Monday, April 18, 2016


He’s outfoxed American policy vectors in Syria, reinforcing the brutal and corrupt Bashir Assad regime, keeping that dictator in the driver’s seat in Damascus. He’s stood up to the West and its challenges to his annexation of Crimea and his suborning insurrection (with a little outside help from…) in eastern Ukraine. He’s countered Western sanctions with a cry for local production to fill the void. He’s cozied up to Iran and sent jets to harass an American naval destroyer in international waters and a US Navy jet in international airspace. Local oligarchs who defy his direction have faced loss of their wealth, prison and in some cases, death, with no consequences to Vladimir Putin.
Popularity polls in his native Russia still hold him in high regard. Is this a Russian Czar who can do no wrong in the eyes of the vast majority of his people? Are there any flaws in his seemingly impermeable armor or is this the Russia we are likely to face for a decade or more going forward?
Russians are well-aware of the skimming and glomming of major assets and cash by government officials and those in their privileged quarter. After all, most of these mega-wealthy elite did not pay fair market value for ownership of companies, land and natural resources when the Soviet Union collapsed, and yet, somehow, they wound up owning what used to belong to the government anyway. Connections and access defined the new Russia, feigning free market capitalism when raw corruption just passed the power of the old Soviet elite to the new Russian elite (many of whom are the same people or their children).
Maybe most Russians just shrugged their shoulders, asking “so, what’s new about this,” when the Panama Papers suggested that many of those in Putin’s inner circle availed themselves of the tax-evasion-and-illicit-gain illusive “Russian doll” corporate structures and secret accounts through the Panamanian law firm Mossack Fonseca. But perhaps there are more ordinary Russians taking another look at their leadership than Mr. Putin has faced before. After all, for most Russians, the economy has tanked and daily life is increasingly miserable.
With oil and gas prices still very low, the cash that Russia had counted on to finance a new solid economy vaporized. Oil riches have devolved into a nation that has uncharacteristically run a major deficit since 2012, with its sizeable reserves expected to run out in 2017. The ruble itself has crashed and burned as Russians thus faced higher prices for just about everything, from basic commodities to simple utility bills. With the pressure of sanctions compounding, many Russian companies are unable to generate their expected top-line revenues, resulting in too many workers missing paychecks. To rub salt in already raw wounds, the government has been forced to close basic institutions like public schools and hospitals. Infrastructure is crumbling fast as well.
The little cracks in Putin’s armor were beginning to be visible at Mr. Putin’s annual televised response to selected queries from the Russia people, which took place this year on April 14th. “A somewhat humbled, or at least not swaggering, President Vladimir V. Putin held his annual, live call-in show on [April 14th], with his answers to the choreographed calls intended to underscore his concern for the plight of ordinary Russians amid a second, punishing year of recession.
“Largely gone were the diatribes against opponents like the United States and Turkey. In their place was praise for domestic cheesemongers and Russian fishermen, and approval of government efforts to keep prices down for everything.
“Perhaps the entire marathon, three hours and 40 minutes, the 14th ‘Direct Line’ session, could best be summed up by Mr. Putin’s answer to a first grader named Alina. She asked the president whether he thought a woman could become president of Russia. Her dad had told her that only a man like Mr. Putin could handle America, she said.
“‘We should not be thinking about how to cope with America, we should think about how to cope with our internal problems, our internal issues,’ Mr. Putin answered. ‘Roads, problems with the public health service, the education system, the development of our economy, economic recovery, problems of setting the pace of growth.’… If Russia addressed those problems, Mr. Putin said, the country would feel ‘invulnerable.’
“But Russians were clearly feeling vulnerable, as questions poured in …  In all, around three million questions were submitted by telephone and Internet, television executives said, of which Mr. Putin answered about 60… The first questions were posed by two studio anchors who pulled them from social media platforms, one about the steep rise in prices and the second asking when the economy would hit bottom.
“‘The government’s economic officials keep telling us that we have hit the bottom in the crisis and are now on the way up again,’ noted the caller. ‘They’ve already said this seven times. Where is the Russian economy now as you see it?’
“Mr. Putin, who had previously predicted that economic growth would rebound by now, was more cautious this time, calling it a “gray period.” The president admitted that the economy had shrunk by 3.7 percent last year, but said he expected it would only contract by 0.3 percent in 2016 and register modest growth after that.
“He also said there was enough money in the two main sovereign wealth funds and other reserves to tide Russia over for the next four years. [Not exactly say most knowledgeable analysts who embrace the 2017 number noted above].” New York Times, April 14th. Is a statement that our economy is contracting less reassuring? And so we will wait and see if those cracks become giant fissures, and if they do, exactly how far Mr. Putin might be willing to go to life those crushing sanctions. Don’t expect anything significant to happen anytime soon, but these signs are very important.
I’m Peter Dekom, and the teas leaves can suggest a major global policy shift if read correctly.

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