In Feb 2011, I wrote a tongue and cheek blog posting called Forty One (41) early warning signals of the collapse and decay of the Russian Federation (Putinism) and Ukraine (Yanukowych Regime)
http://bit.ly/fsflvg. It caused quite a stir and coincidently it was translated by the Russian opposition (Boris Nemtsov) into Russian and reposted to dozens of Russian blog sites. The KGB was even on my back by writing nasty Soviet style yellow journalism smear postings against me , so I guess the article hit a nerve in the Kremlin. The KGB was logging into my blog site daily for about 6 months after that.
Well, the Yanukowych regime did collapse, the PUTIN is still (barely) hanging on.
So I think it's time to update my Early Warning Signals blog post with new data points.—Walter Derzko
Here is my seventh cut. Thank you to everyone who has suggested new data points that I missed.
The Key Driving forces are in red and with an **
There are likely many more early warning signals, but who knows which ones will trigger the collapse of Putin or the RF? Maybe an oligarch/elite/ inner circle revolt or palace coup? Or a sovereign debt default? Watch for more August 2015 Surprises like the drop in the Ruble this week !!!!
151 Early Warning Signals that point to the Isolation, Decay and Collapse of the Russian Federation just like we saw before the collapse of the USSR by Walter Derzko
-Life Expectancy: The overall life expectancy at birth in Russia was slightly lower in 2009 (the latest year for which figures are available) than in 1961, almost half a century earlier. [1]
-Life Expectancy: The life expectancy at age 15 for all Russian adults was more than two years below its level in 1959; [1]
-Life Expectancy: According to the U.N.’s World Health Organization, the life expectancy for a 15-year-old boy in Haiti is three years higher than for a Russian boy the same age. [2]
-Life Expectancy: The life expectancy for young men sank by almost four years over those two generations. [1]
-Life Expectancy: The country’s death rate far exceeded its birth rate: in 2000, life expectancy for men was only 58, and for women 71. [2]
-Life Expectancy: Despite a recent slight uptick in births versus deaths, life expectancy now stands at 64 for males and 76 for women (137th and 100th in the world, respectively, hardly fitting for a supper power)[2]
-Mortality: The country has high mortality rates due to elevated rates of smoking, alcohol consumption, drug use, chronic human disease, violence, poor diets and obesity. Investment on healthcare is low. [6]
-Mortality: According to Russian health experts, 40 percent or more of the infant deaths in Russia are caused by social factors like alcoholism and drug use by parents or their failure to take their children to doctors or hospitals or to get required vaccinations. [26]
-Mortality: Death rates from cardiovascular disease are more than three times as high in Russia as in western Europe [1]
-Mortality: Russian death rates from injury and violence have soared, on par with those in African post-conflict societies, such as Liberia and Sierra Leone. [1]
-Mortality: Put another way, post-Soviet Russia has suffered a cumulative "excess mortality" of more than seven million deaths, meaning that if the country could have simply held on to its Gorbachev-era survival rates over the last two decades, seven million deaths could have been averted. This figure is more than three times the death toll World War I inflicted on imperial Russia. [1]
-Mortality: The mortality among working-age Russians is rising. In 2014, for example, mortality rates among Russians aged 30 to 45 went up by 1.2 percent. [26]
-Mortality: Two out of three Russian men who died, died drunk [2]
-Mortality: Twenty-five percent of Russian men still die before the age of 55, many from alcoholism and the violent deaths, plus other diseases it fosters. [2]
-Population Decline: Since 1992, according to official Russian figures, Russia's population has fallen nearly every year (1993 and 2010 are the exceptions, with the latter experiencing an increase of just 10,000 people). According to these figures, between 1993 and 2010, Russia's population shrank from 148.6 million to 141.9 million people, a drop of nearly five percent. [1]
-Depopulation: Predictions are that Russia, with a population of 146 million, could become a nation of fewer than 100 million people by 2025, and hardly a superpower [2]
-Depopulation: Russia is aging and the birth rate is plummeting. Putin himself in his first State of the Nation address in July 2000 warned the Russian people, “We are in danger of becoming a senile nation.” [2]
-Fertility: Fertility rates plummeted to 1.2 births per women in the late 1990s and now stand at 1.7 births per women. That rate is still about 20 percent below 2.1 births per woman, the level necessary to ensure population replacement. [6]
-Fertility: A drop in fertility by 50 percent between 1987 and 1999 has resulted in a reduced number of women now at childbearing age, which is beginning to affect the country in a major way: Two thirds of all births in Russia take place among women between the ages of 20 and 29, and this population will decline from 13 million currently to 7 or 8 million in the coming years. Consequently, even if each women were to have more children, the total number of births would fall. [6] and [26]
-Fertility: Another factor mitigating against higher fertility is Russia’s high divorce rate. In 2012, for every two marriages, there was one divorce.[6]
-Fertility: Russia’s abortion rate, estimated at two abortions for every birth, has traditionally been the highest in the world. [6]
-Fertility: The protection of children and traditional family values was also the stated purpose for the enactment of a lesbian, gay, bisexual and transgender propaganda law to prevent distribution of "non-traditional sexual relationships" ideas among minors. [6]
-Fertility: The government is also considering reinstatement of a tax on childlessness, estimated at 10 percent of women in their late 40s. [6]
-Working Age Population/ Labour Force: Russia’s working-age population is declining by a million people a year, a faster rate than the decline of the overall population, which in 2013 stood at around 143 million, 3 million less than when Putin took office [2]
-Working Age Population/Labour Force: Over the next decade, Russia's labor force is expected to shrink by about 15 percent.
-Working Age Population/ Labour Force: Russia is facing difficulties filling critical jobs with largely unskilled non-Russian migrants, many working illegally in the country. [6]
-Working Age Population/Labour Force: Other countries with low fertility rates turn to immigration to pick up the slack. While immigrants make up about 8 percent of Russia’s population, the nation has a reputation for nationalism and xenophobia, and fertility rates are even lower in neighboring Belarus, Ukraine and Lithuania, all possible sources of immigration. [6]
-Working Age Population/ Labour Force: the average age of a worker in the defence industry in close to retirement age and the army is forced to provide untrained conscripts to work in defence factories, resulting in quality problems and defects, exploding rockets and planes /jets falling from the sky. [7]
-Unproductive workforce: Russians aren’t nearly as productive as they could be. For each hour worked, the average Russian worker contributes $25.90 to Russia’s GDP. The average Greek worker adds $36.20 per hour of work. And Greece is not a country you want to trail in productivity. The average for U.S. workers? $67.40.
-Migration: It’s no surprise then that well-educated Russians are leaving their country in droves. Between 2012 and 2013, more than 300,000 people left Russia in search of greener economic pastures, and experts believe that number has only risen since Moscow’s annexation of Crimea last year.(Bloomberg, OECD, PBS, Telegraph, Wall Street Journal, Freedom House, Washington Post) [21]
-Aging Population: Russia’s aging population has placed strains on the economy that will impact numerous sectors including agriculture, manufacturing, the armed forces and retirement schemes. In the next decade, Russia's labor force is expected to shrink by more than 12 million, or around 15 percent. [6]
-Aging Population: The contraction of Russia’s labor force is exacerbated by low retirement ages: 60 for men and 55 for women. In certain situations, for example, hazardous occupations or unemployment, retirement ages are lower. Nevertheless, Russia’s older population does not fare well. According to a 2014 global survey of the social and economic well-being of older people, Russia ranked 65 among 96 countries.]6]
-Health: Only 30 percent of Russian babies born are born healthy [2]
-Health: Many unhealthy Russian babies are “discarded” or sent to government institutions where they often develop cognitive difficulties. Unhealthy children grow up to be unhealthy adults: half of the conscripted Russian army has to be put in limited service because of poor health. [2]
-Health: The syphilis rate among girls 10 to 14—a statistical category that boggles the mind—had gone up 40 times the previous decade. [2]
-Health: One study showed that , 64% of the pregnant women infected with syphilis delivered an infant with presumptive or confirmed congenital syphilis [3]
-Health: Only 30 percent of boys between the ages of 15 and 17 were considered healthy [2]
-Health: Chronic teen alcoholism; 77 percent of teens between the ages of 15 and 17 drink vodka regularly; in rural areas, the percentage can be as high as 90. [2]
-Health: Chronic heroin epidemic; Cheap heroin from Afghanistan is rolling in. Russia has more heroin addicts than any other country [2]
-Health: An H.I.V. epidemic spread by dirty needles was taking hold. Between 2000 and 2012 the number of new cases of H.I.V. increased six fold. About 700,000 Russians were estimated to be living with HIV/AIDS in 2013, a 5 percent increase over the previous year. [2] and [6]
-Health: Chronic TB epidemic. Many of those infected with H.I.V. also suffer from tuberculosis. Russia is second only to India (with 1.3 billion people) in the number of cases of M.D.R. (multidrug-resistant) tuberculosis [2]
-Health: When it comes to the environment, 50 percent of Russia’s water is not potable.
