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Notes on Russia

November 19, 2014

Russia and its redoubtable president, Vladimir Putin, have been much in the news lately. The latest flurry came when Putin was taken out behind the woodshed at the G20 conference in Australia last weekend over his recent moves to inject more Russian troops and arms into Ukraine.

For today’s Outside the Box we have two pieces that deliver deeper insights into the situation with Russia and Putin. The first is from my good friend Ian Bremmer, President of the Eurasia Group and author of Every Nation for Itself: Winners and Losers in a G-Zero World. You probably caught my mention of Ian’s presentation at the institutional fund manager conference where we both spoke last weekend. He had some unsettling things to say about Russia; and so when he followed up with an email to me on Monday, I asked if he’d let me share the section on Russia with you. Understand, Ian is connected, and so what you’re about to be treated to here is analysis from way inside. (He’ll be presenting at our Strategic Investment Conference again next April, too.)

Then we turn to a piece that my friend Vitaliy Katsenelson published last week in his monthly column in Institutional Investor. I need to preface this one by mentioning that Vitaliy was born in Murmansk, Russia, where he lived until age 18, when his family emigrated to the US. Fast-forward 23 years, and today Vitaliy is Chief Investment Officer for Investment Management Associates in Denver and author of the highly successful Active Value Investing: Making Money in Range-Bound Markets and The Little Book of Sideways Markets. That’s quite a journey, and Vitaliy has some very strong feelings about the country he left as well as the one he came to. In his intro to today’s piece he admits,

[This is] one of the most emotionally taxing things I ever wrote. A few days ago my wife looked at me and said, “When are you going to be done with it; this article is bringing you down.” She was right.

But I think you’ll agree that when Vitaliy recently subjected himself to a 7-day news diet of nothing but Russian media, the better to comprehend current Russian attitudes, he resurfaced with some valuable insights.

And I can’t leave our deliberations on all things Russia and Putin without mentioning again Marin Katusa’s new book, The Colder War, which I featured in Outside the Box two weeks ago. It’s a compelling survey of the history and dynamics of world energy markets and the role that Putin seeks to play in them.

Geopolitically, the world seems to be a calmer place as we head into the Christmas season, with the significant and glaring exception of Russia. And remember, falling oil prices will seriously impact an already stressed Russian economy.

But before we turn to the eye-opening if somber notes below, I want to share with you a fabulous story from my friend Art Cashin, who is one of the world’s great raconteurs. I make sure to have dinner with Art whenever I’m in New York. In addition to his wisdom concerning the markets, he simply has the best stories. The last dinner (also attended by Barry Ritholtz and Josh Brown) was at an establishment called Sparks, an old New York watering hole and famous steakhouse not far from Grand Central Station.

Art shared the following story with us and had us in tears. Back in the day, the New York Stock Exchange was a mighty interesting place with a very curious cast of interesting and interlocking personalities. It has calmed down some over the decades, but the stories … well, let’s just let Art tell it.

For years, one of the communal tables at the Luncheon Club would issue a group challenge. They would all set a target for losing weight by some date a couple of months out. The one who weighed up furthest from their target had to buy dinner for the others.

In 1985, the loser was Maurice (Monk) Meyer of Henderson Brothers. Among the others were Jack (Jackie D) D’Alessandro, Pat McCarthy, Bill Fitzpatrick, and Roger Hochstin.

They decided to turn the event into a sort of a Christmas party and scheduled the dinner for the week before Christmas. They made reservations at Sparks Steakhouse.

As the day approached, there was an unexpected development. Mafia kingpin Paul Castellano was gunned down, along with his driver, on the sidewalk outside Sparks.

Nevertheless, the show must go on.

When the fated date arrived, the group decided to meet at the Luncheon Club bar for some rehearsal cocktails. They rehearsed for a couple of hours and then headed for Sparks.

As they arrived, around 7:00, there were some early hints it might be a bumpy evening. When they walked in, the hostess asked if they had reservations. “Only about the food,” snapped Pat McCarthy. That was followed by the maître d’ asking where they’d like to sit, only to hear Roger say, “In the non-shooting section, please.”

Once they were seated, they ignored the menu and ordered more cocktails and several bottles of wine. For the next three hours, they ignored the pleas of several waiters and the maître d’ to order some food to go along with the wine and drinks.

In the meantime, Roger may have been getting bored. He noticed another table with six Japanese men in their twenties and one older man, who looked maybe 60.

Somehow, Roger found a Chinese takeout menu from Chou Lu in his pocket. He put his napkin over his arm as though he were a waiter and went over to the table of Japanese men and began reading the menu in a form of broken Chinglish that would have embarrassed even the producers of the old Charlie Chan movies. Things like “Pork Flied Lice.”

