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Putin: Great Leader? Or Huge Failure?

By Shlomo Maital

putin

U.S. Presidential candidate Donald Trump has expressed admiration for the Russian President Vladimir Putin, comparing him favorably with Barak Obama and calling him a great leader. In today’s New York Times, Paul Krugman adds up Putin’s achievements since he came to power in Russia in 1999.

   He has destroyed Russian democracy, creating a handful of billionaire oligarchs who support him while destroying others who did not. He has utterly failed to diversify Russia’s economy out of oil and gas, even though the old Soviet Union left behind superbly educated people, including many thousands of engineers and scientists who emigrated to Israel beginning in 1990, and who fueled Israel’s high-tech boom. (Many, of course, did not emigrate, but their skills were not made use of – except for Putin’s global hacking operations).

       According to New York Times columnist Paul Krugman, writing in today’s Opinion section,   Putin has shaped a massive Russian military —   which he used for grabbing part of the Ukraine and the Crimea. Crimea, once a tourist haven, has lost most of its tourist business, so it has become a drag on Russia’s economy.

       Why then is he so popular? Putin’s aggressive nationalism appeals to Russians, who seem to recall Stalin fondly and who are not at all fond of democracy, which brought them raging inflation and little else.   One can perhaps understand, partly, Putin’s popularity in Russia. But his popularity among Trump supporters?  

     Utter folly.

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U.S. Has More Oil Than Saudi Arabia

By Shlomo Maital

oil

A Financial Times report today claims that for the first time, proven oil reserves in the United States exceed those in Saudi Arabia (and Russia).

     The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study. Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.

Not surprisingly, Texas has almost a quarter of those 264 billlion barrels; Texas oil wealth will thus continue. According to the report, “three years ago the US was behind Russia, Canada and Saudi Arabia. ….More than half of the US’s remaining oil reserves are in unconventional shale oil.”

   What does this finding mean? First, at last, the decline of Saudi geopolitical influence. Saudi money has financed worldwide Wahabi Islam, an extreme form of Islam that has at times ‘inspired’ bad guys, as in 9/11. The Saudis may now have to keep more of their money at home, and already have issued an ambitious plan for weaning Saudi Arabia from oil, after its former oil minister purposely flooded the market, bashed the price of oil to historic lows – and was fired.

   Second, greater energy independence of the United States, and hence less pandering to oil-rich Mideast nations. And perhaps, less geopolitical influence on the part of Russia. Both Russia and Saudi Arabia have not been forces for good in the global arena, in the past.

   Those who have written off American global leadership, under a weak Obama administration, may have to think again. Oil and geopolitics are close syblings. One qualification, however. U.S. shale oil costs a lot to recover, perhaps as much as $50 /bbl. Saudi oil has a marginal production cost of just a few dollars, as it is pumped easily out of the desert sand. So Saudi still holds a few Trump cards.

Deadly Dominoes: Who Falls Next?

By Shlomo   Maital 

dominoes  

   According to Reuters News Agency, “a prominent opponent has warned Vladimir Putin his days in power are numbered, as Russia awaits the president’s response to the dramatic decline of the rouble. Putin has been silent as the currency collapsed against the dollar.”

   It’s that old déjà vu all over again. Remember August 1998? Russia defaulted on its foreign debt, after the price of oil collapsed. Oil prices, in turn, fell, because of Thailand’s crisis in July 1997 (which saw the baht devalued from 25 per dollar to over 50), leading to the so-called “Asian Contagion”, in which other Asian currencies fell and Asia went into recession. As Asian demand for oil fell, so did the price – toppling the Russian domino. Russian, in turn, would go on to topple Brazil, Argentina…and so on….

