Putin’s straight talk express

Prime Minister Vladimir Putin’s speech to a congress of the United Russia party surely surprised many members of the commentariat. Putin went into great detail about how the global financial crisis is impacting Russia. Of course, the commentariat tells you the Russian government is afraid to do this and bars media from saying otherwise. In his wide ranging speech, Putin covered in great detail the main economic and financial problems facing the country and what the government was doing about it.

Secondly, during the lead up to the speech, many in the Western mass media suggested that Putin would announce – in one form or another – his return to the presidency. Putin didn’t devote a single word to this issue. Many foreign television journalists based in Moscow disappointed their editors. The commentariat was hoping for some sensational news – they didn’t get it because they don’t want to see Russia as it really is, but as the way they want to see it (in service of their editors).

The thrust of the speech was there is no need to panic. The government is acutely aware of the problems facing the economy and has the resources to maintain stability. The currency will be protected and banks will remain solvent. Importantly, pensioners and state employees will be looked after and unemployment benefits will be made available if and when they are necessary. Taxes would be lowered for the business community and access to credit made easier.

If we consider the financial aid and loans already provided to the financial and business community, and the new measures announced today, then it is expected that Russia will run a budget deficient next year of 1% of GDP. The budget surplus in 2007 was 5.4% (and for the first ten months of 2008 a surplus of 7.8%). For Russia, after 8 years of economic expansion, this is truly a shock. However, in the scheme of things, most countries in the world would be envious of Russia’s trials and tribulations. And remember, the pessimists estimate that the Russia’s economy will continue to expand next year – approximately 2-5%.

As things stand now, Russia is in for at least two lean years to come. However, Russia is far better prepared to deal with this crisis than most countries. There will be no shortage of pain, but this time round the state has the political will and resources to cushion the blow.

Key things to note from the address:

* The value of the rouble will be managed. (This is probably the government’s most challenging problem.)
* The banks are safe. Almost all private deposits are protected and insured.
* Pensions and salaries of state employees will be maintained. And pensions will be increased over 50% over the next two years.
* Unemployment benefits will increase as of January 1.
* The residential housing sector to be allotted $U.S. 3 billion in relief.
* Corporate tax rating to be slashed 4% (down to 20%).
* Simplifying the tax code for companies.
* For now, the government will continue with previously announced spending plans.

For those in the know – and by that I mean economists, and not your moralizing and undereducated journos – Putin may have been a tad bit too optimistic. Maybe this is indeed the case. However, economists, and certainly not journos, are held responsible for state policy. Leaders are held responsible and are made to account for their governance. As prime minister of Russia, Vladimir Putin is doing just that.

Peter Lavelle’s new ‘mailbag’

I have decided to add a section to my weekly program “In Context.” I want to reply to readers of this blog and viewers of “In Context.” It will be at the end of the program and it will be called “In Context mailbag.”

Making a weekly program, writing blogs, and always being on standby to go into the news studio is not a full-time job – it is an all the time job. I regret, at least until now, that this has not made me as interactive with readers and viewers as I would like. I want to change this.

What I would like to do is the following: Review all comments about the program and blogs and then reply to a few of them. All I need in return is a real name and an email address. (Your name will be mentioned in the program, though not email address. I need an email address just in case I need to contact you about a comment).

Please keep in mind that I will only reply to reasonable comments about my blogs and program. And to make sure I get as much feedback as possible, you can always write directly to me at: plavelle@rttv.ru

Let’s make this project work out together.

Best,

Peter

Saving Saak’s balls

I didn’t bring up this subject and I sure don’t like commenting on it, but the Georgian president’s “balls” are in the news. (I don’t like it because my very young nephews Spenser and Parker read my blog and I live in terror thinking what my sister will say about this particular posting. But I feel I don’t have much choice – sorry sis).

The commentariat is desperate. It is slowly and with shame facing up to the facts – it willfully lied to cover up evil deeds. Georgia’s Saakashvili DID INDEED start the conflict in South Ossetia and is a war criminal. But as the commentariat backs away from him there is a parting shot – to discredit Vladimir Putin is job number one!

