Russian Ruble Rebound

April 13, 2015

By: Kelly Diamond, Publisher

russian ruble reboundThe US has marginalized quite a few countries over the years through sanctions and embargoes… never mind the wars it starts, funds, or carries out on these foreign lands. And the US in many ways is an economic whale still.

Allow me to provide an example of what I see the US doing. Foreign policy isn’t much different than individual policy, it’s just on a much larger scale with much larger implications. The guiding force, nonetheless, has human nature at the helm.

So let’s say I’m a wealthy consumer who loves to spend her money. I’m one of the most coveted customers out there, and most of the shops in the mall know this by now. I have an entourage that carries my shopping bags for me, I rarely even look at price tags, and if I want it, I buy it. I’m not a very pleasant customer, but most businesses find that my pocketbook is worth the hassle. What’s more is my endorsement of your business. If I like it, favor it, or use it in any way, others will feel inclined to follow suit.

Over the years, some businesses have grown tired of the hoops through which I’ve asked them to jump. They have ignored all other customers in their shop just to cater to me. They have all but tailored their businesses for my sole pleasure. If I so much as remark that they should put a sign up, that sign goes up. One by one, little businesses started to push back.

“We’re not putting this sign up. I’m not rearranging the goods in my store. I’m not removing these goods from my shelves.”

“Okay. Well, you’re black listed. And I will be sure to tell my friends of this too,” I say.

Other shops see the stand that this one rebellious shop took and try to secretly reach out to them without me seeing or hearing of it. Naturally they can’t make their attempts to reach out to the outcast known for fear of being black listed as well.

Soon enough more shops get frustrated and dare to say, “NO!”

I, in turn, blacklist them as well.

Well, the blacklist is getting longer. And the struggling ostracized shops now have a few allies. Those shops start to talk and collaborate.

There are a couple shops who couldn’t care less if I came in or not. One in particular has a lot of what I need and they know it. It has extended me a line of credit several times. I resent them, but since I can’t find any other business that will do what they do and sell what they sell, I’m stuck and I deal with them. My bark is loud, but my bite is toothless.

I find out this particular shop is working with the other blacklisted shops. They are trading with them, making agreements and arrangements with them, and ultimately making enough money doing that to afford to lose my business.

While admitted simplistic, I’m the US in this scenario, the blacklisted shops are Venezuela, Iran, Cuba, and Russia, and the business I resent but can’t afford to blacklist is China.

China and Russia are not even remotely friends of the United States. At best the relationship is tenuous, strained, and precarious. Considerable interference from the US notwithstanding, Russia has managed to keep its nose above water economically through various work-arounds. Currency agreements with China as well as oil trade agreements with Iran and military and arms deals with Venezuela have allowed Russia to remain buoyant.

Russia’s ruble is also closely tied to oil. I wouldn’t go so far as to say it’s BACKED by oil, but — unlike the US dollar’s inverse relationship with gold — it does follow oil’s trends quite closely. When the Saudis were squeezing the US and Russian oil markets with their bitter price war a few months ago, the Russians felt it big time. The Saudis raised their prices for Asia and Russia benefited with a stronger ruble.

Of course Russia understands that Saudi Arabia has the majority of strings economically because of their sway with oil. Saudi Arabia is the one country in the Middle East to which the US turns a blind eye because of their energy influence. Russia naturally is trying to work its way around them too, hence their afore-mentioned oil dealings with such players as Iran and Venezuela.

Saudi Arabia isn’t exactly popular amongst Middle Eastern countries either. Pakistan might be its only “friend” out there. Ironically Pakistan and Saudi Arabia were the only two countries that recognized Taliban rule in Afghanistan, but only Pakistan is getting its ass kicked for it. Iran and Iraq certainly don’t care for them. Lebanon and Syria don’t have a tremendous amount of love for them either… although it would largely depend on which side of the revolution you were talking to out there.

That Iran and perhaps some of the other smaller countries in the Middle East would look for a work around Saudi Arabia by going through Russia and China is certainly not an impossibility.

This quarter Russia’s ruble rallied. As one of the most unpredictable economies in the world, it is anyone’s guess as to how it will fair next quarter. In the true sense of the world, Russia is an economic wild card, and certainly not one to bet against. If it’s economically unpredictable because of myriad factors, then likewise its endurance is attributable to those same factors. Is it oil? Yes. Is it its foreign policy? Yes. Is it trade? Yes. It’s everything and nothing all at once as there are some who contend the sanctions against them had little or no effect whatsoever on Russia’s economy.

There are plenty of heavy hitting countries out there… none of whom are “good”, nor are any “worse” than the others. None of these alliances are foundationally built on principle and humanitarianism. They are rather built on a simple understanding: “the enemy of my enemy is my friend”.

Perhaps there is something to be said for the diversification and multi-faceted economy of Russia.  Not to say they are making all the great choices, mind you, but that they are finding creative ways to work around the US certainly is behavior not unbecoming of anyone or any country wishing to break free from the left or right boot of the US government.

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