Streetwise Professor

September 14, 2011

I Don’t Think He’s Worth That Much

Filed under: Economics,Politics,Russia — The Professor @ 6:32 pm

A couple of day’s ago the WSJ’s Emerging Europe blog ran a story with a headline “Putin: Russia’s Trillion-dollar Man.”   My initial thought on reading the headline was that yeah I know he’s probably really enriched himself in his decade plus in power (and in St. Petersburg before that), but not quite that much.  But upon reading it, I found that the article was about Putin playing Ded Moroz (Grandfather Frost–the Russian Santa Claus):

As it comes closer to Russian parliamentary elections this year and the presidential election next year, Prime Minister Vladimir Putin has stopped promising billions and is now trumpeting more than a trillion dollars in spending to improve the lives of Russians.

According to Kommersant Vlast magazine, Mr. Putin spoke to his United Russia party leaders last week for just over an hour and a half, promising 33 trillion rubles ($1.09 trillion), or 9.6% more than in an April speech to parliament. If this rate of rhetorical spending increases continues, Mr. Putin will soon be spending far more than Russia’s gross domestic product, the magazine suggests.

But outright spending is only the first of Putin’s goodies.  He’s also putting off planned increases in electricity and rail tariffs

Russians, for example, had been braced for a sharp rise in government-regulated domestic energy tariffs that usually go up on January 1 each year. However, Vladimir Putin, the prime minister, announced a reprieve this week, saying the price hikes would be delayed by six months until July 2012.

The tariffs are often well below what costs would dictate, and the scheduled increases were in part an element of a plan to induce badly needed investment in new generation.  The politicization of utility pricing will make it all the more difficult to achieve the necessary improvement in the Russian electricity system.  But Putin evidently has very short term political goals in mind, so the long-term consequences be damned.

Ded Putin’s efforts will put all the more pressure on Kudrin to find the money to pay for the goodies Ded is doling out.  The profligacy also makes government finances more vulnerable to anything that stresses revenues–such as a decline in oil prices resulting from world economic weakness, which of course cannot be ruled out.  Kudrin is raising the alarms about this problem.

But again, that’s a problem for завтра.  But it does raise the question about what Putin is trying to buy today at tomorrow’s expense.  It’s patently political, and his very personal involvement in handing out the gifts strongly suggests that he is laying the groundwork for his presidential candidacy.  Not guaranteed of course, but this clearly steals attention from Medvedev.  So another indicator of his return to the presidency.

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  1. It’s party time in the Kremlin. A trillion dollars in state funds designated for theft by the eliite its stimulus package Putin style-let the Olympic Games of corruption begin.

    Comment by pahoben — September 14, 2011 @ 9:55 pm

  2. Prof, do you happen to know a book called The Managerial Revolution by James Burnham? I overheard the name in a local radio show, the guest economist described it as a quite an interesting read. BTW, thanks for Thomas Sowell’ recommendations, I’ve just recieved Basic Economics and it’s really worth the money and waiting!

    On the topic of tarrifs: What always amazed me is how Gazprom, being marketed as an “Asset of the Nation”, had nothing for the nation to offer. In many years I haven’t seen a new house/condo with gas supply (ovens, heating, etc), which should be much cheaper to operate than with the dreaded electricity. The fees to connect a suburban house to a gas supply are lucrative. Household gas supply development is non-existent, in a country that’s, uhm, the world’s largest gas extractor! How’s that…

    Comment by azzkel — September 15, 2011 @ 11:04 am

  3. It is infuriating indeed that Our rebellious servant Vladimir refuses to exploit the present crisis to ensure that all gains of recent productivity growth accrue to capital. This flagrantly violates Our First Principal-All four Ourselves and nothing for Other People.

    The very idea that resources that, through an accident of history, are located in Russia be kept for Russians, rather than being sold to Us on Our global market, is an intolerable outrage!

