Rumors of financial war: Russia vs. US

Summary:  Did the United States conduct a successful financial “raid” on Russia?  These rumors might not be true — probably are not true – but then so many stories that start wars are false.  Remember the Maine!  More seriously, these rumors signal that the possibility of financial warfare is on the minds of key people.  Probably for good reason.

Russian Rescue Package Expands to $120 Billion“, Wall Street Journal, 19 September 2008 — Subscription required.  Excerpt:

As Russia’s stock market went into free fall this week, conspiracy theories circulated that Washington was egging on American financiers to punish Moscow for its incursion into Georgia last month. The theories gained enough credence that Russia’s finance minister, Alexei Kudrin, spoke with U.S. Treasury Secretary Henry Paulson late Wednesday and sought assurances that the U.S. wasn’t playing politics with Russia in the financial crisis, the Russian Finance Ministry said.  Mr. Paulson told Mr. Kudrin that the U.S. wasn’t, according to the Russian side. A U.S. account of the call wasn’t available.

… In recent weeks, Mr. Medvedev has blamed the crisis primarily on the U.S., which has been the target of Kremlin wrath on all fronts since the U.S. sharply criticized Russia’s war in Georgia.

A top State Department official, meanwhile, this week cited the financial problems as the “price” Moscow was paying for the war. On Thursday, Secretary of State Condoleezza Rice said Moscow’s moves in Georgia and elsewhere “are putting Russia on a one-way path to self-imposed isolation and international irrelevance.”

The question broached by Mr. Kudrin in his phone call with Mr. Paulson reflects a view widely held in the opaque world of the Moscow elite. Russian officials have asked U.S. bankers in recent weeks if the banks have been ordered by U.S. officials not to lend to Russian companies, according to people familiar with the conversations. The banks deny any such order.

“There’s a feeling of hostility,” said one person who works closely with the Russian government. “The biggest problem is that they don’t understand that the problem is home-made.”

… With growth running about 8% this year, there is no sign of a recession, economists said, but that growth rate could be halved next year.  “Growth will slow down,” said Martin Gilman, a former International Monetary Fund official, now a professor at Moscow’s Higher School of Economics.

For a less sanitized version of opinion in Russia, let’s go to our #1 local source in Moscow.

Angst“, Eric Kraus, Truth and Beauty, 10 September 2008 — Excerpt:

Objectively, the Russian economy is doing better than 95% of the economies on earth. Profitability is high, macroeconomic stability is excellent, growth is compelling – there has not been a single bank failure since 2004, and virtually no exposure to US subprime.  Yes, there is the usual litany of complaints, many of them justified – but none of this is really new, and while we are very familiar with the short-term irrationality of markets, we struggle to explain this debacle on the basis of normal market factors alone.

More controversially late last week at least two of the top local Moscow brokers were warning clients that major US banks were being encouraged/pressured to sell their Russian assets. Although certain bulgebracket US institutions were clearly dumping Russian paper last week, it remains possible that they were doing so largely – or entirely – of their own accord.

We have been unable to get confirmation of the alleged political pressure; a very senior person at JPMorgan denied it flat out, whereas contacts at the sole remaining solvent major US investment bank confirmed that they had indeed gotten the call. Our friends on the sovereign debt desks inform us that only US accounts have been selling Russian Federation bonds, but these have all found a new home a couple of percent below last weeks prices. CDS spreads have widened out, but this was primarily hedging activity as cash volumes have dried up.

Intriguingly, aggressive and apparentlyconcerted statements by assorted US officials (vide supra) suggest that it would have pleased them to no end to inflict some economic damage. Whether they are thumping their chests following a successful covert intervention – or are simply trying to put a useful spin on a market-driven sell off to which they were mere spectators – remains an open question.

