Tuesday, February 9, 2016

Putin's biggest failure

Source: The Saker

This article was written for the Unz Review
January 26, 2016

The Russian 5th column: Chubais, Iudaeva, Dvorkovich, Shuvalov, Nabiullina, Kudrin, Uliukaev, Siluanov, Medvedev

Whatever happens in the future, Putin has already secured his place in history as one of the greatest Russian leaders ever. Not only did he succeed in literally resurrecting Russia as a country, but in a little over a decade he brought her back as a world power capable of successfully challenging the AngloZionist Empire. The Russian people have clearly recognized this feat and, according to numerous polls, they are giving him an amazing 90% support rate. And yet, there is one crucial problem which Putin has failed to tackle: the real reason behind the apparent inability of the Kremlin to meaningfully reform the Russian economy.

As I have described it in the past many times, when Putin came to power in 1999-2000 he inherited a system completely designed and controlled by the USA. During the Eltsin years, Russian ministers had much less power than western 'advisers' who turned Russia into a US colony. In fact, during the 1990s, Russia was at least as controlled by the USA as Europe and the Ukraine are today. And the results were truly catastrophic: Russia was plundered from her natural wealth, billions of dollars were stolen and hidden in western offshore accounts, the Russian industry was destroyed, a unprecedented wave of violence, corruption and poverty drowned the entire country in misery and the Russian Federation almost broke up into many small statelets. It was, by any measure, an absolute nightmare, a horror comparable to a major war. Russia was about to explode and something had to be done.

Two remaining centers of power, the oligarchs and the ex-KGB, were forced to seek a solution to this crisis and they came up with the idea of sharing power: the former would be represented by Dmitrii Medvedev and the latter by Vladimir Putin. Both sides believed that they would keep the other side in check and that this combination of big money and big muscle would yield a sufficient degree of stability.

I call the group behind Medvedev the "Atlantic Integrationists" and the people behind Putin the "Eurasian Sovereignists". The former wants Russia to be accepted by the West as an equal partner and fully integration Russia into the AngloZionist Empire, while the latter want to fully "sovereignize" Russia and then create a multi-polar international system with the help of China and the other BRICS countries.

What the Atlantic Integrationists did not expect is that Putin would slowly but surely begin to squeeze them out of power: first he cracked down on the most notorious oligarchs such as Berezovskii and Khodorkovskii, then he began cracking down on the local oligarchs, gubernatorial mafias, ethnic mobsters, corrupt industry officials, etc. Putin restored the “vertical [axis]of power” and crushed the Wahabi insurgents in Chechnia. Putin even carefully set up the circumstances needed to get rid of some of the worst ministers such as Serdiukov and Kudrin. But what Putin has so far failed to do is to

Reform the Russian political system
Replace the 5th columnists in and around the Kremlin
Reform the Russian economy

The current Russian Constitution and system of government is a pure product of the US 'advisors' which, after the bloody crackdown against the opposition in 1993, allowed Boris Eltsin to run the country until 1999. It is paradoxical that the West now speaks of a despotic presidency about Putin when all he did is inherit a western-designed political system. The problem for Putin today is that it makes no sense to replace some of the worst people in power as long as the system remains unchanged. But the main obstacle to a reform of the political system is the resistance of the pro-Western 5th columnists in and around the Kremlin. They also the ones who are still forcing a set of "Washington consensus" kind of policies upon Russia even though it is obvious that the consequences for Russia are extremely bad, even disastrous. There is no doubt that Putin understands that, but he has been unable, at least so far, to break out of this dynamic.

So who are these 5th columnists?

I have selected nine of the names most often mentioned by Russian analysts. These are (in no particular order):

Former First Deputy Prime Minister Anatolii Chubais, First Deputy Governor of the Russian Central Bank Ksenia Iudaeva, Deputy Prime Minister Arkadii Dvorkovich, First Deputy Prime Minister Igor Shuvalov, Governor of the Russian Central Bank Elvira Nabiullina, former Minister of Finance Alexei Kudrin, Minister of Economic Development, Alexei Uliukaev, Minister of Finance Anton Siluanov and Prime Minister Dmitri Medvedev.

