Vedomosti Vid on the Russian budget

An interesting, though not particularly in-depth, report into Russia's budgeting woes - apparently the official budget for 2009 contemplated an average oil price of $95/bbl, with the worst-case scenario pegged to $50/bbl. Even that now seems like it may be unrealistically high, as Kazakhstan, for example, recalculated its budget based on a $40/bbl assumption last fall and (according to this video) is now using an estimate of $30/bbl for 2009.

The Russian government is trying to figure out how (or how far) to revise the oil price forecast downward, but may not formally revise the budget. The presenter notes that this difficult decision will ultimately be up to Putin and concludes that Russia may have two budgets this year - a magical one and a real one.

Why Putin is like Mugabe*

Zimbabwe's President Mugabe has been accusing his political opponents of intending to return farms to their dispossessed white owners.** Where have I seen similar populist rhetoric recently? Oh, right:

[image source]

The Nashi pamphlet this page comes from is an old story, but it is a good illustration of the Kremlin's main anti-Kasyanov talking point throughout the 07-08 election cycle - that he would surrender Russia's oil wealth to "the West" and take things back to the bad old days of the 1990s.

Here is a translation of the quotation attributed to Mikhail Kasyanov (under the banner headline, "This is what betrayal looks like"):

Having received the approval of American businessmen to enter the Russian presidential campaign, I have decided to sell Russian oil for three times less than the current market price.

And here is the actual quotation which appears to have served as the basis for the misquote above:

In his first interview with foreign media since announcing his candidacy, Mr Kasyanov said he would use the huge surplus from high oil prices to improve pipelines. He said: "Such projects would help lower the price of oil and gas on the market." A "fair price", he said, is $20-$25 a barrel. The price is now $63. "The world needs to think about alternative sources of energy, but use what we have now."

As Russian campaign spin goes, this is actually a pretty minor distortion, and no doubt Kasyanov would have been more accommodating, for example, to Western participants in the Sakhalin projects (in fact, one could argue that such accommodation would actually be in Russia's interest, since Western investment and know-how will likely be needed to maximize development of Russia's oil & gas sector). It's worth noting, though, that when Kasyanov was PM, he appeared to at least make a show of driving a hard bargain with Western investors in Russian oil projects.

Nevertheless, it served the Kremlin's interests to portray Kasyanov not only as the corrupt "Misha 2-percent" (a nickname acquired when two percent was enough of an alleged skim to seem offensive; never mind that the only proof of Kasyanov's corruption offered up to the public was a shady dacha privatization involving a sum which the barons of Rosneft and Gazprom would not bend down to pick up off the sidewalk on Tverskaya) but also as an agent of Western corporate interests. Similar nefarious intentions to forfeit Russia's oil wealth were ascribed to Vladimir Ryzhkov (apparently solely on the basis of a meeting with Dick Cheney).

Of course, the myth-making about Russian traitors would be nothing without the creation of a parallel mythology of Western politicos salivating at the prospect of carving Russia up and feasting on the oil wealth. Exhibit A in that book of fairy-tales is the infamous false claim that Madeleine Albright once stated Russia was unworthy of Siberia's oil wealth.

Unlike Zimbabwe, Russia is not a former colony of the West and has never been in danger of losing control of its natural resources. Apparently, Putin & Co. realized that the rhetoric of xenophobia and class hatred travels well to any country.

* Presumably one could fill many blog posts with why Putin is unlike Mugabe. I know almost nothing about domestic politics in African nations, so I would be on shaky ground trying to write such posts (as indeed I may be in trying to draw the comparison which provides the lede for this post). If you feel strongly about the distinctions, feel free to sketch out such posts in the comment section. Let me begin: Putin almost undoubtedly has more genuine popularity in his country than Mugabe does in his; on the other hand, Mugabe's political opponents seem to have actually made it on the ballot, an indignity which Putin refused to suffer.

** For all I know, this may be a valid accusation. My guess, however, is that Mugabe is attempting to spin a more conciliatory stance on the part of the opposition toward the farmers into some sort of treacherous behavior which goes against the interests of the state.

The end of the Putin Era (?) in posters

The folks at Grani.ru, who brought us the Free Khodorkovsky! poster contest a few years ago, have updated the contest concept for the 2007-08 political season. This time, the theme of the contest is "The End of the Putin Era." The contest asked artists to respond to a few questions:

What awaits the country in 2008? When and how will the ruling regime in Russia change? What are the results of Putin's rule? Where will the new leaders take Russia?

I've decided to post a few of these posters here and will even attempt (no doubt futilely, in some cases) to explain the humor or multiple meanings behind some of them.

First, a few of my favorites:

This one I love because it's a photo that anyone in Moscow could have taken - a photo of
an ad for Putinka vodka's toast hotline underneath the sign for the Lubyanka metro station.

This one positions a glass in front of a bunch of bottles of
Putinka in such a way that letters spelling "Kaput" are hightlighted.

Self-explanatory.

This one I liked because it represents the role of broadcast media in inflating
the popularity ratings or visibility of various public figures in Russia (the 1 on the
pump is the logo of the state-run Channel 1 network, also known as ORT).

