By Dmitry Trenin, RT, 4/2/24

When President Vladimir Putin, back in February 2022, launched Russia’s military operation in Ukraine, he had specific, but limited objectives in mind. It was essentially about assuring Russia’s security vis-à-vis NATO.

However, the drastic, expansive and well-coordinated Western reaction to Moscow’s moves – the torpedoing of the Russo-Ukrainian peace deal and the mounting escalation of the US-led bloc’s involvement in the conflict, including its role in deadly attacks inside Russia – have fundamentally changed our country’s attitude towards our former partners.

We no longer hear talk about “grievances” and complaints about “failures in understanding.” The last two years have produced nothing less than a revolution in Moscow’s foreign policy, more radical and far-reaching than anything anticipated on the eve of the Ukraine intervention. Over the past 25 months, it has been quickly gaining in strength and profundity. Russia’s international role, its position in the world, its goals and methods of reaching them, its basic worldview – all are changing. 

The national foreign policy concept, signed by Putin just a year ago, represents a major departure from its predecessors. It establishes the country’s identity in terms of it being a distinct civilization. In fact, it is the first official Russian document to do so. It also radically transforms the priorities of Moscow’s diplomacy, with the countries of the post-Soviet ‘near abroad’ on top, followed by China and India, Asia and the Middle East, and Africa and Latin America.

Western Europe and the United States rank next to last, just above the Antarctic.

Unlike in the previous decade, when Russia’s “turn to the east” was first announced, these are not just words. Our trade partners, not just political interlocutors, have also switched places. In just two years, the European Union, which only recently accounted for 48% of foreign trade, is down to 20%, whereas Asia’s share has soared from 26% to 71%. Russia’s use of the US dollar has also plummeted, with increasingly more transactions being conducted in Chinese yuan and other non-Western currencies such as the Indian rupee, the UAE dirham, as well as the instruments of our partners in the Eurasian Economic Union, and the ruble itself.

Russia has also ended its long and tiresome efforts to adapt to the US-led world order – something which it enthusiastically embraced in the early 1990s, grew disillusioned about in the following decade, and unsuccessfully tried to establish a modus vivendi with in the 2010s. Instead of surrendering to a post-Cold War set-up, in which it was left with no say, Russia has begun pushing back more and more against the hegemonic US-centered system. For the first time since the Bolshevik Revolution, albeit in a very different way from then, the country has de facto become a revolutionary power. While China still seeks to improve its position in the existing world order, Russia sees that state-of-affairs as being beyond repair, and is instead seeking to prepare for a new alternative arrangement.

For the time being, instead of the “one world” concept, which the Soviet Union even accepted in 1986, under Gorbachev, Moscow’s contemporary foreign policy has now split into two. For Russian policymakers, the post-2022 West has turned into a “house of adversaries,” while partners for Russia can only be found in the countries of the non-West, for whom we have coined a new description, “the World Majority.” The criterion for being included the group is simple: non-participation in the anti-Russia sanctions regime imposed by Washington and Brussels. This majority of over 100 nations is not considered a pool of allies: the depth and warmth of their relations with the Russia vary greatly, but these are the countries that Moscow can do business with.

For many decades, our country has been exceedingly supportive of various international organizations; it sought to join as many clubs as possible. Now Moscow has to admit that even the United Nations, including its Security Council (which Russia, a veto-wielding permanent member, has traditionally hailed as the centerpiece of the world system), has turned into a dysfunctional theater of polemics. The Organization for Security and Cooperation in Europe (OSCE), which Moscow long wanted to see as the premier security instrument in Europe, is now nearly totally dismissed due to the anti-Russian stance of its NATO/EU majority membership. Moscow has quit the Council of Europe, and its participation in a number of regional groupings for the Arctic, the Baltic, the Barents and the Black Seas has been put on hold.

True, much of this has been the result of the West’s policy of trying to isolate our country, but rather than feeling deprived of something valuable, Russians have few regrets over having had to leave or to suspend membership. Very tellingly, having re-established the supremacy of national legislation over international treaties, Moscow now cares little about what its adversaries can say or do about its policies or actions. From Russia’s standpoint, not only can’t the West be trusted any longer; the international bodies that it controls have lost all legitimacy.  

This attitude toward Western-dominated international institutions contrasts with the view of non-Western ones. This year, Russia’s presidency of the recently enlarged BRICS group is being marked by hyperactivity in preparations for hosting. Russia is also most supportive of the Shanghai Cooperation Organization, which its close ally Belarus is about to join. Together with countries in Asia, the Middle East, Africa and Latin America, it’s working closely to build new international regimes in a number of areas: finance and trade, standards and technology, information and health care. These are expressly being designed to be free from Western domination and interference. If successful, they can serve as elements of the future inclusive world order which Moscow promotes.

So, the changes in Russia’s foreign policy run very deep indeed. There is a question, however: how sustainable are they?