-Health: Air pollution continues to be an extremely serious issue, suggesting that a solution proposed during the late-Soviet period continues to hold sway. Back then, a Russian health minister advised the country to “breathe less” in order to live longer.
-Health: Russia won the most medals—33—in the recent Sochi Winter Olympics, but many of these athletes are now being accused of doping over the last decade.
-Health: Instead of fixing all the problems in healthcare, Russian bureaucrats want to licence shames and healers. Today’s “Novyye izvestiya” reports that Sergey Kalashnikov, the chairman of the Duma’s committee on health, has announced that he has prepared draft legislation that would create a government organization to license those who offer their services as healers (newizv.ru/politics/2015-08-26/226093-licenzija-dlja-shamana.html). He says he came up with the idea because “an enormous number of charlatans work in this area” and consequently, “this requires regulation.” Under the terms of his bill, those who offer such services will have to present documentation showing they are qualified to perform the services they offer or certificates of their training in Chinese, Tibetan or other traditions. But instead of addressing that problem, Duma members prefer to focus on things like this, the journalist says, adding that from what he can tell, such a shaman-licensing operation would simply become yet another means for officials to corruptly extract bribes from the population. [50]
-Corruption: Ubiquitous unabated Institutionalized corruption and widespread bribe taking, kickbacks, covered up by double entry book keeping systems. A corruption perception index by Transparency International ranked Russia 136th last year, just behind Nigeria. [11]
-Corruption: Average Bribe in Russia Doubles in Rubles, Remains Steady in Dollars. The amount of the average bribe in Russia has nearly doubled this year, reaching 208,000 rubles ($3,485 at today's rate), as the country's currency has shed value amid Western sanctions and an economic downturn, according to Interior Ministry estimates cited by pro-government Izvestia daily on Friday. This compares to about 109,000 rubles Russians are believed to have been paying or receiving as an average bribe in 2014, though police concede that their estimates may not be completely accurate, the report said.The increase in bribe amounts is substantially less significant in their dollar equivalent, because the Russian ruble traded at around 35 to the dollar at the start of 2014, but has slumped to around 60 to the dollar as of this week. [28]
-Corruption: Theft of state property and funds via selective privatization (to your inner circle of friends) and crony capitalism. [11]
-Corruption: Unrestrained money laundering: Russian Bank official charged over laundering of 17m dollars a day; Interfax news agency, Moscow, in Russian 14 Mar 2011
-Corruption: Off shoring of assets and oligarch profits; Cyprus, Switzerland, Belize, Virgin Islands, UK and possibly the Vatican Bank ? [7]
-Corruption: Selective Justice. “Those who commit even insignificant violations but whose actions are not in accord with the leaders of the country are punished severely, Khodorkovsky continues, while those who commit major crimes but do so with the agreement of those in power escape without any punishment at all.” [56]
-Corruption: Putin raiding and taking over private businesses who refuse to pay bribes [54]
-Corruption: Growing nepotism: German Daily Reports on Nepotism at Russia's Gazprom Frankfurt/Main Frankfurter Rundschau (Russia)
-Corruption: Crony Bailouts and Crony Capitalism:** Despite the economic crisis, Duma deputies say, the Kremlin is continuing its “Robin Hood in reverse” strategy, taking from the poor and giving to the rich, an approach which was never popular even when the Russian economy was growing but now is highly offensive when it is not. “Nezavisimaya gazeta” reported that the Audit Chamber had found that the finance ministry had handed out more than ten billion dollars in the last year to firms without adequate checks, a figure more than the ministry said it had to cut the indexation of pensions because of budgetary problems. Clearly, there are officials prepared to take the last kopeck from pensioners and hand out big money to their friends instead.[37]
-Corruption: Reverse Money Laundering: In Russia, corruption has gotten so bad that the logic of money laundering has turned upside down. Many companies face the opposite problem: In order to get things done, they need to take clean money and make it dirty. Russia has a service known as "obnal," or dark money: the process by which legitimate companies take legitimate profits and launder them into off-the-books slush funds to be used for bribes and tax evasion. Obnal has become a billion-dollar business in Russia [4]
-Corruption: Too Little Too Late? Time to scarp the oligarch system? ** It’s time for former Soviet countries to get rid of oligarchs . Was the "Vladimir Yakunin" firing and the dismissal of 12 security officials (Putin unexpectedly took away the chair from 12 high-ranking security ) a trial balloon? --Walter Derzko KEY QUOTE: RUSSIA At one time, Russia had the most billionaires in the world – 100, according to Forbes magazine. Several refused to pledge their allegiance to Vladimir Putin, and he chased them overseas or imprisoned them. Putin did not scrap the oligarch system, however. He simply replaced some oligarchs with others. […] Unfortunately, the buddies he put at the helm of Gazprom, Rosneft and Russian Railways have run those operations into the ground. Recently, he fired the head of Russian Railways, Vladimir Yakunin, in favor of a talented young technocrat whom Putin hopes will revive the company. The head of Gazprom, Alexei Miller, and Rosneft, Igor Sechin, are worried about being fired, too. [40]
-Lawlessness: police focus on extremists and political opposition instead of bandits who run free.[7]
-Culture of Kleptocracy: Russia’s appalling business reputation acts both as a brake on foreign investment and a stimulus to capital flight. [7]
-Illegal Use of Administrative resources: Cyber attack, info wars, online provocateurs to protect the status quo, false flag terrorist operations for excuse to declare martial law.
