Saturday, January 23, 2016

Russian Anxiety Rises as Oil Prices Collapse

Vladimir Putin pictures himself as Russia's new Tsar yet seemingly hasn't learned the lessons of what happened to the real tsars at times when the economy went to hell and foreign wars no longer distract the populous from the inept management of the country.  With the price of oil having plunged further this past week, Russia's oil revenue based government budget is seeing huge deficits and the Russian people are seeing benefits and services slashed.  In the past when the ruling regime has not been able to continue to meet expectations of improving living standards, governments, both tsarist and communist have fallen.  The New York Times looks at the situation which one can only hope may hasten Putin's rule.   As has been the case too often over the centuries, the Russian people have been betrayed by a failed leader who has plunder the country along with his cronies.  Here are article highlights:    

The global collapse in oil prices is reordering economic relations around the world, but the change is particularly daunting for Russia, which relies on energy exports for 50 percent of its federal budget.

In December, President Vladimir V. Putin told the nation that the worst of the recession — the economy shrank 3.9 percent and inflation hit 12.9 percent in 2015 — was over and that modest growth would return in 2016. He has been pushing the oil collapse as an “opportunity” that will wean Russia off energy imports and diversify the economy.

Then in January oil fell below $30 per barrel, with no bottom in sight, and the ruble hit a record low of nearly 85 to the dollar before recovering slightly.

The last time oil prices dropped so low and stayed there, in the 1980s, the Soviet Union disintegrated. Steadily rising prices since 2000 have lifted Russia out of poverty and economic chaos, buoying the prosperity of many Russians with it. Mr. Putin was lucky enough to be president for much of that period, but he now faces an extended decline, with real incomes shrinking.

With the federal budget approved in December based on oil at $50 a barrel, Anton Siluanov, the finance minister, announced that the country faced a budget deficit of about $40 billion, and ministries were ordered to cut spending 10 percent. Budgets were similarly guillotined last year.

Food prices rose 20 percent last year, according to official statistics, but often Russians say their grocery tab is up by a third or more, thanks in part to sanctions Moscow slapped on Western food imports in retaliation for sanctions the West imposed over Ukraine.

“Nobody is starving yet, but incomes are definitely down,” he said, noting that homes are colder, that neighbors turn on just two lamps after dark where they once used five and that people have stopped buying new clothes. Retail sales across Russia were down by 13.1 percent for the year ending in November, according to official statistics, with car sales off nearly 40 percent.

Albeit poorer, Russia remains a petro state, so there are pockets of plenty. Rolls-Royce reported a 5 percent jump in sales last year, the rich splurging as the value of their assets nose-dived.

Others just seemed oblivious. Moscow’s City Hall advertised for tenders for its banquets, noting that menu items should include foie gras and Parma ham (which is banned elsewhere in Russia because of sanctions).

 Social media erupted in mocking resentment. One Russian quoted a famous line by the Russian poet Vladimir Mayakovski from the 1917 revolution, “Eat pineapples, munch your grouse!” and left unstated the second line, “Your last day is coming, bourgeois!”

Russian involvement in wars in Ukraine and Syria has swelled the general whirlpool of anxiety, with the possibility of a global war discussed on state-run television. Some analysts accuse the Kremlin of deliberately seeking overseas adventures to distract people from domestic economic woes.

Some residents, like Mr. Titov, groused that the wealth was being wasted on prestige projects rather than helping ordinary people. Still, he does not expect Russians to sour on Mr. Putin any time soon. In nearby Sochi, Russia spent around $50 billion to host the 2014 Winter Olympics, and a similar construction juggernaut is building stadiums nationwide for the 2018 World Cup.

“The Russian people got what they wanted, a czar ruling the country,” he said of Mr. Putin. “What we need is an effective manager, but what we got is the Olympics, soccer and war.”
In 1913 the Romanov dynasty lavishly celebrated its three hundredth - four years later the dynasty was overthrown.  Is Mr. Putin paying attention or is he too busy envisioning himself as a combination of Napoleon and Hitler?

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