NP - Krugman: Petrothoughts (Via Kevin Drom)

[David Morris]

http://krugman.blogs.nytimes.com/2014/12/14/petrothoughts/

http://www.motherjones.com/kevin-drum/2014/12/krugman-russia-keeps-looking-more-vulnerable-crisis


Paul Krugman just left a conference in Dubai, and decided to write a bit
about oil prices because all the geopolitical stuff he heard was pretty
grim. But the oil stuff wasn't that interesting. His one paragraph about
geopolitics is: <http://krugman.blogs.nytimes.com/2014/12/14/petrothoughts/>

My other thought is that Venezuela-with-nukes (Russia) keeps looking more
vulnerable to crisis. Long-term interest rates at almost 13 percent, a
plunging currency, and a lot of private-sector institutions with large
foreign-currency debts. You might imagine that large foreign exchange
reserves would allow the government to bail out those in trouble, but the
markets evidently don’t think so. *This is starting to look very serious.*

Yes it is, and the reference to Venezuela-with-nukes is telling. A Russian
economic crash *could* just be a crash. That would be bad for Russia, bad
for Europe, and bad for the world. But it would hardly be the first time a
midsize economy crashed. It would be bad but manageable.

Except that Russia has Vladimir Putin, Russia has a pretty sizeable and
fairly competent military, and Russia has nukes. Putin has spent his entire
career building his domestic popularity partly by blaming the West for
every setback suffered by the Russian people, and that anti-Western
campaign has reached virulent proportions over the past year or two. If the
Russian economy does crash, and Putin decides that the best way to ride it
out is to demagogue Europe and the West as a way of deflecting popular
anger away from his own ruinous policies, it's hard to say what the
consequences would be. When Argentina pursues a game plan like that, you
end up with a messy court case and lots of diplomatic grandstanding. When
Russia does it, things could go a lot further.

I have precious little sympathy for Putin, whose success—such as it is—is
based on a toxic stew of insecurities and quixotic appetites that have
expressed themselves in a destructive brand of crude nativism; reactionary
bigotry; disdain for the rule of law, both domestic and international;
narrow and myopic economic vision; and dependence on an outdated and
illiberal oligarchy to retain power. Nonetheless, there are kernels of
legitimate grievance buried in many of these impulses, as well as kernels
of necessity given both Russia's culture and the post-Cold War collapse of
its economy that has left it perilously dependent on extractive industries.

I don't know if it's too late to use the kernels as building blocks to
improve, if not actually repair, Western relations with Putin's Russia. But
it's still worth trying. A Russian crash may or may not come, but it's
hardly out of the realm of possibility. And if it happens, even a modest
rapprochement between East and West could help avoid a disastrous outcome.
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