Javed Hosein :
By merely raising the risks of an impending invasion of Ukraine, Vladimir Putin is driving prices of oil and gas-that account for 60% of Russia’s exports-to levels not observed in decades.
By merely raising the risks of an impending invasion of Ukraine, Vladimir Putin is driving prices of oil and gas-that account for 60% of Russia’s exports-to levels not observed in decades.
Russia was tapping into its National Wealth Fund at a pace of $5.5 billion a year according to a Wall Street Journal report back in October 2021 just to carry out its massive government spending spree in the face of dwindling oil demand driven by shift to renewables and electrification of the transport industry.
It’s pure lunacy for Putin to launch such an aggression against Ukraine when the €9.5 billion Nord Stream 2 project-the 1230 Km long gas pipeline connecting Russia and Germany-is scheduled to go live this year. With this new pipeline Russia bypasses Eastern Europe by creating a direct channel to EU countries. Ukraine’s importance to Russia declines after the launch of Nord Stream 2 which will carry 55 BCM of gas annually doubling Russia’s current pipelined gas capacity to Europe.
In a typical kleptocratic manner, Putin is diverting attention of his government’s failure to keep the Russian economy afloat as most of the nation’s industries have become uncompetitive. It is no secret that Russia’s oil & gas industry is subsidising the economy with unwarranted government infrastructure projects.
In a typical kleptocratic manner, Putin is diverting attention of his government’s failure to keep the Russian economy afloat as most of the nation’s industries have become uncompetitive. It is no secret that Russia’s oil & gas industry is subsidising the economy with unwarranted government infrastructure projects.
Not to mention such infrastructure projects in Russia have become the popular means of transferring national wealth to a few government officials, politicians and their patronising newly minted oligarchs.
Higher oil prices have spooked investors around the globe; driving up inflation that has become uncontrollable partly because of an unpredictable oil market.
The per capita income of Russia in 2022 is forecasted to be only USD 11,900 as compared to USD 63,358.49 for the United States. Even China today has a per capita that is higher than that of Russia.
The per capita income of Russia in 2022 is forecasted to be only USD 11,900 as compared to USD 63,358.49 for the United States. Even China today has a per capita that is higher than that of Russia.
Despite exporting almost 12 million barrels per day of oil at an average price of around USD 90, which amounts to over a billion-dollar revenue to the Russian government, the people remain poor. Russia is also one of the largest exporters of natural gas in the planet, accounting for nearly 40% of Europe’s gas needs.
Russian’s have been facing questionable elections for decades. Putin has politicised the judiciary and all the government institutions. Russian people have lost not just their civil rights, they have no stake in the country’s natural resource driven wealth.
Russian’s have been facing questionable elections for decades. Putin has politicised the judiciary and all the government institutions. Russian people have lost not just their civil rights, they have no stake in the country’s natural resource driven wealth.
The predicament of Russian people is no different than many in least developed parts of Africa, Asia, South and Latin Americas.
Certain African governments and politicians have enriched themselves with the hard currency earned through natural resource exports. The people of Africa have no money and more importantly no say in the governance of many African countries today.
In a similar fashion in many kleptocratic regimes globally, migrant workers are being exploited of billions of US dollars in remittance earnings. The hard foreign currency these migrant workers send to their families residing in developing countries are collected by respective governments; their families are paid in worthless local currency.
Exported human flesh has become the “new oil” for countries like Pakistan, India, Egypt, Nigeria, Mexico etc. Global remittances have reached USD 700 billion last year. Just to put this into perspective; total crude exports globally accounted for USD 661 billion in 2020.
When governments don’t depend on tax revenue of the domestic population, the people become powerless and lose all rights. It is as if such governments don’t need the domestic population anymore. The people lose their stake in the wealth of the country. More importantly, like Russia the population loses the right to earn a living.
We need to remove incentives of these kleptocrats that allow them to concentrate power and extend their regimes. No matter how lasting such regimes are, once they fall, they have no place to hide in their local country. No wonder kleptocracies launder so much hard currency abroad. Stolen foreign currency is transferred to foreign accounts of friends, institutions, relatives of illegitimate regimes and their crony oligarchs.
The West must not just sanction individuals of such regimes but monitor the incoming hard currency that flows into these economies in the first place through exports of natural resources and remittances from migrant workers.
Putin is not mad. There is method to his madness. He is further enriching his fellow kleptocrats in Russia through inflated energy prices. Answer to the tyrant’s aggression may well be to expedite shift to alternate energy sources such as nuclear & renewables while imposing individual sanction on his allies in Russia.