According to the Times Online (and other members of the commentariat) “Nicolas Sarkozy saved the President of Georgia from being hanged “by the balls” — a threat made last summer by Vladimir Putin, according to an account that emerged yesterday from the Élysée Palace.”

Vladimir Putin is a truly a man of the people. His use of language is at times a bit coarse – but so are the times in which we live in. And, by the way, most Russians appreciate how the former president and current prime minister expresses himself – I know I sure do.

I have no idea if Putin really said anything about Saakashvili’s private parts, nor do I care. And again I must really wonder about the integrity of mainstream Western media these days. Once more, we are told, what was said in private is later made available to the public (for politically motivated reasons).

Why was this done? Connect the dots. Sarkozy is being spun as “saving Georgia from complete Russian occupation.” This is ridiculous. Russia didn’t want this conflict and only reacted because it had to. If the Kremlin had wanted to place the Russian flag over Tbilisi it could have, but that was never the mission.

Yes, the Russian military went beyond the immediate conflict zone and destroyed and disrupted Georgian military instillations that could threaten South Ossetia in the future (the same could be said in regards to any potential threat against Abkhazia).

Since the end of the Soviet Union and the advent of an independent Georgia, the leadership in Tbilisi has used the Russia card as an artificial “external threat” to cover-up what is wrong at home. This strategy is all so convenient for the gullible and ideologically-driven West – and very lazy and negligent commentariat.

Saakashvili, his henchmen, and the vast majority of the so-called Georgian political opposition don’t have “the balls” to admit this.

Russia and global shareholding

Two events from the last couple of days demonstrate how the past has failed and what needs to happen now and in the future to benefit us all. First, the Russia-EU summit grudgingly showed that working with Russia as an equal serves the bilateral relationship. And second, the Washington G20 emergency summit puts into glaring relief just how outdated and out-of-step international financial institutions are. All in all, the current international order must evolve and accept that a new distribution of “global shareholding” needs to be ushered in as soon as possible.

I was part of RT’s live coverage of the Russia-EU summit in Nice, France. I strongly encourage my readers to watch these kinds of events as they happen on RT. Watching live news conferences will tell you much more than Western mainstream media – the commentariat tells you what they want you to know and how to think about them.

The live presser with Dmitry Medvedev, that great showman without much substance Nicolas Sarkozy, and the world’s best sidekick José Manuel Barroso was very telling. Of course, the Russian president and the EU leadership stated the obvious – the bilateral relationship is far from perfect and improving, it is fraught with challenges. But at the end of the day, pressure to fundamentally enhance the Russia-EU relationship rests with EU members – not Russia.

Sarkozy and Barroso spent most of their time explaining the EU position on the South Ossetia conflict. Sarkozy was harshly criticized for his mediation that ended the conflict. For Russia that issue is all but a closed book – Russia does recognize Georgia’s territorial integrity, and also the sovereignty of South Ossetia and Abkhazia. This is the new reality and the EU simply must get used to it.

It is obvious, at least to me, that Sarkozy and Barroso went to great lengths to promote a new pragmatic approach towards Russia. Since Georgia’s aggression against South Ossetia it appears Brussels has had a rude wake-up call. The images of Saakashvili (the Washington-backed mischievous adventurer and war criminal) presenting himself with the EU flag standing next to the Georgian flag in his office for the commentariat’s consumption was an EU public relations disaster.

And the countries of “New Europe” haven’t acted much better than the regime in Tbilisi. The Baltic States, Poland, the UK, and other EU members have done nothing to promote EU interests when it comes to its relationship with Russia. Russia and the EU are natural partners and have many here-and-now interests. Washington and Tbilisi are not neighbors, but Europe and Russia are.

There may not be much domestic bliss within the EU family on how to engage Russia, but at least those with level heads and a sense of realism understand that there is no other choice than engagement. Russia can’t be anything other than an equal shareholder in any relationship with the EU.

Much of the same applies to the international financial order. Depending on who you want to believe or how you count, Russia is among the ten largest economies in the world. It also is one of the few creditor countries and has the third largest foreign currency and gold reserves. But what say does it have on how the world economic system is run? How much say does China have? And what about India and Brazil? The answer is that they all have very little. This needs to change. And this is what the G20 in Washington is really all about.

