A Wind of Change

 Much can depend in a nation's life on the personality and beliefs of its leader. Even more, often enough, on those of the men surrounding him. To this, Russia is no exception.

President Putin has always stood by the re-industrialization of the economy and the advancement of the real economy vs the financial economy. However, this always met with limited success and seemed to only make advancements more in a reactionary manner to key anti-Russian world events. Import substitution, raised due to western economic war on Russia, is a prime example of this. While successful, its success has been much more limited then by any account it should have been. It is as if the ship of state was constantly being met with a ponderous head wind, breaking its progress. Agriculture and military have been the exceptions.

Indeed, that head wind was the number two man in Russia. An avowed Atlantist and part of the globalist financial elite, Dmitry Medvedev, as prime minister, was never exactly pro Russian development or mercantilism (there it is that evil word Mercantilism, so hated by the neoliberal free trade crowd). It can be understood of course as 1. Financial economics by its nature is an extraction economy, its quick cash through liquidation of industry and sell off of resources. When backed up by people who see themselves as citizens of the globe or global elites and hold no particular driving and all consuming love for their homeland, their Rodina, this is a formula for disaster.

Since the removal of Medvedev from power and with him the Atlantist neoliberal block and their replacement with Prime Minister Mishustin, the winds of change have arrived.

This was first seen by the Russian advantageous positioning to support the economy during and after the Covid19 lock-downs. I detail these HERE. In tendum, the Russian government gave assistance to the Russian medical supply and biotechnology industry to allow Russia to become an over night medical equipment heavy weight, bringing forth top of the line technologies (detailed HERE) and to be the first to start mass production of the first registered Covid19 vaccine (detailed HERE). Already nations have lined up to purchase and franchise the production of equipment and vaccine. Russia has also shown an ability all over her vast distances to greenfield to completion almost two dozen hi-tech medical hospitals, projects completed in under 100 days each and not temporary trailers like the Chinese "wanders" but permanent building with all the hi-tech equipment (also Russian made) that would be expected from world class facilities.

"The president gave marching orders for the government to work out a package of programs for the growth of the Russian IT industry, to create maximum comfortable conditions for specialists of this industry. Now we are reviewing the changes that will be required in the legal codes to create tax havens for the IT sphere."

Prime Minister Michael Mishustin

One such maneuver is the lowering of pension taxes required from the IT industry from 15% down to 7.6%, almost a 50% cut. Taxes on profits will drop from Russia's already low 20% to 3% for companies who earn 90% of their profits from production and sale of software solutions.

Additionally, manufacturers of electronic equipment and AI systems will also be covered under these new taxes.

No major economy in the world has such beneficial tax codes for the IT industry. Coupled with the fact that Russia produces more engineers than any other nation, an excellent communications infrastructure that is now being upgraded to 5G, its comparatively lower salaries compared to other nations and very cheap utilities and land costs and there is no logical reason not to invest, except for fear bred by ignorance and foreign propaganda. Taking into account the weak position of the ruble vs foreign major currencies, for those selling abroad and ignoring this , it is just down criminal incompetence.

The Russian government has also undertaken a gigantic effort in reviewing, updating and deleting antiquated government standards throughout all industries. This has helped catapult Russia into one of the world leaders of the Ease of Doing Business index in 6 short years. What, the Western MSM forgot to mention that?

Russia: Where to Head in the Post COVID Economic Crash

Let us face it, the Western world's and its satellite's system of Debt-Finance driven paper growth was broken long before COVID showed up and gave it the coup de grace in the back of the head. The system was showing severe strains and creaking under its engorged weight in H2 2019 and Recession was in the air. It was the big white elephant in the room, about which only a few dared to talk to loudly.

COVID's arrival did two things: on the one hand, it turned what was apt to be a medium strength recession into a depression that may make the Great Depression look relatively mild and on the other hand it gave the politicians an excuse for all their 30 years of folly and self enrichment and thus a way out without changing anything. Additionally, it has presented the western central banks the opportunity to play out their latest insane theory: the Modern Monetary Theory...that is, print print print and its all good to print some more. Perpetual Quantitative Easing. A crack binge of epic proportions with a naive belief that nothing bad will arise from it. Ask the Romans how well that worked out for them, or the last Mongol dynasty of China. Two thousand years of history proves otherwise, but then again, History has ended, correct?

