The FT has reported this morning:
Russia's Central Bank has raised its main interest rate from 10.5 per cent to 17 per cent in the middle of the Moscow night, just five days after the last rate rise and hours after the rouble suffered its worst drop since 1998.
I have no love for Putin, his regime or what he has done in Ukraine but I know the world cannot afford an angry bear in the form of an economically wounded Russia. But that it what it looks like we've got. It may have happened more because of the oil price crash than because of sanctions, but that will not matter. In the court of Russian public opinion the problem will have been created by people outside the country, and Putin will no doubt fuel that idea because it will pay him to do so.
Russia is best not left alone when tormented. Serious steps to enhance its economic stability are needed now or we will all pay a price. I sincerely hope the IMF and others are reaching out to Moscow right now, because that is what is needed if we are to keep stability in the region, and in the world economy. This is a moment when economics could get dangerous if left to it own devices.
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Richard, I know that what I am about to say is not strictly a propos the raison d’etre of this Blog, so you may choose to moderate it away, but I cannot agree with your comment “or what [Putin] has done in Ukraine.
Russia is FAR more sinned against than sinning in this matter, since the USA and NATO (an organization which, in the words of the admirable former Congressman, Dennis Kucinich, is “way past its sell-by date, and should be wound up”) engineered a coup to lever out the validly elected President, Yanukovych, replacing him with a rag bag collection of mainly Right wing, and in some cases, openly Nazi-sympathising politicians. The libertarian Right -winger Ron Paul wrote a truly excellent article on this, which I cannot now locate, but his own Institute castigates the US for its actions here – see http://www.ronpaulinstitute.org/archives/featured-articles/2014/august/10/america-started-this-ukraine-crisis/
The Crimea was Russian until 1954, and NATO really thought they could just walk in and take over Russia’s Black Sea fleet and harbour? And James Baker’s and George Bush Snr’s solemn promise to Mikhail Gorbachev not to expand NATO “one inch” has been comprehensively broken, in an attempt to encircle Russia, even trying to get Georgia into NATO!
People need to remember – ESPECIALLY Americans, who have only been invaded once, in 1814, and at a distance in Pearl Harbour in 1941) – that Russia has been invaded EVERY century since the 13th, by Tatars (13th, 14th, 15th and even early in the 16th), by Poles and Lithuanians (yes – they captured the Kremlin early in the 17th century, and burned part of Moscow!), Swedes in the late 17th and early 18th centuries, the French in the 19th, and in the 20th century by an international force in the 1920’s, prolonging the Civil War, and by the Germans in the 1940’s.
In such circumstances, Putin’s reaction was entirely expected, and, given the political make-up of the Kiev Government and the ethnic, mainly Russian, make-up of the eastern part of the Ukraine, entirely measured. Putin always maintained that the Ukrainians had a constitutional apparatus by which Yanukovych could have been impeached, and removed – as he surely would have been, given Ukrainian views on his Presidency. Instead, seeing the chance of removing him by force slip away when he signed the peace accord with the EU representatives, what were surely agents provocateurs in the Maidan (on the “cui bono” principle, who benefited from the shootings that took place that day – not Yanukovych, who seemed to have secured at least a temporary reprieve?) stirred up a further revolt that led to Yanukovych fleeing the country, and the installation of a Government that does contain elements that really are Nazi-sympathisers. But that’s OK for NATO, isn’t it – at least they got their guy in?
You end by saying “Russia is best not left alone when tormented.” and “This is a moment when economics could get dangerous if left to it own devices.” To which I would add this gloss – Russia has experience of invasion, has ALWAYS resisted, and has usually prevailed in the end, as she did with the Tatar invasions, at massive cost. She will do the same again, and NATO needs to draw in its horns and start talking sense, or pay the price – for Russia WILL respond, whatever NATO and Kiev throw at him (On which, a last point – it’s highly significant that no progress has been made on the shooting down of the Malaysian airliner – if they could make the charge stick against Russia or Eastern Ukraine they would, but embarrassingly it looks as if it was shot down by action from the air not the ground)
Andrew
Russia’s obvious weakness is its enormous land mass
That is also its strength
But as you say it does leave it vulnerable – and ignoring that is folly
Whatever the rights and wrongs watching Russia collapse right now would be complete folly
And definitely not what the G8 was meant to be about
But I doubt we have politicians up to saying that
Richard
Andrew, it may be true that Western influence helped remove the Govt. of Yanuhovych but it seems we have little hard information. People seem to focus on the present and the Famine of the 1930s is not mentioned. Estimates of deaths rang from two million to seven million. The main cause was Stalin’s collectivization of agriculture. The Ukrainian govt. declared it be a holocaust and a number of countries have agreed. Because of this the Germans recruited a number of soldiers from Ukraine in WW2 and I guess this is why extreme right wing parties persist although they don’t seem to be a majority. It is not seemly to compare the methods of death between the Nazi holocaust and the Stalinist one but watching families starve to death is going to leave a legacy.
