Naive Questions About Russia’s War Economy

Yves here. Helmer’s post about the competing and radically different plans for restructuring Russia’s economy so it can better cope with the impact of sanctions is timely. Not only is the legislative debate in full swing, but central bank President Elvira Nabiullina also gave an update. She depicted Russia as having weathered the initial impact of the sanctions on the financial system fairly well, but as on the verge of starting to feel the real economy effects bite. This is consistent with our estimate that it would not be until the two month mark that it would be possible to begin to judge how well Russia was adapting to having lost access to critical inputs from the US and Europe like car and aerospace parts.

Note that Nabiullina estimated that the worst crunch would occur over the next six months and conditions should improve after that. While it’s easy to dismiss that as hopium, Nabiullina has a reputation of being careful.

Helmer poses the choices for Russia as state socialism versus oligarch capitalism. Framing it that way makes it seem obvious which would be preferable, but it’s not so simple.

Russia is in the middle of a war, a financial crisis, and a looming real economy crisis. It is also in the process of restructuring its economic relations away from Europe and to the East, most important, to China and India.

A very important reason for Russia to be careful and observant of legal niceties in its divorce from the West is that if it’s seen as unduly willing to take advantage of ambiguous or contested business dealings, its new besties would have reason to worry that Russia might try to take advantage of them when it could.

My impression is a lot of Western firms have not entirely closed up shop in Russia, but in fact are still paying their leases and even making payroll. That puts Russia in an awkward position, because this partial mothballing of the operation still hurts the economy: they aren’t buying supplies or power, for instance. The officials do not have a legal basis for intervening since the Western operator is still meeting its financial obligations. By contrast, if a foreign operator has entirely shuttered its Russian venture, having the state seize abandoned property is not just kosher but also desirable.

Reading between the lines of this piece, another reason not to be so keen about nationalization of foreign or partly foreign owned entities in the absence of abandonment is that it sounds as if bankruptcy is not a well developed process and bankruptcy courts in Russia may also be corrupt. One reason Cyprus was a major banking center was that many major Western companies would structure their inbound investment investment to Russia through Cyprus legal entities and Cyprus contracts. They wanted any disputes to be adjudicated in Cyprus, where they’d be under English law and where the courts were perceived to be pretty fair.

Another issue with bankruptcy is that in the US, the process is very strongly structured to keep the business operating (Chapter 11) rather than liquidating it (Chapter 7). Part of the Chapter 11 process for large bankruptcies is that the bankrupt company can get financing while it is being restructured so it can keep running. I doubt Russia has anything like American “debtor in possession” financing. Thus using bankruptcy to seize a company means liquidating it, as in selling its physical assets. That nearly always kills it as an ongoing business. That is the opposite of what Russia needs now. It needs to keep any viable business afloat.

The final reason to be leery of nationalization is: where is the cadre of experienced government officials who know how to get their hands dirty and manage a complex entity? The reason the American professional-managerial class lurches from disaster to disaster while so far being well removed from the damage is that they can’t be bothered to do the sort of hard and often tedious work of solving nitty gritty material problems. Anything harder than reviewing contract language or picking tile for their pool is beyond their capacity for complexity. But they can get away with that because they are effectively running down legacy assets, built well enough by others that they can tolerate under- and mis-management for quite a while. Restructuring operations, particularly in the middle of a physical and economic war, is a few orders of magnitude more daunting.

In other words, I doubt that there are remotely enough operationally-seasoned managers and executives that could be found and properly deployed to run newly nationalized industries.

Russia is already managing too much disruption on too many fronts. It has to get through the upcoming big business crunch as best it can. This is not the time to implement romantic wholesale revisions of economic relations. After Russia has faced the worst of the crunch, nationalization might be a very sound selective approach where the current owners are unwilling or unable to adapt to war time needs. But it’s not sound as a blanket remedy.

By John Helmer who has been the longest continuously serving foreign correspondent in Russia, and the only western journalist to have directed his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and advisor to government heads in Greece, the United States, and Asia. Originally published at Dances with Bears

“Tell me, please, Grandpa,” the little boy asked the Red Army veteran, “what does a war economy mean and how is it different from now?”

“Well, Yegorushka,” replied the old man, “our beloved President Vladimir Vladimirovich Putin explained just this week: ‘I think commonsense should prevail, after all is said and done. And this is my great hope.’”

“But if the Americans want us to starve to death,” the little boy looked quizzical. “What does commonsense mean?”

Last week Putin wasn’t prepared to acknowledge that the State Duma is now debating the most revolutionary transformation of the Russian economy since October 1993. That was when President Boris Yeltsin, with encouragement from Washington, opened fire on the parliament building, killing and wounding more than five hundred, and destroying the parliament’s powers.

“Just a mosquito bite”, Yeltsin telephoned [2] President Bill Clinton.   “If you need to talk to me any time in the next two days,” Clinton told [3]Yeltsin, “I’ll be available any time of the day or night. All the best.”  “Only that degree of force that was absolutely necessary,” the White House announced [4].

Last week the Duma began reviewing two new laws to decide whether the war economy will run on state planned lines, starting with the nationalization of the assets in Russia of all companies belonging to the hostile axis; or keep running on the oligarch model with a temporary arrangement between the oligarchs and foreign investors until the hostilities are over.

According to Putin on April 12, “we are also aware that the most correct decision in the emerging situation is to debureaucratise the economy and enable the growth of new production outlets based on newly created logistical chains. In this connection, I can say that I have much hope for the rise of small and medium-sized businesses, the initiative from below, and the emergence of new leaders in Russia.”

Putin didn’t mention the alternative submitted to the Duma a week earlier on April 4, by the Crimean parliament, backed by the Communist Party and other deputies. By this omission, Putin was implying he is opposed to it; and that instead, he will support the alternative law announced on April 12 by the Kremlin party, United Russia. This second scheme is to be run — the text of the new law dictates — by Igor Shuvalov, chairman of the state Vnesheconombank (VEB).

Between the two bills, the two schemes, this is now the Russian choice between state socialism and oligarch capitalism. For the time being the mainstream Russian media have yet to realize what’s at stake; no one in the west has noticed. “Tough justice for runaway Western business,” runs the headline in the state-financed Vzglyad [5],   except that the internet publication reports only the United Russia version of the bill without mentioning the Crimean version. Vzglyad’s editors have also omitted to tell their readers that the Crimean bill proposes to transfer the new power over nationalization to Russian voters through the elected parliaments around the country. By contrast, the United Russia bill vests the power to nationalize in the same state bureaucracy which Putin has been directing through men like Shuvalov since 2000.

Source: [5]
Novaya Gazeta, a pro-western Moscow medium, also reported [6] the United Russia bill favourably. Unlike Vzglyad, it mentioned the Crimean alternative briefly.   

