Despite claim that Western sanctions were supposed to target just parts of Russia’s economy and not its general population, they were specifically designed to trigger the collapse of its banking system, food production,  civil construction, and to trigger massive unemployment, widespread hunger and civil unrests.  In essence, in 2016 Russia was supposed to have a return of the 90s catastrophe period known as “perestroika.”

As for Russia’s involvement in Syria, it was supposed to become a ‘quagmire’ that would destroy what precious little military power the country had.

For those who ever relied on Western analytics, it should already be clear that the think tankers’ jobs have been to transmit the desires of their politicians for the future, while Russia and its allies work to change the reality now.

“The Russian reinforcement has changed the calculus completely.”  From this Senate testimony made by  Lt. Gen. Vincent R. Stewart, head of the Defense Intelligence Agency, we had learned in February 2016 that the US intelligence had some sort of a calculus.

If we go back through official statements and the political forecasts on Russia, will we find a calculus at work?

The following is a list of most popular predictions among the Western think tankers , and some numbers and facts to reflect the real state of affairs.

 

  1. The Western sanctions against Russia that began in March 2014 were designed to undermine financing and investments in Russia’s resource-based economy over a five-year period.
  2. Russia will blink under sanction pressure in 2016.
  3. Russian Finance Minister Anton Siluanov: Russia’s $80 billion National Reserve Fund, set up to sustain the nation after the EU and U.S. began punitive sanctions, has already spent $40.85 billion on economic subsidies this year and will be wiped out in 2016.
  4. The combination of challenges accelerated the damage to Russia’s economy, and will foment internal unrest.
  5. Russia is “getting to the point where financing delays in key projects, along with financing constraints on Russian companies and Western firms doing business in Russia, could cause irreparable harm to the economy in the not-too-distant future,” according to Stratfor Global Intelligence.
  6. With ExxonMobil leaving Russia, deep off-shore energy exploration evaporated. Russia will never be able to develop its off-shore oil and gas deposit.
  7. Russia has had very little ability to effectively respond to Western sanctions.
  8. The Russian economy contracted by 4.30 percent in the third quarter of 2015, versus about 1 percent growth for the same period last year.
  9. Russia’s economy minister (Ulukaev that was arrested a month ago) suggested that possibly 60 of 83 Russia’s regions are in crisis mode, and 20 may have already been defaulting on their debt.
  10. Russia faces food shortages, and per Stratfor   Kremlin is “stepping up its security apparatuses” to suppress the starving population.
  11. Per Stratfor, Russia is involved in Syria as a strategy to force engagement with the West.
  12. Moscow’s key objective for 2016 is winning relief from the sanctions, per Stratfor
  13. Stratfor believes Russia will “use whatever it can–Ukraine and Syria included–to present itself as a willing partner.”
  14. Obama predicted that Russia’s involvement in Syria will become a ‘quagmire.’  In 2015, the U.S. officials called a Russian air campaign in Syria to be a ‘predetermined failure.’

 

Facts and numbers

  1. This prediction had failed. Partially due to the Western sanctions, Russian economy is positioned to have five best years ever.
  1. This prediction had failed also. Not only Russian government and large businesses didn’t ‘blink’ and didn’t give in to the Western pressure, they used the sanctions as a tool to curb the capital flight and to boost production.  In 2015, Russia saw a net capital outflow of $58.9 billion, almost three times less than in 2014.  The Russia’s Net Capital Outflow Totals $9.6Bln in Jan.-Sept. 2016

As a reminder, a part of what’s called ‘capital outflow’ is the government debt payments. In 2016, Russia still was paying back debt incurred by the Soviet government. Russia has accepted the Soviet Union debt, relieving all the other former Soviet republics from its burden.

  1. This prediction has failed, also.

Volume of the National Wealth Fund – $71,26 billion dollars, down from  $71,72 billion on January 2016.

Volume of the Reserve fund – $31,30 billion as of December 2016, down from $49,95 billion. It’s not wiped out as predicted.

