Georgia
In keeping with the current Cake Eater Chronicles theme of "More Russian Craziness, Please," I've got some linkies for you, my devoted Cake Eater readers. Today we have Vlad telling us what's really going on with the Russian markets.
Vladimir Putin admitted on Thursday that foreign capital inflows could fall by up to 45 per cent this year, but rejected suggestions that turmoil in Russia’s financial markets was caused by the conflict in Georgia.
The Russian premier said the country was simply suffering from the same credit crisis affecting the rest of the world, but he acknowledged that foreign inflows might fall this year from $80bn (€57bn, £46bn) in 2007 to $45bn or $50bn.
But, speaking to western journalists in the holiday resort of Sochi, he denied there was a liquidity crisis and rejected the view that the turmoil had “anything to do” with the Georgian conflict.{...}
Liquidity crisis? I do not think that means what you think it means. And if it does, it's the West's fault. So there!
But wait, in true Ron Popeil fashion, there's more.
{...}Mr Putin played down the scale of the domestic liquidity problems, saying that when the state treasury had offered extra funds to commercial banks, the banks had taken up far less money than they could have done. In aggressive comments towards the United States, he said Washington had huge deficits whereas Russia had “a double surplus” on its budget and trade accounts{...}
Vlad, darling, let's be clear about one thing: the only reason you have a trade surplus is because of all the Texas Tea you have out in Siberia. Demand is down, darling, and so is the price of a barrel of the black goop. When you only have one resource upon which to fall back, things have a tendency to get iffy.
According to the article, the Russian stock market has fallen about 50% since May. In rough terms, the Great Depression was caused by the Stock Market Crash of 1929, wherein on October 28th and 29th of that year, the dow lost 25% in two days. I might be comparing apples to oranges, because stock markets nowadays, even in Russia, is much larger, and much more complex than they were was in 1929, but still...that's a big chunk of change gone poof!
Courtesy of the FT, here's the timeline.
Yeah, it's been going down, slowly but surely, but notice the precipitous drop since the Georgian Escapade. Putin says it's nothing to worry about, even though his finance minister is ready to tap $32B from their National Wealth Fund (read oil money) and pension reserves and placing it in securities to prop up the market. Yes, that's right: they're thinking not only about tapping their oil wealth, but also the state pensions of the average Russian citizen to solve their liquidity crisis.
They might be thinking that, what with the average lifespan of the average Russian vodka swiller, the funds will never be used for their intended purpose, but golly gosh, Russia is having to leverage the future of its pensioners? My goodness how things have changed.
Ultimately, what we have here is the beginning of the end. The western investment Russia so sorely needs to modernize, even now, seventeen years after the fall of communism, has up and left the country since the Russian invasion of Georgia. Investors have deemed Russia is not a place where the rule of law is upheld, and while that's been known for quite some time, western investors hedged their bets, but the Georgian invasion drove that point home, and they got their money the hell out of that frozen hell hole. Now, to cover the shortfall, Russia is going to rely upon their oil billions.
While $32B is nothing to sneeze at, it's not going to cover the costs involved. No way, no how.
I will fully admit I'm not the smartest chick on the block when it comes to things market related, but I can add and subtract, and I just don't see how it's possible.
Can you?
What will they do after the oil money is gone?
Just in case you'd thought I'd forgotten all about Vlad the Impaler and his plans for world domination with all of the election silliness, know that you are WRONG. And I've got the links to prove it!
One wonders, precisely, what the chairman of Gazprom did to get Khodorkovsky-ed:
{...}The Russian Federal Anti-Monopoly Service said it was pressing ahead with the fine for “violations” of antitrust rules for denying pipeline access to Transnafta, an independent producer in the Tatarstan region.
A spokeswoman at the Anti-Monopoly Service said the fine could be as much as 15 per cent of Gazprom’s annual revenue in the “corresponding market”.