Above all, it should be noted that changes in foreign policy are an important, but also a relatively minor element of the wider transformation which is going on in Russia’s economy, polity, society, culture, values, and spiritual and intellectual life. The general direction and importance of those changes is clear. They are transforming the country from being a distant outlier on the fringes of the Western world into something which is self-sufficient and pioneering. These tectonic shifts would not have been possible without the Ukraine crisis. Having been given a powerful and painful push, now they have acquired a dynamic of their own.

It’s true that February 2022 itself was the end result of several trends that had been gathering momentum for about a decade. Feelings that fuller sovereignty was desired finally became dominant after Putin’s return to the Kremlin in 2012 and the re-unification with Crimea in 2014. Some truly fundamental changes with regard to national values and ideology were made in the form of amendments to the Russian Constitution, approved in 2020.

In March 2024 Putin won a resounding victory in the presidential elections and secured a fresh six-year mandate. This should be seen as a vote of confidence in him as the supreme commander-in-chief in the existential struggle (as Putin himself describes it) against the West. With that backing, the president can proceed with even deeper changes – and must make sure that those he has already wrought are preserved and built upon by those who succeed him in the Kremlin.

It is important to note that the Russian elites, which since the 1990s have been closely tied to the West, have had to make a hard choice recently between their country and their assets. Those who decided to stay have had to become more “national” in their outlook and action. Meanwhile, Putin has launched a campaign to form a new elite around the Ukraine war veterans. The expected turnover of Russian elites, and the transformation from a cosmopolitan group of self-serving individuals into a more traditional coterie of privileged servants of the state and its leader would make sure that the foreign policy revolution is complete.

Finally, Russia may not have been able to start moving so quickly in the direction of sovereignty had it not been for the Western policies of the past two decades: the increasing demonization of the country and its leadership. These choices have succeeded in making perhaps the initially most Westernizing, pro-European leadership that modern Russia has seen – including notably Putin himself and Dmitry Medvedev – into self-avowed anti-Westerners and determined opponents of US/EU policies.

Thus, rather than forcing Russia change to fit a Western pattern, all that pressure has instead helped the country find itself again.

By John Varoli, Substack, 4/3/24

Western perceptions of Russia are based on propaganda wrapped in lies, inside mounds of disinformation. So, what’s the real Russia like? I went there to find out. The results were shocking.

My lead above is obviously a play on Winston Churchill’s famous quip in 1939 about Russia being “a riddle, wrapped in a mystery, inside an enigma.”

In their effort to support the liberal globalist war machine, major western media unabashedly fabricate their coverage of Russia, a country that they hate because of its defense of national sovereignty and traditional values.

In the realm of western media lies, life in Russia is akin to North Korea — poverty is rampant and economic collapse imminent under the pressure of sanctions; secret police scour dark empty streets for hapless victims to drag off to slave labor camps; the Kremlin arbitrarily invades neighboring nations “to rebuild the Soviet empire”; and every Russian wants to escape and flee to the West.

This disinformation is so total and omnipresent that even the most educated and astute minds in the West can fall under its influence. The U.S. has few credible independent media and expert sources, and most Americans don’t have the time and skills to do their own research.

Even I had my doubts — just before departing New York last month, I almost cancelled my trip because I was bombarded with messages from people who tried to convince me that “Putin will abduct” me and use me as “a pawn to exchange” for Russians held in U.S. prisons. I began to wonder — “Maybe they’re right.”

With some apprehension, I boarded the plane and within a day I found myself on the Russian border. This was my first visit in five years. Instead of the lies and disinformation mentioned above, my trip revealed a country with a vibrant civil society where people enjoy far more freedom, economic opportunity and social protections than we do in the West.

Developing in the right direction

I spent two weeks traveling to five regions — the Leningrad Region, Saint Petersburg, the Novgorod Region, the Moscow Region, and Moscow. I saw life in both provincial towns and big cities, and talked freely to a wide range of people. I traveled on my own schedule, living in local neighborhoods not in hotels.

Except for extra questioning at the Russian border due to my U.S. passport, never once was I approached, detained, followed, or harassed by police. Russian cities have a distinct vibe of freedom and safety; something you’d never say about U.S. cities.

Even though I visited in March, when the weather is gray and Russians still struggle with winter doldrums, I found the people to be of tremendous heart, goodwill, respect and kindness. I almost felt like I was back in the USA that we had 30 years ago.

The violence, arrogance, rapacity and anger that marked life in Russia when I lived there in 1992 to 2012 seemed to have dissipated significantly. What had happened in the past 12 years to make such a difference? ….especially when in this same period the U.S. has been on a downward spiral of violence, strife, hatred and collective insanity.

Russia is not perfect; it has a fair share of problems like any country. Provincial towns still have a standard of living that lags behind similar settlements in Europe and the U.S. But overall, Russia is developing in the right direction, which can’t be said for the West that’s plagued by increasing civil strife and approaching financial calamity.

