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ECONOMY UPGRADE: Russia’s economic management receives multiple endorsements

Successful eurobond sale in September, credit upgrade by Fitch, and sharp improvement in World Bank Ease of Doing Business ranking, all confirm effectiveness of Russian government’s economic policies, amidst strengthening recovery.

Alexander Mercouris

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As economic recovery in Russia continues to gain hold, Russia has received authoritative endorsement both for its successful macroeconomic policies and for its rapidly improving business conditions.

The US credit rating agency Fitch on 14th October 2016 upgraded Russia’s rating from BBB- (negative) to BBB- (stable).

Normally I pay no attention to ratings decisions by US credit rating agencies, which have been proved repeatedly wrong, and which in Russia’s case are blatantly politicised. 

Back in 2015, during the worst period of the recession, I pointed out how obviously and completely wrong the decisions of the US credit rating agencies to downgrade Russia’s credit rating at that time were.

The market clearly agrees with me.  Fitch’s Russia rating is only just investment grade, whilst those of S&P and Moody’s actually give Russia a junk rating.  In spite of this – and as I predicted – Russia’s last eurobond issue in September was six times oversubscribed, with almost the entirety of the issue on this occasion sold to US investors.  Even the Western financial media has been finally forced to admit that Russia’s latest eurobond issue was a success.

If I refer to Fitch’s latest upgrade of Russia’s rating, it is not because I agree with Fitch’s rating of Russia (I don’t) but because of what Fitch has to say about Russia’s economic policy

“Russia has implemented a coherent and credible policy response to the sharp fall in oil prices. A flexible exchange rate, inflation targeting, fiscal consolidation and financial sector support have allowed the economy to adjust and domestic confidence to return gradually. The strength and quality of the policy response stands out relative to those of other oil producers similarly affected by the oil price shock.”

(bold italics added)

In other words Russia has responded to the oil price fall intelligently and successfully – more so than have the other oil producers. 

In his State of the Union address of 20th January 2015 US President Obama famously gloated

“today, it is America that stands strong and united with our allies, while Russia is isolated with its economy in tatters.”

Judging by the success of its latest eurobond issue, and the credit upgrade Russia has just been given by Fitch, neither the market nor even Fitch agree with him.

Meanwhile Russia’s World Bank Ease of Doing Business ranking continues its rapid rise. 

In 2011 Russia’s ranking was 123 in the survey out of 183.  By 2014 it had risen to 62 out of 189, by 2015 to 51 out of 189, and in this year’s survey it has risen again to 40 out of 190. 

When I discussed last year’s survey I made the point that the dramatic improvement in Russia’s World Bank Ease of Doing Business ranking is simply incompatible with Russia being the corrupt kleptocracy of the West’s imagination

“In corrupt kleptocratic oligarchies courts do not function efficiently, contracts are not performed and enforced, rights of minority shareholders are not protected, and people are not able to register their property easily and do not pay their taxes.”

I also pointed out that the rapid improvement of Russia’s World Bank Ease of Doing Business ranking proves that the claim that Russia is not “reforming” its economy is quite simply wrong.  Russia is not only continuously reforming its economy, but it is doing so successfully

“……the demand for more and more “reforms” simply ignores the fact that reforms are in fact being carried out.

Anyone who reads through the World Bank’s annual surveys will see that they are all about “reforms”. It is precisely because Russia is carrying out “reforms” that its ranking is rising so fast.

To be clear, modernising the court system, introducing a new bankruptcy law, simplifying procedures for connecting to the electricity supply, and passing laws on registering property and on administering bankruptcy, are reforms.

They may lack the drama of breaking up Gazprom, but academic research, historical experience and the World Bank all say the same thing: it is these sort of unexciting reforms that in the end are the ones that make a difference and which produce results.

In other words Russia is reforming, and it is doing so successfully, in a methodical and purposeful way.

