Some Reading About Russia's Economic Troubles

There's is so much nonesence in the media about the state of Russia's economy that coming across a reasonable and realistic assessment is as unexpected as it is rewarding. Along these lines, the Fortune's "Why Russia will halt the ruble’s slide and keep pumping oil" breaks down the complexities of Russia's convoluted economy into several simple trends all of us can easily comprehend.

We need more writing like this: serious journalism, verified sources, expert delivery - a world apart from the likes of Slate's "Russia is So Screwed". Impatient, opinionated and pigheaded: I would be a perfect Slate blogger. Thank God I am too busy with real life to mess with your virtual one.

Simply put, here's what the "Russian reality" boils down to: as the world's largest country, Russia has more natural resource than anyone else. If Russia was Yugoslavia or Iraq, it would have been bombed and partitioned a long time ago. But it is not Yugoslavia or Iraq and Russia's thousands of nuclear warheads guarantee control over its natural resources.

Russia has something everyone needs and they can't take it by force. Bummer. And so Russia has been, is, and will continue to annoy the hell out of Washington and Brussels. The only practical alternative to oil and gas is nuclear energy, and Russia has that market cornered as well. So the ruble dropped against the Euro: big whoop. The US has overextended itself trying to keep down the price of oil. Well, so far the Americans have been successfull. However, low oil prices have essentially killed the US shale oil business.


Poroshenko's Mental State

Watching Ukrainian TV, I can't help but notice that in the past few weeks Poroshenko increasingly reminds me of Georgia's former president Saakashvili. No, Petro is not chewing on his tie just yet, but certain things he said make me consider his mental state.

Most recently, in the interview to the German "Bild" Poroshenko said that he is optimistic of Ukraine's chances in a total war against Russia.

"I am not afraid of a war with Russia and we have prepared a scenario for a total war. Now our army is in a much better condition than five months ago and we have the support of the entire world."
(Source: Poroschenko: „Russland hält sich an keine Absprachen“, Bild)

In 2008 Saakashvili has also been talking about the "support of the entire world", just to watch his army disappear like a fart in the wind. Five months ago Ukrainian army has been running short on pants: Ukrainian regular troops have been sporting jogging pants and sneakers. And now Poroshenko believes he can take on Russia. As they say, illusions of grandeur don't require grandeur: the illusions alone are usually sufficient.


EU Threatens Further Anti-Russian Sanctions

Ukraine's separatist regions are to hold local elections on Sunday, November 2. Donetsk and Lugansk officials are billing these elections as an alternative to last week's parliamentary elections in the rest of Ukraine - elections from which Donetsk and Lugansk have been excluded. Russia seems to have its mind set on recognizing the results of these "alternative" elections. Coerced by Washington, the EU is threatening escalation of the sanctions regime against Russia.

By choosing to overlook the secret provisions of the Minsk accord, Brussels runs a significant risk of derailing the process of political stabilization in what's left of Ukraine. There is little doubt in my mind that, like Crimea, the Donetsk and Lugansk regions are lost to Ukraine. Having said that, there is hope that the rest of Ukraine may survive this winter intact, even if it has to dip into EU's gas supplies.

The alternative will be escalating civil war between western-Ukrainian national-socialists and, up until now, largely politically-dormant central regions, including the country's predominantly Russian-speaking capital. Simply put, Ukraine will fracture and crumble long before any substantial economic pain from Western sanctions is felt by the Russians.

Time is on the side of the Kremlin. There has been no fundamental shift in the dynamics of the Ukrainian conflict since the annexation of Crimea: the US and the EU are still playing catch-up. This new geopolitical big game may bring a year of fun for the Internet pundits and armchair admirals not unlike myself, but for my homeland it is likely to be the last year in its current borders.


US is Still Reliant on Russian Space Tech

The spectacular explosion of the Antares rocket, built and launched by Orbital Sciences Corp, highlighted America's reliance on decades-old Russian space technology. The rocket booster used in Antares is a modified version of the high-specific-impulse N33 engine from the failed N1 rocket developed in the USSR in the 1960s for the mission to the Moon. After the cancellation of the N1 project, surplus N33 boosters were purchased by Orbital Sciences in 2010, after spending decades in storage. Two such engines were successfully used to launch the Antares rocket in 2013.

