Russia: An Industrial Powerhouse With Nukes

In the recently published Russia Insider special economic report on Russia commissioned from Awara Accounting, we reported about the surprising strength of Russia’s economy as it recovered from three years of sanctions and the oil price shock.

The really devastating news for the typical Russia bashing bigot must have been the extraordinary decrease in the share of oil & gas revenue in Russia’s GDP, which had dropped below 10% according to World Bank data for 2015.

This data spectacularly proves wrong the charade that Russia has supposedly failed to diversify its economy. The report further corroborated this by showing that oil and gas generated only 17% of the country’s budget revenue. The last bastion in the line of arguments maintaining that Russia remained a backward country with no modern manufacturing is the fact that its exports are dominated by oil and gas. That is admittedly true, but for some reason the experts that claim so have ignored the data about Russia’s imports and domestic production. Russia’s imports are the lowest among major countries, and that demonstrates that its domestic industry is highly diversified and self-sufficient as it produces almost everything the country needs.

 

 

But CNBC says you should forget all the facts and listen to Mr. Thin-Air

Just as Awara’s research team had recorded these findings, they stumbled on a delicious piece of baloney served fresh from the fake news provider CNBC. Turns out, CNBC wanted their readers to believe that of the world’s two biggest oil exporters, Saudi Arabia and Russia, the former is the one who was supposedly better prepared for the plunge of oil price and is now advancing a “bold reform agenda,” as Russia just stands there “flexing its geopolitical muscles” in a bid to satisfy its ambitions of geopolitical grandeur and “divert attention from economic worries at home.”

This is a perfect piece for demonstrating how unbothered with facts the fake news media is when they make up their Russia bashing stories. CNBC interviewed an expert called Thin – well if you need to make up your analysis out of thin air, then that’s a good start for sure. (He is presented as Win Thin, global head of emerging market currency strategy with Brown Brothers Harriman. Sic!).

“Despite promises to diversify for years (if not decades), the country remains highly dependent on oil and natural gas exports. These still account for two-thirds of total exports,” Mr. Thin-Air is quoted as saying. At first sight, that would sound correct, but then we then realize that Mr. Thin-Air is talking about Russia and not Saudi Arabia. Although Mr. Thin-Air masquerades as an expert (of something or the other) he has not bothered to find out that for Russia oil & gas makes up 8% of GDP (as was demonstrated in our report), while the corresponding figure for Saudi Arabia was 23%, the rest made largely up by investment revenue from previously accumulated windfall profits from oil sales, with virtually no domestic industry. Mr. Thin-Air then refers to the standard charade of proving the supposed fact that Russia has not diversified its economy by (incorrectly) citing the share of energy in total exports, the actual figure was not 67% as he claimed but 58% (2016).

 

 

 

The supposed expertise of Mr. Thin-Air did not carry as far as to realize that to assess the economy he would have to look at imports and domestic production as well. He also forgot to take a peek at Saudi Arabia’s export figures. Had he done so, he would have seen that in that country the share of energy in exports was 80%. But all this did not hinder him from affirming that “Saudi Arabia was in a better position going into this downturn in oil prices.”

Why Saudi Arabia announces grandiose reform plans and Russia doesn’t

This so-called “reform plan” is essentially a hookah dream that the guys roaming around all day in oversized white pajamas and fancy dressing gowns and having migrant labor taking care of all the real work, would turn the Saudi desert kingdom into an industrial high-tech powerhouse. The idea is that instead of working hard to develop its own industrial and technological base Saudi Arabia could simply buy itself one wholesale for X amount of billions of dollars.

Well, why don’t you hear about such grandiose “reform plans” from Russia? It’s quite simple, there is no reason whatsoever for Russia to attempt to turn its economy upside down with imaginary reforms. As our report shows, Russia already runs a modern and diversified economy. There is no need for any kind of dramatic reforms. In the grand scheme of things, Russia merely needs to adjust its strategies (as all countries would continuously need to do), especially what comes to its monetary policies so as to be able to provide financing to its industries on globally competitive market rates, and do more of what it has already done best: emphasize the role of state corporations and develop state owned national champions, which could be able to conquer global markets.

The constant call for Russia to reform is actually a liberal and Western propaganda hoax aimed at denigrating the present achievements and the leadership of Putin. Under Putin Russia has reformed beyond belief all aspects of the economy and social life. After some initial major reforms undertaken in the first half of the first decade of 2000s, Russia has been in a mode of constant reforms by reacting year by year to the challenges and opportunities that have been revealed.

Usually the catchphrase for this hoax is a call for “structural reforms,” especially beloved by the Russian liberal economists and the Russian business press. The problem with these structural reforms is that nobody ever spells out what they would in actual fact signify, obviously because they simply cannot identify any areas of policy that would in essence merit the dramatic name of reform. Having analyzed that patter for years, our conclusion is that what it all boils down is regime change, “structural reforms” is code for “Putin must go.”

Russia – an industrial powerhouse with nukes

Contemplating these figures that disprove the claim of Russia’s supposed hydrocarbon dependency, US senator John McCain, aka McInsane, pops to mind. He infamously quipped that “Russia is a gas station masquerading as a country.”

 

 

Another popular Russia bashing version of this goes “Russia is a gas station with nukes.” The good thing is that they at least remembered about the nukes, but with this report we take the opportunity enlighten them with the fact that Russia is a diversified self-sufficient economy, an industrial powerhouse…with nukes. The realization of this – not forgetting about the Russian bear’s de facto alliance with the Chinese panda – should come as a shocking wake-up call to all those who still toy with ideas to reach absolute global hegemony at the expense of the Russian people.

The full special economic report is titled What Does Not Kill You Will Make You Stronger: The Russian Economy 2014 – 2016, the Years of Sanctions Warfare.