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Putin’s Goose a Cookin’

March 11, 2014 By Richard C. Young

The economic/monetary squeeze is on for Russia’s 140 or so oligarchs. In response to Putin’s Crimean adventurism, the U.S. and Europe will turn the screws until the oligarchs lay down the gauntlet against Putin. VP is a menace to Europe, the oligarchs and the Russian people. Young western influenced Russians know this well and can support the oligarchs in bringing an end to the Putin Dark Days. Based on international competitiveness, the Russian economy is dead in the water, not to be revived. Putin has nationalized two-thirds of the stock market capitalization base as a way to steal his way to power, resulting in an increasingly uncompetitive Russia. The Sochi games, as Alex Alexiev tells readers here, cost three times what they should have cost. Mr. Alexiev does a great job of outlying Putin’s deep problems in the energy arena as Europe moves to crush Russia’s natural gas stranglehold.

Putin’s Russia is entering a period of economic stagnation, if not outright recession, which will only be exacerbated by Western sanctions. Last year, Russia’s GDP growth slowed down to 1.3 percent with 6.5 percent inflation, the worst result since the 2009 recession, and this year will not be better. Even before Putin’s land grab, economics minister Alexey Ulyukaev forecast yearly growth to 2030 at only 2.5 percent, with inflation at least twice that, while Putin’s former long-term finance minister, Alexei Kudrin, sees Russia able to cope economically only if oil prices keep increasing by 20 percent to 30 percent per annum. In the meantime, Putin’s blatant disregard for international norms of behavior and the threat of sanctions have already brought about a dramatic devaluation of the ruble and a run for the exits by Russians with money. Capital flight in just the first quarter of 2014 is forecast to exceed the estimated $62.7 billion that left Russia in 2013.

Nor is there much Moscow can do by brandishing the oil-and-gas weapon, as poorly informed Western pundits keep suggesting. While in 2000 Europe depended on Russian gas for 48 percent of its consumption, last year the figure was 25 percent and declining further. Back then there were few liquefied-natural-gas (LNG) terminals providing alternative gas supplies, while at present Europe operates 16 of them with at least as many new ones planned. Eastern Europe, long the region most dependent on and abused by Russian monopolistic practices, is also on its way to emancipation. Poland is completing its first LNG terminal at Świnoujście and Lithuania is constructing a floating LNG facility for use in the ice-free port of Klaipeda by the end of this year. With additional LNG terminals being planned in Croatia and Greece, the idea of building a North-South gas-distribution corridor in Eastern Europe has picked up support during the crisis in Ukraine and finally looks feasible. This almost certainly means the end of the Gazprom-sponsored South Stream pipeline project, which was designed by Putin as an instrument of political blackmail of Kiev.

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Richard C. Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
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