This is, of course, only a partial list – the real list is longer and runs deeper in the Russian power structure. The people on this list range from dangerous ideologues like Kudrin or Chubais, to mediocre and unimaginative people, like Siluanov or Nabiullina. And none of them would, by him or herself, represent much of a threat to Putin. But as a group and in the current political system they are a formidable foe which has kept Putin in check. I do believe, however, that a purge is being prepared.

One of the possible signs of a purge to come is the fact that the Russian media, both the blogosphere and the big corporate media, is now very critical of the economic policies of the government of Prime Minister Medvedev. Most Russian economists agree that the real reason for the current economic crisis in Russia is not the falling price of oil or, even less so, the western sanctions, but the misguided decisions of the Russian Central Bank (such as floating the Ruble or keeping the interest rates high) and the lack of governmental action to support a real reform and development of the Russian economy. What is especially interesting is that vocal opponents of the current 5th column now get plenty of air time in the Russian media, including state owned VGTRK. Leading opponents of the current economic policies, such as Sergei Glazev, Mikhail Deliagin or Mikhail Khazin are now interviewed at length and given all the time needed to absolutely blast the economic policies of the Medvedev government. And yet, Putin is still taking no visible action. In fact, in his latest yearly address he as even praised the work of the Russian Central Bank. So what is going on here?

Source: Paul Craig Roberts

Privatization Is the Atlanticist Strategy to Attack Russia

by Paul Craig Roberts and Michael Hudson

February 8, 2016

NOTE: Readers are asking to know who, in addition to the Western-financed NGOs, are the Fifth Columnists inside Russia. Michael Hudson and I left the description general as Atlanticist Integrationists and neoliberal economists. The Saker provides some specific names. Among the Fifth Columnists are the Russian Prime Minister, head of the Central Bank, and the two top economics ministers. They are springing a privatization trap on Putin that could undo all of his accomplishments and deliver Russia to Western control. http://thesaker.is/putins-biggest-failure/

Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.

However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014

Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia's economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.

To be sure, President Putin set a number of conditions on February 1 to prevent new privatizations from being like the Yeltsin era's disastrous selloffs. This time the assets would not be sold at knockdown prices, but would have to reflect prospective real value. The firms being sold off would remain under Russian jurisdiction, not operated by offshore owners. Foreigners were invited to participate, but the companies would remain subject to Russian laws and regulations, including restrictions to keep their capital within Russia.

Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw "hard cash" into the buyouts – ideally from the foreign currency holdings by oligarchs in London and elsewhere.

Putin wisely ruled out selling Russia's largest bank, Sperbank, which holds much of the nation's retail savings accounts. Banking evidently is to remain largely a public utility, which it should because the ability to create credit as money is a natural monopoly and inherently public in character.

Despite these protections that President Putin added, there are serious reasons not to go ahead with the newly-announced privatizations. These reasons go beyond the fact that they would be sold under conditions of economic recession as a result of the Western economic sanctions and falling oil prices.

The excuse being cited by Russian officials for selling these companies at the present time is to finance the domestic budget deficit. This excuse shows that Russia has still not recovered from the disastrous Western Atlanticist myth that Russia must depend on foreign banks and bondholders to create money, as if the Russian central bank cannot do this itself by monetizing the budget deficit.

Monetization of budget deficits is precisely what the United States government has done, and what Western central banks have been doing in the post World War II era. Debt monetization is common practice in the West. Governments can help revive the economy by printing money instead of indebting the country to private creditors which drains the public sector of funds via interest payments to private creditors.

There is no valid reason to raise money from private banks to provide the government with money when a central bank can create the same money without having to pay interest on loans. However, Russian economists have been inculcated with the Western belief that only commercial banks should create money and that governments should sell interest-bearing bonds in order to raise funds. The incorrect belief that only private banks should create money by making loans is leading the Russian government down the same path that has led the eurozone into a dead end economy. By privatizing credit creation, Europe has shifted economic planning from democratically elected governments to the banking sector.

