Sunday, December 14, 2014

State of Putin's union

US sanctions, oil price drop
take toll on Russian toilers

The sharp drop in oil prices in recent months — driven by high levels of oil production from Saudi Arabia and other Middle Eastern monarchies and the growing volume of fracked U.S. oil — is battering the economies of Russia and other countries that are dependent on petroleum exports, such as Venezuela and Iran. In Russia, which is also being squeezed by sanctions imposed by Washington and the European Union, workers and farmers are especially hard hit, as the government of President Vladimir Putin acts to protect the interests of the capitalists for whom he rules at the expense of the wages and living conditions of the toilers.
"It is now a frequent practice to have a 2-3 month delay in wage payment," especially in the automotive and metal industries, Boris Kravchenko, president of the Confederation of Labor of Russia, wrote in September. "The number of industrial protests is growing."

Oil and natural gas account for 70 percent of Moscow's exports, and revenue from the industry provides about half of the government's budget. Since June the price of the crude Russia sells has fallen from over $100 per barrel to below $70. To balance, Moscow's budget requires oil at $100 a barrel.

High energy prices were the basis for the relatively high 7 percent Russian economic growth rate from 2000 to 2008, giving the appearance of a strong, stable economy and rising economic power. Now that illusion is crumbling.

Sanctions imposed by Washington and EU governments, supposedly to punish Moscow for intervening in Ukraine, are also taking a toll, cutting off access for Russian employers to global credit markets. In response, the Russian government has used a large portion of its currency reserves to try to prop up the ruble. The value of the Russian currency has plunged roughly 40 percent this year, which pushes up the price of many goods, including basic food staples.

The Russian economy is sliding toward recession in 2015, Deputy Economy Minister Alexei Vedev told reporters Dec. 2. He estimated inflation will hit 9 percent by the end of this year, the official unemployment rate will rise to 6.4 percent, and real wages will shrink some 3.9 percent. The net capital outflow from Russia will hit $125 billion for 2014.

Several thousand health care workers and others marched in Moscow Nov. 30, protesting government plans to close 28 hospitals in the Russian capital and lay off up to 10,000 doctors. "Health care is falling apart, social care is falling apart, education is falling apart," one doctor named Tatyana told reporters. "In the medical professions salaries are being slashed. They take away all the bonuses, but increase the amount of work." Similar rallies took place in St. Petersburg, Vladivostok and other cities.

Putin's 'State of the Union'
In an annual presidential address Dec. 4, Putin said his government aims to "work towards prosperity and affluence." While couched in language about advancing "the people" that will sound familiar to workers who have listened to a "State of the Union" speech by a U.S. president, the content was to prop up the interests of the bosses. "It's imperative that labor productivity be increased by no less than 5 percent annually," he declared, demanding working people produce more and get less. He said the government should "lift restrictions on business as much as possible."

While saying he would improve "education, health care and the social welfare system," Putin admitted that schools are significantly overcrowded, with nearly 2 million children attending a second shift. The next day, Putin ordered the government to cut spending in real terms by 5 percent on everything except the military and police for 2015-17.

He blamed the falling ruble and rising inflation on "speculators," rather than admit the real impact of the plunge in oil prices.

Putin's speech did little to reassure Russian capitalists, who are increasingly nervous about the economic situation and Moscow's war policy against Ukraine. "The superficial analysis of the situation reflected a disconnect with real life, an 'alternate reality' in which the Kremlin now seems to live," Sergei Aleksashenko, former deputy chairman of the Russian Central Bank, told Time magazine.

Putin also used the speech to once again justify Moscow's annexation of Crimea from Ukraine earlier this year, and its intervention in support of separatist forces in southeastern Ukraine. He presented the Maidan protests in defense of Ukrainian sovereignty last February as an "armed coup." He blamed Washington for developments in Ukraine and Moscow's economic crisis. If none of the events in Ukraine had happened, he said, Washington "would have come up with some other excuse to try to contain Russia's growing capabilities."

The record of U.S. imperialism from Vietnam to Iraq certainly makes these charges seem plausible to many people. But Putin turned reality on its head, claiming Moscow, which oppressed Ukraine economically and politically for decades, is a champion of Ukrainian sovereignty.

Putin's real worry is that workers and farmers in Russia will emulate the mass mobilizations that marked the Maidan protests in Ukraine that overthrew the pro-Moscow regime of President Viktor Yanukovych. The Moscow Times reported that riot police Dec. 2 raided a seminar taking place south of Moscow titled "Maidan: Organizing the Space of Freedom" and detained 25 people for several hours, before releasing them without charges.

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