-Illegal Use of Administrative resource: RF false flag operations - “LNR” factory sews fake Ukrainian military uniforms [17]
-Overregulation: Russia’s centralized economy requires that citizens get a “document” or a spravka from government workers , who demand bribes for timely executions
-Overregulation: Back to centralized control: The Russian government has resumed pressure on exporters to sell foreign currency in an effort to prevent global market turbulence from triggering another rouble sell-off. In meetings and calls from August 19, Central Bank and cabinet officials instructed executives at state-owned and private companies on when and how much of their dollar revenues to convert to roubles, company officials said. "There is monitoring on a daily basis now," said a source at Alrosa, the diamond miner. An source close to Rosneft, the state oil company, said: "Forex sales are being conducted on direct orders from the government." [37]
-Weakened military/ security control at the periphery of the empire. Already facing food shortages and other issues with the countersanctions, Stratfor believes Moscow is “stepping up its security apparatuses within the regions, stepping up its control within the governors and within the mayors.” Stratfor believes Putin is trying to prove that he can “isolate Russia from the West, from Western foods, and keep Russia Russian.” But using the people to demonstrate his power and sustainability, is risking the social contract Putin made with the Russian: “You will always receive your paychecks; I will keep the economy growing; I will quadruple–pretty much-standard of living; you will have Western-style foods and goods inside of Russia.” Putin’s popularity was sky-high for the last 15 years, because he delivered on his promise to the Russian people of strong leadership. But now Putin must chose to battle the West or give in to the needs of the people. [15]
-Conflicts on the periphery: Extremist calls increasingly common in blogs, social networks - Russian police; RIA Novosti > Feb 1, 2011
-Conflicts on the periphery: Russian paper fears conscripting postgraduate students could trigger Russian brain drain Vedomosti website, Moscow, in Russian 12 May 2011
-Conflicts on the periphery: Russia is in civilizational decline, new nations emerge-Siberians see themselves as separate nation from Russia http://bit.ly/lSzxZm
-Conflicts on the periphery: 16 Russian Hot spots/ tension zones or fronts against PUTIN. Putin may someday have to fragment his army (which is understaffed, undertrained and is facing increasing desertions) to all regions of the Russian Federation and beyond to quell growing tensions and hot spots that, if erupted simultaneously or with some help, could splinter his defenses and threaten the territorial integrity of the Russian Federation and lead to regime collapse. 16 fronts /hot spots against PUTIN: 1) Crimean Tartars and all Crimeans in general, 2) Eastern Ukraine, 3) Chechnya, 4) Chinese in Siberia, 5) Japanese territorial island disputes 6) Canada & US & Russia assert control in the Arctic 7) Cossacks Seek Greater Role in Southern Russia’s Economic and Political Life 8) Georgia 9) European front-The Dutch and MH17, Baltics and Poland 10) Karelia will seek to rejoin Finland 11) Moldova/Transdneistria 12) Ethnic tensions brewing with Circassian activists in Karachaevo-Cherkessia, North Caucasus 13) Russians in poverty --revolt/protest in Moscow 14) Russians in poverty-- revolt/protest in St Petersburg 15) Russians in poverty-- revolt/protest in the rural oblasts of the Russian Federation and 16) NATO and the US fleet re-enter the Black Sea --It's not a matter of if but only a matter of when and if it happens in a coordinated fashion. [7]
-Conflicts on the periphery: The Siberia/China flashpoint. In 2000, 28 million Russians lived in Siberia and the Far East. In 2010, only 25.4 million live there. On the other side of the border, Chinese growth and interest in Russian resources could make the Far East a flashpoint. A 2001 Treaty on Friendship and Good Neighborliness, codifying territorial compromises and designed to diminish American influence, formally "sunsets" in 2021—at which time, China may decide to claim some of Russia's resource-rich territories that may well be largely deserted. [18]
-Conflicts on the periphery: The Siberia/China flashpoint. Russia has replaced some of its real live border guards along the Chinese frontier with straw-filled scarecrows dressed in Russian uniforms, according to Beijing’s “Peoples Daily,” a development that suggests some Russian soldiers have found a way to avoid service or that the Russian siloviki, given Putin’s aggressive policies, may be overstretched. The Beijing paper says that a reporter for the Chinese edition of “Global Times” had approached the border to check on the construction of a railroad bridge between the two countries over the Amur River. He photographed the border and on enlarging it discovered the scarecrows (russian.rt.com/inotv/2015-08-25/Peoples-Daily-Rossijskuyu-granicu-ohranyayut). The journalist discovered something else as well: Chinese firms have constructed 60 percent of the bridge between the Russian village of Nizhneleninskoye and the Chinese city of Tuntsian, but there are “no signs” that Russian firms have done anything at all to meet their responsibilities for construction. [51]
-Conflicts on the periphery: The Russian economy shrank by 4.6 percent in the quarter ending June 2015. Although the media has focused on the stability in Moscow and maybe St. Petersburg, the economic decline in Russian provinces has been much more serious. Debt in Russia’s 83 regions has risen by 100 to 150 percent since 2010. Russia’s economic minister suggested that possibly 60 of those 83 regions are in crisis mode, and 20 may have already been defaulting on their debt. President Vladimir Putin and the Kremlin have $541 billion in reserves, but intervention to bailout the regions would drain much of Russia’s wealth, which is spread throughout its currency reserves, the National Wealth Fund and the National Reserve Fund. Stratfor predicts that the Kremlin will allow the economies of many of the country’s Soviet-era mono-cities, which rely on a single industry, to continue to deteriorate. As a relic of the Soviet period, the mono-cities employ the bulk of their populations in a single industry such as manufacturing, metallurgy, timber or energy. These mono-cities generate about 30 percent of the country’s industrial production. With only a single skill, workers in mono-cities generally cannot migrate to find better jobs or salaries. [15]
-Conflicts on the periphery**: Revolts and protests. Stratfor expects that protests against the Kremlin will increase as more Russians fall under the poverty line, and regional and municipal debt grows. They expect the Kremlin to retaliate by cracking down on protest movements and opposition parties to block the formation of any broad and serious any serious challenge to their hold on power. They believe that Russia can hang on with its current strategy for the next couple of years, but Putin’s popularity will soon fade. Eventually, regions could revolt in a similar process that led to the dissolution of the Soviet Union in 1991, when 15 nations comprising a third of the population and a quarter of the Soviet Union declared independence. [15]
-China Pivot off: The launch of China’s "New Silk Road" last month, bypassing Russian territory, was a serious blow to the Russian economic interests. The first Nomadexpress container train has already traveled on route Shihezi (China) - Dostyk (Kazakhstan) - Aktau - Alat (Azerbaijan). From Azerbaijan, the express goes to Georgia, Turkey and the EU. Thus, a joint project of the Trans-Caspian international transport route and the New Silk Road became a reality. The main feature of the project is bypassing Russian territory. Another important caveat is the time. The route takes six days to cover, instead of 25-40 as before. Of course, China is challenging Russia as Eurasia’s largest Eurasian transit state. The New Silk Road has the potential to become more attractive than the obsolete Trans-Siberian Railway. Moreover, Kazakhstan's participation in the project almost completely eliminates the issue of its further foreign policy orientation – it has shifted from Moscow to Beijing. By the way, in this context, Ukraine also has a unique opportunity to expand its own transit opportunities thanks to Chinese shipments. [23]
-China Pivot Off: Gas cooperation between Russia and China is frozen. The gas contract between Russia’s Gazprom and China's CNPC on construction of a Power of Siberia pipeline, pompously presented earlier (signed in May 2014, its estimated total value was $400 billion), is frozen for an indefinite period. As it turned out, the idea of reorientation of Russian gas exports from Europe to Asia, with China being a priority, has failed. The main reason is the reduction of gas consumption in China caused by the slowdown in the country’s economic growth, the development of gas production within its own territory (By 2020, China will have produced nearly 30 bcm of shale gas alone), focus on gas imports from Turkmenistan (China currently imports 30 bcm of gas from Turkmenistan, with the possibility of expanding imports to 60-70 bcm by 2020), as well as a gradual decrease in share of oil and gas energy in the country’s total energy balance within the framework of the latest global trends. Besides, the Chinese side did not agree to the price offered by Gazprom, which attempted to propose an equivalent to the European price. China has almost always pushed for the suitable price, which is significantly lower than that for other purchasers of the Russian gas. It is equally important that Bejing has provided no options of the financial assistance whatsoever for the construction of new gas pipelines on Russian territory, to the Chinese borders. Such stalemate allows forgetting the prospects of gas cooperation between the two countries. Besides, it is better for China to wait a full collapse of Putin's regime, so that, as member of anti-Russian coalition club, it could bite a piece of the “Siberian pie”, on far more favorable conditions of access to the those very oil and gas fields. It seems like China has flagrantly given Putin a “black mark” on a gas issue.[23]
-China Pivot Off; Bank transactions sour. With regard to financial cooperation between the two countries, there is growing evidence of Chinese banks' reluctance to carry out interbank transactions with their Russian partners. Chinese banks have also considerably reduced participation in foreign trade transactions with Russia. Cases of recent expansion of payments in rubles and yuan in certain Chinese border provinces can be explained by China’s will to extend the operating field for yuan, as Bejing has witnessed sharp reduction in the inflow of foreign currency to Russia, especially of the US dollar and euro. So, Putin should not expect any financial aid from China. There are currently no other donors due to severe Western sanctions, and they are not expected to emerge any time soon. [23]
-Chinese Land and Resource Grab: Land is yet another demonstrative issue in Russian-Chinese relations. More precisely, it is about Bejing’s rapidly growing appetite for the development of Russian territories. For example, a huge stir in Russia was caused by the plans of Trans-Baikal regional authorities to lease nearly 300,000 hectares of land to the Chinese company Huae Xinban for a 49-year term for less than $5 per hectare. Although this issue has not yet been fully resolved, the locals have already organized a protest movement. Most probably, the opinion of local activists will not be taken into account, and China will get the desired land by either paying more for the rent, or simply by financially stimulating Russian officials. No wonder the Russian Prime Minister Dmitry Medvedev offers Russian youth to study Chinese, not just English.
