Of late I’ve been reading that the accomplishments of the Putin era come down to one thing: high oil prices.

These articles are usually written by cynical anti-Russian westerners or second-rate Russian journalists serving as mouthpieces for special interests, but it’s nice at least that they accept Putin’s accomplishments and don’t try to hide them. I don’t want to run down the list again but from fighting poverty, strengthening Russia’s balance sheet, creating an ever-growing middle class, spreading prosperity to the regions, modernizing infrastructure, education, and housing, and funding science and technology – Putin has succeeded. It’s hard to hide such things and it’s well-noted that even his critics are beginning to acknowledge them.

But along with the praise, these negative articles try to play down the successes by claiming that it’s all because of high oil prices. And, of course, predictions of doom are always included. “Oil prices will collapse soon and everything will come crumbling down,” they foresee and have foreseen for five or six years now. When oil fell from $110 to $100 recently they called it the beginning of the end.

I personally think Russia’s rise is NOT because of high oil prices and actually think that Russia’s economic growth will accelerate at oil prices much lower than those we’re seeing today, but to confront the ill-perceived theory that Russia’s rise was caused by and is sustained with high oil prices I set-out to find the average oil price during Putin’s rule and the result might surprise some…

Because, as per data (Column R) collected by the Department of Energy, the average price of the Ural-blend oil between the first week of August 1999 - when Putin became Prime Minister - and today is just $40.23 !!!

For the first five full years of Putin’s rule, from August 1999 through August 2004, the price of oil hadn’t even reached $40 and it didn’t reach $50 until almost a year later.

I consider high oil prices to mean oil prices higher than $70, yet $70 on a consistent basis wasn’t reached until mid-July 2007. This means that for 92% of Putin’s rule oil prices were below, sometimes much below, what would constitute high oil prices.

lol at Russia's critics once again !

How outstanding was Russia’s move to pay market prices for Central Asian gas, starting in 2009? I mean, there are absolutely no negatives in this play; it is full of positives!

First of all, the entire price increase will be passed-on to consumer markets in Europe. Gazprom’s profit margin will be maintained. In the case of certain FSU nations that still enjoy subsidized prices from Moscow, the move-up to market prices will be substantial and immediate.

And no complaints will come of this, like "Evil Russia’s interfering and blackmailing us, help!" Russia can easily pass these questions and interview requests to Turkmenistan, who will gladly accept them as it cares even less of its public appearance than does Gazprom. If Turkmenistan wants to act coy, it will say that it's just doing what Matthew Bryza advised it to do (gracious in defeat, gentleman Bryza sticks to his story and says he is glad of the move-up to market prices). Besides Bryza, European Commission contacts also advised Turkmenistan to raise its prices, hoping at the time to drive a wedge between Russian and Central Asia and never thinking that Russia would do the obvious. Instead, these European officials dug their own grave (so to speak) and guaranteed Russia's dominance over Central Asian gas and sky-high energy prices for the forceable future.


Second and most important of all, it will completely shatter a geopolitical system based on exploitation that the western powers, especially the United States and the United Kingdom, have become dependent on far more than Russia has.

Frankly, one can argue Russia cautiously tried to exploit the Central Asian nations for below-market natural gas after the breakup of the Soviet Union. But, the United States and United Kingdom have been doing this for ages and in far greater numbers, savagely exploiting natural-resource rich Africa and Latin America for centuries. And I'm not going to go back and talk about slavery and stuff, which is cringing to even think about. Simply today American and British energy and mining companies are stealing African and Latin American wealth from out beneath. Every knows what's going on: the corrupt leaders; the generous 1% royalty schemes; the one-sided PSA "deals"; IMF-forced privatizations for pennies. And so on and so on.

Russia, here and now, is able to fill a void and correct this historical wrong. Like a Nigerian energy official said earlier this year, "What Gazprom is proposing is mind-boggling.. They're talking tough and saying the west has taken advantage of us in the last 50 years and they're offering a better deal... they are ready to beat the Chinese, the Indians and the Americans."

