Saturday, December 26, 2015

Stratfor's 11 Predictions For the Next Ten Years: #1 Russia Will Collapse....

This is old news but interesting. The Stratfor Forecast is from February, 2015.

As we said a year ago in "Jim Grant is (still) bullish on Russia, gold and private equity":
He's gone from serious analyst to...I don't know what. Gold's going lower and Russia is Russia, where people with an actual understanding of the place travel in armored Mercedes limos and have a hidey-hole in London....

There's no reason to buy this but here's the Russia ETF for those who don't have Putin's cell number:
RSX Market Vectors Russia ETF weekly Stock Chart
Grant started buying Russia in May 2014 and went for broke in November-December.
I think I'll listen to him on interest rates but maybe not equities.
And for those contemplating Russian sovereign debt, one last self-ref from July 2014's "Betting Big on Russian Bonds":
Even the Czar's bonds eventually paid off, a little. 
See also:
Tracking Inflation In Russia: The Value Of A Bribe Has Been Cut In Half 
As to gold, the week he made that call gold settled at $1225.40.
It settled last week at $1075.80 for the most active (Feb.) contract, up $7.50 on the day.

Here's today's headline story from Business Insider:

Stratfor has 11 chilling predictions for what the world will look like in 10 years
Earlier this year, private intelligence firm Strategic Forecasting, or Stratfor, published its Decade Forecast, in which it projects the next 10 years of global political and economic developments.
While international analysts often try their hand at predicting the major events of the coming year, Stratfor believes that it's identified the major trends of the next 10.

In many ways, Stratfor thinks the world a decade from now will be more dangerous place, with US power waning and other prominent countries experiencing a period of chaos and decline.
Russia will collapse ...
"There will not be an uprising against Moscow, but Moscow's withering ability to support and control the Russian Federation will leave a vacuum," Stratfor warns. "What will exist in this vacuum will be the individual fragments of the Russian Federation."

Sanctions, declining oil prices, a plunging ruble, rising military expenses, and increasing internal discord will weaken the hold of Russia's central government over the world's largest country. Russia will not officially split into multiple countries, but Moscow's power may loosen to the point that Russia will effectively become a string of semiautonomous regions that might not even get along with one another.

"We expect Moscow's authority to weaken substantially, leading to the formal and informal fragmentation of Russia" the report states, adding, "It is unlikely that the Russian Federation will survive in its current form."
... and the US will have to use its military to secure the country's nukes.
Russia's nuclear-weapons infrastructure is spread across a vast geographic area. If the political disintegration Stratfor predicts ever happens, it means that weapons, fissile materials, and delivery systems could end up exposed in what will suddenly become the world's most dangerous power vacuum.

The breakout of Russia's nuclear-weapons stockpile will be "the greatest crisis of the next decade," according to Stratfor.

And the US will have to figure out what to do about it, even if it means dispatching ground troops to secure loose weapons, materials, and missiles.

"Washington is the only power able to address the issue, but it will not be able to seize control of the vast numbers of sites militarily and guarantee that no missile is fired in the process," the Decade Forecast states. "The United States will either have to invent a military solution that is difficult to conceive of now, accept the threat of rogue launches, or try to create a stable and economically viable government in the regions involved to neutralize the missiles over time."
Germany is going to have problems ...
Germany has an export-dependent economy that has richly benefited from the continent-wide trade liberalization enabled through the EU and the euro, but that just means the country has the most to lose from a worsening euro crisis and a resulting wave of euroscepticism.
The country's domestic consumption can't make up for this dip in Germany's export economy or for a projected decline in population. The result is Japan-style stagnation.
"We expect Germany to suffer severe economic reversals in the next decade," the Decade Forecast says. 
... and Poland will be one of Europe's leaders....MORE

From the February 23, 2015 Stratfor Decade Forecast 2015-2025: 
....Russia
It is unlikely that the Russian Federation will survive in its current form. Russia's failure to transform its energy revenue into a self-sustaining economy makes it vulnerable to price fluctuations. It has no defense against these market forces. Given the organization of the federation, with revenue flowing to Moscow before being distributed directly or via regional governments, the flow of resources will also vary dramatically. This will lead to a repeat of the Soviet Union's experience in the 1980s and Russia's in the 1990s, in which Moscow's ability to support the national infrastructure declined. In this case, it will cause regions to fend for themselves by forming informal and formal autonomous entities. The economic ties binding the Russian periphery to Moscow will fray.

Historically, the Russians solved such problems via the secret police — the KGB and its successor, the Federal Security Services (FSB). But just as in the 1980s, the secret police will not be able to contain the centrifugal forces pulling regions away from Moscow this decade. In this case, the FSB's power is weakened by its leadership's involvement in the national economy. As the economy falters, so does the FSB's strength. Without the FSB inspiring genuine terror, the fragmentation of the Russian Federation will not be preventable.

To Russia's west, Poland, Hungary and Romania will seek to recover regions lost to the Russians at various points. They will work to bring Belarus and Ukraine into this fold. In the south, the Russians' ability to continue controlling the North Caucasus will evaporate, and Central Asia will destabilize. In the northwest, the Karelian region will seek to rejoin Finland. In the Far East, the maritime regions more closely linked to China, Japan and the United States than to Moscow will move independently. Other areas outside of Moscow will not necessarily seek autonomy but will have it thrust upon them. This is the point: There will not be an uprising against Moscow, but Moscow's withering ability to support and control the Russian Federation will leave a vacuum. What will exist in this vacuum will be the individual fragments of the Russian Federation.

This will create the greatest crisis of the next decade. Russia is the site of a massive nuclear strike force distributed throughout the hinterlands. The decline of Moscow's power will open the question of who controls those missiles and how their non-use can be guaranteed. This will be a major test for the United States. Washington is the only power able to address the issue, but it will not be able to seize control of the vast numbers of sites militarily and guarantee that no missile is fired in the process. The United States will either have to invent a military solution that is difficult to conceive of now, accept the threat of rogue launches, or try to create a stable and economically viable government in the regions involved to neutralize the missiles over time. It is difficult to imagine how this problem will play out. However, given our forecast on the fragmentation of Russia, it follows that this issue will have to be addressed, likely in the next decade.

The issue in the first half of the decade will be how far the alliance stretching between the Baltic and Black seas will extend. Logically, it should reach Azerbaijan and the Caspian Sea. Whether it does depends on what we have forecast for the Middle East and Turkey....MORE