Donnerstag, September 04, 2008

If This Is What The Russians Really Think...

If this is what the Russians (at least the некультурный among them, incapable of nuance...) are really thinking, then things are going to get significantly worse before they get better, and it is not going to be fun. .

Why do I say that?

Let's take a look at the list that Andrei Baranov and Andrei Lavrov write in Komsomolskaja Pravda, scarcely a local rag.

Ten reasons why Russia doesn't feel like it even has to pay attention to the West:

1. Can the EU tighten the visa regime with Russia?

I doubt it. The EU won't profit from it. The streams of Russian tourists have been a growing source of income for a number of European countries. It'd be silly to deliberately "lose" them. Also, it'd be irrational to rebuild the Iron Curtain in front of the students and scientists.
One could of course prevent our civil servants from getting a visa. However, thousands of officials and businessmen have to go from Europe to Russia on urgent business trips. They definitely wouldn't want to encounter the unpleasant consequences of Moscow's inevitable counter measures.

In other words, the West will not have the courage of its convictions and will be more than happy to conduct business as usual: after all, that's what they did the in 1970s, 1980s and well into the 1990s, and there were more than a few Germans, especially amongst the socialists, who were definitely not happy to see the Soviets fade and East Germany to be disclosed as a rubbish heap of dreams.

2. Is there a threat of severing diplomatic relations with major countries?

There definitely isn't a threat. Nobody in the world would associate their long-term relations with nuclear Russia with a serious, but local conflict. Even Georgia didn't dare to close their embassy in Moscow. Yesterday Tbilisi declared that they recall the ambassador, but keep two or three diplomats.
Similarly, by the way, Russia did exactly the same in autumn 2006, as Georgia was actively sending out "Russian spies". In the end, it wasn't such a big deal: a bit later our ambassador returned. Besides, it'd be weird if Tbilisi were to sever relations with a country where millions of Georgian citizens live.

Again, here is where the Russians are completely convinced that the West has no real reason to do anything: there simply is too much, for the West, at stake...

This is virtually identical to the arguments of the 1980s for increasing trade with the West from the Soviet side: make the West, or at least Germany, dependent on Russian goods, or at least make it hard for them to impose sanctions without making business angry...

3. Is curtailing of cooperation with NATO a danger?

It's not curtailing: it's freezing, and not even completely. We put on hold the part of cooperation that concerns military programmes, not losing anything in terms of protocol matters. However, as to the issues that NATO will definitely have difficulties without our help (cooperation with Afghanistan, global anti-terrorism programs etc.), Moscow is willing to continue the cooperation with the alliance. In other words, not we, but the NATO members should fear the deterioration in relations with Russia.

Again, here there is no cost in the eyes of the Russians: as long as the Russians can keep the pretense up that there can be progress, they can use this as a negotiating tool, and will. Threaten sanctions? Then we'll cancel the NATO cooperation!

This is all part of the Russian "negotiation" tactic, which is nothing more than getting the maximum while giving away a minimum, instead of a real commitment from both sides. The Russians continue to live, eat, breath and think Zero-Sum games...

4. Is the formation of a global anti-Russian coalition that, for example the G8 calls for, realistic?

It's a lost cause. Even the West isn't that one-sided when judging the situation in Caucasus; especially since Saakashvili's reputation seems to be fading in many Western countries. Besides, it is totally ridiculous to talk about a "global coalition" against our country. Each country has its own interests, and very often it is Russia that helps ensure them. Finally, the power of veto at the UN Security Council gives us the possibility to prevent any attempts to give anybody the idea to isolate Russia.

Again, we see the attitude: whatever you want to do is unrealistic, while we are always perfectly realistic. This is the "We can do no wrong because of the historical inevitability of victory inherent in socialism" mentality of the Soviets: now there's just "we've got a veto, got fuck yourselves."

5. Would the West dare to to boycott Olympics in Sochi in 2014?

Well, they could. Everybody remembers the boycott of the Moscow Olympics in 1980. But we still have another six years. Besides, they should worry about the London Olympics in 2012 instead…

Interesting turn-around: will the Russians boycott the London Olympics? The only thing I can read into this is either a veiled threat to sabotage the London Olympics, or the conceit that an Olympics without the Russians don't really count...

6. Should we expect a new armaments race?

The process of developing new weapons (whether you call it armament race or advancement of military technology) never stopped for a moment, even after the collapse of the USSR. It's just that in the USA the process has been faster than in our country.
The richer we become the more means can we provide to reinforce our defense. In the end, the notorious "new thinking" in international affairs didn't start working. In this world we still respect the strongest one, especially because truth is always protected by power.

Ohhh, I like this one: truth is always protected by power, and the strongest deserves respect. This is the most revealing comment of the entire article.

I think that tells it all: the corollary of this, of course, is that whatever power says, must per definitio be the truth.

And what the Russians really, really don't understand is that they are a full generation behind the West in all categories, if not two in key categories such as sensor techbologies and UAVs. Further, the track record of Russian weapons has been abysmal when not in the hands of the Russians, and given the technological gap - made now worse by the fact that the Russians no longer field the mass needed to compensate for this - the Russians are, basically, clueless when it comes to what the US has done in Iraq in terms of forcing the integration of computers, sensors and war-fighting ability. They know what has been done, they know how it has been done, but they do not understand what it means: this is barely understood by partners of the US, let alone the Russians viewing from afar.

