> October 31 2008 02:00
> Financial Times
> Crisis-hit Russia must scale down its ambition
> By Robert Skidelsky
> The Russian stock market has lost 70 per cent of its value this year.
> The commodity prices that spearheaded its boom are now falling. The
> easy credit money from the west that fuelled it has now fled. Russia
> has failed to diversify its economy and its politics
> have long made investors nervous.
The Russian stock market is 35% owned by the state. The oligarchs took out some risky loans and got burned thanks to the freeze in the credit markets. Some will go under, no loss. But after eight years of Putin, Russia doesn't depend on foreign money, the oligarchs, or those stupendously rational and far-seeing foreign investors who went on to complete wreck their own economies.
> First, Russia's consumer economy has been built on the commodity
> economy.
Untrue. The commodity exports were squirreled away in reserves. The government spent money it generated through taxation and increases in real Russian output - meaning, there's plenty of room for Keynesian deficit spending.
> diversification away from
> commodities has barely started since the high price of oil strengthened
> the exchange rate and sucked imports into the retail sector, and oil
> revenues made it easier to posture as a great power.
Diversification has been real, broad, and well-documented. Russia has 500,000 scientists, a booming high-tech sector, and huge investments in nanotech and universities are coming onstream. It's next-door to a fabulously wealthy superpower (EU) and the fastest-growing economy on the planet (China), so it has no lack of customers.
> There are too many banks; most are undercapitalised.
The state owns 90% of all banking assets and did not invest in CDOs and other toxic Wall Street garbage.
> Russian banks and
> companies have about $450bn (362bn, £292bn) of foreign debt, $50bn of
> which must be repaid or refinanced by the year end.
Russia is a $1.3 trillion economy and as of Oct 31, had reserves of $484 billion.
> Mr Putin does not
> understand the need for a degree of consistency between economic and
> foreign policy
Medvedev is in charge, and is making all the right moves. It's interesting how fast he's grown into the job - Putin thoroughly tested him beforehand, of course, but he's already measured up to the extremely high standard set by his predecessor. Actually, Medvedev's crackerjack state of the Russian Federation speech is an interesting foretaste of the multipolar world:
http://www.kremlin.ru/eng/speeches/2008/11/05/2144_type70029type82917type127286_208836.shtml
-- DRR