Doing so requires hard work and unremitting attention to detail. The Russian authorities deserve credit for successfully doing it, not the criticism for doing nothing that they normally get.”

I also made an extended point about what Russia’s ranking in the World Bank Ease of Doing Business survey says about the overall level of Russia’s society and economy.  The continued advance in Russia’s ranking to 40th in the world shows that this point remains valid, so I reproduce it here in full

“The second point is that if one looks at what sort of countries now outrank Russia in the survey, it turns out that they are – broadly speaking – the three Asian industrial giants: Japan, Taiwan and South Korea, the two Asian city states of Hong Kong and Singapore, and the traditional and well established industrialised societies of the West: the US, the three rich countries of the British commonwealth (Canada, Australia and New Zealand) and most (though not all) the states of the EU – in sum what was once called “the first world”.

If one removes the one indicator where Russia scores especially badly, Trading Across Borders – for which there are special reasons (see above) – Russia becomes even more clearly aligned with these “first world” countries rather than with those countries that make up what used to be called “the third world”.

The Russian government’s target is to achieve 20th place in the World Bank’s ease of doing business survey by 2018. That may be too optimistic, though it is worth pointing out that the target for this year was 50th, which Russia only missed by one place.

If Russia does achieve a ranking of 20th in the world by 2018 then it will be right in the middle of the “first world” group of countries rather than just outside it. At that point it will also have one of the best business climates in the world.

Even if Russia does not achieve 20th position by 2018, the pace of improvement in the rankings is so fast it suggests Russia will break in fully in terms of quality of its business climate into the list of “first world” countries before long.”

Inevitably, as Russia’s position in the World Bank Ease of Doing Business survey has rapidly improved, some commentators both in the West and Russia have cast doubt on the survey, even though its methodology is rigorous (originating apparently with Harvard University) and even though it is based on thorough field work.   Needless to say these are the same commentators who regularly cited the survey when Russia’s ranking in it was poor.

There is in fact no reason to think the rapid rise in Russia’s position in the survey does not reflect actual business conditions.  As I said in my discussion of last year’s survey, its results were anecdotally confirmed to me in a meeting I had with a group of local businessmen in Perm. 

A far more authoritative person has now come forward and said the same thing.  This is German Gref, the single individual who is perhaps best informed about conditions for businesses in Russia because he is the CEO of Sberbank, Russia’s biggest bank, which is the national (as opposed to local) bank that small businesses in Russia are most likely to look to for credit. 

Gref stands politically at the farthest liberal end of the spectrum of Russia’s political and economic establishment, and he is far from shy about criticising the government, which he does frequently.  Yet in a meeting with Putin on 4th August 2016 he confirmed the improvement in business conditions in Russia

“I think that the environment that we will have in place by the end of 2016, when all of the legal amendments take effect, will mean that Russia will be offering one of the most interesting and technologically convenient environments for small businesses.”

(bold italics added)

Because of the extremely poor relations between the West and Russia, Russia’s economy and its economic management are continuously and relentlessly criticised in a way which plays well to Western prejudice but which grossly distorts understanding of the country and its government.

Russia’s highly conservative macroeconomic policies emphasising tight budget discipline (the federal budget deficit at the peak of the recession was 3% of GDP, roughly the same as that of the US and below that of Britain during their ‘recoveries’, with the Russian government planning to cut the deficit by 1% of GDP over each coming year), low taxes (income tax is levied at a flat rate of 13%), high real interest rates (currently around 4% above inflation), open financial markets, low debt (government debt in Russia is 17.7% of GDP compared to 104% in the US, 229% in Japan, 89% in Britain, 96% in France and 71% in Germany), low external debt (roughly 20% of Russia’s GDP, compared to 114% of the US’s, 570% of Britain’s, 220% of France’s, 145% of Germany’s and 60% of Japan’s) and floating exchange rate, have in reality enabled Russia – as Fitch says – to adjust rapidly and very successfully to the fall in oil prices.

