Apolitical about the political risks of the Russian economy
From the authoritative agency Moody's Russia tried to either reassure, or inspire, raising her sovereign rating to investment level. But after this sweet pill, from which our real economy is neither cold nor hot, something like a painful inoculation immediately followed: we were talking about the key risks of our economy.
Among them, in this peculiar brief course of political economy from Moody's, political factors rather than economic and even non-financial factors emerged in the first places. Such an approach frankly contradicts all the traditions of such examinations, all the more so since the topic of incontinency of power that has got the edge on teeth is asking for first place. It seems that this is the main internal risk for the Russian economy, although Moody's doesn’t mention it directly.
It should be noted that the agency for the first time in its practice mentioned the risk of this kind. Literally, Moody's assessment translates as the risk of an “unorganized regime change”, and there is a growing Russian dissatisfaction with the political system and potential problems with the transfer of power due to “Putin’s dominance.” It should be noted that even in 2007-2008, when the problem of the “successor” was indeed relevant, Moody's economic reviews did not even talk about political risks.
Possible problems with the change of power in the country, it seems, were never mentioned at all, but now suddenly in Moody's they decided to evaluate the risks in the rather distant future of 2024. Agency experts admit that Vladimir Putin does not necessarily have to leave the political scene in that very same 2024 year. However, in their opinion, the dominance of the current president in Russian politics "will complicate the transition to a new political leadership."
Getting acquainted with such Moody's assessments, it is quite possible to think that Russians do not care at all about the question “What is after Putin?” But it is not difficult to see that in the report of Moody's, this most important thesis is actually neatly packed somewhere in the middle of a document. However, the first of the list of key risks can be considered as a direct consequence of this main one.
Moody's experts have no doubt that the main obstacle to the growth of investment and productivity in Russia is the dominance of the public sector and the growth of monopolization. According to their estimates, by no means indisputable, the state sector in the Russian economy takes up to 50 percent. This, according to analysts, and "creates unequal conditions for business activity." We will not dispute how monopolistic the positions of those structures that Moody's unequivocally consider to be dominant, we note only that most of them do not occupy the lowest positions both in the Russian and in the global economy.
According to Moody's experts, it is the state sector that continues to impede not only productivity growth, but also investment growth. The authors have no confidence that foreign investments really bring any real benefit to our economy, while we can see the return on state investments with our own eyes. And this is for all kickbacks, bribes and other nice "features of national business."
It is the state sector, again, according to Moody's estimates, in this case, almost indisputable, that creates unequal conditions for business activity. Monopolies, what can you do with them, although you would know in Moody's what kind of fierce competition we have inside those very monopolies. However, these are lyrics, but it is the state sector that, again, according to agency experts, forms the rules of the game in Russia that are in no way combined with the sacred right of ownership and the rule of law. Until now, in Moody's reports, we have not had to read so much about the high level of corruption and the low level of legality, the ineffectiveness of the judicial system, and finally, the low quality of Russian institutions.
In many ways, it is impossible to disagree with the experts of Moody's. So, the dominance of the public sector is really becoming unbearable in areas such as mining, transport or finance. We, as well as specialists from the rating agency, cannot but be disturbed by the situation in the Russian communal flat, where some successful private traders are almost immediately absorbed by structures close to power, whether central or local.
At the same time, Moody's agency, it seems, has long since written off the dubious results of privatization in Russia, when the most attractive assets were listed on a limited circle of “privileged” oligarchs, and “cut” the energy monopoly of RAO “UES of Russia” arranged by Chubais. At the same time, the fact that the state order from the not yet sawn-up monopolists, such as Gazprom, Russian Railways, Rosneft and leading banks, effectively keeps small and medium-sized businesses in the country afloat, is not taken into account at all.
But against the background of serious concern over the demographic situation in Russia, no concerns have been expressed by the agency’s experts either in the industry as a whole or in the energy and agriculture sectors. The Russian defense industry, as well as the nuclear industry and the space industry in Moody's, prefer not to notice at all, although they are increasingly claiming the role of the very locomotives capable of pulling our economy onto a growth path.
But Western analysts are seriously and generally soundly concerned about the viability of the Russian IT sector, which, according to their estimates, is also experiencing government intervention. Although, in our opinion, there it’s time to talk about much more extensive foreign intervention, and not necessarily Western. However, in the IT sector, the intervention of the bureaucracy is almost ubiquitous in the form of either softly attracting cybersecurity firms to espionage or compulsory transfer of control over successful businesses to structures close to power.
Among the external risks for Russia are those that are directly related to politics, foreign analysts are also far from the last roles. Despite the fact that Russia continues to demonstrate surprising resilience to sanctions, it is their Moody's that is considered the most dangerous for our economy. But this is on condition that the US government will nevertheless go to impose sanctions on Russia's sovereign debt, as well as directly against Russian state-owned banks and structures that participate in the implementation of the Nord Stream-2 gas pipeline project. And also on the condition that the European Union will be followed by the European Union, of which there are very big doubts.
Until now, the effect of sanctions, as is known, has been mitigated by limitations both in terms and in addressees. History with the structures of Oleg Deripaska, in general, forced the whole world to speak not so much about the strictly selective nature of the sanctions policy, as about the attempts of American business to use them as a tool for primitive weaning of property.
Not less, and perhaps even more important external risk, Moody's considers again the growing capital outflow from Russia. For the time being, the same sanctions in general unfolded the financial flows, and now experts express great doubts that the outflow of capital will be able to again reach the record levels of 2014 of the year. But after all, with the risk of new sanctions, most of the financial sector of the Russian economy could be in jeopardy. And this is a direct incentive for the withdrawal of capital abroad.
