EXCHANGE RATING RUSSIA DOWN AND OUT

https://orientalreview.org/2017/09/18/exchange-rating-russia/

Why Russia — a country with less money than Canada and fewer people than Nigeria — runs the world now” wondered the Canadian newspaper National Post in January. The piece doesn’t give useful answers: nuclear weapons, good diplomacy, yes, but also the usual claptrap about “ruthlessness” and “Abandon[ing] economic worries to double down on efforts to grab geopolitical status”; in short only a brute lashing out in delirium tremens. The editors should better have wondered whether the headline even made sense: the first point is wrong and the second irrelevant. But, like so much of what passes for analysis in the Western media, it’s written backwards: it’s decision-based evidence making.

Talking about the relative insignificance of Russia’s GDP is an old game: Wikipedia says Canada’s GDP is greater than Russia’s and Germany’s is about two and a half times greater. These comparisons all assume that the price of the ruble in US dollars is a measurement of Russia’s production; a mere tweak in the relative exchange therefore knocks Russia from Number 8 down to below Spain according to Business Insider in 2014. Easy to calculate, easy to write, these head nodders are just feel-good junk: Russians don’t actually eat dollars, they don’t buy their necessities with them and they won’t have to eat grass and Putin speeches when a ruble buys fewer USDs.

There’s something deeply misleading and, in fact, quite worthless about these GDP comparisons. Whatever rubles are selling for at the moment, Russia has a full-service space industry which has the only other operating global satellite navigation system, the only taxi service to the ISS, much of which it built, and, apparently, the only rocket motors good enough for US military satellites. Neither Canada nor Germany, let alone Spain, does. It has an across the board sophisticated military industry which may be the world leader in electronic warfare, air defence systems, silent submarines and armoured vehicles. Canada, Germany, Spain do not. It builds and maintains a fleet of SSBNs – some of the most complicated machinery that exists. Ditto. It has a developed nuclear power industry with a wide range of products. Ditto. Its aviation industry makes everything from competitive fighter planes through innovative helicopters to passenger aircraft. Ditto. It has a full automotive industry ranging from some of the world’s most powerful heavy trucks to ordinary passenger cars. It has all the engineering and technical capacity necessary to build complex bridges, dams, roads, railways, subway stations, power stations, hospitals and everything else. It is a major and growing food producer and is probably self-sufficient in food today. Its food export capacity is growing and it has for several years been the leading grain exporter. It has enormous energy reserves and is a leading exporter of oil and gas. Its natural resources are immense. Its pharmaceutical industry is growing rapidly. It is intellectually highly competitive in STEM disciplines – a world leader in some cases. Its computer programmers are widely respected and regularly win the ACM International Collegiate Programming Contest. (Yes, there is a Russian cell phone too.) Its social networking apps attract users outside Russia (especially with fears that US-based ones may be censored or otherwise controlled). It’s true that many projects involve Western partners – the Sukhoy Superjet for example – but it’s nonetheless the case that the manufacturing and know-how are now in Russia.

Germany or Canada has some of these capabilities but few – very few – countries have all of them. In fact, counting the EU as one, Russia is one of only four. Therefore in Russia’s case, GDP rankings are not only meaningless, but laughably so. While Russians individually are not as wealthy as Canadians, Germans or Spaniards today, the foundations of wealth are being laid and deepened every day in Russia.

And, speaking of oil prices, what these head-scratchers all miss is this simple fact: Russia sells oil in dollars but produces it in rubles. So, whatever the exchange rate, things pretty well balance out. In fact, thanks to the exchange rate, Russia had some of the lowest production costs, measured in USD, in the world in 2015. It also funds its space effort, automobile production and wheat fields in rubles. And sells whatever exports they produce in dollars.