Quoting Moscow lawyers and business lobbyists, Vzglyad  portrays the measures in the United Russia bill as a nationalist reaction against the sanctions imposed by the US and NATO on their companies  to cease trading with Russia and pull out of their domestic plants and investments. Vzglyad editorializes the proposed bill is too state-controlled: instead, it favours allowing the foreign companies to continue running their Russian businesses through cutouts or arms-length trust managers they accept;  or holding auctions of shares in the foreign assets on the Moscow stock exchange in which the foreigners will have the option to buy their shares back.

“In 98% of cases there will be a situation when the state will take everything,” Vzglyad reports its source saying.  “Instead, it would be logical to create public joint-stock companies and conduct an IPO of shares on the Moscow Stock Exchange. Then a fair price will be set, and there will be more chances to find buyers. Minority shareholders will be able to buy shares.”

Court bankruptcy procedures could be abused, Vzglyad warns. “We are talking about deliberately bringing a company to insolvency in order to take over its assets in a rigged bankruptcy procedure.  The consequences of the adoption of such a law will be deplorable. Because the [state officials] will not be able to manage many of these companies effectively. Most likely, the companies will simply be taken apart. And, of course, that will not protect anyone. Competitive companies win in modern markets. And their competitiveness is determined not only and not so much by assets as by management.”

Vladimir Potanin, one of the original Yeltsin oligarchs and controlling shareholder of Norilsk Nickel and the Interros group, says he favours buyouts of foreign companies on terms he will negotiate himself.  He’s opposed to nationalization by the state, Potanin told the Moscow business newspaper RBK [7]. “It actually turns out that we spend our public money on buying shares in foreign companies. There’s no need for that. This can be done for private money.”

This was subterfuge. Potanin has just arranged his own purchase of Rosbank shares from the withdrawing French bank, Société Generale (SocGen), on preferential terms worked out between Potanin and the Central Bank’s governor, Elvira Nabiullina. The terms for SocGen, which had bought its stake in Rosbank from Potanin in 2006, were that it “essentially gives the business away for free,” pricing its exit at Rosbank’s current writedown value [8].

At the same time Potanin’s deal with Nabiullina arranged special Central Bank refinancing to cover the €500 million in Rosbank debt Potanin has agreed to take over from SocGen.

“It’s a bit distressing that ultimately this is an enormous gift to one of the wealthiest oligarchs,” Reuters quoted one of its French sources. Asked by the US-government financed news agency if “SocGen’s deal meant other companies could sell their assets to Russian buyers, Kremlin spokesman Dmitry Peskov said [8]: ‘This depends on the decision of an owner of a specific company which is leaving Russia.’”  That’s Putin’s endorsement.

This scheme is also backed by Valentina Matvienko, speaker of the Federation Council, the upper house of the Russian parliament. “There is no question of nationalization in any way [which amounts to the] destruction of the institution of property,” she has declared [9]. “This cannot be done, otherwise the world economy will be destroyed. Of course, we don’t want to turn into raiders — the way our opponents behave. But it’s unacceptable to nationalize someone else’s property.”

President Putin with Vladimir Potanin. Potanin is sanctioned by Canada, but not by the US, UK or the European Union.

Alexei Kudrin, the Kremlin economic adviser, has announced the scheme he favours is trust management for the foreign companies until they return — and no Russian counter-sanctions against them. Kudrin proposes to give foreign businesses the incentive to return to Russia. “I hope that no measures will be taken that will make it difficult for [them] to return,” he said [10], claiming  the president and the cabinet of ministers agree with him.

Kudrin, officially head of the Accounting Chamber, is the last of the original founders of the oligarch system from 1996 to remain in office since Anatoly Chubais fled the country last month [11].  An avowed opponent of Russia’s defence and military spending and pro-American candidate to succeed Putin, Kudrin is counting [12] on the failure of the Ukraine military operation and then political capitulation by the Kremlin.

Former president Dmitry Medvedev, who is currently deputy secretary of the Security Council, has also gone on record in recent days to oppose[13] nationalization of foreign company assets.

The United Russia version of the new nationalization bill can be read here [14].

For the “appointment of an external administration for the management of an organization”, the objectives are described in Article 1 as “ensuring the security of the state and financial stability, as well as the rights and legitimate interests of organizations, creditors, employees and society.” These goals are immediately qualified: “the application of the provisions of this Federal Law is not aimed at unjustifiably infringing on the rights and legitimate interests of the organization, its creditors, as well as shareholders.”

The targets are “a foreign person (foreign persons, including several persons not affiliated with each other) who is associated with a foreign state which commits unfriendly actions against the Russian Federation”; “Russian legal entities and individuals (including if such a foreign person has the citizenship of this state, the place of registration of such a foreign person, the place of preferential conduct of economic activity by him or the place of preferential profit from the activity is this state), and is a controlling entity or owns in aggregate, directly or indirectly, not less than twenty-five percent of the voting shares of the organization or shares in the authorized capital the capital of the organization”; and “the organization is essential for ensuring the stability of the economy and civil turnover, the protection of the legitimate interests of citizens in the Russian Federation or in a subject [region] of the Russian Federation.”

If the impact of foreign sanctions or pressure on these foreign-owned companies to withdraw from Russia threatens domestic commodity, food supply, medical and other markets and local employment, a committee of state officials will be empowered to appoint an external administration for the foreign companies.  This government committee is authorized to decide who will become this administrator. The bill identifies its preference to be the state development corporation Vnesheconombank (VEB); this is headed by Igor Shuvalov. Both VEB and Shuvalov are currently sanctioned by the US, UK, and European Union.

According to the bill, once Shuvalov and VEB decide on their targets for “external administration”, they will then stamp an application for a court order implementing their scheme. With advice from Shuvalov, the court ruling will then set the guidelines for share disposals, asset sales, production targets, payroll and employment, solvency and borrowing limits for the administration to follow.

VEB is also given the power in the bill to order that the external management of the target company be handed over to another Russian company or oligarch group as trustee, or placed into bankruptcy for liquidation. For the archive on how Shuvalov has been performing these operations among the oligarchs for the past twenty years, read this [15].

The scheme is only a temporary one, said [16] one of the bill’s co-authors, Anatoly Vyborny. (right)   “We are creating rules of the game under which foreign investors can comfortably wait out the period of turbulence. They will be able to resume operations in Russia or sell their stake. In other words, we give them the opportunity to approach this issue carefully, not to cut off the profitable business which they built in our country.”

The alternative, the Crimean bill,  is a scheme for nationalization which is intended to leave no ambiguity or discretion for a government committee to allow the foreign shareholders and managers to return or recover; it will exclude them permanently. The small print also targets Russians who have taken foreign passports or who live abroad. Read the text in full [17].

