Annals of Resurgent Russia – CIA World Factbook 2008

The 2008 version of the CIA World Factbook has been published. While the demographic data has not been updated, new economic estimates have been published for 2007.

Firstly, let’s take a look at the basics. Russia’s GDP is now estimated at 2076bn $ in 2007, up from 1723bn $ in 2006. This is not just because of Russia’s 7.4% growth and dollar depreciation, but because estimates for it have been revised upwards – apparently it has taken a hint from the World Bank, which has used new data on international price comparisons to slightly improve Russia’s position and massively downgrade (by 40%) China and India.

This also means that in purchasing power parity terms, Russia’s GDP is now the seventh largest in the world, moving up two places since 2006 by overtaking Italy and France. Now, it is within shooting distance of the UK (2147bn $). Assuming, like the Economist Intelligence Unit, that Russia will grow by 6.7% and Britain by 1.9% in 2008, this means Russia will overtake Britain in 2008. Assuming a conservative 6% Russian growth and 2% German growth, Russia should overtake Germany in 9 years from 2007 (in 2016), thus fulfilling predictions that it will become the world’s fifth largest economy by 2020 some four years earlier. It also means Russia’s PPP GDP as a percentage of the world’s increased from 2.65% in 2006 to 3.15% in 2007. All this is also evidence that the ‘economic catch-up’ forces I described in Towards a New Russian Century? are in gear.

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News 16 Jan

Freedom House publishes its 2008 report on Freedom in the World.

Russia scored a 6 for Political Rights and and 5 for Civil Rights (1 is best, 7 is worst). According to their figures, Russia is no different from Algeria, Azerbaijan, Bhutan, Brunei, Egypt, Kazakhstan, Oman, Pakistan, Qatar and the UAE, and less free than Afghanistan, Jordan, Kuwait, Morocco, Nepal, Togo, Thailand and Yemen. In other words, it sits right alongside the the tinpot dictatorships and monarchies of this world.

As you might well imagine, we have issues with that – and we’ll cover them in detail, probably in our next Editorial. Suffice to say for now that Da Russophile disagrees.

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Core Article: What We Believe

In the first 5 days of its existence, this blog has been priveleged to receive more than more than 200 page views from more than 100 visitors from 18 different countries. We have also been linked to by the Winthrop88 blog and Marginalia (probably the leading English-language blog about Latvia) – of those that we’re aware of, anyway.

We have also also been receiving mail. While most of it is constructive, some is of a negative character, along the lines of us being ‘unreconstructed Stalinists’, a Nashi-sponsored ‘Kremlin mouthpiece’ and ‘shameless apologists for Putins dictorship (sic)’.

To clear this up, we will compile a list of our opinions on various topics, Russia-related and not. This will make up a Core Article. This is so that you, dear reader, don’t have to waste your time on deconstructing our articles.

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News 14 Jan

President Putin’s visit to Bulgaria to bring pipeline deal, NPP contract

A new company is being created, in which Russia will own a 51% stake, to build a pipeline to carry Russian oil via the Bulgarian Black Sea port of Burgas and Greece’s Alexandroupolis on the Aegean, so as to bypass the congested Bosporus. It will pump 35mn metric tons a year, though capacity can eventually be increased to 50mn.

Atomstroyexport, Russia’s state nuclear equipment monopoly, has also been awarded a contract, estimated at 6bn $, to build two reactors for Bulgaria’s second nuclear power station in the town of Belene. According to Foreign Minister Lavrov, more agreements could be signed on Putin’s visit to the country, timed to coincide with celebrations of the 130th anniversary of the liberation of Bulgaria from Ottoman rule by a force led by Russia’s Tsar Alexander II.

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Annals of Resurgent Russia – It’s the Economy (in 2007), Stupid!

Twice a year the World Bank files a Russian Economy Report. The last one was in November 2007. Let’s look at its first chapter – “Recent Economic Developments”. It does what it says, i.e., condenses Russia’s economic situation in 2007 into a few pages of dense text, stats and charts.

First comes the summary:

RUSSIAN ECONOMIC REPORT – NOVEMBER 2007

Russian economic performance remains robust. Having grown by 7.9% (year on year) in the first half of the year, Russia is likely to post full-year GDP growth of over 7% in 2007. Output growth was driven by rising domestic demand, in particular, buoyant household consumption and business investment. On the supply side, sectors servicing the domestic demand (construction and retail trade) continued to boom. Manufacturing growth remains solid but is tapering off. The negative contribution of net exports to GDP growth is explained by the real appreciation of the ruble, which is making Russia’s exports more expensive abroad and imports less expensive to domestic consumers.
In a context of an economy growing close to potential, with high energy prices and large capital inflows, Russia faces two main challenges: inflationary pressures and rapid appreciation of the exchange rate. The most notable monetary development in 2007 is the surge in inflation. While it remained under control in the first quarter, inflation kept gaining momentum in the remainder of the year. Inflation reached 9.3% over the first ten months of 2007. Most likely, end-of-year inflation will reach 11 percent (Dec/Dec) compared to 9% in 2006 over the same period. The surge in inflation is explained by rising world food prices and by monetary factors. Large capital inflows pushed the balance of payment surplus to record highs and are becoming an important source of reserve accumulation ($450 bn). However, unlike oil revenues, capital inflows are not absorbed by the Stabilization Fund, driving money expansion and exerting upward pressures on the ruble. Given limited monetary instruments for sterilization and the current stance of monetary policy (that limits the pace of nominal exchange appreciation), reducing inflationary pressures is becoming exceedingly a difficult task.