The Russian equity market has – in recent weeks – been the worst performing global major market. Trading has been substantially worse than in the run-up to the 1998 crisis (where we saw regular dead cat bounces) or during the Yukos debacle. There is one minor difference – in 1998, the Russian economy was dying, the CBR coffers were empty, GDP was stagnant, oil was dropping below $10, and despite Russian domestic debt paying >100%, the government was surviving on expedients.

Russia is currently seeing 7.9% GDP growth, growing trade and budget surpluses, very limited capital flight (with a net positive capital account YTD), and no signs of substantial economic slow-down. Contrast this with Estonia, Latvia or Turkey…or the UK! While markets are often a bit irrational, we would be surprised to see them begin to defy the laws of gravity without reason.

At present, we simply do not know whether or not this was truly the onset of economic warfare; we tend to distrust conspiracy theories, and would note the existence of several plausible counter-arguments …

T&B is frankly bewildered. While we remain sceptical about the purported attack, we are at a loss to find any rational explanation for what we are seeing.

Originally published at Fabius Maximus and reproduced here with the author’s permission.

18 Responses to "Rumors of financial war: Russia vs. US"

  1. Anonymous   September 23, 2008 at 1:20 pm

    I don’t understand what is hard to understand here. First off, US is a free market society. We don’t mix business (i.e. private) with politics (i.e. gov), but we do have quite alot of politics undeniably. These conspiracy theories on the free-est market in the world don’t seem to hold much ground.Market sentiment is declining world wide. What would be so hard to understand that under russian’s corruption and vague contract laws that people are simply getting fed up with the risk under today’s global market pressures. Also, say the U.K. suddenly brought in an oversized military and occupied spain tomorrow — i have a hard time believing normal people would still be in 100% support of U.K. markets regardless of how “profitable” the risk would be. The only one punishing russia is themselves.

    • Guest   October 16, 2008 at 2:05 am

      The ignorance of the person who wrote this is incredible.You obviously don’t have a clue about the history of the relationship between the Ossetians and the Georgians or the Abkhazians and the Georgians. They have fought several bloody wars. Both those small freedom loving nations ( to use the tactical language of the US press )want only one thing- freedom from the big sadistic Georgins who have commited genocide against them! History! But the most hilarious assertion is that the US doesn’t mix business with politics. You must be living in la-la land. Insane.

  2. Gloomy   September 23, 2008 at 3:26 pm

    Did you notice that oil prices had dropped precipitously prior to this market meltdown? Did you know that a large part of the Russian economy is dependent on oil? Is it surprising that responsible investors want to move assets out of a war zone?

    • Alex   September 24, 2008 at 10:25 am

      Your comment is ridiculous. First of all, oil at $95 for 2 days cannot explain market fall in Russia simply because they were making a killing at $50 a few years back. Now $95 is double that, so that could not have triggered the meltdown.Secondly Russia is NOT a war zone :) Georgia is, unless of course you didn’t study geography. Western hysteria about the conflict is ludicrous and doesn’t hold water under the lightest of examinations.

      • Anonymous   September 24, 2008 at 8:51 pm

        Alex,Russia is not a war zone and we all knkow that Gloomy meant Georgia; however, Russia has proved be the agressive in recent months. Before you get on me let me tell you I am Russia and I am in banking in Moscow as an analyst in private equity. I hope we will have jobs after this crisis.Georgia is not “Western Hysteria.” It is simply Putin at his best. Look at Ukraine and what is happening. Look at the food and energy squeeze that is happening to them by Russia.This is not a Southern Ossetia v. Kosovo issue. If that were true then Moldova should leave Russia and I would like to know what will happen when Chechnya wants to do the same. If Moldova or Chechnya would threaten to leave Russia as Chechnya wanted in the past we would see a sea of tanks occupying the region.Russia plays the card when it wants because the posturing of Georgia and an affront to Bush over NATO entry for Georgia and Ukraine. That is all it is.As for the price of oil it was dropping for a month and half from the highes of $147. Oil is based on forward looking contracts and downward momentum was hurting Russian oil companies. Look even Roland Nash of Renaissance Capital said that was the case, so please take your conspiracy theory elsewhere.Finally, Alexie Kudrin, Russia’s Finance Minister, said many telling things about oil. Now, Russia needs oil to be at a minimum of $70 per barrel or it would be a death spiral. You want the link in English or I can translate from Russian.Your statements are ridiculous and show that you appreciate only conspiracy theories. If that is truly you, then please read the Moscow News because it is filled with it.