Packed houses of worship

Orthodox churches are packed. Unlike the U.S. and Europe that are building ‘progressive’ societies based on secular totalitarian ideology, I saw Russians exhibit sincere devout religious sentiment, visiting houses of worship even during weekdays, and, in general, adhering to a moral code as they went about their daily lives.

Even in Moscow and St. Petersburg the churches were packed, which was very unexpected. Urban dwellers across the globe often have little room for religious faith in their lives. But that’s not the case in Russia. Moscow lives up to its moniker as the “Third Rome”, Christianity’s central city.

With some friends, I visited the tomb of St Sergius at the Holy Trinity Lavra in the Moscow Region. The line of the faithful stretched long to approach the saint’s tomb and leave a prayer request. In the fight with the West, Russia’s monasteries are the country’s ‘secret weapons’. No contraption designed by NATO’s military industries can overcome the spiritual power of Russia’s monasteries and its faithful.

Unlike Zelensky’s Ukraine where the native Orthodox Church has been banned, priests jailed, and churches and monasteries bombed, freedom of religion flourishes in Russia. Traditional faiths are protected from the scorn, derision and persecution that they often face in the West.

No anti-American feeling

While there (rightfully) was much criticism of the White House’s violent and lawless foreign policy, I encountered no hostile sentiment toward the American people; not the slightest incident. In fact, many Russians continue to learn English, watch American entertainment and listen to our music. Compare that to how we have cancelled everything to do with Russia and their culture.

Even though I’m a citizen of a country that now sponsors terrorism and fuels a brutal war against Donbass and Crimea, Russians didn’t harbor ill feelings towards me. I had encountered far more anti-American sentiment while living in Russia in the 1990s, a time when relations were rather friendly.

On this trip, Russians went out of their way to help me in every way possible; to be hospitable, friendly and accommodating. How to account for such humane and enlightened attitudes? Perhaps it’s connected to the piety of the Russian people, with their deep understanding of the power of mercy, charity and forgiveness, and a belief that individuals shouldn’t be held responsible for the sins of their ruling class.

Rising living standards

The Russian economy is booming and people now live far better than before the year 2000 when Vladimir Putin became president. Unemployment hovers just above 2.5%, and inflation is under control. Interest rates, however, are in the range of 17%, which is a drag on further economic growth.

Even if we put aside the technological and industrial advances of the past two decades that have improved life for most people across the globe, there are specific policy decisions by Putin’s government that have improved the quality of life.

These include his vigorous efforts to improve law-enforcement, restore public safety, as well as smash organized crime and the stranglehold that liberal oligarchs once had over Russia’s economy. Throughout the 1990s and into the 2000s, the oligarchs siphoned off hundreds of billions of dollars in national wealth, mostly from the sale of natural resources, and then stashed the cash abroad.

To this day, I can personally name Russian gangsters, fugitives from justice in Moscow, who have found a warm welcome in the U.S. This is why some oligarchs in exile can’t forgive Putin and continue to finance so-called ‘opposition figures’ such as the deceased U.S. asset Alexei Navalny.

By ‘rising living standards’ I don’t merely mean material well-being. There are also non-tangibles to consider, such as living in a country where the government protects and supports national cultures, traditional values and sovereignty. This is certainly a major factor contributing to the optimism that I sensed in the air.

Finally, the food — the food is fantastic. Natural. Delicious. Fresh. I surmise this is the result of strict state regulation over the food supply and the quality of ingredients and means of preparation — Something that’s nearly absent in the U.S.

Vibrant and open discussions

Everyone I spoke to, from the average person in the street to those who I met at events, exhibited an exceptional intellectual curiosity and ability. People were open-minded, eager to discuss and debate. They exhibited a high level of knowledge about their country and the world.

I lectured at the St. Petersburg Technology University, where insightful discussions ensued with students, some of whom disagreed with Russia’s policies. No one was afraid; conversations were lively and uninhibited. There were no ‘thought police’ ready to pounce, as is often the case in American universities.

For the most part, the vast majority of Russians sincerely support President Putin, as recent elections prove. There are two main reasons for his massive popularity — he stopped Russia’s disintegration in the 1990s, and his policies have made the country a much better place to live.

Also, I attended a few talk shows on state-run TV where we discussed geopolitics. I was surprised that the TV host always presented the U.S. version of events, even showing western media coverage so that the audience would clearly understand both sides of the issue, and not just the Russian point of view.

Then several of us would go on to discuss, debate and analyze the issue at hand. Never once did anyone try to prep me, control me, prod me or push me to say certain things. In fact, a few of the talk shows were live on air — which goes to show just how much freedom the Russian media allows.

“Do Not Travel” to Russia?

