Hey Vlad, whats in it for me?

The power for prosperity trade has long been perfected in Asia.  Be it the Chinese Communist party or the Singaporean Peoples Action Party, it is well established that if you want to rule a country you need to pay the masses for their support.  Asian people are not philosophically committed to democracy, by and large, so they will listen to a deal.  If those seeking political power want to, say, build a casino or two, or rid the nation of defiant opposition, then there is a price that the people will extract to compensate them for their acquiescence. Typically this can be in the form of rapid economic growth.  Economic power is political power in our modern era and smart governments know this.
The Chinese Communist Party has played this trick for decades and won.  It is difficult to foresee a situation where Chairman Xi loses power while economic growth ticks along at 6-7% per year or, put another way, the average Chinese family’s income doubles every 10 years.   But you cannot treat the electorate as stupid –  one prominent Singaporean’s  threat to cut housing assistance to electorate’s that didn’t support the PAP 15 years ago was a little too blunt to be acceptable behaviour in a nation that counts itself as the intellectuals of Asia.
So what can Vladimir Putin learn from Asia’s winning formula? Where do we start? Is the Ukrainian invasion a winner?…Whereas modern warfare had been expected to take place in either the bang-bang world or cyber-space it seems the true theatre of war is the banking system.  Big missiles may look good at parades and kill indiscriminately but nothing can compare with no money.  Only rich countries go to war.  Poor countries can make their own arrangements.
The West is doing its best to make Russia poor.  Having worked with Central Banks for much of my JPMorgan career I can say that the Central Banking community have been dragged kicking and screaming into this fight. Typically, Central Banks keep their reserves with each other since they trust each other not to default.  (The pressure on each Central Bank, however, to deny Russia its assets has been strong and they have frozen these assets.  However this sets a nasty precedent for them and they will be scrambling to protect their own reserves from similar actions.)  In Central Bank – land, liquidity is King and it is not uncommon for them to keep ‘secret accounts’ that act as emergency funds in the event of official reserves being frozen.  These accounts are typically held at money-centre banks, sometimes administered by hand selected members of the Central Bank itself seconded to the bank.  While Russia had USD670billion in foreign reserves prior to the Ukraine invasion, they may have had USD6billion in secret accounts that may or may not have been recalled.  If not withdrawn in advance, these accounts will be frozen inside the private institutions.  USD6billion is hardly enough to run a war however it could buy some time.
The meme-culture that has been so effective driving the likes of Gamestop to prices that cannot be justified is probably Vlad’s biggest foe.  Angry young men and women with a smart-phone and a brokerage account are difficult to placate so any company that baulks at supporting the Russian blockade will suffer their wrath.  Major companies such as Apple, Zara, Shell, Coca Cola and others have simply just abandoned their assets in Russia which is a small price to pay compared with the alternative from the meme-brigade.
So what, Vlad, is in this invasion for the average Russian or the far-from average Oligarch?  Cut off from their wealth and their instagram accounts, the Russian people must be asking what’s the point of the Ukrainian invasion.  Old school propaganda is the natural fallback for Vlad Putin but this is the 21st Century and no-one laps that rubbish up without asking questions.  The private jets and ships that the oligarchs play with have effectively been seized and impounded with scant regard for their property.  One can only imagine how quickly these treasures will turn to rust-buckets or become target practice for international navies.  Red Square in Mayfair will soon be overtaken by squatters.
Nothing above indicates that Vladimir Putin has understood the forces that have kept him in power, made excuses for his errors and allowed him to prosper.  These are economic forces that, as in Asia, have created wealth along with his power.  Putin was a folk hero of sorts, challenging the West while making his people rich.  Now he is just a thug and a murderer who has missed the point of modern politics.  What’s in it for me, Vlad? Nothing, you say, Vladimir…oh dear.  Then that is the end of you, Vlad, it’s only a matter of time… 


Do you like what you read? Then subscribe to our blog below…