What of the future? Well there’s a simple answer to that question – compare Russia in 2000 with Russia in 2017: all curves are up. Meanwhile sanctions are driving the Russians to create new industries, oilfield services for one, or to boost others: agricultural products are now the second-largest export sector. Understandably, many Russians prefer the long time gain to the immediate (and declining) pain and hope the sanctions continue. For what it’s worth, PwC predicts Russia will be first in Europe in 2050, but, even so, I think it misses the real point: Indonesia and Brazil ahead of Russia? No way: it’s not GDP/PPP that matters, let alone how many USDs your currency buys, it’s full service. (Anyway, by 2050 the renminbi or gold will likely be the measure and how will the USA itself look by that measurement?).

Russia has a full-service economy and it won’t become any less so in the next 30 years. And there’s very few of them. And… in that little group of four autarkies on the planet, which are on the rise and which not?

Simple-minded GDP comparisons by exchange rate cause people to get it wrong over and over again. A more intelligent question would be to wonder whether Russia, hampered in the past by autocracy and Marxism-Leninism, might be about to show its real possibilities.

A crime against the Russian spirit

Window

I open the full window, rather than just the fortochka, in October!!!!

Coming as I do from a country with pretty formidable winters to another, I was astounded how wimpy Russians are.  Come October, the windows are nailed shut and the fur hats are clamped on tight. But I remember only two really cold — 25ish — winter days in three years there.

Why Russia Hasn’t and Won’t Invade Ukraine

These pieces are papers that I believe to be still relevant; they were published earlier elsewhere under a pseudonym. They have been very slightly edited and hyperlinks have been checked. NOTE 2017: I originally wrote this in November 2014. Breedlove has come and gone but a new American general is apparently believing that there are thousands of Russian soldiers in Eastern Ukraine. So this is apposite again.

https://orientalreview.org/2017/09/11/russia-hasnt-wont-invade-ukraine/

Here we go again. NATO is again – how many times does that make it? – echoing Kiev and saying that Russia has invaded Ukraine. Or so says NATO’s General Breedlove. “‘Across the last two days we have seen the same thing that O.S.C.E. is reporting,’ General Breedlove said at a news conference in Sofia, Bulgaria. ‘We have seen columns of Russian equipment, primarily Russian tanks, Russian artillery, Russian air defence systems and Russian combat troops entering into Ukraine.’” Well, here are the OSCE reports, read then and see whether you think Breedlove is telling the truth: columns moving around in east Ukraine, yes; crossing the border, no. Meanwhile, back at the Pentagon, the official spokesman has no “independent operational reporting that tells me that they have crossed the border”. But NATO has its own reality.

So has Russia invaded Ukraine? Of course, that all depends on your definition of “is” is, or some similar piece of deceptive hair-splitting, doesn’t it? But, for most people, “invasion” means regular troops and equipment crossing the border and staying there. Is Moscow aiding the rebels in the east? Probably. But that’s not what’s being claimed.

The neatest way to respond to these endless frothings is this:

If Russia had invaded, you wouldn’t have to ask; if you have to ask, it hasn’t.

It would have happened quickly and be plain for all to see. A thousand soldiers, a dozen or two tanks is not how it would have happened: it would have been big, it would have been sudden and it would have been over quickly. There would be no need for grainy satellite photos of combine harvesters or whatever they were; no need for reporters who forgot their cell phones saying they saw something: there would be Russian soldiers at the Dnepr certainly and maybe in Kiev or Lviv; Russian soldiers, guns, helicopters, tanks and aircraft all over the place. (Interesting to speculate, as it gets colder and armed thugs throw their weight around, how Russian troops would be received in Kiev today, isn’t it? But we’ll probably never know).

Or at least the first part would have been over quickly. Just like the US invasion of Iraq. Getting to the Dnepr, Kiev or Lviv would have been easy, but once there, the Russians would have found themselves surrounded by people who didn’t want them to be there. And that, as the Americans found out in Iraq, is quite a different thing. If one were to take a horizontal slice of Ukraine from east to west and ask the inhabitants to rate the presence of Russian soldiers in their neighbourhood from one to ten, one would get an answer ranging from ten in the far east to minus ten in the far west: flowers in the east, bullets in the west.

Russian troops in the centre and west would find themselves opposed by people who had had military training in the Soviet or Ukrainian Armed Forces, many of whom had military experience in Afghanistan. In other words, Russian invaders would be met with exactly the same response that western Ukrainian invaders found in the east.

