Category Archives: Russia

Putin: Battered, Bruised But Not Broken

Yves here. The triumphalism among Western commentators as the ruble plunged last week is more than a little cringe-making. We’re not yet in Two Minute Hate territory yet, but this feels like a warmup. Robert Parry provides an insanity check:

Official Washington’s “group think” on the Ukraine crisis now has a totalitarian feel to it as “everyone who matters” joins in the ritualistic stoning of Russian President Putin and takes joy in Russia’s economic pain, with liberal economist Paul Krugman the latest to hoist a rock…

Indeed, much of what Krugman finds so offensive about Putin’s Russia actually stemmed from the Yeltsin era following the collapse of the Soviet Union in 1991 when the so-called Harvard Boys flew to Moscow to apply free-market “shock therapy” which translated into a small number of well-connected thieves plundering Russia’s industry and resources, making themselves billionaires while leaving average Russians near starvation.

The piece goes on to debunk in considerable detail the caricature of Putin presented in America, the most important element being the charge that Putin was the aggressor in Ukraine and is therefore getting what he deserved. Mind you, Putin is still an authoritarian, but we don’t find that objectionable in many of our putative allies, starting with the Saudis.

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John Helmer: Ukraine Finance Minister Natalie Jaresko Accused in Colorado Court

Yves here. Helmer was first to provide in-depth reporting on the US citizen and State-Department supported Natalie Jaresko, who was mysteriously parachuted into the post of Ukraine Finance Minister a few weeks ago. Jaresko is in the midst of a nasty divorce from her former business partner. As Helmer wrote:

It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts. It is exceptional for them to fall out over the loot.

Helmer gives us the latest update on this protracted battle, and what it says about the Natalie Jaresko’s willingness to play fast and loose.

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Oil, Ruble and Ideology

Yves here. Since the financial media is covering the continuing meltdown of the ruble intensely, we thought it would be helpful to add some information that seems to be missing from most reporting. This post by Jacques Sapir from the 14th (hat tip Michael Hudson) provides important detail on the importance of oil to the Russian economy (far less than typically depicted, although it is the biggest source of foreign exchange), the impact of the fall of the ruble and oil prices on the domestic budgets, and the odds of a Russian default. Note that Sapir is sanguine on the default front and does not see a rerun of 1998 in the offing, by virtue of of Russia having large foreign currency reserves. Note that Menzie Chinn of Econbrowser differs, and uses a chart from the Economist to make his point:

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IMF, World Bank Halt Lending to Ukraine – Franklin Templeton $4 Billion Ukraine Bet Goes Bad

Yves here. While the financial media is riveted with the spectacle of the ruble meltdown and the Russian government rate hike to 17%, and the investor rush out of all things emerging markets, another drama is playing out in Ukraine. If you’ve been following this drama, the Ukraine economy is substantially intertwined with Russia’s, and Russia was already subsidizing it by giving it a break on gas prices. When things got ugly, Russia revoked the subsidy, demanded repayment of outstanding gas debts, and cut off gas shipments. This made for an ugly situation, since 70% of gas to Europe goes through pipelines that transit Ukraine meaning Ukraine could simply steal European-bound gas if they got desperate, creating a conflict with one of their new patrons. Moreover, it raised the specter that any rescue of Ukraine would wind up routing funds to Gazrpom to pay off the gas bill, another outcome unappealing to a West determined to punish Russia every way it could (the dispute over the outstanding debt is being arbitrated, with a decision due next summer, which also allows Europe to wash its hands of money going to Gazprom).

This detailed account of the wrangling over what to do about supporting the basket case of Ukraine makes a couple of issues very clear: one, the amount of funding needed is much larger than the officials want to admit to, and two, the approaches under discussion are at best stopgaps. A default and restructuring look inevitable.