I wrote months before COVID lock-downs why anyone working remotely should already be living in Russia, it only makes economic sense. Now for the rest.

The West was already facing steep youth unemployment, with the US suffering in the 25-30% margin, many of the starter jobs having been taken either by illegal aliens, for the low skilled, or by H1Bs and automation for the higher skilled labor pool. Europe, even worse, with some EU members hitting the 50% mark. With COVID this will only get worse.

Russia is in a unique position. For one, it has a giant reserve of half a trillion dollars that is actually growing, due to the increase of the cost of gold, even as the government pulls funds to support the economy. The government has done a lot to make sure that Russia is well positioned to come out of this in one piece. The crisis has given feeder stock to many Russian industries, some created in answer to COVID that will feed industrial production in the years to come.

Additionally, with debt to revenue of 16% of GDP, as opposed to most Western nations of 80-150% and growing rapidly, and because of the endless anti-Russian sanctions, Russia is mostly immune from the crashing banking and tsunami of debt storms rolling down on these economies. The final plus is that the Russia lock-down looks set to serious lifting in mid to late May and in all will last only about 1.5 months, as opposed to the 2-3 month lock downs or longer in the West.

This of course means there will be greater opportunities in the Russian market for all those western unemployed engineers and scientists, well greater than sitting around on a bankrupt government dole.
Metallurgists, industrial engineers, mechanical engineers, electrical engineers are in extremely short supply and that considering that Russia graduates more engineers than any other nation, almost twice as many as second place America.  It is also huge and experts are needed.

With all of this, where do you think that venture capital is going to go? To bankrupt struggling western economies or to where it can still earn some semblance of a profit?

Finally, for those who fancy themselves social conservatives, Russia is definitely a go to place. Society is naturally conservative and old fashioned. More akin to the majority in the West in the 60s, 70s and 80s rather than the present. In other words, the good old days the present leading generations remember from their childhoods. Christianity is not frowned upon, it is celebrated. Getting on a plane or a public bus, one is apt to see icons of Christ or the saints on the dashboard of the driver or in the corner of the niche for the stewardesses. Like wise moderate Islam, Judaism, Buddhism, Shamanism, Catholicism can be found practicing in peace and without interference. Even in this COVID madness, the churches were never closed, because under the Russian constitution, the government has no right to interfere in religious matters.

In a roll of good news, the Russian government has continued to liberalize immigration policies. In a follow on article, I will outline just how easy it is for Americans to move to Russia and get citizenship.

Amongst other things, the requirement to give up the previous citizenship has been removed, effectively allowing duel citizenship for anyone who is not directly working for the government, in politics or working on secret projects. Additionally, anyone who has a spouse or child who is a Russian citizen no longer has to pass the Russian language test (though you will be hard pressed with work if you do not learn Russian) and the 3 year living in Russia requirement to put in for citizenship.

Next on the list is the reform of the Temporary and Permanent Residency programs. The order is to first get the Temp, which lasts 3 years and then put in for the Perm program. The Permanent Residency used to require reissue every 5 years but is now life long, as long as at least 183 days a year are spent in Russia. The cross hairs are now on the Temporary Residency which will be removed totally with everyone going directly to Permanent Residency.

Russian Highly Qualified Specialist work visas are also relatively easy to get, as long as you have a sponsor. In all, it takes less than a month to get the visa processed.

So if you have not wondered, you should be. If you have not planned, you should be. There is still a light in the middle of this bleak spring of despair.

Russia Is Well Positioned UPDATE 4 (1 June 2020)

Despite the "best wishes" of the Western mass media that everything in Russia is failing, the reality of the situation is that Russia is uniquely positioned to rebound economically faster and stronger then the over leveraged West.

Even the NYT came to this conclusion "Thanks to Sanctions, Russia Is Cushioned From Virus’s Economic Shocks", true, you can taste the bile in the first half of the article, but then they get to the various points.