Ironically, only the older man spoke English, and he seemed to think it was a wonderful joke. He told Roger that Roger’s table seemed to be having a wonderful time and asked if he might join it briefly.

Roger brought him over and introduced him around. There was a pleasant exchange for about 15 minutes and then Jackie D asked him where in Japan he came from. They man replied – “Actually, I’m from Okinawa.” Bill Fitzpatrick darkened and said, pointedly, “My favorite uncle was killed on Okinawa by you people during the war.” The man quickly excused himself.

Pat McCarthy reminded Bill that he had not had an uncle in the war. Jack turned to Pat and said, “That doesn’t matter; Bill went through the barrier about two drinks ago.”

Anyway, the waiter finally prevailed upon the boys to order entrees by 10:00. Meanwhile, Maurice was sinking fast. He had come out despite a bad case of the flu, since he was the designated payer. It quickly became evident that Meyer would not make it much past 10:30. He called for the check.

As they were about to help Meyer to his feet, Jackie D noticed that McCarthy had had his untouched entrée put into a doggie bag. Not wanting to be outdone, Jackie reached down and put his medium rare petite filet in his inside jacket pocket without benefit of a doggie bag.

At the coatrack, Jackie attempted to help Meyer get his overcoat on. In doing so Jack lifted his own hand high and out. That swept his jacket off to the side, revealing a shirt dripping with blood from the medium rare filet in his pocket.

Perhaps recalling Castellano’s recent fate, one woman at a table spotted Jack’s shirt and screamed, “My God! He’s been shot!”

Everybody in the restaurant hit the deck, including the maître d’ and our adventurous group. When everyone got back to their feet, the maître d’ told the boys they were never allowed back – collectively or individually.

In a huff, the boys headed off to the John Barleycorn.

Art can go on all night with stories like that. You really should put them into a book, Art.

You have a great week. I am off to the gym, where The Beast will continue to try to whip this poor old body into some similitude of shape.

Your still smiling from all the great stories analyst,

John Mauldin, Editor
Outside the Box

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Notes on Russia

By Ian Bremmer
Nov. 17, 2014

the russians are taking every opportunity to escalate an already plenty hostile relationship with the united states and some selected allies. the g20 summit was particularly negative on that front, with russian president putin bringing along some warships to australia, while canadian prime minister stephen harper led a rope line of western leaders calling putin a scoundrel and a liar. putin left early, claiming a need to catch up on sleep and some other business to attend to.

like in ukraine.

i had a chance to talk with some senior russians last week, including two advisors to the kremlin. they explained that putin expected his offer of a ceasefire in southeast ukraine would be sufficient to get the americans to tolerate a status quo, while bringing the europeans to the table with some sanctions reductions. that didn’t happen: instead a coordinated harder line policy stayed in place, while the americans and germans looked set to put more sanctions in place unless the russians actively backed down. despite mounting economic pressure on the europeans, the frozen conflict/long game the kremlin was playing didn’t look like it was going to succeed.

and so the kremlin moved backed to escalation, dramatically expanding their direct military presence in the region – confirmed by nato and the typically-conservative osce, denied by the russian government – and announcing plans to build up troops in crimea. they’re preparing both sides to consolidate their territory, initially through taking the port city of mariupol...potentially then a land-bridge between eastern ukraine and crimea and beyond (odessa being the most obvious place). the most likely path is the kremlin now looking for provocations to “go further” – they’ve already expressed a level of outrage around the ukrainian government severing economic ties to the separatist region – then the fiction of ceasefire is erased and the russians/separatists take more territory. ultimately, whatever the formalized “governance” structure, the kremlin is moving towards making crimea and southeast ukraine a single place.

there’s very little the ukrainians can do. the ukrainian military will remain badly outgunned, and the local populations in the region remain fairly anti-kiev, even if they’re skittish about the notion of russian takeover. we’ll see a pickup in international calls to provide arms for the ukrainian military, but they’ll be rejected, most particularly by the united states. at best we’ll see a step up in intelligence and training support, to little consequence.

putin’s military efforts are also stepping up outside ukraine: the “unknown” but clearly russian submarine off sweden, a russian nuclear armed exercise during an intelligence meeting in denmark; bomber patrols in the gulf of mexico. they’re all bluster, but a clear message to america and its allies...and pose a far higher potential for accidents – one scandanavian airlines flight recently made an emergency alteration to its flight path when a russian military jet suddenly appeared in front of it.