    Comment by a — September 15, 2011 @ 2:46 pm

  4. This article is useless twaddle without specifying a time-frame, which according to the comments is actually over a span of 10 years. That means 3 trillion rubles extra per year, which does not seem to be all that significant.

    As usual, LOL at Western journalists.

    Comment by Sublime Oblivion — September 15, 2011 @ 6:06 pm

  5. “Household gas supply development is non-existent, in a country that’s, uhm, the world’s largest gas extractor! How’s that…” this commenter has clearly never been to Moscow and driven past those giant gas-fired hot water boilers that supply those apartment blocks. While that could probably work in New York, Chicago or even the densely populated parts of L.A., most of America is too spread out for such an efficient approach (which coincidentally, also makes it harder to shut off the gas to people in winter time, though cutoffs do happen in summer).

    Comment by Mr. X — September 15, 2011 @ 6:14 pm

  6. S/O I didn’t realize you’d dyed your hair and started appearing on RT America:

    Sounds like technocratic utopia to me!

    Comment by Mr. X — September 15, 2011 @ 7:09 pm

  7. @Mr.X – Yep, never been to, but i don’t consider Moscow to be a part of Russia, it’s a state of it’s own for many years already. I’ve seen a lot of houses here with gas powered boilers too, hell, I even live in a house like that, but it’s a 50-year-old soviet built house, and I’m talking about newly built property, which doesn’t offer gas pipe connection at all.

    Comment by azzkel — September 15, 2011 @ 11:59 pm


    Comment by So? — September 16, 2011 @ 2:23 am

  9. The worst day of the year is when they shut off the central hot water system in Russian cities unless you have your own electrical water heater.

    There used to be in some places a direct in line gas heater for showers. The problem was often that they would plug with particulates in the water and then unload steam through the shower head once sufficient pressure built up. The steam always seemed to unload at the worst possible with respect to sensitive anatomy.

    Comment by pahoben — September 16, 2011 @ 9:07 am

  10. Good point azzkel about Moscow being a city state-I hadn’t thought of it in those terms. In Western Siberia there has long been animosity towards Moscow I guess similar to DC in the US. The difference between the standard of living in Moscow vs W. Siberia for the common folk is more pronounced than between DC and the rest of the US however. The federal budget of course flows through Moscow and Moscow seems to have a lot of sticky fingers.

    Comment by pahoben — September 16, 2011 @ 9:47 am


    I wonder what S/O thinks about this considering that the last time an enormous volcanic eruption occurred that drastically influenced Russian climate in the early 1600s, it was a year ‘without summer’ and crops failed, contributing to the ‘Time of Troubles’ and Polish-Lithuanian takeover of Moscow.

    Comment by Mr. X — September 16, 2011 @ 2:52 pm

  12. “4.This article is useless twaddle without specifying a time-frame, which according to the comments is actually over a span of 10 years. That means 3 trillion rubles extra per year, which does not seem to be all that significant.”

    So you’re saying Western journalists should have exposed the fact that Putin has admitted Russia has critical problems but is not doing anything remotely like a serious effort to address them? Good point! Western journalists are FAR to soft on Russia! Welcome to the ranks of the Russophiles!


    Comment by La Russophobe — September 16, 2011 @ 2:54 pm

  13. @Mr. X,

    I stopped reading somewhere around the 10th word. Climate change is not a pseudo-science, and Alex Jones is a conspiratorial nutjob.

    Comment by Sublime Oblivion — September 16, 2011 @ 9:36 pm

  14. Just think S/O- an eruption of Yellowstone would take out not only a disproportionate number of Red State idiocracy but would also cool global temps. Oh happy day and just in the nick of time considering the sea level rise licking at our feet.

    Al Gore depended on Miss Rhode Island’s expertise on sea level rise in his twenty four hour rage against the idiocracy machine. Completely understandable if you wait until Miss Rhode Island weighs in regarding geo engineering by volcano before you take a public position.

    Comment by pahoben — September 16, 2011 @ 11:43 pm

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