At the same time the rapid improvement in business conditions shown by the rapid rise of Russia’s ranking in the World Bank Ease of Doing Business survey shows that Russia is also working hard and successfully at getting its microeconomic conditions right.

In other words the people who run Russia’s economy know their job and by and large they do it well. 

That does not mean they are infallible.  In my opinion interest rates are far too high, with the 4% inflation target for next year in danger of becoming a fetish. 

However compared to the appalling mismanagement one sees elsewhere, far from being the collapsing kleptocratic empire of Western fancy, Russia looks like an island of stability and good sense.

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Maria Butina, her crime: A love of the NRA and being Russian (Video)

The Duran – News in Review – Episode 61.

Alex Christoforou

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Russian Foreign Minister Sergey Lavrov has communicated to US Secretary of State Mike Pompeo that Russian national Maria Butina must be set free and allowed to return to Russia, after she was arrested by US officials on dubious spy charges.

Lavrov said that the US should immediately release the Russian gun activist, who is being held in the US on espionage charges, after a phone conversation with his US counterpart.

Lavrov called the charges levied against Butina “fabricated.”

In his conversation with US Secretary of State Mike Pompeo on Saturday, “Lavrov stressed that the actions of the US authorities that arrested Russian citizen Butina on fabricated charges are unacceptable.”

In an official statement the Russian Foreign Ministry called for her “immediate release.”

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris examine the oddly timed, out of the blue arrest of Maria Butina, who is being held by US authorities for what they claim to be a violation of the FARA act.

In reality Maria Butina’s crime is much more troubling than simply failing to register as a foreign agent.

Maria made the double mistake of being in the United States of America as a Russian citizens who loves guns, at a time when racism and bigotry against Russians and NRA supporters is surpassing McCarthyite levels.

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Via RT

The Foreign minister raised the issue during phone conversations that were made at the request of the US and aimed at “further normalization of the US-Russian relations” following the summit between the US President Donald Trump and Russia’s Vladimir Putin in Helsinki. Lavrov and Pompeo also discussed the process of denuclearizing the Korean Peninsula, as well as the situation in Syria.

The 29-year-old Russian student and a gun activist was arrested in the US about a week ago and charged with acting as a foreign agent without registering her activities with the authorities. Butina has pleaded not guilty to the charges.

On July 16, a DC Federal Court rejected Butina’s bail plea and ordered her to be placed in custody pending trial over fears that she could flee or contact Russian intelligence officials. Her lawyer says the trial is being politicized and Russian embassy staff were only allowed to visit her in jail on Thursday.

The Russian Foreign Ministry has called Butina’s arrest politically motivated, adding that it could have been aimed at disrupting the Helsinki summit between Putin and Trump. On Thursday, the ministry also launched a campaign hashtagged #FreeMariaButina on Twitter to raise awareness of her case.

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Ugly breakup at FBI: Lisa Page throws ex-lover, Peter Strzok, under the bus (Video)

The Duran – News in Review – Episode 60.

Alex Christoforou

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While Peter Strzok’s testimony put a face on the deceptive and secretive Deep State, GOP lawmakers who were present at Lisa Page’s closed-door deposition said they learned a lot of new information from the ex-FBI lawyer, and ex-lover of Peter Strzok.

Lisa Page confirmed to GOP lawmakers that the text messages sent between her and her lover Strzok “meant exactly what they said,” contrary to Strzok’s testimony.

According to The Gateway Pundit, one damning text message in particular sent from Strzok on May 19th, 2017, just two days after Robert Mueller was appointed Special Counsel, intrigued investigators and the public alike.

“There’s no big there there,” Strzok texted.

According to investigative reporter, John Solomon, Lisa Page confirmed that text from Peter Strzok did indeed refer to the Trump-Russia case.

Strzok knew it was a nothing-burger yet he forged ahead.