I think the way armed men have appeared so quickly in the Crimea and elsewhere. often with heavy weapons and uniforms would seem to point to Russian encouragement and supply.
As it stands NATO does not include the Ukraine, and I hope it doesn’t but that does hand power to the Russian Govt. to veto any decision by the people of Ukraine.
I agree with Richard’s main point about the need to reach out to Russia. The problem, as I see it, is that much of Russian public opinion has not reconcilled themselves to the loss of super power status, much like Britain in the 1950s and 60s with the loss of Empire (if indeed we have done so since!)
My view is that the West is the source of Putin and the current situation. As I see it, if we had stuck by Gorbachev and ignored Yeltsin, we’d have had a gentler transition to a more Western style economy (and I’m saying that through gritted teeth because I’m not too sure if I even like what that has become). Basically the West has peed in the wind as far as Russia is concerned and now it will come back at us twice as hard.
Those Chicago boys had to get their man in and institute the neo-lib shock doctrine instead so they got the manifest drunk puppet Yeltsin to run the country (down).
As I understand it, all the money the IMF originally put in as investment during those dark days was squirreled away and I also recall that the Russians refused to pay it back. The Klondike like economy that resulted even turned pro-Thatcherites like John Gray against capitalism (Gray felt that Russia had given birth to a new form of extreme capitalism that was potentially very dangerous to world peace).
So to me, Putin is a reaction to lots of things (as others have mentioned above) but principally he seems to stand against the reduction in state power to enable the private sector (or the new oligarch class) to grow instead. I think he also stands against the uncontrolled forces that free-market proponents advocated under Yeltsin. He has even tried to wrestle control of key economic resources back from the oligarchs. I’m not passing him off as a great leader or a democrat but he has his work cut out and too much of that is caused by poorly thought through transitional arrangements after Gorbachev.
If we look at Russian history we see a paradox; a country perhaps too big to govern effectively but at the same time a country that has needed to be governed because the seeds of its destruction often lie within its own borders. I think that Putin knows this. He is Russian through and through. I can see his POV. I remember reports of social security and pensions going unpaid; people creating markets to sell their stuff to earn money; increases in poverty side by side with increases in affluence.
Would the IMF risk getting involved again? Would they tolerate having their fingers burnt a second time? Highly unlikely. I think that the West is looking for further splintering because the Americans will think only short term like they did in the early 1990’s.
When the iron curtain came down I’ve often felt that the biggest mistake was to allow the Americans to get in first. Europe should have opened its arms and let Russia in. This would have had all sorts of potential benefits for both sides. Instead we let America call the tune. Whether its Russia, Iraq, South America – whereever they have been, recent American international intervention has caused nothing but mayhem afterwards. Russia needed a Douglas MacArthur-like figure and they got a drunken puppet called Yeltsin instead and some dodgy economics from the windy city.
The only thing I can think of is helping through trade deals – not cash – with Europe getting out from underneath the American yoke and forming a mutually beneficial alliance on their own.
Europe let Russia down; the pro-marketeers let Russia down. This is what neo-lib economic failure looks like. Congratulations to all concerned.
Hear, hear! Mark C. Gorbachev offered a vision of “a common European home”, and instead Russia got, as you say, a Klondike-style invasion of Chicago School rip-off merchants, who did a “scorched earth” job on Russia. Much the worst effect of Yeltsin’s rule was the drop in average life expectancy in Russia for men fell from about 73 to 54! Some price to pay for the wonders of the “free” (actually the usual “fixed and stitched up”) market. Putin did at least rein in the appalling oligarchs, who had bought and sold the WHOLE Duma Parliament. And now we need to go back to what Gorbachev was proposingc- which SHOULD, I firmly assert (see my earlier posts) include a winding back of NATO and a REAL change of direction in the USA -interestingly, Gorbachev recently said that the USA needed to undergo its own “perestroika”. Quite!
Interesting relevant article on the BBC website today: http://www.bbc.co.uk/news/magazine-30483873
@ Jon
Many thanks for an exceptionally interesting article.
In a follow-up to this, first, here’s the Ron Paul article referred to in an earlier post – an exceptionally comprehensive deconstruction of House Resolution 758, by which the USA has effectively declared war on Russia, and on ENTIRELY bogus grounds
http://www.ronpaulinstitute.org/archives/featured-articles/2014/december/04/reckless-congress-declares-war-on-russia/
And here’s Gorbachev’s prophecy (request for?) an American “perestroika”
http://rt.com/usa/gorbachev-america-perestroika-occupy-629/
Would that we had acted as Jeffrey Sachs begged the West to do, as set out in your article, and in keeping with Gorbachev’s genuine desire for REAL détente and real coming together into “Our Common European Home”.
Peace sells no weapons.
http://m.youtube.com/watch?v=8y06NSBBRtY
Spot on