        • Guest   September 25, 2008 at 6:46 am

          > Russia has proved be the agressive in recent monthsThe image of Russia being aggressive is creation of the Western mass media, and people in the West unfortunately have no way to verify it, because they can’t read Russian. It’s a one-way communication. Quite many Russians can read English, so they are in a way immune against the Russian propaganda, which, of course, also exists.I am watching the war against Russia by the West(ern mass media) since the Yugoslavia events. I have no doubt, this is a very big scale, sophisticated and cruel war, and Georgia is just one episode of it. Russia only recently started to deal with this, and of course we now have an image of aggressive Russia.

          • Guest   September 25, 2008 at 8:17 am

            Guest,I am Russian. I speak, read, and write Russian. I graduated from Russian University and Georgia is not a creation of Western Media Hysteria.In Abkhazia and Southern Ossetia the Russian government has for years been circumventing their integration and even living in harmony with Georgia. True, Abkhazia and Souther Ossetia were autonomous under the USSR; however, areas that have large ethinic Russians does not mean that they should break-away from territorial region that they have been designated to be a part of after the fall of the USSR by the UN, NATO and global community aside from Russia.You want to know why because then Moldova and Chechnya would have the same right Medvedev stated of self-determination as he said was his right to “protect” Southern Ossetia and the ethnic Russians.There was no signs of genocide as Medvedev stated. In Kosovo, there were mass graves and a systematic genocide. Medvedev alledges genocide without genocide.Further, Russia has been handing passports for years to Southern Ossetians. This is undermining the territorial integrity of the sovereign nation who the international community deem is the true owner.Moreover, why did Russians occupy well into Georgia? They moved only when forced to move on fear of international isolation. The answer is this is Putin flexing his muscle and not about ethnic Russians or the western media. Western media was denied entry to Georgian areas effected by Russia and not by Georgia. This is well documented even in Russia.If you want links in to Russian sites and blogs that say Georgia is just Putin’s war and he flexing his muscle I have them. That is if you can read and understand Russian.The notion that Moscow News is anything important is silly. Obviously, you don’t know Russian media, which demonstrates you don’t know Russian. When I wrote Moscow News that is the same as Conspiracy Magazine which is pro-Russian only. It was said tongue and cheek, but obviously no one here knows Russia or MY society. That just proves my point, so thank you Guest for just proving my point.

          • Guest   September 25, 2008 at 10:04 am

            The above post (to which I don’t see a way to reply) proves my point that some Russians are immune to the Russian propaganda. Clearly, they are not so immune to the Western propaganda, as it’s so massive and sophisticated.As a side note, this guy doesn’t sound like a typical Russian of nowerdays to me.

