“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Wednesday, December 03, 2014

Capital flight and the pressure of Western sanctions on Russia is biting

The Guardian view on Russia: rouble trouble

As Vladimir Putin pursues a high-stakes expansionist foreign policy, problems are piling up on the home front. The rouble appears to be in freefall. Never since the financial crash of 1998 has the national currency seemed so weak. Russia’s central bank has already spent over $100bn this year trying to prop it up. Fears of inflation, and of bank runs by Russian citizens worried about their savings, are once again haunting the country, a chilling reminder of the financial instability of the 1990s. Moscow is now expecting the economy to enter recession next year, a sharp contrast with its earlier forecast of 1.2% growth in GDP. Capital flight is reaching new heights.
The main sources of this grim reality are to be found in the 40% drop in global oil prices since the summer, as well as in western sanctions imposed in response to Russia’s actions in Ukraine.
But the bleak economic picture is also the result of one of the hugely wasted opportunities of the Putin era: there has been no genuine economic modernisation of Russia, a country that remains overwhelmingly dependent on oil and gas exports, just as it was in Soviet times. For all of Mr Putin’s nationalistic posturing, this is a political leadership that has failed to bring Russia into a 21st-century economy centred on innovation, knowledge and new technologies. The heavy industry inherited from Leonid Brezhnev’s USSR has been the foundation of the Russian petro-state. More than two-thirds of Russia’s exports are from the energy sector.
Mr Putin’s domestic strategy throughout the last decade has been to present Russians with a deal: improved living standards in return for the curbing of political freedoms and concentration of political power. This quid pro quo was made possible by higher oil prices, which rose from $30 a barrel in 2003 to a peak of $147 a barrel in 2008.
Soon Moscow will surely try to mitigate the potential consequences of the rouble’s decline, including unease at home. It will hope that a weakened currency will reduce the pressure on the budget, by boosting the rouble value of Russia’s oil reserves. But that won’t stop Russian banks struggling to deal with debt. And a continued fall in the exchange rate will encourage Russians to convert roubles to dollars, thus increasing the risk of bank runs.
Mr Putin has now said that Gazprom will scrap the South Stream gas pipeline project to Europe, a sign of the trouble Russia is in. Whether these hard times will mellow his external ambitions or fuel further revanchist adventurism is now a key question. The Russian president should come back to sober realities and choose moderation. The economic numbers leave him little alternative.


  1. Several police died in clashes with militants who attacked a traffic post in the Chechen capital Grozny and then stormed a building housing local media, Russian officials said on Thursday.


    Some 1,100 guests including top officials and lawmakers will attend Putin's address to the nation expected to lay out Kremlin's political and economic priorities during a bitter confrontation with the West over Ukraine.

  2. Meet ISIS’ new breed of Chechen militants

    Following the Islamic State takeover of Mosul, its Chechen military leader, Omar al-Shishani (Omar the Chechen) received ample media attention.

    The man’s rise in ISIS’ ranks, has overshadowed the significance of a better established Chechen figure, Murad Margoshvili, aka Muslem al-Shishani, whom activists say has a Che Guevara status among his compatriots in Syria.

    “For many Syrian and foreign fighters, Muslem is known for both his bravery and good looks,” according to Sami Hamawi, a media activist in an Islamist brigade who fought with the Chechen leader in the Latakia Province.
    Omar, formerly Sergeant Tarkhan Batirashvili in the Georgian army, was appointed ISIS’ military leader after the death of Abu Abdel Rahman al-Anbari, the previous Iraqi commander of the group, is only 28, and has had a limited history of fighting against the Russian Army, the Chechen Militants’ historical archenemy.

    Batirashvili grew in Georgia’s picturesque Pankisi Gorge, until he was 14, when he allegedly joined Ruslan Galeyev’s forces in their fight against the Russian backed rebels in Abkhazia, according to Omar’s father, Teimuraz Batirashvili, an Orthodox Christian.
    Chechens, the source continues, are among the major groups in the ISIS military forces: “We call them here the four pillars: Iraqis, who are the most respected, being the initiators, then the Chechens, the Tunisians and the Saudis.”