-Chinese Land and Resource Grab: Another fact confirming the intention of China to get hold of as much Russian resources and territories as it possibly can until the final collapse of the present Russian Federation is the country’s broad interests in Russia’s Magadan region, the top region in silver mining and the fourth in gold extraction. Chinese Southwest mining company has decided to invest RUR 400 million this year in the development of deposits of antimony and silver. The company's plans cover the construction of roads in the region, mineral exploration, and mining of silver and other precious metals in the already known deposits. Earlier, the Kremlin did not allow China getting close to Russia’s main fields of natural resources across Siberia and the Far East. [23]
-Capital Outflow: The net outflow of capital from Russia reached $32.6 billion during the first quarter of 2015, according to the Central Bank. The bank is now forecasting that capital flight may reach $131 billion by the end of 2015. In reporting first quarter numbers, the Central Bank also upwardly revised the 2014 figure for net capital outflow to $154.1 billion from the previously reported $151.5 billion. That figure marks the highest annual total of capital flight since the Central Bank started tracking the trend back in 1994. [5]
-Evaporating Foreign Direct Investments (FDI) Foreign investment is now below zero Foreign direct investment stopped coming to Russia at the beginning of 2014 according to Central Bank data . "Currently, there are direct and indirect bans on investing in Russia and our western partners now have doubts about some of Russia's large-scale projects," [7] and [22]
-Growing prolonged recession: Russian won’t likely come out of the recession until 2018 if that. [7]
-Budget Deficit: Russia’s central government has cut its budget by 10 percent across the board in 2015, except for defense. As a result, social programs have been slashed, and even funding to host the World Cup 2018 has been severely restrained. [15] Also Ukraine ready to stop financing Donbas enclave controlled by Russian terrorists [39]
-Plummeting Rouble: The Rouble has lost over 50% of its value against the $USD in 2015 [7]
-Plummeting Rouble: As Rouble Collapses, Russia’s Cossacks Issue Their Own Currency – with Putin’s Picture on It [12]
-War in Ukraine: Moscow has spent an estimated 53 billion rubles ($835 million) as of May 2015 to support and finance the separatist forces fighting in eastern Ukraine (UNIAN, May 12).
-War in Ukraine: Putin calculated that everyone would close their eyes to the annexation of Crimea. After an initial burst of euphoria, Crimea has turned out to be a burden rather than a victory; Ukrainians in the east have not supported Putin’s aggression, and “besides, the West is acting in a very monolithic and consolidated way by introducing serious sanctions which are constantly being intensified. At the same time, no one supports Russia,” not even its “closest and most dependent” neighbors. [25]
-War in Ukraine: Eastern Ukraine resembles Transdniestria but not really Abkhazia or South Osetia, Zubov suggests. Both places are ones in which “the soviet mentality dominates.” For Ukraine’s future, “it is very important that this mentality be overcome,” and that will require tact and care in dealing with the population of the east once Russian forces leave. Once Moscow pulls its forces out, Zubov argues, pro-Moscow groups “will not hold out two weeks. They understand that perfectly well, and therefore as soon as Russia leaves the Donbas, they will go with it, surrender or flee. The so-called LNR and DNR will cease their existence very quickly.” [25]
-War in Ukraine: And Russia will leave {Ukraine} because it does not want to suffer further sanctions and become a large North Korea. According to Zubov, “unofficial talks are going on about this now.” Their task is simple: how can Russia leave without losing face. “But apparently, it won’t be able to do so without losing face.” Thus, Ukraine will have to show great tact in dealing with the situation. Putin wasn’t prepared for all this because he had not prepared for war. Indeed, Zubov says, “no one seriously thought about war even in Soviet times, and when Khrushchev attempted to do something in Cuba in 1962, he was immediately removed. Everyone understands that nuclear war is impossible. Therefore Russia only uses this as a threat.” [25]
-War in Ukraine: How will Putin pull out? Zubov says that in his view, Putin launched his aggression in Ukraine for three reasons: to boost his popularity, to keep Ukraine from leaving the Russian sphere of influence, and to ensure that Russia’s military-industrial complex would not suffer given the importance of Ukrainian plants for its operation. But because he miscalculated, the Kremlin leader “has lost everything.” [25]
-War in Ukraine: Dead Russian soldiers a state secret. Last May President Putin officially declared military deaths in peacetime a state secret. His decision was seen as an attempt to cover up the Kremlin’s role in the Ukraine war. Russian human-rights groups protested Putin’s decree. Last week, the Supreme Court upheld Putin’s decree, ruling against the complaint by a Russian civil society group claiming that the decree was illegal, that it was hiding the true information about Russia’s military involvement in eastern Ukraine.[33]
-Western sanctions hurting economy: Sanctions could cost Russian industry $20 bln: Official [9]
-Uncontrolled inflation: Russia’s inflation rate hit 16.9 percent in the first half of 2015, cutting wage values by 14 percent over the last 12 months. [15]
-Low energy/ oil prices; The Russian budget needed $85-$100 oil to break even, depending on which source you listen to. Now in Aug 2015 it’s in the mid $40s
-Low energy/oil prices: Russia is at the Mercy of Oil Markets. The price of oil has now fallen below $45 a barrel—welcome to the new normal. OPEC continues to pump oil at historic rates as it tries to price out competitors (US fracking and LNG), and Iran expects to bring over a million new barrels a day to world markets after the lifting of international sanctions. These are deeply troubling developments for Moscow, which relies on oil and gas sales for nearly 50 percent of its government revenues. In 1999, oil and gas accounted for less than half of Russia’s export proceeds; today they account for 68 percent. Moscow has grown so reliant on energy sales that for each dollar the price of oil drops, Russia loses about $2 billion in potential sales. For Russia to balance its budget, oil will need to surge back to $100 a barrel. That’s going to take a while.
(CNBC, CNN, Wall Street Journal , World Affairs, EIA, BBC, Financial Times) [21]
-Low energy/oil prices: Quality of Russia's crude reserves deteriorating admits Russian ministry [13]
-Low energy/oil prices: Eleven of Russia’s 14 oil processing firms are now operating at a deficit; and consequently, “what we see today is just the quiet before a very strong storm.” [20]
-Low energy/oil prices: Even if oil prices were to rise to 70 dollars a barrel, that would not be enough to prevent a further decline in the Russian economy. And given that the actual price will be much lower, that decline will be very steep indeed. As prices fall to 40 dollars a barrel, Zhukovsky says, Russia will discover “a third bottom” and then “a fourth” and so on. [20]
-Low energy/oil prices: Most analysts think that at the present time, the amount of oil produced exceeds demand by 1.4 to 1.7 million barrels a day. That will push prices down further as will the return online of Iranian production. Prices will thus fall, and Russia, although not an OPEC member, produces enough to affect prices – or at least it could have a year ago. “Now, let us consider the statistics,” Inozemtsev says. OPEC countries were producing 36.6 million barrels a day in 2014; Russia was producing 10.8 million. At the November 2014 OPEC meeting, Igor Sechin, the head of Rosneft and a close ally of Vladimir Putin, flew in and declared, for the first time officially, that that company had “already reduced production by 25,000 barrels a day and was prepared to discuss its further reduction.” “If [Russia] had wanted to support OPEC in the regulation of prices, it should have suggested cutting production by 400-450,000 barrels a day and preferably even more,” not the miserly amount it did. Why didn’t Moscow do the rational thing as far as prices were concerned? Inozemtsev asks rhetorically. The answer lies in the fact that “Rosneft remains the main taxpayer of the country,” and cutting production would thus reduce the income of the Russian state. But now because of what it failed to do in October 2014, Moscow faces a much greater loss of income. [49]
-Surplus of energy on the world markets; the real essence of Putin's energy woes are structural, not cyclical. The global energy game is changing — and it is not changing in Moscow's favor.