Crimea was different: there it was all flowers, all the way and the borders are clear, distinct and obvious. Not at all the same in the rest of Ukraine. (NOTE 2017: And the Russian troops were already there, a point that Western accounts usually glide over.)

Yes, the Russian Army could get to the western border in a week or two without much difficulty but it wouldn’t be able to stay there.

So that’s why Moscow hasn’t and won’t “invade Ukraine”: it doesn’t want to find itself bogged down in months or years of ambushes, IEDs and all that. And then probably have to leave at the end, anyway. Moscow has watched the US in Iraq and Afghanistan. And, of course, it remembers its own experience in Afghanistan. Huge cost for a trivial and momentary gain.

The same reason, come to think of it, why Moscow, with its alleged desire to rebuild the empire or whatever, didn’t put Georgia into the bag in 2008. And why it won’t invade Estonia either. It could do it, but it wouldn’t be worth it.

Afterword: All this is predicated on the West confining its support to the discreet provision of training and weapons (something that Breedlove and the others don’t talk about much – the projection in this whole affair is enormous). Should NATO forces enter Ukraine and move east, then all bets are off.

RUSSIAN FEDERATION SITREP 21 SEPTEMBER 2017

WADA YA KNOW? Fake story, fake accusation as I said at the time “My default position nowadays is that it’s all lies.” NYT reports that WADA has cleared 95 of the 96 athletes they looked at. But that propaganda outlet cannot resist suggesting that that Russia may have destroyed the evidence. That’s the information war: smear the unfounded charge all over; when the story collapses and the damage done, move on to the next one. What we did learn however, is that a remarkable number of Western athletes have a doctor’s note that allows them to take banned substances. Interesting eh?

MOSCOW ELECTIONS. While the pedestal party won overall, there was some excitement because, in a very low turnout, “liberals” organised a win in some seats in Moscow. Karlin is not impressed and points out the correlation with bicycle rental stations. Shamir takes it more seriously seeing it as the latest Washington regime change effort. Perhaps he’s right: both The Guardian and Newsweek hail it (BTW: the comment by Germann Arlington absolutely nails the Big Inconsistency of Western reporting: “If the elections are rigged then the result should have been the usual 98% for Putin’s party. If the election is not rigged then why is it always presented as such?”). Russian politics are pretty frowsty: the pedestal party dominates (but the Putin Team is popular) the KPRF and LDPR were led by the same guys when the USSR was still around, even Yavlinskiy (then, now) is still out there (Crimea is part of Ukraine: not a big vote getter). One day things will start to change but I doubt this is the moment.

LISTENING IN. Wikileaks tells us about Russian scanning of electronic communications. Putin often tells us that everything is done legally. Well, it always starts that way, doesn’t it? If they can, they will.

ZAPAD-2017. Well, the exercise is over and Russia didn’t conquer/invade/attack or even threaten anybody. Next overreaction scheduled in four years. (I amuse myself laughing at the excitables.)

SAUDI-RUSSIA VISIT. My take on Salman bin Abdulaziz’ visit to Moscow. I remember that Abdulaziz switched from London to Washington in 1945 and speculate that Riyadh may again be adjusting its place in the developing new power order.

STALIN’S NOT BACK. Robinson describes a visit to a church dedicated to the New Martyrs situated on a Cheka killing ground. The truth is that Russia remembers everything.

NEW PARK. The horrible old Rossiya Hotel is gone and replaced by an interesting park (design idea).

SANCTIONS. According to the UN rapporteur, sanctions and counter-sanctions cost the EU US$3.2 billion a month; the Russian economy has lost US$55 billion in total. He calculates the total cost to both at US$155 billion. In short, he agrees that Europe has been hit much harder than Russia and certainly much more than the USA. Perhaps that was the real point: Washington’s “overriding strategic objective the prevention of a German-Russian alliance“.