          • Guest   September 25, 2008 at 9:37 pm

            Typical Russian!You cannot reply because you don’t have any facts to reply with.I live in Moscow in Arbat neighborhood.Sorry to tell you be we get CNN, CNBC, RT, SkyTV and many others. Russia is not as backwards as you seem to believe.However, that Russians don’t call Putin a despot, then you have never been to Russia. You have not done any large volume of business with Russia. Please continue to read your books and have your ideas because you don’t know anything.In Sochi, last weekend Putin had is annual economic/networking conference with foreigner that want to do business with Russian companies. He presides of it and deals are done, but if the government doesn’t like them they don’t get done. The government is an extension of Putin and nothing else. This is what every Russian knows.Obviously you don’t speak, read or write Russian because if you did there is many writings about Putin in that manner. Russians have always named their leaders. Yeltsin was the drunk. But, not since Stalin have we had a Despot and Putin is one.Georgian conflict/war whatever you like would never have happened, if NATO were not on the table for Georgia or Ukraine. Never. We all know that.Putin believes he is creating nationalism again. Medvedev wants to temper that, but even he is stupid did you see what happen with Polyus today. Medvedev needs to shut his mouth because it strikes to the heart of risk and uncertainty that exists in the Russian market.Russia’s agression is Putin and he is something fear. He has single handedly destroyed foreign investment, increased country risk, increased financial risk, and hasn’t handled any of the rampant corruption in Russia.Work in Russia. Live in Russia. Then you will know. You don’t because if you did you would know and if you want links I can provide them and if you don’t want me to translate you can use google translation it is not bad.As for being a guy, well I am woman. There are some in banking in Russia.I am very typical of educated class and arbat is very cosmopolitan and wealthy, but then again from what you said you don’t know Moscow. If you didn’t you really don’t know it well.

          • Klug   September 26, 2008 at 3:38 am

            What is Russian University and where is it situated?

        • Klug   September 26, 2008 at 3:32 am

          Do you really Russian and do you really think that Moldova is a part of Russia?

          • Guest   October 16, 2008 at 2:28 am

            I strongly suspect that this ” Russian Woman ” banker off the Arbat is in fact a Georgian trying to pose as a Russian. The vitriolic tone and the repeated assertions that the other writers knows nothing about Russia display a hatred of the country that you would have never heard from the dissidents of old. They were patriots, who loved their country and abhorred the communist regime. This idiot is straight out of the I-hate-all-Russians-they’re-all-Soviet-commies school.

  3. Guest   September 23, 2008 at 4:28 pm

    The two comments above are not serious. If the US is a “free market society”, then what about USSRA as Roubini describes it? While oil may play a role, Russia is not a war zone. Fabius Maximus is addressing a serious question and he has provided some proof, but not decisive, that the US is waging financial war on Russia. It hasn’t been terribly effective and it isn’t the only factor, but we should stay alert for more clues.

    • Anonymous   September 23, 2008 at 8:00 pm

      Can I ask you what did Fabius really say? Nothing. There is no transparency in Russia. Medvedev say it himself. Corruption is at an all time high.Country risk by the Eurasian placed Russia next to Angola.Tranparency International has placed Russia as one of the most corrupt places on earth. Even the district attorney of Moscow said that there is a minimum of $120B worth of bribes per year.Legal reform? Ha ha ha! Yukos, Mechel, TNK-BP. In Sochi where I was this past weekend you do not speak your mind. You want to know why because Putin will take over your company.William Browder was barred from the country after he and his investment firm, Hermitage Capital Management Ltd., ran afoul of the Putin government. After the Kremlin canceled his visa in 2005, police seized documents and computers from the offices of Hermitage Capital and its attorneys. Then Mr. Browder learned someone had transferred ownership of Hermitage’s Russian holding companies to a convicted murderer.A long-running dispute over control of TNK-BP, accusations of government fraud by Hermitage Capital, the investment fund, and Vladimir Putin’s crackdown on Mechel, the steel company, for alleged price-fixing has made investors worry about the stability of the Russian business environment. The tension ratcheted up still further last month when Russia invaded Georgia.“From a Russian point of view, all their individual actions over the past five years look sensible, reasonable and logical,” Jules Mort, an emerging markets fund manager for Thread-needle, said. “The problem is that, when considered in aggregate, they don’t make for a comfortable background for international investors.”Mr Mort attributed the capital clawback in part to investors dropping their bets that the rouble would continue to rise against the dollar.Russia is also hugely exposed to fluctuations in the price of oil.Commodities stocks make up half the stock market and the Government’s tax take from the oil companies depends on the price of oil. Prices for a barrel of crude recovered to $108 on Friday, still well ahead of the $85-a-barrel threshold at which Russia’s current account surplus disappears.Christopher Traulsen, director of fund research for Morningstar UK, reckons that Russia is too much like a game of roulette for retail investors. “I’m not a big fan of Russia funds,” he said. “Go into a global emerging markets fund that allows the fund manager to dip in and out of Russia when the time is right.”If you think that Paulson called his buddies at GS to say don’t invest in Russia you are wrong. GS is not even on the street in Russia. GS pulled out years ago and was thinking of getting back in last year with the acquisition of Renaissance Capital. That was a deal what should have been done, but wasn’t. Shame Jennings is the last decent banker in Russia because he is not a Russian.