Source: [17] 

According to Article 1, “the objects of property rights located on the territory of the Russian Federation and owned as of February 24, 2022,  by foreign states, foreign persons associated with foreign states which commit unfriendly actions against the Russian Federation, Russian legal entities and individuals (including if such foreign persons have the citizenship of these states, the place of their registration, the place of preferential conduct of economic activity by them,  or the place of preferential extraction of profit from their activities in these states), as well as their beneficiaries and persons who are under the control of these foreign persons, regardless of the place of their registration or the place of their preferential conduct of economic activity, are subject to compulsory seizure of ownership of the subjects of the Russian Federation on whose territory they are located.”

Not only production companies but houses, cars, boats, airplanes, and bank accounts are also targeted in direct tit-for-tat for the Anglo-American sanctions. “The objects of ownership include movable and immovable property, cash, deposits in banks, securities, corporate rights, other property (assets) which directly or through affiliated persons belong to foreign states and persons specified in the first paragraph of this part.”

“The compulsory seizure of property of foreign states and persons specified in the first paragraph of part 1 of this Article shall be carried out on the basis of a decision of the state authority of the subject of the Russian Federation authorized by the law of the subject of the Russian Federation to make such a decision on the territory of which such property is located… The compulsory seizure of property of foreign states and persons specified in the first paragraph of part 1 of this Article shall be carried out without compensation for its value.”

The Crimean bill explicitly places the power to decide on nationalization in the elective parliaments, both the federal and regional ones, thus blocking the closed-door lobbying of government officials and their agencies. It also prevents the courts from intervening to suspend or stop a parliamentary order.

Communist Party deputies are backing the new bill and extensive reorganization of the state bureaucracy to implement the running of the companies after they have been nationalized.  According to Karelian Communist leader Yevgeny Ulyanov [18], “more than 5,500 sanctions have already been imposed on our country, these are the largest restrictions in history. Now the West is preparing new ones; there is no doubt they too will begin to operate. In fact, the policy of strangling Russia is being implemented, while they are driving Europe into crisis and declaring a trade war with China. All this takes place against the background of the special operation of the Russian Federation in Ukraine.”

“We believe that it is possible to survive and move forward only with the help of a mobilization economy. Well, it is necessary to start with the nationalization of key industries and the banking system. But the first step is to turn the assets of foreign companies which have left Russia into state ownership….It is necessary to use public investments to launch stopped production, restore broken economic chains, including logistics, and fight unemployment and poverty. As before, we believe that it is necessary to establish a state monopoly on the production and sale of alcohol and tobacco.”

“A separate task is to change the taxation system. It is necessary to abolish the value added tax in the production sector and replace it with a turnover tax. At the same time, across the country, [we should] exempt the poor from income tax and increase the tax burden on the rich.”

“The result of these measures will be a doubling of the budget, which we propose to turn into a development budget. That is, we are gradually showing how to create a more effective socio-economic system of the country…It is important to ensure state control over exports and imports in order to develop production. The export of hydrocarbons should be combined with a reduction in prices for gas and petroleum products within the country. Accelerate the development of oil refining. We all understand that the current, constantly rising gasoline prices in Russia for consumers are abnormal for a country which is a world leader in oil production.”

“We believe that state planning needs to be restored in Russia. To create a special State Committee [Gosplan] for this purpose. To entrust it with the coordination of economic activities at the national, sectoral and intersectoral levels. The priorities of the new Gosplan should be the resumption of fully fledged work in the aviation, machine-tool and automotive industries, energy and metallurgy. This will make it possible to make a breakthrough in high technologies, and most importantly — to establish control over tariffs and pricing and ensure accelerated growth in the production of goods and services.”

Delaying tactics on the nationalization issue are unacceptable in the present situation, adds Duma deputy Mikhail Delyagin [19] , a well-known economist and member of the Just Russia faction. “For most companies, we do not see any concrete steps yet, except for declarations. Even those who have suspended their activities, for example, closed shops or restaurants, often do not break lease agreements, continue to pay the money required in such cases to employees…The authorities are showing weakness and trying to negotiate with those who are economically trying to destroy the country.”

“This bill [Crimean version], like any other, may have its drawbacks, which can be formally found fault with. But the principle should be very simple – if a company wants to leave the country, its property should be confiscated at the moment when it declares its intention to leave the country. No questions asked. If you are participating in an economic war against us, you are not our partner. An economic war of annihilation is being waged against us. If you are playing on both sides, then you will be destroyed.”

“The state is the entity that determines the rules. With whom to negotiate? With someone who wants to destroy us? Decide – either you want to destroy us, or you cooperate with us. If you cooperate, we can agree on tax regimes, on the use of tax benefits, subsidies. But if you want to destroy us, then your property will be confiscated. And the maximum good that we can do for you is to let you out of the country as individuals. And we will have state property with the preservation of the entire management, which will not leave, with some bonuses because this management has unique competencies and skills.”

“From the point of view of business support [19], it is possible, of course, to go the Ukrainian way – that’s to say, roughly speaking, to change the board of directors.  If someone is afraid of sudden movements, he can choose the Ukrainian way. But our economic impotence is reaching  catastrophic proportions: the situation when the confiscation of all Russian property and all Russian legal entities is officially announced in Ukraine, Ukrainian oligarchs continue to earn money in our country. A child’s question arises – does the Russian state really exist or is it a mirage?”

Yegorushka, who began this story by asking these questions [20], was tired from listening to the old man. “You can’t figure anything out in this world”, he said.

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  1. LawnDart

    Russia went into overdrive in an effort to localize critical components for manufacturing and production back in 2014: they saw what was coming. This article pairs well with this post:

    Top official explains why Russia hasn’t run out of precision missiles in Ukraine

    The main bonus that comes with import substitution is that new niches are created in the economy. It’s a challenge and an opportunity for Russian industry, for Russian design and engineering, for research and development centers to use their own modern technology and products in order to fill these niches and not give them up. I can say that such niches have opened in almost every systemically important sector of Russia’s economy.

    1. The Rev Kev

      I would assume that some of those imports by now have been digitally scanned for their dimensions and have been reverse engineered to make a local equivalent. With the idea of western patents being thrown out the window, they would be able to manufacture them and in the process pick up the skills necessary to extend their manufacturing expertise. And what are those western corporations going to do when they learn what is happening? Sue Russia? In what court?

      1. LawnDart

        Captain Vlad may as well hoist the Jolly Rogers at this point, now that he’s been exiled from the “rules-based order” of unfriendly nations and declared outlaw.

        Why not open piracy? Russia has a highly-skilled and well-educated population, abundant resources, and is unsanctioned by most of the world. If IP, copyright and tradmark protections don’t exist, what could be the effects on an economy such as the USA’s? Putin can steal our toys and share them with the rest of the kids, and all we could do is cry about it.

        1. Doctor Duck

          Well, atrocities and such we can tolerate, but IP expropriation? Them’s fighting words.

    2. lance ringquist

      this should be a generic quote,

      “protectionism opens niches in almost every systemically important sector of any economy.”

