Day: March 4, 2008

Russia is emerging as a global economic giant

By Liam Halligan

In the run-up to today’s Russian vote, the Western press has been full of insinuation, slur and downright disinformation about a nation which has risen from the ashes and is now emerging as a global economic giant.

I lived in Moscow for several years during the mid-90s – the roughest period of Russia’s “transition” from state-planning to capitalism. I’ve paid regular visits ever since. I now work for a company that manages foreign investments in emerging markets – including Russia.

So, feel free to sniff at my motives. But please don’t sniff at the facts, which show that Russia, over the last ten years, has achieved possibly the most incredible economic turnaround in human history……

When the Soviet Union imploded in the late 1980s and the planned economy collapsed, Russian growth sunk deep into negative territory. For the next decade, the country lurched from crisis to crisis.

Then, amid signs of recovery in 1998, Russia’s fragile post-Communist economy collapsed again – caught in a financial melt-down affecting all emerging markets. Trying to defend its currency, the country defaulted on its sovereign debt.

Since then, Russia has grown at a real terms average of 7 per cent a year. In 2007, growth hit 8.1 per cent – higher than the year before, despite the US-originated sub-prime crisis that has hobbled much of the world.

Russia’s reserves have ballooned from practically zero in 1998 to $480bn (£242bn) today – the third largest haul on earth. The country is now almost debt-free – with a budget surplus of 6 per cent of GDP, and a trade surplus almost twice as much again.

Goldman Sachs describes Russia’s economic performance as “remarkable”. UBS calls it “awesome”. Russia, India, China and the other large emerging markets are upending the world economic order. Their resurgence has created hundreds of billions of dollars of wealth and lifted tens of millions from poverty.

Western politicians struggle to adjust to these new realities – particularly when it comes to the old “Cold War” enemy. But Russia is now the world’s ninth largest economy – and rising fast. And, in my view, much of the scorn aimed its way is nothing but a small-minded reaction to this rapidly shifting balance of global power.

Three years ago, Russia overtook Saudi Arabia to become the world’s largest crude exporter. And the country’s post-Soviet recovery was initially built on a 50 per cent rise in annual crude production.

Had that increase not happened (had Russia chosen to join OPEC, for example), oil would now be way above $150 a barrel, rather than close to $100. Imagine how much that would now be hurting oil importers like America and the UK.

But Russia is now far more than “just an oil and gas economy”. Retail sales are growing at around 13 per cent a year in real terms – one reason why leading multi-nationals are now piling into Russia. Construction is expanding by 16 per cent a year, and domestic investment by 20 per cent – as Russia rebuilds its shattered post-Soviet infrastructure. Again, this trend is now attracting massive – and welcome – foreign investment.

The big blot on Russia’s economic landscape is inflation – almost 12 per cent last year. Like many fast-growing emerging markets, the country suffers from high food prices. But Russian policy-makers are now allowing the ruble to appreciate more quickly – bearing down on expensive food imports. And, while the rest of the world has been cutting interest rates, Russia’s Central Bank just raised them – as part of its bid to tackle inflation.

This is a country, of course, with many problems. As in any nascent capitalist society (think England in the 1780s, or America in the 1870s), there is corruption and the legal system is fragile.

But, in recent years, despite factional in-fighting, the direction of economic policy has been clear. Russia now has a 13 per cent basic rate of income tax. Foreign banks can set up at will. Moscow, St. Petersburg and, increasingly, Russia’s regions are rippling with stores bearing Western names and products. Despite his “hard-man” image, these developments have all happened since President Putin took office in 1999.

And today’s likely winner – Dmitri Medvedev – will encourage further liberalisation. The 42-year-old has made a series of speeches calling for “reduced taxes” and “decentralisation of power”. A trained lawyer, Medvedev will put effort into “improving the legal system”.

Dismiss this as a wish-list if you like. But, again, the direction of travel is clear. Russia wants to be a fully-developed market economy and part of the global system – but on equal terms.

Will it be pushed around by the West? No. Will it allow the West to pull its historic trick of annexing countries with large natural resources, or treating them as supine? No.

Above all, Russia wants to trade with the West. But the West keeps blocking its membership of the World Trade Organization – despite admitting China.

Since the Soviet Union collapsed, Russia has made huge strides – economically, but also in terms of freedom. Today’s election, while imperfect, is a testament to that.

Western businesses are engaging with Russia as quickly as they can, desperate to gain a foothold in what will soon be one of the world’s very biggest economies.

Western politicians, meanwhile, cling to their cold war clichés – replacing the “iron curtain” with an “iron curtain of the mind”.

• Liam Halligan is Chief Economist at Prosperity Capital Management
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I have been making it clear in this Blog that Russia is not what it seems to the American & Europe Brain Washed Media Biased Individual!

Russia is the next World Power Economy!

Ruble as world currency?

Kyle & Svet

comments always welcome.

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Like we reported the Russian elections were given a clean bill of health and even though they may not have been too exciting! They cost much less than the 3/4 of a Billion Dollars that the American elections have spent so far! The people are happy, government is happy & Putin is happy! (Not sure if Medvedev is happy yet)

Russia’s presidential elections were held in line with international standards, Bolat Nurgaliyev, Secretary General of the Shanghai Cooperation Organization and the leader of its observer mission, told a press conference in Moscow today, adding that the election had been free and fair. Nurgaliyev noted that 19 observers from the mission had monitored the elections from February 21 until March 2. The observers visited 96 polling stations of Moscow and the Moscow region on Sunday. They also visited seven polling stations during the vote counting and did not register any violations.

No observer mission has questioned the results of the Russian presidential vote, Russia’s election chief Vladimir Churov told a press conference today. He noted that, “according to the assessment by reputable legal scholars,” the Russian election law is one of the most progressive in Europe. Churov said that the Central Election Commission of Russia had received several comments and recommendations from monitors, and added that his agency would pay particular attention to these, but would probably not be able to follow all the recommendations, as some of them related to the organization of debates, and a number of observers had proposed changes to legislation in this aspect.

Paul Marie Couteaux, head of the European Parliament’s observer mission in Russia, believes that foreign media sources have a rather biased opinion about presidential election in Russia. He made this statement in Moscow today, adding that most foreign correspondents are trying to promote the idea of mistrust for the election. Couteaux also noted that most foreign media companies in Western Europe are owned by large financial corporations and act in their interests. However, he indicated that the general public understood that Russia and Western European countries were partners and disregarded those statements by media companies trying to compromise Russia.

Lets see anyone in America get 70% of the popular vote….

Kyle & Svet

comments always welcome.
USA Presidential Election cost in 2004!
Election Costs are going skyhigh in 2008!