This comment originally appeared in AGE The expressed views are the author’s own.
On the day of inauguration, President Trump welcomed the desire of Ukraine President Volodymir Zelensky for peace and pointed out to Russian President Vladimir Putin to end his attack on his peaceful nation. We congratulated Trump to see through Putin’s diplomatic propaganda and economic bluffs. From peace negotiations to economic partnership, Trump has returned to the devil’s faith. Now while Putin is dependent on business opportunities for US firms in Russia as part of his US negotiations over Ukraine, Trump seems to be eager to make a deal. What CEO knows, but Trump lacks is that Putin’s unclear offer is much less than the eye is.
No US company is eager to return. Russia is an embedded economy, with rotten infrastructure and impossible gaps of the supply chain. It is a dangerous, unsafe place, unreliable to do business.
CEO’s mood for Putin’s Russia is anchored in their knowledge that Putin is an incredible dictator that can nationalize their businesses in a notice of a moment. This weekend alone, Putin has accepted his plans to increase the expropriation of private enterprises, including the confiscation of many Western company assets.
Even before the war, making business in Russia has always been a bad deal for US companies, and some non-Russian companies have ever made enough money there to be of valuable risks. “Many people lost a lot of money there in Russia. I think they will be too restrained to love to come back. Once at one time, peace bursts there but not too often,” Oilman and Trump Ally Harold Hamm recently said Financial time.
CEO resistant to returning to Russia are mere allocitants of rational capital that perceive Russia as a bad agreement for shareholders. From a pure point of view of money, CEO would face a revolt of shareholders if they were trying to destroy shareholders’ capital for dangerous investment in Russia. Even in the development of large deposits of Russian minerals and developing energy, they require significant capital investments, which would take many years to make a return, and given the volatility of US-Russian relations, no CEO would like to risk those blocked investments if relationships between the two governments were aggravated again.
The truth is that Putin is desperate for American businesses to return to renounce his economic collapse. This is a disguise of despair like generosity, and no one should be deceived. Russia is not from a distance a main superpower. Its economy is smaller than that of Chile and produces few ready -made goods – industrial or consumer – sold in world markets. As a vassal state in the ancient trade system, all Putin must sell are raw materials in energy, metals and agriculture. And now, with all these goods available cheaper and safer worldwide, Russia is economically irrelevant.
Yes, Russia needs American businesses much more than US businesses need Russia. In fact, most US businesses attracted just over 1% of their total global income from Russia to their peak, and since most firms are withdrawn from Russia, it is now essentially close to zero. Far from damaging US businesses, shareholders rewarded companies to attract, facilitated that overlapping operational, regulatory and reputation rose, with their actions made an immediate increase after the exhibition and setting new high records after high records in the weeks and months later.
In fierce contrast, the Russian economy is exploding in simple appearance. Russia’s inflation in Russia is about 25%, interest rates on loans are a 25%usurizing, and borrowing has reached an almost complete stop, making ordinary life unbearable and unaffordable for normal Russians. Sectordo sector has fallen 60 percent to 95 percent. Putin is running big deficits and no nation is buying its debt – even China. Millions of skilled technology workers have fled the country and oligarchs have inspired $ 300 billion. Russian foreign direct investment has dropped from $ 100 billion a year to zero.
To finance his war machine, Putin has dumped the furnace room furniture in the oven, cannibalizing the manufacturing sectors and relying on unstable, deficit recorders. Putin’s Bluff is called after Putin is quickly running out of cash, with the value of the Russian sovereign property fund and the rainy day reserves that have fallen by 50% over the last two years. At this pace, Russia will be without money until the end of the year if not faster.
Russia has revealed the difficult way it is always easier for consumers to replace a reliable supplier than for a supplier to find new markets, as global supply chains have found alternative resources for any Russian goods export. Russia has one of the highest prices of every oil manufacturing nation in the world, with $ 44 per barrel, nearly double that of Saudi Arabia and other strict oil producers – Russia Russia has exported oil near Breakven prices when supply chains and transport costs are evidenced inside.
In natural gas exports, Putin does not have such pipes in Asia and thus ignites most of his natural gas as waste. In contrast, the EU now welcomes the liquid natural liquid gas (LNG) from the SH.BA, Norway, Algeria, and 22 other economic, reliable sources – which in turn have again become the gas steam to serve all of Europe, as the EU now has deep water ports and converting plants in Germany, Portugal. Russia is even more desperate for American businesses to return now because they cannot get Arctic oil from the ground without the help of technology and brain power, meaning that their production will fall in the years to come without the help of the US.
American CEO knows how to do business with Vladimir Putin is not just wrong, it’s bad business. The US president must hear them: recognize the opportunity he has and let the Russian economy fail.