This could be the finest portrait of Joe Biden (above), capturing the essence of his soul — an evil man who has brought misery and suffering to so many. I suspect that such a portrait is hidden somewhere in a White House attic, something right out of Oscar Wilde’s novel, The Picture of Dorian Gray.

The White House is afraid of Americans traveling to Russia. Why? Because they don’t want us to know the truth about how Putin has succeeded in making Russia stronger and more prosperous, how he protects the national culture and its traditions — All things that most Americans would love to see their own government do.

That’s why the State Department has labeled Russia as “a level 4 risk — DO NOT TRAVEL.” John Kirby, the White House’s national security communications adviser, has said that “If you’re a U.S. citizen, including a dual national, residing in or traveling in Russia, you ought to leave right now. Depart immediately.”

For my part, I can’t wait to return to Russia. And many Americans agree with me. Russia has become a destination for American dissidents and refugees, with a private effort afoot to build two ‘American villages’ outside of Moscow.

Crocus and Russia’s historic mission

My trip to Russia was marred on my last day with news of the heinous terrorist attack in Moscow. Investigators have pretty much proven that Ukraine’s secret services were behind the Crocus City massacre and that the West most likely assisted. Earlier this year, Under Secretary of State Victoria Nuland had threatened Russia with “nasty surprises”, while Chairman of the Joint Chiefs of Staff General Mark Miley threatened “There should be no Russian who goes to sleep without wondering if they’re going to get their throat slit in the middle of the night.”

At the very least, the U.S. and all of NATO bear responsibility for the attacks because over the past two years they’ve incited hatred of Russians through disinformation, as well as by arming the regime in Kiev, and because the CIA actively trains the Ukrainian secret police in committing terrorist attacks and other crimes.

The Crocus City terror attack is a turning point. It’s the nail in the Kiev regime’s coffin, and possibly that of NATO. The attack has only strengthened Russian resolve. Just in the past week, the Russian Air Force has knocked out much of Ukraine’s energy infrastructure, and a hunt is underway for agents of its secret services responsible for a multitude of terrorist attacks.

More than ever, Russians understand very well that they’re fighting for their survival, against a formidable coalition of some 50 hostile nations that’s come to their doorstep to continue where Napoleon and Hitler failed. In many ways, we could even classify the liberal globalist onslaught as the ‘spiritual heir’ to the bloody French Revolution and Nazi death cult.

Recent events show clearly that we’ve left the realm of mere geopolitical rivalry between East and West. This is now another epic war against evil. And the past 210 years show conclusively that Russia always emerges triumphant.

Meduza, 4/15/24

Last week, Russia’s Finance Ministry released its preliminary report on the federal budget indicators for the first quarter of 2024, revealing results that surpassed expectations. Government earnings soaring above last year’s figures, a surprisingly positive outcome partially attributed to high oil prices and increased consumer spending. With more money in its coffers and the war in Ukraine still raging on, the Russian government is only increasing its spending. However, this upward trend raises concerns about continued inflation. Meduza explains what led to this sudden influx of funds and what economists think about the Russian economy’s outlook.

Why are Russia’s oil and gas revenues up?

In the first quarter of 2024, oil and gas earnings surged by nearly 80 percent compared to the same period in 2023, injecting 2.9 trillion rubles ($31 billion) into Russia’s federal budget. There are a number of factors that led to this sizeable increase. Firstly, oil prices are on the rise. At the beginning of the year, a barrel of Brent crude oil was trading at $80; now, it’s going for more than $90. The U.S. has been replenishing its raw material reserves as OPEC countries cut production, leading to a shortage that’s driven up prices. Furthermore, the conflict between Israel and Hamas has threatened shipments through the Red Sea, raising concerns among investors about potential disruptions to the supply chain. Moreover, Iran, one of the world’s major oil suppliers, has now entered the conflict.

Secondly, Russia has revised its method for calculating the mineral extraction tax (MET). In 2023, revenues were collected based on actual prices for Urals oil, the blend used as the price benchmark for Russian oil exports. However, the returns were unpredictable: discounts on raw materials constantly fluctuated in response to sanctions pressures. Starting this year, there’s a new system in place. If the price difference between Urals oil and Brent isn’t too significant, the authorities still use the actual Urals oil price for tax calculations. However, if the gap widens, the Russian Finance Ministry imposes a maximum discount of $20 per barrel in its calculations. This means that if a barrel of Brent is selling at $100 and a barrel of Urals is selling at $50, the ministry disregards the actual price and levies taxes based on a price of $80 per barrel. This maneuver has proven effective: analyst Kirill Rodionov calculated that at the beginning of last year, the average price used for tax calculations was $51 per barrel. Now, with the new calculations, the average is closer to $70.