RUSSIANS IN SYRIA. The author has sent me a file of photos which are of interest. What is immediately apparent (I can’t help comparing them with what I saw during Chechnya I) is the aura of tough professional competence and lots of sophisticated kit.

S-400. Turkish President Erdoğan says Ankara has already put down a deposit on the S-400 SAM system. I am still rather puzzled: this is a crown jewel weapon system and Turkey is, still, in NATO. We are assured that this is just the export model and that even taking it apart wouldn’t reveal its secrets.

TRUST. Trump announced the closure of the CIA support to Syrian rebels. Or has it ended, or was that just weasel-wording that allowed the Pentagon to continue? Who can say? Foreign Affairs magazine, no less, has just gone public with The Pentagon Is Spending $2 Billion Running Soviet-Era Guns to Syrian Rebels” and there are persistent reports (denied by Washington of course) that US helicopters lifted people out of Deir ez-Zor after the Syrians broke the siege. (Deir ez Zor was the scene of the US attack on Syrian forces a year ago.) Trump’s constant references to the Iran nuclear deal as “one of the worst” does not give anyone confidence that Washington would keep its word to Pyongyang (or anybody).

AMERICA-HYSTERICA. All the reasons why the Russia-election-interference story is bunkum. Not least of which is the remarkable inactivity of the FBI: for example “The FBI has never questioned Assange [he confirms that] or Murray” and neither has it ever looked at the DNC servers. Nonetheless, every time you think the hysteria has gone as far as it can, it goes a bit farther: Morgan Freeman joins the circus. Bershidsky trashes the latest nonsense. One can hope that it’s finally jumped the shark.

NEW NWO. Beijing shows its teeth.

© Patrick Armstrong Analysis, Canada Russia Observer

RUSSIAN FEDERATION SITREP 6 SEPTEMBER 2017

AMERICA-HYSTERICA. “A New Report Raises Big Questions About Last Year’s DNC Hack” finally got the VIPS analysis into the mainstream. (Briefly: Guccifer 2.0 documents were locally downloaded and doctored to give a Russian flavour). Has this killed the story? Maybe: the MSM has been shrieking about other things since. (And the interminable US investigations inch closer to the truth.) Normal hysteria returns: “Putin’s Hand Can Clearly Be Seen In the Chaos of a Destabilized West“. Amazing how powerful these people think he is, isn’t it? Nothing is beyond his reach (except Kiev and Vilnius.)

DIPLOMATIC PROPERTY. A complete violation of the Vienna Convention: “Article 22. The premises of a diplomatic mission… are inviolable… The host country must never search the premises…”. Washington has set a precedent that will come back to bite it: what’s to stop any country that thinks it’s on Washington’s target list from doing the same? Incredible. Who’s in charge?

BRIDGE. The Kerch Strait bridge rolls along. Here’s the railway arch being moved into position and the first ship passing under it. Here’s an amusingly one-sided account of things from the Daily Signal.

ZAPAD 2017. NATO is giving itself a major case of the fantods over this exercise “close to its borders”. The website so you can follow yourself: 14-20 September in Russia and Belarus, 13K troops, 70 aircraft, 250 tanks, 200 guns and 10 warships. “Anti-terrorist” of course – aren’t they all these days? – “The exercise stipulates that some extremist groups have penetrated… “. They have them every four years.

QUAGMIRES. Shortly after Moscow began its intervention in Syria, Obama opined “An attempt by Russia and Iran to prop up Assad and try to pacify the population is just going to get them stuck in a quagmire and it won’t work“. Well, yesterday Damascus broke the seige of Deir ez-Zor which probably marks the beginning of the mopping up phase. In short it’s not a quagmire and it did work. The US involvement in Afghanistan, on the other hand, is about to enter year 17, getting on for twice as long as the Soviets were there. That is a quagmire and that hasn‘t worked; the Pentagon isn’t even sure how many soldiers it has there: 8.4K, 11K or more? Russia has had three military actions this century – Chechnya II, Ossetia and Syria – all victories; all US military interventions have been failures. What’s the difference? I would suggest that Russia initiates military violence with a clear plan 1) to do only what violence can do 2) that is integrated with a diplomatic and civil program for the things it can’t and 3) coordinated with reliable allies on the ground. When it has done what it set out to do, it stops. Washington, on the other hand, 1) expands its aims after the initial success far past those that violence can achieve 2) has a negligible diplomatic effort and 3) its allies on the ground turn out to be phantasms of the Washington echo chamber. Added to which, I do not believe that the US military is nearly as competent as its cheerleaders think it is; I suspect it resembles the post-Vietnam mess I saw on exercises in Germany in the 1980s. Maybe even “hardwired for failure“.

