Mr Putin is discovering that global finance is more frightened of the US Securities and Exchange Commission than Russian T90 tanks. Any sanction against any oligarch linked to any Russian company could shut it out of global capital markets, potentially forcing default. Creditors in the West would be burned. But nobody cares about them once national security is at stake, something markets have been slow to grasp. Nor has he chosen a good moment for his gamble. Europes gas tanks are unusually full. The price of oil is poised to fall -- ceteris paribus -- as Iraqs output reaches a 35-year high, the US adds a million barrels b/d a day this year from shale, and Libya cranks up exports again. The International Energy Agency says global supply jumped by 600,000 b/d last month. Deutsche Bank predicts a glut. So does Chinas Sinopec. Mr Putin needs prices near $110 to fund his budget. He may face $80 before long. At the end of the day he has condemned Russia to the middle income trap. The windfall from the great oil boom has been wasted. Russias engineering skills have atrophied. Industry has been hollowed out by the Dutch Disease: the curse of over-valued currency, and reliance on commodities. He jumped the gun in Ukraine, striking before the interim government had committed any serious abuses or lost global goodwill, a remarkably sloppy and impatient Putsch for a KGB man. He took Germany for a patsy, and took China for granted. He has gained Crimea but turned the Kremlin into a pariah for another decade, if not a generation, and probably lost Ukraine forever. It is a remarkably poor trade. Telegraph UK
Posted on: Fri, 28 Mar 2014 23:51:34 +0000
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