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The original was posted on /r/armenia by /u/ar_david_hh on 2024-10-06 23:59:08+00:00.
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from an interview with Russian economist Igor Lipsits about the dying Russia, economies of Russia and China, high inflation, Western sanctions, Ukraine war
REPORTER: Does Putin have money for war?
LIPSITS: Yes, enough for several years, because Russia has been saving money since 1999 when the price of oil went up. Even today the price is quite high. In the past, part of this oil revenue did not reach the country because it was redirected to the reserves for a rainy day. Today nothing is being saved; everything goes directly to the war effort. But money is still coming because Russia has the ability to export oil.
REPORTER: But globally oil prices are on the decline and Russia's big client China is switching to electric vehicles (EVs). These days Chinese consumers buy more EVs than traditional vehicles.
LIPSITS: That's logical. Look, China's main goal right now is to find new types of products where it can be competitive in the 21st century. The 20th century was an era of flooding the world with cheap products, but that doesn't bring enough money anymore, so there is a need to explore new areas, and these areas are electronics and renewable energy, solar panels. To export it, they need to make it cheap. To make it cheap, they need to produce it in large quantities. To produce it in large quantities, they need their local consumers to buy it in large quantities. This is why China is stimulating its population to buy EVs and renewable energy products.
But it's important to understand that China's economy is in trouble. We are observing the developments with horror. It's one negative report after another coming from there. This doesn't mean China is collapsing, but there are serious shifts. A week ago the central bank of China adopted a whole package of measures to make credits more affordable and dumped very large sums to save the economy from collapse. The real estate is quietly dying. They kept it on life support for a while, but they can't do it any longer so now they are trying to prevent people from going bankrupt by allowing them [some kind of a real estate exchange or repositioning program]. So as long as China is not doing financially well, they will use less Russian oil and gas.
REPORTER: If Russia fully relies on oil, why have Western sanctions had such little impact on the export of oil?
LIPSITS: Because the West doesn't know what to do with Russia. At first, they loudly announced serious sanctions but midway they paused and had second thoughts, which is why the sanctions turned out to be half-assed or to be more accurate: idiotic.
The West did the silliest thing imaginable. They announced sanctions but decided to delay its implementation. They decided to impose a price cap on Russian oil starting in December but announced it several months earlier. This warning caused panic and speculative games in the market, and an effort to quickly buy as much as possible. This helped Putin big time. The U.S. seriously helped Putin and practically allowed him to compensate for the loss of Russia's gold-currency reserves. In 2022 Russia earned $280 billion on oil exports, a huge sum. The U.S. helped Russia. If you are going to impose sanctions, you must launch it immediately, otherwise, you allow speculators to play a game, which is what happened.
I hate saying "I told you" but I have a private Facebook page where I warned my followers immediately that this oil price cap sanctions model was idiotic from the beginning. It's a clownish situation. The evaluation of the price of oil entering the oil tanker was made based on the judgment of the captain of the tanker. There is nothing more stupid than that in this human world. You rely on the captain of the tanker to be an angel and not a liar. This is so silly. But they did it.
The bigger problem is with the West's uncertainty about what to do with Russia. They can't decide if it's best to destroy Russia or keep Putin in power but with a weakened power. They don't have a coherent strategy so we see sporadic and ineffective steps.
The only sanctions that currently truly work are the banking sanctions; it's hurting Russia. As for the oil sanctions - not so much. They want to harm Russia without harming themselves but it's not working out well.
Some economists warned the West from the beginning that it's best to ban all Russian oil exports completely from the start. That would hurt the West, but it would collapse Russia quickly and the West would suffer for a shorter period of time and would overall suffer less.
REPORTER: Is there a way to measure how effective this or that sanction is?
LIPSITS: No, because sanctions have a complex effect on the economy so it's impossible to single out and say it got worse by X% because of that sanction. People were asking when the Russian economy would collapse when the sanctions began. In reality, sanctions don't collapse the economy, they degrade it, and this degradation is visible in the decline of income per capita, when the country loses a technological market, etc. It's not "collapsing". Iran, North Korea, and Cuba didn't collapse despite decades-long sanctions. Russia can become impoverished and backward but the population can lower their standards for a long time, and Russians are already accustomed to living poor.
Russia won't simply collapse, but it will never be a technological superpower anymore, will never be rich. This is already clear. Russia will forever be a poor country now. People criticize me for using words like "never" and "forever". Look, Russia survives on income from oil and gas. There is little manufacturing processing, and even most metal exports are not finished goods, they are half-raw products. The enriched uranium is an exception, but this is possible thanks to the tech inherited from the USSR. Also titanium... what else? It's a short list of exports that keep Russia alive.
They [Kremlin] always say only 25% of Russian budget revenue comes from oil and gas. This is nonsense. [Russian scientists] at Carnage and I separately calculated that it's 70%. Income from everything else, including taxes on people, makes up the remaining 30%. Russia truly is a gas station masqueraded as a country. It's insulting, but it's accurate.
Russia was supposed to collapse in the 1970s but it got a lifeline with the help of West Siberian oil and gas. But these fuel fields will expire. The USSR hit the jackpot there. It was beautiful, it was rich, everything was exported, and the USSR lived a cunning life of combatting "imperialists" while simultaneously surviving on the oil money from imperialists. A very cunning model, so the USSR was not an empire of idiots, it was an empire of ideologically strange personalities.
The USSR was actually supposed to die sooner - in the 1960s. This is not a controversial statement. Back in 1960s, it was already clear that the economy was collapsing. This is why there were attempts to implement reforms: the Kasygin-Liberman reforms was introduced because the economy was no longer able to grow and was collapsing. Then they found oil and gas and it served as "doping" that kept the USSR going for another 20 years.
REPORTER: Putin is basically doing the same...
LIPSITS: ... of course.
REPORTER: Putin is combatting the West with the money generated from products sold to the West.
LIPSITS: Well, except in this case, it's the money from China, which is not as "beautiful" and plentiful as the West. It's not the same market, not the same buyer, not the same freedom of choice. Since the war in Ukraine, Russia has suffered a severe loss of "economic sovereignty". This phrase irritates many, but I'm accustomed to irritating people. The sovereignty - the decision to choose whom you sell and how much you bargain - is lost. Today Russia is surrounded by slingshots aimed at it; it's been cornered. There are sales to India as well. Now we hear about completely crazy projects like building a pipeline to Pakistan, to Iran, and lately some projects with Azerbaijan. That's the situation right now.
REPORTER: Do Russian elites understand that the sanctions and their effect are here to stay?
LIPSITS: Some of the elites understand that Russia has entered the final stage of its existence. It sounds scary and many do not believe this, but I'm talking about a century-long process. Russia has been slowly dying since 1913. That was the last year. In 1914 Russia joined the WW1 and that launched the death of the Russian Empire and it continues today. It's a huge country, a big population and many smart people, which is why death is slow. This is normal. How long did the death of the Roman Empire last? 2.5 centuries? But Russia is not Rome, and it will die faster than Rome. It began in 1913, and it has already lost territories and nations/people that were part of the Empire, but most horrifyingly, it has lost human capital.
People often ignore this but the USSR survived on the backs of human capital inherited from the Russian Empire, which had excellent science and scientists. None of...
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