March 20, 2014

It'll take more than an absence of Remy Martin to dislodge Putin

Posted in Economic History · 37 comments ·

Every month you’ll hear about the number of new cars that are sold. This is usually taken as a bellweather for the health of the economy. Cars are expensive and the more that are shifted in any one month, or indeed year, the healthier the economy. Also because so many people use their car to get to work, an upswing in the demand for cars indicates an upswing in activity across all sorts of areas.

Last year, while the second-hand car market moved ahead, Irish new-car sales dropped 6.6pc in 2013. This was despite a sales surge after the introduction of the new bi-annual ’132′ registration on July 1. Sales fell to 74,303 from 79,574 in 2012.

Contrast falling new-car sales in Ireland with the situation in the UK, where the end of the recession, the availability of credit and an unemployment rate almost half of ours, has seen new-car sales go through the roof.

Last year, there were 2.3 million new cars sold in Britain. That’s a lot of motors and it compares to 2.9 million cars bought in Germany. It also marks a 10.8pc increase in UK car sales on the year.

Car purchases in Britain are now higher than at any time since the 2007/08 crash. So yes, the British bought 2.3 million cars last year but did you know that the Russians bought 2.7 million cars in 2013, not far behind Germany? There seems to be an impression among those who have not spent much time in Russia that it is still a Cold War country, with few retailing opportunities. This is very far from the truth. For example, Russia is already the largest telecoms market in Europe. Russia’s retail base is powerful. In fact, Russia will soon be a bigger retail market than Germany.

In contrast to the maxed-out consumers of much of Europe and the US who are up to their gills in debts, Russian consumers are sitting on vast housing equity. There is almost no personal debt in Russia. And with just 260 cars for every thousand Russians – compared to around 540 cars per thousand in Germany – this massive eastern market of 145 million people is far from saturated. The demand for cars will grow and grow in Russia and that’s why leading carmakers such as Ford, VW, Renault and Peugeot-Citroen have invested heavily in Russia. At the moment, Russia is being portrayed as the Cold War evil empire of John McCain’s imagination. For those with similar mindsets, the consumer image of Russia is still of a man smoking a raspy fag, driving a Lada. In reality, it is something very different.

Years ago when I studied Russian in Ruza, 80 miles to the west of Moscow, Russia was just beginning to emerge from Communism. This difficult period was followed by the crazy Yeltsin years, culminating with the 1998 default. Thereafter, the country began to show signs of becoming a more “normal” economy. Granted, it is still too dependent on resources and admittedly the oligarchs have robbed the country of its money and ploughed Russian mineral wealth into fancy property all over the world, but we are still talking about Europe’s soon-to-be second-largest retail market. Russia is already Europe’s biggest market for food, telecoms and white goods and it will soon surpass Germany to become Europe’s largest retail market overall.

The West’s tactic today, as outlined by William Hague and John Kerry, is to target individuals as well as the general Russian public with sanctions in order to force Russia to leave Crimea. We know that Russia, under both Yeltsin and Putin, has witnessed the single biggest transfer of a country’s wealth from the state to about 400 families at the very top. The West’s hope now is that by choking off the Breitlings, Bentleys and Bugattis, the oligarch’s wives and leggy mistresses, shocked at having to “rent” their skis rather than bring their own top of the range models to St Moritz – will lean on their men to lean on Vlad the Expropriator, to give Crimea back to Ukraine! It will take more to dislodge Putin from Crimea than an absence of Remy Martin, and therefore sanctions against Russia won’t affect political power in the Kremlin that much. Russians have put up with a lot more than not having access to iPhones and the like for a while and anyway, there is always China for sanction-busting. Don’t tell me that the country that counterfeits everything, will not open its massive land border with Russia for sanction-busting business. And who loves a bit of sanction-busting? Why the mafia and illegtimate business of all sorts.

So who will get hurt? Sanctions will hurt European exporters big time which is why the German stock market has fallen 6pc since the Ukrainian crisis began.

Irish firms export goods and services worth about €637m to Russia every year, making it one of our more important trade partners outside the EU and US. Irish exports of goods to Russia grew 183pc between 2004 and 2012, with growth potential for bilateral trade in services and goods estimated at around €3bn a year out to 2020.

Russia, with its population of 143 million, is the second-biggest trading partner for Ireland among the so-called BRIC (Brazil, Russia, India and China) economies.

Therefore, Irish companies, particularly food and drink companies which have made inroads in Russia, will be badly affected by sanctions. Interestingly, the history of sanctions is not a particularly bright one. When a regime is entrenched, where the violating country is self-sufficient in energy and where the opportunity for sanction-busting is so enormous, what tends to happen is that bad business drives out good business. The South African apartheid regime survived for 30 years under sanctions. Russia is not Serbia or even South Africa, but it is Europe’s biggest neighbour and biggest supplier of energy. As a result, the reality when seen from Berlin is very different from the reality sitting in Washington. Does Europe have the economic stomach or the financial muscle to endure this war of attrition with Russia over Crimea – a place many Europeans believe is Russian anyway? I have my doubts.

