Paul Krugman- Putin’s Bubble Bursts

[n2doc]

If you’re the type who finds macho posturing impressive, Vladimir Putin is your kind of guy. Sure enough, many American conservatives seem to have an embarrassing crush on the swaggering strongman. “That is what you call a leader,” enthused Rudy Giuliani, the former New York mayor, after Mr. Putin invaded Ukraine without debate or deliberation.

But Mr. Putin never had the resources to back his swagger. Russia has an economy roughly the same size as Brazil’s. And, as we’re now seeing, it’s highly vulnerable to financial crisis — a vulnerability that has a lot to do with the nature of the Putin regime.

For those who haven’t been keeping track: The ruble has been sliding gradually since August, when Mr. Putin openly committed Russian troops to the conflict in Ukraine. A few weeks ago, however, the slide turned into a plunge. Extreme measures, including a huge rise in interest rates and pressure on private companies to stop holding dollars, have done no more than stabilize the ruble far below its previous level. And all indications are that the Russian economy is heading for a nasty recession.

The proximate cause of Russia’s difficulties is, of course, the global plunge in oil prices, which, in turn, reflects factors — growing production from shale, weakening demand from China and other economies — that have nothing to do with Mr. Putin. And this was bound to inflict serious damage on an economy that, as I said, doesn’t have much besides oil that the rest of the world wants; the sanctions imposed on Russia over the Ukraine conflict have added to the damage.

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http://www.nytimes.com/2014/12/19/opinion/paul-krugman-putins-bubble-bursts.html

[SidDithers]

1. Things you won't read at RT...

DU rec.

Sid

[elehhhhna]

2. he's got the weaponry and motives to fix the oil price collapse overnight

This could get very messy very fast. Knock out a few major Saudi fields, false flag or barefaced, and oil will go over 100bbl in 72 hours.

[MADem]

3. Yeah, that's a good plan.... not!

Let's start a shooting war with a US (and other major powers') ally without provocation...that would go over real well around the world!

[elehhhhna]

10. the saudis are being very provocative. it's economic warfare.

[pampango]

12. Saudis exporting its oil is economic warfare. Russia exporting its oil is ... ?

Should the Russia (or the US or the EU or the UN) be able to tell Saudi Arabia how much oil it is allowed to export? "Cut your exports or we bomb your oil wells." Does each country or international organization have the right to decide when Saudi Arabia should do this? Would Iran or Venezuela or Nigeria be justified in bombing Saudi oil fields in the right circumstances?

And of course much of the recent increase in oil production has come in the US. Might Russia be justified in bombing those oil wells as well?

Would the US and others be justified in bombing Chinese factories if they conduct economic warfare by exporting too much "junk" to our country? Is China exporting too much 'junk' different from Saudi Arabia exporting too much oil?

[elehhhhna]

15. im not advocating this. saudi directly caused this at this specific time

In order to undercut its competitors by making our drilling and production uneconomic. Theyve done it the past. It is causing major trouble for the banks,private equity, and the majority of oil producing nations, including ours, many of whom will not be able to meet obligations b/c they depend on the revenue from their NOC's. I work in this business. It is going to be ugly here and devastating elsewhere. Just saying. I'll cop to this: I'm not super fond of the KSA after 9/11.

[MADem]

18. The Saudis have WAY more friends than Pootie does, these days.

They may not be terribly progressive, but they sell a product that is still in high demand and they do so reliably. They make their fair share of money from their sales, but they don't leave their customers in the lurch--and anyone who tried to screw with them would find out real quick that this was an horrific idea.

Not sure why you say they are being "provocative." They aren't rattling any sabres.

You'll need to elucidate.

[nilesobek]

19. Putin has already stated he will "level," Saudi Arabia,

due to the Saudis exporting terrorism to Chechnya. I seriously doubt the USA would defend SA. After all, they are a barbaric country. This is a long pass play Putin can make with minimal consequences.

[Nye Bevan]

4. A few DUers also have an "embarrassing crush" on Putin.

They quote Russia Today a lot and blame the evil West for Putin's seizing Crimea.

[Gothmog]

5. Putin is in real trouble here

Russians put up with Putin so long as the economy was doing well. Now that bubble has burst, Putin is in trouble. I can see Putin starting a war to make his people happy

[edhopper]

6. Hasn't he already?

Or does invading Ukraine not count?

[Gothmog]

7. This has not been a full invasion yet

But it is clear that Putin is using the Ukraine and Crimea for his domestic political popularity. If the voters decide that the sanctions are part of the problems with the ruble, then these tricks will not work

[Igel]

8. I'm far from certain about this.

Putin's real fear has bubbled to the surface for the last decade, and that's centrifugal forces operating in the current rump empire. While the majority of Russia's population are Russians, some of this is a kind of legal fiction--many are bi-ethnic or tri-ethnic.