The Russian government has also seen an increase in revenues from its quarterly profit-based tax (NDM). Unlike MET, which is paid based on the volume of extracted raw materials, NDM is levied on profits from sales. This allows companies to defer their tax burden until after they’ve become profitable, which, in theory, encourages them to invest in developing new reserves. Likewise, when an oil deposit begins to deplete, the tax starts to drop off, incentivizing companies not to abandon the project. The more companies increase their overall production, the more tax revenue the government stands to make once the companies turn a profit.

When a company transitions to paying NDM, it continues to pay MET, albeit at a heavily reduced rate. Nevertheless, due to the advantages of tax deferral, the profit margins for certain companies remain higher under the combined scheme than when paying only MET at the full rate. Russia has been steadily expanding this profit-based tax regime, growing its share of the federal budget’s oil and gas revenue from 9 percent to 52 percent over the last five years. According to Rodionov’s calculations, federal revenue from NDM went from 211 billion rubles ($2.3 billion) in the first quarter of 2023 to 587 billion rubles ($6.3 billion) in the first quarter of 2024.

The Finance Ministry’s report also highlights a one-time revenue boost from a temporary increase in the MET rate mandated in January 2024. In the fall of 2023, the Russian government halved damper payments, a type of subsidy that compensates oil companies for selling fuel on the domestic market. Unsurprisingly, this led to a sharp increase in gas prices in Russia. The government quickly abolished the unsuccessful reform but decided to compensate for the damper payments through a higher MET.

Since Russian tax legislation doesn’t allow for MET to be applied retroactively, a higher MET rate was imposed on companies in January of this year, allowing the Finance Ministry to make up for last fall’s budget losses. Although the report doesn’t disclose the exact amount, Interfax’s sources estimated it at around 190 billion rubles ($2 billion).

The ruble’s depreciation could also have impacted the statistics. At the beginning of 2023, the Russian ruble was stronger, trading at around 70 to the U.S. dollar, meaning fewer rubles for every dollar of oil earnings, notes Evgeny Nadorshin, the lead economist at PF Capital. The ruble weakening to 90 to the dollar automatically led to an increase in budget revenues from oil sold abroad.

Taking all of these factors into account, Russia’s Finance Ministry predicted that oil and gas revenues will continue to exceed the baseline level, saying it observes a “stable positive trend.”

Where else is the money coming from?

While government earnings from oil and gas have certainly gone up, Egor Susin, the managing director at Gazprombank Private Banking, highlights other revenue streams as the primary positive contributors to the budget. Over the course of a year, non-oil and gas revenues have risen by 43 percent, bringing in 5.8 trillion rubles ($62 billion) in the first quarter alone.

The Finance Ministry attributed much of these gains to turnover taxes: taxes levied on the volume of business activity or turnover of goods and services rather than on profits. For instance, value-added tax (VAT), brought in 3.4 trillion rubles ($36.3 billion) in three months. Russia is experiencing a growth in domestic demand, as analysts at Raiffeisen Bank have pointed out, and consumer spending is increasing despite inflation.

As a rule, Russia’s Central Bank sees high demand as a risk for further inflation. For the Finance Ministry, however, the situation is beneficial — at least in the short term. While the government’s budget also suffers due to inflation (e.g. with the cost of infrastructure projects going up), the ministry can acquire funds immediately and then distribute the rise in expenses over time.

The ministry also mentions “planned receipts of one-time non-tax revenues.” Generally speaking, “non-tax revenue” refers to things like fees for the use of state property, customs duties, environmental levies, and so on. It’s possible that in this case, the ministry is referring to the sale of state-owned assets. In 2023, the Russian authorities initially aimed to generate 1.8 billion rubles ($19.2 million) through privatization. However, due to urgent budgetary needs, they ultimately sold off 29 billion rubles ($309.7 million) worth of property. This year, the ministry has set a significantly higher target from the outset: selling 100 billion rubles ($1.07 billion) worth of state-owned assets.

Although the Finance Ministry acknowledged that last year’s low baseline facilitated such noticeable growth, it views the current situation with non-oil and gas revenues as stable and anticipates “continued rapid revenue growth.” Raiffeisen Bank analysts concurred, predicting that consumer activity in Russia will likely remain high “in the coming months.”

Will Russia start spending more?

The Russian government has already ramped up its spending. Compared to the first quarter of 2023, budgetary expenses have increased by 20 percent.

With the onset of the full-scale war in Ukraine, federal budget expenditures acquired a pronounced seasonality, rising sharply at the beginning of the year when the government pays out advances on state contracts. In the first two months of 2024 alone, expenditures amounted to 6.5 trillion rubles ($69.4 billion) while revenues totaled only five trillion ($53.4 billion), resulting in the Finance Ministry nearly exhausting the deficit limit for the entire year. Last year, the same trend raised concerns; in the end, however, the deficit didn’t stray too far from the target.

