Streetwise Professor

May 24, 2012

Russophobes on the Rampage on the High Beta Economy

Filed under: Commodities,Economics,Energy,Financial Crisis II,Politics,Russia — The Professor @ 1:52 pm

Apropos my Russia-as-a-high-beta-economy theme, consider this Russophobic jeremiad:

Vladimir Putin faces the risk of Russia’s political stability being shaken if Greece leaves the euro area, triggering a global crisis and sinking the price of oil, according to the Center for Strategic Studies in Moscow.

There’s a more than 50 percent chance of a Greek exit, which would lead to more countries pulling out of the currency union, Mikhail Dmitriev [what a clever disguise!], the research institute’s head, said in an interview yesterday. Russia’s main risks are a worsening economy, which would swell anti-Putin sentiment, and increased political repression, according to a study published today by the institute, which advises the government.

“If these trends continue, we will see the escalation of political violence and repression on one hand, and the worst economic crisis on the other,” said Dmitriev, a deputy economy minister from 2000 to 2004. “This may lead to Putin losing control and a chaotic political transformation.”

The article goes on in a familiar vein, linking Russia’s economic fortunes to the price of oil, and the price of oil to the impending train wreck in Europe.  Nothing you haven’t read here, if you’ve been reading here.

Moreover, Dmitriev echoes another long-standing SWP theme.  Namely, that in the present political environment, a sufficiently severed adverse economic shock could threaten Putin’s brittle political system:

“The political crisis could quickly become acute if it’s aggravated by a fresh economic crisis,” it said. “This is highly likely to provoke a rapid loss of political control and an accelerated change in the political system.”

Dmitriev predicts that in the event, Putin will respond with repressive measures.   Indeed, one can see the new law imposing huge fines on demonstrators as a preparation for such an eventuality.

No, pointing out that  (a) Russia is hostage to international economic conditions, and (b) Russia’s brittle polity is in turn vulnerable to economic shocks is not Russophobic.  It is a very reasonable appraisal of reality, and many Russians viewing the situation objectively, like Mikhail Dmitriev and the Center for Strategic Studies, arrive at the same conclusion.

Print Friendly, PDF & Email


  1. I must point out one more outcome: he will orchestrate few terror attacks in major cities, speed up his attack on Georgia (militarily) , Ukraine and Moldova (economically) he will do anything to get public attention away from economic problems and will blow his patriotic horn against opposition… in other word history will repeat itself…

    Comment by ALLA WAGNER — May 24, 2012 @ 5:58 pm

  2. Our dear Professor,

    “In a worst-case scenario following a Greek exit from the euro area, Russia’s economy would contract 2.1 percent with the potential for $95 billion in capital leaving the country in a year, Ksenia Yudaeva, chief economist at Moscow-based OAO Sberbank (SBER), the country’s biggest lender, said by phone yesterday.”

    Yes, a 2.1% contraction of the Russian economy would be without precedent! Perhaps there is hope of Putin’s fall yet!

    Comment by a — May 24, 2012 @ 7:07 pm

  3. A worsening economy in Russia is not a risk, it’s a fact:

    Comment by Ivan — May 25, 2012 @ 12:50 am

  4. More on the subject here:

    If the slide in the price of oil continues, watch out!

    Comment by Gordon — May 25, 2012 @ 6:55 am

  5. Brilliant choice of words (the link above): “…Dmitry Medvedev, Putin’s protege and his choice as president for the last four years…”

    Comment by Ivan — May 25, 2012 @ 11:05 am

  6. Now, a village idiot (a hypothetical one of course) would argue that there is nothing wrong with the Russian economy… The facts may argue the opposite:


    MOSCOW (Reuters) – Russian President Vladimir Putin on Thursday ordered the government to approve a plan to sell in 2013-2015 state shares in the holding Rosneftegaz, which manages stakes in Gazprom and Rosneft , the Interfax news agency said.

    Igor Sechin, the energy ‘tsar’ in Putin’s former government who this week was appointed as Rosneft’s CEO, has long opposed the sale of the stake in Russia’s top crude producer.

    (Reporting by Vladimir Soldatkin)–finance.html?goback=%2Egmp_4419314%2Egde_4419314_member_118094128
    This is a u-turn – 180 degrees. Such u-turns are not done because they are fun. They are done when the situation is not fun at all…

    Comment by MJ — May 25, 2012 @ 12:09 pm

  7. the following article outlines the pain they are feeling – the paranoid ramblings and propaganda suits a deteriorating economy and a discredited policy apparatus. the best way to describe it is the political equivalent of Leslie Nielsen yell at the crowd “Move along, nothing to see here!” after the large missile crashed into the fireworks factory in a Police Squad movie.

    Comment by sotos — May 25, 2012 @ 7:23 pm

RSS feed for comments on this post. TrackBack URI

Leave a comment

Powered by WordPress