South Ossetia
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?
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.
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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