Armstrong Economics Blog/Russia
Re-Posted Mar 6, 2018 by Martin Armstrong
Putin’s address on March 1st to the Federal Assembly seems to have sparked a lot of crazy emails with people talking nonsense about things they do not even come close to understanding. Yes, the headline grabber was Putin’s statement about a new invincible cruise missile. I will address that in a moment. Overlooked, however, was Putin addressing the real issues of economic concerns that seem to have gone over everyone’s head. The problem with the Oligarchs where he is implying that things need to change for the good of Russia. China moved to Capitalism directly from Communism and we see the difference with China poised to surpass the US economy by 2032 and is already the second largest economy in the world. Russia, on the other hand, simply moved from state-controlled economic system to one where political friends became Oligarchs and prevented a free market economy. Russia economically ranks 12th in the world behind the USA, China, Japan, Germany, France, United Kingdom, India, Brazil, Italy, Canada, and South Korea. This is what Putin was addressing, the need to truly open up the economy to competition. If you try to compete against an Oligarch by opening a restaurant in Moscow, you will be lucky to survive beyond 24 hours. Russia is economically a third world country with a lot of weapons. Putin realizes that for all its military power, it collapsed BECAUSE it did not have the economy to support its military ambitions.
Putin also addressed trying to keep people from leaving Russia. Despite the Global Warming movement that is really trying to reduce the population, in fact, the population is declining among the industrialized nations and Russia is no exception. The population of Russia peaked at 148,689,000 back in 1991, just before the breakup of the Soviet Union. Ever since the collapse of Communism, people realize that the State will not simply take care of them. As a direct result, the birth rates have been steadily dropping and there have been abnormally high death rates in Russia as well among the elderly. Russia’s population has been declining at an annual rate of 0.5%, or about 750,000 to 800,000 people per year since 1991. Add to this figure, the migration of Russian women looking for Western men, and you have a crisis brewing in the decline of population in Russia that threatens its long-term viability.
Nevertheless, the area of Putin’s speech that has sparked the wildest claims were those comments which mentioned the invincible strategic nuclear systems in various stages of development. The boast of a missile that can penetrate the US defense system has been known behind the curtain as the RS-28 “Sarmat” system which is a new land-based heavy intercontinental ballistic missile (ICBM). This is what is being fitted with advanced technology to assure penetration of any missile defense.
Putin definitely made global headlines with these comments. However, I really did not think it warranted comment since Russia’s ability to defeat U.S. missile defenses is nothing new. I suppose I have known that fact but it seems many did not. Let me explain something that may not be common knowledge. U.S. policy has been not to deploy a defensive system that could neutralize a Russian retaliatory response to a U.S. nuclear attack. The reason this is the basic policy is the concern that such a system which was called Star Wars, would destabilize the world and result in a new arms race where Russia would be driven to re-establish a retaliatory capability. Putin’s response was directed at Trump and his administration’s idea of reversing that policy creating a new Ballistic Missile Defense Review. This was part of the February 2018 U.S. Nuclear Posture Review which states that any improvements in U.S. defensive capabilities will be deployed in such a way as to “preclude an arms race” with China or Russia. Therefore, Putin was addressing this very issue and to make it clear that there MUST remain a balance between powers for all the nukes keep everyone in check.
Putin also addressed a maneuverable hypersonic glide the “Avangard” which is a new missile system with a vehicle of this type. Putin also mentioned a long-range nuclear-powered unmanned underwater vehicle that can be fitted with a nuclear warhead, known commonly as “Status-6.” Both of these systems are designed to evade any U.S. defensive measures — Avangard by presenting an unpredictable flight trajectory, while Status-6 is an entirely new sea-based way to deliver a nuclear weapon. Both are designed to maintain the power balance.
The invincible new cruise missile was really a statement to Trump not to start a new arms race. You simply have to understand what is going on behind the curtain right now.