Among them, in this peculiar brief course of political economy from Moody's, political factors rather than economic and even non-financial factors emerged in the first places. Such an approach frankly contradicts all the traditions of such examinations, all the more so since the topic of incontinency of power that has got the edge on teeth is asking for first place. It seems that this is the main internal risk for the Russian economy, although Moody's doesn’t mention it directly.
It should be noted that the agency for the first time in its practice mentioned the risk of this kind. Literally, Moody's assessment translates as the risk of an “unorganized regime change”, and there is a growing Russian dissatisfaction with the political system and potential problems with the transfer of power due to “Putin’s dominance.” It should be noted that even in 2007-2008, when the problem of the “successor” was indeed relevant, Moody's economic reviews did not even talk about political risks.
Possible problems with the change of power in the country, it seems, were never mentioned at all, but now suddenly in Moody's they decided to evaluate the risks in the rather distant future of 2024. Agency experts admit that Vladimir Putin does not necessarily have to leave the political scene in that very same 2024 year. However, in their opinion, the dominance of the current president in Russian politics "will complicate the transition to a new political leadership."
Getting acquainted with such Moody's assessments, it is quite possible to think that Russians do not care at all about the question “What is after Putin?” But it is not difficult to see that in the report of Moody's, this most important thesis is actually neatly packed somewhere in the middle of a document. However, the first of the list of key risks can be considered as a direct consequence of this main one.
Moody's experts have no doubt that the main obstacle to the growth of investment and productivity in Russia is the dominance of the public sector and the growth of monopolization. According to their estimates, by no means indisputable, the state sector in the Russian economy takes up to 50 percent. This, according to analysts, and "creates unequal conditions for business activity." We will not dispute how monopolistic the positions of those structures that Moody's unequivocally consider to be dominant, we note only that most of them do not occupy the lowest positions both in the Russian and in the global economy.
According to Moody's experts, it is the state sector that continues to impede not only productivity growth, but also investment growth. The authors have no confidence that foreign investments really bring any real benefit to our economy, while we can see the return on state investments with our own eyes. And this is for all kickbacks, bribes and other nice "features of national business."
It is the state sector, again, according to Moody's estimates, in this case, almost indisputable, that creates unequal conditions for business activity. Monopolies, what can you do with them, although you would know in Moody's what kind of fierce competition we have inside those very monopolies. However, these are lyrics, but it is the state sector that, again, according to agency experts, forms the rules of the game in Russia that are in no way combined with the sacred right of ownership and the rule of law. Until now, in Moody's reports, we have not had to read so much about the high level of corruption and the low level of legality, the ineffectiveness of the judicial system, and finally, the low quality of Russian institutions.
In many ways, it is impossible to disagree with the experts of Moody's. So, the dominance of the public sector is really becoming unbearable in areas such as mining, transport or finance. We, as well as specialists from the rating agency, cannot but be disturbed by the situation in the Russian communal flat, where some successful private traders are almost immediately absorbed by structures close to power, whether central or local.
At the same time, Moody's agency, it seems, has long since written off the dubious results of privatization in Russia, when the most attractive assets were listed on a limited circle of “privileged” oligarchs, and “cut” the energy monopoly of RAO “UES of Russia” arranged by Chubais. At the same time, the fact that the state order from the not yet sawn-up monopolists, such as Gazprom, Russian Railways, Rosneft and leading banks, effectively keeps small and medium-sized businesses in the country afloat, is not taken into account at all.
But against the background of serious concern over the demographic situation in Russia, no concerns have been expressed by the agency’s experts either in the industry as a whole or in the energy and agriculture sectors. The Russian defense industry, as well as the nuclear industry and the space industry in Moody's, prefer not to notice at all, although they are increasingly claiming the role of the very locomotives capable of pulling our economy onto a growth path.
But Western analysts are seriously and generally soundly concerned about the viability of the Russian IT sector, which, according to their estimates, is also experiencing government intervention. Although, in our opinion, there it’s time to talk about much more extensive foreign intervention, and not necessarily Western. However, in the IT sector, the intervention of the bureaucracy is almost ubiquitous in the form of either softly attracting cybersecurity firms to espionage or compulsory transfer of control over successful businesses to structures close to power.
Among the external risks for Russia are those that are directly related to politics, foreign analysts are also far from the last roles. Despite the fact that Russia continues to demonstrate surprising resilience to sanctions, it is their Moody's that is considered the most dangerous for our economy. But this is on condition that the US government will nevertheless go to impose sanctions on Russia's sovereign debt, as well as directly against Russian state-owned banks and structures that participate in the implementation of the Nord Stream-2 gas pipeline project. And also on the condition that the European Union will be followed by the European Union, of which there are very big doubts.
Until now, the effect of sanctions, as is known, has been mitigated by limitations both in terms and in addressees. History with the structures of Oleg Deripaska, in general, forced the whole world to speak not so much about the strictly selective nature of the sanctions policy, as about the attempts of American business to use them as a tool for primitive weaning of property.
Not less, and perhaps even more important external risk, Moody's considers again the growing capital outflow from Russia. For the time being, the same sanctions in general unfolded the financial flows, and now experts express great doubts that the outflow of capital will be able to again reach the record levels of 2014 of the year. But after all, with the risk of new sanctions, most of the financial sector of the Russian economy could be in jeopardy. And this is a direct incentive for the withdrawal of capital abroad.
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