    Muslem, on the other hand, 16 years the senior of Omar, possessed a deeper history in the Chechen conflict, before moving to Syria.

    According to this biography, narrated in English on the ChechensinSyria blog, he served in the Soviet air defenses in Mongolia, and joined the Chechen fight against Russian forces early in 1995, alongside Arab Mujahideen.
    The Islamic Emirate of the Caucasus, an al-Qaeda aligned group fighting against Russian forces and their allies, and Muslem, sided against ISIS in its fight against Nusra and other militant groups. ISIS accused Muslem of being a Nationalist, raising the Chechen flag before Islam’s, while they published a video of a Ukranian who defected from Junud al-Sham.

    1. Khaled Izza, an expert in Russian affairs, says that “Moscow fears the return of these al-Qaeda affiliated fighters to recruit, organize and execute operations in the heart of Russia,” insisting that secret police agency FSB (former KGB) has infiltrated many Chechen cells and brigades.

      Sources in Raqqa and the Latakia Province, where Muslem is based, estimate that thousands of Caucasian fighters are in Syria, many of whom are in ISIS’ ranks, while Izzi thinks the number is lower, and so does the BBC. The reason might be that the locals tag all the Russian speaking foreign fighters “Chechens,” raising their number.

      “Regardless of the outcome,” says Mustafa, “when the time comes, Russia will gradually find cells of well trained Chechen fighters inside its federate borders.”

  3. Red-bearded Abu Omar has become a symbol of much that Washington hates and fears in its war on ISIS or ISIL, as the group is widely known: He is a foreign fighter—a convert to Islam, no less—and a veteran of the U.S.-trained Georgian military.

    He’s proved able to implement devastating tactics against the Kurdish and Iraqi armies, and wreaked havoc with the moderate Syrian rebel forces the Americans are rushing to train. According to U.S. intelligence, he is a member of the shura council, a group of the top ISIS leaders; he helped organize the seizure of Mosul, Iraq’s second-largest city, and now commands ISIS forces in northern Syria that are the focus of the American-led bombing campaign.

    His units are believed to have about 1,000 foreign fighters in their ranks, and may have been responsible for holding foreign hostages.

    But Abu Omar also is a figure whose history on the battlefield extends into the rebellious Russian province of neighboring Chechnya, where his mother had her roots. And even as he plots defenses against American and allied air raids, he is taunting Vladimir Putin and his allies in Grozny.

    1. On that same day Abu Omar offered to pay a $5 million reward for the assassination of one of the Kremlin’s most influential figures, Chechen President Ramzan Kadyrov, and lesser rewards for the liquidation of 11 more members of the Chechen leadership ranging from $500,000 to $4 million.

      In the Syrian war zone’s crazily complex web of allies, Kadyrov has become a key agent of Putin used to shore up Syrian President Bashar Assad. Indeed, Kadyrov told journalists that most ISIS insurgents were the secret agents of the United States and other secret services. “We killed them during the war in Chechnya and we will kill them there [in Syria],” Kadyrov said in a statement mocking Abu Omar and other ISIS leaders.

      Grigory Shvedov, editor of the reliable website Caucasian Knot and a prominent human rights defender, told me that ISIS wants Chechen insurgents to return and fight in the North Caucasus.

      “These significant rewards prove that the ISIS leaders are serious about internationalizing their jihad; that’s an order for expanding the war from the Middle East to the North Caucusus, which would be tragic for the Russian state,” Shvedov said. “The rewards are meant to attract those who are thinking today about where to go for their jihad.”

      This month ISIS commanders talked explicitly about their plans to fight a war against Putin in a video posted online.

  4. Officials in Lebanon's army say that they've arrested the wife and son of Abu Omar al-Baghdadi, the self-describe caliph and leader of the Islamic State of Iraq and Syria (IS or ISIS or ISIL). The pair were arrested ten days ago as they tried to enter Lebanon from Syria.