   And it is more or less recurring. The cause of Russia’s crisis, this time, is not Asia, but rather Russia’s leader Vladimir Putin, whose adventure in Crimea and Ukraine has proved costly. The Russian people appear to believe that it is all a Western conspiracy to wound Russia.   But in fact, it is in part a Saudian Arabian move, done not infrequently by that country, in order to bash oil prices down and hurt the Return on Investment for alternative energy forms that compete with its oil.    By keeping oil prices unstable and variable, Saudi Arabia can mess up the boom in fracking, wind, solar and other energy forms.   And at the same time, no one in Saudi weeps if Iran’s economy is badly hurt, along with that of Russia – and America’s enemies in general are also damaged. This episode has happened before – a sharp fall in the price of oil helped disassemble the USSR in 1989-91.

   Meanwhile, the dominos continue to fall. Israel’s agricultural exports are badly hurt by the falling ruble. Turkey’s currency hits a record low against the dollar. Bonds of oil companies Petrobras, Pemex and Gazprom plummet and yields soar. Investors bail out of emerging markets, even those that are solid.   This is a problem – emerging market companies sold $1.7 trillion in bonds since 2009. Petrobras’ debt is especially high.

     Bottom line: No reason to rejoice over Russia’s woes, even if you dislike Putin. In the end it is always the people who suffer. Once again, we learn that adventurous leaders can ruin countries, even large nuclear ones. And it is the citizens who pay the price. Once again, we learn that we live in a global village, where dominos fall continuously and sometimes in ways we cannot predict or even imagine.

How America Buried Its Future in Its Defense Budget

By Shlomo Maital

USS NEw Mexico

   In Thomas Friedman’s New York Times column, March 31, he writes about his cruise on the U.S.S. New Mexico, a modern nuclear attack submarine, underneath the Arctic ice cap.

   He describes: “Excellence…if anyone turns one knob the wrong way on the reactor or leaves a vent open, it can be death for everyone. …As one officer put it: ‘You become addicted to integrity’. There is zero tolerance for hiding any mistake. The sense of ownership and mutuality and accountability is palpable.”

   How many American companies would LOVE to be able to describe themselves as Friedman describes the U.S. Navy submariners? How many would LOVE to have world-class cutting-edge technology, like the U.S. Navy, far beyond that of other companies?   Why don’t they? Because the U.S. defense budget in 2014, despite cuts, will total $526.6 b., or 4 per cent of America’s GDP. This is fully one-third of all the world’s defense spending in 2014, or $1.538 trillion, up from $1.538 trillion in 2013, the first rise in global defense spending in a decade. America is burying its economy in those costly nuclear subs.  

   Years ago, I visited an aircraft carrier, the U.S.S. Theodore Roosevelt. 11 decks of amazing technology and 5,000 superbly trained 18-year old or 20-year-old sailors. Planes launched and retrieved, at night, in darkness, simultaneously. Microsoft, IBM, eat your heart out.

   America’s chief rival, China, spends only $132 b. a year on defense, or one-fourth that of America. And NATO? The 28 NATO nations have agreed they should spend 2 per cent of GDP on defense (half of America’s level), but none except the U.K. (2.4 per cent) actually do.  

   And Russia? Russia will boost its military spending by 44 per cent in the next three years, to fulfill Putin’s vision of a Great Russia (“bring back the U.S.S.R.!”).

   So to sum up: The world is again in an arms race, defense spending is rising, and we are wasting huge sums on things like nuclear subs. Europe, as always, is sheltering under America’s defense spending, and has nothing to face Russia with. America has sunk its economy in military technology, which despite myths does not translate into cool civilian technology, for the most part.

   * What purpose do those superb Navy subs and aircraft carriers serve, when the main threat to America is Taliban terror, al Qaida fighters armed with AK-47’s and home-made improvised explosive devices?  

   * Would the world be a better place if America’s economy were made stronger by diverting defense spending into infrastructure and civilian technology and education?

   * Should Europe quit sponging off America and spend to defend itself?

   * Is Russia again going to impoverish itself by putting billions into defense rather than rebuilding its flagging civilian economy, just as the U.S.S.R. did, fatally? Russia’s Siberia oil production is declining because Russia simply is not maintaining its oil infrastructure there – this, despite piles of cash in the bank. Simple incompetence.

   Stay tuned.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2019
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