  2. Bugs

    My understanding is that erm, a few, big Western firms have transferred equitable ownership to the Russian directors of the affiliates. I don’t see any changes on the ground except for that section of the balance sheet for marketing and operations being moved off the filings until further notice.

  3. John Steinbach

    When I, and about 150 others, participated in a Gray Panther riverboat cruise from Odessa to Kiev in 1988, we visited a number of collective farm villages. Nearly without exception, a large photo of Stalin hung on the living room wall.

    I suspect the state socialism option will have substantial public support.

    1. Blue Duck

      An interesting tidbit regarding the collective ownership of the Ukrainian breadbasket – the west’s golden boy Zelensky was pushing for the privatization of Ukrainian agriculture just before the invasion. Putin really screwed up ArcherDanielsMidland plans to make big bucks from Ukrainian agriculture.

      1. deplorado

        A couple years ago (I think Spring 2019) the European Court of Human Rights officially reprimanded the Ukrainian parliament for refusing to pass a law to open up Ukrainian land for sale to foreign entities.

        The reasoning of the court was that the Ukr parliament was restricting the human rights of Ukr citizens to sell land to whoever they want. Im not kidding. That is some court.

        I havent followed since but Im pretty sure the court and whoever is behind it hasnt given up.

    2. GM

      Yes, it would have substantial support indeed. Notice all the Soviet flags that are being waved around, and even raised over the “liberated” towns in Ukraine.

      What is rarely understood is that Stalin’s repressions were largely focused at the top. It did spill over to random regular people, and forced population transfers did affect regular people directly, but generally that rule did apply. It wasn’t the random factory worker that had to spend his nights drenched in cold sweat fearing he would be on a one-way trip to Kolyma the next day, it was their boss.

      This is why the man was so revered by the masses and in the same time so demonized to this day by the people who end up in positions to write the history of what happened.

      It was the equivalent of the current PMC that suffered the most during the purges because there was real accountability, and the higher up you were, the more serious that accountability was — if a director of some enterprise was corrupt or incompetent, he got shot, while the workers on the floor were generally not punished, and management in between would have gotten various less severe punishments (a few years in jail, demotion, etc.).

      This was generally a very effective system — what was achieved in terms of real material progress in those decades speaks for itself. And it did drastically improve the lives of ordinary people.

      The Achilles heel is that the nomenklatura/PMC need to be regularly purged, or they will eventually undermine the system. And that is what happened once the purges ended – the system transitioned from top-down punishment to one of horizontal movement (by the 1960s and 1970s if you failed as a manager in one area, you simply got moved to an equivalent position in the hierarchy elsewhere, where, surprise, surprise, you generally failed even more miserably) and eventually no movement at all, outright feudalization, and punishment targeting those at the bottom in the late 1970s and the 1980s.

      Now notice the parallels with the current system in the West, where failure is not just not punished, but generally rewarded.

      And this is why the PMC/”liberal establishment”/etc, hates Stain so viscerally – it must never be allowed for people to even contemplate returning to a system like his. It threatens not just their privileges, but even their very survival. But because it is the PMC that writes the history books and controls the propaganda apparatus, they have been very successful in achieving that objective. Things are not helped by the fact that one needs to think at a certain level of abstraction about the historical process in order to understand what is going on, and few people have the mental training to do that.

      BTW, the only place where there still seems to be real top-level punishment is China, and it’s probably not a coincidence that things generally work there. Recall what has been happening during COVID – wherever local officials failed to control it leading to the need for prolonged lockdowns, they got demoted (and I might be wrong but I am under the impression than in Wuhan at least some got shot too; even if they didn’t, they certainly deserved it). In the West we have millions dead and tens of millions disabled, and the people responsible for that got rewarded, as they have been in every case of appalling dysfunction and degeneration (which at this point is mostly everything in society) for decades.

      If Russia is to prosper moving forward, they need to go back to something close to the Stalinist model. And to purge the oligarchs and the support class around them, as publicly and visibly as possible. This would also give a great psychological boost to the long suffering population and help move things forward. Recall how optimistic Soviet society was in the 1950s and 1960s, they need that now too, and also realize that people being unhappy about the system in the 1980s did not mean they wanted laissez faire capitalism, exactly the opposite.

      They don’t really have much of a choice if they are to survive in the long term, and sanctions and isolation from the West are golden opportunity to do that. It is not that there is no understanding of the problem among the leadership – what I am describing here has been widely analyzed and discussed there by prominent public intellectuals, in pretty much the same explicit terms. But I don’t like what I am seeing so far, the grip of the oligarchy over their society is still too strong.

      1. digi_owl

        Speaking of Wuhan, i suspect that is also why there were early reports of local coverups. Because the local leadership do not want that kind of attention, because they know they will get the stick.

        And wasn’t that kind of “purging” that Putin did during his early years? Thus bringing the rest of them in line. And the ones he targeted was those with the biggest foreign ties, and thus ruffling some feathers in places like London and New York.

        1. GM

          What Putin did was far from enough

          The fact is that if you take a look here:

          You will see various sheikhs and Russian oligarchs dominating the list.

          And all of the latter’s vessels were built after Putin became president.

          Meanwhile there isn’t a single Chinese name on the list.

          A proper curtailing of the power of oligarchs would have meant no more yachts, period. Obviously, it is about far more than the yachts, but the yachts are a convenient symbolic proxy because of the uniquely intense dissipation of valuable resources away from useful for the general society use that they represent.

          1. Joe Well

            I thought Putin curtailed the *power* of the oligarchs, not their *wealth.*

            In the US, we may think they’re the same thing, but they’re not, especiallly when you realize that the gazillionaires’ liquid wealth is only a tiny fraction of the government’s, let alone that the government can create new money.

          2. ModernTimez

            The assumption that anyone wealthy should be purged or at least made profoundly less wealthy seems baked into this comment. I doubt Putin or most modern-day Russians feel that way. The Russians I’ve known—not a horde, but more than a handful, almost all under 50—have been quite ambitious and capitalistic. Of course, that’s anecdotal, but it’s backed up by Russia’s income tax system, which amounts to a 13% flat tax. Russia ca. 2022 is a friendly place to the rich, all things considered.

            What Putin did was to essentially negotiate with the oligarchs by reframing Russia’s precarious economic situation at the time, which was perceived internationally as placing him in a hopeless negotiating position, into a form of leverage—he made it clear that the country was going to fall apart and the oligarchs were going to become targets of enraged people without enough to eat, (and not without cause, by the way), unless they agreed to reasonable terms. Ultimately, he worked out an amnesty deal on copious “back taxes” that left oligarchs substantially less wealthy in numerical terms without really impacting their quality of life (unless going from, say, a 3 billion dollar net worth to a 1.7 billion dollar net worth really impacts anyone’s quality of life, which I doubt). Over the next few years, he also sidelined the oligarchs politically for the most part.