    The name of the captured woman is Saja Hamid al-Dulaimi. It's unclear whether she actually is one of al-Baghdadi's three wives, or whether she's a former wife, or whether she's really married to some other jihadist unrelated to al-Baghdadi.

  5. President Vladimir Putin has warned Russians of hard times ahead and urged self-reliance, in his annual state-of-the nation address to parliament.

    Russia has been hit hard by falling oil prices and by Western sanctions imposed in response to its interventions in the crisis in neighbouring Ukraine.

    The rouble, once a symbol of stability under Mr Putin, suffered its biggest one-day decline since 1998 on Monday.

    The government has warned that Russia will fall into recession next year.

    Speaking to both chambers in the Kremlin, Mr Putin also accused Western governments of seeking to raise a new "iron curtain" around Russia.

    He expressed no regrets for annexing Ukraine's Crimea peninsula, saying the territory had a "sacred meaning" for Russia.

    He insisted the "tragedy" in Ukraine's south-east had proved that Russian policy had been right but said Russia would respect its neighbour as a brotherly country.

    Analysis: BBC's Sarah Rainsford in Moscow:

    The final draft of Vladimir Putin's annual speech is written by the president himself. It is his view of the state of the Russian nation and outlines his priorities for the year ahead.

    So it's telling that Mr Putin chose to stress his unwavering hard line on the crisis in Ukraine: what happened in Kiev was an "illegal coup" and Crimea, which Russia annexed, is like "holy land" for Russia and will always be treated that way.

    Vladimir Putin again accused the West of meddling in Russia's internal affairs and using sanctions to "contain" the country as it grew stronger and more independent. His response was a rallying-cry to Russians to pull together for the good of their country.

    That included a remarkable call for a one-off amnesty on the return of Russian capital stashed offshore. But people here are starting to feel the economic consequences of their president's defiance, though sanctions. For those who are worried, this speech probably offered little reassurance.

    On Monday, the rouble slid almost 9% against the dollar before rallying after suspected central bank intervention. As of Thursday morning, it was trading at 52.81 roubles to the dollar.

    Over the past year the rouble has lost around 40% of its value against the dollar and inflation is expected to reach 10% early next year.

    Russians are believed to have taken more than $100bn (£64bn; €81bn) out of the country this year and Mr Putin promised an amnesty for anyone choosing to bring their money back.

    He said that they would face no questions over how they had earned it.

  6. Dec 4 (Reuters) - The rouble weakened on Thursday, reversing strong morning gains, as a keynote state-of-the-nation speech by Russian President Vladimir Putin left investors unimpressed by promised reforms.

    At 1025 GMT, the rouble was 0.3 percent weaker on the day at 53.37 versus the dollar and 0.1 percent weaker at 65.71 against the euro.

    The rouble had been up around 1.1 percent against both currencies at 0900 GMT, but fell sharply into negative territory after Putin began his speech with harsh rhetoric repeating his long-standing criticisms of Western policy towards Ukraine, and defended Russia's actions towards its neighbour.

    The rouble saw a weak rally when the Russian President began elaborating pro-business reforms, including an amnesty on capital returning to Russia, a freeze on higher taxes, and an easing of regulations for small businesses.

    Putin also called for "harsh" measures against currency speculators, without elaborating.

    However, the Russian currency was back in negative territory by the end of the speech, which left markets unimpressed either by steps to resolve the confrontation over Ukraine, or by domestic economic reforms.

    "Net-net, not seeing any new big ideas in this speech which are going to help the Russian economy, or ease market pressure on Russian assets. This is old school, Cold War stuff," Standard Bank analyst Tim Ash said in a note.

    The rouble had seen strong gains in the morning, when the central bank published a statement that reiterated its readiness to intervene in the market to defend the currency, and slashed its interest rate on foreign currency repo loans designed to address forex shortages.

    The bank has resumed interventions this week, with $700 million in forex sales on Monday. Traders said the bank had intervened by a similar amount on Wednesday. The bank releases data on interventions with a two-day delay.

