Wither Russia? Back to its historical comfort zone

OPINION: "Putinism's Piranha Stage," by Bret Stephens, Wall Street Journal, 9 June 2009.

FRONT PAGE: "Russians Outfox U.S. In Latest Great Game," by Alan Cullison, Wall Street Journal, 11 June 2009.

BRIEFING: "Russia's economy: A new sick man; The crisis is dire, but that does not mean that the Kremlin is about to lose control. On the contrary," The Economist, 6 June 2009.

INTERNATIONAL: "Rebuffing Obama, Kyrgyzstan Insists That U.S. Air Base Will Close," by Michael Schwirtz, New York Times, 12 June 2009.

INTERNATIONAL: "Russia Rejects the Notion of a Joint Missile System in Europe," by Ellen Barry, New York Times, 12 June 2009.

Good piece by Stephens.

Putinism by stages: 1 is through Khordokovsky's arrest (the oil baron) in late 2003, and involves Putin as determined technocrat; 2 is the Bonapartist elevation of Putin to czar; and now stage 3 sees Putin morph into a Chavez-like figure where the chief piranha now turns on the plutocrats--a sad return to Soviet-era logic on economic control.

Will it work economically? God no, as The Economist points out. Putin will survive for quite a while, as oil inches back up, but in terms of demographics and innovation and an economy beyond natural resources, Russia will become a bigger but less interesting version of Kazakhstan. Actually, Kazakhstan is starting to look a lot better.

Still, some optimism from The Economist:

This transformation of Soviet state plants into private firms run by young MBA graduates is perhaps the biggest achievement of the Russian economy over the past two decades. It is far from complete. But it has probably gone far enough to pull businesses . . . through the crisis.

The big problem for now is the lack of business credit, which isn't likely to improve any time soon.

An interesting further bit from our British mag:

The severity of the credit crunch is the price Russia is paying for failing to develop its own financial markets and to tame inflation. The two are connected: ordinary Russians feel life is too short and uncertain to put money into pension funds or insurance companies, and prefer to spend it as quickly as possible. "Nobody in Russia plans for more than two years ahead," says Peter Aven of Alfa Bank.

This is perhaps the biggest failure of the Putin era:

"But the crisis has laid bare the flaws of Russia's politics, which has failed to diversify the economy, create a domestic financial market or build institutions. The Russian economy is today more dependent on oil and gas than it was even ten years ago. Corruption, an old vice, has become the norm. The Kremlin's policies have choked competition, both political and economic.

McKinsey, the consultancy, says that productivity in the Russian economy has improved, but it's still only 26% of the U.S. levels. Thus, most of Russia's growth over the past decade was capacity utilization, and nothing more.

As for the state buying up ailing firms from the oligarchs (Stephens' projection), The Economist says little of that is happening for now and there's a good reason to expect it won't be any flood. The government is reluctant to pick up the foreign debt, so it will logically wait for the debt restructuring and then cherry pick.

As for popular protests, expect even fewer. Russians simply expect nothing from their government--the lasting ironic legacy of communism.

Given the depressing state of affairs at home, not too surprising that Russia has become decidedly more intransigent abroad, especially where it's relative wealth gives it serious pull, like the Caucasus and Central Asia. I say "relative" WRT the locals and what the U.S. is willing to spend in return. China has no political interests in Central Asia, just business ones. It is slowly but surely usurping Russia's influence, but in a stealthy fashion.

Still, and all in all, I stick with James Baker's consistent analysis that America has no interest in picking fights with Russia, whether it's missile defense or supply routes to Afghanistan.

We simply have bigger and better fish to fry.