Wednesday, 21 January 2009For the Russian economy good and bad events took place at the beginning of the year 2009. The good events are the gas dispute with Ukraine and the Gaza Strip war. Many people have been killed, many buildings have been destroyed, which is good for the Russian economy. The situation in the entire Middle East can be destabilized, and then the oil prices will grow again making the Russian government breathe with relief.
Cutting off the gas, which is supplied to Southern Europe via Ukraine, is also a very timely measure, particularly with account taken of the cold weather in Balkan Peninsula and Rumania. The people are frozen, schools and hospitals are not heated, which is also very good since this favors the oil price hike.
If the Russia-Ukraine gas conflict did not occur, it should be invented. It seems to me that the conflict has been invented. In the long run, the non-payments and gas theft are of no importance. There is a need to make a row and to find an occasion to cut off the gas. In this respect the Ukrainians are ideal partners for Moscow. They can provide this occasion at the first opportunity.
The growing unemployment in the U.S.A. is a bad event because in that country petrol will be in less popular demand, however it is not deadly. A report about growing unemployment in the U.S.A. will influence the prices within one or two days. But a real catastrophe occurred at the beginning of the year - even China has faced the crisis.
While the experts discussed whether the economic growth in the Celestial Empire would slow down and the Chinese authorities told the population that China would not see the economic slump, the enterprise managers calculated the losses and started curtailing production. At the beginning of the year thousands of Chinese companies became bankrupt and were shut down, millions of people became jobless.
Against this background, neither the conflict between Gazprom and the Ukrainian officials nor the bombs dropped by the Israelis on the Gaza Strip civilian population will save the situation. For the world market, the Chinese factor is of much more importance than everything else. This is a real demand fall rather than just news affecting the traders' behavior. Even the Western experts changed the future oil market forecast from bad to very bad. The oil prices are reported to fall to $30 for a barrel in the first quarter of 2009.
It is clear what this means for Russia. The currency reserves and money, which were pointlessly put into the Stabilization Fund of the Russian Federation, will be wasted earlier than it was expected. The government's decision to support the most important Russian companies, which was made at the end of 2008, will not save the domestic market since a fall in oil prices implies dismissals, salary decrease and decline in living standards in Russia. Of course, it is possible to give money to big companies that the government officials hold dearest of all, but who will buy the products manufactured by those enterprises? What can those enterprises do with the money when the crisis gains momentum with the markets' narrowing?
It is quite clear that considerable amount of the state aid will be stolen or, speaking the politically correct language, misused. However, this takes place when the state tries to help the business at the expense of taxpayers. This help itself is theft, no matter how the money is spent. The public money goes to businessmen, the society indemnifies for losses and the profits, if any, go to corporations.
There is another unpleasant question: How will government-paid workers receive their salaries when Russia runs out of budget, which will happen in August (and not in December) unless the economic catastrophe starts earlier? Minister of Finance Aleksey Kudrin said that if Russia ran out of budget, the reserve money would be used "automatically". By the way, this money is being spent to support "strategically important" companies.
There is nothing else left for the government to do but to print new bonds. Today the rouble is losing value against the dollar, but real devaluation has yet to come. The people do not know what to do - when they convert their savings into dollars, the dollar loses value, when they convert their savings into euros, the dollar rate grows.
Unfortunately, the population will lose anyway. It always loses in the games of officials and corporative elites. The essential peculiarity of the current crisis is that not only the population but also the officials and the companies' owners will have a hard time. It is not known whether this will be a consolation for the ordinary Russians.
Boris Kagarlitsky is Director of the Institute of Globalization and Social Movements |
Wednesday, 21 January 2009
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