the likelihood of moscow backing down in this environment is near zero. the sanctions aren’t having a meaningful impact on the russian economy (yet) and the popularity of the kremlin isn’t taking a hit. the speech from former soviet general secretary mikhail gorbachev – no fan of putin, but clearly pointing the finger at the west for russia’s troubles – makes that clear. and it’s getting harder for the americans to find an out. german chancellor angela merkel continues to be the best opportunity for compromise, but her relationship with putin is now only barely functional (the kremlin advisors i spoke with said this was the single biggest misstep from putin to date – they believed his bilateral conversations with her were too aggressive and led merkel to feel misled; neither believed the relationship could be salvaged near-term). and so russians are now presuming the sanctions environment will be there for the long haul, and are thinking about the longer term economic implications.

i’d now say that’s meaningful before we get to russia’s 2018 elections: further sanctions causing steep recession leading to unrest in the regions, which begins to metastasize to the cities. that would spook russian elites, some of whom could split from the kremlin. the key early warning indicator would be meaningful defections of any insiders to the west. but critically, we’re at least a year or two away from that. by which time ukraine has been economically devastated, while the strategic shift of russia-china is thoroughly entrenched.

Putin’s World: Why Russia’s Showdown with the West Will Worsen

By Vitaliy Katsenelson
Institutional Investor, Nov. 17, 2014

My father, Naum Katsenelson, painted this watercolor, “Dolls Become Humans,” two years after we came to the United States in 1993. This is the only “thematic” picture my father ever painted.

If you look at the picture carefully you’ll see the silhouette of Lenin in the clouds (representing the past). On the far left there is a Stalin doll and a line of people going to prison. Across from Stalin on the right there is a doll of Brezhnev (you’ll recognize him by his large, distinct eyebrows). On the building on the right there is an image of Gorbachev. Look carefully at the faces in the foreground (representing the present and the future): as they get closer to you they become more humanized – transforming from dolls into humans. The man in front of the woman draped in the American flag is my father; the boy with the Star of David on his chest is me.

This was an aspirational picture. In 1993 the Soviet Union fell apart. Russia’s future looked bright – although it was in chaos, it was a democracy. The dolls here are an analogy for robots, suggesting uniformity of thought. As I was composing this I called my father and asked him if he’d paint the same picture today. He said, “No. Today’s picture would look very different.”

I spent three months aggravating over the following article. It was one of the most emotionally taxing things I ever wrote. A few days ago my wife looked at me and said, “When are you going to be done with it; this article is bringing you down.” She was right.

I grew up hating America. I lived in the Soviet Union and was a child of the cold war. That hate went away in 1989, though, when the Berlin Wall fell and the cold war ended. By the time I left Russia in 1991, the year the Soviet Union collapsed, America was a country that Russians looked up to and wanted to emulate.

Twenty-three years later, a new version of cold war is back, though we Americans haven't realized it yet. But I am getting ahead of myself.

After Russia invaded Crimea and staged its referendum, I thought Vladimir Putin's foreign excursions were over. Taking back Crimea violated plenty of international laws, but let's be honest. Though major powers like the U.S. and Russia write the international laws, they are not really expected to abide by those laws if they find them not to be in their best interests. Those laws are for everyone else. I am not condoning such behavior, but I can clearly see how Russians could justify taking Crimea back – after all, it used to belong to Russia.

I was perplexed by how the Russian people could possibly support and not be outraged by Russia's invasion of Ukraine. But I live in Denver, and I read mostly U.S. and European newspapers. I wanted to see what was going on in Russia and Ukraine from the Russian perspective, so I went on a seven-day news diet: I watched only Russian TV – Channel One Russia, the state-owned broadcaster, which I hadn't seen in more than 20 years – and read Pravda, the Russian newspaper whose name means "Truth." Here is what I learned:

If Russia did not reclaim Crimea, once the new, illegitimate government came to power in Ukraine, the Russian navy would have been kicked out and the U.S. navy would have started using Crimean ports as navy bases. There are no Russian troops in Ukraine, nor were there ever any there. If any Russian soldiers were found there (and there were), those soldiers were on leave. They went to Ukraine to support their Russian brothers and sisters who are being abused by Ukrainian nationalists. (They may have borrowed a tank or two, or a highly specialized Russian-made missile system that is capable of shooting down planes, but for some reason those details are not mentioned much in the Russian media.) On November 12, NATO reported that Russian tanks had entered Ukraine. The Russian government vehemently denied it, blaming NATO for being anti-Russian.

Malaysia Airlines Flight MH17 was not downed by Russia or separatists. It was shot down by an air-to-air missile fired by Ukraine or a NATO plane engaged in military exercises in Ukraine at the time. The U.S. has the satellite imagery but is afraid of the truth and chooses not to share it with the world.

Ukraine was destabilized by the U.S., which spent $5 billion on this project. As proof, TV news showed a video of Senator John McCain giving a speech to antigovernment protesters in Kiev's Maidan Square. It was followed by a video of Vice President Joe Biden visiting Ukraine during the tumult. I wasn't sure what his role was, but it was implied that he had something to do with the unrest.