The move signals a subtle power shift within the Kremlin and the country’s energy sector that may weaken Gazprom’s clout{...}
Get that? The Russian Federal Anti-Monopoly Service is going after Gazprom, the STATE controlled gas company, and Putin's favorite foreign policy enforcer, for denying pipeline access to an independent producer. One branch of government is going after another branch of the government? In the west, you'd expect this sort of thing. But in Putin's Russia? {insert sing-song voice here} Somebody's out of favor.
If I were the chairman of Gazprom, well, I'd be thinking about getting my money, my family, and myself out of Russia ASAP. I don't think this is going to end well for him.
The cash crisis is worse than previously thought. Investors are, left, right and center, bailing out of the Russian markets, and there's a bit of a lending crisis as a result.
{...}Bankers and analysts said real estate and retail businesses were being hardest hit by a slowdown in lending. “There are real estate developers who can’t finish projects. They can’t get money from anyone, state banks included,” said one senior banker in Moscow speaking on condition of anonymity.
“No one was ready for the lack of cash to manifest itself so quickly,” he said.
“Nobody has any money. The country has got all this cash but the banking system and capital markets are not particularly good at allocating it. There is a flood of liquidity in the state’s fields and a drought in the private sector.”{...}
Western analysts claim that close to $20B has left the country since Russia invaded Georgia. Russia says, optimistically, that it's only around $5B...at most.
Who do you believe?
On Monday, Russian President, Dmitry Medvedev, aka "The Lackey", finally---FINALLY---agreed to pull Russian troops out of the port city of Poti by the end of the week, and out of "Georgian" territory (which, of course, doesn't mean South Ossetia or Abkhazia) by the end of the month.
This diplomatic triumph was brought to you by the President of France, Nicolas Sarkozy, who, it seems, managed to get Russia to finally live up to the terms of an agreement it signed a month ago, that, of course, doesn't respect Georgian territorial rights.
Wooooh. Color me impressed!
In another case of European wobbliness, yesterday in Brussels, the EU told Ukrainian president Viktor Yushenko, essentially, we're not going to let you into the EU just yet, but, never fear, your hopes are still alive---you know, once we've weaned ourselves off Russian gas and oil. Whenever that might be.
A communiqué issued at an EU-Ukrainian summit set out a framework for closer ties between Kiev and the 27-nation bloc, but omitted the crucial words “membership perspective” to describe Ukraine’s future relationship with the EU.
Sacre Bleu! C'est Close Une!
Ukraine, a country of 46m people wedged between the EU and Russia, had hoped that Russia’s military assault on Georgia last month, and its subsequent attempt to partition the former Soviet republic, might prompt the EU to go the extra mile for Ukraine.
Tuesday’s communiqué affirmed the EU’s commitment to Ukraine’s sovereignty and territorial integrity, and held out the prospect of agreements on free trade and easier travel for Ukrainians to EU countries, but stopped short of a promise of EU accession.
“Be clear that this agreement shuts no door, and maybe it opens some doors. This is the most we could offer, but I believe it to be a substantial step,” Nicolas Sarkozy, France’s president, told reporters.
Diplomats said Germany and the Netherlands, and to a lesser extent Belgium, were the most reluctant to state clearly that Ukraine could one day join the EU.{...}
There were all sorts of claims that last week's schism between Yuschenko and Ukrainian Prime Minister, Yulia Tymoshenko, was the reason for the EU's hedge. I'm not so certain. After all, what's one former Soviet satellite's struggle for democracy and a free market compared to a warm home and petrol for the Peugot?
And, finally, we have everyone's favorite Italian Prime Minister, Silvio Berlusconi, mucking up the works.
{...}Strains in the transatlantic relationship were on display in Rome on Tuesday as Dick Cheney, the US vice-president, and Mr Berlusconi read out statements.
The US delegation, in Italy for five days, had pushed for clear endorsement from Mr Berlusconi. Instead, he did not utter a word of criticism against Russia. The Italian premier said he had tried to explain to Mr Cheney his personal success in helping to defuse “what happened in Ossetia and then in Georgia”. He stressed the importance of sustaining the Nato-Russia council, the joint forum he inaugurated in 2002 with President George W. Bush and Vladimir Putin, then Russia’s president.
