty, “Hell. I don’t need you to do that. I didn’t have to fight work traffic to get that done. I can sit on the pot and do it,” considering the kids was saying the only thing he could say. The rib bones are starting to show on these brick and mortar places.
How much is the ruble plunging against currencies other than the US dollar such as the yuan, euro, pound and yen?
over the last 3 months:
-25% against EUR
-27% against JPY
-23% against the yuan.
This is a ruble crash, not a “strong dollar” problem.
Could you do same thing for CAD $ versus all major currencies.
Not much of difference I would say.
It is not end of the world, we are still alive and kicking here in The True North.
The CAD fell about 25% against the USD in 1.5 years. That’s bad enough. But not nearly as bad as crashing 26% in 90 days, as the ruble did.
CAD against other currencies over the last 90 days:
The CAD and Mexican peso have moved roughly in parallel. But the Bank of Mexico is actively trying to prop up the peso, not push it down further. The BOC has yet to go that far. But it didn’t cut rates at the last meeting. So maybe that’s as low as it wants the CAD to go.
It’s like being blindfolded in one of these Not-so-Funhouse rides- yesterday it’s the yuan, before that the euro, now the ruble. When Christine Lagarge deigned, from her I(tax-free) throne at the IMF to put the yuan in the SDR basket, how did she have any idea how many they were printing up out of sight? The gold standard had a very obvious, simple, sensible, calming function, but the problem is the Klepto-Keynesian-Central-Bankers want it all for themselves, and not the people with fiat money. And Russia could have stabilized its currency any time it cared to by making the so-called security strip out of gold, instead of Mylar, even if it meant stripping the stuff off Lenin’s famous urinal.
You know, I have heard that 3/4ths of all known mine-able gold reserves in the world are in Russia, primarily Siberia. If the world goes to back to the gold standard, they won’t need to defeat the West, they can just buy us out…..
Price of vodka and firewood not affected. There is problem?
Re: Siberian gold. These very low grade deposits require either very low paid or slave labor to operate at a profit.
BTW: selling shares in gold that is in the ground may be the mother of all scams. The old Vancouver Stock Exchange was its Mecca.
By the time the exchange closed 90 % of all stock it ever issued was worthless. But all together they might not add up to the TSX Bre-X scam- which cost investors billions and should have resulted in litigation against the TSX.
The first independent geologist (hired by Freeport) who examined the samples knew it was a fraud right away- the gold was rounded placer gold not hard rock gold. ‘Proceed with extreme caution’ was his written opinion who knows what he said privately. A salting job pure and simple.
Freeport never said a word to anyone else- which I guess is their privilege.
Canada’s own Barrick had a near miss- it was trying to buy Bre-X for billions but was connected to the wrong family members of the ruling clan.
Russia is much more resilient than westerner’s could imagine. The long suffering Russian people are it’s strength. They know tough times and lived through them many times. I know the Russian resolve, they just tuck in their necks and carry on regardless of conditions.
The global economic picture is not that bad, when viewed without holding up the US dollar as a benchmark. Pretty much ALL currencies are down against the US dollar. The Russian’s are now saying: “So what”? The ruble compared to all the other currencies is holding it’s own. With a foreign reserves balance and room to move interest rates, the Russian CB is in much better shape than most realize.
There comes a time when money is just too expensive. This is now unfolding for the US dollar. Globally. The ONLY reason it has international financial voice, is it’s 50 to 60 percent global use as the “old” reserve currency. This has been changing with increasing speed. As offshore users have come to the conclusion that it’s now just too expensive and are finding alternatives to avoid it, speeding it’s downfall.
Canada is well and truly caught between a rock and a hard place. Being connected at the hip to the US trade wise, financially, geographically and socially, with a (relatively) small foreign reserve and very large debt overhang, there is no wriggle room left.
OK, let me repeat this here, and I will also add this to the article since the same question keeps coming up:
over the last 3 months, the ruble did this against these currencies:
-25% against EUR
-27% against JPY
-23% against the yuan.
This is a ruble crash, not a “strong dollar” problem.
Yes. Down against “western” currencies, but on par with their “silk road” partners. Russian oil and gas sales to their partners are priced NOT in the US dollar, which has other economic spheres seeking US dollar alternatives to trade. As the Russian CB seems to be saying; “So be it”!