ISRAEL. Jerusalem seems to have understood its defeat sooner than Washington. Iran has a much stronger presence in Lebanon, Syria and Iraq thanks to two decades of calamitous interventions. It is argued here and here that a nervous Netanyahu received a dusty answer from Putin in Sochi: Iran is Russia’s “strategic ally in the Middle East”.

BRICS. The summit communiqué is rather blah except for 10 and 11 which deal with finance and currencies. There’s a story that China “is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold“. This would be a strong blow to the power of the US dollar and, by extension, of Washington itself. When Kennan warned against the “superficial and ill informed” decision to expand NATO I don’t think he foresaw all the downstream consequences. Beijing, famous for long-term thinking, took a warning from it too. Newton’s Third Law of geopolitics.

OOPS! It will be at least 2024 before the US can replace the Russian rocket motors. Carefully excluded from Congress’ sanctions bill of course.

KOREA. Has there been much mention in your local news outlet of the US-South Korea exercises of 21-31 August which, they say, sometimes include practising “decapitation strikes”? (The media often leaves out important synchronicities.) I’ve heard that North and South will meet in St Petersburg. We shall see; there is a solution to the problem: what Beijing calls “double suspension“. And it probably doesn’t require Washington: Seoul could agree to stop the exercises and tell some of the 35K+ US troops to leave. Putin has strongly condemned Pyongyang’s tests: “a flagrant violation“.

© Patrick Armstrong Analysis, Canada Russia Observer

RUSSIAN FEDERATION SITREP 24 AUGUST 2017

THE NEW NWO AND RUSSIA. This is very much worth reading. The authors argue that in the coming (well, already here) rivalry between the American maritime power and the Chinese land power, Russia is the swing player that can hand victory to one or the other: “So logic says that the US should be very nice to Russia and seek to establish some kind of military alliance”. Well, logic’s voice isn’t loud enough for the US Congress to hear. Also interesting is their discussion of Germany’s choices and the important role Saudi Arabia could play if it changes protectors again. (I too wondered this two years ago.)

PUTIN’S POPULARITY. Some Western academics asked “But is his popularity real, or are respondents lying to pollsters?” and concluded “Putin’s approval ratings largely reflect the attitudes of Russian citizens.” I didn’t bother to read their paper because I know – as does any serious observer – the answer already. Of course he’s popular: he is the leader of a team which has achieved a tremendous turnaround in Russia’s situation. Since 2000 all indicators are up. I wish we could say the same in our part of the world.

RUSSIA INC. GDP grew 2.5% year-on-year in the second quarter; this is the highest growth since 2013. PMI is up to 52.7. Inflation is the lowest in five years.

USSR DEBT. With a payment to Bosnia, Moscow has paid off the last of the debt it inherited from the USSR. When an earlier agreement that the 15 would divide the debt fell apart, Moscow took responsibility for all of it in return for USSR assets abroad. It did this despite the fact that its creditors insisted on repayment while many of its debtors could not pay. The total was about USD80 billion and many debts to it were forgiven. I well remember how glad we all were that it took responsibility for the debts as well as the other leftovers: weaponry outside, nuclear weapons and its guarantee of Russian citizenship to any Soviet citizen who wasn’t automatically given citizenship where he lived. It was only later that the last three were rebranded as evidence of imperialistic intentions.

DEMOGRAPHICS. There has been a small net decline in Russia’s population this year after several years of growth. We will see if this is a bump or a trend. (Although Karlin, who is much more knowledgeable than I, predicted a return to “normal” rates two and a half years ago.)