According to European diplomats, Bush administration hawks view with suspicion Mr Berlusconi’s close personal ties to the Russian leader and worry about Italy’s presidency of the G8 from January . Italy has already made clear it intends to invite Mr Putin to the summit in Sardinia.{...}
But why, why would Silvio be siding with Russia? Well, do the words "oil," "gas," and "Eni" and "competing pipelines," ring a bell?
{...}US hawks are alarmed by Italy’s tight energy relationship with Russia, particularly the “strategic partnership” reached between Moscow's Gazprom and Italy’s part state-owned Eni in 2006, and the South Stream pipeline planned to take Russian gas across the Black Sea.
{...}Umberto Quadrino, chief executive of Edison, Italy’s second-largest energy group, is lobbying the Bush administration to put its full weight first behind Edison’s ITGI Corridor project and, later, the more ambitious but still somewhat hypothetical Nabucco pipeline. Both would bypass Russia but transit Georgia.
ITGI would take 8bn cubic metres of gas from Azerbaijan’s Shah Deniz field in the Caspian all the way to Italy. Azeri gas is already reaching Georgia and Turkey and can be extended to Greece. The only “missing link” is an undersea pipeline across to Italy to be built by Edison and Greece’s Depa.{...}
Curious, eh?
Politically, this is a smart move on Berlusconi's part. He's got nothing to lose by siding with the Russians on this one, particularly if he's of the European mindset that Obama will be in the White House come January 20th. If the South Stream pipeline is actually finished, he's got a direct pipeline to Russian gas, that doesn't go through any politically pesky territories in the meanwhile, and he can then charge the rest of Europe a fortune for gas, or, conversely, shut it off when Russia's whims demand that he do so. He's siding with those whom he considers to be the big boys.
Which, of course, leads one to question whether his former electoral competitor, Walter Veltroni, was actually right when he called Berlusconi a fascist, before the April election that brought Berlusconi back to power. Is he the new Mussolini, as the Italian left has advertised? Well, time will tell, but I suspect the judgment won't so much be based upon whether the trains run on time, or if he manages to actually do something about all the Roma who have illegally set up shop in Italy, or if Naples' trash finally gets picked up, but rather on the average Italian's gas bill.
- Kathy's blog
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MOSCOW — As Russia struggled to rally international support for its military action in Georgia, Vladimir V. Putin, the country’s paramount leader, lashed out at the United States on Thursday, contending that the White House may have orchestrated the conflict to benefit one of the candidates in the American presidential election.
Russia's prime minister, Vladimir Putin, seen during his interview with CNN in Sochi, Russia's Black Sea resort. Mr. Putin has suggested the United States pushed Georgia toward war and said he suspects a connection to the American presidential campaign.
Mr. Putin’s comments in a television interview, his most extensive to date on Russia’s decision to send troops into Georgia earlier this month, sought to present the military operation as a response to brazen, cold war-style provocations by the United States. In tones that seemed alternately angry and mischievous, he suggested that the Bush administration may have tried to create a crisis that would influence American voters in the choice of a successor to President Bush.
“The suspicion would arise that someone in the United States created this conflict on purpose to stir up the situation and to create an advantage for one of the candidates in the competitive race for the presidency in the United States,” Mr. Putin said in an interview with CNN.
He added, “They needed a small victorious war.”
Oh, but wait, it gets better...
{...}“We have serious reasons to believe that directly, in the combat zone, citizens of the United States were present.”
