Starting out the new year with some additional notes on international affairs.
The reference in the title is from a comment from former German Chancellor Helmut Schmidt in once referring to the Soviet Union. Of course, as Tony Judt noted in his magisterial book Postwar: A History of Europe Since 1945, there are those missiles. Thus, this is a topic of concern to everyone, particularly in regard to the events surrounding Crimea and Ukraine. This past April I noted the threat implicit in Putin’s actions and the need for European solidarity in opposing his actions to maintain the peace and stability of the region. When combined with Russian violations of nuclear arms treaties this is cause for concern.
Since April much has happened, including measured sanctions by the European Union and the United States, to prevent the Russian Federation from leveraging its economic power to gain an advantage over Ukrainian sovereignty. In addition, the depressed state of the world economy, among other factors, has created an oil glut that has also reduced Russia’s ability to leverage its oil reserves against any countries that would oppose it. As a result, the ruble has taken a hit and Russia has made all of the wrong moves to bolster its currency.
On the middle point, certain notable voices here in the United States have pointed to an increase in oil production as the main cause but the numbers do not support this contention. Instead, a combination of factors: alternative energy production, more efficient fuel consumption, and a drop in consumer demand have all conspired to, well, act as a market is supposed to behave. Combine this with the refusal of major producers to reduce output to manipulate the market in order to prop up the price and you have what commodities do most often–rise and fall on the whims of the demand of the moment. I have no doubt that eventually the world economy will recover, but keep in mind that the very real threat of Global Warming will continue to drive societies to find alternatives to fossil fuel. That is, given that they continue to recognize the existential threat that it poses to humanity (aside from the dysfunctional geopolitics that fossil fuels seem to drive). In the meantime, seeing the handwriting on the wall, net exporters like Saudi Arabia have little incentive to reduce production when they can sell as much as possible and gain a larger share of the market against their competitors.
For the uninitiated like Fifth Column blogger Patrick Smith at Salon.com, who apparently only sees conspiracies and control of a kind that–well–actually exists in Putin’s Russia, this is known as market competition. Nary a peep from Mr. Smith has emanated lately (or from our own right wing plutocrats) about the Russian oligarch being a statesman running rings around our democratically-elected U.S. president or his decorated former U.S. Navy officer (and later antiwar activist) Secretary of State. Were it only possible for the state controlled Russian press to have the freedom to make such alternative observations of its own leadership in their country. Okay–enough sarcasm for today, but I think I made my point: mendacity and irrationality make for strange bedfellows.
Along these lines some interesting insights about Putin’s Russia have come out in the book entitled Putin’s Kleptocracy: Who Owns Russia? by Karen Dawisha. This is a brave undertaking given that a lot of critical writing about Russia, apart from the abolition of a free press there, has been taken down from websites. This is not because of some mysterious ability on the part of Putin and his cronies but because of their immense international (until recently) financial power and the expensive lawyers that such money can buy. Cambridge University Press, for example, because of the U.K.’s lax libel laws, declined to publish the book. Thus, a U.S. publisher had to be found. In addition, Russia has bought off columnists and politicians around the world to muddy the waters about the reality of the regime. A very enlightening review of the book and the history surrounding it appears in The New York Review of Books by Washington Post and Slate columnist Anne Applebaum.
In summary, Dawisha’s book demonstrates that during the period when Gorbachev was desperately attempting to reform a crumbling and inefficient system that had plodded along under the Brezhnev doldrums, that KBG agents like Putin were moving Russian currency assets aboard in Europe with the intent of eventually using their economic leverage to retake the country when all of the hullaballoo blew over. Thus, rather than a failing attempt at liberalization and democracy, what we see is the reinstitution of authoritarian rule after a brief respite. The same old corrupt elites that had run the old Soviet Union under central planning are now simply wearing capitalist oligarch clothing. This probably explains why the Russian central bank is moving to bolster the ruble through higher interest rates, which will only exacerbate the economic collapse. But the general welfare is not their concern. It’s all about the value of Russian reserves and the economic leverage that such value and power lends to control.
Globalization has made this a small world, but one still fraught with dangers. For companies in my industry and policymakers here in the United States, I would recommend that a wall of separation be established from companies–particularly those technology companies in information systems–with ties to Russian oil and its oligarchs.