What Happens When The “Reset” Button Becomes…
…the “EJECT!” button?
Russia risks Soviet-style collapse as rouble defence fails
Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after “shock and awe” action by the central bank failed to stem the collapse of the rouble.
“The situation is critical,” said the central bank’s vice-chairman, Sergei Shvetsov. “What is happening is a nightmare that we could not even have imagined a year ago.”…Michal Dybula, from BNP Paribas, said the rouble’s plunge risks setting off a systemic bank run. “A large-scale run on deposits, once under way, would make capital controls pretty much unavoidable,” he said, adding that the authorities may start by forcing state-controlled companies to sell foreign assets and repatriate funds.
In Washington, the White House said it had no intention of easing pressure on Russia to halt the freefall. “It is president Vladimir Putin’s decision to make. The aim is to sharpen the choice that he faces,” it said.
President Barack Obama will not veto a law passed by Congress imposing a raft of new sanctions against Russia, even though he warned previously that it goes too far for European leaders and risks splitting the trans-Atlantic front. The measures include $350m of military assistance to Ukraine, and authorize Mr Obama to impose curbs on energy companies investing in Russia, as well as to prohibit credit to Gazprom.…After years of bluster and suggestions by Mr Putin that the US is a paper tiger, the Kremlin is now coming face to face with the cataclysmic consequences of what it has done by invading Ukraine and changing Europe’s borders by force. By the same token, Washington needs to move with care since it would be a geostrategic miscalculation of the first order to push a nuclear-armed Russia too far into a corner, or to perpetuatue a cycle of grievance.
Anthony Peters, from SwissInvest, said Russia’s leaders had misled their own people and have until now been in denial about the crisis engulfing them. “Not since Soviet times have we seen such steadfast refusal by the Kremlin to acknowledge the presence of severe political and economic problems while sacrificing the people in the name of orthodoxy. The Russian people are legendarily stoic in the face of hardships but beware if, and when, their patience runs out,” he said.
The rouble crash has doubled the cost of servicing nearly $700bn of external debt owed by Russian banks, companies and state bodies, mostly in dollars. They must repay $30bn this month and a further $100bn next year. Oil giant Rosneft has requested $49bn of state aid to weather the crisis.
I have complete confidence that our Super Geniuses in DC will manage to engender the worst possible outcome.
That’s the Gift they have.
These are dangerous times, and we are ruled by petulant children.
Biz, Politics, World Stuff | Mr. Bingley | 
December 17, 2014 8:31 am
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“Petulant children” is FAR to kind. By more than half.
Otherwise, spot on.
It wasn’t the drop in oil prices alone that created the latest catastrophic economic collapse in Russia. The severe santions orchestrated by both the U.S. and Europe have been bleeding Russia’s reserves for some time and when the oil prices dropped, they had nothing left to weather the storm. In one way, its somewhat satisfying to see Putin be the victim of Karma, however, Germany’s financial collapse in the late 30’s eventually led to WW2. Bad things happen when a major country is trapped in a corner.
The other important and potentially devastating issue here is the state of oil based derivatives. Just like the real estate derivatives from a few years back, blew up when the one-way bet that houses wouldn’t come down in price, failed, the exact same thing is about to happen with oil based derivatives. Forced sell offs, followed by snowballing panic will be causing financial clusterfcuks all over the world and none greater than our own back yard. Get ready for a rough road ahead.
The West missed a big opportunity to reach out to the Russian public to get them to understand we meant them no harm and show another way beside despotism. Sydney B. Is right. This won’t end well.
Russians, with few exceptions, seem to love despotism. It’s all they’ve ever known, and they get nervous having to make choices on their own. Much easier to obey the orders of the Boss.
They are also marinated in conspiracy thinking. Anything we do will be interpreted as hostile to Russia, even if we meant it to be helpful, even altruistic.
I think there was a short time in the 1990s when the US could have reshaped the internatinal system into something of a halfway decent world order. Unfortunately Bush 41 lacked “the vision thing” (for all his blathering about a “New Woeld Order” that turned out to mean nothing) and Clinton couldn’t be bothered, so the chance was missed. By Billary’s second term it was gone.
From Booker in our Daily Telegraph;-
Quite one of the oddest and most frightening stories of the year has been the ludicrous and persistent misrepresentation in the West of the reason for the tragic shambles unfolding over Russia and Ukraine.
This has been presented as wholly the fault of the Russian “dictator” Vladimir Putin, compared by Hillary Clinton and the Prince of Wales to Hitler, for his “annexing” of Crimea and for fomenting the armed uprising in eastern Ukraine. Almost entirely blotted out has been the key part played in triggering this crisis by the remorseless urge of the EU to draw the cradle of Russian identity into its own empire.
It was entirely predictable that Russia and the ethnic Russians of eastern Ukraine would respond as they have done. So, too, was the wish of the vast majority of Crimeans, 82 per cent of them Russian speakers, to rejoin the country of which they were part for most of two centuries – let alone Russia’s reaction to the prospect of seeing their warm-water ports taken over by Nato.
The real significance of this unholy mess is that it marks the moment when the remorseless expansionism of the EU, founded to eradicate nationalism, finally ran into that implacable sense of national identity personified, for all his failings, by President Putin.
He and his people may now be paying a terrible price. But there was no way that poking the Russian bear like this, with such silly boasts as David Cameron’s declaration that he wished to see “Europe stretching from the Atlantic to the Urals”, would not arouse just such a reaction. As I wrote last March, the EU’s reckless bid to absorb Ukraine will eventually be seen as as much an act of fateful self-delusion as its equally reckless launch of the euro.
Just where these two crazy blunders may eventually lead we are only beginning to see – not least since Russia still supplies the EU with nearly a third of its gas.
I tend to agree with this lucid and well-informed journalist, and would go so far as to state that, if one reads all the allegedly-unbiased news reports from that unhappy country, a lot more people think as we do!