Speaking of Joe Biden, I learned that his son just joined the board of Ukraine's largest natural gas company, which will benefit significantly from a destabilized Ukraine.

Ukraine is a zoo of a country, deeply corrupt and overrun by Russian-haters and neo-Nazis (Banderovtsi – Ukrainian nationalists who were responsible for killing Russians and Jews during World War II).

Candidates for the recent parliamentary election in Ukraine included Darth Vader (not kidding), as well as a gay ex-prostitute who claims to be a working man's man but lives in a multimillion-dollar mansion.

I have to confess, it is hard not to develop a lot of self-doubt about your previously held views when you watch Russian TV for a week. But then you have to remind yourself that Putin's Russia doesn't have a free press. The free press that briefly existed after the Soviet Union collapsed is gone – Putin killed it. The government controls most TV channels, radio and newspapers. What Russians see on TV, read in print and listen to on the radio is direct propaganda from the Kremlin.

Before I go further, let's visit the definition of propaganda with the help of the Oxford English Dictionary: "The systematic dissemination of information, especially in a biased or misleading way, in order to promote a political cause or point of view."

I always thought of the Internet as an unstoppable democratic force that would always let the truth slip out through the cracks in even the most determined wall of propaganda. I was wrong. After watching Russian TV, you would not want to read the Western press, because you'd be convinced it was lying. More important, Russian TV is so potent that you would not even want to watch anything else, because you would be convinced that you were in possession of indisputable facts.

Russian's propaganda works by forcing your right brain (the emotional one) to overpower your left brain (the logical one), while clogging all your logical filters. Here is an example: Russian TV shows footage of schools in eastern Ukraine bombed by the Ukrainian army. Anyone's heart would bleed, seeing these gruesome images. It is impossible not to feel hatred toward people who would perpetrate such an atrocity on their own population. It was explained to viewers that the Ukrainian army continued its offensive despite a cease-fire agreement.

Of course if you watched Ukrainian TV, you would have seen similar images of death and despair on the other side. In fact, if you read Ukrainian newspapers, you will learn that the Ukrainian army is fighting a well-armed army, not rebels with Molotovs and handguns, but an organized force fully armed by the Russian army.

What viewers were not shown was that the cease-fire had been broken before the fighting resumed. The fact that Putin helped to instigate this war was never mentioned. Facts are not something Russian TV is concerned about. As emotional images and a lot of disinformation pump up your right brain, it overpowers the left, which capitulates and stops questioning the information presented.

What I also learned is that you don't have to lie to lie. Let me give you an example. I could not figure out how the Russian media came up with the $5 billion that "America spent destabilizing Ukraine." But then I found a video of a U.S. undersecretary of State giving an 8.5-minute speech; at the 7.5-minute mark, she said, "Since Ukrainian independence in 1991 … [the U.S. has] invested more than $5 billion to help Ukraine." The $5 billion figure was correct. However, it was not given to Ukraine in three months to destabilize a democratically elected, corrupt pro-Russian government but over the course of 23 years. Yes, you don't have to lie to lie; you just have to omit important facts – something Russian TV is very good at.

Another example of a right-brain attack on the left brain is "the rise of neo-Nazism in Ukraine." Most lies are built around kernels of truth, and this one is no different. Ukraine was home to the Banderovtsi, Ukrainian nationalists who were responsible for killing tens of thousands of Jews and Russians during World War II.

Putin justified the invasion of Crimea by claiming that he was protecting the Russian population from neo-Nazis. Russian TV creates the impression that the whole of Ukraine is overrun by Nazis. As my father puts it, "Ukrainians who lived side by side with Russians did not just become Nazis overnight."

Though there may be some neo-Nazis in Ukraine, the current government is liberal and pro-Western. Svoboda – the party whose members are known for their neo-Nazi and anti-Semitic rhetoric – did not get even 5 percent of the votes in the October election, the minimum needed to gain a significant presence in parliament. Meanwhile the TV goes on showing images of Nazis killing Russians and Jews during World War II and drawing parallels between Nazi Germany and Ukraine today.

What also makes things more difficult in Russia is that, unlike Americans, who by default don't trust their politicians – yes, even their presidents – Russians still have the czarist mentality that idolizes its leaders. Stalin was able to cultivate this to an enormous degree – most Russians thought of him as a father figure. My father was 20 when Stalin died in 1953, and he told me that he, like everyone around him, cried.

I keep thinking about what Lord Acton said: "Power corrupts, and absolute power corrupts absolutely." The Putin we scorn today was not always like this; he did a lot of good things during his first term. The two that stand out the most are getting rid of the organized crime that was killing Russia and instituting a pro-business flat tax system. The amount of power Russians give their presidents, however, will, with time, change the blood flow to anyone's head. Come to think of it, even Mother Teresa would not have stood a chance in Russia.

