FREEFALLING…Putin Style (Opinion)

The rouble has crashed, it has fallen to 80 then resuscitated to 70 to one dollar. The Russian government is unable to support the currency.   People rush to dump roubles and salvage goods for them as best they can. Rising interest rates seem to have failed to stabilize banks or the currency. While not admitting a financial panic, watching local behavior, the conclusion is hard to avoid. People are urgently trying to maintain themselves while the currency loses value before their eyes.

This is the true price of Putin’s invasion of Ukraine, it is a price paid by the average Russian citizen, their pensions and salaries becoming more and more meaningless as the consumerism they have grown to cherish is pushed further away from their reach. The people have been told by their leaders and the state-controlled media that the economy has been attacked by the West, and that they will prevail by being morally strong. The call to patriotism and pride resonates with the common people; they believe they will defeat the West. Some stories are heart warming reminders that people will find silver linings no matter how foolhardy their leader’s behaviors might be.  

Oil Prices Continue the Slide

The Russian plans for $95 per barrel benchmark prices have been buried beneath a gusher of U.S. oil production. Oil shale projects with low interest financing have proven influential and persistent despite low market prices. As benchmarks fall below $60, there are few signs of falling U.S. production, and the world still has an oversupply of crude. The ironies are not lost here. It resembles a Russian tragedy of its ages, and played out many times before. Whether by Czarists aristocrats, class and privilege conscious communists, or as now, billionaire oligarchs, the common people find the reasons to go on believing. They buy into a dream that they will never share, or, perhaps as in America, the poor feel it is their role- to be loyal to the rich. While appealing to patriotism, It appears that much of the international aggression is aimed at creating greater luxuries for the oligarchs.

The motto emblazoned across this prow of this sinking ship is that:  the Crimea is ours…. This is little comfort to the growing bottom economic layer where inflation and a crashed currency have made comfort less obtainable. It is not a substitute for the middle class preferences that keep them preoccupied with personal progress, it is not a substitute for the capital flight from Russia as investors have withheld or withdrawn nearly a trillion dollars in investment capacity from the Russian economy since the invasion of Ukraine. While Putin makes news by elaborate gestures to Turkey, China, and India this path to diversification is characterized by weakness and desperation. It is not the high-tech super warship cancelled by France, or the elaborate gas pipeline into central Europe.  All over the world, fast money moves are building new Russia-free linkages, and this is the true damage brought by Putin, he has set Russia on a path of isolation as the global economy grows exponentially around his military aggression.

The Powers of Political Media

Like the United States, Russia has a propaganda machine that feeds a constant stream of counter-reality to its people. In the United States for example, they were fed a multi-billion dollar deluge of ant-Obama, ISIS, and Ebola.  Many believed that the U.S. was under siege by Obama, ISIS and a flood of immigrants from Latin America, who also carried ISIS and Ebola.  The hysteria worked and despite a booming economy and amid excellent signs of economic recovery, the American people recently voted a radical, pro-corporate government into place that is determined to depress the middle-class. There is a similar dynamic in Russia, where news media have created a narrative that holds Obama to blame for Putin’s aggressions. While Putin may be building seaside resorts for his rich allies, the average Russian believes they are in a Holy test of will and patriotism.  The problem in both the U.S. and Russia is simply this, under media influence people support political causes that will limit progress and do permanent damage to their future prospects.

Sanctions Accelerate Damage

The world owes a debt of gratitude to President Obama’s leadership on Ukraine sanctions. The Obama response to the invasion of Ukraine marks a noticeable first: oil is not a fuel for military aggression.  The oil-money powered Russian military has not achieved its objectives so far. The simple and easy conquest of Ukraine has brought instead an economic maelstrom.  War is a failure of reason; historically, it has been a tool of base convenience and essential evil.  Sanctions are an effort to bring about reason, debate, and positive change. In Russia, there is a gravity–defying syndrome of patriotism and bravery in the face of growing economic chaos. The people, their hopes and political will, all committed to keeping the society moving forward. However, like any objects spinning in air, there is a good chance that, in the end, gravity will prevail.