Thursday, November 13, 2008

Russia Update

Keith Gessen, author of All the Sad Young Literary Men and co-founder of n+1 - the preferred journal of New York City's messenger bag class, wrote a piece for the London Review of Books on the state of the Russian economy. It is well done and I suggest checking it out for an idea of what Gessen, who's been living in Moscow for the past few months, is seeing and hearing in the Russian media, government, and economic apparatus. Basically, he supports my point that Russia is a whole lot of bark and not much bite (unless you're a tiny former Soviet bloc state of, oh, say, 4 million people) and the bark they have is mostly lubricated by high oil prices which are, ahem, plummeting. An excerpt:

"The Russians get to worry about other countries in crisis (the way they worried about Americans after 11 September, despite having a much more serious domestic terrorism problem), and meanwhile keep their money in the bank, and, most important of all, keep it in roubles. Because the rouble, for the moment, is the biggest problem facing the government. If oil prices fall too low and the rouble fails, as it did in 1986 (though this was kept secret) and in 1998, and if the coal miners go on strike again because they haven’t been paid and block the trans-Siberian Railway, savings will be wiped out.

This would be a national humiliation – something more destabilising to regimes, as the Putinists know, than mere economic collapse. A few weekends ago there were rumours that the rouble’s collapse was imminent, and the dollar started climbing away from the official rate at the independent currency exchange kiosks around town. Reporting on the rumours the next day, Kommersant quoted a banker saying that Russians had a ‘genetic’ memory of 1998, and were being told, by their genes, to go and buy dollars. Except the truth is that Russians have an actual memory of 1998. Even I have an actual memory of 1998....

What would it take for this regime to stumble? People have been saying for a long time that Putin will not be tested until oil prices fall. Now oil prices are falling, and Putin-Medvedev are mostly blaming the United States and stoking up anger at Ukraine’s president. If oil prices keep falling, their magnificent cash reserves – $500 billion before the current crisis – could, in a country of 140 million people, turn out to be less handy than they’d thought."

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