The Russian government continued to enjoy fiscal surpluses. The federal budget surplus reached 7.1% of GDP over the first nine months of 2007. But the approved 3-year budget entails a fiscal relaxation that under the current oil price outlook would reduce the overall budgetary surplus to 0.2 percent of GDP by 2008. The amendments introduced to the budget 2007 law entail an increase in non interest expenditure that would bring the budget surplus down from 4.8% to 2.8% at the end of 2007. These amendments aim at increasing public investments in priority infrastructure and social sectors with a view of boosting growth. However, raising public investments might not be enough to close Russia’s infrastructure gap and drive sustained economic growth. Keeping up private investments and improving the efficiency of investments will be as important. In addition, the pace of fiscal expansion needs to be studied carefully to avoid exacerbating tensions between fiscal and monetary policies.

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News 13 Jan

Rally against Georgia poll result

Thousands of opposition supporters have taken to the streets in Georgia in protest at what they say were rigged presidential elections last weekend. Those gathered in the capital, Tbilisi, are demanding a second round of voting. Pro-Western leader Mikhail Saakashvili polled 53%, narrowly averting a run-off against his nearest rival, Levan Gachechiladze, who won 25% of the vote. Mr Saakashvili called the snap poll to resolve a crisis after suppressing anti-government rallies two months ago.

The BBC’s Neil Arun, who was at the rally, said much of the protesters’ anger was directed at Western observers who have said the polls were essentially democratic, although there were significant problems. The authorities have warned the demonstrators they will not tolerate any more civil unrest.

And time and time again, consistently, there surface allegations of fraud. This is not to say Georgia is a failure at democracy, but that there were serious problems in the conduct of these elections is in no doubt.

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Mailbag: Back from a Russian Century?

Four days and 50 reader views into our baby blog’s existence, we have been priveleged to receive a number of letters to our darussophileATyandexDOTru address. All of them deal with our Towards a New Russian Century? core article (which is, in addition, the most popular item on this blog by far – possibly because colleen was kind enough to link his winthrop88 blog to it).

The biggest critique of it, voiced by colleen and the letter writer DP, was my neglect of the topic of peak oil in my analysis of geopolitics in the next 20-30 years.

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News 11 Jan

Net capital inflow into Russia hit $82.3 bln in 2007

MOSCOW, January 11 (RIA Novosti) – Net capital inflow into Russia reached a record $82.3 billion in 2007, almost double the previous year’s figure, the Central Bank announced on Friday.

In 2006 the figure was $42 billion. In the last three months of 2007, net capital inflow was $23.5 billion, compared with net outflow of $7.6 billion in the third quarter.

This is around 6% of Russian (nominal) GDP. Foreign investors are rushing in to buy into Russian IPO’s.

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News 10 Jan

Russian moves to ban tobacco advertising

MOSCOW, January 10 (RIA Novosti) – The Russian government has decided to completely ban tobacco advertizing, by signing up to a World Health Organization anti-smoking convention.

In its first session of the year, the government approved a draft law on joining the WHO Framework Convention on Tobacco Control (FCTC), which stipulates a ban on advertizing tobacco products.

The FCTC requires parties “in accordance with their respective constitution and constitutional principles, to undertake a comprehensive ban on all tobacco advertising, promotion and sponsorship within five years of the WHO FCTC’s entry into force for that Party.”

About time, considering that 70% of men and 30% of women smoke in Russia, one of the highest rates in the world, and that 300,000 people die from smoking every year in Russia.

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Annals of Western Hypocrisy – Georgia Presidential Elections 2008

Saakashvili wins Georgian elections in first round (January 6th)

TBILISI, Georgia: Georgia’s American-allied president won re-election over the weekend and avoided a runoff election in this small former Soviet state by a margin of 1 percent of the vote, according to official results released Sunday.

The main opposition candidate, Levan Gachechiladze, did not concede the election and on Sunday he claimed that fraud had tainted the results. He called for street protests, threatening a muddy the outcome.

The campaign organization of Saakashvili, a U.S.-educated leader close to the Bush administration, had already claimed victory on the basis of on exit polling during the election Saturday. International observers called the vote free “in essence” but cited violations.

This normally wouldn’t matter much, but bearing in mind the narrowness of Saakashvili’s final score (52.21 as of 8 Jan) this can be significant.

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