Here’s a big shocker: China is not Russia’s main trading partner.
Exports to China account for just 7.5% of total value.
The major export partner by a fair margin is the EU, followed by Turkey and Japan.
If we look at imports, China is the second source of imported products, well behind the EU. Intriguingly enough, despite sanctions, the third source of imported goods is the US, which supplies a large part of the oil and natural gas rigs used to wage war on Saudi Arabia, Norway and US fracking outfits.
Data for 2015 are still unavailable, but in 2014, despite the first phase of the commodity crash, Russia still had a large trade surplus, estimated at US $180 billion, the same as 2013. This was achieved by reducing imports exactly in parallel with the drop in export revenues. In short ordinary Russians and private companies tightened their belts so that the Kremlin could still amass foreign reserve currencies.
It’s likely in 2015 Russia still managed to turn a trade surplus, albeit a far smaller one, but at a tremendous cost for the private sector, cut off from credit and crushed by a crumbling ruble which makes imports, often vital capital goods, prohibitively priced in local currency.
Russian tactics are often highly effective, but invariably unsophisticated and extremely costly.
Now, regarding Russian bonds. It has been known for a few years now the present Russian government would have absolutely no problem defaulting on debt, be it sovereign or issued Rosfnet, Gazprom or Rosoboronexport (all State-owned) and even going as far as ordering private companies to default. This idea started surfacing when Russian companies and individuals (often acting as fronts for the Kremlin in return for extremely generous “commissions”) were flooding Europe with cash and it seemed there would be no end to Russian splurging.
The reason for this assessment is President Putin’s economic advisors have a completely different take on bond markets than Western or even Chinese ones: for them the instant the costs outweigh the advantages of paying interests, a default is the natural course of action. They seem to care little about rating and the fact each default increases future yields.
In short practical, not financial, considerations drive defaults in Russia: the Kremlin is not going to lose its sleep over ratings and yields like Western countries and companies do.
This is the reason I’ve always felt bonds issued by Russian companies pay far too low interests for the risks involved. A lot of people attracted by 7-9% yields over the past year or so are going to get mauled far worse than those who bought junk-rated fracking bonds. Honestly I wouldn’t touch that toxic waste unless it carried a 12-14% yield, far closer to the default risk and I am still being charitable.
the draw-down against the the US Dollar has to be in sync with all currencies which trade on the foreign exchange markets. If there would be an anomaly, that would create an arbitrage situation. I do not believe that the Ruble is an appropriate vehicle to use for such arbitrage (due to thin and volatile trading). I believe that this subject is beyond the ken of most readers, unless someone reading has solid experience in trading foreign exchange and can chime in.
Apparently three times is not enough Wolf, they don’t get it.
They repeat how the Russian people have suffered and survived worse. They seem to forget those long suffering and surviving Russian’s now have such a short life span there have been more than three generations of them since the end of WW 2. Russia isn’t the same place now as it was then anymore than the US is. This financialization bomb detonated seven years ago but has yet to expand too it’s fullest. Like the bombing of Dresden that created a fire that fed on itself until the cobblestones turned to glass. God only knows what of this world will remain when the dust finally settles.
OutLookingIn, Russian resolve? It’s easy to mistake resolve when all opposition has been silenced. See the Alexander Litvinenko report released in the UK today. Hopefully you’re not getting your views from watching RT. The cash crunch in Russia will only grow worse as their external reserves wither away.
And you Dear Sir, obviously get all your views from the politico, oligarchic/industrial complex controlled, so-called “free” western main stream media.
not to mention they are spending somewhere north of 100M dollars a month on the war in syria. where is that money going to continue coming from ? how long can they continue like that?
Cash crunch? We have a huge cash crunch right here in the western US. I am self-employed and two years ago made 60% of my income in Lubbock and Midland, TX. It’s GONE. The businesses I worked with are now at 3 days a week and don’t return calls. My business is off by 80%. Russia having trouble? China having trouble? Who cares———the US is in deep trouble!
And the weather geo-engineering is bringing us all kinds of high winds in winter, instead of spring time. Another complaint of mine. I’m using a new email here, Wolf, I hope my comment won’t be deleted.