  4. Anonymous   September 23, 2008 at 7:42 pm

    Actually, Russian GDP this year is revised to 7%. Russia derives 60% of tax revenues from oil and gas. Oil and gas make up 65% of all Russian exports. Inflation is now near 15%. The IMF stated in June that the Russian economy was on the verge of over-heating, if you want the link I have it.Oil was at an all time high of $147 and now around $106. Oil is tied to the dollar if the dollar increases and there is no supply shortage oil will drop, since it is denominated in dollars.Now, I know that Dr. Doom believes that the dollar will fall; however, people who actually know about currency don’t buy the drop on dollar longs. George Davis, chief fx technical analyst at RBC Capital Markets said the following:Davis added that longer-term charts clearly point to U.S. dollar strength but a “counter-trend retracement” is likelyShort-term the dollar will fall, but long-term points to US dollar strength.Oil down. Metals and mining down, except for Gold. Liquidity crisis in Russia where Russian Real estate once red-hot, has begun to feel the chill of the global financial crisis, executives say. Banks have stopped lending, prompting developers to shelve new projects and abandon plans to list on domestic and international markets. Developers and analysts say they expect intense consolidation in the months ahead, along with a fall in prices from dizzying heights. Moscow real-estate prices have jumped nearly 30% this year, with average residential prices hovering at just below $465 a square foot, after tripling in the past three years.The slowdown is likely to trim economic growth and carries political risk for the Kremlin, which has made affordable housing a priority. The government wants to raise living standards and get people out of cramped and decrepit Soviet-era apartment blocks.Dmitry Lutsenko, of Moscow-based developer Mirax Group, said his company has canceled $4 billion of new investment projects and would focus on existing projects instead.”While the situation is uncertain, it’s better not to hurry,” he said in a phone interview. “Everyone has fears.”Loan costs have tripled for Mirax. Where it could once borrow money from banks at a rate of 8.5%, those same banks now are demanding 25% interest. Mr. Lutsenko said Mirax had shelved listing plans and was waiting for smaller rivals to run into trouble so it could acquire them cheaply.Developers’ stock prices have fallen amid the credit tightening. “Over the last two months, their share prices were getting slowly killed,” said Alexei Yazykov of Moscow-based finance house Renaissance Capital. “In the last two weeks, they have been put in the grave.”One such victim was developer OAO Sistema-Hals. Its share price on Moscow’s dollar-denominated RTS exchange stood at just $1.25 Thursday, down from more than $7 at the start of July. The company is trying to unload about a quarter of its real-estate portfolio to help pay down debts that analysts put at $1.2 billion.For midsize builders, the credit crunch is proving scary. “I’m 100% worried,” said Bakhattin Demirbilek, whose Esta Construction Co. builds shopping malls around Russia. Three of his company’s five current mall contracts are in question because the buyer wants to back out.Even showcase Kremlin-backed projects look likely to be affected. Yury Reylyan of Basic Element, who is in charge of a $4 billion infrastructure project to get the Black Sea resort of Sochi ready for the 2014 Winter Olympics, said some aspects of the project may need to be scaled back because of falling demand.High corruption in government. Corruption in Russia is at its worst level in eight years, Transparency International said Tuesday, stoking investor fears just a week after the country’s markets suffered their biggest losses in a decade.An annual survey by the Berlin-based watchdog put Russia in joint 147th position with Bangladesh, Kenya and Syria, raising a challenge for President Dmitry Medvedev, who has made fighting graft a priority and drawn up measures to tackle the problem.”All this data taken together demonstrates that the situation in Russia has reached a threatening scale,” the watchdog said. “The phenomenon of corruption … seriously undermines the very statehood of Russia.”Corruption has penetrated every sphere of life — from politics to business, health and education, the report said.”It is a very painful and difficult problem for our country,” Medvedev said in July. “Corruption as a systemic challenge, as a threat to national security, as a problem which leads to a lack of faith among citizens in the ability of government to bring order and protect them.”The watchdog voiced skepticism, however, that Medvedev’s anti-corruption measures would be effective.No transparency or legal recourse, Mechel, Yukos and TNK-BP.Hmmmmmmmm. You think the Russian market was not going to come down or that it wasn’t over-priced.I know Dr. Doom’s premise. Russia has $523B war chest, no longer $568B, so why isn’t Russia doing well. It goes against everything that Dr. Doom believes in. Well that is because an emerging economy is dependent on everyone else for 60% of their revenue.Do you know there is no highway connecting Moscow to St. Petersburg? I go there often you have small highways like interstate ones and it is oly 480 miles away. There is no infrastructure and they haven’t even agreed upon the so called $1T infrastructure fund.Putin is a despot. That is what we Russians call him. This isn’t a country it is the state of Putin and now during times of crisis people want a flight to safety, ie to cash. When the dust settles as Liz Ann Sonder said today there will be a flight to US equities who have been the least hit out of any economy.Did you see that Russia’s state-controlled Bank for Development and Foreign Economic Affairs, Vnesheconombank, said Tuesday that it will buy a 98% stake in Svyaz Bank, according to a statement published on VEB’s website.Kit Finance died on Tuesday of last week. Renaissance captial need to find a buyer for 50% of its equity for only $500M when 5 months before they were valued at $8B.Please, Russia is dead.