With current oil prices, Russia’s situation has already begun to improve. While the first quarter saw an overall deficit, March’s budget boasted a surplus of 860 billion ($9.2 billion). Analysts from Raiffeisen Bank say the Russian government’s spending spree at the beginning of the year “shouldn’t be perceived as a risk factor” to the budget. According to their forecasts, the deficit will remain this year, but it will be smaller than in 2023: no more than 2.5 trillion as opposed to last year’s 3.2 trillion ($26.7 billion versus $34.2 billion, respectively). Analyst Semyon Novoprudsky thinks the deficit could be even lower, despite the increase in government spending.

The budget for the current year includes expenditures totaling 36.6 trillion rubles ($390.9 billion). However, this figure was approved before President Vladimir Putin announced five new national projects and numerous other social welfare programs during his annual address to Russia’s Federal Assembly. Economists estimated the cost of their implementation at 1.2 trillion ($12.9 billion) per year. This will be likely offset by tax increases, which, just a month ago, was raising concerns among economists.

Now, analysts from the Telegram channel MMI posit that “with current oil prices, there’s no threat to deficit stability.” Egor Susin from Gazprombank concurs, saying that “the budget appears to be in good shape for the next few months.” Faridaily, run by journalists Farida Rustamova and Maxim Tovkailo, predicts that the Russian government “will be able to finance extravagant military spending, social payments, and infrastructure development without any problems.” Meduza couldn’t find any pessimistic comments from experts.

So, Russia’s economy is just fine?

There are certainly still risks for the Russian economy. In theory, an increase in revenue allows the Finance Ministry to spend more than planned — as it did last year. This injects more money into the economy, further fueling consumer demand in the face of limited supply. Russia’s Central Bank consistently stresses that this has adverse effects on price inflation. And while it aims to keep inflation at 4–4.5 percent in 2024, economists have expressed doubts that this target is feasible.

Elvira Nabiullina, the head of the Central Bank, has noted that maintaining a high key rate helps curb inflation. (Currently, the Central Bank has the key rate set at 16 percent.) With interest rates higher, saving becomes more attractive and credit becomes more expensive, which, in turn, cools demand. In the second half of the year, the Central Bank plans to wait for a slowdown in price growth and then begin to reduce the key rate; however, it might postpone the process. Previously, analysts at the government-owned bank Promsvyazbank expected the key rate to be brought down as early as June; now, they’re predicting a decrease no sooner than August.

Increasing budget expenditures also heighten risks for the national currency exchange rate. The Finance Ministry supports Russian businesses by providing them with funds for production, which often requires imported components and equipment. This means companies have more capital to purchase foreign currency for such transactions. Russia’s Economic Development Ministry officially predicts that the average exchange rate for this year will hover around 90 rubles to the U.S. dollar. However, SberCIB Investment Research predicts the ruble will weaken to 95 against the dollar by the second quarter, while the Moscow-based investment company Tsifra Broker expects the exchange rate to hit 100 rubles to the dollar by the end of April.

Government spending won’t be the only influence on this, of course. The overall state of Russian exports will also impact the ruble: declining overseas shipments of raw materials are reducing foreign currency inflow, creating a deficit. Meanwhile, the population is buying more and more dollars and euros. In February, Russians spent 100 billion rubles (the equivalent of $1 billion) on these currencies; in March, that figure rose to 155 billion ($1.66 billion).

The situation may worsen if sanctions on Russian oil begin to take effect. So far, both lax monitoring and loopholes involving third-party sales have largely enabled Russia to bypass the G7 and E.U.-imposed $60 “price cap” on Russian crude oil. Even so, G7 nations have yet to propose an alternative to the price cap; they’ve only threatened to lower it even further. And while Western governments have imposed sanctions on a few companies for circumventing the ban, such measures are not widespread.

By Ben Aris, Intellinews, 3/30/24

Russia external debt has been falling steadily and reached $326.6bn in December 2023, compared with $322.3bn in the previous quarter and $383.6bn at the end of 2022. It could pay the entire amount off tomorrow – in cash. (chart)

The Kremlin has been paying off its external debt. Low external debt means Russia doesn’t need to tap international capital markets so is not vulnerable to any sort of sanctions on bond issues, which are easy to apply and enforce.

Coupled with Russia’s strong current account surplus, which was up to $5.2bn in February from $4.5bn in January, thanks to high oil prices, Russia can fund itself easily on this profit. (chart)

At the same time gross international reserves have been rising and are now hovering around $600bn at the end of the first quarter. Half of these reserves are frozen. About $150bn are in monetary gold (up from $135bn pre-war) and the rest in yuan.

Even counting out the frozen funds, Russia can cover its external debt dollar for dollar with cash, whereas everyone in the West is massively leveraged, including the Ukraine where the debt-to-GDP ratio is almost at 100%.

It is these rock-solid fundamentals – no one else in world has even remotely similar metrics – which is the essence of Putin’s Fiscal Fortress. It is a ridiculously strong basis, which means even if the West manages to reduce Russia income from oil and gas exports, it will still have a massive amount of wiggle room.