You raise the interesting possibility here of stagflation for the Russian economy. I seem to recall economists saying this could never happen–a central bank raising interest rates against a backdrop of domestic economic weakness.
All in all another BRIC (against) the wall.
India is still humming along.
Agree! If I had to make a ten year, no look investment in any of these economies it would have to be India. We’ll see if their next central bank head after Rajan can keep the party going.
as the actor who played the japanese commandant in the movie “bridge over the river kwai said………
you slaves be happy in your work……….
and so they are………..
Or the classic, “The whippings will continue until employee morale improves”. I think if we ever create an all-out 1984 type totalitarianism, it will not be dedicated to making everybody as miserable as possible, instead everybody will be required to do the opposite under pain of death. You will have to walk around like you are psychotically happy with a BIG smile all the time.
“You will have to walk around like you are psychotically happy with a BIG smile all the time.”
I see you’ve worked in BHP Billiton before…
I have been following with great interest the actions of Putin and Russia since the Kiev uprising in Ukraine. Clearly the US is intent on subordinating Russia and Putin. And clearly Putin will not be subordinated. Even today, note the headlines about Putin likely ordering the pulonium assasination of a KGB defector. The timing and widespread distribution is more than a coincidence.
I think the Russian people support Putin even though they are paying a huge price economically (for now). Putin himself prepared his countrymen for tougher times and put a positive spin on things by saying that Russia would produce more within the country and that would be a good thing. He is correct on this account and western countries including the US would do well to retrench from some of this rampant globalism.
I think Putin is a brilliant strategist and quite a patriotic leader. I think he correctly believes the west was systematically dismantling his country after the Soviet Union collapsed and a strong leader needed to step into power to save Russia.
He has on more than one occassion mentioned that Russia is a world power in that they have nuclear weapons and that she should be included and respected as such. He has also indicated (correctly) that he would use such weapons if Russia felt threatened (also correct).
What we have going on here is the US being challenged for bullying the rest of the world to maintain its’ coveted dollar hegemony. I doubt Putin or his countrymen will give in to any level of financial pain. They have a much longer view on things.
Oh dear. I do hope Wolfstreet doesn’t become yet another Russian troll hangout.
i am aghast. you mean putin is not the savior of humanity? i am shocked beyond words that you would think that……/sarc off……
I am not a Russian troll. I am an open-minded American that sees a larger economic picture than what the western press is willing to describe. Putin has his downsides and I’m sure he has directed some nasty things as President. Of course we (America) has too (in spades), so I don’t think any of that is particularly relevant.
You write: “What we have going on here is the US being challenged for bullying the rest of the world to maintain its’ coveted dollar hegemony.”
Let me clear you up on something: you don’t fight the dollar hegemony by trashing your own currency.
Russia doesn’t have a choice on their currency if they are going to assert themselves. The western powers are determined to hurt them economically.
But Putin is a tough cookie and his people are behind him. I maintain that they can and will survive their currency depreciation.
This is a longer struggle than 2 or 3 years. The US is clearly losing power/influence througout the world as it does one stupid thing after another; all ill intended to maintain the dollar hegemony. Nation by nation, country by country, attitudes are changing and the hypocrisy of the US/western developed countries is showing clear. When the petro dollar influence breaks significantly, things will not be so easy in the US either.
Mike R. Your summation of the facts is correct.
I would only add that the current “global strength” of the US dollar is an artificial financial mirage, created by the Anglo-American hegemony to preserve the status quo.
This is a move to financially (rather than militarily) force support of the system, or risk financial currency destruction. The western oligarchic controller’s are circling the wagons around the US dollar, adding their “weight” to this struggle.
If worse-comes-to-worse they kick over the game table! Then ALL bets are off.
‘last man burning’ strategy ???
Thanks for voice of reason, and see beyond the fog and fiction perpetrated by western media.
I also think is the West is way underestimating sly as fox Putin and resilience and resolve the Russian people. Take a look at the history – they destroyed Napoleon and Hitler who ravaged the Europe and stood up to US during cold war.
Ironically the Russians along with Chinese have been buying a LOT of gold in last couple of years and especially last 6 months. I suppose 1 way to defend your FIAT currency with gold.
Russia like our northern brethren Canada with oil and natural resources as chief export are for now facing currency pressure but I think more like temporary.