“If the facts are confirmed,” he added, “that United States citizens were present in the combat zone, that means only one thing — that they could be there only on the direct instruction of their leadership. And if this is so, then it means that American citizens are in the combat zone, performing their duties, and they can only do that following a direct order from their leader, and not on their own initiative.”{...}
{my emphasis}
Is he serious? Does he really think this crap is going to play? Nobody's getting behind the Russians---well, no one who could claim respectability---and their actions in Georgia. So, it would seem the next logical move, according to Vlad's playbook, is to blame it on the US and the evil imperialist, George W. Bush. After all, everyone HATES the US. Why wouldn't the US have started a war in Georgia? We're evil! It's something Bush would totally do: start a war to win an election. He did it with Iraq---why wouldn't he with Georgia?
If anyone in the UN buys this line, I swear to God, we should, as I've said before, ship in mounds of the finest cheese, and when the lactose intolerance kicks in, a highly trained spy should light a match and send that stupid place to the sky.
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Putin's presidential lackey, Dmitry Medvedev, explains "Why He Had To Recognize Georgia's Breakaway Regions" in today's FT.
Let's jump in after the introduction:
{...}Not all of the world’s nations have their own statehood. Many exist happily within boundaries shared with other nations. The Russian Federation is an example of largely harmonious coexistence by many dozens of nations and nationalities. But some nations find it impossible to live under the tutelage of another. Relations between nations living “under one roof” need to be handled with the utmost sensitivity.
The Russian Federation is an example of largely harmonious coexistence by many dozens of nations and nationalities? Ummm, is the word Chechnya ringing a bell?
But moving right along...
After the collapse of communism, Russia reconciled itself to the “loss” of 14 former Soviet republics, which became states in their own right, even though some 25m Russians were left stranded in countries no longer their own. Some of those nations were unable to treat their own minorities with the respect they deserved. Georgia immediately stripped its “autonomous regions” of Abkhazia and South Ossetia of their autonomy.
Can you imagine what it was like for the Abkhaz people to have their university in Sukhumi closed down by the Tbilisi government on the grounds that they allegedly had no proper language or history or culture and so did not need a university? The newly independent Georgia inflicted a vicious war on its minority nations, displacing thousands of people and sowing seeds of discontent that could only grow. These were tinderboxes, right on Russia’s doorstep, which Russian peacekeepers strove to keep from igniting.
But the west, ignoring the delicacy of the situation, unwittingly (or wittingly) fed the hopes of the South Ossetians and Abkhazians for freedom. They clasped to their bosom a Georgian president, Mikheil Saakashvili, whose first move was to crush the autonomy of another region, Adjaria, and made no secret of his intention to squash the Ossetians and Abkhazians.
Meanwhile, ignoring Russia’s warnings, western countries rushed to recognise Kosovo’s illegal declaration of independence from Serbia. We argued consistently that it would be impossible, after that, to tell the Abkhazians and Ossetians (and dozens of other groups around the world) that what was good for the Kosovo Albanians was not good for them. In international relations, you cannot have one rule for some and another rule for others.{...}?
Chechnya? No bells are ringing? Nothing comes to mind here, at all?
"You cannot have one rule for some and another rule for others". Oh, really? Forgive me if I'm wrong here, but when has Russia ever been a defender of "the rule of law"? Of equality of law? Please. Supposedly, this is Medvedev's line, and the one major plank in his campaign platform which he was adamant about: that the rule of law would be upheld in Russia under his administration. I don't think it comes as a surprise to anyone that what he really meant was, "We'll talk about upholding the law when it serves our purposes and change the law when we need to." Everything needs to be nice and legal. Yep. Because Russia is all about upholding the Rule of Law, international and otherwise.
Just one question, though: have you guys extradited Andrei Lugovoi to Britain yet to stand charges for the murder of Alexander Litvinenko?
Oh, you have? Really? So I should expect to see him in the dock at the Old Bailey any day now...right? Right?
{...}Only a madman could have taken such a gamble. Did he {Saakashvili} believe Russia would stand idly by as he launched an all-out assault on the sleeping city of Tskhinvali, murdering hundreds of peaceful civilians, most of them Russian citizens? Did he believe Russia would stand by as his “peacekeeping” troops fired on Russian comrades with whom they were supposed to be preventing trouble in South Ossetia?
