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Sunday, February 7, 2016

Things in Russia are beginning to seem ominous.

I'm a coin collector.  I love the idea of touching an old sea-salvaged Spanish Real and trying to imagine whose hands had held it previously.  Normally, I focus my coin collecting on French coins, as France has a history of creating interesting coin profiles (and I'm half-French).  Yesterday at the coin shop I frequent, I noticed six 20-franc Gold coins for sale.
When my friend behind the counter told me how much they would cost, I realized that gold had dramatically increased in price (per ounce).  Why am I boring you with all of this background?  Because the price of gold usually ebbs and flows with the price of crude (not always).  The price of oil continues to drop, with many analysts not willing to offer a clue as to when it might reverse the trend.  Since the fall of the Soviet Union, Russia has benefitted tremendously from its oil deposits.  At times it seemed that the West had nothing to leverage against Russia and its vast amount of crude and natural gas.  A number of former Soviet-bloc nations are dependent on imports of Russian fuel, and the Russians have made it obvious that they are not above freezing people to win a diplomatic stalemate.  But today the situation is vastly different.  The Russian economy is in a crisis.  The sanctions regime applied to Russia by the EU countries and the United States, to protest Russia's interfering with the sovereignty of Ukraine, has really left a mark, as they say.  Russia's commodities-based economy is drying up, as the supply of oil shows no letdown.  In many ways, Russia is dependent on money created by its oil industry.  Russia may have been able to survive the oil glut, and they may have made it through the sanctions regime as well. But can Russia survive both at the same time?

Now that we have reviewed the current situation, what actions might Russia take in response to its difficulties?  There is concern that, taking a page out of the Argentinean military junta's actions in 1982 (Falklands War), Putin might attempt to distract the Russian people from the economic crisis by
starting a war.  Russia already has two going; would Putin consider adding a third?  The Baltic states have been a present just waiting to be opened by Russia for some time.  Lithuania, Estonia and Latvia are tempting for a number of reasons: the Soviet Union occupied all three over 50 years, and settled Russian families in all three nations.  Also, none of the Baltic states has an armed forces to make the Russian military even hiccup.  In fact, NATO has been talking about not only bringing in the three as new members, but also deploying NATO forces (in a purely defensive posture) to these countires.  Just the thought of U.S. tanks in Riga, Tallinn, and/or Vilnius (OK, I admit it; I had to look up one of them!) sends the Russias into a furor.  The real question is, if Russia were to create some event of international mischief, how would that help with its economic crisis?  It can be argued that "a nice little war" can do wonders to jump-start an economy, but I don't think that applies in this instance.  Also, maybe a war close-to-home would invigorate the masses with nationalist fervor, which would spread to include an increase in manufacturing hours, a decrease in time-off, more money spent domestically and on government savings bonds, etc.  No matter how I look at it, though, I just can't see it happening.  The world is so different as opposed to when it was possible to use an international event to restart an economy.  In truth, I don't think that Russia can afford another war at this point.  Russia can't redirect its economy overnight.  The Russians desperately need oil to reverse itself, or, after they have successfully returned Assad to power, I predict that Russia will pull out of the war against ISIS.

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