Interview from June 9, 2022. Includes English subtitles.

If you want to see what Moscow looks like in summertime, check out this video of a walking tour of part of the city from last July.

This is a video from the YouTube channel Lost in Moscow. Check out them out here. According to the notes at YouTube:

“Streets and remarkable places seen within this video: Tower 2000 and Bagration Bridge // One Tower // Evolution Tower // Imperia Tower // City of Capitals // Naberezhnaya Tower // IQ-quarter // Eurasia Tower // Federation Tower // Mercury City Tower // Grand Tower // OKO // Neva Towers // Northern Tower // Bagration Bridge // Delovoy Tsentr (Moscow Central Circle) // Afimall City”

By Ben Aris, Intellinews, 6/14/22

Ukraine’s despair index, which indicates the amount of pain felt by the bottom third of society, has spiked in the last two months, driven up by soaring inflation, rising unemployment and increasing poverty levels, while that for Russia peaked in April, but appears to be falling again.

Invented by bne IntelliNews several years ago, the despair index is a rough measure of the amount of pain the more vulnerable parts of society in emerging economies feel during crises. It is simply the addition of inflation rates, unemployment levels and poverty levels.

Poverty has been increasing in Russia as the economy faces a prolonged recession. In the first quarter of 2022, the number of Russians living below the poverty line grew by 69%, Rosstat reported in June.

The number of Russians living below the poverty line was 20.9mn people against 12.4mn a year earlier, according to RosStat estimates, an increase of 8.5mn in only the first three months of 2022.

However, the level of poverty remains relatively modest in Russia and on a par with the lower end of most EU countries when purchasing power parity is taken into account. The poverty line in Russia is set at RUB12,916 ($221.26) against the national average income of $765 per month in the last quarter of last year.

Russia had a poverty ratio of 14.5% before the war in Ukraine started, which compares favourably with the EU average of 21.7% in 2020 before the various crises hit the globe. Indeed, in May 2020, when bne IntelliNews last surveyed despair in Emerging Europe (see chart), Russia’s poverty rate was even lower than most of the EU and US levels at 12.9%.

With high inflation and an 8%-15% economic contraction anticipated this year, the Russian poverty rate is expected to rise. The government, anticipating problems, is in the course of rolling out a social spending programme of up to RUB4 trillion to cushion the blow.

Compared to the fourth quarter of 2021, the average income of Russians decreased from RUB47,694 to RUB36,234, a drop of 24%, although part of that fall has been offset by the incredibly strong rally in the value of the ruble, which is up by about 30% thanks to swift and stringent action by the Central Bank of Russia (CBR) after Russian troops crossed Ukraine’s border.

Average salaries have also decreased from RUB62,828 to RUB60,101, or by 4.3% in the same period, reports RFE/RL, and unemployment has risen by 800,000. But here too, the increase in unemployment remains modest and overall unemployment is currently 4.2%, according to the most recent data, close to the all-time post-Soviet lows.

Despair index

Taken together, the results allow a fresh calculation of bne IntelliNews’ despair index.

bne IntelliNews’ despair index is based on the so-called “misery index”, which is simply the addition of inflation and unemployment. Crises increase both these variables, which disproportionately hurt the lower income strata of society.

To the misery index, bne IntelliNews added poverty to better capture the pain on societies in emerging markets which don’t have well developed social welfare networks.

An ideal despair index should score below a value of ten if residual indicators are taken into account: inflation (2%) + residual unemployment (4%) + poverty (0%).

Unfortunately, while 2% inflation and 4% unemployment are regularly reported, no countries have ever managed to eradicate poverty, which runs at least 12% in the developed world and averages in the mid-teens or above in most developing countries.

Of course, where you set the bar for poverty makes a big difference and each country has a different level, making direct comparisons between countries problematic, but the despair index remains a useful indicator of how much a country is suffering from economic problems.

At the end of last year Russia posted a very modest 21.1 despair index. Compared to bne IntelliNews’ last despair index survey in May 2020 that put Russia ahead of all of Western Europe, where all the countries were reporting results in the high-20s to mid-30s.