Russia had no option but to crush the attack to save lives. This was not a war of our choice. We have no designs on Georgian territory. Our troops entered Georgia to destroy bases from which the attack was launched and then left. We restored the peace but could not calm the fears and aspirations of the South Ossetian and Abkhazian peoples – not when Mr Saakashvili continued (with the complicity and encouragement of the US and some other Nato members) to talk of rearming his forces and reclaiming “Georgian territory”. The presidents of the two republics appealed to Russia to recognise their independence.
A heavy decision weighed on my shoulders. Taking into account the freely expressed views of the Ossetian and Abkhazian peoples, and based on the principles of the United Nations charter and other documents of international law, I signed a decree on the Russian Federation’s recognition of the independence of South Ossetia and Abkhazia. I sincerely hope that the Georgian people, to whom we feel historic friendship and sympathy, will one day have leaders they deserve, who care about their country and who develop mutually respectful relations with all the peoples in the Caucasus. Russia is ready to support the achievement of such a goal.
So, basically, Medvedev had to act because, well, Saakashvili started it. And like any frustrated father, whose kids are acting up in the backseat while he's driving around town, doing the Saturday errands, he replied, in essence, I'll come back there and END IT. Just you never mind that it suits my purposes quite nicely to do so anyway. Never mind that there's evidence to the contrary on that claim. Because not only did he get to invade Georgia, he also, pretty much, annihilated their military, killing their soldiers and civilians, invading their ports, blocking their commerce, and stripping any and all hardware the Georgians could use to press the Russian's exit from Georgia's sovereign territory. It works out so much nicer this way.
If there was any hope left that Medvedev would stand up to Putin, despite the fact that he's Vlad's handpicked successor---and I'm not saying there was much to begin with---it has completely disappeared. Medvedev is Putin's bitch. And that's a fact, Jack.
Also, if I had any investments in Russia, even in a smallish mutual fund, which had invested in a smallish way in some project to reach the Russian market, I would bang on to my stockbroker about pulling my money out of there AS SOON AS POSSIBLE. Same goes if I had invested in companies with a large presence in Russia, like Exxon Mobil or Royal Dutch Shell. Get thy money out of that country, people. You'll lose it otherwise. Not that I'm a stockbroker or anything, but it would seem the wise thing to do. If they don't have any problems invading a sovereign nation under the guise of trumped up charges of genocide, what's to stop them from going whole hog and appropriating western investment under the "rule of law?" They've done it before. They'll do it again, and this time around they're high on their "success" in Georgia and won't give a damn about any consequences they might face.
Your Neighbors Have Had Their Home Invaded, What Do You Do?
Submitted by Kathy on Thu, 08/14/2008 - 17:22
Why, you finally get with the program and go out and buy a gun.
They've been working on this deal for over a year now, and if you think the current events in Georgia didn't have anything to do with Poland's hasty reversal, you, my devoted Cake Eater readers, need a good lesson in geopolitical theory.
Poland's government changed during the winter and the new Prime Minister, Donald Tusk, wasn't too keen on the deal, set up originally by President Kacyzinski, and his twin brother, the former Prime Minister, who are more than a little whacko about the threat from Russia and have put Polish society through an anti-commie witchhunt for the past several years. (yeah, Polish politics are that confusing.) If Tusk was going to do it at all, he wanted more bang for his buck, to make it worthwhile to antagonize Russia in such a way---and he got it, in the form of Patriot missiles, and a mutual defense agreement, wherein the US will come to their aid if Poland suddenly gets in trouble, above and beyond any NATO promises to do the same. Of course, the Poles are obliged to come to the US's defense, should, you know, someone decide to invade here, but you get the gist. What has happened in Georgia has them running scared.