Several hours after the Antares explosion, the unmanned Russian Progress supply vehicle was launched by Russia from the Baikonur Cosmodrome in Kazakhstan and delivered more than 5,000 pounds of food, fuel and supplies to the ISS. Russia's Roskosmos space agency said it was ready to ferry additional US cargo to the station if asked to do so by NASA.

There is a consensus among American and European aerospace experts that for the past two decades the US has been lagging in rocket engine design and development. Outsourcing space launch projects to private enterprises lacking funds and expertise for large-scale R&D work left the US uncomfortably reliant on Roskosmos' services and technological artifacts from the Soviet space program.


The massive N1-L3 rocket from the cencelled Soviet manned Lunar project.

Russian Mini-Subs Invading Sweden

According to the latest reports in the Swedish tabloids, the country's glorious navy has already pulled half-a-dozen Soviet spy submarines out of the shallow waters of the Stockholm archipelago and is looking for at least one more.

The gist of the story is that someone claiming to be a super-secret Russian spy submarine sent an open-text radio transmission - sort of like a cell phone call the NSA intercepts by the billion - saying they were having some sort of an emergency off the coast of Stockholm. The Swedish Navy concluded that the only possible explanation for this was that a super-secret Russian spy submarine having some sort of an emergency off the coast of Stockholm.

Armed with this crucial knowledge and a grainy cell phone photo of what very well might has been a super-secret Russian spy submarine having some sort of an emergency off the coast of Stockholm or a half-assembled piece of Ikea furniture, the Swedish Navy launched a massive search operation. Every available piece of anti-submarine equipment has been put to use, except for the only piece of anti-submarine equipment that might have been useful: the singular ASW helicopter the Swedish Navy had, but sold six years ago.

Already, the Swedish special forces have successfully tracked down and apprehended a mysterious man in black claiming to be (and actually being) a local pensioner fishing for sea trout. It is still unclear if the shit found in his pants was genuine or part of a clever GRU disguise. Swedish Real Admiral Anders Grenstad promised the country's navy will continue searching "land, sea and air for signs of the vessel". Presumably, now Admiral Grenstad will be concentrating on land and air, as searching for the phantom submarine at sea yielded no definitive results.


Winter Jitters in Europe

The US was able to get Brussels onboard with its anti-Russian agenda by promising quick resolution to the conflict. "If we stick together on the sanctions threat and present a solid front," Washington promised, "the Kremlin will fold before there's any real damage to EU's economic interests in Russia." Well, the plan was rubbish to begin with and nobody's really surprised it didn't work. But there's one thing you can always count on this time of year in Europe: cold weather. It's coming, it always does.

When a few months ago Ukraine's impromptu government floated the idea of reverse-flow gas supplies from Europe, experts in the field noted the plan's - how should I put it kindly - technical unfeasibility. They experimented a bit, but by now that game's over. And so the new leadership in Kiev is coming face-to-face with some old friends: the Kremlin and the winter. If you've seen a map of Ukraine (maybe you're not American), don't be fooled by the country's southern disposition: I'm from Kiev and - trust me - it gets cold there. Very cold, very quickly.

Most residential heating in Ukraine is done via centralized water heating plants pumping steam and hot water into massive cast-iron radiators mounted by the window in every room of your steel-reinforced concrete apartment. Yes, it is a massively inefficient system developed during Khrushchev years and replicated throughout the former Soviet Union.

If you think huddling around an electrical space heater would provide temporary relief, you should think again. Had Ukraine spent the past two decades fixing its crumbling infrastructure instead of spending money on annoying Russia and hosting sports extravaganzas, at it could have upgraded its electrical power grid. Presently, electrical distribution system and residential wiring simply can't support widespread use of electrical heaters. People would end up without heat and without electricity, as they often do already.

Another thing happens in Kiev when central heating plants go down: water pipes burst. In Kiev, just as in the rest of the former USSR, the water distribution system was designed to work in tandem with the central heating plants pumping hot water to keep pipes from bursting. No hot water - no water at all. And no electricity. Hopefully, this explains why all of the sudden Ukrainian government found itself back at the negotiating table with Gazprom.

The EU knows exactly what will happen if that deal falls through again: Ukraine will have no choice but to steal gas destined for the EU consumers. Unlike similar situations in the past, this time around Russia's beef is not just with Ukraine but with Brussels as well. There's a lot of talk about how Europe is an important customer for Gazprom and what technical challenges there are with cutting off gas supplies. True - all of it. Having said that, the current anti-Russian sanctions regime is nothing short of economic warfare and Russia may decide that desperate times require desperate measures after all.