And its ongoing commodity exports to the global south mean that it will continue to enjoy the raw materials subsidy for its economy. Because of their external debt (USA, Italy, much of G7, everyone in Africa and even China) everyone else is a lot more vulnerable to a global slow down. Russia is probably currently the least vulnerable on a macro fundamentals basis.

Russia’s external debt $bn

Russia’s current account $bn

Having said that, MinFin is increasingly turning to the OFZ domestic T-bill market to fund the deficit – expected to be RUB1.6 trillion year, down from RUB3.4 trillion last year, or 0.8% of GDP and 1.9% of GDP respectively.

Pre-war MinFin used to issue around RUB2 trillion (c$20bn) of OFZ a year, and most of them on a very long maturity of up to 20 years. Yields on these bonds were a hansom 6-7% and foreign investors poured in to buy billions of dollars’ worth.

Post-war of course those foreigners have left with non-rez share falling from a peak of c34% to c7% now. (chart) Moreover, the cost of this borrowing has gone up as yields have risen to c14%. So, this is relatively expensive borrowing.

Moreover, the volumes issued have gone up dramatically. In an underreported story Siluanov said at the start of last year MinFin planned to issue about RUB1.5 trillion of OFZ but ended up issuing RUB2.5 trillion. (It would have been more, but oil prices recovered in Q4).

The plan for this year, at the start of last year, was also for RUB1.5 trillion, but in December Siluanov was already talking about RUB4 trillion – that is almost double pre-war levels. And the $3-6bn of annual Eurobond issues has also obviously stopped.

The total outstanding OFZ has doubled to cRUB20 trillion (chart) since the pandemic started when Russia spent around 3% of GDP on economic relief (globally a very low level). You can see issues jumped again since the war started and total outstanding is now cRUB20 trillion (c$200bn). So, the debt situation is not quite as rosy as first appears.

Still, even $200bn worth of outstanding domestic debt is not bad at all. Firstly there is a pool of some RUB19 trillion of liquidity in the banking sector so again all this debt can be covered in cash by domestic resources.

Secondly, £200bn is about 10% of GDP, so even this borrowing is extremely modest by developed economy standards and easily managed.

By Tarik Cyril Amar, RT, 3/30/24

William J. Burns has published a long piece in Foreign Affairs under the title ‘Spycraft and Statecraft. Transforming the CIA for an Age of Competition’. This is an essay likely to be read with great attention, maybe even parsed, not only by an American elite audience, but also abroad, in, say, Moscow, Beijing, and New Delhi, for several reasons. Burns is, of course, the head of the CIA as well as an acknowledged heavyweight of US geopolitics – in the state and deep-state versions. [https://www.foreignaffairs.com/united-states/cia-spycraft-and-statecraft-william-burns]

Few publications rival Foreign Affairs’ cachet as a US establishment forum and mouthpiece. While Burns’ peg is a plea to appreciate the importance of human intelligence agents, his agenda is much broader: In effect, what he has released is a set of strategic policy recommendations, embedded in a global tour d’horizon. And, last but not least, Burns is, of course, not the sole author. Even if he should have penned every line himself, this is a programmatic declaration from a powerful faction of the American “siloviki,” the men (and women) wielding the still gargantuan hard power of the US empire.

By the way, whether he has noticed or not, Burns’ intervention cannot but bring to mind another intelligent spy chief loyally serving a declining empire. Yury Andropov, former head of the KGB (and then, for a brief period, the whole Soviet Union) would have agreed with his CIA counterpart on the importance of “human assets,” especially in an age of technological progress, and he would also have appreciated the expansive sweep of Burns’ vision. Indeed, with Burns putting himself so front-and-center, one cannot help but wonder if he is not also, tentatively, preparing the ground for reaching for the presidency one day. After all, in the US, George Bush senior famously went from head of the CIA to head of it all, too.

There is no doubt that this CIA director is a smart and experienced man principally capable of realism, unlike all too many others in the current American elite. Famously, he warned in 2008, when serving as ambassador to Moscow, that “Ukrainian entry into NATO is the brightest of all redlines for the Russian elite (not just Putin).” That makes the glaring flaws in this big-picture survey all the more remarkable.

Burns is, obviously, correct when he observes that the US – and the world as a whole – is facing a historically rare moment of “profound” change in the global order. And – with one exception which we will return to – it would be unproductive, perhaps even a little churlish, to quibble over his ideologically biased terminology. His mislabeling of Russia as “revanchist,” for instance, has a petty ring to it. “Resurgent” would be a more civil as well as more truthful term, capturing the fact that the country is simply returning to its normal international minimum status (for at least the last three hundred years), namely that of a second-to-none great power.

