Written by Chris Miller, Putinomics focuses on power and money in Russia in recent history. Specifically, how Vladimir Putin ended up getting to where he is today from the fall of the Soviet Union.

Three goals of government. Centralize power, Prevent discontent, and have private business drive economy without sacrificing first two. Hyperinflation and chaos in the 1990s, due to Russian debt. Breakdown of communism just like China from supply shortage from fixed prices. Putin started at KGB, then St. Petersburg as head of external relations in 1991; managing tax collection, foreign investment, then helped Sobchak unsuccessfully run for mayor; helped Sobchak escape from prison through hospital.

-after collapse, most state assets taken illegally or underhanded. E.g Rem Vyakhirev, serving as leader of Gasprom, did rigged auctions to executives to buy shares at low price. Sell gas at below market price to shell companies then resale at full value, allowing the owners of shell companies to profit. $1.5 billion to Vyakhirev. Norilsk Nickel, bought by Vladimir Potanin for $170 million (minimum bid) as other bids for double were rejected for “technicalities”. “Loans for shares”, no rule of law, powerful oligarchies in Yeltsin’s tenure in the 1990s. Tax collection issue, no tax from free providence of gas and electricity monopolies – could not control companies, people, or local governments to cooperation from Moscow’s Kremlin. Losing tax battle with Gasprom and not splitting it, Yeltsin had to borrow from George Soros in hundreds of millions to find government pensions. Putin headed the FSB, the KGB successor after being formally dismantled. Russia defaulted on debt in 1998 to devalue Ruble against other currencies, to avoid printing money and hyperinflation. Prime Minister chosen by Yeltsin, then president after Yeltsin resigned in late 1999. Putin wants strong state and rebuilding economy, a coalition between business and government, which was popular to many. Strong state, strong economy. Putin wanted vertical integration of power so that local governments would heed the central government. Russia a mess in the 1990s.

-Putin sought to restore rule of law and pressured the oligarchs who “stole money and plunder the national wealth to his advantage”. Vowing to never let this repeat in Russia. Removing oligarchs was popular amongst Russian citizens.

-oil price increase and decrease of ruble (decreased production costs) leads to more and efficient oil production in the 2000s, how to tax them? Mil bail Khordorkovsky was very confident and lacked political tact – led to him challenging Putin. Money hungry. Banking, then oil, at expense of everyone else. Putin worked with oil tycoons that were friendly with him and the people of the past. Putin first taking down oligarchies that opposes him but also hated by the public in jail or exile, smart. A way too high $28 billion tax bill levied on Yukos oil (massive support from public due to 1998 bankruptcy), and led to jailing, and oil assets sold again at below asset value. This led to willing cooperation from other Russian oil companies for taxes due to the strongest and most vocal Khodorkovsky, being put down.

2001- Putin fires Vyakhirev and hires Miller, an independent outsider, who also fires loyalists. Then, new corruption by political elites and friends at Gazprom as still majority controlled by government. Gasprom purchases 13.1 billion of Sibneft to enter oil. Renationalize oil and gas. Gasprom has export monopoly, low price to Russians for gas monopoly. Now, will be shared, forcing Gasprom to be more efficient or else Independent gas producers take more market share (from 10 to 30% in 15 years at 2018).

-In the 2000’s over half a trillion dollars put into various foreign reserve currencies. Countries like Russia and China are able to succeed due to stable leadership in power for long periods of time that know what they are doing. Since 1998 default, up until the oil peak in 2007, Putin built up gold and foreign currency reserves, paid down various debts, over the communists wish of spending more. Very smart to save in high oil price times and avoid overspending. Tax heavily commodity booms while lowering taxes for other areas to support exports. Immediate past hard times led to conservative, smarter economic policy. They wanted low inflation to force some economic growth. Hyper inflation however is bad. Putin wanted 3% inflation, which has still not occurred in Russia. Money in foreign reserves to avoid inflation, conservative budgets and estimates of oil price. Stabilization fund, not over 500 billion in amount; excess used elsewhere. As the economy recovered, Russians, like everyone, had the memory of a goldfish and wanted to start spending more. Canada made no attempts to improving or saving money in any fund, which is why since 2015 it is a disaster and has not really recovered, even though Russia has done so, and its stocks, some are up 4x in 4 years.

-lots of Putin’s friends ended up becoming rich and appointed in various positions. Like Canada, inefficient monopolies in industries, such as railway run by Yakunin and others with exorbitant wealth, hidden in offshore accounts

-Russian companies were largely built to benefit the few who controlled them, but this is lessening now as they are benefiting the shareholders now, especially more than ever.

-Corruption only benefits a few, whereas open competition benefits all

-Galitsky, who made it on merit, opened Magnit, equivalent of Walmart to standardize food to supermarkets

-governments are judged based on living standards of its people

-prevent protests with low unemployment and wage growth by pressuring the oligarchs; population and job inefficiency as a result

-pay pensions, even at expense of individual accounts in the three pronged retirement accounts

-Russia, like Canada, is a resource based country. Do not let banking system collapse.

-control countries currency exchange rate: keep supply fixed by spending foreign currency reserves. If keep spending own currency, you increase the supply and decrease the value, making imports more expensive for citizens.

Difficult for resource countries to diversify from commodities, especially large countries like Russia and Canada.

-spending massively after the recession, rigged election in 2012, meet protestors with fierceness, use populism to get the lower class support

-Geopolitics; many of the former Soviet bloc is centred around Russia, and willingly. E.g. Bulgaria gets 90% of its gas from Russia, Kazakhstan is dependent on China and Russia. Ukraine however picked the EU, forcing Nordstream to develop directly to Germany

-After Russia took Crimea, several economic sanctions against Russian firms and individuals, some unwillingly

-Most of Gazprom’s debt is in foreign currency