Shale, liquefied natural gas (LNG), and renewables — three areas where Russia is extremely weak — are ascendant and are dramatically altering the market. [8]
-Energy-dependent, undiversified economy: If one looks at Gazprom as a barometer of Russia's fortunes, one statistic says it all: in 2008, the company had a market value of $360 billion; today it is worth just $55 billion. [8]
-Lack of Diversification: It’s not simply the size of your economy, but its diversity and resilience that counts. For years, the Kremlin has supported and protected large state-owned companies at the expense of small and medium-sized enterprises (SMEs). But those smaller firms are the foundation of any strong and well-diversified economy. SMEs spur innovation and respond effectively to changing times, technologies, and consumer tastes. In the EU, SMEs contribute an average of 40 percent to their respective countries’ GDP; in Russia, SMEs contribute just 15 percent. Those are daunting figures for anyone looking to start a business in Russia. Things aren’t getting better—between 2008 and 2012, Russia’s private sector lost 300,000 jobs while the state added 1.1 million workers to its payroll. Rather than diversifying, Moscow is doubling down on its state-centered approach to economic development. (JYSkebank, The Economist) [21]
-No Technology substitution: Russians need to recognize that the low oil prices are not the product of “a conspiracy of the US and the Arabs against Russia.” Instead, they are the result of an Arab effort to drive down the price so that the latest technological innovations in extraction technology the Americans have will not be profitable. Russia isn’t part of the equation for either, Zhukovsky says, but this also means, the basic trend won’t change anytime soon. Moreover, if Russia sits and does not make fundamental change, the new oil extraction technologies will in fact be “a death sentence” for the Russian economy. Russia’s only chance to “move forward” is to focus on scientific and technical progress, to behave as the Chinese have done gradually shifting into ever higher tech areas rather than relying on the sale of natural resources or minimally processed goods. But that is not what the Russian government is doing. [20]
-Economic speculation: Vladislav Zhukovsky, an economist known for predicting disasters in the Russian economy and for then turning out to be right, says that the situation is more dire than almost anyone imagines because oil is heading to 25 US dollars a barrel, the ruble to 125 to the US dollar, and inflation to 30 percent. If he is even partially correct, Russia faces not a “black Monday” or a “black September” but a “black” and bleak future. […] Many at the top of the Russian economic pyramid are behaving as they did in 1998, betting on an ever weaker ruble by buying hard currency and then planning to get back into the Russian market later at firesale prices and thus improving their position but not the country’s. These people, Zhukovsky says, “have their families, portfolios and property abroad. They are interested in having the situation in Russia be as bad as possible and the ruble to fall as far as possible so that they will be able to sell their apartments there and buy them here on the cheap.” In 1998, at the time of defaults, the Russian stock market fell 80 percent, the ruble fell 84 percent, “and all our bureaucrats … took the money they had and converted it into hard currency. “When the market collapsed, they bought shares at three cents on the dollar. The very same thing is happening now. Moreover, Zhukovsky adds, after the coming collapse “the American, European or Chinese investors will come.” They too will take advantage of the low prices just as they did in 1992 and 1998 [20]
-Independent Press shut down [7]
-Opposition hounded, jailed or murdered [7]
-Western food embargo; Putin orders that 600 tons of western food be destroyed [42]
-Western food embargo: Putin hopes local producers will fill the export food gap, but Moscow Strawberries Rot in Fields After Trade Near Metro Banned
-Western food embargo: Putin to ban four EU food exporters - Albania, Iceland, Liechtenstein, and Montenegro and Ukrainian food exports to Russia from Jan 1, 2016 if Ukraine implements the trade provisions of its EU association treaty; The potential Ukraine ban is more significant, with food exports to Russia last year still worth $415 million, out of total exports of $11 billion, despite the conflict over Crimea and in east Ukraine. The Iceland ban is the biggest. According to Russia’s Federal Customs Service, the Nordic state exported $232 million of mostly seafood to Russia in 2014. Albania exported $10 million of fruit and dairy. Montenegro exported $40,000 of fruit and vegetables. Liechtenstein didn’t export any food. [19]
-Wine Ban: Russia bans 3 California wines [48]
-Detergent Ban: Russian regulator makes retailers clean shelves from foreign detergents. Russia's Federal Service for Health and Consumer Rights (Rospotrebnadzor) has made retailers withdraw foreign-made detergents, namely those produced by Henkel, Procter & Gamble and Colgate-Palmolive, from shelves, according to Russian online newspaper Kommersant. [47]
- Medical Import Ban: “Health experts say that the ban, which targets more than 100 kinds of foreign-made medical goods and equipment, would deal a devastating blow to Russia’s most vulnerable citizens. Under the proposal, state-funded facilities would no longer be allowed to import items such as ventilators, MRI scanners, X-ray and ultrasound machines, defibrillators…”[45]
-Internet, social network ban: One of the Kremlin’s most senior officials, Nikolay Patrushev, Speaking at a Vladivostok conference today, denounced the use by officials of “foreign” resources like Google, Yahoo, WhatsApp, and others as a threat to national security (regions.ru/news/2558115/). He said that this is “a systemic issue for all of Russia, but in the Far East, it is especially serious.” Patrushev asked that the heads of the regions there “devote particular attention to these issues and take corresponding measures.” Continuing “negligence” in this area will not be tolerated. The Russian Security Council official’s remarks follow earlier reports that the Duma may adopt a law this fall that would “prohibit bureaucrats and state employees from using social networks at work.” Observers say that this measure will be considered this fall, after the law on “cyber sovereignty” goes into effect on September 1. [50]
-Jokes, satire and anecdotes about Putin and the regime: "If you see smoke and smell burning rubber, don't rush to call the fire department. It's probably the smell of your neighbors using Russian contraceptives" ))) [16]
-Growing poverty levels: Caught up in the worst economic decline since the 1998 ruble crisis, Russia’s national poverty rate increased by 14 percent in the first half of this year. So far, Russia has been unwilling to increase the minimum wage or social benefits to fight poverty. [15]
-Growing poverty levels: As of Aug 2015, 23 million Russians live below the poverty level and another 14 million that live in 319 single industry cities and towns can be soon be added to the poverty rolls since the Russian government can’t afford to pay subsidies [7] and [27]
-Growing poverty levels: Moscow stores report growing theft of food and even toilet paper [29]
-Growing poverty levels: Government Proposal to Limit Russians' Ownership of Livestock Elicits Outrage [10]
-Growing Poverty levels**: Falling or No government subsidies for 319 single industry towns who have lost their single industrial base [7] and [27]
-Subsidy Drag: There are 319 single industry towns who have lost their single industrial base [7] and [27]
-Subsidy Drag: Only three former USSR territories have economies that could make a contribution to the Russian Federation or the Eurasian Union: Kazakhstan, Azerbaijan and Turkmenistan. The rest are an economic drag-the economically badly off countries of the CIS – Uzbekistan, Kyrgyzstan, Tajikistan, Armenia, Moldova and others.