  5. Guest   September 25, 2008 at 1:30 pm

    While I would agree that Russia is rife with corruption -the same can be said about China and India -particularly India. Yet – for some reason India is not on the list with Angola -where it should be in my view.As a skeptic -one must be aware that political motives and idealogy tints the perspective and analysis of many of these so-called independent agencies -from Human Rights Watch, Moody’s and of course the Red Cross.Bottom line- Russia despite its torrid corruption is NOT in a deficit and has cash on hand. It has a tremendous inventory of resources (as the world once again switches from a service based model to a resource based model). In addition- along with Iran and Venezuela -hey are decreasing their dollar reserves and hence will put pressure on the value of the dollar.The US with now over 11 TRILLION dollars of federal deficits and its propensity to have annual deficits in the range of 500 bilion for the foreseeable future on expenditures of roughy 3 trillion dollars a year -has finally been exposed as a nation that may not and will not pay off its debt.This is the primary reason for allowing Saddam to invade Kuwait (so as to establish military outposts; with consent from frightened autocrats/kleptocrats; in Saudi Arabia, UAE and of course Kuwait). This was a prelude to usurp the total oil supply of Iraq – which would amout to conservatively 9 trillion dollars a year at a market price of 100 dollars at 3 Million barrel/day at say 2M it would be 6 trilion dollars. ( is the way the US intends to pay off its deficit along with the rising cost of oil. Given the difficulties of occupation, associated military costs ,on going insurgency -they should still be able to make 2 trillion dollars off the books. With the US deficit now hitting one trillion – that means they get 1 trillion a year off the books. If efficiencies and the price of oil ‘improve’ then as much as 5 trilion a year!! Rumors regarding the Central bank of Bahgdad and its realtion to JP Morgan and so to the Fderal reserve are not exaggerations but have been sketchily documented. corruption is certainly not just a problem i Russia and if the new that says that Iraq oil revenue is only in the tens of billionsis ‘believed’ than the ligarchs of Russia are just minnows in the shark infested waters of the US.Factor – that the US + IRAQ+ Gulf kleptocracies + Nigeria etc total roughly =65 percent of the worl oil market- that means that you should see an additional depreciation of 35 percent in the dollar to make up for the Venzuela’s/Russia’s and Iran’s of the world. So you should see the Euro approachin 1.90 US dollars and the pound at roughly $3 with in the next 5-10 years. will not be the issue for the US and it’s oil allies as it will be more than off-set by the rising rice of oil which will outstrip inflation – as it is – it already has made up for all the inlation by rising from $60 to $100 and soon to go higher.In this tide of wold wide extortion – the fundamentals are sound for Russia. Continuing surpluses ad perhaps headway against corrupion and most importantly a well run government (relative to others) – will see Russia with better infra-structure, better capital reserves and emerging as a nation on par wth France/Germany in terms of GDP. Especially if US decides to increase the price of NAtural gs as well- which it appears it has.