If anything USD must come down as it cannot be the only man standing with strong currency. Wait for the chorus of earning misses due to strong USD and loud moans from exporters who in turn will force the Fed to usher in lower USD and 1 sure way to do that is back to ZIRP since many countries are resorting to NIRP.
I view this as a short term problem for Russia. By short term I mean a couple years. They are endowed with tremendous natural resources the West will be begging for by 2020. They also have virtually no government debt, sit on a large stack of gold and do not have a population or immigration problem. Also, as mentioned before, they are tough! Much tougher than the wimps and obese land whales who inhabit the US.
If our foreign policy wasn’t so ass-backwards, we would look to Russia as a global partner. Don’t think Germany isn’t behind closed doors.
Never knew I had twin brother.
The USD is taking them all to the woodshed, but down 25% against the euro is rough. Looks like Russia is their Canada. Just checked be Mexican peso today. It’s up to 18.5 to the USD. Wow.
I think we haven’t seen the end of decline for the ruble yet. Putin is a KGB thug , yet at the same time he thinks he is Peter the Great. Economics for him does not matter, let the Russians eat cake. Putin will run the economy to the ground hoping to get some international standing . He has miscalculated and is paying dearly for it.
Russian can take a lot of suffering but so can anyone when there is no choice, so can North Koreans so can many other unfortunate people stuck under murderous dictatorships.
I received recently an e-mail from a friend of mine in Russia asking me if it was true that Yellow stone volcano was about to explode any time now and extinct life in USA as the info was continuously on Russian channels all last week. I wouldn’t want to be living in Russia right now.
The only good that might come out of this, would be the end of Putin , but that will bring about the end of Russia as we know it as Putin is Russia right now.
Ruble will go beyond 100 if the oil touches $20 with as consequence dictatorship in Russia becoming more severe.
I see the CAD touching 60 cents in the same scenario, yet I cant see how things might evolve if the ridiculous housing bubble pops, or what might cause it to burst. Don’t see interest rates going up and people seem to be paying their mortgages on time so far (arrears are within historical norms). Job losses in the oil sector were mainly last year, so unemployment has been fairly steady. If anything, the cheap loonie will give more buying power to foreign RE hunters in Canada.
But if RE did pop, the oil price crash will be a walk in the park for the Canadian economy compared to the devastating damage that RE crash will bring about.
It’s interesting what your friend said about the Russian news of the Yellowstone volcano. I noticed long ago that their news is full of the most ridiculous things, superstitions and dire predictions. It’s almost as bad as china’s news service, which while not as overtly bombastic and negative also carries a lot of insidious junk. China news beats Russian news in arrogance though; looks like the Chinese feel they have to make up for past weaknesses.
Thank you wolf btw for posting about Russia. I hadn’t thought about them in a long time. Financially, I would love to invest in Russia if it weren’t so unstable. My fantasy trade: buy timberland that is currently too cold to be used for farming. If global warming allows winter wheat to be grown in another decade it means a 5 to 10X return. If not, we’ll then the land is still good for timber. But no such investment product exists:(
Guys, you must check out the English version of Pravda! It is quite amusing, better even than the National Enquirer!
With the British government having effectively indicted Putin for 1st Degree Murder yesterday, the Russian people are going to have to think long and hard about just how much they are willing to endure to support Putin’s Imperial ambitions.
Already he has made mortal enemies ( and imposed sanctions) on two neighboring states with a population of 120 million people, almost equal to his own. Seen his nation become of supplier of LAST resort for its most valuable export commodity due to his clumsy attempts to use energy as a tool of strategic blackmail. This guy is right out of the 1930’s only he is running a moth eaten nation with a population smaller than Pakistan’s and an economy not much bigger. The Russian presence on the UN Security Council is becoming a sick joke!
I really don’t think so. With enormous resources and first class scientific/technical establishment and huge powerful military, you cannot compare Russia to pathetic failed 3rd world states like Pakistan. The Russian people have aways regarded their government in the same way they have regarded floods and droughts, forest fires and blizzards, plagues and earthquakes and any other natural disaster you cant avoid and must endure, Democracy has never been able to take root in Russia. They alternate between anarchy and tyranny and I think they honestly prefer the latter. Putin is a perfectly typical Russian leader and they are not particularly surprised at the latest revelations from the British. After all, to make Polonium 210 requires a major research reactor (the lethal dose is about a microgram) and it was perfectly clear who was behind the assassination. I doubt anybody in Russia was shocked. if anything, Putin gained machismo points for ruthlessness. Russians want a strong, iron-fisted ruler. Let the world tremble!
