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  • Understanding Where Russia Is Today [View article]
    It's the second blog on the link, the one called "the economics of corruption"
    Apr 16, 2013. 07:10 PM | 1 Like Like |Link to Comment
  • Understanding Where Russia Is Today [View article] I wrote a thing about this on my blog, correlating GDP growth against Transparency International rankings, democracy index and looking at resource extractive industries..

    People in Russia and abroad are too against the notion of Putin turning "good". They believe people and things always stay the same. In the short run they are right.. in the long run though its a different picture. Putin is intelligent and in my mind, he will do what is best for himself and that is a strong economy.
    Apr 16, 2013. 06:37 PM | 1 Like Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    By the way every political change in Russian history has been caused by a deterioration in economic conditions.

    1861, 1905-1917, 1989-91, 1997-9

    Im not saying that it is the only factor, but its a very large factor... And regarding the potential for political change and control of the country.. While it is true your babushka in some small village near Yakutsk will support Putin, her voice doesn't matter... The people of Moscow and St Pete are the ones that matter. Revolutions start in major cities not the countryside...

    Now will there be a revolution... NO.. we are a long long long long way off that.. Its just a potential outcome and a threat, that Putin may want to avoid. Particularly given what happened to his friends in the middle east.
    Apr 16, 2013. 04:09 PM | Likes Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    By the way... Putin clearly agrees with you.. So far the response to weaker economic growth has been a political clampdown. Which in the short-run works... in the long-run it is less sustainable. But will take years of under-performance to break. It just depends how long Putin wants to stay in power for....

    till 2018? then he can clamp down and leave probably ok..

    till 2024? then he really has to do something about restructuring the economy.
    Apr 16, 2013. 04:04 PM | Likes Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    Some Oligarchs have changed, they care about their family, next generations and want a better Russia for it.. or they want to protect their wealth instead of take more.

    The problem is so many people have dirt on their hands, corruption isnt an Oligarch problem is a society wide problem. Even if you havent done it, it can be made up that you have. Russian and Western businessmen I know continue to divert money out of Russia into Western markets. Real-estate is always the favourite, and there are large areas bought up by Russians: London, New York, Monaco and even less "obvious" places like Montengro.

    Its sort of game theory as well, no-one wants to make a move until they are sure everyone else will with changing Russia, otherwise you might piss someone off and lose a lot. Things need to change from the top down, from within government. An opposition would be very healthy for encouraging that, it would give an alternative and an incentive to change.

    Interesting analysis I did of former soviet union countries... I basically found that the ones which are less corrupt and more politically free have lower growth rates and no natural resources (Serbia, Croatia etc.). The ones which are bad had easy growth from natural resources (Kazakhstan, Azerbaijan Russia etc..)... So maybe now the easy growth has gone, Russia will move in that direction. Its that or a big political clampdown.. (unfortunately the latter appears to be happening at the moment)
    Apr 16, 2013. 04:01 PM | 1 Like Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    Please... Every businessman in Russia knows that Russian corruption is far in excess than western corruption. The extent difference is huge. I know countless business owners both Russian and foreign who own businesses in Russia and internationally and consider Russia the worst.

    Yeltsin left because the economy collapsed and he wanted a safe way out. It was his last chance to leave before things would get messy. There could be a point in time when Putin would like to do the same... and I would say Putin will go out with a very similar deal to what Yeltsin got.

    Governments all over the world have changed since the financial crisis, in fact Russia is one of the few that has not.. because the crisis was short lived and barely touched the household sector. But this is the point entirely, a short crisis is easy for Russia... she has the buffers to prevent it from spinning out of control. A sustained period of under-performance she cannot. Oil spending a few months at $40 is far better than it spending 5 years at $80 for Russia. (unless the latter brings about change)

    Sovereignty is useless when people dont have jobs and inflation is surging. You are right for what you talk about, but this is when the economy is healthy. When times are bad, yes some political rhetoric is needed to divert blame but to solve it economic reforms are needed and this is where Russia is heading today unless reforms are made.
    Apr 16, 2013. 03:55 PM | Likes Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    Putin's power comes from the economy's success. Without economic success he will lose his power. If the Russian economy goes into a sustained period of economic contraction Putin will be forced to leave. Putin knows this, this is why he has started the rhetoric against corruption. His support has deteriorated notably and yet the economy is still growing, unemployment is low and inflation is low. Just imagine if all of these go in the other direction... Please do not think I am talking about today in Russia, I am talking about the future if the economy is not reformed and there are pro-longed economic difficulties.

    Lawfully elected.. Im not sure which laws you are talking about? :) I work and live in Russia, and I know exactly what type of election abuses go on... still I dont dispute he is the tallest guy in the room, in the room of midgets. The majority of Russians think all politicians corrupt, and try to live their life ignoring it.

