FINANCE WAR PROBABLY HASN’T HURT RUSSIA TOO MUCH

John Helmer: How the Russian Economy Looks If You Aren’t Wearing NATO Night-Fighting Goggles

7/9/2017

Yves here. Notice that Russia is close to being an autarky and the sanctions appear only to have made it more so. Ooops.

By John Helmer, the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and an advisor to government heads in Greece, the United States, and Asia. He is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears

If your enemy is waging economic war on you, it’s prudent to camouflage how well your farms and factories are doing. Better the attacker thinks you’re on your last legs, and are too exhausted to fight back.  A new report on the Russian economy, published by Jon Hellevig, reveals the folly in the enemy’s calculation.

Who is the audience for this message? US and NATO warfighters against Russia can summon up more will if they think Russia is in retreat than if they must calculate the cost in their own blood and treasure if the Russians strike back.  That’s Russian policy on the Syrian front, where professional soldiers are in charge.   On the home front, where the civilians call the shots,  Hellevig’s message looks like an encouragement for fight-back – the economic policymaker’s equivalent of a no-fly zone for the US and European Union.  It’s also a challenge to the Kremlin policy of appeasement.

Hellevig (right), a Finnish lawyer and investment analyst,  has been directing businesses in Russia since 1992. His Moscow-based consultancy Awara has published its assessment of Russian economic performance since 2014 with the title, “What Does Not Kill You Makes You Stronger.” The maxim was first coined by the `19th century German philosopher Friedrich Nietzsche. He said it in a pep talk for himself. Subsequent readers think of the maxim as an irony.  Knowing now what Nietzsche knew about his own prognosis but kept secret at the time,  he did too.

Hellevig’s report can be read in full here.

The headline findings aren’t news to the Kremlin. It has been regularly making the claims at President Vladimir Putin’s semi-annual national talk shows;  at businessmen’s conventions like the St. Petersburg International Economic Forum (SPIEF);  and in Kremlin-funded propaganda -– lowbrow  outlets like Russia Today and  Sputnik News, and the highbrow Valdai Club. A charter for a brand-new outlet for the claims, the Russian National Convention Bureau, was agreed at the St. Petersburg forum last month. Government promotion of reciprocal trade and inward investment isn’t exceptional for Russia; it is normal practice  throughout the world.

The argument of the Hellevig report is that the US and NATO campaign against Russia has failed to do the damage it was aimed to do, and that their propaganda outlets, media and think-tanks are lying to conceal the failure. Small percentage numbers for the decline in Russian GDP and related measures are summed up by Hellevig as “belt-tightening, not much more”.  Logically and arithmetically, similarly small numbers in the measurement of the Russian recovery this year ought to mean “belt expanding, not much more.” But like Nietzsche, Hellevig is more optimistic. Here’s what he concludes:

  • “Industrial Production was down merely 0.6%. A handsome recovery is already on its way with an expected growth of 3 to 4% in 2017. In May the industrial production already soared by a promising 5.3%.”
  • “Unemployment remained stable all through 2014 – 2016, the hoped-for effect of sanctions causing mass unemployment and social chaos failed to materialize.”
  • “GDP was down 2.3% in 2014-2016, expected to more than make up for that in 2017 with 2-3% predicted growth.”
  • “The really devastating news for ‘our Western partners’ (as Putin likes to refer to them) must be – which we are the first to report – the extraordinary decrease in the share of oil & gas revenue in Russia’s GDP.”
  • “In the years of sanctions, Russia has grown to become an agricultural superpower with the world’s largest wheat exports. Already in the time of the Czars Russia was a big grain exporter, but that was often accompanied with domestic famine. Stalin financed Russia’s industrialization to a large extent by grain exports, but hereby also creating domestic shortages and famine. It is then the first time in Russia’s history when it is under Putin a major grain exporter while ensuring domestic abundance. Russia has made an overall remarkable turnaround in food production and is now virtually self-sufficient.”
  • “Russia has the lowest level of imports (as a share of the GDP) of all major countries… Russia’s very low levels of imports in the global comparison obviously signifies that Russia produces domestically a much higher share of all that it consumes (and invests), this in turn means that the economy is superbly diversified contrary to the claims of the failed experts and policymakers. In fact, it is the most self-sufficient and diversified economy in the world. Our argument that Russia’s economy is the most diversified in the world is easily proven by World Bank statistics on the share of imports of goods and services as a percentage of the GDP. This is illustrated by Chart 17, which compares the levels of import of Russia with a sample of countries.” Hellevig also urges using his purchasing power parity measure (PPP) of real output and goods flows rather than a nominal measure based on devalued currency exchange rates.

  • “We predict Russia to push through the 4 trillion level in 2017 and overtake Germany by 2018 to become the world’s fifth biggest economy.”

David Low’s cartoon in the London Evening Standard of October 31, 1939, two months after the Soviet-German Non-Aggression Pact was signed, and after Poland was invaded. Germany is now tied by the US and NATO to the Ukraine, and the guns are drawn openly. Not even guarded rapprochement between Germany and Russia is possible; there is no significant political support for it among German voters.

 

Click on first link above to continue reading.

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