Since the start of this year Russia’s despair index has started to climb, mainly driven up by soaring inflation. The economic shock to the system has yet to have an impact on poverty levels or unemployment. In the first quarter of this year the despair index was up to 30.2, but adding in the recent peak inflation rate of 20% set in May and assuming a jump in unemployment to 8% – the peak value during the coronavirus (COVID-19) pandemic – then that lifts the despair index to an uncomfortably high 42.5.

Stagflation

The rapid intervention by the CBR into the economy has successfully contained much of the pain. The central bank cut rates for the fourth time last week, bring the prime rate back to 9.5%, where it was before the war started, saying that inflation pressure had been successfully curbed. Industrial production has slowed, but in the last PMI survey, companies are not reporting an increase in dismissals this year. It seems likely that in the next quarter the despair index will fall back to 30, whereas strongly rising inflation will be pushing up the rest of the world’s despair indices to comparable or higher levels.

The poverty rate in the US was 14.4% in February – on a par with Russia’s poverty rate now – and unemployment was 3.6%, giving it a misery rating of 18. But with inflation soaring to 7.3% in March and 7.4% in April, the US despair index rate has climbed to 27.4, which was almost exactly the same as Russia’s despair rate in the first quarter of this year.

This week the Fed indicated that it has not tamed inflation and will probably hike rates by 75bp as the US looks like it is entering into a phase of stagflation – high inflation and high interest rates that will slow the economy and also send unemployment up. The Fed, like many central banks, needs to hike rates aggressively to contain the situation.

In other countries it may already be too late to prevent a nasty bought of stagflation. Czechia broke another record this week, posting inflation up to 16% – its highest level since December 1993 – which is showing no sign of slowing down. With a prime rate of 5.75%, Czechia’s real interest rates are already deeply negative and it seems impossible for the central bank to reverse the trend without some massive rate hikes.

Currently Czechia’s unemployment rate of only 3.3% currently means it has a misery rate of 18.3%, and the country also has a modest poverty level of 12.2%, according to the last bne IntelliNews survey, but thanks to the high inflation rate it now has a despair index value of an uncomfortably high 30.5%. That’s on a par with Russia, but while the Russian despair index value is expected to fall in the short term, that for Czechia will almost certainly rise once the central bank is forced to hike rates. Both Czechia and the US are now anticipated to go into a recession as a result of the stagflation, says Charlie Robertson, chief economist at Renaissance Capital.

Ukraine despair

Despair is unfortunately well known in Ukraine and the war is expected to inflict a lot of pain on the population. Inflation has spiked in Ukraine like everywhere else, reaching 16.4% in April, before falling back somewhat to 12.9% in May.

But the inflationary pressures are very strong, leading the National Bank of Ukraine (NBU) to put through a massive hike at the start of June to bring the prime rate to 25% from 10% in one step. That will have a heavy toll on growth, where the economy was already expected to contract by 30% or more this year due to the war.

Unemployment was already running at 10.6% in the last quarter of 2021, but it is anyone’s guess where it is now. At least a third of Ukraine’s firms shut down in the first months of the war and over 90% say they have been affected. Now the country is starting to come back to life after Russia withdrew from most of its territory. While 42% of Ukrainian entrepreneurs did not work in March and 26% in April, only 17% of SMEs are currently out of work as of the start of June.

Still the impact on unemployment will be high. Assuming a modest 11% for May then Ukraine has a misery score of at least 24% in May and probably closer to 30% in reality.

The poverty level is more difficult to gauge. Officially Ukraine had a poverty rate of only 1.1% before the war, but that is based on a count of the number of people living on less than $5.5-$13 a day, or $165-$390 a month. Poverty is still so high in Ukraine that the poverty level is measure in terms of a dollar-a-day numbers rather than a minimum salary.

