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What a Difference a Decade Makes

Putin puppet and official Russian Presidential seat warmer Dmitry Medvedev has issued an imminent shut off notice to Ukraine gas consumers:

President Dmitry Medvedev told Ukraine on Wednesday to pay its gas debts "to the last ruble" or face the prospect of sanctions from Moscow against its wider economy.

His comments came after Russian energy giant Gazprom on Wednesday warned Ukraine it would cut gas deliveries on January 1 if a new contract were not signed for 2009 and the debts for 2008 not paid back in full.

"The money must be paid until the last ruble if they do not want their economy to be hit by demands and sanctions from the Russian Federation," he said in an end-of-year interview on Russian television.

We cannot carry on like this. They should just pay up."

If the consequences of these threats were not so dangerous it would be comic listening to a Russian lecture others on the requirement to make good on debts in the very year we celebrate the Tenth Anniversary of the Russian Debt Default of 1998, one of the lowlights of which was the Russian's refusal to have an audience with then Deputy Treasury Secretary Lawrence Summers:

Investors' perceptions of Russia's economic Stability continued to decline when Lawrence Summers, one of America's top international-finance officials, was denied a meeting with Kiriyenko while in Russia. An inexperienced aide determined that Summer's title, Deputy Secretary of the Treasury, was unworthy of Kiriyenko's audience and the two never met.

Recent events suggest that the Russian hard ball position with Ukraine is déjà vu all over again and President elect Obama needs to pay close attention to this problem if he is to prevent a catastrophe of Georgian proportions. The run up to the 1998 Russian debt crisis included a collapse of the (Russian)stock market concurrent with a collapse in energy prices. Sound familiar?

The collapse of worldwide energy prices will bring an entirely different set of issues to be confronted by the new administration, few of which were openly debated in the election. A desperate and potentially bankrupt Russian state is a problem that it is orders of magnitude greater than anything Obama has opined on to date.


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Comments (8)

Yes, Obama is facing a whol... (Below threshold)
Allen:

Yes, Obama is facing a whole lot of problems. And I'm sure some people with their magic crystal balls will know what he is going to do before he even takes office, in 24 days.

Well, in 24 days, a lot can happen in this world. What is President Bush going to be doing to defuse this. Anything? After all, we only have one President at a time. Guess time will tell.

Funny -- I'm currently rea... (Below threshold)
Mike:

Funny -- I'm currently reading William Poundstone's fascinating book Fortune's Formula, and I just finished the chapter that discusses the 1998 Russian ruble devaluation and treasury bond default, which effectively wiped out the chic 90's hedge fund Long Term Capital Management.

In the 1990's, Russian treasury bonds were "junk" rated and were paying returns of up to 40% because of the instability of the new "free market" Russian economy. Because so many Western investors were lured by the ridiculously-high interest rates of these bonds, they over-invested in them. And to make matters worse, the Russian bond default caused a ripple effect, which depressed the treasury bond market around the world, particularly in Asia.

Since then, investors have learned their lesson, so it's doubtful that Russia could impact the world's economy in such a way again.

But I totally agree with you that a bankrupt -- yet heavily armed -- Russia is indeed a very serious threat. I also think that the same holds true for Venezuela and Iran, both of whom have recently purchased large quantities of arms and infrastructure-related staples from Russia.

the Russian's refusal to... (Below threshold)
DSkinner:

the Russian's refusal to have an audience with then Deputy Treasury Secretary Lawrence Summers

Well, they probably knew he was a misogynist and refused on that basis. Does NOW have a Russian office?

Poor Russkies...falling oil... (Below threshold)
GarandFan:

Poor Russkies...falling oil prices seem to have them in a pinch. Wonder what's gonna happen to Hugo when he defaults on all that military hardware he purchased.

Putin is also a puppet........ (Below threshold)
Van:

Putin is also a puppet.......to communism!

Russia and Venezuela have N... (Below threshold)
Van:

Russia and Venezuela have NO OTHER products to export other than oil and gas! Russian Vodka even isn't any good and they usually drink it all up before they can export any! Keep up the good work Commrade Putin. Maybe another DVD sold to the public will get you out of debt.

""A desperate and potential... (Below threshold)
Brian Richard Allen:

""A desperate and potentially bankrupt Russian state is a problem that it is orders of magnitude greater than anything (zerO - AKA NMFingP!) has opined on to date. ""

Neither the world's most dangerous dullard nor his every-bit-as hapless and as gormless VP, the senator for big banks and even bigger fabulizations, will need to trouble himself over drunk, decadent, degenerate, dying and just about dead, Russia.

Russia is rooted (a little Aussie lingo for youse, there) and will not see out another five years in its present form -- or within its current borders.

Pretty soon the Peking predators, soon to be about as strapped for cash as Moscow and likely to be long frustrated by their inability to launch a successful amphibious assault on the Free Republic of China's Taiwan, will invade and repossess China's former North Eastern territories and -- on rapidly discovering Russia's absolute inability to defend itself, will then every-bit-as-rapidly invade and capture all of Siberia.

And will then cheerfully supply Ukraine, Georgia and indeed every one of the squalidly socialistic Eurabian Neo-Soviet's states, including its offshore satellite: once great Britain; with all of the oil and gas and coal those also sorry states can afford!

Brian Richard Allen
Los Angeles - CalifUBAMAcated 90028 -- & the Far Abroad

Enviromentalism rears its u... (Below threshold)
Spurwing Plover:

Enviromentalism rears its ugly head in the ukraine showing just how hideous enviromentalism is i mean already the euroweenie union threatens sancions against african nations that still use DDT showing how RACHEAL CARSONS lies have become world law




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