    Also the reason why the swing is important is that once someone is perceived weak politically in Russia the game is up, so once you start falling from an "ok" level of power it becomes self-fullfilling. Putin is not at that critical level yet, but he is going closer to it, and a recession would push him there.

    I have supported Putin for a long time, he was certainly the right man for the job before, but now its not clear he is.. unless he is willing to change himself,and actually do what he says regarding reforming corruption.
    Apr 16, 2013. 12:39 PM | Likes Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    It seems so... the question is who spent the gains on productive and diversified industries? and who spent it on corruption and consumption?

    Unfortunately too much of it in Russia was spent on the latter. That is not to deny that real industry outside of commodities has been built over the past 10 or so years, but its not big enough to compensate the headwinds.
    Apr 16, 2013. 05:39 AM | Likes Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    The communists are not opposition. They are exactly the same type of people as the United Russia party, same background, commit the same abuses, vote yes on the same measures.

    You always talk about war and geo-politics like it is the only thing in the market. There is a lot more to the market, any spike in $150-$180 would be disastrous for EVERYBODY including Russia. It is demand destructive and would only be a temporary spike.

    As for Navalny... please... Calling him a crook is to call every single Russian a crook. You need to draw a line somewhere to separate the good guys from the bad, and I don't think you can call him bad. If you send him to prison for 9 years, the rest of the Russian government should be getting 30+ years.

    But whether Navalny is right or not for opposition is besides the point. There is no opposition, this IS the problem. You have one set of views in government with no pressure against them. There is no way to punish poor governance.

    The recommendations are all for trading, I do not believe Russia will default. But critically the reason why Russia is exposed is that if oil&gas prices fall, they cannot finance their spending and will end up with a large deficit. But how to finance it? It wont be financed from international borrowing. Or to put it another way, Russia cannot have a sustained capital account surplus; where will the money come from?

    Anyway CDS's are a leveraged way to play it. Russia needs oil above $100 (on their own estimates) and some put it at $120-$130. Simply this won't happen. So any sustained period below this will cause carnage.
    Apr 16, 2013. 05:18 AM | Likes Like |Link to Comment
  • Storm Clouds Gathering In Moscow [View article]
    True, but the others have much more of a "free-ride" that is easy to get.. Russia doesn't have that anymore, they need to stop acting like kids and grow up.

    to look at it roughly:
    India & China are 3,000 5,000 GDP per Cap.
    Russia $17,000...

    Easy growth is that first bit from 0-15,000 depending on what resources etc your country has. But resource growth story is over now for Russia.
    Apr 15, 2013. 06:09 PM | 1 Like Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    If you take away the Rosneft TNK BP event, I am still positive on Gazprom. But this event has changed long term risk of holding the name.

    If you assume your shares are worth what they are meant to be, then I'd double up on Gazprom.
    Apr 11, 2013. 02:09 PM | Likes Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    While western press is extremely negative on Russia. Russia does not help itself. It is Russia's responsibility to change the perception of the press instead of bitching about it.

    Westerners do not understand Russia, but when Rosneft wipes out minorities in the way they did, you can understand why the West has the view it has.
    Apr 11, 2013. 02:07 PM | Likes Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    Reform will come from the next generation, as it has done already where it has been present. At the end of the day Putin is 61 and cant stay around forever, he along with many his age are ex-KGB and a certain way of thinking...

    Next comes the Medvedevs, people who are "genuine" politicians (not coming from KGB/FSB) Medvedev was a professor.

    Finally comes those who grew up in Russia, not the Soviet Union. Those who grew up with internet, and no Soviet schooling.

    Progress takes time.
    Apr 10, 2013. 05:10 PM | Likes Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    Well Yearly GDP growth is.

    But you are right, things are soft at the moment. But a lot of it is statistical noise to do with inflation. Second half of year inflation will be lower and "real" economy will be higher, but still the economy has slowed dramatically. As for IP, it is always highly volatile, but lets not get lost in the short term. If you want I can right an article on the short term about Russia (which would show fairly similar sentiment to your comment) but I focus on the long-run.

    A rate cut is imminent.

    Alex, comparing Russia to US is a bit false. US has become hugely competitive with energy prices, core Europe is the big loser. But this isnt really the driver of Russian growth, its not a Manufacturing exporter, unlike US and Europe where elec prices will make a difference.

    Russian growth is coming from the consumer. Higher debt and wages fuelling consumption boom.
    Apr 10, 2013. 02:28 PM | Likes Like |Link to Comment
  • Understanding Where Russia Is Today [View article]
    & Russian history is littered with way too many of them. It is not a good economy to go in "blind"... this is why if you look at global asset allocators they are hugely underweight Russia.
    Apr 10, 2013. 10:44 AM | 1 Like Like |Link to Comment