It’s good to be king, if just for a while
To be there in velvet, yeah, to give ’em a smile
It’s good to get high, and never come down
It’s good to be king of your own little town
Tom Petty, from “It’s Good To Be King”; from the album Wildflowers
The internet is abuzz; the press rushes to warn of disaster soon to come – bloggers and journalists alike shout it from every rooftop. Vladimir Putin will stand once more for election to his nation’s highest office!! Everyone has an opinion, from poets to schoolteachers, from dreamers to cynics and from the hovels of the humble to the mansions of the mighty. The vast majority of English-speaking analysis adjudges this decision a calamity for Russia that will make Stalin’s purges look like mud-wrestling for octogenarians. Can pestilence and plagues of boils be far behind? Apparently not.
Joining the Massed Prophets Of Doom (thanks to Foppe for the link), is Yevgeny Yasin, Russian economist and former Minister of the Economy from 1994 to 1997. Economic changes will entail political risks and unpopular decisions that will stop Putin, says Yasin. The guy hasn’t even been elected yet, and already he’s a failure as a leader. Boy; tough crowd.
Yevgeny Yasin…..why does that name sound so familiar? Oh, yeah – I remember. Together with fellow numpty triplets Vladimir Mau and Yevsei Gurvich, he helped round out what I described as the Triad Of Tools, back in March of this year. On that occasion we discovered that Yasin, like his fellow numpties, appeared to be roughly as accomplished at economics as he is at extreme skateboarding. Well, perhaps that isn’t entirely fair – he’s hopeless at economic forecasting, although his economic education is enviable. But still, I ask you: what good is an economist who is reliably wrong in predictions of future economic trends? Anyone can predict economic events that have already happened – Jeeze, I could do that, and I stayed out of retail because I was afraid I wouldn’t be able to make correct change. More to the point, why should anyone believe your economy-related predictions when you’re less accurate than flipping a coin?
Among the clangers dropped by Yasin during his stint as psychic visionary, “…If investment stalls, President Putin will have no hope of doubling the size of the economy within a decade, as he has promised. My longstanding skepticism about this promise has now hardened into certainty: the Yukos affair will make it impossible to sustain the growth rate required to achieve this goal because the arrest of Mikhail Khodorkovsky and the seizure of his assets has dealt a devastating blow to business confidence.”
Is that so? According to the CIA World Factbook, growth in Russia remained remarkably stable between the time of Yasin’s prediction (2003) and 2008 – when worldwide markets took a shitkicking that had nothing whatever to do with Khodorkovsky – and never dipped below double the best it had been under Yeltsin. GDP growth for the USA during the same period started at a measly 3.1% in 2003 (less than half that of Russia for its worst year during the period measured) and had sunk to 2% by 2007.
Did Russia somehow manage to sustain growth unassisted by FDI while investors fled for the hills, terrified at Khodorkovsky’s outrageous treatment? Doesn’t look like it: Foreign Direct Investment climbed exuberantly between 2003 and 2006. Yasin probably felt he was on solid ground, since FDI in 2003 was pitiful – less than $1 Billion. However, unfortunately – for Yasin’s forecasting – it was $15 Billion in 2004. Three years after Yasin’s Doomsday warning, it was better than $27 Billion and trending sharply upward. So much for the sobering effect imposed by Khodorkovsky’s conviction. FDI tumbled later in response to the global financial crisis, but imagining the global financial crisis as a collective expression of sympathy for Khodorkovsky (sentenced 5 years before it’s onset) would be, if you’ll forgive me, a bit of a stretch. Yasin was correct that Putin failed to double the economy in a decade, but that seems to me a bit unrealistic to expect from any leader, and Putin certainly had it going in the right direction while vastly increasing investment rather than stalling it. Also, he never actually “promised” anything of the sort – it was phrased as a goal in his State of the Union speech to both houses. Besides, it’s just annoying when economists predict, “such-and-such will happen in this many years if everything stays exactly as it is now”. A pastry chef who understands simple multiplication could do that, and everyone knows the economy barely stays the same all day, never mind over a decade.
More? Sure. Here’s NostradYasin again, still steadfastly unrepentant in 2004: “The current account balance is to drop to $15 billion in 2004 and $5 billion in 2010.” Still steadfastly wrong, too; his prediction didn’t even get the direction of the trend right. The current account balance was actually more than $46 Billion in 2004, the same year Yasin predicted it would fall to $15 Billion, and it had recovered to nearly $69 Billion in 2010, following a massive worldwide economic crisis and down from a high of $105 Billion in a year it was supposed – according to Yasin – to be heading for $5 Billion. He was only off by….$64 Billion. That’s well within the margin of error for prediction by someone whose profession is economics, surely? Not.
