Streetwise Professor

June 21, 2013

Be Afraid. Be Very Afraid.

Filed under: Economics,Energy,Politics,Russia — The Professor @ 3:27 pm

If you’re Russian.  For the Russian Finance Minister Sulianov has stated that Russia can survive a Fed taper, and that “Russia, as opposed to other developing countries, will be less impacted by that occurrence.”

Why afraid? Because recall that Putin and Medvedev said in September 2008 that Russia was an “island of stability.”

Yeah.  That worked out.  Russia had the biggest decline of any major economy in 2008-2009, and has experience moribund growth since.

Expressions of Russia’s ability to weather world economic storms are delusional. Russia is a high beta economy, due to its extreme exposure to highly pro cyclical commodity prices, meaning that if the taper (and the fraught situation in China) lead to an economic slowdown.  Indeed, the relatively steep declines in Russian stock prices in the tumult of the last days illustrates this point.

But this was not the most risible part of Sulianov’s statement.  This was:

Russia is also investing $70 billion into its upcoming global sports events, the Sochi Winter Olympics 2014 and the 2018 World Cup. However, Siluanov told CNN said the investment was not purely designed for growth.

Sochi, the cost of which is reportedly $50 billion and rising, was “never meant to be a purely economic growth stimulating initiative,” he said. “It was always an infrastructure project.”

According to Siluanov, “it is designed to improve life in the region,” and “make it more popular and attractive for our citizens.”

I’m dying here.  Seriously.  Improving life for whom in the region? The corruptocrats? That I can believe.  As if the typical “citizen” of “the region” is going to see anything but crumbs, while many billions disappear into bureaucratic and oligarchic rat holes.

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  1. Apparently Brazil is spending $18 bn and $13.3 bn on its olympics and World Cup. Maybe if Russians would have been a bit more like the Brazilians in standing up to government waste, the Russian events wouldn’t have cost twice as much as the Brazilian ones.

    Comment by aaa — June 22, 2013 @ 12:52 am

  2. Sochi will finally get a sewage system. Not exactly crumbs.

    Comment by So? — June 22, 2013 @ 1:49 am

  3. Brazil is a tropical country hosting Summer Games. Russia is an Arctic country hosting Winter Games in the only sub-tropical part of the country. It’s bound to cost more.

    Comment by So? — June 22, 2013 @ 3:08 am

  4. @So? Come on. Seriously. The Sochi games will cost more than all that has ever been spent on all past Winter Games, combined. Semitropical location should actually reduce some construction costs, and not increase others. Does it cost more to build a hockey stadium in Dallas than in Montreal or Winnipeg? Probably less, accounting for wage differences, due to the ability to work year-round, less downtime due to weather, etc.

    But these differences are trivial compared to the total amount being spent on these Games. And we-yes, that we includes you, if you would be honest enough to admit it-know that the inflated cost is directly attributable to corruption and ineptitude.

    I would also note that the costs are four times the original estimates. Did Russia just notice that this was a subtropical location, and had overlooked the implications of this fact when making its original estimates?

    And insofar as the sewer system is concerned. Yes, in the scheme of things that is a crumb. Bringing that up is merely a way of trying to distract attention from the most extensive construction projects in Sochi: the hog troughs.

    The ProfessorComment by The Professor — June 22, 2013 @ 4:23 am

  5. The money would have been stolen anyway. At least this way, Sochi gets a sewer system.

    Comment by So? — June 22, 2013 @ 6:52 am

  6. A sewerage system, or a few pipes and channels sending raw shit straight into the Black Sea?

    Comment by Tim Newman — June 22, 2013 @ 6:19 pm

  7. few pipes and channels sending raw shit straight into the Black Sea

    That’s what they already have right now.

    Comment by So? — June 22, 2013 @ 7:45 pm

  8. Right. So let’s see if there is any material difference after a few billion dollars have been spent.

    Comment by Tim Newman — June 23, 2013 @ 10:38 am

  9. Having seen the mess they have made of renovations to Moscow’s sewerage system, I sincerely doubt there will be any material difference.

    Comment by Andrew — June 24, 2013 @ 6:00 am

  10. Gentlemen:

    You can’t prove any of these allegations. Obama Putin Consulting hasn’t done anything wrong. We never violated any laws. Direct quote from Lois Lerner.


    Comment by ObamaPutin — June 29, 2013 @ 10:18 pm

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