Many people in Africa and Latin America will never forgive the west for the way it has behaved, from slavery, imperialism, colonization, and modern-day exploitation. Alternatively, Russia maintained pretty strong support in Central Asia throughout the 90s and 00s and will improve its relations with the Central Asian nations enormously when the new pricing scheme comes into effect and wealth and prosperity flourishes throughout the region.

Therefore, not only has Russia solidified its strategic near-abroad, but it has also opened-up an opportunity to win-over the west’s strategic appendage, the natural resource-rich countries in Africa and Latin America. I am certain that this is part of Russia’s grand strategy and something that it's going after. The west's crown jewels, for real.

Certainly a game of chess
November 27, 2007: Gazprom says that it will significantly raise what it pays for Central Asian gas in 2008, leading to market prices in 2009 (this is widely underreported in the western press, but just saying)

January 5, 2008: A Nigerian energy official says that a Gazprom move into the country could be forecoming, citing Gazprom's ability to offer a better deal against 50-years of western exploitation (after feeling comfortable defending its home turf, Russia begins to move on the offensive, tit for tat)

February 22, 2008: Matthew Bryza criticizes Gazprom for acting as a "shady middlemman" by doubling the price of Central Asian gas sold to Europe (in retrospect, this could be seen as a direct response to Russia's moves in Nigeria. Also in retrospect, one must wonder why Bryza missed the memo regarding what happened on November 27th)

March 3, 2008: Gazprom cuts natural gas shipments to Ukraine over a pricing dispute. Western press is hesitant to criticize Gazprom as they conclude the company is just looking to recoup more from Ukraine as it itself is paying more from Turkmenistan (Russia is testing its strategy vis-a-vis the press and public opinion)

March 11, 2008: Gazprom confirms that it will be buying natural gas from Central Asia at market prices and hints that the increase in prices will be completely passed-on to its customers in Europe. Several analysts call this agreement earth-shattering for European energy policy

September 2003: BP pays $7.7 billion for 50% of TNK-BP

April 2006: BP says that it has already recouped $5 billion of its initial investment in the form of dividends

Today: One can fairly say that BP's investment in Russia has been completely recouped and then some. And with TNK-BP's market cap at more than $27 billion, BP's stake in the company, in its own right, is almost twice as much as its initial investment.


Frankly, the Russian government and Russian companies yearn for the day when BP decides to sell its stake in TNK-BP. They have the money to buy the stake, they want it deal, and they'll pay a large market premium for it.

So to all those western "pundits" advising BP to exit Russia, Russia deeply and sincerely hopes that BP will take your recommendations !

But, looking at the above timeline, chances are that BP will tell the likes of Daniel Altman and Robert Amsterdam to mind their own business and s%u& th@ f/*$ ^% !!!

In August 1942, as the Soviets were fighting for their lives in Stalingrad, Churchill flew to Moscow to tell Stalin that there would be no Second Front in Western Europe that year to draw off German forces.

During that trip, Churchill also asked Stalin to forgive him for interfering in Russia after the Russian Revolution (to which Stalin famously replied, "Who am I to forgive. Only God can forgive").

Many people don't know about the western interference in Russia from 1918 to 1920. But it happened and it wasn't the diplomatic goings on and "orange revolutions" types of interference that are more common today. It was real interference. Battalions on the ground. In Russia. In the Far East and Siberia. And in the north.

British, Americans, Czechs, Poles, Japanese, French; all scavenging for a piece of the largest country on earth, which was still recovering from a devastating civil war. Literally a piece ("Siberia is too vast and wealthy a region to belong to Russia alone," etc.).

All of the occupations ended in failure. Sooner than anyone expected, Russia was back on its feet. And grand delusions of "disintegration" evaporated. Rapidly, the pseudo invaders made their way out.

Fast forward to the 1990s and we see the same general thing happen. Russia's down... in come the vultures.

Instead of the Polar Bear Expedition and Czech Legion, it was Harvard economists, IMF officials, and multinationals this time around. A more subtle type of occupation and exploitation was attempted the second time, if you say.