Russia has been cut off from the Western financial markets, Russia has been busy regrowing its industry for the past 7 years and Russia has a huge reserve of over $600 billion set aside for occurrences just like this with a government debt of less than 10% to GDP. But this is not enough, what Russia has, unlike the West, is a leadership that is ahead of the curve.

The Russian leadership has foreseen what is coming down the road and has taken key steps to block that road as best as possible. Russia instantly closed the borders with China, while infected people from China were still traveling everywhere. Russia closed commercial flights with the rest of the world more slowly and that did allow for the infection to leak in. Either way, for what ever reasons: Grace of God, cold weather, partial immunity from TB vaccines, the virus has been slow to spread and the rate of full recovery is 5 times to that of deaths, while globally right now its about 2 to 1, of the officially recognized infections.

The Russian government has stock piled medical equipment and has retooled very quickly to manufacture additional equipment and materials, enough so as to send aid to 14 other nations, including the US, as well as 15 plane loads of trucks and personnel to aid Italy, bringing lacking equipment, such as disinfectant machines, spreaders, and liquid as well as over 200 doctors and military biochem experts. Russia has disinfected over a twenty hospitals and homes for the old, as well as building field hospitals, throughout hard hit northern Italy.

Russia has over 44000 artificial/assisted breathing machines and two large manufacturers are working 24/7 manufacturing more. As a comparison, Japan with the world's oldest population, a population of 120 million, has only 24000 and 10000 are already occupied by the sick from other infections. Milan, Italy had 48.

But more so then the medical preparedness, is the economic steps that Russia has taken to make sure that a post infection economic crash does not come at the end of the month long quarantine.

Europe and the US panicked, sending everyone into lock down without a single thought about how the already financially overstretched and struggling populations will feed themselves and survive a month plus without money to buy food and in some cases without food, not to mention pay rents, credit debts and utilities. All plans came only as an after thought, not much for proper full spectrum planning. Over 10 million have filed for unemployment in the US alone, in just two weeks. Unheard of numbers.

The Russian government, spearheaded by President Putin has avoided this and has put in key points for both the workers and the small and medium businesses. They are as follows:

For people:

1. 50% increase to unemployment benefits by the Federal government, so that unemployment will not be less than the minimum allowed salary. Sure a person will not be eating steaks on this but he will not be starving either. Unemployment is available to anyone who has worked for at least 4 months previously. As a comparison, in the US unemployment is available only to those who work full time, on contract pay (not hourly workers) and has worked at least 12 months previously.

2. Provinces will add to the unemployment payout as much as their budgets allow. Moscow for one will double the unemployment payouts of the Federal government.

3. Sick leave pay has also been increased by 50%.

4. People facing unemployment or inability to pay credit due to pay cuts are now able to take a 6 month credit holiday from payments. Banks, by law, have 3 days to process the paperwork and freeze credits.

5. Pensions will be indexed +6%.

6. Filing for Bankruptcy is now free.

For business:

1. For small and medium businesses percent free loans to pay salaries up to 20 million rubles ($270.000 at current exchange rates) without a need to pay back for 8 months after the emergency is lifted.

2. Rents owed on Federally owned lands and infrastructure waived for 8 months.

3. All taxes on rent givers are waved in exchange for them lowering the rent payments demanded from their renters.

4. All business taxes, with the exception of VAT, are waved for 6 months.

5. Large funds for investment in support of whole business sectors.

6. Bankruptcy for businesses can be stalled for 8 months.

Other ideas are still being worked out.

As you can see, the Russian government is dead set on making sure Russian bounces back fast, hard and ahead of its Western competition. But to make sure Russia does not become a temporary slush fund for Western credit, two additional laws were passed:

1. a 13% tax on all percents, dividends and other earnings on deposits or investments over 1 million rubles. This is only on the money earned, as money making money will now be equated to income, unlike in many countries, so the rich will pay their fair share along with all workers.

2. a 15% tax on all monies being transferred out of Russia. So it will no longer be a quick slush fund and get the cash out later, doing damage to the economy built on those monies. At least a portion will remain in the country to be put back into the economy.