7. Will Russian bank accounts held abroad be frozen?

Just recently, the Washington Post has published an article calling for thorough inspection of bank accounts of the Russia's elite and asking to keep an eye on the businesses of those who have strong connections with Russia's leaders.
"Checking accounts is of course permitted and in fact necessary, especially on suspicion of financing of terrorism or drug mafia; especially if a certain account or a bank transfer seems suspicious, it is considered common practice" ― states the director of department of strategic analysis FBK Igor Nikolaev. However, in our case they have no such ground, so there is no reason to worry. Think of it as an emotional outburst from the USA.
The USA won't be able to freeze our Stabilization Fund either. After all, we've been investing in their state too. What will the USA do? Refuse to pay and break their own obligations? In this case, sorry, but America will go bankrupt. Why should Americans destroy their own lives just because of their anger towards Russia.

Again, the mythology of we're right, you're wrong, and there is no reason to suspect anything...and if you do, then we take our monies and Fuck You.

Again, a fatal conceit: if the FBI and Treasury were to start investigating for fraud, for illegal payments, for whatever, then the fallout in the markets would do the work. No one will want to do business internationally with someone under such investigation, especially if it is accompanied with disclosure of some of the less palatable Russian business practices. The reason this hasn't been done already? Because you keep your powder dry for when you need it, and there is no reason to give away what one knows...

8. So what should we expect from the US Dollar?

The USA could put Russia under macroeconomic pressure. Taking down their shares from our stock market would be enough. Actually, that is exactly what the foreign investors are doing after reading the threatening articles in the Western papers.
"It could happen, that the exchange rate RUB 27 = US$ 1 will remain only in our memory" � suggests Igor Nikolav. There is a number of essential factors that could weaken our national currency; for example inflation or slow investment activities. Of course, certain developments and the threat of isolation worsen the situation.
However, there won't be any sudden collapses. After all we've put aside about US$ 600 billion. But no matter how great our financial backup is, if in just a week of War in South Ossetia Russia spends US$ 16 billion (the central bank has spent this amount to prevent the rouble from falling), we won't hold out for too long. However, as long as the Dollar is growing, Igor Nikolav believes that in about a month a US$ 1 will cost RUB 26.
As to the stock market, it will continue to fall as long as Russia and the USA continue to argue, but sooner or later it will recover. After all our companies are quite expensive.

If Igor Nikolav believes that the conversion rate will invert, then I'd like to know what he is smoking (or drinking). This is so silly that it isn't even funny. The Russian economy is critically dependent on goods from the West, as well as being part of the international financial community. Since the attack on Georgia, over $26bn was taken out of Russia, reducing the available credit significantly. The Russians have $600bn in currency reserves? Even with spending "only" $16bn/week to prop up the ruble, all reserves would be exhausted in less than 40 weeks, ca. 10 months: before then, the reserves would be too low to provide liquidity for trade, and expenditures of this would bring all Russian trade to a standstill in around 10 weeks. If currency specualtors get involved, then about 10 days. Max.

Russia is extremely vulnerable to economic warfare, especially if it is properly coordinated and targetted...

9. Won't the import goods disappear from our stalls?

"It is very unlikely that anybody would stop exporting or importing, at the moment. After all, it's hard cash. The worst that could happen would be freezing important co-projects" � explains the director of the Russian economic school, Sergei Guriev.

The West won't stop importing to Russia either. Look, their food isn't that cheap, and where would they get new market outlets? It wasn't a coincidence that the WTO made us accept the import of ''Bush's Legs'' and the meat from abroad. As a result, the pressure from these import products has disturbed our cattle breeding business.

Anyway, why would the USA subsidize their manufacturers, but forbid us to do the same. Then again, it's not like we have to fulfill any obligation to WTO that in the end, we didn't even agree to.

"To put it mildly, we were tricked", explains the minister of agriculture Alex Gordeev. "Now we will slowly reduce the amount of imported chicken, and pork, replacing it with our own product. We are talking about hundreds of thousands tons, here".

To stimulate our manufactures, the government's agriculture commission decided to pay our farmers an additional RUB 102 billion: 39.5 will be paid out this year and in the next year, farmers will receive 21 billion. The main thing is that we don't overestimate our abilities and that the money does actually reach its intended recipients.

In other words: "we don't need no stinkin' imports, we eat wonderful and great Soviet chickens." Sorry, Russian. The reason that Russia imports chickens is that it is cheaper for the Russian consumer to do so: that's how the market works. Import substitution for political reasons is a great way to waste money...

10. Could the West say "no" to our resources?

The major components of Russian export are oil, gas, coal and wood. What's more, these are our main sources of export earnings. Russia is a raw material-producing country � you can't help it. We sell the whole world our natural resources.

Obviously, nobody will be able to do without our exports. Remember the panic that broke out in Finland and Sweden after Russia imposed heavy export taxes on wood. The Europeans wouldn't like to freeze in the winter, and for now there's no alternative to Russian oil and gas. The thought of serious sanctions against Russia is therefore ridiculous � it's Europe, with their double talk and all, that should worry that Russia could turn their back on them and impose an embargo. Asian countries like China, Japan and South Korea will gladly buy Russian oil.

It's not a question of doing without Russian exports: it's more a question of what price one is willing to pay. Remember, the question was not "can" the West say no, but "could" the West say no: oil, gas, coal and wood are fungible products, pure commodity products, products that can be bought anywhere.

If Russia were to be boycotted, prices would go up, but this becomes part of the political calculus.

So what is to be learned by these 10 points?

First of all, the Russians - or at least these two guys - appear to be completely untroubld with the invasion of Georgia. Their view of the West is that they won't do anything if it affects commerce, that there is nothing that they can do anyway against Glorious Russia, and that they need us more than we need them.

Fatal errors, all of them. This does not bode well for the next several years...

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