AGRICULTURE. The Agriculture Minister estimates the grain harvest will be 110 million tonnes which would leave as much as 40 million for export. So Russia will presumably keep the title of number one.

VISA RETALIATION. My take: I believe Moscow is ready to follow Washington right down to zero representation is that’s where it goes. But, if the Russiagate bubble bursts (probably the most severe blow is the exposure of the Guccifer 2.0 fake by VIPS) then the original pretext will burst too and things can get back to normal.

MAKING WATER RUN UP HILL. Lithuania is getting LNG from the USA and Ukraine coal from the USA. More expensive but supposedly for security. Well, whatever: if they want to pay more, let them. Of course in all likelihood they will “pay” with IMF or EU loans. Payback’s a problem for later.

CHANGE OR BLIP? The Prime Minister says Riga is interested in better relations with Moscow and a Polish poll shows number who regard Russia as a threat down about 50% in 3 years. After all, despite years of “Europe faces a ‘real threat’ from Russia” Russia still hasn’t conquered anybody. But that just makes some people shout louder: “The growing Russian military threat in Europe“.

TRUMP KEEPS AFGHANISTAN GOING. Reinforcing failure. Trump Vows To Leave A Better Afghanistan For Nation’s Grandchildren To Fight In. The generals rolled him, as they rolled Obama. And if it really was short skirts, then there’s a lot more to that story than he, or McMaster, probably know. Today the Americans get their supplies in via Pakistan or the Central Asian countries (through Russia). Washington has made threatening noises at Pakistan and Russia. How then?

CHICKENS, HOME, ROOST. Torchlight parades in Kiev, Riga, Tallinn. And now Charlottesville. “Nationalists” there, but “Nazis” here. Some historical background for the Ukraine case; Baltics.

AMERICA-HYSTERICA. Newsweek discovers a new bottom level. “Charlottesville’s Alt-right Leaders Have a Passion for Vladimir Russian Federation President Putin“.

UKAINE. More signposts of disaster. Ukrainians now spend 50% of their income on food; not poverty says the Minister of Social Policy fatuously but because they like to eat well. The Economist rates Kiev among the ten least liveable cities. Did Ukraine supply the rocket motors to North Korea? And, I’ve mentioned this before, but the longest-lasting effect of the Kiev coup may be a nuclear disaster.

© Patrick Armstrong Analysis, Canada Russia Observer

DIPLOMATIC RECIPROCITIES

(Question from Sputnik about my thoughts on Moscow’s reaction to the US visa slowdown.)

The cynic would say that, after the reduction, the US has too few staff to spare from plotting Putin’s overthrow to do normal diplomatic duties. Or maybe it’s some half-witted notion that, deprived of a chance to go to Disney World, the Russian population will rise up and overthrow Putin and let the US Navy into Sevastopol at last. It is however somewhat ironic, given the American confidence in the superiority of their own system, that they would want to make it harder for Russians to experience such a superior exemplar of freedom and democracy.

As to Russia’s retaliation, the diplomatic business is based on reciprocity or so, in my experience, is the Russian practice. So there will be some retaliation and one that will likely astonish Foggy Bottom

My belief is that Russia has realised that, as Putin told Stone, individuals may change but the US system does not. Given Washington’s support for opposition figures, its predilection for interference, its funding of GONGOs hostile to the Russian government, military actions in the neighbourhood, oft-stated declarations of enmity culminating in the latest sanctions, I would expect that Moscow is ready to follow Washington all the way down to zero representation if that’s where it goes. Moscow has less to lose than Washington.

One can always hope that a more sensible approach will win out but that hope is ebbing away as Trump makes more and more concessions to the War Party and his “why not make friends with Russia” thoughts are washing away.

If — one never wants to completely give up hope — the Russiangate nonsense is blown up thereby destroying the pretext for the original US actions, then maybe we can get back to something normal.

(But I would still advise Russia — as I would other countries — to insist on exact reciprocity of numbers and to expel all American GONGOs so as to reduce the capacity for mischief.)