Reposted from Timothy Post
Thank to Fred Wilson for the heads-up on the NY Times article this past weekend titled, Waving Goodbye to Hegemony.
Here’s an excerpt from the article where the author discusses Russia and the role he sees it playing in the post-American unipolar world,
…. In exploring just a small sample of the second world, we should
start perhaps with the hardest case: Russia. Apparently stabilized and resurgent under the Kremlin-Gazprom oligarchy, why is Russia not a superpower but rather the ultimate second-world swing state? For all its muscle flexing, Russia is also disappearing. Its population decline is a staggering half million citizens per year or more, meaning it will be not much larger than Turkey by 2025 or so — spread across a land so vast that it no longer even makes sense as a country. Travel across Russia today, and you’ll find, as during Soviet times, city after
city of crumbling, heatless apartment blocks and neglected elderly citizens whose value to the state diminishes with distance from Moscow. The forced Siberian migrations of the Soviet era are being voluntarily reversed as children move west to more tolerable and modern climes. Filling the vacuum they have left behind are hundreds of thousands of Chinese, literally gobbling up, plundering,
outright buying and more or less annexing Russia’s Far East for its timber and other natural resources. Already during the cold war it was joked that there were “no disturbances on the Sino-Finnish border,” a prophecy that seems ever closer to fulfillment.
Russia lost its western satellites almost two decades ago, and Europe, while appearing to be bullied by Russia’s oil-dependent diplomacy, is staging a long-term buyout of Russia, whose economy remains
roughly the size of France’s. The more Europe gets its gas from North Africa and oil from Azerbaijan, the less it will rely on Russia, all the while holding the lever of being by far Russia’s largest investor. The European Bank for Reconstruction and Development provides the kinds of loans that help build an alternative, less corrupt private sector from below, while London and Berlin welcome Russia’s billionaires, allowing the likes of Boris Berezovsky to openly campaign against Putin. The E.U. and U.S. also finance and train a pugnacious second-world block of Baltic and Balkan nations, whose activists agitate from Belarus to Uzbekistan. Privately, some E.U. officials say that annexing Russia
is perfectly doable; it’s just a matter of time. In the coming decades, far from restoring its Soviet-era might, Russia will have to decide whether it wishes to exist peacefully as an asset to Europe or the alternative — becoming a petro-vassal of China….
Here’s the comment I left on Fred’s blog in response to the article:
Interesting article but the analysis of Russia is not based on facts.
The birth rate of Russia will surpass its death rate in 2010 and there will then be population growth. Russia has the world’s 3rd largest currency reserves of almost $500 billion. The Russian government has almost no debt. The personal tax rate is 13% and people pay it.
There is almost no consumer debt in Russia today. That is both a blessing and an opportunity for growth. The sub-prime crisis in the US and Europe will impact the Russian stock market negatively but have a zero impact on the “real” economy.
The percentage of people with home mortgages is less than 2.5%. Think about what that means. The average family living in an apartment in some provincial city of a million people (say Volgograd) owns an apartment that’s worth $1,000 per square meter. At 80 square meters the apartment might be small and ugly (by our standards) but it’s still worth $80,000. That family owns it outright - 100%.
This year or next the home equity industry will reach critical mass and that very same family will be able to take out a mortgage for $10,000 or $15,000. Since they have free health care, rising wages, no car payments, no mortgage, and free education for their kids almost all that money will be spent on consumer products. If you think the consumer products boom now (and there is!) wait until all that illiquid home equity is made liquid.
The automobile market in Russia is the fastest growing in the world. It’s natural resources are second to none.
There are a number of rumors that the Russian government is going to revalue the Ruble UPWARDS. Very unusual but brilliant. The Ruble is worth approx 25 to 1 right now (25 Rubles buy 1 US Dollar). After the elections in March (yes, Medvedev will be elected) the Russian government may make it so that 1 Ruble buys 4 US Dollars. Essentially, we would all trade 100 of today’s Rubles for 1 “new” Ruble note. Yes, they will need to print new paper.
The rationale behind such a move is very smart. The US Dollar will I believe within the next 5 years lose its place as the reserve currency of choice. The other options are obviously the Chinese currency and the Euro. The Russians want the Ruble to be part of that mix. The revaluation changes the perception of the Ruble.
So to close. The gist of the article is that the uni-polar world will become multi-polar. I disagree with the author’s assertion (quite black and white) that there will be 3 dominant players instead of 1.
I would suggest that it is more realistic that the number will be closer to 10 countries/zones. Think Japan, Britain, Brazil, India, Russia, the EC, China, the Asian Tigers, Australia, South Africa, Saudi Arabia, Dubai, and Scandinavia. To limit it to 3 is too myopic.
So, if one is like Howard Lindzon and looking for investment opportunities, don’t forget Russia and the Russian Ruble.