But, in the end of the day, both of these occupations had the same idea in mind: Keep Russia down and steal as much of it as possible.

Churchill apologized.

Even though George W. Bush is not responsible for America's rape of Russia, he should take the prerogative and apologize, on behalf of the American nation, for the crimes orchestrated by the Bill Clinton administration. Including breaking James Baker's promise to Gorbachev that "there would be no extension of [NATO's forces] one inch to the east."

Our behavior during these eight years was really embarrassing. Directly and indirectly, this nation committed crimes against humanity and against the Russian people (the masses, not the half dozen oligarchs who we helped create).

Luckily for the Russians, they regrouped and are strengthening again. Good for them.

But an apology from us to them is still necessary, in my opinion.

Konstantin Sivkov, the first vice president of the Russian Academy of Geopolitical Problems, made news on February 23rd when he told Interfax that by 2012-2015 the U.S. will be able to annihilate Russian strategic nuclear forces by a non-nuclear preemptive strike.

Interfax: Western military experts have recently started to talk about the possibility of attacking Russia and annexing its territory, Sivkov said. "Russia is supposed to be dismembered into three parts, with the Western part going to the European Union, the central part and Siberia to the U.S., and the eastern to China. This is a rough scenario," he said.

Russian armed forces will be unable to successfully counter an aggression, Sivkov said. "At the present time, the conventional armed forces cannot properly perform their duties in a regional war, like the Great Patriotic War, even in theory. Even if fully deployed, their potential is limited even in local wars. The only factor that deters [the U.S.] now is the nuclear arsenal," he said.

Interesting discussions concerning these comments can be found here and here.


Should we make anything of this? Well, it depends.

Is Sivkov playing to the domestic audience to raise support for increased weapons purchases? Or is he baiting the United States and NATO on the Kremlin's orders? Or is he a paranoid wackjob?

Of these three explanations, the most fascinating one is the middle one and it delves on some military analysis. The theory is that some Russian generals think that they can successfully take on NATO in 2012-2015. Knowing this, and knowing that NATO's attack of Russia is inevitable, they are trying to bait NATO into attacking at the time they want it to attack.

Moreover, although I do adore Russia so much - specifically its history, its culture, and its current leadership - I can admit that Russia is one of those countries that tries to use disinformation to achieve well-planned-out strategic results. If in fact they are trying to bait NATO into attacking between 2012-2015, throwing out statements like this could help.

Explanations vary, but the generals might feel that Russia cannot adequately defend itself until 2012. Under this circumstance, disinformation would be used to imply that it can defend itself today, therefore lowering the probability of a near-term attack. Alternatively, the generals might feel that the future is uncertain and it's better to play the hedge. Here they will look to move the attack back, if they think it is likely planned for after 2015.


To be fair, I have done some research on the Russian Academy of Geopolitical Problems. The Academy seems to have a knack of putting-forth alarmist statements, originating from both Sivkov and Leonid Ivashov, the Academy's president. For example:

Sivkov (July 2005, link, link2: The Alliance has achieved strategic depth of operations in Russia, U.S. tactical aircraft operating from NATO airfields may now reach Moscow, Tula, Kursk, and other cities of Central European Russia. This is an important factor from a geostrategic point of view. . . . It means that there are no more strategic barriers between Russia and NATO. What may it lead to? It may lead to escalation of border disputes with NATO countries (say because of certain territorial claims, or problems with oil production at sea, and fishing matters) into armed conflicts. Dangers of this sort exist in the Baltic region (Estonia claims the Pyatlov District of the Pskov Region) and in North Europe. . . . The situation is such that a local conflict may promptly become international. When it happens, it will be the alliance as such or the United States that will be putting forth demands, not the initiator of the conflict. Weapons may be used if Russia refuses to make concessions—space weapons first and foremost.

Additionally, in a June 2007 interview with Russia Today, Sivkov claimed that the United States has launched an arms race and urges Russia to respond in kind.