Also, Gold Reserves in Russia increased to over 1600 tons in fourth quarter of 2016, up from from 1415 for January 1st, 2016. .

Only in November the Bank of Russia purchased 1 million troy ounces of gold, or 31 tons.

This might explain relatively modest holding of US dollars.

  1. This prediction has failed. “Internal unrest in Russia” being a wet dream of the Western politicians and military is not going to happen. Instead, the society is united and consolidated as never before. Large segments of population have become actively involved into monitoring social and professional media for any attempts to disturb peace and tranquility in the country. It’s even come to ridiculous complains by the Western pundits that the last elections of the members of Duma was “boring” and “uneventful.” Considering, that two weeks prior the elections, an arrest of a Police colonel yielded $200 million in cash fresh from the US Mint press, still wrapped in federal mint packaging. Considering, also, that another $300 million were found on his father’s bank accounts. It’s a general idea that this cash was intended for organization of a “Maidan” like event in Russia. That didn’t pan out, because an “opposition” doesn’t exist without foreign money, just like mold doesn’t exist without dampness.

By the way, this half a billion dollars went to the federal budget.

  1. Failed. Predicting “an irreparable harm” to Russia’s economy, Stratfor only achieved an irreparable harm to itself.

 6. The US and EU sanctions included prohibiting the export of goods, services and technology in support of E&P for Russian deepwater, Arctic offshore and shale projects to Gazprom, Gazprom Neft, Lukoil, Surgutneftegas and Rosneft, including Yuzhno-Kirinskoye Field. Sanctions were aimed at crippling the country’s energy and finance sectors.

The intent was to be surgical,” said Thane Gustafson, senior director and advisor of Russian and Caspian energy for IHS. But “The actual results have been dramatically different. … The sector that was supposed to have been targeted is the one that has been least affected.”

Matthew Sagers, managing director of Russian and Caspian energy for IHS, said Russia has “managed to fly in the face of gravity,” being the only area to his knowledge to increase capex in 2015 and see more development drilling.

Russian production rose to 10.7 million barrels a day (MMbbl/d) in December 2015 and inched up to about 10.8 MMbbl/d in January 2016. [source]

Russian Gazprom created a brand new gas production center beyond the Arctic Circle, that no country in the world was able to do. Russia has proven its leadership in the Arctic.

The VI International Conference “Russian Offshore Oil and Gas Development: Arctic and Far East” (ROOGD-2016)

China’s imports of Russian oil hit an all-time high of 33,670,000 barrels, up 52.4% from the year before.

OPAL gas pipeline increased its capacity load to 81% as of December 27, press service of OPAL Gastransport GmbH

NB:  EPMAG is lying to its readers by stating that “oil and gas revenues account for more than 50% of the federal budget revenues in Russia.” In reality, Oil and gas revenue. Oil and Gas Revenue Accounts for 21% of Russia’s Budget Not 50%

Russia runs a quite acceptable, by Western standards, budget deficit, which is expected to be 3.8% of the GDP (consolidated budget), down from 4.6% in the previous year.

For the next 2017,  country expects GDP growth of 1.6%, budget deficit of 1.7% of GDP and the dollar’s average exchange rate of 63.5 rubles for 2017 with the average price of Brent crude oil of $50 per barrel. If the average oil price is closer to $60 per barrel in 2017 GDP growth may exceed 2%, budget deficit will be within 1% and the dollar’s exchange rate may be below 60 rubles mark.

  1. The Austrian Institute of Economic Research, the strong fall in exports from the EU to Russia was due, at least partially, to the imposition of sanctions and counter sanctions. The potential trade loss in terms of value added (€34 billion in the short run and €92 billion in the long-run) and employment were attributable to deterioration in trade relations that extended sanctions can exacerbate. That study (inter others) thus concludes that the sanctions have had serious consequences on employment in the EU with cost to the EU over €100 billion in business and up to 2.5 million in jobs.
  2. Christensen, O. Fritz and G. Streicher , “Effects of the EU-Russia Economic Sanctions on Value Added and Employment in the European Union and Switzerland”, WIFO Study, Austrian Institute of Economic Research, Vienna, July, 2015.
  1. Russia’s economy grew in 2016. Stock market is up over 40% year-to-date. In December the Russian Ministry of Economic Development revised its outlook for industrial production growth in 2016 to +1% compared to the previous +0.4%. In November, national statistics firm Rosstat said industrial production in the first 11 months of 2016 rose +0.8% from 2015 and +2.7% compared to the same month a year ago. IP also rose around +1% from October levels.