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Yanis Varoufakis: How the United States Rolls (Post-Global Minotaur) – by Slavov Žižek

By Yanis Varoufakis, a professor of economics at the University of Athens. Originally published at his website. In this article, aptly subtitled It’s lonely being the global policeman, Slavoj evokes a parallelism between the age of extremes that began as the British Empire was losing its grip with the present moment in history. Now that the […]

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Michael Hudson: U.S. New Cold War Policy Has Backfired

Yves here. Michael Hudson looks at the way what he calls “the New Cold War” is creating alliances among countries that the US has as designated enemies, when the classic foreign policy playbook is to do everything you can to keep your opponents isolated.

One thing that is striking about the US decision to escalate against Russia is that it’s not at all clear what the trigger was. And that raises the possibility that these hostilities were instigated out peeve, or what one might more politely call imperial reflex, reflecting the belief that Russia needed to be punished for its various sins, such as supporting Iran, outmaneuvering the US in Syria, and harboring Snowden. And the assumption appears to have been that Russia could be taken down a notch or two on the geopolitical stage at no cost to the US. Hudson explains that the reverse is proving to be the case.

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Meet and Greet Natalie Jaresko, US Government Employee, Ukraine Finance Minister

The new finance minister of Ukraine, Natalie Jaresko, may have replaced her US citizenship with Ukrainian at the start of this week, but her employer continued to be the US Government, long after she claims she left the State Department. US court and other records reveal that Jaresko has been the co-owner of a management company and Ukrainian investment funds registered in the state of Delaware, dependent for her salary and for investment funds on a $150 million grant from the US Agency for International Development. The US records reveal that according to Jaresko’s former husband, she is culpable in financial misconduct.

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Russia Can Survive An Oil Price War

Yves here. This article is an important sanity check on the impact of the current oil price war on Russia. We’ve seen similarly skewed conventional wisdom on the Saudis: “No, they can’t make it on a fiscal budget basis at below $90 a barrel,” completely ignoring the fact that the Saudis clearly believe it is in their long-term interest to suffer some costs to inflict pain on some of their enemies, and render some (a lot) of shale oil and alternative energy development uneconomical, which increases their ability to extract more in the long term from their oil asset.

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Michael Hudson, Other Experts Discuss America, China and Russia Jockeying in G20 and APEC Summits

Yves here. This is an intriguing exchange among Michael Hudson, John Weeks, professor emeritus of development economics at the University of Long and Colin Bradford of Brookings. The points of difference between Hudson and Bradford are sharp, with Bradford admitting to giving a Washington point of view that Obama scored important gains at the APEC summit, with Hudson contending that both confabs exposed America’s declining role and lack of foreign buy-in for its neoliberal economic policies.

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Michael Hudson: Putin’s Pivot to Asia

Yves here. Understandably, US reporting on the just-finished APEC summit focused on Obama’s objectives and supposed achievements. Russia has historically not been a major force in the region and thus received less coverage here. It was therefore surprising to see our man in Japan Clive tell us that Japanese media coverage of Putin at APEC was on a par with the column-inches given to Obama.

On Real News Network, Michael Hudson describes how Putin is shifting Russia’s export focus and economic alliances towards Asia, particularly China. Putin did better at the APEC summit than most Western sources acknowledge, and that could have longer-term ramifications for the US.

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Russia to Launch New Payments System to Circumvent SWIFT Network

Many observers have become unduly excited about what they depict as efforts to break the dollar hegeomony, such as the joint effort by the so-called BRICS nations to form a development bank. While having a suite of internationals funding entities, particularly ones focused on activities that in theory increase the collective benefits of relying on a reserve currency, are seen to be important, it does not follow that launching useful new funding institutions will break dollar dominance. As much as US abuse of its position as issuer of the reserve currency is correctly resented, there isn’t a competitor waiting in the wings. The Eurozone has blown it with its failure to clean up even sicker banks than the US has, and by compounding a bad situation with its adherence to destructive austerity policies. China clearly has the potential to displace the US longer-term, but it is unwilling to run the requisite trade deficits, since that means exporting demand and hence jobs. And no country had made the transition from being a major exporter to being consumer-driven smoothly; a crisis or protracted malaise would also delay China displacing the US as currency top dog.

But not being able to get rid of the dollar any time soon does not mean that countries that the US is trying to punish by using its influence over international payments system won’t find nearer-term escape routes.

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