            This was possible because (A) He was right; the country was falling apart in 2000, largely because of an unsustainable wealth gap that could be traced back to the oligarchs plundering everything in the free-for-all 1990s. Staving off total disaster and then creating a functioning economy over the next few years meant the first step was reclaiming a big chunk of what had been plundered. (B) He was practical about the situation and handled it as a series of business negotiations, more or less. Whatever else anyone thinks of Putin, being practical and avoiding rash or emotional decisions is a core part of why he’s managed to lead Russia for 20+ years with high public approval.

            In this instance, Putin was practical in the basic sense that he avoided the moralistic calculuses of most Western governments and looked primarily at what was viable and would likely work out best for the country. In a way, this seems simple, in another way, I have a tough time picturing many other world leaders being this savvy and judicious in such a high-stakes negotiation process. He knew if he pushed the oligarchs too far, they’d f**king kill him (or even if he escaped to live in exile, well, he’d be in exile, looking over his shoulder all the time, everything in Russia would be going to s**t and he’d go down in history as a total failure). He also knew if he didn’t push the oligarchs far enough, he would be unable to rebuild the country, causing regular people living in abject poverty to revolt against both him and the oligarchs, which would be equally disastrous. So he convinced most of the oligarchs this was a logical course of action. Once most were convinced, that meant he also had the support necessary to throw the others in prison and confiscate most of their fortunes if they refused to negotiate what he considered a reasonable amount of “back taxes” from what they had plundered. Of course, some oligarchs managed to move most of their fortunes out of Russia and left the country to live in exile, but most of the oligarchs played ball and Putin was able to come down hard on many who didn’t. All in all, it was enough.

            Today, some of the guys who played ball still have yachts. Why wouldn’t they? Putin’s clash, if one can even call it that, with the oligarchs was never a moralistic crusade bent on vilifying the rich and taking their s**t; it was a practical series of negotiations—(with some more punitive measures coming into play when this comparatively friendly approach failed)—that saved the country from collapse.

            1. GM

              I doubt Putin or most modern-day Russians feel that way

              Putin not, average Russian certainly does.

              Barely anyone in Russia who got rich did so fairly. Even in the few cases of people who seemingly did become rich on their own talents, if you dig deep, you will find that the real story is actually rather different (also, even in the US, many of the tech billionaires were really picked as the winners based on who was going to play ball with the existing power structures).

              The typical story is that somebody was in a position to grab a chunk of the real wealth of the Soviet state in the 1980s, seized that opportunity, then played ball with the remnants of the KGB structures, while showing talent for navigating and surviving the subsequent power struggles. Not everyone can do that, it takes certain qualities, but it is also true that one can hardly call that “deserved” wealth.

              It is like that to this day — the first generation of looters are now entering retirement age, they are not being succeeded by upwardly mobile people who made it out of nothing (as it had been the case during Soviet times — one could start from absolutely nothing and make it to the top back then, and that was in fact the background of a lot of the people at the top), they are being succeeded by others already in a position close to the existing power structures.

              This is widely understood and a source of never ending discontent. The people you know are not representative.

              Of course, that’s anecdotal, but it’s backed up by Russia’s income tax system, which amounts to a 13% flat tax.

              Which means the state is taking from the poor and giving to the rich even aside from handing trillions of wealth to the oligarchs in the 1990s.

              It would have been exactly like Latin America or South Africa if it weren’t for the nukes, which have, ironically, preserved the state not just in military but in social terms — because you can’t leave the nuclear arsenal to the private sector, that forces the state to retain control over that rather large sector of the economy, In Latin America there are no nukes, so society is not constrained by them and is free to, and has degenerated to the full banana republic experience.

              Today, some of the guys who played ball still have yachts. Why wouldn’t they?

              Because the flagship of the Black Sea fleet just went to the bottom and it will be many years before it is replaced. How many battleships and submarines could have been built and maintained with the tens of billions that were spent on yachts? And those yachts weren’t even built in Russia itself where that would have created jobs for people, what happened was that real mineral wealth was exported out and with the money from that jobs were created in the shipyards in Germany, Italy, Sweden, etc. In other words, pure looting with nothing of use in return.

              Meanwhile the Chinese have in a couple decades built a huge fleet rivaling the US Navy while not having a single one of their billionaires in the list of megayacht owners. Do you think that’s a mere coincidence?

      2. Lex

        My only quibble with this is that the Soviet flags aren’t about support of Soviet communism (necessarily) they’re about the great patriotic war. Which should be a clue to the west about how Russia is approaching this emotionally. One of the issues Russian speakers in Ukraine have is demolishing WWII memorials and not allowing victory day celebrations. In general, I don’t think westerners understand the deep emotional meaning of victory day or the GPW to Russians.

        1. digi_owl

          Because to “the west” WW2 was about Battle over Britain, Pearl Harbor, Omaha Beach, and nukes. Not about an invader that considered “your kind” draft animals to be worked to death at best, vermin to be exterminated on sight at worst.

        2. GM

          They are about both.

          The war plays a big role, but it isn’t just that.

          The trauma of the 90s (which were worse there than the Great Depression was in the US) still lives, and to this day for a majority of people life is worse than it was prior to 1991.

      3. Sausage Factory

        The flags you are seeing waved are the victory flags, its purely symbolic and represents the same flag (in the famous photo) of the soviet troops placing the Russian flag over the reichstag in 1945. So when you see tanks flying it or it being run up the local administration center or village hall it represents the victory of that particular unit or battle – the fact we’re seeing it so much is testament to the number of victories experienced in the field in the ‘SMO’ – you rarely, if ever see the flag waved or used in day to day life in Russia (maybe a few places the further east you go who have yet to taste the fruits of capitalism due to corruption etc) You always see it a lot on Victory Day of course, usually with added text and dates etc as well as the hammer and sickle. (this year will be 77 years since victory so that will be on a lot of flags getting waved) The Russian Federation flag is standard everywhere. Older people living precarious lives pine for the USSR for sure but I don’t think anyone is pining for socialisms return (the communists are the second largest party in Russia – about 16% – but they’re not really communists in much the same way that the German ‘greens’ are not really green)
        As for Stalin, the Georgians still like him but there is no real desire for a repeat that I can detect and as for nationalisation Putin has been hinting at it for a few years, at Valdai conferences etc (the Eurasian version of Davos but much less secretive) he’s a very pragmatic guy, as are most Russians, if the world is so screwed up that you need to take industries into the hands of the state, in order to guarantee stability, then why not, he says it is always best to be flexible and apply the right tool for the job even if it is only temporary, see he isn’t ideologically bound by dogmatic beliefs that no longer function or are now irrelevant as with say the US or the UK. Smart guy.
        Russias MIC is great value for money because it is only partially private but they do it for the country and not the exorbitant amounts of profits we see in the US. That’s why Russia has 4 different type of hypersonic missile to choose from and the rest of the world has non. Functioning product is paramount.