A few weeks ago Putin turned 62, and thousands of people took to the streets to celebrate his birthday. (Most Americans, including this one, don't even know the month of Barack Obama's birthday.)

In my misspent youth, I took a marketing class at the University of Colorado. I remember very little from that class except this: For your message to be remembered, a consumer has to hear it at least six times. Putin's propaganda folks must have taken the same class, because Russian citizens get to hear how great their president is at least six times a day.

We Americans look at Putin and see an evil KGB guy who roams around the country without a shirt on. Russians are shown a very different picture. They see a hard-working president who cares deeply about them. Every news program dedicates at least one fifth of its airtime to showcasing Putin's greatness, not in your face but in subtle ways. A typical clip would have him meeting with a cabinet minister. The minister would give his report, and Putin, looking very serious indeed, would lecture the minister on what needed to be done. Putin is always candid, direct and tough with his ministers.

I've listened to a few of Putin's speeches, and I have to admit that his oratory skills are excellent, of a J.F.K. or Reagan caliber. He doesn't give a speech; he talks. His language is accessible and full of zingers. He is very calm and logical.

Russians look at the Putin presidency and ask themselves a very pragmatic question: Am I better off now, with him, than I was before he came into power? For most the answer is yes. What most Russians don't see is that oil prices over the past 14 years went from $14 to more than $100 a barrel. They are completely responsible for the revival of Russia's one-trick petrochemical economy. In other words, they should consider why their economy has done better the past decade, and why it may not do as well going forward. Unless Putin was the one who jump-started China's insatiable demand for oil and other commodities that drove prices higher, he has had very little to do with Russia's recent "prosperity."

I place prosperity in quotes because if you take oil and gas riches away from Russia (lower prices can do that with ease), it is in a worse place today than it was 14 years ago. High oil prices have ruined Russia. They have driven its currency up, making its other products less competitive in international markets. Also, capital gravitates toward higher returns; thus oil has sucked capital from other industries, hollowing out the economy. After the Soviet Union collapsed, Russia had a chance to broaden its economy; it had one of the most educated workforces in the world. Sadly, it squandered that opportunity. Name one noncommodity product that is exported from Russia. There aren't many; I can think only of vodka and military equipment.

But most Russians don't look at things that way. For most of them, their lives are better now: No more lines for toilet paper, and the stores are full of food. Their personal liberties (such as freedom of speech and freedom of the press) have been taken away from them, but many have so much trust in their president that they don't mind, whereas others are simply complacent.

Today we see three factors that influence oil prices and are working against Russia: Supply is going up with U.S. shale drilling; demand growth will likely decline if the Chinese economy continues to cool; and the dollar is getting stronger, not because the U.S. doing great but just because the rest of the world is doing worse. If oil prices continue to decline, this will expose the true state of the Russian economy.

When I visited Russia in 2008, I sensed an anti-American sentiment. NATO – which in Russia is perceived as a predominantly American entity – had expanded too close to Russian borders. Georgia tried to join NATO, but Russia put a quick end to that. Russians felt they extended a friendly hand to the U.S. after 9/11, but in response America was arraying missiles around its borders. (The U.S. says they are defensive, not offensive; Russians don't see the distinction. They are probably right.)

The true colors of this new cold war came to light recently. In August 2008, according to Henry Paulson, the U.S. Treasury secretary at the time, "top level" Russian officials approached the Chinese during the Olympics in Beijing and proposed "that together they might sell big chunks of their GSE (Fannie Mae and Freddie Mac) holdings to force the U.S. to use its emergency authorities to prop up these companies."

This incident took place just weeks before the collapse of Lehman Brothers. The U.S. economy was inches from revisiting the Stone Age. The proposed Russian-Chinese maneuver could have made such an outcome more likely. The Federal Reserve would have had to step in and buy Fannie's and Freddie's debt, and the dollar would have taken a dive, worsening the plunge in the U.S. economy. Our friend Putin wanted to bring the U.S. economy down without firing a single shot, just as he annexed Crimea from Ukraine.

Today anti-American sentiment is much greater in Russia. European sanctions are seen as entirely unjustified. Here is why: Crimea had a "democratic referendum," and the Ukrainian conflict is believed to be not of Russia's doing but rather an American attempt to destabilize Russia and bring Ukraine into NATO. In his annual speech at the Valdai conference last month, Putin said America had pushed an unwilling Europe into imposing sanctions on Russia. America is perceived as an imperialistic bully that, because of its economic and military power, puts its own self-interest above everyone else's, and international law.