Now we will wait and see what other new projects or laws will come in and only time will tell who in 2 months will be standing, who will be on their knees and who will be on the floor bleeding out with a white chalk outline.

God Bless.

Update 6 April 2020

The situation on the ground has continued to evolve, with several governmental and non-governmental actions starting to continue easing life for Russians and Russian business.

1. Sberbank has created a payment holiday for its clients, for up to 6 months. This, unfortunately, does not mean that percents are not accuring, but payments can be put off, as follows:
   -- Mortgages up to 1.5 million rubles
   -- personal loans up to 250.000 rubles
   -- automobile loans up to 600.000 rubles
   -- credit cards up to 100.000 rubles
   -- small business short term loans up to 300.000 rubles
While the sums are small, it is a start.

2. Government has cut pension contributions from businesses for their employees by 50%. This is the biggest chunk of the payroll taxes that a business has to pay.

3. Internet- all major internet providers have agreed that they will not cut service for those who are unable to pay, during the crisis period, however long it lasts.

Update 8 April 2020

The Russian government has allocated 10 billion rubles ($133 million) to double the salaries of medical personnel fighting the Coronavirus out break.

Emergency salary loans to small and medium businesses are now full operative and are being turned around in under a day. Bank staff are working from 0800 to 2400 daily.

Update 17 April 2020

In order to recharge the economy once the locks downs are over, the Russian government is now offering guaranteed 6.5% mortgages, with the government picking up the tab for any percentage above the 6.5% level. The mortgage level limit is 5 million rubles for Moscow and St. Petersburg and 3 million for the rest of the country.

Update 1 June 2020

The Russian government has now started to pay a one time sum of 10,000 rubles per child between the ages of 5 and 16. The first deposits have started and parents have up to the end of September to file.

Government loans to small and medium businesses for the purpose of paying salaries have now been modified so that if 90% of the work force is kept on, the government will wave the debt totally. If 80% of the work force is kept, 50% will be waved.

How to Motivate Russians

A few years back, I had a senior regional vice-president from Houston give me and others advice that the only way to motivate Russians is with the whip. He thought he was at the peak of wisdom, when in reality he showed everyone, who was Russian anyways, his absolute ignorance. 

This, like many stereotypes comes from yellow propaganda of the Cold War that dipicted Russians as some sort of slave race under either the Tsars (who were hardly what one would call despotic) or Communist leadership. 

True, Stalin did use slave labour, but this was first and foremost against political opponents not as a form of economics.

So what then? Money? To some degree, yes but that wears thin on the Russian soul rather quickly.

Now wait, if I can not whip them or bribe them, then how do you motivate those damn Russians? Or is it all a riddle in a quandary? 

Truth be told, it is all much simpler than that. Russia is a great nation, one that has withstood what would have ground any other people into sand. A quick perusual of Russia's 1400 year history will quickly teach that lesson. 

 So what is the secret? Its in that Greatness itself. Russia and Russians must always have a great cause to strive for. Be it for the Mother Russia of the ancient knyazei (princes) or Holy Third Rome Defender of Orthodox Christianity of the Tsars or the World Proletariat Unite of the early Bolsheviks or Building Enlightened Communism of the later Bolsheviks, Russians have to have an overwhelming goal to strive and sacrifice for, to believe in. 

This is why the 90s were such a disaster. The Communists fell and all the new, corrupt, self absorbed leadership could come up with was: now we will be like all other nations....what? That's it? Then there is nothing to strive for. And that is one of the keys to President Putin's success, to some degree, he has returned those ideas, albait still in a murky form. 

 So there is the example. Your workers are not just building and designing trucks, they are building the best trucks in the world that will be exported all over the world. Your genetisists and their lab assistants are not just making vaccines but are making vaccines which will save the lives of millions of children. 

But do not make these empty words. When the leadership does not believe in what it is saying, the Russian worker will see through the smoke quite quickly and then you are in an even worse state than before. 

To manage in Russia is to lead in Russia and for that you need actual leaders and leaders with vision, vision that goes further than the next quarterly report. Who is up for the task?