    • Guest   September 25, 2008 at 10:04 pm

      Guest,Corruption is much higher in Russia by Eurasia Group and they are one of the most trusted and used by Alfa Bank, Renaissance Capital, Troika-Dialog and all the Russian investment banks on country risk. We live by Moody’s, S&P, and Fitch. They are the only way to rate credit risk and all banks around the world live and die by them.Your interpretation from an source. About uses people who interpret information and not known experts, so your source is in question. Mine are not they are verifiable people in the industry and from news releases from Moody’s, Moscow Times, BNE and many others.But that said that your sources are of course questionable by anyone who in the economics community how does it prove your statement that the US plans to use Iraq for oil. That is odd.The NYTimes article is true, but this is not unlike what happened during the Marshall Plan for Europe for reconstruction. The other supporting banks were in a bid. I know because the bid was open for all banks. I am in a Russian bank and we presented a bank to enter the group. The criteria was very transparent and open. Iraq doesn’t have an Investment Bank or a Banking Holding company now to handle this sort of investment. This is defintely needed, so I don’t understand your point. This is not conspiracy.As for MarkTaw information from the CIA, I think there is a bit of a discrepancy because Russia definitely has the 6th largest reserves in the world and not the 7th.Actually future contracts of oil are looking downward in the long term if we have a global recession or even if the US bail-out comes most currency economist are dollar longs. Oil is denominated in $, so we will see price come down and settle around the $75 level or slightly higher and it could dip to the sixties.I didn’t say Russia is the only country that is corrupt, but these groups actually go to Russia. Obviously you have never worked or lived in Russia, so you don’t know the red tape.We have operations in China and India and for a foreign bank we did not have that much red tape as we have in Russia. I presented actual respected groups you presented nothing to refute that, so your arguement does not stand.As for surplus, of course Russia has it. But, my dear Russia has no infrastructure. When you have nothing and msot of your 147M population doesn’t live in Moscow you need to start spending. From hospitals, education, roads, to telecommunication, to water ways that is far more than $1T it is far more than $2T. Russia has nothing outside of Moscow and St. Petersburg. Our population is not a billion like China and India. We need to start spending. China started spending they have a lot to do and their Soveign Wealth Fund is twice the size of Russia, but it is easier to do business there.In May of 2008, Putin signed into law 45 areas of the Russia commerical/industrial/commodities industries that foreign companies cannot have more than 40%. The list can encompass most any area that is protectionism.Russia has made no headway against corruption. Medvedev admited that himself in June 2008 and you presented nothing to dispute my actual quotes.If you want to talk about conspiracy, then go about it. It is obvious that you are not in banking and don’t know Russia.I feel sorry for all of you looking for conspiracies you know it is a mental problems.

