Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Warning Signs Of Instability In Russia

Politics / Russia Feb 20, 2017 - 02:58 PM GMT

By: John_Mauldin

Politics

BY GEORGE FRIEDMAN AND JACOB L. SHAPIRO : Geopolitical Futures forecasted that 2017 will be “an inflection point in the long-term destabilization of Russia.” After just six weeks, there are clear signs that this forecast is right on track. You can read more about GPF's outlook for Russia in This Week in Geopolitics (subscribe here for free).

Russia has four areas of instability: the distribution and prevalence of wage arrears, pressure on its banking system, low-level social and economic unrest, and government purges.


The map below shows these developments.

Wage Arrears

The bottom part of the Russia map shows wage arrears by region. “Wage arrears” is a fancy term for workers not being paid. In December 2016 (the last month for which Russia’s Federal State Statistics Service has data), total wage arrears amounted to 2.7 billion rubles (roughly $46.4 million in USD).

There are two regions where this is a big issue. The first is port regions. Primorsky region, whose capital Vladivostok is Russia’s largest port on the Pacific, has the worst incidence of wage arrears. It accounts for 21.2% of the country’s total. The second area is Siberia.

The import of these wage arrears is not their size in absolute figures. It is where Russian workers are not getting their paychecks. This points to a bigger issue.

Russia’s economy is highly regionalized. More than a fifth of Russia’s wealth comes from Moscow and its surrounding areas. The central government keeps the Russian Federation together by redistributing wealth to the interior.

The first places to expect economic trouble are port and interior regions. The port regions will struggle because trade is the oxygen that port cities need to breathe. (And Russia’s main export, oil, is facing prolonged low prices.) The interior will struggle because the central government will have less money to allocate.

This forces a lose-lose choice for Moscow: austerity or cuts to military spending

The wage arrears map is an indication that GPF’s model for Russia is accurate. If the model is accurate, the probability of the forecast coming to fruition greatly increases.

Russia’s Banking System

The decline in the price of oil has had a negative effect on the Russian banking system. Incidents of Russian depositors applying for deposit insurance have greatly increased. And some regions are suffering from banking crises.

In Tatarstan, for example, the region’s leading bank suspended operations in December. This deprived both individual depositors and businesses of access to funds. As a result, workers weren’t paid and bankruptcies increased. It also required intervention from the central government.

The map points out regions where over 100 banks have had their licenses revoked. By itself, this does not present a clear picture. Russia’s banks could be under severe pressure. The fact that the main fund used by Russia’s Deposit Insurance Agency has decreased in value by 75% in two years gives this argument some weight.

Russia could also be cleaning up its banking system. This would mean shutting down banks involved in illegal or irresponsible activity. But in view of the other negative indicators, the former is more likely.

Protests in the Countryside

Economic difficulty can lead to social unrest. In the Russian countryside, small-scale protests have been observed. Small incidents have also occurred in major cities like Moscow and St. Petersburg. The map plots these areas of protests.

There are two points worth noting. First, none of these protests have shown any sort of wider national organization. Second, they are relatively small (often in the low hundreds). They’re important but should not be overstressed. The Russian countryside is not singing the songs of angry men, nor is it close to doing so.

There are, though, clear signs of discontent bubbling to the surface. These signal a frustration with salary cuts, unpaid wages, and social services that have been reduced by Moscow. Small events are the canary in the coal mine… and spell trouble for the Russian government down the line.

Purges

The last two items on the map show political and security purges ordered by President Vladimir Putin. Russian media have described these moves as a “major political reshuffle.” That is a euphemism for what it really is.

The point of a purge is to get rid of potential rivals and install loyalists in their place. On Feb. 6–7, two governors from Perm and Buryatia regions were forced to resign. Vedomosti, a leading Russian-language business daily, reported that more resignations and removals are expected in the regions identified in the map.

Unlike wage arrears, these purges are not confined to any one geographic area. Some are in Siberia, some are in the regions toward the Caucasus, and others are in the immediate vicinity of Moscow. That Putin feels unsure enough of his position to carry out these kinds of political changes reveals a great deal.

Presidential elections are coming for Russia. They will likely be held in 2018. Like President Xi Jinping in China, who is using “anti-corruption” as a pretense to remove rivals ahead of his reappointment at this fall’s Communist Party Congress, Putin is securing his political position in the name of fighting corruption.

The purges are not limited to governors who hold power in the Russian Federation’s political system. Putin has also removed generals from the Interior Ministry as well as the Ministry of Civil Defense, Emergencies and Elimination of Consequences of National Disasters. These ministries are responsible for forces that are used to control domestic social order and quell protests.

Ensuring the loyalty of such ministries is essential and must be done before serious problems emerge. A total of 16 generals have been removed, according to RIA Novosti, and two of those were also removed from military service.

Writing on the Wall?

It is not GPF’s forecast that the Russian Federation is in danger of imminent collapse. None of these data points by themselves indicate that GPF’s forecast has been confirmed. They simply highlight Russia’s underlying weakness. They also explain why Putin, who just a few months ago was strutting on the world stage, has gone somewhat quiet

Prepare Yourself for Tomorrow with George Friedman’s This Week in Geopolitics

This riveting weekly newsletter by global-intelligence guru George Friedman gives you an in-depth view of the hidden forces that drive world events and markets. You’ll learn that economic trends, social upheaval, stock market cycles, and more… are all connected to powerful geopolitical currents that most of us aren’t even aware of. Get This Week in Geopolitics free in your inbox every Monday.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in