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Mon, Sep 1st 2008, 02:54

N.J. SLABBERT

China's reluctance to align itself with Russia's actions in Georgia is a significant consideration for Moscow to weigh in its assessment of its current position. Another is the implications for Russia's ability to attract foreign investment. Jason Bush, writing for Der Spiegel, points out the downward movement in Russian stock prices and the presently continuing vigor of the country's consumer growth, but these conditions cannot be reasonably expected to persist in the face of growing Western unease. With its long background in an economic management culture that is less than optimally sensitive to private sector interpretations and their consequences, Russia may have badly misjudged the durability and superficial nature of its current economic circumstances. It is for the West to convince Moscow that it is shooting itself in its economic foot. -- Nicholas J. Slabbert

Mon, Sep 1st 2008, 22:44

Donald Stadler, Self-employed, Diamond Contributor (1052)

Good point at the end, Mr. Slabbert. I think the confidence exhibited by Russia, Iran, and Venezeula have their basis in high oil prices. The problem is that none of these countries appear to be investing their windfall profits in more enduring sources of wealth like manufacturing or service capacity. Russia is famed for it's oil wealth, but I haven't seen Russian manufactures on the market in the UK.

If the world oil price falls significantly, as it will sooner or later, Russia and the others will feel something very akin to a hangover after a drunken binge.

I don't believe the 'West' will be able to convince Russia of much of anything, just as I don't see Hugo Chavez or the President of Iran listening to any message. The message will be communicated otherwise - in the form of the increasing success of oil conservation measures resulting in a falling oil price - the loudest message of all in it's quiet way....

Tue, Sep 2nd 2008, 01:59

N.J. SLABBERT

Russia, Iran and Venezuela all have different situations but in Russia's case I think there is clearly a lack of economic foresight in the failure to use this income wisely; they have indeed not begun to tap into the global trading opportunities that are available to them (by contrast with China). And yes, the oil bonanza will not last forever, which they also do not seem to have taken into account. As for convincing Moscow of its errors, there are several ways to engage them, including, as you rightly mention, a concerted Western effort to reduce oil dependency. Another is diplomacy that emphasizes what they have to gain by avoiding global pariah status. - Nicholas J. Slabbert

Wed, Sep 3rd 2008, 19:53

Donald Stadler, Self-employed, Diamond Contributor (1052)

Surely theyre are differences between the countries, but I wonder whether your comment about differences isn't more about expectations. Russia is more or less European, Iran is a Gulf state, and Venezuela is in South America. All three countries have debatedly benefitted from the oil boom, and all three countress don't seem to have been investing the proceeds wisely in education, services, or manufacturing.

Iran is not exactly a prototypical Gulf sheikdom, it is far more of a nation than many of it's close neighbors. An India rather than a Pakistan or a Saudi Arabia. I would argue that it's more appropriate to judge Iran by the standards more similar to how we judge European countries by than compare it to Dubai or the UAE. Although Dubai and the UAE HAVE been inversting, though I doubt whether 7-star hotels make the best long-term investments.

I'm not sure what Iran is investing in education, but have heard many stories about how the Iranian oil infrstructure has been allowed to deteriorate. I've heard these stories about Russia and Venezuela as well.

Russia seems to have anoher major failing as well. Russia invested a fair bit in education under the USSR, but I've read a fair bit in recent years indcating that the great universities of the Soviet era have been allowed to degenerate, and receive very little investment or maintenance. Given that Russia is potentially an full-s[ectrum economic superpower this is inexplicable. We ought to be seeing Russian manufacturing exports by now, and given the historical high quality of Russian science and humanities we ought to be seeing much more in the way of innovation and knowledge industries than we are seeing out of Russia.

This surprises me. I think Putin has been focussing on the short term, wasting the windfall on improving the military and pushing around it's neighbors. Contrast this with China, which is not militarily active in it's area and DOES invest in it's people.