What is going on in Russia
The purpose of this post is to explain in clear, crisp terms what is happening in Russia.
The economy in Russia
Putin did a good job in making Russians feel good about being Russian after the 1990s. He brought pride in being Russian back. However, being a Czar true democracy did not exist, therefore, capitalism in Russia had a hard time to develop in a diversified way, as to stay in power Putin used his influence to reward economic oligarchs.
Therefore, the Russians became the arabs of Europe, that is, an economy built on oil and gas. People became rich, some people.
Russia in Crisis
Infustructure and long term investment projects in Russia were based on oil being over 100 dollars. At 50 dollars the Russian economy has stoped and is moving backward.
Russian Ukrainian dispute
In times of falling prices Putin wants to raise prices and flex his monopolistic power, to off set losses and retain popularity, which might ride on the Russian economy. Further, like in Georgia Russia is flexing itself as Russia wants the satallites of the old Union back in its fold, Russia is an empire of course.
Ukraine is saying no. Europe should help Ukraine, but its watching as it wants smooth business and does not want to upset daddy Russia giving Europe gas.
Russia has tried to make Ukraine look like the bad guy. But Russia turned off the gas and said Ukraine did it . But truth is Russia did turn the gas off as a ploy, to get Germany to build the Baltic pipeline to cut Poland and Ukraine out.
Germany of course is meeting with the Russians as they want to make business and do not care about Ukraine.
But if oil is going to stay low, Czarist policies may backfire as Adam Smith’s invisible hand will punish Russia for its highly concentrated economy with no real free movement of labor and capital.
Two things might happen in Russia
- Either oil will come back or Europe will be weak and give in and all is well for Putin
- Or Ukraine will go West and Putin will lose power with oil being too cheap to buy people with. But that is the less likely scenario.
Of course I hope for the latter.
3 responses to What is happening in Russia
Eh, sorry for the grammar. I’m sleepy:
Did Ukraine pay for the gas that it had already used?
Why does have Ukraine to pay less, than the EU?
Why did Russia still offer to sell gas for 250, not 380 euros, as is sold to the EU?
Ukraine paid in full. What Russian did was throw on some extra fees at the last minute. This is what Ukraine contested. Its funny you say the EU rate. Did you know Germany gets a special rate of 200 euros, while Poland pays 400 euros. The Russian president is now in Germany trying to make a pact between Germany and Russia, to hurt Poland and Ukraine for its trying to break free from Moscow, cutting these countries out.
Its funny how Russia cuts off gas in January, while any other normal country like Norway for example would not be so cruel.
Further, Russian prices are not market prices they are monopoly prices. They ‘set’ prices. Look I am living in Eastern Europe and Russian history has been my passion and I am Slavic so I am not against the Russians at all, I am for them. The best thing Russia could do is clean up corruption and break up the monopolies and join the EU and have a real democracy, if Russia did that it would become very wealthy with a strong middle class. Very wealthy. The current economic model is only for the elite.
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