-Subsidy Drag: Added Russian Budget deficit**; Ukraine ready to stop financing Donbas enclave controlled by Russian terrorists [39]
-Military Industrial complex decay**: “A couple of months ago, Vladimir Ryzhkov visited Mikhail Sokolov on air of Radio Svoboda and lamented the fact that Putin’s geopolitical adventures were destroying the Russian military-industrial complex, because a huge part of the supply of components, systems, engines, etc. in the Russian arsenal belonged to the Ukrainian companies. Now they do not cooperate with the Russian military-industrial complex, and the Russian military-industrial complex will be destroyed. In September 2014, in the first round of the Ukrainian sanctions against Russia, apart from other measures, it was banned to export a number of military goods. Now the government of Ukraine has approved an expanded package of sanctions. It is supposed that the sanctions list will include 156 legal entities and more than a thousand individuals, among whom will surely be many organizations and people from the Russian military-industrial complex. [7] and [24]
- Unsustainable Militarization & renewal stalling: Russia will not need its military-industrial complex for the next 20-30 years. Russia needs receivership and the Marshall Plan. This statement would be wrong, if the Constitution of the Russian Federation acted in Russia, and there was society in the sense of ‘nation’. But we have nothing, and will not have, as long as it appears with the help of receivership as it was in West Germany after 1945 and de-Nazification. The Russian military-industrial complex is doomed.The Russian military-industrial complex has international sanctions imposed against it, which have long hammered the final nail in its coffin by a simple forward contract. The latest weapons of the XXI century and the sanctions against the Russian military-industrial complex are incompatible with each other. The program of upgrading the Russian army for the period up to 2020 is just the greatest scheme of stealing 20 trillion rubles in the history of Russia, and nothing more. By 2020, some will become very rich, a lot of people will become very poor, but there will be no Russian military-industrial complex, as there will be no XXI century weapons. When the ‘guns before butter’ choice is made, in the conditions of attacks on other countries and international sanctions, there will be no guns, no butter, no country,” Rabinovich wrote on his page on Facebook [7] and [24]
-Collapse of defence parts industry** Russia has no substitution for many critical Ukrainian military parts [7]
-Russian navy falling apart: The only RU aircraft carrierKuznetsov doesn't have many years left in her. Her boilers are "defective," according to the trade publication Defense Industry Daily. Yet when she goes to the breakers to be dismantled, Moscow could find it impossible to replace her. For one, the shipyard that built all the Soviet carriers now belongs to Ukraine. It lies just outside of Crimea, and Russian forces did not manage to seize it. Moreover, Ukraine is still the exclusive supplier for many of the heavy components, including engines and gears, for Russia's warships — even the ones Russia builds in its northern shipyard. With the continuing tense stand-off, Kiev recently banned arms sales to Moscow. Russia's attempts to revitalize its domestic shipbuilding industry have not gone smoothly. In 2005, India inked a nearly $1-billion deal with Russia for a rebuilt Soviet-era small flattop. Russia's work on Vikramaditya was so poor, however, that she suffered a near-total breakdown shortly after her purported completion in 2012.
India finally accepted Vikramaditya in 2014 — after the total cost of her refurbishment had nearly tripled to $2.3 billion. If Russia can't even remodel an existing warship, imagine the difficulties it would face designing and building a big new ship from scratch. [52]
-Aging defence industry workforce [7]
-Inexperienced defence industry workforce: Russia is facing difficulties filling critical jobs with largely unskilled non-Russian migrants, many working illegally in the country. [6] and [7]
-Educational Decay: According to the Organization for Economic Cooperation and Development, OECD, the proportion of Russia's adult population with postsecondary training or degrees is higher than in almost any OECD country. And in the Soviet era, Russian scientists and inventors were renowned for their acumen (albeit mainly in fields with military applications). But today, Russia's educational system appears to be broken, or at least the country seems unable to derive the expected benefits from it [1]
-Educational Decay: Standardized international test results reveal that Russian primary and secondary schooling today is at best mediocre. In a 2009 OECD test to measure scholastic performance, Russian students' reading scores were lower than Turkish students', and Turkey itself is near the bottom of the OECD rankings. Russia's university and higher education system looks even worse. [1]
-Innovation: Although Russia today accounts for about six percent of the world's population with a postsecondary education, barely 0.1 percent of the worldwide patents granted by the U.S. Patent and Trademark Office over the last decade and a half were awarded to Russians. This is not some U.S. conspiracy against Russian inventors: the records of the UN's World Intellectual Property Organization show that Russia's share of out-of-country patent applications over that same period was less than 0.2 percent of the global total. [1]
-Innovation: The picture is hardly better when it comes to the output of scientific papers: the number of articles by Russians in peer-reviewed journals was no higher in 2008 than it had been in 1990, whereas output almost everywhere else in the world rose over those same years. By 2008, Russian authors were publishing far fewer scientific papers than the authors of Russia's BRIC peers: Brazil, China, and India. In effect, Russia stands as a new and disturbing wonder in today's globalized world: a society characterized by high levels of schooling but low levels of health, knowledge, and education. [1]
-Innovation: Russia's Space Program in Crisis After Decades of Brain Drain, Neglect. "The Russian space industry is in an obvious state of crisis," said Asif Siddiqi, a professor at Fordham University in New York and an expert on Russia's space program. Russia has lost 15 spacecraft since 2010, with assembly mistakes blamed in most cases. [41]
-Innovation: "We've fallen behind on {our space} science program ... We've forgotten how to make and fly unmanned probes," said Igor Marinin, head of industry publication Novosti Kosmonavtiki. Space probes take years to reach their destination — but Russia does not have a single one making its way through space. Its latest successful probe wrapped operations in 1986. Part of the problem is that while Russia boosted space spending from $960 million in 2005 to $4.1 billion last year, this is still dwarfed by NASA, which spent $17.6 billion in 2014. [44]
-Innovation: Brain Drain**: A brain drain is also hobbling the sector. The Russian space industry was depleted of manpower after the Soviet Union's collapse in 1991 and many experts fled to better-paying jobs in the West. This, in turn, caused a generation gap, particularly in crucial research and development. "None of the long-term plans proposed in the past 15 years have been completely achieved on time" "The 40-somethings that are supposed to be taking up top jobs in the industry should have started in the 1990s — and they didn't," Marinin said. And while salaries have improved over the last two decades, they still haven't reached anything close to parity with the West: A Russian cosmonaut made just $26,000 a year in 2012, compared to $63,000 to $139,000 at NASA, according to state agency RIA Novosti. Money problems aren't going away. Falling oil prices and Western sanctions could see billions stripped from Russia's space program over the coming years, experts say. This is money that Russia's Federal Space Agency, the Roscosmos, can hardly afford to lose. (Roscosmos did not respond to a request for comment on this story). So Russia's state-dominated space industry is set to continue struggling to outperform its Western counterparts. Meanwhile, existing companies are plagued by lack of quality control and expert oversight. In 2013, a Proton rocket was lost because a worker installed a sensor upside down — and hammered it in to fit.
Added to this, economic sanctions mean certain spaceship components can no longer be imported (from Ukraine or the west-WD) and must now be reinvented in Russia. [44]
-Innovation: Brain Drain: 1/3 of university graduates want to emigrate from RU work abroad [55]
- Alienation of Europe & the West; Putin and company have managed to alienate the entire civilized world and to become a pariah state. [40] Most recently the Russian Veto in the UN Security council over the MH17 tribunal
-Alienation of Europe & the West: Russia has outraged and alienated Europe and much of the Arab world. It is fitting that Russian analysts are calling for Moscow to defend its final stronghold in the Middle East. Thanks to the work of our agents of influence, Syria is set to become Russia’s Last Stand in the region. Even the short-term survival of the Assad regime only works to deepen the bitterness the Sunni majority feels toward Russia. Indeed, Russia’s identification with Shi’a forces—Iran, Assad, and Hizballah—ensures the wider alienation of Russia from the 90 percent of the world’s Muslims who are Sunni. As we’ve already seen in Libya, the inevitable collapse of Assad and other retrograde client states elsewhere will ultimately deprive Russia of the billions of dollars it invested there, and leave Moscow increasingly isolated and disliked internationally. [7]
- Pariah state: Spies and agents of influence: Four European parties from the far right to the radical left -- France’s National Front, the U.K. Independence Party, the Danish People’s party and Greece’s Syriza --have expressed sympathy for Putin while finishing first in their national elections to the European Parliament last year. Putin has worked to build bridges to governments in Greece, Cyprus and Hungary. One of Budapest’s lawmakers in the EU Parliament, Bela Kovacs, is accused by Hungarian prosecutors of being a Russian spy, which he denies.
“If you look at almost every far-left or far-right organization in Europe today, the one unifying theme is that they all look up to Mr. Putin as a role model,” Eyal, director of the London-based Royal United Services Institute for defense studies, or RUSI, said in an interview in London. Putin has built an “enormous apparatus” across Europe in part because of the huge sums of money he’s been showering on the spy services, according to Oleg Gordievsky, a former KGB colonel who spied for the U.K. from 1974 to 1985, when he was smuggled into Finland in the trunk of a car. [43]
- Pariah state: Spies and agents of influence: Sweden’s service, SAPO, says that Russia has deployed “hundreds” of spies on missions around Europe, including Stockholm, and that they operate across “a series of platforms,” including consulting, media and travel. Defense, national security and law enforcement now eat up 34 percent of Russia’s budget, more than double the level in 2010. The share of spending that’s black -- authorized but not itemized -- has doubled in the period to 21 percent, or 3.2 trillion rubles ($50 billion), according to the Gaidar Institute, an independent research group in Moscow.