The Duran’s Alex Christoforou, RT CrossTalk host Peter Lavelle, and Editor-in-Chief Alexander Mercouris discuss how Peter Strzok’s testimony has undoubtedly contradicted Lisa Page’s cooperative deposition, as the ex-FBI lawyer is preparing to save herself, while throwing her ex-lover under the bus.

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Via The Epoch Times

Representatives John Ratcliffe and Louie Gohmert of Texas recently shared their observations of the closed-door testimony of former high-ranking FBI lawyer Lisa Page, which concluded on July 16.

One of the major questions regarding the testimony was whether it would match the one given by FBI Deputy Assistant Director Peter Strzok.

But while Ratcliffe said he found a mismatch, Gohmert wouldn’t go so far.

Page and Strzok played major roles in the investigations on both 2016 presidential candidates: former Secretary of State Hillary Clinton’s use of a private email server and the Trump campaign’s alleged ties to Russia. During the same period, Page and Strzok had an affair and exchanged thousands of text messages expressing a strong bias against Trump and in favor of Clinton.

“When I questioned Lisa Page on Friday about the anti-Trump text messages that were sent between herself and Peter Strzok, there were significant differences in her testimony and Strzok’s as it relates to what she thought some of these text messages meant,” Ratcliffe said in a July 16 tweet, shortly before the second round of questioning.

“Page gave us new information that Strzok either wouldn’t or couldn’t, confirming some of the concerns we had about these investigations and the people involved in running them,” he wrote.

On July 17, Ratcliffe expanded on his further statements about Page’s testimony. Radcliffe told Fox News…

“There are differences in their testimony.”

“In many cases, she admits that the text messages mean exactly what they say, as opposed to agent Strzok, who thinks that we’ve all misinterpreted his own words on any text message that might be negative.”

Via The Epoch Times

In one of the texts, Strzok vowed to “stop” Trump from becoming president. In another, the two discussed having an “insurance policy” in the “unlikely” event that Trump would win the election.

Strzok, who gave a closed-door testimony on June 27 and a public one on July 12, said the first message meant he and the American people would stop Trump. The second, he said previously, meant he wanted to pursue the Russia investigation aggressively, in case Trump won.

GOP lawmakers were furious with Strzok’s attitude and unwillingness to answer questions. In a scathing monologue, Gohmert even linked Strzok’s credibility to the fact that he was unfaithful to his wife.

President Donald Trump repeatedly called Strzok’s testimony a “disgrace.”

The lawmakers said Page was comparatively more cooperative.

“There were times the FBI lawyers would be reaching to the button to mute her comment, and she would answer before they could mute her comment,” Gohmert told Fox News.

He said Page didn’t contradict Strzok “so much,” but “has given us insights into who was involved in what.”

“I think she’ll be a good witness,” he said.

Page ditched her first testimony appointment on July 11, prompting GOP lawmakers to threaten her with contempt of Congress. She then agreed to appear on July 13, which gave her the opportunity to review Strzok’s public testimony before giving hers.

The lawmakers are probing the FBI’s and Justice Department’s decisions before the election, suspecting they were influenced by political considerations.

Texts between Strzok and Page suggest that the FBI initiated an offensive counterintelligence operation against the Trump campaign as early as December 2015.

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Russia makes MASSIVE progress on its ‘super-weapons’

Avangard hypersonic glide vehicle moves into serial production, nuclear-engine powered cruise missile tests continue, and more as Russia continues to outdo all Western military tech

Seraphim Hanisch

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On July 19th and 20th, The Russian Defense Ministry announced several milestones of progress in its advanced weapons systems programs. These programs were revealed to the world in March of this year, when Russian President Vladimir Putin gave the State of the Russian Federation speech.

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While at first the Western onlookers did not believe the amazing announcements of hypersonic weapons and nuclear-powered cruise missiles with unlimited range, subsequent releases and concurrent observation by the American military experts has shown these developments to be as real as Mr. Putin claimed they are.