Putin uses anti-Americanism as a shiny object to detract attention from the weak Russian economy and other internal problems. In the short run, sanctions provide a convenient excuse for the weakening Russian economy and declining ruble. They have boosted Putin's popularity (at least so far). As the Russian economy gets worse, anti-American sentiment will only rise.

This new version of the cold war has little in common with the one I grew up in. There are no ideological differences, and there is no arms race (at least not yet, and let's be honest: Today neither country can afford one, especially Russia). At the core of it, we don't like what Russia is doing to its neighbors, and Russia doesn't like what we do to the rest of the (non-EU) world.

The criticisms of U.S. foreign policy voiced by Putin in his latest Valdai speech are shared by many Americans: The U.S. is culpable in the unresolved, open-ended Afghanistan adventure; the Iraq War; the almost-bombing of Syria, which may have destabilized the region further; and the creation of the Islamic State, which is in large part a by-product of all of the above. Yet Putin's abominable Ukrainian excursion and the thousands of lives lost were never mentioned.

But there is also something less tangible that is influencing Russia's behavior: a bruised ego. During the good old Soviet Union days, Russia was a superpower. It mattered. When it spoke, the world listened. The Russian people had a great sense of pride in their Rodina (Mother Russia). Today, if Russia did not have nuclear weapons, we'd pay much less attention to it than we do. Pick a developing country without oil whose president you can name. (Okay, we Americans can't name the president of almost any other country, but you get the point.)

Anti-Americanism and Putin's popularity will both rise as the Russian economy weakens. For instance, Putin took his own people hostage when he imposed sanctions on imports of European food. The impact on Europe will not be significant (the Russian economy is not very large in comparison to the European Union), but Russia is very dependent on these imports. In the U.S. consumers spend about 13 percent of their earnings on food, but in Russia that number is almost three times larger. Therefore, food inflation hurts Russians much more. Yet as food inflation spiked, so did Putin's popularity and anti-Americanism. Even declining oil prices will be explained as a anti-Russian manipulation by the U.S.

Unfortunately, the only thing Russia has going for it today is its nuclear weapons. Russia has started to remind us of its military recently. According to NATO, the alliance "has conducted over 100 intercepts of Russian aircraft in 2014 to date, which is about three times more than were conducted in 2013."

Every article needs a conclusion, but this one doesn't have one. I am not sure what this new cold war means for the world. Will Russia start invading other neighboring countries? Will it test NATO resolve by invading Baltic countries that are part of NATO? I don't know. Economic instability will eventually lead to political crises. We have plenty of economic instability going on around the world.

I'll leave you with this thought: On March 7, 1936, the German army violated the Treaty of Versailles and entered into the Rhineland. Here is what Hitler later said:

"The forty-eight hours after the march into the Rhineland were the most nerve-racking in my life. If the French had then marched into the Rhineland, we would have had to withdraw with our tails between our legs, for the military resources at our disposal would have been wholly inadequate for even a moderate resistance."

Those two days determined what Germany would do next – build out its army and start World War II.

Comparing Putin with Hitler, as one of my Russian friends put it, is "absolutely abominable" because it diminishes Hitler's atrocities and overstates by a mile what Putin has accomplished to date. Yet it feels as if we are at a Putin-of-1936 moment. Will he turn into a Putin of 1939 and invade other countries? I don't know. But the events of the past nine months have shown Putin's willingness to defy international law and seize the advantage on the ground, betting – correctly so far – that the West won't call his bluff.

As Garry Kasparov put it, while the West is playing chess, responding tactically to each turn of events, Putin is playing high-stakes poker. We ignore Putin at our own peril.

Vitaliy Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. To receive Vitaliy’s future articles by email or read his articles, click here.

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walterbruno1938@hotmail.com

Dec. 8, 2014, 2:40 p.m.

Katsenelson`s pamphlet initially, sounded a little less biased than ordinary reports on Putin`s Russia presented in “German”( better called foreign ) mass media.  However when he ventured into history quote” the German army violated the Treaty of Versailles entered the Rhineland” and further…..” what Germany would do next-build out ist army and start World War II”, it should be obvious to everybody with some insight that the boy with the star of David on his chest is extremely biased. Only so much:
The Treaty of Versailles was not only shameful because it was NOT a treaty as it was forced on Germany after WWI by victorious countries including the US,  Germany was given the “Kriegsschuld”,  Tthe French had invaded the Rhineland , consequence of Germany^s starving people were unable to fully pay for staggering reparations.
With the events after WW I in mind, who started WW II? The Germans as Katsenelson Claims? in accordance with history -a set of lies agreed upon ? Or were it the Poles which had grabed sizeable chunks of German land? When Hitler- Germany invaded Poland in agreement with Stalin`s Sowjet-Union, France and Britain declared war on Germany, however, not on Russia which invaded Poland a few days later.!
Put it this way: Germany had more reasons to invade Poland to regain stolen land than for example, Bush America had recently to invade Irak.
Thus, with Katsenelson``s biased historical perspective in mind which can be repudiated even by diligent high school students, his observations on Putin`s Russia become incredible. Emotions are neither condusive to scientific research nor to objectivity.  Walter Bruno

tjbenton80425@aol.com

Nov. 27, 2014, 9:07 p.m.