As bne IntelliNews reported, average incomes in Ukraine have been growing fast in the last two years, and dramatically closing the gap with Russia, but Ukraine remains one of the poorest countries in Europe, whereas Russia’s $765 average wage, in purchasing power parity terms, is on a par with the lower end of the EU.

Ukraine had a poverty level of 27% in bne IntelliNews’ last survey, which would give it a despair rating of around 55 now, guesstimating the actual inflation and unemployment. But UNDP said last week that poverty could reach 90% as a result of the war, which would drive the despair index up to 115, even taking the current estimates for inflation and poverty into account.

That is an extremely high result, but not quite as bad as the worst of the chaos of the 1990s, when the despair index went over 200. In Russia the despair index went over 200 in those years as it seems the total collapse of the economy, sustained over several years, causes more despair than just a war.

Ukrainians have to look forward to a lot more suffering until the war is over. There is the prospect for a rapid bounce-back if the West follows through on its promise of a multi-billion dollar Marshall Plan, but in the meantime life will be very hard.

By Mike Whitney, Unz Review, 6/16/22

“Rejection of Russian energy resources means that Europe will become the region with the highest energy costs in the world. This will seriously undermine the competitiveness of European industry which is already losing the competition to companies in other parts of the world…. Our Western colleagues seem to have forgotten the elementary laws of economics, or simply prefer to ignore them.” Vladimir Putin, President of the Russian Federation

On Tuesday, Russia announced a 40% reduction in the flow of natural gas to Germany through the Nord Stream pipeline. The announcement, that was made by Gazprom officials, sent tremors through the European gas market where prices quickly soared to new highs. In Germany—where prices have tripled in the last three months—the news was met with gasps of horror. With inflation already running at a 40-year high, this latest reduction in supply is certain to tip the German economy into recession or worse. All of Europe is now feeling the impact of Washington’s misguided sanctions on Russia. Here’s more from Oil Price website:

“Russia’s Gazprom said on Tuesday that it would limit natural gas supply via the Nord Stream pipeline to Germany by 40 percent compared to planned flows because of a delay in equipment repairs… The lower supply of gas via Nord Stream to the biggest European economy, Germany, sent Europe’s gas prices surging by double digits…

Russian gas deliveries to Europe… have already been down after Ukraine stopped last month flows from Russia to Europe at … one of the two transit points… thus supply was cut off for a third of the gas transiting Ukraine onto Europe.” (“Europe’s Gas Prices Surge 13% As Russia Reduces Nord Stream Flow“, Oil Price)

The United States and its European allies have imposed more sanctions on Russia than any country in history. But Tuesday’s announcement helps to illustrate who is actually suffering from the sanctions and who is not. Russia is not suffering, in fact, Russia does not seem particularly perturbed at all. It has calmly brushed aside Washington’s attacks as one would whisk-away a fly at a family picnic. Even more surprising is the fact that the sanctions have strengthened the ruble, increased revenues from raw materials, sent Russia’s trade surplus into record territory, and pushed gas and oil profits into the stratosphere. By every objective standard, the sanctions appear to be benefiting Russia which, of course, is the opposite outcome that was expected.

Washington’s Economic Sanctions on Russia: Success or Failure?

1. The Russian currency (the Ruble) has rallied to a five-year high.
2. Russia’s commodities are raking in windfall profits
3. Russia’s trade surplus is projected to hit a record high this year
4. Russia’s oil and gas sales have risen sharply

There’s no evidence that Washington’s sanctions have achieved the objective of “weakening” Russia or damaging its economy. There is, however, considerable proof that the sanctions have backfired and inflicted a heavy toll on their supporters and their people. And while it’s hard to quantify how much damage has actually been done, we’ve tried to identify specific categories where the impact has been most dramatic. The sanctions have:

1. Triggered a sharp rise in food and energy prices. (soaring inflation)
2. Caused major disruptions in global supply-lines (Deglobalization)
3. Greatly increased food shortages and the likelihood of famine
4. Precipitated a severe slowdown in the global economy