  4. Harry

    I had some contact with the Russian bankruptcy process back in 1999 and 2000. It seemed to be a perfect model of US processes, but at the time a fair deal more corrupt. Of course that was before the Sacklers showed how to do US style corrupt bankruptcy. Classic scams involved using remote courts, showing up with dodgy paper which had been paid, or forging/stealing company seals to create new liabilities. But shockingly, mostly the courts sided with holders of legitimate paper. In fact to a degree which made VR Groups business highly profitable.

  5. kemerd

    If Russia fails that will be because of neoliberal elite who still cannot (or do not want to) fathom what just transpired
    I also don’t see why simple nationalisation would not work, everything except owners who are there to collect dividends us still there, does Yves think top management really do anything important?

  6. Sound of the Suburbs

    Klaus Schwab, has been spilling the beans.
    The WEF has got its people everywhere.

    Putin was a young global leader of the World Economic Forum, along with France’s Macron and Canada’s Trudeau.
    This explains why Putin doesn’t know how the monetary system works and runs a budget surplus.

    What’s wrong with running a budget surplus?
    The zero sum nature of the monetary system is not understood.

    This is the US (46.30 mins.)
    The private sector going negative is the problem as you can see in the chart. This is when the financial crises occur.
    When the Government deficit covered the trade deficit they were fine, but then they tried to balance the budget
    As the Government goes positive, into Bill Clinton’s surplus, the private sector is going negative causing a financial crisis.
    The current account deficit/surplus, public deficit/surplus and private deficit/surplus are all tied together and sum to zero.

    What were those old rules of thumb they developed over the years by trial and error?
    Balanced government budgets AND balanced trade (current account)
    You can’t have one without the other, as the Americans have demonstrated so well.

    The Germans can balance the budget safely because they run a big trade (current account) surplus.
    The Germans put rules together that work for them because they run a big current account/trade surplus.
    They don’t realise why these rules won’t work in countries that run current account/trade deficits.

    A budget surplus sucks money out of the economy.
    The zero sum nature of the monetary system is not understood.
    As one thing goes up, something else goes down.

    1. lance ringquist

      much to agree with, except, we ran huge budget deficits and trade deficits under bush, the economy still crashed.

      now there is no such thing as a budget deficit if you are sovereign, but i understand what you are saying. bush pumped trillions into the system, it still crashed. was it because of nafta billy clintons massive deregulation of the economy, well yes to a point. was the crash caused by the fact that under free trade, workers were no longer able to pay their debts, consume, save a little and have some leisure time, i say it was all of the above, except that free trade drained workers wealth away so fast, so complete, that they could no longer service their debts, let alone eat.

      and their debts remained the same under free trade, and most likely increased, but wages fell, exactly what the free tradin austrian types had hoped for.

      that is when the s##t hit the fan, 2008.

      today we are running huge budget and trade deficits, but the economy is still tanking, hammered by low wages and inflation. is the inflation from the budget deficit, maybe some, but most of it hits the pockets of parasites.

      but the real cause of this massive inflation is free trade. we are litterely paying someone else to stock our shelves with what we used to make.

      and to top it off, massive amounts of high cost energy is being used to ship it, transport it, and western companies are not part of our sovereignty under free trade. they are a high cost of free trade.

      germany is about to find out that workers who cannot consume, service their debts, save a little and have leisure time will do to their trade surplus so-called advantage.

      the sooner the world figures out that a country is a business that has to be run by their own goverance, the sooner things will balance out somewhat, and that will free up human ingenuity. some good, some bad, but we hope the good wins over the bad.

      1. Sound of the Suburbs

        There are so many concurrent problems, separating them out isn’t easy.

        I have carried out a thorough investigation into 2008.
        It’s similarities to 1929 soon became apparent, and indicated that the problem lay in the economics, neoclassical economics.

        The economics of globalisation has always had an Achilles’ heel.
        The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
        Not considering private debt is the Achilles’ heel of neoclassical economics.

        1929 and 2008 stick out like sore thumbs.
        At 18 mins.

        What goes wrong with neoclassical economics?
        1) It makes you think you are creating wealth with rising asset prices
        2) Bank credit flows into inflating asset prices.
        3) No one notices the private debt building up in the economy as neoclassical economics doesn’t consider debt.
        4) The banking system and the markets become closely coupled, and as soon as asset prices fall it feeds back into the banking system
        5) The money creation of unproductive bank lending makes the economy boom as you head towards a financial crisis and Great Depression.

        How does free trade actually work?
        Why is it so much cheaper to get things made elsewhere?

        The early neoclassical economists took the rentiers out of economics.
        Hiding rentier activity in the economy does have some surprising consequences.

        The interests of the rentiers and capitalists are opposed with free trade.
        This nearly split the Tory Party in the 19th century over the Repeal of the Corn Laws.
        The rentiers gains push up the cost of living.
        The landowners wanted to get a high price for their crops, so they could make more money.
        The capitalists want a low cost of living as they have to pay that in wages.
        The capitalists wanted cheap bread, as that was the staple food of the working class, and they would be paying for it through wages.

        Of course, that’s why it’s so expensive to get anything done in the West.
        It’s our high cost of living.
        Disposable income = wages – (taxes + the cost of living)
        Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
        High housing costs have to be paid in wages, reducing profit.

        The playing field was tilted against the West with free trade due to our high cost of living
        The early neoclassical economists had removed the rentiers from economics so we didn’t realise.
        That’s why it’s so much cheaper to get things made elsewhere.

        1. Sound of the Suburbs

          All the problems do have a common root.

          I was following two strands of thinking.
          Problems with banking, money, wealth and the monetary system.
          People like Richard Werner, Steve Keen, MMT and Richard Koo had lead the way.

          How what was known in Classical Economics had disappeared in Neoclassical Economics
          Michael Hudson lead the way here.

          Was there a link?
          Eventually I worked it out.

          Neoclassical economics is a pseudo economics; it’s more about hiding the discoveries of the classical economists than telling you how an economy actually works.
          Any serious attempt to study the capitalist system always reveals the same inconvenient truth.
          Many at the top don’t create any wealth.
          That’s the problem.
          Confusing making money and creating wealth is the solution.
          Some pseudo economics was developed to perform this task, neoclassical economics.

          Rentiers make money, they don’t create wealth.
          Rentier activity in the economy has been hidden by confusing making money with creating wealth.

          Banks create money, not wealth, and so lie at the epicentre of the confusion.

          What you think is happening and what is actually happening are two very different things.
          Global policymakers have been finding out the hard way.