There is no need for Russia to accept this pro-rentier economic philosophy that bleeds a country of public revenues. Neoliberals are promoting it not to help Russia, but to bring Russia to its knees.

Essentially, those Russians allied with the West — "Atlanticist Integrationists" — who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia's control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests.

Despite some success in reducing the power of the oligarchs who arose from the Yeltsin privatizations, the Russian government needs to retain national enterprises as a countervailing economic power. The reason governments operate railways and other basic infrastructure is to lower the cost of living and doing business. The aim of private owners, by contrast, is to raise the prices as high as they can. This is called "rent extraction." Private owners put up tollbooths to raise the cost of infrastructure services that are being privatized. This is the opposite of what the classical economists meant by "free market."

There is talk of a deal being made with the oligarchs. The oligarchs will buy ownership in the Russian state companies with money they have stashed abroad from previous privatizations, and get another "deal of the century" when Russia's economy recovers by enough to enable more excessive gains to be made.

The problem is that the more economic power moves from government to private control, the less countervailing power the government has against private interests. From this standpoint, no privatizations should be permitted at this time.

Much less should foreigners be permitted to acquire ownership of Russian national assets. In order to collect a one-time payment of foreign currency, the Russian government will be turning over to foreigners future income streams that can, and will be, extracted from Russia and sent abroad. This "repatriation" of dividends would occur even if management and control remains geographically in Russia.

Selling public assets in exchange for a one-time payment is what the city of Chicago government did when it sold the 75 year revenue stream of its parking meters for a one-time payment. The Chicago government got money for one year by giving up 75 years of revenues. By sacrificing public revenues, the Chicago government saved real estate and private wealth from being taxed and also allowed Wall Street investment banks to make a fortune.

It also created a public outcry against the giveaway. The new buyers sharply raised street parking fees, and sued Chicago's government for damages when the city closed the street for public parades or holidays, thereby "interfering" with the rentiers' parking-meter business. Instead of helping Chicago, it helped push the city toward bankruptcy. No wonder Atlanticists would like to see Russia suffer the same fate.

Using privatization to cover a short-term budget problem creates a larger long-term problem. The profits of Russian companies would flow out of the country, reducing the ruble's exchange rate. If the profits are paid in rubles, the rubles can be dumped in the foreign exchange market and exchanged for dollars. This will depress the ruble's exchange rate and raise the dollar's exchange value. In effect, allowing foreigners to acquire Russia's national assets helps foreigners to speculate against the Russian ruble.

Of course, the new Russian owners of the privatized assets also could send their profits abroad. But at least the Russian government realizes that owners subject to Russian jurisdiction are more easily regulated than are owners who are able to control companies from abroad and keep their working capital in London or other foreign banking centers (all subject to U.S. diplomatic leverage and New Cold War sanctions).

At the root of the privatization discussion should be the question of what is money and why should it be created by private banks instead of central banks. The Russian government should finance its budget deficit by having the central bank create the necessary money, just as the US and UK do. It is not necessary for the Russian government to give away future revenue streams in perpetuity merely in order to cover one year's deficit. That is a path to impoverishment and to loss of economic and political independence.

Globalization was invented as a tool of American Empire. Russia should be shielding itself from globalization, not opening itself to it. Privatization is the vehicle to undercut economic sovereignty and increase profits by raising prices.

Just as Western-financed NGOs operating in Russia are a fifth column operating against Russian national interests, so are Russia's neoliberal economists, whether or not they realize it. Russia will not be safe from Western manipulation until its economy is closed to Western attempts to reshape Russia's economy in the interest of Washington and not in the interest of Russia.

Further reading:

The rabid Russian-hater Zbigniew Brzezinski on Russia sponsored by the Atlantic Council: 


About the Atlantic Council

1 comment:

  1. Given the reach of the NWO tentacles, and the wishes of the MIC for perpetual War spending, we can assume Vlad had a lot of help. The Best Enemy Money can Buy: http://www.reformed-theology.org/html/books/best_enemy/chapter_03.htm


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