The US doesn’t want to admit it and the commentariat is too timid, docile, and ideologically rigid to say what is evident to anyone who knows something about recent history and finance. The West has been literally living on borrowed time and money. Washington preached to the world through its controlled organs, the IMF and the World Bank, about the principles of market-driven capitalism. The problem is the US and many Western countries didn’t practice what they preached. But guess what! Many of the new emerging countries did take the advice on board – though wisely considering their own particular needs and circumstances.

I take enormous pleasure speculating about some of the behind-the-scenes chats in Washington. I see the Russians saying to the Bush people “Your management of credit and monetary policy has been disastrous and hurt the rest of us.” How about the Brazilians telling the Americans “your negative current account policy is politicized and your selective trade sanctions damage world trade.” The Indians might well evoke something about the proper regulation of banks, “Mr. Bush, we understand that in a market economy the government shouldn’t be a major shareholder in lending institutions.” And what about the Chinese? They might be interested to know from Washington when it is appropriate to bail out an industry like the automakers? How does that jive with market principles?” I could go on and on….. And it might even be funny with the exception that all of us face an uncertain future.

The pupils have come of age. Broadly speaking, the principles of market capitalism are sound, though with some serious flaws. It may all depend on the level of state intervention and regulation. But one thing is for sure. If the world economy is to avoid a long-term slump, it is essential the new players in the game be given a voice and more say in how the global economy is regulated.

We need a new global shareholders’ agreement. Washington and its Western friends can’t lecture the world anymore. They are on their knees now. Those like Russia and its emerging market peers have plenty to tell the world about what must be done now.

Will Washington listen?

Eating lots of crow

I am a media-watcher fanatic. I read everything I can find on what interests me most. And I won’t surprise anyone when I write that I have relished witnessing western mainstream media climb down the humiliating ladder as it distances itself from Saakashvili’s Georgia.

I remember it all too well. I begged my boss to cut me loose last July to allow me to travel far and wide during the month of August in pursuit of what I thought were some great documentary ideas. She wisely told me, “Peter you know we need you close, here in Moscow, August is an unpredictable month.” Of course, in retrospect, she was right.

The month of August aged me. I am still recovering from it, but in a good way. Not everyone can say the same.

All through August I kept asking myself and my close workmates, “Do I need a reality check?” I appeared on Sky News, Al-Jazeera, GMTV, other TV stations, and did a countless number of Western radio interviews “to explain the Russian side of things.” I maintained that I am not in a position to explain Russia’s position or policy, I only speak for myself.

What befuddled me was why international media simply couldn’t connect the dots about the South Ossetian conflict. I had no secret or inside knowledge – I just had access to what anyone else had: a variety of publicly known reports on who said what and when events were reported.

All of this didn’t matter. Working at RT branded me as a non-objective observer. Looking back on it all, this labeling is without any substance. I had the luxury to watch every moment of RT broadcasting during the month of August. We got it right, though our reporting was not flawless. We made some mistakes, but we got the narrative spot on. We reported that Tbilisi started the conflict from hour-one! RT’s western media peers – months later – are still trying to catch up.

Have a look back. The nature of today’s media hopes that you will forget and never challenge what you watch or read. That is something I will not stand for.

Read on:

The BBC really did an about-face when it aired a documentary that made up for its bias during the first day of the South Ossetian conflict. I guess I should say better late than never – but I won’t and can’t.

Britain’s “The Sunday Times” continues its long climb down with “Georgia fired first shot, say UK monitors.”

Consider the BBC again: “OSCE ‘failed’ in Georgia warnings.”

How about: Embassy Magazine (Canada), “The Story From Inside Wartorn South Ossetia” by Scott Taylor.

And this one really gets to me: Voice of America, “US Says Georgia Erred in August Attack in South Ossetia” by David Gollust.

And this one adds insult to injury: International Herald Tribune “OSCE chairman coy about Russia-Georgia war.”

And then there is the Washington Post - even bloggers printed by this neocon organ say the obvious: “Report: Georgia may have sparked the war with Russia.”