Anyway, as much fun as it is mocking Yasin’s portentuous peccadilloes – and God knows, there’s no shortage of material – we’re going to have to let it go for now, because it’s getting a little repetitious. Also, given Yasin’s penchant for getting the future ass-backwards, there’s probably no more auspicious forecast he could make than that economic changes will ruin Putin – history and Yasin’s track record suggest exactly the opposite is likely to occur.
Besides, Yasin wasn’t the only former Russian government official to weigh in with silly unsubstantiated predictions – just opening your mouth and going for it seems to be all the rage these days. Mikhail Kasyanov, for example, predicts Russia may see its cash reserves dry up as it struggles against the falling price of crude oil, its main asset. Moreover, intones Kasyanov, Russia could record a 5% budget deficit, if crude price falls by a third.
Well, for what it’s worth, Brent Crude is up right now by .46%, at $107.14 per barrel. But I think everyone will agree that hardly constitutes a trend. Time to see, then, if Kasyanov knows something the pros who ride oil prices for a living don’t.
Unsurprisingly, no; he doesn’t. According to Oil-Price.Net, world oil supplies will likely tighten significantly for 2012. Writing for oil-price.net, Steve Austin reports the International Energy Agency (IEA) released strategic oil reserves to the market through July and August; a measure customarily reserved for desperate times such as a major war. This is only the third time since the IEA was established in 1974 that it has taken such action. Hmmm…interesting. Mr. Austin also passes along the conclusion of a Goldman Sachs Group economic report that predicts oil supplies will become “critically tight” in 2012. And the IEA’s expended reserves will have to be replaced.
A very interesting analysis of Saudi Arabian capability to make up any shortfall is careful to point out the Saudis have always kept the extent of their reserves a closely-guarded state secret, and that they are likely to be considerably less than many believe. Also, Saudi Arabia is plagued with growing civil unrest; a less desirable (from a western viewpoint) corollary of the vaunted”Arab Spring”. Simply put, the Saudi government unilaterally increased production by 530,000 barrels per day in June – despite OPEC’s decision not to increase production – because it needs the money for massive domestic spending to head off revolt and to prevent the price of imported grain from climbing due to transportation cost increases, due in their turn to higher oil prices. This, according to the report, is unsustainable and will accelerate well depletion. It also has much to do with depressing the current price of oil. What’s going to happen when they stop pumping the extra? Hey – you’re good at this.
According to the UN, the world population will hit 7 Billion this year, and double by 2100 if left unchecked. Increasing affluence among the former poor and middle classes in the BRIC countries results in increasing motor vehicle ownership, and greater demand for fuel supplies. The IMF predicts a growth rate of 7.8% for India and 9.2% for China in 2012; this, the report offers, “will have a lever effect: less oil production capacity while the demand skyrockets”.
If increased demand and decreased production come together to result in crude prices that fall by a third, I’ll eat one of Kasyanov’s shoes. In more bad news for the Putin’s Election Will Spell R.U.I.N club, global economic recovery is predicted to accelerate later this year, increasing demand further.
Similar reports agree that stopping civil unrest from reaching Saudi Arabia is of paramount importance. If tumult roils the Kingdom, the go-to strategic source for the world’s energy will be its largest producer…Russia. Russia currently supplies almost 65% of the European Union’s energy needs, and views of its reliability as a producer “have undergone a paradigm shift…[owing to] steps taken by its Prime Minister”. Is that new confidence likely to be shaken by that official’s move from Prime Minister to President? I’m going to go out on a limb and say No. With the opening up of GAZPROM’s European pipelines to competitors such as Surgutneftegaz and Rosneft, “the Russian oil industry will continue its upward trend….The booming Russian oil industry will prove to be divine succor for all European nations as they no longer want to depend on the unstable and hostile mini-Iran countries for their fuel needs.”
Consider, also, that the Global Slowdown Will Crush Putin theory presupposes that – in the event of a Putin victory – the world will deliberately put itself into recession for at least 6 years just to spite Putin, by keeping oil prices artificially low. And that oil companies would joyously sing from the same song sheet, forswearing the tempting profits offered by a tight market. And that western electorates would reelect the same leaders who skipped recovery in order to put a thumb in Putin’s eye. This is analysis?? Come on.
Last and decidedly least on the list of Self-Important Discontented Russians (the only variety the west is interested in hearing from) – fluttering the heartbeats of Russophobe chicks the world over while inspiring the gag reflex in nearly everyone else – the Sochi Centerfold weighs in: Boris “Boilerplate” Nemtsov offers his opinion in an attempt to remain relevant. That’s always puzzled me – the west can’t be bothered to quote anything Putin or Medvedev says unless they disagree – offering the hope of a fight between them – or say something that might be construed as a threat against the west or one of its friends. Yet it can’t get enough of maudlin political rhetoric from its pet dissidents, who command no respect and barely any attention from the electorate in the country they aspire to lead. It’d be like the Russian press flocking around Joe Lieberman in 2004 to get his take on the election.