So far, Russia has withstood these attacks patiently and without any retaliatory response. But we must assume that the sudden 40% reduction in gas flows to energy-dependent Germany is intended to send a message. Keep in mind, Nord Stream 2 was a massive multi-year, $10 billion project to which Russia was fully committed until Germany ‘pulled the rug out from under Putin’ at the eleventh hour. Germany proved that—when push comes to shove—Berlin will always march in lockstep with Washington rather than fulfill its business agreements or act in the interests of its own people. What Germany is discovering now, however, is that acting as Washington’s poodle comes at a very high price indeed. Here’s more from Reuters:

“Gazprom said on Tuesday it has curbed supplies via the Nord Stream 1 undersea pipeline to Germany to up to 100 million cubic metres (mcm) per day, down from 167 mcm, citing the delayed return of equipment that had been sent for repair….

Gazprom no longer exports gas westwards through Poland via the Yamal-Europe pipeline following Russian sanctions against EuRoPol Gaz, which owns the Polish section. Flows via Yamal-Europe continue eastwards from Germany to Poland.

“Due to the delayed return of gas compressor units from repair by Siemens … and technical engines’ malfunctions, only three gas compressor units can currently be used at the Portovaya compression station,” Gazprom said..

“Due to the sanctions imposed by Canada, it is currently impossible for Siemens Energy to deliver overhauled gas turbines to the customer. Against this background we have informed the Canadian and German governments and are working on a viable solution,” the company said.” (“Nord Stream gas capacity constrained as sanctions delay equipment“, Reuters)

Not often. Russia is sending a simple but poignant message to Germany: “You made your bed, now sleep in it.” Russia’s reaction is perfectly normal after having been “stabbed you in the back.”

And, Germany’s travails are just beginning because it has no way to make up for the energy shortfall it will face in the near future; a shortfall that will precipitate rolling blackouts, freezing homes, and a relentless strangulation of its domestic industry. As the German government is discovering, there is no viable substitute for Russian hydrocarbons which is neither readily available nor does the quality fit Germany’s particular requirements. In other words, the US has led Germany down the primrose path believing that they could simply switch to other energy suppliers and everything would be just dandy. That is certainly not the case. As it happens, Germany and all of Europe are going to pay more for their energy than any region in the world which will severely undermine the EU’s competitiveness. This, in turn, will lead to a sharp decline in living standards as well as growing social unrest. Here’s more from the Wall Street Journal:

Naturally, the media is going to point to a maintenance snafu as an excuse, but how credible is that? How often is supply of a vital resource cut by nearly half due to a compressor malfunction?

“For decades, European industry relied on Russia to supply low-cost oil and natural gas that kept the continent’s factories humming.

Now Europe’s industrial energy costs are soaring in the wake of Russia’s war on Ukraine, hobbling manufacturers’ ability to compete in the global marketplace. Factories are scrambling to find alternatives to Russian energy under threat that Moscow could abruptly turn off the gas spigot, bringing production to a halt.

Europe’s producers of chemicals, fertilizer, steel and other energy-intensive goods have come under pressure over the last eight months as tensions with Russia climbed ahead of the February invasion. Some producers are shutting down in the face of competition from factories in the U.S., the Middle East and other regions where energy costs are much lower than in Europe. Natural-gas prices are now nearly three times higher in Europe than in the U.S.” (“Some European Factories, Long Dependent on Cheap Russian Energy, Are Shutting Down; Industrial energy costs are soaring in the wake of Russia’s war on Ukraine, hobbling European manufacturers’ ability to compete globally”, Wall Street Journal)

The Wall Street Journal would like you to believe that Russia is responsible for Europe’s poor choices, but, it’s not true. Putin didn’t raise prices. Prices rose in response to the EU’s increased demand due to shortages brought on by the sanctions. How is that Putin’s fault?

It’s not. And the same goes for the EU officials who accused Putin of “blackmail”, a claim for which there was no basis whatsoever. When that accusation was made, the price of gas in the EU was one-third of its price today. Is that how blackmail works, by charging less than the market price?