This slow climb down is embarrassing to witness. All these great and morally over-confident media outlets and governments hate to admit they got it all wrong from the start.

Does it matter? Does mean anything? Sadly, no. Western media sold the war against Iraq without much resistance. They badly reported on the South Ossetian conflict (and with no consequences).

I feel very much vindicated. But I don’t feel good about the state of the media. Being part of the media used to mean something – like being the last resort where truth and honesty could be found. When it comes to coverage of the South Ossetian conflict, I only see a belated attempt to cover up shamelessness and a dereliction of professional duty.

Medvedev’s terms and Russia’s conditions

(Note to my readers – I expect to do a segment on the following topic in this week’s “In Context.” So please forgive me in advance if I keep this blog short and to the point. I don’t want to steal my own thunder).

President Dmitry Medvedev’s announcement that term limits for president and parliament may be extended has created a lot of commentary and the usual rumor-mongering. I accepted Medvedev’s announcement at face value for two reasons.

First, what the Russians do about their political system is their business.

Could you imagine the Soviet leadership sponsoring an international media campaign condemning America for adapting the 22nd amendment to the US Constitution (on presidential term limits back in 1947)? The slogan could have been: “Americans denied the right to reelect the incumbent for a third time! America’s limited democracy!”) Or how about today’s Kremlin condemning the gerrymandering done in every state of the US by the party in power? Or criticizing the Electoral College? It would look very stupid, arrogant, and presumptuous. America has its democracy and it should be allowed do what it deems best for itself without needless outside commentary. Shouldn’t Russia be given the same courtesy?

Second, who is say it is “all about Putin?”

The respect the Russian people have for the former president and now prime minister is difficult to describe if you haven’t directly experienced his impact on Russian politics and society for the past eight years. Putin could have legally and with popular support changed the constitution while he was in office to stay for a third term. But he didn’t. Now we are told that Medvedev will “suddenly resign” next year because of some “crisis.” Well, isn’t that interesting! Russia has recently been in a military confrontation with Georgia defending the rights and lives of Russian passport holders (and internationally recognized peacekeepers) in South Ossetia and is now dealing with a global financial meltdown that started in the United States. To my mind both fall under the rubric of “crisis.” Nonetheless, Medvedev is still in office and appears to have every intention of staying there until the next election.

I watched and read with the usual detached humor the commentariat report on this story. A story surfaces in a “respected” journal (which means nothing in Russia as op-eds published in “respected” journals are all over the place when it comes to politics and worldview). Nonetheless, this was an opening to spill a lot of ink for no particular reason beyond Russia is a great conspiracy story that sells.

Until I am provided with solid evidence and rational thinking, I have every reason to believe that Medvedev will finish his term in office and if voters are satisfied with his performance he will be elected again in 2012 (for a six-year term?).

Will Putin be president again? I have no idea at this point. But as things stand now, if he were to show interest in this high office again in 2012, he would clearly have a fighting chance. If the Russian electorate desires this, there would be nothing wrong with such a choice.

Democratic norms are not static or determined by one country. Democracy as a value and process is best decided at home.

Medvedev’s message to Obama

On November 5 two important events happened almost simultaneously – Barack Obama became US president-elect and Russian President Dmirty Medvedev addressed his country’s Federal Assembly for the first time. Obama stated that he would pursue a foreign policy that respected America’s partners. Medvedev said (and I am paraphrasing) “don’t tread on Russia.” Was this the wrong way for Medvedev to turn the page in Russia-US relations? I don’t think. Let me explain.

Western broadsheets slammed Medvedev for not congratulating Obama on his great and historical victory. Why would Medvedev do this? He was addressing a joint session of the Russian parliament. I may be wrong but I don’t remember an American president stopping the State of Union address to convey a message of congratulation to any world leader. Why would an American president to that? The US president addresses the Congress and the American people with that speech. (Note: three hours after the address Medvedev did sent a telegram to Obama congratulating him on his victory).