  7. Thuto

    Imho, the fortunes of returning firms will be determined by how they navigate the risks created by their decision to mothball operations in response to the invasion. Given that import substitution is usually a multiyear undertaking, enterprise-facing/b2b companies (e.g. critical component suppliers) may have an easier time restarting operations if their wares are difficult to replace with locally produced alternatives in the short term but they will be pushed to the periphery of the supply chain sooner or later (alternative suppliers from friendly countries have also been rushing in to fill the gap left by departing western firms, so there’s that too). Otoh, consumer-facing firms that sell largely discretionary items (e.g. McDonald’s, Iphones) will find that returning isn’t as easy as turning the entrance signage around from “closed to open”, consumer sentiment will be hostile (as evidenced by some top Russian social media influencers cutting to shreds their western designer handbags) and rightly so, these firms allowed themselves to be weaponized to wage an economic war against the Russian state and as such, regaining the trust of customers will be an uphill battle.

    The dearth of managerial talent to run newly nationalized foreign companies notwithstanding, the image of those firms that chose to shutter operations is severely dented and Russia/ns will in my view approach reintegrating them with justified caution and this will, along with other technical considerations, determine the mechanism for said reintegration. Making western firms the backbone of a country’s economy is now a threat to national security.

    1. lance ringquist

      Making western firms the backbone of a country’s economy is now a threat to national security.

      you can say that about what is happening in any country under free trade.

      “western companies, or any company are not part of our sovereignty under free trade. they are a high cost of free trade.”

      the explosion of billionaires happened from 1993 onwards around the world. a business under free trade should be viewed as a threat to any country and their peoples.

  8. Tom Pfotzer

    To oligarch or not.

    Central planning or private “planning”.

    There may be some lessons to learn from China.

    One of Deng Xiaoping’s famous development strategies was to let a few people get rich first before the attainment of common prosperity.

    A few have gotten rich; now it’s time for the common prosperity.

    This may be a key turning point in Russia’s economic evolution. The external sanctions give Putin the crisis he needs to effect fundamental change.

    The Chinese have done some very good top-down, central planning work. So, it can certainly be done, and it’s recent, and it’s been done by a nation that’s a good friend to Russia.

    War-time isn’t a great moment to add new economic turmoil. That’s true. It’s also true that war-time is a great time to re-focus investment and existing capacity into high-growth, high-wealth creation industries.

    There are many Russian candidates for this type of spending, in addition to airplane and car parts, there’s also railroads, power generation and distribution, refineries, chemical synthesis plants (plastic, fertilizer, cement, metallurgy and ore refinement, castings, steel rolling mills, extrusions, etc.).

    Russia really needs infrastructure, and infrastructure creates a lot of jobs, and creates a lot of wealth. So, there’s no question that war-time spending _could_, if directed correctly, create enormous new wealth, and that wealth _could_ get spread around evenly.

    This decision may create a very vibrant middle class for Russia.

    Yves said:

    In other words, I doubt that there are remotely enough operationally-seasoned managers and executives that could be found and properly deployed to run newly nationalized industries.

    I ask: who is running those industries now? Are all the managers foreigners? If they’re all foreign, then there is indeed a problem. If they’re mostly Russian nationals, then there’s much less risk of operational failures during a nationalization event hand-off.

    With respect to nationalization .vs. slap-on-wrist, the question is whether the foreign business is willing to take direction from Russia…or not. If the foreign company takes direction from Russia’s enemies, then the decision is not “if nationalization” it’s “when nationalization”. Nobody with any sense keeps an enemy on the premises.

    I say make the “oligarch or not” and “central plan or not” decisions first. Consult with China; they have very relevant experience.

    I hope Russia chooses the Crimean plan. Go for a system that builds a middle class: build skills, invest in the people, and use this moment to build industries that systematically create wealth, not just extract it.

    Since it’s “war-time”, the iron is hot; I’d forge an newly-designed economy that has great long-term promise.

    No Yeltsin redux for me, thanks.

    1. Yves Smith Post author

      With all due respect, I have no idea by what you mean by “nationalization event hand off”. The government becomes the manager. The former know-how is lost. And in any event, it’s also partly irrelevant since managing a crisis or managing a restructuring requires an entirely different skill set than managing an established operation. The current staffers might have some hope of muddling through. A new team, or partly new team?

      You may not like to hear it, but what Russia has to do is hard enough that it cannot afford the greatly added complexity of introducing any further changes than absolutely necessary. Widespread nationalizations is like trying to jump from one boat to another while going over a waterfall.

      1. juno mas

        Yves, you are assuredly more knowledgible and circumspect about Russia’s economic challenges ahead than most. I’m still impressed with your prescient analysis of the Greece/EU banking tug-of-war.

        Another element of this impending economic transition for Russia is the determination/fortitude of the Russian people. My experience is they are a smart and determined culture. They know how to adapt. If they see winning the military war with Ukraine as existential then it seems to me they will endure considerable economic pain (for however long) to get there. Time will tell. (It will be interesting to see how much pain the American’s are willing to endure.)

        1. Sierra7

          juno mas:
          Bingo, Bingo! Your second paragraph!
          (“Simplicity, Clarice. Simplicity!” From the movie “Silence of the Lambs”)

      2. Tom Pfotzer

        “nationalization event hand-off” is the transition from owner A to owner B on the event of nationalization of the enterprise.

        The government doesn’t have to operate the enterprise, any more than stockholders operate a capitalist enterprise. As I said in my post, if all the mid- and upper-management are foreign, there is a transition problem.

        I see the complexity of ownership change as approximately what’s involved when a company is formerly public and taken private…here’s the gotcha – assuming key staff stays put.

        I do agree with your point about not swapping boats while going over a waterfall, but I think the analogy doesn’t have to be that sudden, does it?

        The process could take years _if_ the current owner says “we’ll cooperate” initially, and then doesn’t. Set some performance metrics, and if those metrics aren’t met, start the nationalization process, and make that process binding once its started.

        For those companies which are pulling out summarily, the decision’s been made.

        I agree that crisis management and major transition require a very different skillset than operating at equilibrium. Is there not some mechanism to keep the transition out of crisis territory, like:

        a. Gov’t announces metrics for foreign operator’s performance, sets up a gov’t authority for metrics data collection, and instituting nationalization as nec

        b. Gov’t tells operations staff well in advance when / if nationalization is to occur

        c. Gov’t makes plenty of transition resources (capital) available to help incentivize key people to stay, or recruit replacements from elsewhere in the economy, or other nations

        d. Gov’t keeps ownership for a while, maybe spins them off in a decade as conditions permit

        Point being it doesn’t have to be big-bang. Think about what happened to the auto and railroad industries once WWII war-time happened. Prod lines got shut-down, re-tool, re-train, top-down command-economy instruction, etc. It got done. Railroad was almost totally nationalized. I think even soldiers were running some trains, IIRC.

        1. Yves Smith Post author

          You are Making Shit Up. There is already a statue with draft language. You don’t get to make up your fantasy version of how this could work, you need to deal with the options Russia is considering, and yours is not one of them.

          It clearly states that the entities will be operated by “The State Development Corporation ‘VEB.The Russian Federation'” as the default but others may apply and there is a process for determining who is appointed if others show up.