[7] and [43]
-Pariah State: Russia FSB fueling ISIS with Jihadists. Even as America touts its counterterrorism partnerships with Russia, evidence points to the FSB directly feeding Dagestanis to ISIS. [...]Proof, if it were needed, for how valued this cooperation is among U.S. policymakers came in the conspicuous absence of Alexander Bortnikov, the director of the Federal Security Service (FSB), Russia’s domestic intelligence agency, from sanctions levied by the Treasury Department against Russian officials. The sanctions targeted bureaucrats involved in both the invasion and occupation of Crimea and the unacknowledged maskirovka war that Moscow is still waging in eastern Ukraine—a war that has drawn amply on the resources of the FSB and has included several “former” FSB officers on the battlefield. Not only was Bortnikov not sanctioned, he was invited by the White House last February as a guest to President Obama’s three-day conference on “countering violent extremism,” whereas the current FBI director, James Comey, was not. [...] Yet a recent investigation conducted by Novaya Gazeta, one of the few independent newspapers left in Russia, complicates this cozy tale of counterterrorist cooperation. Based on extensive fieldwork in one village in the North Caucasus, reporter Elena Milashina has concluded that the “Russian special services have controlled” the flow of jihadists into Syria, where they have lately joined up not only with ISIS but other radical Islamist factions. In other words, Russian officials are adding to the ranks of terrorists which the Russian government has deemed a collective threat to the security and longevity of its dictatorial ally on the Mediterranean, Bashar al-Assad. […]The FSB established a “green corridor” to allow them {Jihadists} to migrate first to Turkey, and then to Syria. (Russians, including those living in the North Caucasus, can catch any of the daily non-stop flights to Istanbul and visit Turkey without a visa.) [46]
-Soviet style show trials: Russian military kangaroo court sentenced Ukrainian film director Oleh Sentsov and Ukrainian civic activist Oleksandr Kolchenko to, respectively, 20 and 10 years imprisonment on trumped-up charges of terrorism. Amnesty International and other human rights groups immediately responded with protests, while Amnesty’s press secretary in Ukraine compared the trial to Stalinist (or Soviet) show trials.[53]
- No Incentive to Change** : Russia’s biggest problem may be denial. Typically, a stumbling economy brings about change in political leadership. Some countries, like Greece, take this to an extreme—Athens has seen five different governments in five years. But Russians have gone the other way—as their economy has slowed, Putin has grown more popular; he now holds an approval rating of 86 percent. More surprising is that while 73 percent of Russians are unhappy with their economy, 7 in 10 approve of the way Putin is handling it. How is that possible? About 90 percent of all Russians get their news from Russian television channels directly controlled by the Kremlin. By framing sanctions and the invasion of Ukraine as “Russia vs. the West”, Putin has succeeded in stoking the country’s nationalism. Today, 63 percent of Russians have a very favorable view of their country, up from 29 percent in 2013 and 51 percent in 2014. It’s easier under those circumstances to blame bad economic circumstances on outsiders. Credit where credit’s due—Putin knows what his people want to hear. It’s just not clear if he knows how to fix his flailing economy. (TIME, Pew Research Center, Washington Post, Pew Research Center) [21]
-No Constant Pressure on Elites: Unwillingness of the population to keep up the pressure on elites. In January 1991, nearly half a million Russians went into the streets in Moscow to protest the Kremlin’s actions in Lithuania; and that “response of the Muscovites was a decisive factor in the liberation of the Baltic countries.” But a few years later, far fewer were ready to go into the streets to protest Yeltsin’s criminal war against Chechnya. And “what do we see now?” There were protests at the end of 2011 and in May 2012, but the numbers were much smaller, a maximum of 100,000; and those who took part were immediately “written down as a fifth column.” And there have been far fewer brave enough to protest what Moscow is doing in Ukraine. [36]
-No Lustration: failure of the country to conduct lustration so that those with the values and styles of the Soviet regime would not return. They did not ask themselves the most obvious question: could they imagine a post-war Germany in which a Gestapo officer could become chancellor? But because they did not resist this in Russia’s case, “the KGB (now the FSB) was preserved, not reformed, and has taken its revenge.”Kovalyev says that he does not exclude the possibility that the Russian Federation will suffer the same fate as the USSR, adding that he “has hope and at the same time fear that the current situation cannot extend for a long time.” It is clearly the case that the current regime must be replaced, but it is “another question as to who can be its replacement.” [36]
-Hopelessness: The gloom now reflects the old adage that “the night is darkest just before the dawn.” [36]
-Kremlin Revolt**: Kremlin Elite Engaged in Search for Putin's Replacement, Piontkovsky Says Aug 13, 2015 by Paul Goble [14]
-Kremlin Revolt**: Putin Alienating Kremlin Elites with His Nuclear Blackmail Threats Such a demonstration of “schizophrenia in the Kremlin,” one that is approaching “the clinical,” Borovoy argues, frightens those with the elite who still have a modicum of good sense because it signals that there is very little Moscow might do and that the actions of the foreign ministry are simply another part of the Kremlin’s “propaganda machine.” Those within the elite may be more likely to desert him over this than even over economic sanctions, Borovoy suggests, because everyone can now see that the Putin regime is behaving according to the following “inadequate” logic: “Because we do not like your reaction to the downing of the Boeing, we will no longer feel bound by the non-proliferation treaty and provide nuclear arms to those who want them.”
Such a declaration, the Russian opposition figure says, is “in violation of all international agreements.” Moreover, he argues, “the despair in which Putin finds himself suggests that such inadequate actions will be carried out.” That in turn will force the international community to conclude that one of its members “has gone mad.” [30]
-Kremlin Revolt**: Is A Slow Putsch Against Putin Under Way? [35]
-Kremlin Revolt** Opposition calls for civil disobedience; Mikhail Khodorkovsky says that Russian citizens are fully entitled not to observe unjust laws imposed not to promote justice but to protect the power of Vladimir Putin, a potentially dramatic development in the relationship between the Russian opposition, the Russian people, and the Kremlin [56]
-Xenophobia: Foreign Agents Law. “it is immoral and unjust to label groups ‘foreign agents’ and drive out of the country the Dynasty Foundation which supports scholarship while at the same time [the pro-Kremlin] United Russia Party receives financing from offshore accounts.” [56]
-Sovereign Debt Default**: “International rating agencies like Standard & Poor’s warn that Russia might default in a massive way sometime in the next two or three years. They suggest that Russia’s regions won’t be able to pay their debts, and Moscow will have trouble covering them. Moreover, these experts note, the Russian economy is now in recession, an economic downturn deepened by international sanctions, a decline in the price of oil and the devaluation of the ruble which makes repaying any foreign debt all the more expensive. “From this,” Dokuchayev writes, “extends a direct path to sovereign default.” By the end of this year, Russian companies and banks must repay 134 billion US dollars in foreign obligations. That is no small sum, but it would seem bearable given that the country’s reserves are about 400 billion US dollars. But if Moscow has to cover other losses, seeks to support the ruble, and faces a new drop in oil prices, that may not be enough. Many of those suggesting that Russia is at risk of another default focus on the last factor and suggest that as Iran comes back on stream and the war in Libya ebbs, the supply of oil relative to demand will grow and prices will fall to 20 US dollars a barrel or even lower in the coming months. If that happens, the “Novyye izvestiya” writer says, a dollar will be equal to 120-130 rubles and a euro to “about 150.” That could lead Russia to default by itself.” [31]
-Sovereign Wealth Fund: **Russia has already been forced to dip into its huge Sovereign Wealth Fund, saved during the years of high oil prices. Anton Siluanov, the Finance Minister, has warned that if the budget deficit does not reduce, the entire fund could soon be used up. [32]
-Existential Threat to the USA: Pentagon chief: Russia is a 'very significant threat; 'Defense Secretary Ash Carter is calling Russia a "very, very significant threat," agreeing with an assessment made by top military officials. A chorus of top military and political officials (General Dunsford, Secretary of State John Kerry, his top Europe official, Victoria Nuland, Defense Secretary Ashton Carter, and General Philip Breedlove, the supreme allied commander for NATO) have said recently that Russia is the top threat to the U.S.'s national security in comparison to the Islamic State in Iraq and Syria. [34]
** Key driving factors
References
[1] The Dying Bear; Russia's Demographic Disaster; By Nicholas Eberstadt
[2] The numbers Putin doesn’t want you to see Vanity Fair March 31, 2014
[3] High Rates of Congenital Syphilis in Russia Linked To Inadequate Prenatal Care https://www.guttmacher.org/pubs/journals/3519003.html
[4] http://www.vox.com/2015/7/30/9073285/putin-russia-corruption
[5] Russia: Massive Capital Flight Continues May. 01 2015 http://www.themoscowtimes.com/business/article/russia-massive-capital-flight-continues/520112.html
[6] Russian Demographics: The Perfect Storm
[7] private conversations with industry experts
[8] Putin is actually in serious trouble http://www.businessinsider.com/putin-is-actually-in-serious-trouble-2015-8
[9] http://www.unian.info/economics/1110555-russias-costs-from-sanctions-estimated-at-20-bln.html
[10] http://www.themoscowtimes.com/news/article/government-proposal-to-limit-russians-ownership-of-livestock-elicits-outrage/527766.html
[11] Forty One (41) early warning signals of the collapse and decay of the Russian Federation (Putinism) and Ukraine (Yanukowych Regime) http://bit.ly/fsflvg
[12] http://windowoneurasia2.blogspot.ca/2015/08/as-ruble-collapses-russias-cossacks.html
[13] http://bit.ly/f8w1F1
[14] http://windowoneurasia2.blogspot.ca/2015/08/kremlin-elite-engaged-in-search-for.html
[15] STRATFOR: RUSSIA ECONOMY HITS PERFECT STORM http://www.breitbart.com/national-security/2015/08/12/stratfor-russia-economy-hitsperfect-storm/?