TASS, the Russian News Agency, released information on these weapons systems in separate reports:

Kinzhal

The Kinzhal hypersonic missile:

Squadrons of MiG-31 fighter jets armed with Kinzhal hypersonic missiles should enter combat duty in the Black Sea region and at other Russian fleets and flotillas, said Russian military expert Viktor Murakhovsky, the editor-in-chief of the Arsenal Otechestva magazine.

Besides, a squadron (between 12 and 16 aircraft) of MiG-31 fighter jets armed with Kinzhal hypersonic missiles entered combat duty in the Caspian Sea region in April.

“I think at least one squadron of those complexes should be deployed at any fleet, in other words – at all regions where we have fleets and flotillas. We need to deploy them in the regions of the Black Sea, the Baltic Sea, the Northern Fleet. The Pacific region also should not be forgotten,” Murakhovsky said.

He said that such systems can become a “good instrument” against not only vessels equipped with high-precision weapons, but also for countering carrier attack groups.

“We know how expensive a carrier attack group can be. By employing this asymmetric method, which is unbelievably cheap in comparison with building a carrier attack group, we can neutralize this threat almost completely,” the expert said.

Burevestnik nuclear-powered cruise missile trials:

The Burevestnik is an entirely new cruise missile, powered by a nuclear engine. This gives the missile unlimited range. In theory, such a missile could be launched at a target and spend days or weeks in hidden flight using advanced guidance systems, and then close on its target at the optimal time to assure destruction of that target with maximum surprise. The TASS piece goes on to say:

The Russian Defense Ministry announced that Russia was preparing to test upgraded test prototypes of the nuclear-powered Burevestnik cruise missile with an unlimited range.

According to the expert, it is highly likely that the prototype of the missile “has already made a flight.”

“Clearly, it was something like the pop-up trials of Sarmat – a launch without the nuclear-powered engine, in other words, with an ordinary missile booster, conducted in order to assess the possibility of a launch, aerodynamics and the operability of the entire system in general,” [Murakhovsky] said.

Further reporting from TASS had this to add about the Burevestnik program:

Russia is getting ready for flight tests of the Burevestnik nuclear powered cruise missile, an official at the Defense Ministry told reporters on Thursday.

“The missile’s component makeup is being improved based on clarified requirements, while ground tests continue and preparations are being made for experimental flight tests of the improved missile,” the official said.

According to the Defense Ministry, “work on an unlimited-range missile is going according to plan.”

“In the meantime, launching systems are also being designed, while technological processes to manufacture, assemble and test the missile are being improved. This range of work will make it possible to start designing a totally new sort of weapon – a strategic nuclear complex armed with a nuclear powered missile,” the ministry official noted.

[The head] of the 12th Central Research Institute at Russia’s Defense Ministry Sergey Pertsev, in turn, said that the tests of the new cruise missile equipped with a small nuclear power unit had confirmed the accuracy of the technical decisions that Russian researchers, engineers and designers had made. In addition, the tests enabled the researchers “to receive valuable experimental data necessary for specifying a number of requirements.”

“A low-flying and low-observable cruise missile carrying a nuclear warhead, with an almost unlimited range, an unpredictable trajectory and capability to bypass interception lines is invincible to all the existing and advanced air and missile defense systems,” the Russian Defense Ministry stressed.

A further use of the nuclear engine technology is also expected in the Poseidon underwater drone, Mr. Murakhovsky stated that separate systems for the craft have been successfully tested. He further noted that the next task is to design the entire layout, build a test model and begin testing the whole platform.

The Avangard Hypersonic Missile

While the Kinzhal is a Mach-10 capable hypersonic system that can be launched from a fighter, the Avangard is a Mach-20 capable system that has intercontinental reach. There is almost no footage of this system released to the public, but the concept videos show how the system works. TASS reports this status:

Russia’s Strategic Missile Force is preparing a position area for accepting the Avangard hypersonic missile system for service as part of the efforts to strengthen the country’s military security, the Defense Ministry announced on Thursday.