Ivashov is a member of Axis for Peace, an anti-imperialist intellectual movement capable of opposing neoconservatives according to Wikipedia.

In January 2006, Ivashov wrote: It is globalization what creates the conditions for the emergence of these extremely dangerous phenomena. It is in this context that the new world geo-strategic map is being designed, that the resources of the planet are being re-distributed, that borders are disappearing, that international law is being torn into pieces, that cultural identities are being erased, and that spiritual life becomes impoverished.

He goes on to urge the respect for international law and peaceful cooperation among countries and their citizens.

In January 2007, Ivashov erroneously predicted an imminent American nuclear attack on Iran.


Suffice to say, I haven't come any closer to understanding Sivkov's remarks, no doubt. So I'll just leave it here.

It has been widely reported that Russia’s president-elect is for re-shaping the world's financial system, steering it away from dollar hegemony. It is a cause that he is passionate for and will prioritize during his reign, in all probability.

Coincidentally, less widely reported remarks by Russia’s standing president might have influenced Medvedev’s position and, moreover, exposed Russia’s hand.

On November 22, 2005, Putin said that he backs the Central Bank's plans to double its gold reserves. "I support the proposal that the Central Bank pay greater attention to precious metals in forming our gold and foreign exchange reserves," Putin said (related story).

It appears that Putin is living up to his word.

The World Gold Council recently reported that Russia increased its gold reserves by 44 tonnes last year, spending more than $1.5 billion, and holds 438 tonnes of gold. Even though most of these purchases occurred during the latter half of 2007, they were enough to make the Russian Central Bank the world’s biggest purchaser of gold for the entire year (related story).

In my opinion, a concerted effort is being made by countries with large foreign currency reserves to diversify their currency reserves into gold and other precious medals. This effort is done gradually and secretly to allow their reserves to retain as much of their value as possible in the diversification process. Prisoner’s dilemma comes into play, sure, and we must assume that there is some collusion going on.

As far as Russia goes, its gold purchases are probably much larger than they’re letting on. Without a problem, Russia could eventually be purchasing up to 100 tonnes of gold per month for its reserves.

In fact, Putin all but confirmed the continued diversification of Russia’s reserves away from the dollar this week.

Vladimir Putin (3/3/08, link): Given the situation on the world markets I invite you to prepare proposals to streamline the management of the country’s financial reserves, the Reserve Fund, the National Prosperity Fund and gold reserves. We have repeatedly brought this up with the Prime Minister, the Minister of Finance and the Chairman of the Central Bank. These suggestions are appropriate: i.e. there is nothing revolutionary here, but we are obliged to react to what is happening in the world economy.

In my article FX trading, Russia style, I argue that Russia and other like-minded nations moved-up their war vs. the dollar in retaliation to the goings-on with Kosovo. The dollar’s continued weakness and the remarkable strength of gold reaffirms this thesis in my opinion.

Addendum: Loss of Empire
David Robertson writes: Britain accumulated so much gold in its Imperial heyday that the floor of the Bank of England vault is said to have collapsed beneath the weight.

All for naught.

Between July 1999 and March 2002, Gordon Brown, the Chancellor of the Exchequer at the time, sold 60% of Britain’s gold. Brown sold 395 tonnes in 17 auctions at an average price of $275.6 per ounce (link).

This sale was later attacked as a "disastrous foray into international asset management" as he had sold at close to a 20-year low, according to Wikipedia.

But in the end the British people forgave Brown for this mistake and elected him their Prime Minister just last year…

Oh, I forgot.

When I read this line by the misinformed Robert Coalson of Radio Free Europe / Radio Liberty something felt wrong:

Although Russia has dramatically paid down its state debt in recent years, it has accumulated a staggering corporate debt, estimated by the newsweekly "Itogi" at $423 billion.
Something felt wrong because Coalson didn't give any comparative data. He simply cited a figure, making us believe that it's too high.

But is it really?

