So here comes an explanation about the Russian economy from 1991 up to 2022 and the Ukrainian invasion.
Our oldest management business consultant Lars Eriksson born 1942 is the person giving our clients and readers his thought on the Russian economy.
Hi!,everybody my name is Lars Eriksson and i have worked as a management and business consultant for the past 50 years time.
I was born in Stockholm in 1942 into a poor working class family.
I moved to Los Angeles in 1969 and i lived in the states until 1992.
In 1992 i moved back to Stockholm and i got a job offer in 1993 in Moscow, helping American and European smaller to medium sized businesses to help them establish there operations in Russia.
You have to remember that i was very experienced in global business at the age of 51 when i moved to Russia.
But nothing could have prepared me to work in this chaotic gangster wild west country that Russia was in 1993.
The Russian economy has never been stable to begin with!.
Also we should all remember that Russia had no internet in 1993, so you had to meet people face to face, and build contacts that way.
I have personally meet many of the people you now see on the tv OR read about is magazines and newspapers when they where up and coming.
I will not name any names, but i have meet almost all the top guys both in the political and business world during my years in Russia from 1993 to 2014.
Russia has always been very corrupt and nothing got ever done without the all mighty dollar bills.
I remember by first big project for a UK based company who wanted to establish an office in Moscow with a small warehouse/plant to start conducting business.
You had to pay officials for everything back then, to get electricity and water not to mention garbage collection.
A lot of people talked about the Russian mob and, yes they where a problem for a lot of our clients back then.
But they where like kindergarten kids when comparing to the corrupt officials from the Russian parlament the Duma, or local officials you had to deal with to get anything done in Russia.
The Russian economy grew a lot from 1991 up until the ruble crashed in August 1998.
Ownership on land and buildings was always very unclear, when the companies i helped set up shop in Russia, opened up their operations on Russian soil.
I can tell you that more often than not, when one of our clients had built a small factory on land they had bought in Russia.
Some local politician or shady businessman showed up with an official document stating that they where the rightful owner of the land the factory was standing on!.
And then the negotiating started, where he asked for 1 million dollars and that was usually negotiated down to 200.000 dollars over time.
Many companies where told by the firm i was working for that the ownership of land was very unclear in Russia, and that these type of claims would come up more often than not.
There was a great hope among a lot of Russians that Russia would take a huge step towards Europe and America in the mid 90s and even up until around 2006.
But after our war criminal Putin came into power in late 1999 he made it very clear that he was not a friend towards foreign investors, that wanted to invest heavily into Russia.
And already around 2006-2008 many western companies understood the ownership risk with owning a company in Russia.
And many smaller to medium sized western companies pulled out of Russia or has today just a small office/warehouse/production type of business in Russia.
The big companies like McDonald’s, Volvo and IKEA they had also issues in Russia, but they where big enough to sort true them from a high level.
Most of the companies that i helped from America or Europe where companies that had everywhere from, 10 to 200 employees in Russia.
And these companies where used to the protection and laws in Europe and in America, so many where completely unprotected by local government or Russian national laws.
Every business owner has at least two bodyguards at all times and the office has security personal always on sight.
One very interesting aspect of the Russian economy was that there was no support from the STATE to support foreign investments from small to medium sized companies coming in and creating high paying jobs and tax revenues.
And this is where i feel that Russia made a big mistake in not protecting and helping smaller to medium sized companies expand their operations in Russia.
Basically you where on your own, when you invested 1 or 2 million dollars into your Russian company.
And you had to depend on fixers like me, or Russian fixers who could help you navigate the labyrint that the Russian bureaucracy was and still to this day very much is!.
Russian economy is like a very powerful BMW 7 SERIES that they started driving and the switched to gear two and three, and this is where they stopped!.
They where never ever able to switch gears after driving on gear 3.
So while there was a quit decent amount of Russians in Moscow, St Petersburg and other bigger cities in Russia who where able under Putin to become the Russian middle class, they still to this day only make around 40% of what the American middle class worker does.
It became also very clear to all foreign investors like Bill Browder from Hermitage capital and others around 2010 that unless you paid Putin and his friends a lot of money, you had no future in Russia.
The Russian middle class is a lot to blame for going along with Putin and his cronies.