Does Ian Bremmer’s keyboard not have a “SHIFT” key or why is he exempt from the rules of grammar regarding proper Capitalization that the rest of us have had to follow all of our lives?  I am NOT impressed.

hendrikus hoksbergen

Nov. 22, 2014, 8:30 a.m.

why is it ignored that the Russians are nearly debtfree and dont have any reason to “fight” the US and de EU?

the standard of living in Russia, during putin, has gone up steadily.

that puting took crimea is understandable: it used to be russian and only because Nikita Chroesjtsjov (ukrainer himself) gave it to ukraine does not mean that the crimea people are ukrainian.
if putin did not respond to the western invasion un ukraine then the russian fleet in the blacksee was gone. and ....a US navy fleet would have been arrives.
would that bring stability ??  I doubt it.

I think putin doesnt have any intention to “invade” other former sovjet countries, he just wants NATO to stop from going east.

europe should stop doing what the US wants it to do and think for itself. if things go wrong the war will be in (eastern) europe and not in one of the US states. and as an European citizen (in switzerland) i dont want a WW III in my backyard.

so stop behaving like fools and TALK without sanctions and treatning.

 

David Wooten

Nov. 20, 2014, 3:38 p.m.

Neither Bremmer nor Katsenelson addressed relevant facts about the recent conflict between Russia and the West.  The fact is that Russia, despite its huge land mass, only a population (145m) and economy that are both tiny fractions of NATO’s and is NOT a threat to US or to Europe - it is the other way around.  Russia has a large and easily penetrable border through which armies from Western Europe invaded twice in the last century at great cost to Russia as a single country in WWI and as part of the Soviet Union in WWII. NATO’s borders are 1000m east of where they were two decades ago before the dissolution of the Warsaw Pact, and this advance was a blatant violation of (oral) promises made by former 20yr) W. German foreign minister, Hans Dietrich-Genscher and US Secretary of State James Baker.

And it doesn’t matter how much of the taxpayers’ money Assist Sec of State Victoria Nuland spent on Ukraine. She, along with Senator McCain and (Ambassador) Geoffrey Pyatt, was actively involved with organizing (PAID and violent) demonstrators against Ukraine’s legitimate President just because he accepted a much better offer from Putin than the one he negotiated with Nuland and the EU. Moreover, his ouster was accomplished in a most DECEITFUL manner while Putin was hosting the Olympics.

And it is dangerous - because Russia has little in the way of conventional weaponry to hold off an invasion by NATO that is quite clearly in the future. Their only defense against NATO is the unthinkable. Think they won’t use it?  Think again.  NATO planners are not going to take that chance, once the real hostilities begin. NATO is going to try and take out Russia’s only deterrence as soon as possible - and the Russians know it. That is, for Russia, it’s use ‘em or lose ‘em. Sure ‘we’ will win.  ‘Only’ a few hundred million will perish. But, (if I survive) I won’t be proud of ‘my’ government. Its leaders will just make me even more sick to my stomach than I already am.

BTW, Katsenelson says Russia does not have a free press. Does he not know that most US newspapers are on the financial ropes and that their reporters are dependent on mostly government news sources for their stories?

John Richards

Nov. 20, 2014, 3:01 p.m.

I was disturbed to read this article, and to be presented with such a distorted, one-sided view of the world. Putin wears the black hat, the US wears the white. But when I read the comments from other readers, I took great heart in the fact that there are quite a few respondents who are thinkers and are paying attention to the events in the world.
Many of the problems in the world are created directly by the pervasive US Security State, over which no one has control any longer. If the author is conflicted, it is because he loves his new home, but perceives many of the same flaws which were so evident in his Soviet birthplace. He is in denial.
So today we have a situation where “spy” and “traitor” are defined as someone revealing how that security state is spying on the general public and breaking the law to do so. Perhaps it is time to reread Orwell’s “Nineteen Eighty Four.”  It took us thirty additional years to reach it.

Duncan Hume

Nov. 20, 2014, 2:33 p.m.

After reading the intro I was expecting some interesting insights from Katsenelson but what do we get but the same mumbled story that Putin is evil and plans world domination that is the dominant theme of American news. I watch western news, I see no evidence there to back up the stories of Russian aggression in the Ukraine. no pictures of troop movements, no pictures of Russian forces fighting alongside the separists. It is the Western press that is manipulating the story, and it is plain to see. Looking to the future there is no telling what happens next, America has covertly declared war on Russia, it is quite possible (maybe even probable) that Putin is a lot smarter than his western counterparts, dont be surprised that there will be surprises!