“The Russian defense industry has completed developing the Avangard missile system with the principally new armament – the gliding cruise warhead. Industrial enterprises have switched to its serial production,” the Defense Ministry said.

“A set of organizational and technical measures is underway in the position area of the Dombarovsky large unit of the Strategic Missile Force to accept the Avangard missile system for operation,” it added.

The development of new strategic weapon systems “is aimed at increasing Russia’s defense capability and preventing any aggression against our country and its allies,” the Defense Ministry stressed.

The infrastructural facilities of the large unit’s position area have already been prepared for the missile system’s operation, the ministry said.

“The position area has been prepared in geodesic and engineering terms to accommodate the missile system. Work is underway to build new and reconstruct old facilities to provide for the operation and the combat use of the system. Technical and utility supply lines are being modernized and electric power, communications and command and control cables are being laid. Work has been arranged to train personnel and prepare armament, military and special hardware,” Russia’s Defense Ministry said.

Deputy Commander of Russia’s Strategic Missile Force for Armament Sergei Poroskun has said that the Avangard hypersonic missile system features combat capabilities that “make it possible to reliably breach any anti-missile defenses.”

The Okhotnik attack drone

The Okhotnik (“Hunter”) attack drone is now being viewed as a prototype for Russia’s “sixth-generation” fighter plane. TASS describes this in more detail:

According to [a defense industry] official, although the sixth generation fighter jet project “has not yet taken full shape, its main features are already known.”

“First of all, it should be unmanned and capable of performing any combat task in an autonomous regime. In this sense, Okhotnik will become the prototype of the sixth generation fighter jet,’ the source said, adding that the drone will be able to “take off, fulfill its objectives and return to the airfield.”

“However, it will not receive the function of decision-making regarding the use of weapons – this will be decided by a human,” he said.

TASS was unable to officially confirm the information at the time of the publication.

Another defense industry source earlier told TASS that the prototype of Okhotnik (Hunter) was ready and would start test flights this year.

The Russian Defense Ministry and the Sukhoi Company signed a contract for developing the 20-ton Okhotnik (Hunter) heavy unmanned strike aircraft in 2011. The drone’s mock-up model was made in 2014. According to unconfirmed reports, composite materials and anti-radar coating were used to create the Okhotnik. The drone is equipped with a reaction-jet propulsion and is supposed to develop a speed of 1000 kilometers per hour.

Peresvet laser weapons systems

TASS reported that the Russian military forces are now training for the use of the Peresvet combat laser system:

Russian Aerospace Force has accepted for service the laser complexes Peresvet and the military are now taking drills that involve the novel combat technologies, the Russian Defense Ministry said on Thursday.

“The Peresvet laser complexes have been placed at sites of permanent deployment,” the report said. “Active efforts to make them fully operational are underway.”

“To ensure their proper functioning, the necessary infrastructures and specialized facilities for housing the complexes and duty crews have been built,” the ministry said.

The crews assigned to the Peresvets have taken upgrader courses at the Alexander Mozhaisky Military-Space Academy in St Petersburg.

The Russian military strategy of “asymmetric response.”

The overall defense strategy is termed an “asymmetric response”, and Mr. Murakhovsky explained the principle in this way:

“This is an asymmetric response, in which new classes of weapons are created, instead of new types within the framework of the existing systems. Other states are not expected to have anything of this kind [in the near future],” he said.

The expert described this response as “quite an efficient one, all the more so because it requires no additional investment – all the works are being carried out within the framework of the state procurement program.”

He added that unlike the Soviet Union, Russia avoids being dragged into a direct arms race and searches for cutting-edge solutions instead of simply increasing the number of weapons.

“The development of counter-weapons to those arms [may be possible] in distant future, but it does not mean that they can be created at all,” Murakhovsky added.

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