Thursday, April 10, 2014

Steal Now... Pay Later

OK, I know readers of this blog now "get it": Russia under Putin is a bad guy and a serious threat to global peace. 

However it is now a race against time: Putin's greed and contempt for all laws, whether domestic or international, is sending the Russian economy straight onto the rocks. On current trends, the Putin regime is creating so much damage that Russia has a very short window of maybe less than 3 years before its sustained challenge to the international system leads to firstly economic crack up and secondly political meltdown.

The latest numbers must make for sobering reading in the fetid Kremlin corridors where Putin struts, basking in the short-run popularity of a "good war". As of last week, Russia had already seen $70 billion leave the country in 2014. The forecast for capital flight from Russia this year is now an eye-popping $170 billion. Just to put that in context, the total Russian reserves before the crisis broke were about $470 billion. Meanwhile across the planet, despite the impact of Western governments rapidly seeking to avoid buying gas from Russia, World prices are stable, and with US likely to release some shale gas and some of its oil reserves into the global market, prices are actually set to fall. These, remember, are the major foreign currency earners for Putin's petro-state and most analysts suggest that Russia spends more than it earns even at oil price levels of around $95/bbl. Russia will enter a recession later this year, and may already be in one now. Growth is gone, and there are still plenty of bills to pay and mouths to feed if the oligarchs are going to continue to live the good life.

Meanwhile new investment in Russia has collapsed. At a time when Russia urgently needed large-scale new investments in industry, which employs far more people than the oil and gas industry, so beloved of Russia's tyrant, all new projects are being scrapped, wholesale.

The fact is that the contemptuous and bellicose rhetoric of Putin's regime has made up minds across the Planet: the Kremlin has so little respect for international law that there are no agreements where Russia can now be trusted to keep their side of the bargain. If the choice is between the sleazy, corrupt and poor Russian economy or the American and European economies, which combined are now 40 times larger, it is pretty easy to see why investors will follow the money. That, by the way, goes for China too. It has been faintly pathetic to hear the Russians proclaiming that, if the EU now boycotts Russia as a hostile state, they will simply trade with China. China will indeed trade with Russia, but strictly on their own terms and for their own benefit. The Chinese will jump at the chance at getting large gas concessions, but these will be at well below market prices, and the Russian economy will be further weakened and impoverished in order to serve Putin and his accomplices. 

Now Russia is launching an information war- spreading absurd propaganda and sending agents provocateurs, not just to Ukraine, but other places, including Estonia, in order to set a narrative that across the former USSR, "the Russians are restive". It is one of the few real weapons, short of outright war, that they still have: the classic Soviet playbook of "salami tactics" is being used- but the staged victimhood is not playing well at home. Russians are still demonstrating against the policies of Putin, and in quite large numbers. 

There will come a time when the writ of Putin will not bend a single blade of grass. The West needs to be patient, alert and determined. Eventually the thuggish crime scene that is contemporary Russian politics will face new challenges as a new generation recognizes that their leaders are not merely "the party of thieves and crooks", but the party of insane and fantastical greed, satanic arrogance and spectacular incompetence as well.

The West must understand that even though there are no deals that can be made with Putin, determination can, nevertheless, win the day. His crimes are now manifest, the question is how to stop him taking any more and how to protect ourselves while the regime progressively fails.

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