Well, I did some research and not to be dramatic, but... the accumulative debt of all Russian corporations does not equal the debt of just the first American company that I looked up, which is Citigroup. Citigroup's debt is $574 billion (pure debt, not including pension obligations, payables, etc.).

Who knows if Citigroup is even the leader in this category among all American companies, it's just the first company I looked at. Other companies I checked include AIG ($176 billion), Ford ($184 billion), and General Motors ($193 billion).

According to the latest figures of the Federal Reserve, nonfinancial business debt in America totaled $9.8 trillion at the end of the third quarter of 2007. In fact, just the increase of nonfinancial business debt in America between the third quarters of 2006 and 2007 is almost twice as much as Russia's total corporate debt. Even if measured as a percentage of GDP, Russian companies are still underleveraged by a factor of 3.5 as compared to their American counterparts.

Oh, and the $9.8 trillion figure doesn't include the debt of Citigroup, AIG, and other banking and insurance companies. Financial sector debt is $15.4 trillion. And household debt is $13.6 trillion btw; federal government debt is $5.1 trillion; state and local government debt is $2.2 trillion. Trillion seems to be the operative word.

Suffice to say, Robert Coalson is stupid.

As is another Russophobe who tried to make the same idiotic argument recently:

Boris Nemtsov (link): As a result, as we reach the end of Putin’s presidency, we once again find ourselves with the stable empty and the door open – without a social security system that works properly, facing a growing deficit in the pension fund, with an army straight out of the last century, with state companies in immense debt... Debt accumulated by corporations for the purchase of assets instead of investing in production now exceeds $400 billion and is nearly equal to the state’s financial reserves. The major borrowers are Gazprom, Rosneft, and the state banks. Should any of these corporations default, it is going to be the Russian public which will have to pay the cost as state reserves will be rapidly frittered away on keeping the inefficient state companies afloat.


Pathetic bad journalism by desperate Russophobes is really nauseating.

Exposing a fraud. Priceless.

For those of you who haven't noticed, in 2007 Russia edged-out France to become the world's seventh largest economy according to data gathered by the CIA.

GDP (PPP) estimates for 2007 ($ trillion)

(i) World 65.820
(ii) European Union 14.450
1. United States 13.860
2. China 7.043
3. Japan 4.346
4. India 2.965
5. Germany 2.833
6. United Kingdom 2.147
7. Russia 2.076
8. France 2.067
9. Brazil 1.838
10. Italy 1.800
11. Spain 1.362
12. Mexico 1.353
13. Canada 1.274
14. South Korea 1.206

It is widely expected that sometime this year Russia will surpass the United Kingdom for sixth place, an event that might be marked with cynical and/or protectionist editorials in newspapers and periodicals of the English language.

Or, perhaps, it might be marked with applause. Take for example two remarkable passages from articles published in the last few days:

Liam Halligan (for the Sunday Telegraph, 3/2/08, link): Over the last ten years, [Russia] has achieved possibly the most incredible economic turnaround in human history.

The Economist (2/28/08, link): To appreciate the impact oil prices have on the economy, compare real GDP growth of about 7% with growth measured in international prices. In dollar terms, says Rory MacFarquhar of Goldman Sachs, Russia's economy has grown on average by 27% a year, the fastest of any big economy since 2000. The flow of petrodollars is fanning a massive consumption boom, making Russia the sixth-biggest market in Europe. Disposable incomes (and retail trade) have been growing twice as fast as GDP.

These are quite flattering statements by Halligan and MacFarquhar, which truly reflect the situation in the ground.

(as opposed to the the misinformation distributed by the senile, desperate, and disturbed; read Aslund, Nemtsov, Illarionov, Romanov, Wolf, McFaul, and the other hired-guns, for example)


Russia's gaining ground on the United States, too. In 1999, Russia's GDP was less than 7% of America's. Fast forward to 2007 and Russia's GDP equals 15% of America's.

I happen to believe that Russia's GDP will accelerate at a breathtaking speed and surpass America's by 2020. Sounds impossible now, but certain things are coming into place; stars being aligned, if you say. More on another day.