Next, let me mention what most in the mainstream (purposefully?) missed in the Medvedev address. He spent approximately a third of the hour and half presentation on the issue of enhancing Russia’s democracy and dealing with the country’s worst social ailment – state corruption. Medvedev was in reflective mood. Yes, Russia’s democracy had gone through a lot. There have been tremendous ups and downs and the occasional cul-de-sac. But much more must be done. For instances, smaller parties (read: the opposition) must have representation in the national legislature. And that a return to direct election of governors needs to be considered. These issues and many more make it clear that Russia’s democratic journey is on track, with lots of challenges ahead.

What the mainstream picked up on were two issues – both presented in way to make the West feel incredibly indulgent about itself. First, the proposal to extend the term limit of the presidency from four to six years. And the parliamentary term to be changed from the current four years to five. Of course this was identified as an evil plot to have Putin return to the presidency as early as next year. All of this is sheer nonsense. The commentariat has never once gotten it right when it comes to Russia’s domestic politics – their conspiracy theories have always ended in tatters and in embarrassment.

Can I ask a simple question? Why should anyone outside of Russia really care if the Russian president serves a four year or six year term? Russia doesn’t worry about how the US or French presidents are elected or for how long. And you know what? If the Russian people want to vote again for Vladimir Putin, then what is wrong with that? Putin didn’t change the constitution to suit himself when he could. Why would he want to change the electoral laws now to benefit himself?

Ok, now for the issue that made the news in a big way. Medvedev made it clear that he wants a new and pragmatic relationship with the US. However, this will not be at any cost, especially if it is at the expense of Russia’s security. The Bush neocon crowd leaves power with the anti-missile system agreement for Eastern Europe in place. If Obama continues this policy Russia has warned it will react in kind. Medvedev made the same warning in his address. If Washington intends to start a new arms race (in Europe of all places), then Russia will have no choice but to reciprocate.

Why should any one be surprised by Medvedev’s remarks? Many NATO members and the EU itself have doubts why the US needs to deploy an anti-missile in Europe. If Iran and North Korea are a threat – Washington’s so-called “rogue states” - then place the anti-missile system in a place that could counter these so-called threats. The fact is Iran and North Korea are not a threat to Europe. But such a system is a very real threat to Russia.

When Medvedev brought up the issue of countering Washington’s plan for anti-missile defense, media reaction was largely negative. Medvedev was deemed as rude, insensible, aggressive, and speaking out of turn. The commentariat’s consensus tells us to be nice and respectful of America’s president-elect. Sure. Why not? But the commentariat is not made up of leaders. The commentariat is rarely, if ever, held accountable for what it says and writes. Medvedev doesn’t have this luxury.

I thought Medvedev’s speech was brilliant. It hit all the right buttons. No leader today can afford to take national security lightly, particularly the Russian president. The West has repeatedly lied to and taken advantage of Russia since the end of the Cold War. Medvedev reminded Obama that just because there will be a new occupant in the American White House doesn’t mean Russia will change or sacrifice its security interests. Medvedev did Obama a favor: the new American president should have no illusions about where Russia stands.

P.S. To my readers: I am ecstatic that Obama has won! I really want the Russia-US relationship to be firmly based on pragmatic mutual respect. At this point, I can only be disappointed.

Bailing-out the “oligarchs?”

There is a flurry of articles in MSM claiming that the Russian state may be aiming to re-nationalize large chunks of the economy. What is cited as evidence is the huge credit facility put into place to assist large Russian firms with considerable debts - denominated in foreign currencies - to Western investment institutions. This is not re-nationalization – it is responsible management of the economy during this time of global turbulence.

The Russian government has dedicated over $200 billion to aid ailing companies and investment institutions impacted by the global crisis. At this point, these funds are directed to support specific domestic sectors (banking, construction, and retail) and provide loans to Russian companies with large debts in foreign currencies to non-Russian financial institutions. In return for the assistance, or what many call a “bail-out,” the Russian state will demand shares in traded companies as collateral. This is fair and wise. In the world of business, the only way to ensure a debt is repaid is to have an asset to leverage against.

To date unconfirmed reports claim that two of Russia’s wealthiest tycoons Oleg Deripaska (UC Rusal –metals) and Mikhail Fridman (Alfa Group - telecoms) have signed up to the “shares-for-bail-out scheme.” The Russian development bank VEB, tasked to oversee this program, has yet to officially release details on which companies are part of this plan and for how much.