[16] http://www.bbc.com/news/blogs-trending-33851990
]17] “LNR” factory sews fake Ukrainian military uniforms http://euromaidanpress.com/2015/08/11/lnr-factory-sews-fake-ukrainian-military-uniforms/
[18] Implosion The End of Russia and What it Means for America by Ilan Berman 2013
[19] Russia hits EU allies with symbolic food ban https://euobserver.com/foreign/129885
[20] Russian Economy Approaching ‘Perfect Storm’ -- Oil at 25 Dollars a Barrel, Ruble at 125 to the Dollar, and Inflation at 30 Percent http://windowoneurasia2.blogspot.ca/2015/08/russian-economy-approaching-perfect.html
[21] These 5 Facts Explain Russia’s Economic Decline http://time.com/3998248/these-5-facts-explain-russias-economic-decline/
[22] http://rbth.com/business/2015/01/29/russia_is_facing_record_capital_and_investment_outflow_43261.html
[23] http://www.unian.info/politics/1111271-china-finishes-putin.html
[24] 'There will be no Russia soon': Russian financier names cause of imminent collapse of Russia http://joinfo.com/world/1007537_there-will-be-no-russia-soon-russian-financier-names-cause-of-imminent-collapse-of-russia.html
[25] http://windowoneurasia2.blogspot.ca/2015/08/putins-russia-is-deeply-ill-country.html
[26] http://windowoneurasia2.blogspot.ca/2015/08/another-echo-of-1990s-russias.html
[27] http://www.themoscowtimes.com/business/article/russian-single-industry-towns-face-crisis/526024.html
[28] http://www.themoscowtimes.com/news/article/average-bribe-in-russia-doubles-in-rubles-remains-steady-in-dollars/526556.html
[29] http://windowoneurasia2.blogspot.ca/2015/08/how-bad-are-things-for-russias-poor.html
[30] Putin Alienating Kremlin Elites with His Nuclear Blackmail Threats http://windowoneurasia2.blogspot.ca/2015/08/putin-alienating-kremlin-elites-with.html
[31] Seventeen Years On, ‘Shadow of Default’ Still Hangs over Russia http://windowoneurasia2.blogspot.ca/2015/08/seventeen-years-on-shadow-of-default.html
[32] http://thenationonlineng.net/suffering-from-a-glut-of-black-gold/
[33] http://www.thedailybeast.com/articles/2015/08/19/how-russia-hides-its-dead-soldiers-killed-in-ukraine.html
[34] http://thehill.com/policy/defense/251622-pentagon-chief-russia-is-a-very-very-significant-threat
[35] Is A Slow Putsch Against Putin Under Way? http://www.forbes.com/sites/paulroderickgregory/2015/08/20/is-a-slow-putsch-against-putin-under-way/
[36] 1991 and 2015 – Three Views about the Past and Future of Russia; Saturday, August 22, 2015 http://windowoneurasia2.blogspot.ca/2015/08/1991-and-2015-three-views-about-past.html
[37] Kremlin Taking from the Poor and Giving to the Rich, Duma Deputies Say' http://windowoneurasia2.blogspot.ca/2015/08/kremlin-taking-from-poor-and-giving-to.html
[38] Russia piles pressure on exporters to sell foreign currency http://www.cnbc.com/2015/08/23/
[39] Anti-Donbas Sentiment Growing in Ukraine http://www.worldaffairsjournal.org/blog/alexander-j-motyl/anti-donbas-sentiment-growing-ukraine
[40] Armine Sahakyan: It’s time for former Soviet countries to get rid of oligarchs http://www.kyivpost.com/opinion/op-ed/armine-sahakyan-its-time-for-former-soviet-countries-to-get-rid-of-oligarchs-396385.html
[41] http://www.nbcnews.com/news/world/russias-geriatric-space-program-creaking-n413607
[42] http://www.theguardian.com/world/2015/aug/18/russia-cheese-ban-gang-uncovered-arrests-moscow
[43] Brussels Break-In Shines Light on Putin’s European Mischief Henry Meyer Jeremy Hodges http://www.bloomberg.com/news/articles/2015-08-24/brussels-break-in-shines-light-on-putin-s-european-mischief
[44] Russia's Space Program in Crisis After Decades of Brain Drain, Neglect http://www.nbcnews.com/news/world/russias-geriatric-space-program-creaking-n413607
[45] ’MASS MURDER’: Russian patients brace for ban on [Western] medical imports,” http://www.rferl.org/content/russia-ban-on-medical-supplies/27204460.html
[46] Russia's Playing a Double Game With Islamic Terror http://www.thedailybeast.com/articles/2015/08/23/russia-s-playing-a-double-game-with-islamic-terror.html
[47] Russian regulator makes retailers clean shelves from foreign detergents http://www.unian.info/economics/1115009-russian-regulator-makes-retailers-clean-shelves-from-foreign-detergents.html
[48] http://www.lepanmedia.com/russia-bans-three-california-wines-from-shelves/
[49] http://windowoneurasia2.blogspot.ca/2015/08/moscow-had-chance-to-prevent-oil-price.html
[50] http://windowoneurasia2.blogspot.ca/2015/08/russia-has-two-misfortunes-fools-and.html
[51] Are Russia’s Siloviki Overstretched? Beijing Says Strawmen Guarding Russian-Chinese Border http://windowoneurasia2.blogspot.ca/2015/08/are-russias-siloviki-overstretched.html
[52] Russia's navy is falling apart http://theweek.com/articles/572496/russias-navy-falling-apart
[53] http://www.worldaffairsjournal.org/blog/alexander-j-motyl/back-ussr
[54] http://windowoneurasia2.blogspot.ca/2015/08/putin-economy-based-on-theft-cant.html
[55] http://windowoneurasia2.blogspot.ca/2015/08/more-than-third-of-new-university.html
[56] Khodorkovsky Calls for Civil Disobedience against Unjust Laws and Putin's Unjust System http://windowoneurasia2.blogspot.ca/2015/08/khodorkovsky-calls-for-civil.html
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