The Wizard’s Curtain

NEED TO KNOW

The Wizard’s Curtain

The Kremlin has done its best to project an image of a resurgent, vigorous Russia striding across the world stage under the steady hand of strongman Vladimir Putin.

Thanks to Russia’s annexation of the Crimean peninsula and its prominent role in the Syrian civil war, even Washington insiders have bought into the Kremlin’s propaganda narrative, according to Forbes.

But a quick glance behind the proverbial wizard’s curtain reveals a very different story: Russia’s resurgence rests on frighteningly shaky economic fundamentals.

Its finances in particular have been hit hard by the combination of low oil prices and sanctions imposed by the European Union and United States over Moscow’s actions in Ukraine.

National reserves have plummeted as Putin has diverted rubles to plug up a budget deficit that’s been growing since the price of oil plunged two years ago, reported the Times of London in September.

To cope with its hemorrhaging budget, the Russian government said last week that it would embark on another ambitious privatization drive – effectively a transfer of cash to the state from oligarchs dependent on Putin or an appeal to foreign investors willing to accept big risks and rewards.

Russia’s indebted government plans to raise almost 1 trillion rubles ($15.8 billion) in the next two years by selling off state-owned stakes in major banking, shipping and energy companies, reported Reuters.

But while another round of privatizations might be a short-term fix for Russia’s finances, it’s unlikely that these selloffs on their own will address the long-term, underlying weaknesses of Russia’s economy.

Officials at the Valdai Discussion Club – a roundtable of Russian and international policy analysts – said as much at the club’s annual meeting held in Sochi on the Black Sea in October.

While sanctions have indeed taken a toll, attendees said “the bigger issue is Russia’s long failure to undertake structural reforms,” according to the Financial Times.

Industries outside the energy sector have long been neglected under Putin. Combined with a shrinking labor force – Russian demographics are a “disaster” according to the Washington Post – the lack of innovation has helped Russia’s economic output remain stagnant since 2008, wrote the FT.

The private investment that analysts say is needed to jumpstart entrepreneurs has not been forthcoming. Recurring surges in state ownership and an unfavorable tax code have scared away many a private-sector investor, too, wrote the Washington Post.

Ordinary Russians are bearing the brunt of this economic pain, according to a recent analysis from the Stratfor Institute.

Stratfor argued that Russia is entering a “bust” phase following its post-Soviet boom in which the state becomes increasingly aggressive at home and abroad as its vulnerabilities grow.

In this light, Putin is arguably acting out of a position of weakness instead of strength, making Moscow an even bigger headache for the West and suggesting that ordinary Russians won’t be the only ones to suffer if things grow worse.

WANT TO KNOW

Isolationist Abroad

President-elect Donald Trump is having a face-to-face with Japanese Prime Minister Shinzo Abe Thursday, in the new US leader’s first foreign meeting since the election.

While Trump has already had a “cordial” phone call with Chinese President Xi Jinping, Asian leaders will be watching his first visit carefully to gauge how deeply he aims to remain engaged with America’s allies in the region and what actions he may take on trade, given the isolationist and protectionist rhetoric that peppered his campaign, USA Today reported.

Abe is likely to try to salvage at least part of the Trans-Pacific Partnership, a 12-nation trade deal that is important to his economic plans and excludes China. He’ll also seek to secure a commitment to Japan’s continued defense and establish a working relationship with the incoming president, the paper said.

Interestingly, if Trump does kill TPP, that will most likely push America’s Asian trade partners to pivot to the Regional Comprehensive Economic Partnership, which does include China. But he’s visiting Japan before selecting his foreign policy team.

Refugee Reprieve

Kenya offered a last-minute reprieve to some 350,000 refugees living in five camps outside Dadaab, near the country’s eastern border with Somalia.

Following criticism from human rights groups and a request from the United Nations, the government on Wednesday announced a six-month extension of the previous Nov. 30 deadline for the closure of the camps, the Christian Science Monitor reported.

Kenya views the camps as a security threat, fearing that militants from the Somalia-based Al Shabaab terror group are using Dadaab to carry out attacks in Kenya.

Early in October, Al Shabaab claimed credit for an attack that killed six people in the northeastern Kenyan town of Mandera, for instance. It was also responsible for a 2013 attack on the Westgate shopping mall in Nairobi.

Al Shabaab, which is linked to Al Qaeda, views Kenya as an enemy due to the participation of its military in the multinational force fighting the extremist group in Somalia.

Mexico’s Response

Mexico won’t pay for the wall promised by President-elect Donald Trump. Instead, its government is pulling out all the stops to make sure its citizens don’t become victims north of the border.

Mexico’s foreign ministry said Wednesday it would make more mobile consulate services available and establish a 24-hour telephone line for questions about immigration to protect its citizens from fraud and other abuses. Its consulates will also provide more appointments for migrants to get passports, birth certificates and consular identification cards, Reuters reported.

The ministry also said Mexico will “strengthen dialogue” with U.S. state and local authorities to protect its citizens and advised migrants to avoid trouble with the law in response to Trump’s pledge to deport some 3 million immigrants with criminal records.

Honduras, Guatemala and El Salvador – which also account for many migrants – agreed to join forces and seek support from Mexico to forge a joint strategy in response to Trump, El Salvador’s foreign minister told Reuters.

DISCOVERIES

Sticks and Stones

North Korea has passed along a stern message to its neighbor and primary benefactor China: Can you cut it out with the fat jokes already?

The Chinese public has taken to fat-shaming North Korean President Kim Jong-un on popular social media channels such as Weibo ever since the portly leader’s rise to power in 2011.

Web users are particularly fond of “Kim Fatty III,” as well as “Kim Fat Fatty” and “Kim Abundant III.”

But an Internet search for the “glorious leader’s” more pejorative pseudonyms won’t yield much nowadays. The Chinese reportedly cracked down on the cyber bullying after a discussion on the matter between concerned officials from both nations.

But alas, Internet trolls are relentless.

The public has circumvented newly implemented censors by separating insults into two separate Chinese characters. They’ve also come up with new derivatives of the banned insults, such as “Fatty III.”

Kim Jong-un is purportedly oblivious to the slights, evident from his continued affinity for Swiss cheese, scallops and whiskey.

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