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Tuesday, September 26, 2006

The Old Neo-Soviet Switcheroo

Diligent watchers of Russia may recall that some time ago the Kremlin made noise with the claim that Russia's GDP would double in 10 years. Now that this goals has proved, to put it mildly, elusive, the Kremlin has changed its approach, as is evinced from the following report by the Moscow News (pay close attention for the classic Neo-Soviet sleight of hand):

Russian Finance Minister Alexei Kudrin said on Sunday, Sept. 24, that in his opinion it is possible that Russian economy would be equal in strength to the financial systems of the United States of Germany. In an interview with Russia’s Channel One, Kudrin said: “We want to create a system that would be equal in strength to the economies and financial systems of the United States or Germany. I have to say that this distance can be covered in ten years in the country conducts a very skilled financial policy.” Kudrin stressed that over six years — from 2000 to 2006 — Russia has gone up eight levels in the rating system of the world’s largest ratings agency. It started out with one of the lowest ratings, which correspond to financial crisis, and worked its way up to investment-grade rating. The minister noted that it still has seven steps to go to the highest rating, which is held by the United States, France and Germany. To reach this rating is an ambitious task, but one that Russia can surely fulfill, Kudrin said. The Russian minister also stressed that a new default would be impossible in Russia. “There will be no default under any conditions,” Kudrin said. He pointed out that the country has a “serious protection from all kinds of defaults” - the Stabilization Fund, which collects windfall oil revenues. Earlier on Friday, the minister explained that Stabilization Fund will be divided into reserve part, which is going to amount to 7-10 percent of the GDP, and the fund of future generations, which will accumulate all the money above of this sum. “Today we already have a fund with a size of 6.4 percent of the GDP,” Kudrin said on Sunday. He explained that soon the 7 percent of the GDP level will be exceeded and the fund of future generations will be spun off from the Stabilization Fund. “We will put the money in securities that have proved their reliability,” the minister noted.
Did you see it? Smooth, huh? So now we're no longer talking about actual economic growth, we're only talking about Russia's credit rating matching that of the West. In this way, the United States and Germany can be neatly lumped together as a single target for Russia to aim at, even though the economy of the United States is fives times larger than that of Germany.

And what, pray tell, does the government of Russia want to do with a really high credit rating (assuming it can get one -- remember, Kudrin is the man who swore Russia's admission to the WTO was a done deal at the St. Petersburg G-8 meeting, so nothing he says is, excuse the pun, creditworthy)? How will such a credit rating help it to pump oil out of the ground (it clearly has no intention of developing a consumer economy since that would empower a class of entrpreneurs, and it just got finished sending their key figurehead to Siberia)? This remains unclear.

But in any case, it's Russia's plan to have the same credit rating as the United States and Germany some time over the course of the next ten years, while its people continue to wallow in abject poverty and literally become extinct.

Quite some plan, isn't it? La Russophobe dares to wonder what's next, when that too proves beyond Russia's grasp. Maybe Russia will then move on to exceeding Germany and the United States (put together) in consumption of alcohol. But with Russia's recent disastrous failure in trying to impose new alcohol regulations in mind, that too may be a pipe dream.

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