Russia’s Finance Minister Anton Siluanov [see #3]“The economy may surprise to the upside next year,” Siluanov said. “If so, growth will have an impact on the dynamics of wages and incomes, which have already shown a steady growth pattern in real terms thanks to falling inflation.”

Suddenly… FSB arrests just one liberal minister, and economy starts growing.

  1. His prediction has failed. Russia’s economy minister Ulukaev was arrested a month ago, officially for bribery and corruption, unofficially for treason. The IMF data of debt-to-GDP ratio by country shows that that Russia’s share in a world debt is lowest in Europe and equal only to 0,49 percent of the world debt, while the European continent, excluding Russia, holds over 26 percent of total world debt. In September 2016, Fitch Affirms Russia’s Penza Region at ‘BB’; Outlook Stable. Penza’s economy is historically weaker than the average Russian region with a GRP per capita at 76% of the national median in 2014. Other Russia’s region were also affirmed as “stable.”
  1. No to predicted hunger revolts. Per Bloomberg’s October report: Russia becomes a grain superpower as wheat exports explode with the grain harvest is amounting to 117 million tons in 2016, which is the highest ever in history. In 2016, US lost out to Russian wheat exports. Russia’s poultry producers found new markets to sell due to significant increase the domestic production due to import cuts.

RosStat: In 2016 an average Russian consumed 98.5 kg of fresh vegetables and 72.6 kg of fresh fruit and berries.

Russia records increase in greenhouse vegetable production per fruit-inform.com

Based on data from regional agro-business management bodies: the gross yield of greenhouse vegetable crops in the whole country amounted, as of 29 November 2016 to 607.1 thousand tons; which is 31% more than in 2015, when the total volume stood at 462.4 thousand tons. The volume of cucumbers increased by 23% and amounted to 409.4 thousand tons, compared to 333.1 thousand tons in 2015. The tomato production amounted to 182.5 thousand tons, which is 53% more than in 2015, when it amounted to 119.4 thousand tons. 15.2 thousand tons of other vegetable crops were also harvested. For comparison, in the same period of 2015 the yield was 9.9 tonnes, i.e. it was 1.5 times smaller.

  1. This prediction has also failed. The agreements between Russia, Syria, Iran and Turkey to end the war in Syria took place, and the Western countries were excluded from the deal.
  1. This prediction has failed. Russia’s counter sanctions are already in place until December 2017, with an indefinite renewal option.
  1. This prediction had also failed. The Western sanctions actually gave a boost to the economy.
  1. Another failed prediction. One year on, Russia’s war in Syria is hardly the predicted ‘quagmire.’ Even the Dark side itself admits that “the United States made a mistake by waving off this intervention as a doomed adventure. Failing to take it seriously has ramifications for the region beyond the Syrian war.”

As the warontherocks author also admits, “the quagmire is less visible in Russia’s military operations, and more in U.S. thinking on how to deal with Moscow.”

News in brief:

A word from the Dark side:

Russia is playing from a position of enormous strength in the new 2017 year

 

A collective failure of the Western “analytics” is so obvious that anyone should start looking for answers someplace else, rather than wasting money to feed a greedy bottomless pit, populated with ‘stink’ tankers.

Consider that the thesaker.is predictions and analytic have been always accurate.

Thank you for your time,

Scott

A featured image: MOSCOW – AUGUST 21, 2016: Aerial view of Moscow-City over Moskva River. Moscow-City (Moscow International Business Center) is a modern commercial district in central Moscow.

The Essential Saker: from the trenches of the emerging multipolar world