I remember being beaten up in Moscow by a member of the duma and his two bodyguard’s for not allowing them to shake down a company from Dallas on my watch.
So Putin allowed a lot of gangster politicians to shake down foreign businesses from day one, and this has never stopped.
So the Russian mentality is that if i am doing well fuck! everybody-else, so there is no nation building going on in Russia and it never has had any interest in making sure that the whole country moves forward together!.
So when we talk about the Russian economy it is based on raw materials and Oil.
So oil and gas and natural resources is over 70% on the total GDP in Russia.
And this also means that Russia has wasted so many decades to improve other industrial products and businesses that could have balanced the GDP better.
One should also remember that 50% of this money is stolen by Oligarchs and Putin every year.
In the last decade the IT sector has grown quite a lot and there has been smaller silicon valleys popping up here and there all over Russia.
BUT! they have mostly lived on working for US and European companies in and from Russia.
This is now all gone in less than two weeks time.
And with all social media like twitter, instagram and Meta/Facebook being banned in Russia there is a new iron curtain coming down a new USSR 2.0 that we are seeing take place in front of our eyes.
So some American politicians have said that Russia is a gas station disguised as a country, which i quite rude, but there is some truth to it!.
We should also remember that the Russian economy with 140 million people is pretty much on the same level GDP wise as Spain.
And Spain with 45 million residents have no Oil or gas to sell.
If we also take into consideration how poor the country is outside of the big cities where up to 50 million Russians have no indoor plumbing.
Europe and America has nuked the Russian economy back 30+ years at least.
And now the Russian population have to pay the price for supporting a dictator that Putin truly is!.
I have seen that many Europeans and Americans have high hopes that the people closest to Putin will stop this or over throw the government.
I am not hopeful, because the Russians that are against this Ukrainian invasion are to few and have no real power to do anything about this.
Alexei Navalny was the last hope for a candidate that could get Russia back on track again”.
He is in prison and wont get realesed for many years to come.
And we see some very brave Russians protesting against Putins war, but they are way to few.
Only if 15-30 million Russian would start protesting on the streets every Saturday, could we see a move on Putin and his cronies.
I do not see that happen anytime soon.
Life will not change so much in the country side, other than pensions will be reduced by 25-30% In the upcoming year.
But in the big cities we will see a lot of middle class Russians that will once again feel how it is to live and work in the USSR 2.0.
Their living standard will drop by at least 50% already this year!.
I personally feel really sorry for all the Russians that wants to be a part of the Western world and have been protesting against the war and Putin.
They will also now have to pay the price, for one war criminals believes that he can take over Ukraine in 2022!.
The Russia we saw between 1991 and 2021 all the progress that was made even if it was no where enough, is all gone in two weeks time.
You have to understand that in 1998-1999 the whole world was helping Russia move forward and the trade was still booming, today no company wants to touch the Russian market.
Many people say that China will save Russia and its economy, it wont happen.
China will always look out for number one ,which is China.
And for sure they will buy Russian oil and gas and other minerals but for a big discount!.
And i also believe strongly that the US and Europe will still buy Russian oil and gas for many years to come.
But the other businesses and all foreign investments are gone from Russia and it is not coming back anytime soon!.
Even if the Russian people would find away to get rid of Putin and his cronies, the PR damage is so big that it will take at least a decade to get companies back to Russia.
And here once again all the missed opportunities in the last 3 decades comes into play again, that the Russian economy is so small that a lot of foreign companies do not need the PR headache that Russia is today.
I feel very sad that in 2022 we see bombs fall on cities again in Europe, I WAS BORN IN WAR TIMES 1942, THE SECOND WORLD WAR.
And i had hoped to see no more wars in Europe in my life time.
But Russia(Putin) created this mess and everyone including Russians have to suffer for it.
And if you do not understand that the Iron curtain has fallen down already then you are blind.
The Russian rubel is cheaper than toilet paper at the moment so that says it all!.
Good buy Russia, it was nice to know you for 3 decades.
The things i learned and saw in Russia has made me a better person, and i have a better understaning for why some countries never ever will be truly able to be part on the Western world.
We can all hope for a miracle when it comes to Russia, but i do not hold my breath!.
Take care out there.
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