Yet Burns’ agenda is more important than his terminology. While it may be complex, parts of it are as clear as can be: He is eager (perhaps desperate) to prevent Washington from ending its massive aid for Ukraine – a battle he is likely to lose. In the Middle East, he wants to focus Western aggression on Iran. He may get his will there, but that won’t be a winning strategy because, in part thanks to multipolar trend setters, such as the Shanghai Cooperation Organization and BRICS, Iran’s escape from the isolation that the US has long imposed on it is already inevitable.

Regarding China, Burns’ real target is a competing faction of American hawks, namely those who argue that, bluntly put, Washington should write off its losses in Ukraine and concentrate all its firepower on China. Burns wants to persuade his readers that the US can have both its big fight against China and its proxy war against Russia.

He is also engaged in a massive act of CIA boosterism, clearly aiming to increase the clout of the already inordinately powerful state-within-a-state he happens to run himself. And last but not least, the spy-in-chief has unearthed one of the oldest tricks in the subversion and destabilization playbook: Announcing loudly that his CIA is on a recruiting spree in Russia, he seeks to promote a little paranoia in Moscow. Good luck attempting to pull that one on the country that gave us the term “agentura.” Moreover, after the horrific terror attack on Crocus City Hall in Moscow, it is fair to assume that Burns regrets having boasted about the CIA expanding its “work” in Russia. Not a good look, not at all.

What matters more, though, than his verbal sallies and his intriguingly straightforward, even blunt aims, are three astonishingly crude errors: First, Burns insists on reading the emerging outcome of the war in Ukraine as a “failure on many levels,” for Russia, revealing its, as he believes, economic, political, and military weakness. Yet, as the acknowledged American economist James K. Galbraith has recently reiterated, the West’s economic war on Russia has backfired. The Russian economy is now stronger, more resilient, and independent of the West than never before.

As to the military, Burns for instance, gleefully counts the tanks that Russia has lost and fails to note the ones it is building at a rapid rate not matched anywhere inside NATO. In general, he fails to mention just how worried scores of Western experts have come to be, realizing that Moscow is overseeing a massive and effective expansion of military production. A curious oversight for an intelligence professional. He also seems to miss just how desperate Ukraine’s situation has become on the ground.

And politics – really? The man who serves Joe Biden, most likely soon to be replaced by Donald Trump, is spotting lack of popularity and fragility in Moscow, and his key piece of evidence is Prigozhin and his doomed mutiny? This part of Burns’ article is so detached from reality that one wonders if this is still the same person reporting on Russian red lines in 2008. The larger point he cannot grasp is that, historically, Russia has a pattern of starting wars on the wrong foot – to then learn, mobilize, focus, and win.

Burns’ second severe mistake is his argument that, ultimately, only China can pose a serious challenge to the US. This is staggeringly shortsighted for two reasons: First, Russia has just shown that it can defeat the West in a proxy war. Once that victory will be complete, a declining but still important part of the American empire, NATO/EU-Europe will have to deal with the after-effects (no, not Russian invasion, but political backlash, fracturing, and instability). If Burns thinks that blowback in Europe is no serious threat to US interests, one can only envy his nonchalance.

Secondly, his entire premise is perfectly misguided: It makes no sense to divide the Russian and the Chinese potentials analytically because they are now closely linked in reality. It is, among other things, exactly a US attempt to knock out Russia first to then deal with China that has just failed. Instead, their partnership has become more solid.

And error number three is, perhaps, even odder: As mentioned above, Burns’ language is a curious hybrid between an analytical and an intemperate idiom. A sophisticated reader can only wince in vicarious embarrassment at hearing a CIA director complain of others’ “brutish” behavior. What’s worse: the tub-thumping or the stones-and-glasshouse cringe? Mostly, though, this does not matter.

Yet there is one case where these fits of verbal coarseness betray something even worse than rhetorical bravado: Describing Hamas’ 7 October assault as “butchery,” Burns finds nothing but an “intense ground campaign” on Israel’s side. Let’s set aside that this expression is a despicable euphemism, when much of the world rightly sees a genocide taking place in Gaza, with US support. It also bespeaks an astounding failure of the strategic imagination: In the same essay, Burns notes correctly that the weight of the Global South is increasing, and that, in essence, the great powers will have to compete for allegiances that are no longer, as he puts is, “monogamous.” Good luck then putting America’s bizarre come-what-may loyalty to Israel first. A CIA director at least should still be able to distinguish between the national interests of his own country and the demands of Tel Aviv.

Burns’ multipronged strike in the realm of elite public debate leaves an unpleasant aftertaste. It is genuinely disappointing to see so much heavy-handed rhetoric and such basic errors of analysis from one of the less deluded members of the American establishment. It is also puzzling. Burns is not amateurish like Antony Blinken or a fanatic without self-awareness, such as Victoria Nuland. Yet here he is, putting his name to a text that often seems sloppy and transparent in its simple and short-sighted motivations. Has the US establishment decayed so badly that even its best and brightest now come across as sadly unimpressive?