The Eurasian Economic Community

I've written before about an early taste that I developed on a concrete balcony in Corby for the love stories of Chingiz Aitmatov, the great Khyrghz author and winner of various prizes.

I thought about him today when reading about the revolution in his country last week, which many are now tying to a Russian coup of the sort that the west has been sponsoring across the world for some time now.

It's necessary, I think, to put things in the context of the bigger picture. Russia has oil, and gas. For the first time it is efficiently exploiting Siberia. Its experience of the west, however--and I knew a few of the Panzertruppen economists who went over there in the nineties--was so negative that it had to close its monetary borders after the crisis of 1998-9. It has built up huge surpluses of dollars and oil, which President, now Prime Minister, Putin, has used ruthlessly--and well.

However, these surpluses were not spent on infrastructure or investment. They make Russia oddly dependent on other people's demand. Russia's banking system is still a sickly child. Its people have taken advantage of global investment and credit and over borrowed. So Russia hasn't been able to take advantage of its protected economy.

Instead, it has reached out to states that either produce or sell or distribute its oil, and created a tariff Union that it prefers over individual membership of the WTO. This is the Eurasian Economic Community, which includes Belarus, Kazakhstan, Khyrghystan, Tajikistan, and Russia. Uzbekistan left a while ago, but fell out with the Bush regime too, and is now petitioning to be a sort of Gas Khanate or satrapy under Russia.

The whole process illustrates an intriguing feature of globalisation 2.0. Globalisation, even or especially in states that produce commodities, is turning into regionalisation, and this process is being spurred along by the collapse of global--for which you can read Western and Japanese--financial markets. This is accelerated by the way in which western credit is being generated by quantitative easing to maintain western consumption and useless credit, which is a form of subsidy less honest and more dangerous than the one the Russians employ.

As oil goes up in price--but not to a level where it will be economic to discover more or to build new refineries--hydrocarbon economies will be caught in a stop go cycle that looks like nothing so much as a Friedman-Phelps Phillips curve. Funny.

The oil game is a very interesting, and brutally realist one. To get ours, from central Asia, we need to stay in an awful war which, back in 1979, the United States in a sense started to create a Soviet Vietnam. But that means relying on Pakistan and on lies about democracy whilst maintaining the occupation of Iraq. Meanwhile, Russia has to tell itself that it is rebuilding cultural bridges, whilst tying former soviet republics to itself along the lines of energy pathways and sterilising the surpluses earned with eurobonds.

A great game indeed....