Roger Bootle at The Telegraph is the bearer of happy tidings in an article headed: No one wants Russia to implode but optimists have their work cut out. Well, perhaps "no one" is a bit of a stretch because it certainly doesn't include me! I do realize that there would be a considerable shock to the gas market but, dammit, I'm British and I 'll manage it with typical British pluck not least because the sight and sound of sundry 'gangstapparatchiks' including 'Vlad the Impaler' being swept away in the turmoil of national bankruptcy would do me a power of good. Of course, the Russian people would suffer enormously but then, that's what they do so awfully well!
Apparently, the other day 'Vlad' "described the UK as a small island that no one pays any attention to" but as Mr. Bootle reminds him, and us, we have a GDP of some $2.5 trillion compared to Russia's $2.0 trillion. See, 'Vlad', ours is bigger than yours! Also, a great deal of Russian wealth stems from its gas industry but that is rather like one of my frequent farts (for which I am fined 50p by the 'Memsahib' every time I'm caught!) in that it smells and makes a lot of noise but it ain't gonna last forever! Russia is in dire need of investment, not least because so much of its money is shifted overseas at a rapid and growing rate:
Part of the problem may be a dysfunctional banking system, which tends to restrict lending to small and medium-sized businesses. But over and above this, there is substantial capital flight. The central bank reckons that $55bn of capital will flow out of the country this year (equivalent to 2.5pc of GDP.)
The fundamental issues are the political and legal system, the appallingly high level of corruption and the dreadful demographics. The first two factors seriously inhibit investment, both foreign and domestic. They also directly reduce productivity since even mundane bits of economic activity or investment have to be liberally laced with pay-offs and bribes, with the result that the ultimate return is not as large as it should be.
Well, perhaps I am over-eager because these "events, dear boy, events" always take longer than you think but even so, in my opinion the rise and rise of shale gas could seriously dent current price levels and if the Russians find their main income shrinking who knows what the effects might be. Nothing terminal, I trust!