    Russian stock indexes also fell back during Putin's speech, but remained in positive territory, helped by rising global stock markets.

  7. The following is from a recent article by Charles Hugh Smith…

    Financialization is always based on the presumption that risk can be cancelled out by hedging bets made with counterparties. This sounds appealing, but as I have noted many times, risk cannot be disappeared, it can only be masked or transferred to others.

    Relying on counterparties to pay out cannot make risk vanish; it only masks the risk of default by transferring the risk to counterparties, who then transfer it to still other counterparties, and so on.

    This illusory vanishing act hasn’t made risk disappear: rather, it has set up a line of dominoes waiting for one domino to topple. This one domino will proceed to take down the entire line of financial dominoes.

    The 35% drop in the price of oil is the first domino. All the supposedly safe, low-risk loans and bets placed on oil, made with the supreme confidence that oil would continue to trade in a band around $100/barrel, are now revealed as high-risk.

    We are heading for a derivatives crisis unlike anything that we have ever seen. It is going to make the financial meltdown of 2008 look like a walk in the park.

    Our politicians promised that they would do something about the “too big to fail” banks and the out of control gambling on Wall Street, but they didn’t.

    Now a day of reckoning is rapidly approaching, and it is going to horrify the entire planet.


  8. Tolstoy wrote about the Russian wars with Chechnya in his day in "Hadji Murat".

    The Moslem warrior was in a way the bravest most thoughtful fellow in the story, the hero of it.

    Concerned about his wife and family among other things.

    Not an ISIS type.

  9. .

    Evidently, Homeland Security is hiring 1000 new workers to support Obama's waiver program. About 1% of them will be fraud investigators which I assume means that the others will be paper pushers green lighting applications.

    Not bad paying jobs though. It's reported you can earn up to $157,000.


    1. Certainly pays better than minimum wage.
      Pushing paper more profitable than flipping burgers.

      Pushing paper must be of greater service to mankind, aye.

    2. Beats farming but not being a SuperSalesMan.

  10. Ayn Rand's Early Novel To Be Published After 80 Years.................drudge



  11. American Thinker
    Home Archives Video Cartoons About Search Login More Down Arrow
    « Crowder: Abortion of 'special needs' children 'a holocaust'
    Share Share | Share on twitter Twitter
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    December 4, 2014
    White leftist UCLA female student patronizingly instructs black cop on racism
    By Thomas Lifson

    This is the video of the day. It encapsulates so much that is wrong with academic leftism. The arrogance. The enrapture with theoretical constructs over experience.

    Watch, if you have the stomach, as the crowd of demonstrators cheers it all on.


  12. Game of Thrones
    Modi Looks East

    Narendra Modi is looking eastward, and it’s a big and important story that most newspapers outside of India are missing.

    This week Modi kicked off a three-day trip to India’s northeastern region, where he announced a host of development programs to boost the local economy. Also during his visit, he dedicated a power station that will export electricity to neighboring Bangladesh. Modi is pushing for greater economic ties between the two countries, and this week voiced support for a resolution to their border dispute that would include land swaps—a marked turn away from the BJP’s opposition to the plan, which was proposed by Modi’s predecessor.

    As part of his “Look East” program, Modi has also made a point of reaching out to Burma. Most recently, he had a warm meeting with Aung San Suu Kyi at a recent ASEAN get-together. India is investing in a number of large-scale infrastructure projects that will bolster trade with Burma, including a project that will link Calcutta to a Burmese port.

    Modi has his work cut out for him with this eastern initiative given the region’s history. Northeast India (the bits on both sides of Bangladesh, including Assam and other small states in the cut-off bit of India that borders China and Burma) and West Bengal were the hardest hit by partition and the politics of the 1950s. Before partition, Bangladesh, Burma and northeast India were all part of a single big trading area. Partition shut down relations between Bangladesh (part of Pakistan until the 1971 war) and the Indian state of West Bengal.