Represented are Putin, Ivanov and Medvedev, and also, among others, Ksenia Sobchak
(who's sort of like Russia's answer to Paris Hilton) and ORT political commentator
Mikhail Leont'ev, who was already delivering blisteringly anti-American monologues a
few years ago, so I can only imagine what he's progressed to lately.

"A king is made by his retinue," reads the poster, which has the king surrounded by
sixes ("шестёрки") of various suits. In Russian slang, to be someone's "шестёрка"
means to be their "flunky" or "gofer" (according to Multitran), but to give the word its
proper prison slang meaning (since VVP likes to throw around a bit of prison slang
himself now and again), it's best translated in this context as being someone's bitch.

A number of the posters dealt with the possibility that Putin might stay in power or continue to run things from behind the scenes, and with the Russian electorate's lack of choices:

This is another great play on an image from pop-culture: "лохотрон" means any kind
of a scam designed to ensnare suckers or "лохи." The smaller text reads "the future does
not depend on you." The reference is to an ad campaign by mobile telephony provider
Megafon, which had the tag line "the future depends on you." Megafon was originally a
St. Petersburg-based company (Northwest GSM) which exploded onto the national scene
in the early years of Putin's rule, allegedly thanks to help from Putins telecoms minister
Leonid Reiman, who supposedly has an interest in the company.

The lenses of the glasses read "the end of the Putin era," and the
text below reads "visible only through rose-colored glasses."

Pretty much self-explanatory; the small print
reads, "I'll make you an offer you can't refuse..."

The hand is making the "fig," a hand gesture sort of (though not entirely) like giving
someone the finger in the US. The gesture can be used in Russia to signify refusal
when asked to do something, as if to say, "like hell I will." The creative tilting of
the 8 in 2008 to make the infinity symbol suggests who is telling whom to go нафиг.

Another frequently recurring theme in the posters submitted for the contest was Russia's oil wealth, and all of its consequences - from international braggadocio to domestic dependency to good old-fashioned class struggle:

Self-explanatory.

"We are sitting well!"
This expression can mean "everyone's having a good time" when used in the
context of a social gathering; but "to sit on the needle" or "become seated on the
needle" is Russian slang for becoming hooked on intravenous drugs.

"The Chekists are on duty until the last drop..."

This one may be my very favorite, because it incorporates themes of both oil
wealth and the power of the broadcast media. The figure with its feet propped
up on the barrel of oil is labeled "the authorities" (власть can be a difficult word to
translate), and the submissive figure watching TV is labeled "the people."
The caption below reads "an earth-shaking (or 'epochal') age."

"Addicted to oil"?

An interesting article exploring the potential pitfalls of a petrodollar-addicted economy - and noting the discount to the RTS resulting from the uncertainty associated with the 2008 political succession:

Market Comment: The trouble with oil
Alfa, Russia (via bne)
Monday, April 2, 2007

[...] The focus today will be on oil. The trouble with the current rise is that Russian equities, on balance, no longer benefit from it. Quite the opposite - the rising price presents a clear threat to global equity markets at a time when investors are preoccupied with worries over the US economy and global growth.

Despite the more than 8% rise in the price of oil last week, the local bourses ended the week with sliding prices and only a small gain (the RTS rose 1.1% while MICEX ended 0.2% lower) for the week. The reason is because since mid-2006 the main driver of the local equity markets has been the trend in global emerging markets. Ever since the re-weighting of Russia in the GEM index (as a result of the removal of restrictions on Gazprom shares), the RTS has moved more in line with MSCI GEM. At the end of 2006 Russian equities accounted for 10% of the GEM universe, and the valuation of the market, based on 2007 earnings, was considered to have closed to an appropriate discount (10%) given the uncertainty associated with oil vulnerability and the political succession.

Hence the current rise in the price of oil presents much more of a risk to the market than it provides a favorable backdrop:

• Rising oil threatens economic growth in the global economy and causes inflationary pressures. Therefore while the US Fed may not be inclined to raise rates because of the threat to growth, it cannot easily start to cut either because of the inflation threat.

• This means that one of the optimistic assumptions that supported equities during last December's strong run, i.e. falling rates in 2007, is less sure and allows the more bearish investors to again focus on the poor growth indicators.

• Rising oil does not materially affect the earnings growth of either the oil shares or the market because of the high incremental tax take by the state.

• High oil does of course add to federal budget earnings and helps boost the Stabilization Fund. But since January the ruble is now much more highly correlated on a trend basis with the oil price (see later).

This means that higher oil also pushes the ruble higher and the broader effects (i.e. more speculative flows and greater liquidity) increase inflationary pressures.

• For export earners, i.e. mainly the extractive industries, that means a margin squeeze as dollar-based revenues are reduced and domestic costs are increased.

• If the price of oil spikes, or even creeps, much higher, it will add to the weight of worries already depressing international equity markets.

That could very easily result in another round of fund redemptions from nervous investors - especially if there is also some other negative indicator in the global economy (i.e. a bad US housing or payroll report this week) at the same time. [...]