          What struck me, skimming the statute, is that it looks as if the proposed law is pretty narrow, as in it proposed takeover only in cases of necessity, and it has pretty restrictive tests.

    2. lance ringquist

      the rich parasites in the 1930’s kept saying the deplorable are unable to run the businesses, and will create massive inflation and unemployment.

      yet those dim wits did just that themselves, and ignored co-ops that many were run just fine by amateurs.

      when ever i see trained managment types, or ones that carry books around touting business propaganda, i run from them as fast as i can.

      if the elite think that a amateur cannot run a company, just ask yourself who were the ones who ran general electric, or boeing, these are the guys considered the cream of the crop, at least by the elite.

      i would not worry to much about finding managers, amateurs will do just fine in many cases.

  9. Matthew G. Saroff

    Gilbert Doctorow, no relation to Cory, and an old Russia hand, has this observation at the end of a long post:

    I will just turn attention to the announcement in Russia that as of today the public can make cash withdrawals of dollars and euros in substantial amounts, and also can order foreign currency transfers abroad, up to $5,000 if I understood properly. This means that poor Mr. Piotr Aven, the billionaire banker and Russian wheeler dealer sitting in London at present with his vast assets frozen under sanction rules, may yet be able to pay his chauffeur by ordering a transfer from his Sberbank account in Moscow.

    Curiously no one is asking how and why Russia has reopened nearly free currency exchange and cash withdrawals after a month of strict clampdown. Where are the dollar bills and euro notes coming from? Surely the question is begging to be asked. It is not coming in from tourists to Russia since there are virtually no foreign tourists in Russia at present. It is not being carried by foreign business visitors for the same reason. So let us guess. Could it be that Germany and other select EU Member States are delivering plane loads of cash to Moscow to pay for their gas, oil and coal deliveries? Yes, this would allow them to claim they are defying Putin over payment in rubles while respecting the terms of their long term contracts with Gazprom. But it is a pretty picture that they would not want made public, since the European Parliament would make the life of them all quite unbearable if the word got out. Perhaps readers can offer better explanations.

    Ignoring the silliness about the EU Parliament, which is just a debating society, me makes a case for some significant sanction evasion by the largest economies in Europe.

    1. caucus99percenter

      Yep, my impression after 40+ years in Germany is that the façade of fake democracy that is the European Parliament has even less actual significance than the National People’s Congress in China. The latter’s rubber stamp is at least a required formality, whereas virtually all important decisions in the E.U. are taken directly by the Commission and its unelected president, and never debated and put to a binding vote in the European Parliament at all.

      1. Irrational

        Occasionally, the EP manages to push a piece of legislation through written by lobbyists. I think this was the case with the REACH directive on chemicals. However, generally they are too pre-occupied with their own self-importance.

  10. Thomas Bergbusch

    I think the answer is that industries that provide mainly consumer products will be distributed among an investor class (sometimes called oligarchs), but that goods essential to defence and a (quasi) war economy, may be nationalized. For instance, the Azovstal steel plant is likely to be rebuilt and run as a public entity — a crown corporation, at least for a time.

  11. Susan the other

    What interesting stuff. Choosing an open war economy or choosing nationalization. Why can’t they nationalize critical industries, putting the less important ones in trust? Do the laws of private property override sovereignty? Or specify that a country must either nationalize everything or nothing? That it is in some way “unfair” to nationalize specific industries when others are allowed to operate almost as usual? This must be all or nothing? That sort of thinking is too inflexible. They should do the Crimea option for mobilizing and winning the war – and to maintain some semblance of good faith with friendly foreign enterprise they can do trusts that extend and protect interests. And why should it take the extreme distress of war to nationalize critical infrastructure? We’ve got an ocean of critical infrastructure collapsing into unsustainable garbage; the planet is in deep trouble. The whole world should be nationalizing and rationing things in a very organized manner. Who needs the silly social affectations of “friendship” and indulgence in frivolous economic trajectories in a time like this? The war in Ukraine is just making it obvious. Nationalize it. “Compulsory seizure of ownership” might be a relief.

  12. Thomas Bergbusch

    I wonder how many of the privatized foreign firms could be turned over to employee control. The data I have seen from Europe seems to show that employee-owned companies grow faster; keep jobs in local communities at a higher rate; default on their debt less often; are more resilient in economic downturns and have an unambiguous record of producing wealth for lower- and middle-class workers. So, that might be an option:

      1. Peerke

        Konsum! I remember them well particularly the one in Dresden Neustadt – a lifesaver on many an occasion. Did not know it was a DD firm. In retrospect I wish I had done a bit more research on ownership of these firms when I lived there. If only we had something like that here in AZ.

  13. Evelyn Sinclair

    Oh no! Bad news for billionaires!

    Putin signs decree to remove Russian stocks from overseas exchanges

    “In a huge blow to the nation’s billionaires, Russian President Vladimir Putin has signed a new decree that requires Russian companies to remove their listings from overseas exchanges. ….”

  14. LawnDart

    In a F-you to the four or five eyes, India seems to be placing it’s chips on Mother Rus, or at least that’s what they appear to be advertising:

    ‘Direct hit on the target’: IAF successfully test fires BrahMos missile from Sukhoi Su30-MKI jet

    The target was a decommissioned Indian Navy ship. BrahMos Aerospace, an India-Russia joint venture, produces missiles that can be launched from submarines, ships, aircraft or land platforms

    The (-b)RICs seem to be aligning, and if I’m not mistaken, a majority of the world’s population are Russian “friendlies.” The CIA needs to get busy and stir some stuff up between China and India– perhaps send Chelsea Clinton to Hyderabad to head an NGO under the tutelage of Toria Nuland and rile-up some nationalists… …does India have nazis?

    1. LawnDart

      On the same note:

      China Pledges to Strengthen Russia Ties ‘No Matter How the International Situation Changes’

      “In the first quarter of this year, the bilateral trade volume between China and Russia reached 38.2 billion US dollars, an increase of nearly 30%,” the statement continues. It’s a boost in trade which the Chinese Foreign Ministry says “fully demonstrates the great resilience… of cooperation between the two countries.”

      The “unfriendlies” are seeming like a bossy high school clique who vaguely realize, as June and graduation approach, that their best years will soon be behind them.

      1. LawnDart

        Oh hell, we lost “our guy” down South:

        Brazilian Culture secretary resigns after a speech with quotes Nazi propaganda minister Joseph Goebbels

        Alvim had struck an unexpectedly solemn tone in the speech, which announced the creation of an arts prize worth 20 million Reais. When taking on his current role in November, he promised to launch a “cultural war” against progressiveness and vowed to align public policy to conservative values.

        Vikki needs to send this guy some cookies, pronto. And not Chelsea, because if she takes after her father at all, the last thing we need are photos to leak of her going topless and strutting her stuff on the beaches of Rio. We barely have enough bleach to shoot into our veins let alone enough to disinfect our eyeballs.

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