There's just one thing, though, that gave me a good chuckle out of all this. Dana Perino, White House Spokeswoman, said that this deal, "was not an attempt to antagonize Russia." BAH! Who are you trying to kid, lady? Of course it was intended to antagonize Russia. Forget the cover story about setting up missile defense in Poland to protect us from Iran, this is all about Russia, baby. And it's about time the Russians learned they're going to have to pay a price for what they did in Georgia. That means a missile defense base in Poland, and in the Czech Republic. That means Ukraine will shortly be ushered into NATO. That means Russia will be kicked out of the G8, and won't be allowed into the WTO. That means, potentially, a shortage of western investment into building up Russia's oil and gas infrastructure, which is probably just fine by BP, Royal Dutch Shell and any number of other oil companies due to Putin's tendency to let them build things up and then appropriate their hard work for the benefit of Rosneft and Gazprom, the Russian state oil and gas companies. The days when the former Soviet satellites were unable to rely upon the West for help in dealing with Russia's imperialistic whims are over with. It should be interesting to see just how pissed off Vlad gets at this development. But he brought it on himself. He, apparently, needs reminding that what he thought was his backyard isn't his anymore.
As a related aside, it's kind of funny how the past couple of days have brought that red-headed stepchild of international relations theory, the Domino Theory, back into favorable use.
Sergei Lavrov, Russia's Foreign Minister:
"One can forget about any talk about Georgia's territorial integrity because, I believe, it is impossible to persuade South Ossetia and Abkhazia to agree with the logic that they can be forced back into the Georgian state," Lavrov told reporters.
Thanks for clearing that up. We'll take it as Gospel and do whatever you say we should do. Mmmmhmm. Because, after all, Russia knows best.
Bite me, asshole.
So...Vlad the Impaler decided to invade Georgia. Oh, whoops. Pardon me. He's simply trying to help the ethnic Russians in South Ossetia keep intact their cherished ties to the motherland, and to protect them from those nasty, uppity Georgians who had the gall to think they could join NATO. And, as it stands right now, Russia is acting like it's a two-for-one sale and is now gunning (quite literally) to bring Abkhazia back into the fold as well, never mind the fact that they've invaded soveriegn Georgian territory---and have slaughtered God only knows how many Georgian civilians---in the process.
This is all about imperialism. Not ours, but Russia's. And something had better be done about it, toute suite, to put the Russians back in their place, or they might get ideas about parts of the former USSR, oil rich places like Azerbaijan, where there actually is oil, and isn't that far away from Georgia, the Baltics, or even perhaps Poland and the old Warsaw Pact nation states. I don't think you can put anything past Vlad. Really and truly I don't. They're flush with oil wealth, and think they can do anything nowadays. Reclaiming their former borders just might be one of his goals.
I don't think diplomacy is going to get anywhere, sadly. We're beyond that now. The only thing that's going to stop Russia from moving forward is NATO intervention. And I'm serious about that. Vlad's counting on NATO not wanting to move, for fear of antagonizing Russia, which still has a huge mess of nuclear warheads, by the way. And he's got good reason to believe they won't in the example that was Chechnya. The west didn't intervene in that slaughter because, mainly, Russia has the bomb. It's the ultimate litmus test nowadays for intervention. Do they have the bomb? Yes. Then, no, we won't intervene, for fear of nuclear retalitation. They don't have the bomb? Well, invade away. Part of the calculation dear old Vlad undoubtedly made was that NATO won't respond, in part, because they're busy in Afghanistan. He thinks he can get away with it. And they do have their veto on the Security Council, so anything that comes out of the UN isn't worth the paper it's written on. (Not like it was to begin with...but you get the gist.)
Is Georgia worth saving, ultimately, becomes the question. I think it is. It may not be chock-a-block full of natural resources, but it does have one very significant thing in its favor: a pipeline, that travels from Baku in Azerbaijan to a port on the Meditteranean in southern Turkey. If Putin decides to go for that, well, I do believe they've found a reason to intervene. Oil security being something worthwhile to defend in this day and age. If, however, he doesn't, and holds fast in Southern Ossetia and Abkhazia, the Georgians are, very sadly, doomed.
But their inclusion in NATO will be assured next go round. You know, provided there's an independent Georgia left to apply for membership.
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