The Wolfowitz Doctrine
Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed formerly by the Soviet Union. This is a dominant consideration underlying the new regional defense strategy and requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power.
P.S This is not the Wolf Doctrine.
The ruble was something like 2500 to the dollar when I was there in 1994. I think they just whacked off a couple of zeros in some currency reform some time later.
It was 5,000 to the dollar when I got there in the summer of 1996. It was losing value on a daily basis. All prices were quoted in dollars even in Siberia and converted to rubles at the new rate.
I stayed with Russians throughout the time. Which was totally awesome. Often a woman in the household would speak one of the foreign languages I speak. Wonderful people. But they were facing incredible hardships.
And you’re right, the ruble went on to totally collapse. Hence the Russian Financial Crisis (or Ruble Crisis) in 1998 during which the ruble was massively devalued and Russia defaulted on its debts.
In many former Soviet countries people used to keep their savings in US paper currency. In Ukraine in 1995 it was around 200,000 kuponi to the dollar and $100 was a lot of money. I exchanged newer paper currency for old silver certificates for several friends who couldn’t exchange old currency at banks. These silver certificates dated from the 1930s, had apparently been in the family for many decades. I heard of a bank in Kharkov that didn’t have enough local currency on hand (1994) to change $100. On the other hand counterfeit US currency was common, I gave several friends counterfeit currency detectors.
My Father spent two years in Russia with the Peace Corps after he retired from his law practice. i agreed to move out to his farm and keep an eye on the place while he was gone. He was deeply impressed with the resilience and spirit of the Russians people and kept up with the friends he had made there long after he came back. America should not underestimate the Russian people.
A number of people comment on the resilience of the Russian people- their ability to endure hardship etc.
Agreed, but for a cause- either the Great Patriotic War against Germany or for a time, the Cold War.
What is the reason for Russia suffering now? Oil, of course but whose fault is it that this advanced technology society is so un-diversified, that it is closer to a Saudi Arabia than a US, UK or Germany?
It is Putin’s fault.
The suffering of the Russian people (which has only just begun as the government burns through its reserves) is self- inflicted.
Here is the supreme irony of Russia’s intervention to stop Ukraine turning to the EU- the EU is RUSSIA’s only hope. And Ukraine might have functioned as a political bridge as well as a land bridge.
Instead Russia finds its export (and import) channels physically blocked. Its pipeline ideas get more circuitous and far fetched.
Its interesting that Russia’s slowing began before the crash in oil or the sanctions. It began with Putin’s re-entering the Presidency.
The wealth creators knew the mafia was back. Russia is not a safe place for money without political connections.
The funny thing about this is that highly placed Russian officials, former and sitting, say the same thing but in a thinly veiled code.
Both former finance minister Kudrin and the present head of the central bank have described the situation as a crisis calling for ‘painful reforms’
A reform is painful for entrenched rent- seekers who seek to profit from their position- who would that be?
Both these officials are calling for an end to Putinism, which shares more than a first letter with Peronism- the Argentine disaster that never ends.
However, I doubt that in fifty years there will be candidates running in Russian elections under the banner of Putinism.
Russian people are wonderful people but their resilience is not more or less than any other people / human being in other places of the world.
The survival instinct is in our genes and when faced with danger people will resort to evth in their power, and when nothing works they die.
Russians have no choice, (if anything I would say they are cowards rather than courageous for being subdued by Putin without a fight, but this is maybe a little unfair to them), they do not have a revolutionary spirit anymore and are just getting buy.
Many live a miserable life and die young (their life expectancy is 67 years worse than some african countries). If you remove Moscow and St-Peter, the rest of Russia is worse than Africa, without the painful cold winter as a bonus.
What is so resilient about Russians that is not found in other peoples?
It is like saying for a dying cancer patient that he is courageous – what else can he/she do?
i’d rather be here than there, but yes, russians are pretty tough people. they have to be.
things will only get difficult for putin when things get better.
might be a while.