A Silver Lining to Economic Crisis – a Quieter Introspective Russia?

With the daily avalanche of doom and hideous gloom battering us from every angle – it’s very difficult (neigh, almost impossible!) to find any silver lining strong enough to tug on with reasonable focus and interest. So when you trip over the odd headline here and foreign-correspondent article there (in quiet corners of the media sphere) on Russia’s woes … an almost sickeningly-wicked sense of schadenfreude cannot help but push the corners of one’s depressed frown into a merely untidy pensiveness.

The Russian Trading System Stock Exchange (“RTS”) – a Dollar-denominted market place – puked some 9.4% today on continuing concerns over liquidity in the Russian economy, the stability of its banks and the Kryptonite effect cheap natural gas (and oil) is having on its heavily Petrodollar-dependent Government. The Russians keep suspending the ‘orrible markets and yet they keep falling!

Why am I being SUCH a dick about another nation’s misery and economic torment? Because when the U.S. (and Western Europe) were on our knees, buckling under the weight of $125 oil and monopolistically-influenced rocket-high natural gas prices, who was stomping on our despair like some mad Lex Luthor character? The Russians!

Granted, the phrase ‘Axis of Evil’ is about as passé as a plate of Foie Gras in a ‘Sherman McCoy’s‘ refrigerator, but Putin’s clique of ‘Anti-U.S. Dis-Favored Nations’ – of Venezuela, Cuba, Iran, Libya, Syria (the list goes on) all thoroughly enjoyed their Oil-laced boom times at the hefty expense of the U.S. at its oil addicted expense. The Kremlin often cheekily suggests and forecasts the demise of the U.S. as a global leader.

The fall in the price of energy – of Oil and Natural Gas – lovingly tracks the hefty decline of the ‘imbalanced’ (fossil-fuel-heavy) Russian economy. An economy so poorly diversified of industry that a plunge in energy and commodity prices whacks huge chunks out of their Cash and Gold Reserves and pops their GDP from a decade of 8% year-on-year growth to an ugly contraction of 2.2% this quarter alone (!) (and more accurately measured as a 20% decline using realistic U.S. metrics.).

The almost Czar-like popularity of former-President (and now Prime Minister) Vladimir Putin allowed him to abolish various pillars propping up Russia’s fledgling democracy and to rollback (else suppress, abolish or kill) freedoms taken for granted by the Western world. So when internal criticism of the Kremlin DOES make it onto the ‘Broadsheets’ it is about as surprisingly refreshing as a criticism by an Iranian Mullah of another exalted politician – Iran’s Ahmadinejad. Rare but enjoyable!

A quote by the Examiner say’s it very succinctly (far more condensed that I am able! [apologies!]):

Today Iran and Venezuela cannot meet their budgets because to balance they require an oil price of $ 60 or more. Russia is in an equally serious position with an economy dependent on energy for 60 % of all revenues. America can only hope that budgets for trouble making will be curtailed along with the falling revenue.

Though the Examiner’s next sentence is disagreeable with my palate – but unlike a Russian reporter’s strife – we’re all allowed to disagree (even little bloggers!)

The crash of oil prices have reduced powerful tycoons to go begging for bailouts from the Kremlin. Their power rose by attachment to the Putting leadership and now he can consolidate his gains by choosing which companies , industries and individuals will survive. The so-called oligarchs will have their ranks thinned. Even the survivors will be poorer as they give up control or swaths of shares in return for support.

The annual report to the Senate’s Intelligence Committee (an Oxymoron?) by the U.S. Intelligence Community – called the Intelligence Community Annual Threat Assessment – reaffirms this punditry: {it is a hefty read!}

While it is true that the downturn in the global economy will have an impact on national security for the United States (and most other countries), it will present as many opportunities as challenges. The report itself acknowledges that the decline in oil prices “may put the squeeze on the adventurism of producers like Iran and Venezuela,” not to mention Russia. Also it states that the crisis gives the U.S. “the opportunity to fashion new international global structures that can benefit all.”

Nice condensed version by the Washington Post here.

Of course – the CBR – Central Bank of Russia – belies such negativity, stating all is well, the sun is shining, the economic future is strong and Vodka sales will continue to grow over the near-term.

To be fair and open …there are other rays of good news for Russia – which may help pump their Gold reserves (?) – else they’re in pain and shall be forced to sell their gold reserves on the open market to pay for massive stimulus liquidity injections:
It appears they’ve uncovered a massive gold and silver natural reserve in the far east of Russia – called the Kamchatka Peninsula. Predicting some 1,200 tones of gold and 8,000 tons of silver laying underground and just waiting for the picking. Bastards!

The outlook for gold? confusing and contradictory for many ugly reasons – gold continues to fly nonetheless!

With one last burst of ‘ah ha!’ as I try to close my rambles with a reasonably pithy conclusion … Those seeking to (re)invest in Russia – which was once labeled the wunderkind of emerging markets should surely read some wonderfully miserable perspectives on Russia by the brilliant online investment-focused media outlet – Seeking Alpha.

They provide four reasons why you should consider Brazil, India or China (or anyway ‘cept Russia) as thus:

1 - Falling oil prices pushing Russian economy to breaking point – devalued assets, currency and reserves.

2 – Putin’s cronyism, corruption and total disregard for the rule of law.