For some this plan is the Kremlin rubbing its hands looking for revenge and a return to a “commanding heights” control over the economy. In some ways, this sounds like a compelling storyline. After all Putin’s first term in office was to rein in the oligarchs: “pay taxes, stay out of politics, and you can keep your booty gained during the 1990s – or else.” And believe me – I remember rejoicing when hearing those words. Oligarch capitalism was destroying Russia. The oligarchs had a choice – work with the state or get out of Dodge. I am sure many know what I am getting at: the “Yukos Affair.”

Today things are very different. Back in the 1990s the state needed the oligarchs to survive. Boris Yeltsin sold off the country’s crown jewel for pennies on the dollar to be re-elected in 1996. Later, he became their prisoner. Putin rightfully put all of that to an end – the state should determine Russian economic policy, not greedy individuals.

I believe First Deputy Prime Minister Igor Shuvalov when he said, according to the Financial Times, “We don’t have the goal of collecting as many shares as possible. Our goal is that they [the borrowers] pay their debts. In an extreme situation – and this is not something we need; it is not something we want – then we would receive their collateral. If this happened … we do not need to sell it right away like a commercial bank. We could wait until the situation was better and the market conditions were better.”

Well those are the words of a pro-business, pro-market reformer. The state does not need more assets – it still has too many for my tastes. The Kremlin needs internationally competitive and efficient Russian businesses paying taxes.

And let’s all remember something. If the Russian government wants to nationalize a company or sector, it can do it legally if it wants in a snap. Today there is no need to create an elaborate clandestine plan to redistribute assets.

I no longer use the word “oligarch.” I prefer the word “tycoon or titan.” The word oligarch belongs to Russia’s difficult past. Now the Russian state and big business work together. Both are fortunate that the state can “bail out” one to the benefit of both – and everyone else in Russia.

S. Ossetia: Resurrecting the truth?

The BBC (specifically BBC 2 Newsnight) needs to be complimented for challenging the commentariat’s standard interpretation surrounding the South Ossetian conflict. Part of the standard interpretation is that Russia started the conflict and that Georgia was an innocent victim. However, the BBC didn’t break a major story. It has meekly and with a modicum of dignity reported on what many of us have known all along: Saakashvili’s reckless war aimed to ethnically cleanse South Ossetia. He, his regime, and his Western backers are war criminals.

For the last three months the truth of this war has been murdered over and over again. During this time a few brave media outlets questioned the Georgian government’s propaganda machine and Western patrons desperate to sweep the truth under the rug. Then the financial meltdown happened. Saakashvili was probably hoping his war crimes would be quickly overshadowed by events and forgotten.

Some of us have not forgotten – we cannot accept the death of outrage. I covered the South Ossetian conflict at RT for weeks on lots of angered adrenaline and sleeplessness. I am very proud to say that there is ABSOLUTELY nothing the BBC had in its report that RT didn’t report and MUCH MORE when events were happening! The hubris of Western media has no limits – the BBC pretended RT didn’t exist and CNN simply stole our pictures. I have no doubt both watched RT at the time, but what we said didn’t match their worldview. At every turn they followed their governments’ official policy positions.

Is this true of RT as well? All I can say is that no one at RT told me what to say. My bosses only worried that I would lose it on air because of sleep deprivation and moral outrage.

Most of the BBC report would be laughable if it weren’t so tragic. What makes my blood boil is that the BBC made its “grand revelations” after Western donors promised billions of dollars to a regime that should be standing trial in The Hague for crimes against humanity. The BBC report should be submitted as evidence.

The BBC report was painful for me to watch. I felt as if I was being told for the first time in my life that the sun rises in the east and sets in the west – and all to make me feel I was being exposed to secret knowledge.

A BBC journalist (finally) visited South Ossetia’s capital Tskhinval to gather eye-witness accounts of the conflict. Wow! That one hurts. Why didn’t the BBC interview RT’s Oksana Boyko? She was there from almost the start of everything – experiencing great emotional stress and dealing with living standards that barely supported life. She even made a very bold and moving documentary that puts to shame anything found in the BBC report. I guess a Russian journalist comes from a lesser God than a BBC journalist.