The Russian population's stalled. Much of the juvenile population is, as in the US, among "national minorities".

And in many areas, Russians are and always have been the minority. Many of the "ethnic Russians" that have sought refugee status from the Donbas have been sent to such areas to shore up Russian ethnic percentages. These refugees are strongly "patriotic" Russians among wishy-washy or even non-Russian populations.

In 1991 and 1992 various "autonomous" areas in Russia wanted increased autonomy. Some muttered about independence. Any such talk now is met with repression, arrest, economic harassment. Even among the Tatars, their local imams have had their head replaced by an imam that preaches a "Russian Islam" (to use RIA Novosti's expression for it)--an Islam that is vetted by the central powers to be Russian-friendly.

Having external foes just helps shore up the Putin's internal support. At this point, if the economy collapses and the collapse can be blamed on Westerners trying to undermine Russia and Russian historical greatness, that's fine. During this time, as in the last year, internal threats are actually more easily handled. What Putin doesn't want, not yet and possibly never, is an open war where the "zinc boys" return home as Cargo 200 that can be laid at his feet. He's not strong enough for that yet: He'd need a serious, open attack on Russians, and probably on Russians on Russian soil, before there'd be support for that.

What's missing is concern over areas like Belorus' and Kazakhstan, which are ambiguous about Ukraine. On the one hand, they won't justify what Russia's doing or show approval because they could be next. On the other hand, they don't dare defy what Russia's doing or show condemnation because they could be next. The Custom Union is part clay and part (low-grade cast) iron.

[elehhhhna]

16. it hasnt been doing well, hes had ten years to fix it, and he knows it.

[lumberjack_jeff]

9. I suspect that the drop in oil prices was engineered for this outcome.

This is a primary rationale of the Keystone XL: to depress global oil prices for geopolitical reasons. Putin being chief among them.

[elehhhhna]

17. kxl is not meant to depress prices.

The Canadians just aren't stupid enough to build refineries when they can transport to the U.S. refiners instead. KXL is doa at these prices.

[pampango]

11. "... many American conservatives seem to have an embarrassing crush on the swaggering strongman."

"But Russia’s difficulties are disproportionate to the size of the shock: While oil has indeed plunged, the ruble has plunged even more, and the damage to the Russian economy reaches far beyond the oil sector.

The kind of crisis Russia now faces is what you get when bad things happen to an economy made vulnerable by large-scale borrowing from abroad — specifically, large-scale borrowing by the private sector, with the debts denominated in foreign currency, not the currency of the debtor country. So why did it borrow so much money, and where did the money go?

Well, you can answer the second question by walking around Mayfair in London, or (to a lesser extent) Manhattan’s Upper East Side, especially in the evening, and observing the long rows of luxury residences with no lights on — residences owned, as the line goes, by Chinese princelings, Middle Eastern sheikhs, and Russian oligarchs. Basically, Russia’s elite has been accumulating assets outside the country — luxury real estate is only the most visible example — and the flip side of that accumulation has been rising debt at home.

Where does the elite get that kind of money? The answer, of course, is that Putin’s Russia is an extreme version of crony capitalism, indeed, a kleptocracy in which loyalists get to skim off vast sums for their personal use. It all looked sustainable as long as oil prices stayed high. But now the bubble has burst, and the very corruption that sustained the Putin regime has left Russia in dire straits."

[muriel_volestrangler]

13. And that's why it's been so puzzling to see some on the left of DU support Putin

when his economic model for Russia has been the 99.99% vs. the 0.01% - who were winning.

[pampango]

14. Good point. Putin and his cronies are the classic 1% yet some liberals support them.

And they are classic neocon, homophobes and misogynists. The usual 'family values' types that we oppose at home.

I suppose it's a variant of 'the enemy of my enemy ...".

[Cha]

20. "American conservatives have an embarrassing crush on.." putin? He hasn't seen DU's PCS..Putin's

Crush Squad! Ghoulianni and DU's PCS

Man of the year in Russia.. 15 years running..

From your link, n2doc.. mahalo

"It’s quite a comedown for Mr. Putin. And his swaggering strongman act helped set the stage for the disaster. A more open, accountable regime — one that wouldn’t have impressed Mr. Giuliani so much — would have been less corrupt, would probably have run up less debt, and would have been better placed to ride out falling oil prices. Macho posturing, it turns out, makes for bad economies."