Trump’s assault on globalization will hurt Russia badly and soon, Russian analysts say

Image: Liu Rui, globaltimes.cn

Image: Liu Rui, globaltimes.cn 

International, More

President Donald Trump’s assault on globalism, something the Kremlin welcomes as a means of increasing disorder abroad, is going to hurt Russia and its population far harder than many now imagine and far more quickly now that Moscow’s reserves are running out, according to two Moscow analysts.

Pavel Pryanikov

Pavel Pryanikov

The first, Pavel Pryanikov, the founder of the Tolkovatel portal, says he can understand why many Americans oppose globalization because they have the domestic institutions and resources to cope with its demise but that he can’t understand Russian support for it because Russia will suffer as a result.

The US has strong engineering schools and research centers, he points out, and it will not be difficult for America to rebuild on its own territory the factories now in China or South Korea that are producing for its market. There may be some rise in prices, but given the size and strength of the American economy, the US will take them in stride.

But the situation in Russia is very different: It lacks the domestic institutions and financial capabilities the Americans have, Pryanikov says; and that means that it will face serious increases in the prices of imported goods without the capacity to substitute domestic production of them.

Consequently, he continues,

if globalization is limited, this will mean for Russia “in the mid-term range only a growth of mass poverty and the spending of budgetary funds on import substitution projects that are unlikely to work as planned and that would cost more than Moscow can afford.

That conclusion is supported by the following fact: currently, Americans invest 70 billion US dollars in venture projects each year, while Russia makes only 400 to 500 million in this sector. That is the US invests 150 times more than Russia does, and that should tell Russians and perhaps even the Kremlin all they need to know about what the end of globalization would mean.

Oleg Buklemishev

Oleg Buklemishev

And in a commentary on the Republic.ru portal, Oleg Buklemishev the director for the Moscow State University Center for Economic Policy, explains why the impact of an end of globalization on Russia will not only be serious but that it will come far sooner than many now expect.

The economist points out that

“Russia has exhausted its cushion of security” that its various reserve funds, which are now running out, had provided and that means it is “ever more dependent” on the price of oil and the attitudes of investors, factors over which the Kremlin has less control than it may think.

And that in turn means that any short-term shock to the Russian economy as a whole from changes in the international one is something that the Kremlin can no longer compensate for, as it has in recent years, by turning to reserves. These no longer exist, and so shocks from abroad will more quickly translate into shocks at home.


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Edited by: A. N.

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Comments

  1. Avatar Vlad Pufagtinenko says:

    A good news story.

    1. Avatar Mykola Banderachuk says:

      good story over my morning coffee – feel good moment.

    2. Avatar Fortranz says:

      Trump should tweet this article to Putin. Too bad he won’t..lol

  2. Avatar Alex George says:

    Good points but, won’t the factors identified by the two commentators drag Russia down whether the world is globalised or not?

    Pitiful levels of investment, lack of good engineering and research schools and financial reserves running on empty – yes i agree with all of that. But it’s a problem in any sort of world.

    1. Avatar Dagwood Bumstead says:

      They are certainly dragging Dwarfstan down, but the point is that with increased prices for imported goods Dwarfstan will be bankrupt that much sooner, or not be able import any of the goods it needs despite them being urgently required, e.g. oil and gas equipment which it can’t make itself. The alternative is to make the equipment in Dwarfstan, but does Dwarfstan have the engineering and manufacturing ability to do so?

  3. Avatar zorbatheturk says:

    RuSSia’s banking system has total assets equal to slightly over 100% of RuSSia’s GDP, approx. $1.4 trillion. China’s banking system in 2016 had total assets of over 212 trillion yuan, or $31 trillion. There is also a substantial shadow banking system in China, possibly as big as $4 trillion. Banking assets are loans and bonds. So, financially speaking, China is nearly 25 times bigger than RuSSia. China also uses nearly half of the world’s coal, metals, cement, and many other commodities like rubber. China is also heading for a crash of some kind, due to its massive overinvestment in everything. When China goes down, the ruSSians won’t know what has hit them. RuSSia relies on commodity exports. The price of these exports depends on Chinese demand. For years now Chinese demand has been artificially stimulated by endless growth in credit, from $1 trillion in 1999 to $35 trillion today. History shows that these types of credit bubbles rarely end well. Expect a savage bust.

    Got that, Putin?

    1. Avatar Brent says:

      Couldn’t happen to a “nicer” pair of of tyrannical, land grabbing, human rights abusing, murdering regimes….

      1. Avatar Dagwood Bumstead says:

        China will survive the crash, though heavily damaged. Dwarfstan, however, won’t. To quote Medvedev, “There’s just no money.”

    2. Avatar Dagwood Bumstead says:

      I doubt whether the dwarf will ever get it. As a typical third-rate Chekist, he only understands terror. Economics are a compete mystery to him, and even if he did understand, he is obsessed with increasing Dwarfstan’s military at the expense of everything else. As Finance Minister Alexei Kudrin repeatedly warned the dwarf that Dwarfstan couldn’t afford his expansion programme for the armed forces and security services, but was sacked for his impertinence.

      Now, with Dwarfstan slowly imploding as the money runs out, the chickens are truly coming home to roost.

  4. Avatar Dagwood Bumstead says:

    With Trump now permitting the laying of oil pipelines that Obama had forbidden, US oil production will only go up, with a negative effect on world oil prices. NOT something that the dwarf can use, what with rubbles running out fast. I suspect he may already be regretting trying to manipulate the US Presidential election in Trump’s favour. Coal prices may also head downwards as a result of Trump’s policies, meaning less money for the so-called LNR and DNR and forcing Dwarfstan to send even more rubbles to prop up Zakharchenko and Plotnitsky.
    On second thought, the dwarf may be too thick to understand all this.