David McWilliams writes daily on international economics and finance at

Subscribe to receive my news and articles direct to your inbox


  1. cooldude

    Interesting article and very relevant. The interesting thing about this “political situation” in the Ukraine is that we had a twice democratically elected government overthrown by a bunch of neo nazis funded through Nuland by the US. How does this represent democracy or the “will of the people”. A lot more people are starting to think critically about these never ending displays of US imperialism and are starting to see through the rubbish the likes of Gilmore is spouting. It is probably because Russia prevented a war in Syria which nobody wanted except the neocons and their friends in Israel. I hope Russia continues to play an important role not just economically but politically in preventing these never ending wars which the US has engaged in.

    • Patrick

      Yes, indeed. We need to remember that the US is very good at propaganda. Think before you believe all the news that you hear or read.
      Ireland is at the centre of the Western World but listens to news from the West only. Time for Irish people to use both of then ears.

    • Deco

      The entire crisis has spoke legions about Western leadership (sic) and the Western media.

      The same chancers that backed unfathomable bank bailouts, backed neo-liberal economic policies for the third world, backed kleptocrats, ramped up debts of the welfare state, etc.. is at is again. The agenda is a chain of regime change. Iraq, Libya, and loads of other place (which usually have hydrocarbons – or are close to places that have hydrocarbons) (because the kleptocrats refused to recirculate petro revenues into the western asset markets). Because the entire Reaganomics ponzi racket needs continual refinancing.

      The Western leadership is no longer representative of the interests of the common citizenry. In fact it is the opposite. It is very similar to the situation that existed before WW1. With the media doing exactly as it did then – glorifying the need to start a fight.

      The Post-Reagan/Thatcher/MiltonFriedman economic model is deeply flawed. Rather than accept it, the leadership wishes to force somebody else to carry the can. Usually it is the commodity producers.

      Millions of Americans on food stamps. Almost as many Europeans on unemployment assistance. A war will bring down the numbers, and stimulate the economy for business.

      At the root of the problem is the entire ponzi economic policies of Thatcher, Reagan, the PDs, etc… Growth is based on more and more debt. And somebody must buy the debt. And interest rates must be controlled. Which requires control of commodity price based inflation.

      The whole thing is anchored in Western addiction to debt.

      • Colin

        Deco, there are many on the right who are regarded as ultra right wing (in a sneering way), including myself, who opposed the idea of a US led armed coalition using force in Syria. The main reason is because the West would have sided with those supporting Al Qaeda. Al Qaeda wants to destroy the real natives of that land, the Christians. Their agenda is clear, turn Churches into mosques, put dhimmi tax on the Christians, restrict their lives, and force them to either convert or emigrate.

        Now we have former atheist Russia, standing up for the Christian underdog in the middle east, against the will of the Post-Christian West. You can’t make this sh1t up!

        • cooldude

          In the US Obama has enacted an executive order which gives him the power to seize the assets of anyone who questions the official/factually incorrect version of what is going on in the Ukraine. Free speech has left the building a long time ago. There are still some real journalists who go to the trouble of unearthing the real facts behind this so called takeover. Here is one

        • jaysus

          Sorry to tell you Colin, but Russia is still atheist, the majority are anyhow, so how you can say the former atheist Russia is beyond me. They may have lost communism but thankfully not common sense.

          Good insight into modern Russia David, can you do a few more articles on this, its very interesting?

          • Colin


            jaysus, great name there mate, but it looks like Russia is backpeddling into its Orthodox Christian heritage, leaving atheism in its wake. sure our prayers have been answered – re the conversion of Russia!

            3 new churches opening each day.

            and Putin there in church blessing himself, lighting candles, saying his prayers, kissing the pope, while enda tells us we are not a catholic country anymore.

            Watch it and weep.

  2. Adelaide

    Ron Paul called it, the situation is ‘farcical’. The bust US and bust EU are going to sanction a booming Russia while lending billions to a bust Ukraine, money Ukraine will use to buy gas/oil from Russia, all because Yanukovych had his one moment of clarity and realised that navigating towards the EU would be economic suicide for an antiquated agrarian economy like Ukraine’s. Russia has long kept Ukraine’s ’19th century’ economy afloat with discounted gas and oil. Now without Russia’s support Ukraine will disintegrate into a failed bankrupt state without friends, which is ironic, considering that the Maidan protest was against lack of jobs-poor living standards-corrutption. Ukraine has made a huge blunder. It’s like an innocent child running away from the controlling but protective embrace of a burly older wealthy brother into the arms of a decrepit ailing peodophile pickpocket Fagan.

    • Adelaide

      Anonymous Graffiti – “The only freedom that concerns people is the freedom from poverty”

      • Colin

        The gay lobby who love a parade or 10 in New York would disagree, it seems.

        • Pat Flannery

          Colin: out here in the West we have no trouble with gays in our parades, it is all hatemongering groups we try to keep out.

          As a founding member of the San Diego St. Patrick’s Day Parade back in 1979 I can tell you that our main problem over the 35 years has been with unionist organizations trying to use the parade for incitement to hatred, which is what you are trying to do on this site.