Anyway, Nemtsov – predictably – suggests capital flight (a concept he manifestly does not understand or is deliberately misinterpreting) could rise to $100 Billion this year (the entire Russian GDP for 2012 is only forecast to be a little over $2 Trillion), educated Russians will likely stream over the borders like fleas leaving a dead body, and the dullards who remain will surge into the streets in rage when they realize they can’t “replace the government through elections”. Sure they will, Boris. Nemtsov’s protests have never drawn more than a couple of hundred people in a nation of better than 140 million, and when he tried to co-opt an ongoing car and motorcycle show last summer and turn it into a political demonstration, he got arrested. The police didn’t get all his followers, however; they melted into the crowd – of about 200 people. Since it’s hard for a big group to disappear into a smaller one, it seems safe to assume the protesters were fewer than 200 or so.
Let me…ummm….go on record here as predicting none of the things Nemtsov warns of is going to actually happen. But it’s his political philosophy that makes me laugh – the government must be replaced every election cycle, regardless if it’s doing a good job and regardless the spotty qualifications of contenders to replace it, or the will of the people is being ignored. Is there really an electorate like that, anywhere, that simply chucks out the ruling party every election in favour of something new? If so, Nemtsov ought to think about moving there.
But the negative invective was not restricted to select Russians who believe they know more about governance than the government: oh, no. As I mentioned earlier, the western press tumbled over itself in a rush to condemn United Russia’s choice. Exemplary of the coverage is Forbes’ “Oh No, Another Twelve Years of Vladimir Putin“. Paul Gregory’s Russia coverage is uniformly pretty negative, and accompanying political articles in his sidebar suggest his empathy for the hardcore conservative Republican spectrum. Those who follow U.S. politics with any interest will know that demographic despises Russia, and would love to get a liberal narcissist like Nemtsov installed as leader. Still, the article has some standout comedy moments. For instance, Mr. Gregory describes Yury Luzhkov as “Moscow’s popular mayor“, fired by the Tandem “in preparation for the elections“. In fact, the final popularity poll on Luzhkov showed only 36% of Muscovites approved of him – hardly popular – and he was both a founding member of and reliable vote-getter for United Russia. Firing party stalwarts who are adept at generating votes to keep you in power might be solid electoral strategy for the Republicans in the USA, although I can’t say I’ve ever seen them do it, but in Russia politicians certainly know better. One of Luzhkov’s most vocal critics was none other than Boris Nemtsov.
Similarly – very much in the conservative Republican mold – Mikhail Prokhorov is portrayed as “just folks”; a down-to-earth, Regular Joe who made the mistake of openly criticizing the Kremlin (which, originally, cynics suggested would be his exact role in order to make Russians feel sorry for Medvedev or Putin, and elect whoever United Russia pushed into the ring) and was subsequently fired. Gregory’s analysis is that his party was forced by the Kremlin to fire him (which is certainly a refreshing spin on what actually happened), but that now at least he was free to “return to New Jersey to live the good life, far from Kremlin politics”.
In fact, far from being a Regular Joe, Mikhail Prokhorov is Russia’s second-richest man. Without casting undue aspersions on the residential benefits of New Jersey, Mikhail Prokhorov is about as likely to set up housekeeping there as he is to throw his entire fortune into a brussels sprouts and garbanzo beans restaurant chain. His official residence (in terms of where he pays his residential taxes) is in Siberia, birthplace of fellow Russian Maria Sharapova, although he also maintains a luxurious home in Moscow. While American media was kind enough to scout local properties for him (Regular Joe-type modest accomodations like a 7000 square foot penthouse apartment priced at an affordable $25 Million, or a 30,000 square foot stone mansion for the giveaway price of only $68 Million), he has thus far resisted the undeniable attraction of the New Jersey good life. The world’s most expensive home was more Prokhorov’s style, although that deal fell through and a spat between he and owner Lily Safra – widow of deceased multibillionaire and William Browder patron Edmond Safra – resulted in Prokhorov losing his $55 million deposit. Perhaps New Jersey is on the Prokhorov radar after all – who knows, you might run into him at the donut shop. As if.
In fact, the previous presidential term served by Putin saw the economy grow for 9 straight years – resulting in a 72% increase in Purchasing Power Parity for ordinary Russians, the halving of poverty, an eightfold increase in real household income and a return to stability. This simultaneously explains his popularity in Russia and his unpopularity in the west, home to strong influences which hunger for Russia’s economic collapse and political reapportioning.
Taking us out, some words of wisdom from another inspirational leader, and the author of the passage which inspired half of my title for this post – Dr. Martin Luther King Jr.;
“Change does not roll in on the wheels of inevitability, but comes through continuous struggle. And so we must straighten our backs and work for our freedom. A man can’t ride you unless your back is bent.”
Rock on, Mr. Putin; fair winds and following seas.