The BBC’s interviews with Saakashvili and Britain’s Foreign Secretary David Milliband back up every word I have said on air and in these blogs: both looked nervous, evasive, and unconvincing. Will they ever be held responsible for what they did then and say now?

I am pleased that the BBC made this report. It is flawed in many ways. But its pitch that it is saying something new boggles the mind. When the BBC was spinning Saakashvili’s lies, we at RT did our damn best to do real journalism.

Reporting the global crisis

According to the commentariat the Russian authorities are under-reporting the country’s economic woes for domestic consumption, while focusing on the economic crisis elsewhere in the world. It is far more complicated than this. I expect as much from the commentariat - very skewed and self-serving interpretations. On top of this, there is an obvious sense of glee that “the Kremlin’s room for maneuver” will now be limited. I find this laughable, so keep on reading.

Crisis reporting

Russian media has focused considerable attention on the crisis unfolding in the West, particularly in the US and UK. This crisis was triggered in the US and its impact on the rest of the world is enormous, including Russia. Domestic media has not blacked out how the Russian economy has been affected, but media is careful in what it reports. And there are reasons for this. The authorities want to avoid a panic – this is the only real danger to Russia’s economy at the moment.

The Russian media report on what it believes is important to the average citizen and consumer. This is being responsible. The average Russian consumer is “financially illiterate.” The vast majority have never bought a share in a publicly-traded company. For them, the carnage being experienced by Russia’s stock markets are only numbers and other people’s money. Russia’s stock markets are important, but for the average Russian they are not. Neither is there much knowledge (or involvement in) of hedge funds, pension funds, bonds, and other securities. And only 14% of all real estate transactions include a mortgage.

A small number of small banks have folded, but also rescued in one form or another. To date, not one depositor has lost one ruble in all of this. And if the situation does worsen dramatically, the country’s top banks will remain not only solvent, buy also financially healthy. Again, like the stock markets, Russia’s banking system is very basic and in need of much reform. Most depositors keep their money in Sberbank – Russia’s largest and state-controlled bank. And to increase depositors’ confidence, the government has guaranteed all deposits up to 700,000 rubles for banks participating in this program. This is a large sum of money for the average citizen, approximately $28,000. And keep in mind, Russians are notoriously poor savers.

Consumer credit has caught on with Russia’s middle class. Like their western peers, some will be negatively impacted as the credit crunch plays itself out in Russia. The vast majority of Russians have never made a purchase with borrowed money.

Russians have little awareness of how financial markets work. But there is one part of the economy that all understand very well – the value of the ruble. Since the collapse of the Soviet Union, the ruble has tanked three times. Media doesn’t have to report or cover the state of the ruble – consumers are vividly aware what their rubles can buy or not buy. The government has gone to great lengths to protect the value of the currency. The value of the ruble is not only an important financial concern, but also a political one. And if the price of crude oil stays low for a long length of time, the government will be hard pressed to lower the ruble’s value without losing public trust.

As for reports that store shelves are empty, well all I can say I spent two hours walking around Moscow today. I visited over a dozen stores and shops. If there are empty shelves in Moscow, I didn’t see them. What I did see was a lot of shopping.

To sum up: Many of Russia’s largest publicly-traded companies and their owners have taken a financial bath over the past for few months. This is bad news for Russia in a number of ways. However, the financial sector here is not tightly connected to the rest of the economy. And this is also a reason why media has chosen to report the way it does.

“Changing the Kremlin’s behavior”

A great deal of western reporting on how Russia is faring through the global financial crisis has a gleeful undertone. The worse it gets in Russia, the happier they are! There is also the not-so-hidden-hope that Russia’s foreign policy will be “less aggressive” if the country’s economy falters. Needless to say, I see Russia’s foreign policy primarily as defensive and only assertive when protecting its legitimate economic and security interests.

What is missed with the line of reporting is that it is the West that will be forced to change its foreign policy behavior. Will the West, especially the US, have the cash to fund its regime change projects in the future? Let’s face it depending on how the global crisis pans out, it will not only be Russia adjusting its policies, but everyone else in the world as well.