  6. Guest   September 26, 2008 at 1:33 am

    First-being in banking -is far over-rated-in terms of expecting people to give you creedence- especially over the last several years -where the quality of their intellect has been demonstrated to be far below their capacity to swallow any specious tripe fed to them -as long as they have the the requisite lack of intellectual rigor and ability to be a ‘team player’ to get highly ‘paid’. Trust me -being in close contact for years with several alumni from Havard/Stanford alumni who went on to be investment bankers -I have anecdotal evidence as well as the recent circumstantial evidence. The circumstantial evidence only served as a small factor -since I have studed with these same -‘best of the best of the best sir!’.All fields suffer self-imposed mental problems – take medecine – where simple mathematics – and the application of physics -Fick’s Principle -shows that Stents are not and can not be the answer to a life threatening situation called heart attacks in a serious way (long term and best cost/benefit ratio to the patient and population)- yet I can produce atleast several dozen reputable cardiologits -that will talk themselves blue in the face and point at flawed studies to prove their point- since it seems difficult to retain medicine/statistics and biochemisry all at the same time while charging 600 dollars an hour for a consult – much to much of an effort for the money it appears. Much better to be interventional cardilogists and charge a few grand for 15 minutes – and become a high tech plumber charging a few thousands and glibly repeat NEJM articles sponsored by vested interests and supporting your way of earnig a living. Calcium channel blockers, Vioxx etc are just some examples of how being overly involved in a field is only proof of being extremely myopic and extremely gullible.So much for the ‘I am a banker/finance’ guy and so know better argument. In short – the cliche -of not seeing the forest for the trees may apply here.My points were simple:1. Corruption is everywhere and it is relative-in fact it is a variable that is ubiquitous as far as I know.2. I know banker’s feel that having debt is an ‘asset’ – however -can we agree that for a nation -to have a positive curent account balance is a ‘good’ thing.3. Can we agree that the US is invested in dollar hegemony mainly via the commodity of oil.4. Can we agree that not only Alan Greespan but several others have gone on record -relaying the sole purpose of invading Iraq was oil.Points 2,3 and 4 are amply documented. The connection between JP Morgan, the Central Bank ofIraq is amply documented. The price of oil rising since the invasion of Iraq -which is distinctly aberrant to logic and precedent (Gulf War I) is distinctly documented.What part of application of deduction and induction are difficult for you? Is anecdotal or perhaps better simply repeating what someone says to you sufficient of a basis to cast aspersion and derision? Oh wait- I know – you have been in Russia – so thats the topper.Conspiracy does not connote extreme and fantastical leaps of faith. In fact it is generally accepted that conspire comes from the Latin roots con, with, and spirare, to breathe – so to conspire literally means ‘to breathe together’. So if there is a cohesion of facts, motives, actors to bring about a certain outcome – it is a conspiracy.I was not trying to adress anyone specifically -except to point out the obvious and not so obvious. Iraq is a source of revenue for the US – no doubt about it – and therefore oil. Being burdened with a debt now 86% percent of GDP (of which a decent proportion is based on dubious and overly exaggerated -in terms of price-say services-say finacial/brokerage/investment), having more in terms of upcoming liabiities like the ever growing suckling of the government teat by healthcare companies specializing in medicare fraud, and soon prescription medicine plan, social security etc etc.In short- you are saying there is no such thing as dollar hegemony? There is no need for the US to suport this hegemony through an increase in theprice of oil as it supports their burgeoning debt by causing central banks to hold more dollars rather than dumping them back to the US ? If the preceding is true -then it is in the interest of the US to sustain high dollar prices of oil- and thereby Russia, and otheroil producers do benefit-certainly not as muc as the US- but the fall of oil – wil certainly lead to a tsunami of US dollars returning to the shores of the US – leading to certain hyper-inflation.Anyway—–