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The Decline and Fall of the Putin Empire

Russia declining fortune

If the above chart (with our comments added in red) recently published by Bloomberg Businessweek looks familiar, it should. We published a very similar chart, showing the performance of the Russian economy since Vladimir Putin took power, back in May.  Back then we pointed out that the Putin economy has never reached the level attained by Boris Yeltsin at the end of his two terms as president, shown on the above graph by the point on the extreme left.  And more recently, the Putin economy has collapsed once and is headed for yet a second massive recession.  The GDP growth achieved by Putin during his first two terms was roughly half what Yeltsin had when he left office, and during his third term it is again roughly half the initial level.  Russia has already had one major recession under Putin, and is clearly headed for a double-dip.

Bloomberg’s reporting on the Russian economy ought to send chills down the spine of any intelligent Russian’s spine.

“It’s important that people still go to ADRs and GDRs because people don’t have too much confidence in Russia,” it quotes Alper Ince, who helps oversee about $9 billion as managing director of Pacific Alternative Asset Management in Irvine, California as stating.

And the reason for that lack of confidence is simple:  Putin’s twin failures regarding reform.

“You can build the best of breed pipes to trade Russia, but if Russia Inc. does not shape up its corporate governance issues, international investors will continue to sit on the sidelines,” Bloomberg quotes Luis Saenz, the London-based head of equity sales and trading at BCS Financial Group, as stating.  Putin has failed to reform Russia’s pandemic corruption despite nearly 15 years in power.

And Putin has likewise failed to diversify the Russian economy:

Russia’s phenomenal run of prosperity would have been an ideal time to diversify the economy beyond energy, a goal that harks back to the days of Soviet leader Leonid Brezhnev. Instead, energy’s share of the economy actually increased; as of late 2012, oil and gas accounted for about 70 percent of exports, compared with less than 50 percent in the mid-1990s, providing half of the government’s revenue and roughly 17 percent of GDP, according to the EBRD. Gazprom alone represents 14 percent of the Russian stock market’s total capitalization.

Putin has totally failed in both of his prime directives, corruption and diversification.

During the global economic downturn, Russia was the very worst performer in the G-20.  Gazprom stock has lost three-quarters of its value over the last six years even as energy prices have risen.  That’s because Gazprom’s future prospects are so bleak as the US weans itself off foreign oil and develops massive North American energy resources based on oil shale.

But as in Soviet times, there is no political accountability for the Kremlin. Russians have allowed Putin to seize total control of TV news, so many Russians simply don’t understand the true extent of Putin’s failures.  And even if they did, Putin freely liquidates critics and opposition leaders.  This means Putin has no more to fear from failure than did the Poliburo, and only national collapse can undermine his rule.

7 responses to “The Decline and Fall of the Putin Empire

  1. Maria Los

    This glorious country is led by a two-bit runt…..

  2. marduk ⋅

    this is true, but I would like to point out that any country, where the top quintile owns 70% of GDP can NEVER propsper. Australia also has an economy of $1.5 trillion and it barely covers 20 million people. Russia has lost a hell of a lot of people, but still there are roughly 80 million people living so deep in the shit that it beggars belief. most surving in the informal economy, I think I have mentioned before, a lot of the trade my line does from russia nowadays, apart from ore or coal, is local crime syndicates raiding every business they can and selling the assets they steal to Europe. And then there are the rich nations of Europe who purposely fuck russia just because they can. Maybe Putin is starting to believe all his bullshit on RT. But if he pushes too hard on the subject of Syria, we will see humanitarian catastrophe round 2 and Obama won’t be sending any rotten chicken this time.

  3. The take home message is that you can be a horrible, incompetent and corrupt person and people will put you in power. If you do a reasonable job under trying circumstances but get embarrassingly drunk at times you can be forgotten in a flash and all your work will be dismantled.

  4. Pingback: Putin walks Russia into a Gay Buzzsaw | Dying Russia

  5. Sergey ⋅

    Apart from 70% of the GDP held in the hands of the few, there other serious reasons for Russia’s economic decline. For example, the police there may walk into your office one day, show you a fictitious “court” order” whereby your business is either confiscated “for tax evasion” (which is a traditional bull…t reason) or because it “was sold” to other business” (???!!!), Yes, this is how it works there, and was done to hundreds of business and continues to be done. That is the government actually encourages the police to acquire other people’s businesses, and where do the assets and money go? To the government crooks and their wards. Small wonder that a lot of serious businessmen try to leave Russia. They undermine their own economy themselves. These people live “today” and they do not think about the day of tomorrow. A lot of Russian therefore define their government as a kind junta, and we all know juntas do not live long.

  6. Pingback: Ben Aris of Business News Europe, Getting Russia Wrong | Dying Russia

  7. Pingback: Tipping Russia into Revolution: Russia staring at recession on sanctions that could get tougher | 1913 Intel

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