    Furthermore, a procession of previous Congress governments had shifted investment away from Calcutta, a city founded by the British, and long a major British commercial and administrative center, to Delhi and the west. Things got worse as Burmese nationalist expelled Indian traders and settlers who had moved there in many cases long before the British Raj. Calcutta became something of a backwater, deprived of its natural trading hinterlands, and the far northeast was cut off between a hostile Pakistan, a hostile China with land claims, and a hostile, closed Burma.

    Meanwhile, the region is full of “tribal” peoples who aren’t Hindu in many cases (many converts to Christianity live in this part of India), who resent Muslim immigration from impoverished Bangladesh, and who are related to the various tribal peoples in Burma and China.

    But the tectonic plates are clearly shifting. Bangladesh’s secession from Pakistan, with Indian support, lowered the tensions, but hasn’t done away with them entirely. Close India-Bangladesh relations are really necessary both to revitalize the region and to allow India to develop a more effective territorial defense against Chinese claims. This appears to be primarily what Modi is working on.

    His opening to Burma stirs the pot as well. Some of it is in good ways: there are huge opportunities for trade and investment and for developing a regional network like the one that existed in British times. But the bad ways include the flows of arms, fighters and migrants across a newly opened frontier: India faces some tricky insurgency problems in the region, and many of the tribes are deeply alienated from Delhi. China could well use these realities to cause trouble of its own.

    Regardless, there is a clear advantage for Modi and India if he can sort all this out. Promoting deep trade links with Bangladesh, deepening connections with Burma, and turning one of India’s most backward and insecure regions into a bustling success would be a masterstroke. Whether he pulls it off will play a large part in determining his legacy.

  13. Harvard Study: Lefties Less Successful Than Righties...

    Have More Emotional, Behavioral Problems....................drudge





    'Connect her with male voters'...

    She's Not Rich, She's You!

    PAPER: In spirit of holidays, go see poor Clinton......Drudge

    Nice song, really. Guy on a tractor and stuff. Kinda country/western.

    Quirk, you will love this new Hillary Theme Song !!!

    1. .

      Nice song, really. Somehow the images and words don't seem to mesh though.

      I guess they are improving though. Initially, they were trying to modify the words for this song

      Cow Clinton

      I guess it wasn't working out to well.


    2. .

      By the by, saw your pal Charlie Rangel on TV talking about the situation in NY. He is still looking pretty dapper, nice looking grey suit and red bow tie. Pretty sharp.


  14. .

    I don't often watch FOX so I wasn't real familiar with the name Ben Carson. Now that I have seen some of his thinking I am not really impressed. The guy sounds like a right-wing nut job.

    “To make the comparison of the United States and Nazi Germany — that just struck an awful tone,” said Blitzer in a non-question question. Carson responded: “Well, Nazi Germany experienced something horrible. The people in Nazi Germany largely did not believe in what Hitler was doing, but did they say anything? Of course not — they kept their mouths shut. And there’s some very important lessons to be learned there. The fact that our government is using instruments of government like the IRS to punish its opponents — this is not the kind of thing something that, as far as I’m concerned, is a Democrat or Republican issue. This is an American issue. This is something that threatens all of our liberty, all of our freedom.”

    Carson said a bit more about how Americans are afraid to express themselves, not that Blitzer was impressed with the logic: “But to make the comparison, Dr. Carson, to Nazi Germany, the slaughter of six million Jews by the Nazis, the devastation that erupted in Europe and around the world, to the United States of America,” said Blitzer. “I want you to reflect on what that potentially means.”

    Complying with Blitzer’s polite request, Carson explained: “Again, you are just focusing on the words ‘Nazi Germany’ and completely missing the point … and that’s the problem right now. That’s what PCism is all about. You may not say this word, regardless of what your point is. Because if you say that word, I go into a tizzy. We can do better than that. When I was a child, and when you were a child, they used to say, ‘Sticks and stones break my bones, words will never hurt me.’ What ever happened to that? We need to get to the point where we can look beyond the word and look for the meaning.”

    According to Godwin's Rule on Nazi Analogies Carson has already lost his presidential run before it was even announced.