Of course, not. It’s ridiculous. Europe was getting a great price on a scarce resource until they decided to take Uncle Sam’s bad advice and ruin it for themselves. Now they’re paying through the nose, and they can only blame themselves.

Did you know that EU leaders are already making plans to ration energy this winter?

It’s true. Europe has agreed to become another basket-case US lapdog in order to faithfully execute Washington’s ambitious global strategy. Here’s the story:

“Europe could be forced to start rationing energy this winter, starting with industrial uses of natural gas, especially if the winter is cold and China’s economy rebounds, the Executive Director of the International Energy Agency (IEA), Fatih Birol, told the Financial Times in an interview.

“If we have a harsh winter and a long winter  . . . I wouldn’t exclude the rationing of natural gas in Europe, starting from the large industry facilities,” Birol told FT.

The world faces a “much bigger” energy crisis than the one of the 1970s, Birol told German daily Der Spiegel last month.

“Back then it was just about oil,” Birol told the news outlet. “Now we have an oil crisis, a gas crisis and an electricity crisis simultaneously,” said the head of the international agency created after the 1970s shock of the Arab oil embargo.” (“IEA: Europe Could See Energy Rationing This Winter“, Oil Price)

She’s wrong, isn’t she? We don’t have “an oil, gas and electricity crisis”. What we have is a political crisis. All of these shortages can be easily traced back to the foolish choices that were made by incompetent politicians doing the bidding of neocon fantasists who think they can turn the clock back to the heyday of American global primacy. But those days are over, and everyone seems to know they’re over except the insulated group of self-deluded fanatics at the Washington think tanks and their political spawn at 1600 Pennsylvania Avenue.

Bottom line: We all would have been much better off listening to Kissinger who advised his pals at the World Economic Forum (WEF) to wrap up the Ukrainian war pronto before Russia made changes that could not be reversed. Unfortunately, Kissinger’s appeal fell on deaf ears and Putin has already started redirecting his energy flows eastward. Check out this eyepopping excerpt from an article at oilprice.com:

“The biggest reshuffle of oil trade flows since the Arab oil embargo of the 1970s is underway—and things may never return to normal. The Russian invasion of Ukraine and the sanctions on Russian oil exports are changing global oil trade routes. Over the past nearly five decades, oil flowed more or less freely from any supplier to any customer in the world…

This free energy trade is now over, after …. the Western sanctions that followed, plus Europe’s irreversible decision to cut off its dependence on Russian energy at any cost…

By the end of this year, Europe expects to have effectively banned 90% of all its imports of Russian oil before the war… For oil going to Europe, crude from the Middle East will now travel longer distances to European ports compared to the shorter routes to India and China…

For Europe, the choice of oil supply is now political, and it will be willing to pay a premium to procure non-Russian oil. This will tighten supply options and continue to support elevated oil prices for months to come.

Commenting on the EU’s embargo on Russian seaborne oil imports, Fitch Ratings said last week:

“This ban will have a significant impact on global oil trade flows, with about 30% of EU’s imports needing replacement from other regions, including the Middle East (Saudi Arabia and the UAE have sustained production spare capacity of about 2MMbpd and 1MMbpd, respectively), Africa and the US.” (“The Biggest Reshuffle Of Oil Flows Since The 1970s”, Oil Price)

What does it mean?

It means that inflation will continue to rise as Russia’s prodigious crude supplies are redirected eastward. It means that Washington has abandoned its 30 year-long ‘pet project’, Globalization, and splintered the world into rival blocs. It means that the dollar, the bond market, the western financial system and the so-called “rules-based order”—all of which are inseparably linked to economic growth that depends almost-entirely on the availability of cheap energy—will begin to creak-and-groan beneath the weight of feather-headed policy decisions that have brought certain ruin to the nations of the west and their people.

We’re going to pay a heavy price for Washington suicidal power-grab.

Tara sits down to talk about propaganda, media, narratives and filmmaking with award-winning producer & director Igor Lopatonok.

Interview begins at about the 15 minute mark.