Friday, April 29, 2016

Lavrov On Sanctions.

Yesterday, Russian Foreign Minister Sergei Lavrov in his interview with Swedish newspaper Dagens Nyheter in Moscow was very explicit about Western sanctions:

Foreign Minister Sergey Lavrov’s interview with Swedish newspaper Dagens Nyheter, Moscow, April 28, 2016  

Question: Is there any hope that the sanctions will be lifted?

Sergey Lavrov: I was just going to tell you that we rely solely on ourselves now, and we have all we need to do so. Thankfully, the Lord and our forefathers have left us a self-sufficient country. Now we will be working hard to replace the products we used to import from other countries. This is our strategy. This does not mean isolation or a closed economy. And if one day our Western partners decide to return to their normal policy, it would give us additional opportunities for growth and developing cooperation. But in essentials, we are only going to rely on ourselves from now on.

I wrote about it in this blog many times. I will repeat it again: Western sanctions were the blessing in disguise for Russia. While Obama was boasting that Russian economy was, thanks to him, in tatters,  Russian economy was actually retooling itself. Yes, even uber-liberal Medvedev's cabinet recognizes that all this monetarist mambo-jumbo is just that, the real economy is in the REAL sector of economy, the foundation of which is manufacturing. When even Bloomberg begins to suspect that Obama lives in the parallel universe when dealing with Russia, this speaks volumes. 

While many in the West were dismissive of Russian "importozameshenie" (import substitution), the reality of it was very different from what Wall Street understands as economic development, that is defrauding markets. All those Wall Street "analysts", as always, missed the most important economic fact of Russia--look at the Military Industrial Complex first and only then try to view what is behind it. For some guy with Ph.D in economics from Ivy League it could be an insurmountable obstacle to understand that real, in all senses of this word, economy lies with (again) enclosed technological cycles, it lies with manufacturing of strategic products: planes, rolling stock, processors, machining centers, electric machines, nuclear reactors, scientific instruments, MRI and X-Ray machines and...weapons, weapons and, again, weapons. For a real professional, a single look at and inside Armata tank, Su-35C or SSGN of Project 885 (Severodvinsk-class) will tell more about the real state of Russian economy than looking at BS graphs (most of them rigged anyway) of some piles of abstract economic and financial data from Wall Street. Apart from that, it is manufacturing which creates in European peoples the sense of self-worth, in the end--we just love to create, make things, be it machining centers or space ships. That's what sets us apart and that's what makes us who we are. 

Then comes the question, was import substitution a success. Not as successful as it was expected to be, after all Medvedev and his cabinet is a collection of headless monetarists, while Medvedev, who is a lawyer by trade, goes in Russia by humiliating moniker iPhonya--hardly the type of people who know how to run any real business of manufacturing. Yet, import substitution is by no means a failure, not even close. Consider this: Russia started production of the latest advanced diesel engine and diesel generators. This is huge, since this opens the road to not only independently completing series of Project 20380 (20385) corvettes but also will have a major impact on Russia's shipbuilding industry--both civilian and military. If not for sanctions, this and very many other projects would have never been started. Today, Russia produces the line of most sophisticated machines which ranges from MRI diagnostic centers, CNC machining centers, microprocessors, jet planes and, well, space ships. Many of these advances come today by the way of Military-Industrial Complex and fields associated with it and it is being done much more efficiently than it was done in USSR. Technologies and materials which are being developed in MIC find their way into civilian and purely consumer fields. 

Russia's internal market, its demands are such that import substitution and developing of domestic producers is a natural path for Russia, which also corresponds well with what is going on in the US in terms of slogans--Trump's making America great again can not come without restoration of the US manufacturing base and that means tariffs and good ol' economic nationalism, especially in the field which matters MOST--for financial analysts, if any, who read this text it is time to either step away from monitor or take something which will prevent them going apoplectic--MACHINES and everything they entail. No machines, no real economy--it is an axiom and I, and not me only, don't care what Moody's credit rating is given nor what is the capitalization of such BS as Facebook or Apple (what's next for iDiots--3D time and life wasters with their useless toys?), without machines--no civilization. We, as a people are in dire need to build things which make us proud, from computers to jet airliners, to space ships. Without it, without grand technological ideas we are nobody, stuffed in our cubicles in some real estate or financial office totally removed from seeing the results of our ideas, inspirations, creativity and labor. Even some green peaceniks are getting it. 

Sanctions should stay in place;-)

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