Russian vassalization of Ukraine

[Dylan]

Of course 1% is a big deal. This is also in the context of years of 7% growth....then falling to 4%....now they are technically in a recession.

Also the massive capital outflows and cancelled transactions suggest the outside world is increasingly leery of Russia's economic prospects. Self fulfilling prophecy for a country as reliant on FDI as Russia.

Russia's credit rating was recently lowered.

April saw a huge drop off in orders from abroad, exacerbating foreign currency deficits.

Inflation remains a problem and Russia's central bank is worried, hiking up interests rates in the last few months. Near-full employment, high inflation and increased interest rates? What could go wrong!?!? Lol.

And all of this reminds investors of what they already knew in the back of their heads -Russia is a shit place to do business. Corrupt, unstable and with an increasingly unhinged and unpredictable autocratic ruler calling every shot. There's a reason Russia has basically no small or medium sized businesses. It's just a shit business environment and Putin is taking it backward instead of forward. Instead of privatizing and engaging in structural economic reforms he toys with his oil surplus as stop gaps.

And after this nonsense nobody is going to ramp up investment there in a big way.

Sorry man. Russia is in a deeply precarious economic position.

[gla22]

[Dylan]

The west has much more margin for error. Why do you think that is? Perhaps because the west has more competitive marketplaces, are more conducive to doing business, more stable, more predictable leadership, more educated workers, stronger more stable financial markets, etc.

These are fundamental issues with the Russian economy that will take years of technocratic reform to fix.

Pile on top of that sanctions and at least 5 years of lessened FDI due to this kind of nonsense by Putin, along with an inevitable drop in oil prices which would almost instantly destroy that surplus you mentioned earlier and leave Putin scrambling for cash with which to pay off the oligarchs that keep him in power....it's a goddamn tinder keg. Everybody knows this. Every major fund with any investment in Russia is pulling capital and putting up walls.

I'm starting to think you are partially right though. Russia's fall from grace has been a slow burn over the last few years, accelerating with the imposition of sanctions and market distaste for Russia's antics. It's entirely possible that without a swift economic catastrophe Russia keeps plodding along on the same course, wasting ever more capital on propping up an extraction economy instead of undergoing the tough reforms that could provide for sustainable, systemic growth

Then, maybe in 2016 when oil is at 82 and Putin can't pay the electrical bills for his embassy wiretaps, then he'll look back and think "shit, maybe I should've used that surplus on reforms or focused on fixing our financial markets and making a more business friendly environment instead of fishing shirtless and adventuring in Ukraine."

By then of course it will be too late and Russia will be doomed to stagnate and remain a 2nd world shithole when it easily should have been a first world developed nation 30 years ago but for incredibly terrible economic policies.

[Kane]

[Dylan]

An Economist article had an interesting anecdote. Apparently early in his KGB days an evaluator said that Putin had a "reduced sense of danger."

I think it holds true to this day.

[Kane]

[Kane]

[Dylan]

Always good to have an ex-secret agent turned dictator-for-life who holds imperial ambitions and has a "reduced sense of danger" at the helm of a nuclear armed regional military power.

[exploited]

[Saracen]