Russia’s Leaking Economy

From Yulia Latynina in the Moscow Times, a suggestion of a building scapegoat campaign:

In order to understand how the Russian economy was built, ask yourself one simple question: Is it possible to carry water in a colander? Yes — if you are able to pour more water into the colander than the amount that leaks out of its holes.

For the past eight years, the Russian economy was like a huge colander. With oil prices above $100 per barrel, petrodollars flooded into the colander with amazing force. As long as oil prices remained high, it seemed as if the colander could actually hold water.

Unfortunately, the sharp drop in oilprices cut off the flow coming into the colander, and we discoveredthat it doesn’t hold water after all.

There were other majorleaks as well. Dollars have fled Russia at the rate of $3 billion to $7billion per week. It is useless to try to stop this outflow because thedollars are being sent abroad by the very people who were the mostactive in drilling the holes in the colander in the first place.

There’snothing the government can do about the problem either. If it givesmoney to the banks, they’ll just send it overseas. If it doesn’t givethem money, there will be a catastrophic liquidity crisis and theinterbank interest rates will reach astronomical levels.

Tomake matters worse, the government’s reserves are streaming out of thecolander, but the Kremlin is only worried about choosing whicholigarchs should get a slice of the bailout pie.

How can theKremlin solve the problem of its leaking colander? Find a scapegoat.Who would be the best scapegoat? Russia’s new, young president.