Curt Sanders

Nov. 20, 2014, 1:09 p.m.

Excellent article, accurate and revealing. Czar Putin is a clever and a dangerous leader. Like all deluded megalomaniacs he will overplay his hand at some point. He may have done so already. No worries for the Czar and his cronies they are unlikely to suffer, only the poor average Russian citizen and those of the neighboring country involved in his exploits will…

Barry Rose

Nov. 20, 2014, 9:15 a.m.

I was disappointed in the content of the article, which for the most part gave the Bush & Obama administrations a ‘bye’ on their horrible foreign policy decisions. We do not have to like the president of other countries, but it is insane to underestimate those with nuclear weapons and force them into a ‘fight or flight’ response.  These 2 articles, below, are clear indicators of where our sanctimonious government’s behavior is leading.

http://www.voltairenet.org/article185860.html
and
http://fortruss.blogspot.com/2014/11/grandmaster-putins-golden-trap.html

If the West continues on this self-destructive path, it will not end well.

fallingman7@gmail.com

Nov. 20, 2014, 7:42 a.m.

John, this is neo-con propaganda, and not even very artfully done.  Why would you feature it?  You can’t believe this stuff.

The “Putin as aggressor” meme is so clearly manufactured ... and repeated endless ... by the Washington war establishment and the Pravda-like US media.

Look, I’m an American, born and raised to fear the Russkies.  But lordy, after a while, you figure out the con.  I and a lot of my fellow Americans are anti-US foreign policy, which is insane.  That doesn’t mean we’re “anti-American.”  I suspect the same is true of the Russian people.

I reckon the real threat in the world emanates from foggy bottom and the military industrial complex, not the Kremlin, which has acted completely defensively if you ask me.  This talk of invading the Baltics is the stuff of John McCain’s delusional fantasies.

I can understand why Mr. Katesenelson struggled to write the article.  It’s always harder to write fiction that non-fiction.

DerWanderer

Nov. 20, 2014, 6:36 a.m.

The Ian Bremmer and Vitaliy Katsenelson articles are careen-biased to the point of awash.

First, why is ok for forces in Ukraine (financed and supported by western interests or not) to overthrow a democratic elected govern when that govern was not overtly against Russia, but not to make a referendum in Crimea or eastern Ukraine? As for international law, Crimea was transferred to Ukraine 1954 in the specific context of The Soviet Union. And the Black Sea region is vitally essential, or perceived as by Russia, for security reasons. On the other side we have the U.S Guantanamo Naval base. International Law violation? Who is kidding whom?

Second, one cannot stress enough the folly of the provocation and sanction from U.S.A and E.U against a force that they cannot deal with without immense political and economy disruption with no guarantee whatsoever of a favorable outcome. Russia has allies and has sew up strategic economic and obvious potential military alliance with China and South America (geopolitically and resource essential). Retaliation from the NATO missiles on the border of Russia is a very real possibility such as Installation of multi head nuclear missile in Venezuela, or other South America Country, pointed to United States. Even if redundant and merely symbolically (after all Russia almost touch United states from the north and so its strategic missiles), it is powerful symbolism. And as we know perception in world economics matter, dearly.  What will the United States do, if he can do anything? Can the World afford a second Cold War, or possibly even a third War?

For last and as an aside to give a notion of a normally forgotten part of the world whose resources will be taped by Russia. The “Foro de Sao Paulo” (FSP), is a international organization founded in 1990 in the wake of the Soviet Union Collapse by the extreme left incumbent PT party of Brazil and Fidel Castro. FSP proclaimed aim is reconquest in Central and South America all what the radical left lost in Oriental Europe. FSP members and relations includes Colombian terrorist organization Farc and Hezbollah. This organization did exactly what it set up to do. In a very short time (less than 20 years) almost all of South America and a good Chunk of Central America have extreme left governs headed by members of the FSP. Among Them Brazil, Argentina, Venezuela, Chile, Uruguay, Bolivia, Nicaragua and Ecuador. And are now infiltrated in Colombia internal politics to press a legalization of Farc as a legitimately political party (with an amazing help of notorious members of the United States democratic party), if this occurs Colombia will in no time be governed by Farc in a typical computer vote machine Fraudulent election. In Which occasion,  with exception of minor Paraguay, all of South America will be aligned to the left and, make no mistake, to Russia.     

Incidentally Russia doesn’t suffered economic consequences from the imposed sanctions on imports of European food; the European countries were substituted by a willing Brazil - the greatest source of meat in the world - and Argentina. And probably cheaper.

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