          Get over it. The Irish Republic is a reality. It is not going back into the United Kingdom. It is not perfect but I know of no political entity that is, including the United States and the United Kingdom.

          • Colin


            Let’s clear a few things up.

            You say I’m a unionist. Show me where I said the Republic of Ireland should re-join the UK?

            You seem to think I’m some kind of hate mongering queer basher. Show me where have I said anything of the kind?

            Spend less time projecting untrue assumptions and spend more time reading carefully.

            Hope you had a nice parade with all your friends. Keep up the great work and keep flying the flag, wearing the green jersey and defending the Irish State.

    • Pat Flannery

      I’m afraid you’re right Adelaide.

    • Deco

      Ron Paul is correct.

    • redriversix

      Outstanding Adelaide…..

      simply outstanding !!!

  3. Adelaide you saved me a job you just said everything I Wanted to say,?

  4. Adelaide you saved me a job you just said everything I Wanted to say,? O one other thing that Horrible man Putin Done he gave all old age pensioners In Crimea a Rise to bring In Line with Russia,

  5. Deco

    Will the EU compensate Irish exporters for losses incurred as a result of a boycott that undermines their business effectiveness ?

    Out biggest problem, is that we are not disciplined enough, or sovereign enough to defend our interests. Expect Ireland to get walked over again.

  6. michaelcoughlan

    “The 1998 Default”

    I always figured that the commies were in reality the best capitalists. Russia defaults takes the pain and is now surging ahead. The west responds with central planning and nationalizes debt and mires itself in stagnation. President Pukin knows what he is doing alright.

  7. ME

    And of course, the UK or European politicians wouldn’t lie to us about the number of cars sold. Of course the numbers are real. See “Where ‘Channel-Stuffed’ German Cars Go To Die” on zerohedge at .

  8. kplcards

    Eurasian integration

    We understand that these actions were aimed against Ukraine and Russia and against Eurasian integration…..But there is a limit to everything. And with Ukraine, our western partners have crossed the line …. They must have really lacked political instinct and common sense not to foresee all the consequences of their actions. Russia found itself in a position it could not retreat from. If you compress the spring all the way to its limit, it will snap back hard. You must always remember this…..

    “The address of Russian President Vladimir Putin to the State Duma deputies, Federation Council members, heads of Russian regions and civil society representatives in the Kremlin”

  9. StephenKenny

    David McWilliams uses vehicle sales as an implied indicator as to the health of the UK economy – it’s interesting but there seem to be too many caveats, channel stuffing mentioned above, and ‘catch up sales’ from previous years. It’s only vaguely interesting, after all, wasn’t 2006 the best year ever for vehicle sales in Ireland?

    My suggestion for a meaningful indicator is the recent announcement regarding the annuities market and pensions. AndrewGMooney mentioned it a few months ago, and it’s recently blown up in public. By scrapping the link between annuities and pensions, the government has effectively said that they no longer believe that the UK can produce enough wealth to support private pensions over the coming decades. Along with the desperate hunt for yield, it is clear that the UK has far more money than it has wealth, and that the wealth producing areas are just not really working.

    You could argue that this annuities action is equivalent to hitting the investment air raid alarm button.

  10. redriversix

    What a great game Vlad has played….

    tremendous !!

    Now Comrades…23 comments since Thursday. .? What will become of us ?

    Latvia Comrades !! …liberate the oppressed Russians of Latvia !!!

    The morale compass that perhaps…belonged to the west lies shattered & broken on the steps of the White House..

    Now. ..who’s move is it..?

    Good Morning

  11. SMOKEY

    O’bama is a weak and feeble leader. Putin showed his strength and gave him the two fingers.
    I would prefer a leader that has his country’s best interest at heart than one like Obama who does not.
    Obama has ruined NASA, driven up black on white hate, destroyed the economy, disrespected and debased the White House, its now the Outhouse, deconstructed the military and even though its still the most powerful, it needs to be rebuilt but he has such hatred for guns and power of this type it may well be that another 2 years will totally destroy it,and he will rule like a dictator until his time runs out.
    His ugly bitch wife is on another vacation at US taxpayers expense and all the while he is being shown to be an inexperienced Chicago politician.
    Those who voted for this teleprompter president are even quietly wishing it would end and end fast.
    So at least Putin put his country first, Judo expert did a body drop on Obama. They play chess? Obama played checkers.

  12. redriversix

    I am sorry for you Smokie….I truly am

    But while Bush & Co were surrounding themselves with yes men who relished & gloated over “A New American Century”…Mr Putin was waiting for the grass to grow long in which he would bide his time.

    In this age that Esinhower predicated…one of the “Military industrial Complex”…..

    It matters not who is the “leader of the free World”..

    I find it a Irish person to see America crumble under the weight of her lies & foreign policy.

    Does one need to sleep now to see “the American Dream” ?

    How can the West condemn Russia ?

    We have long since list the morale high ground….or did we ever have it ?
    It seems the lure if eazy money shall be more effective than any Army could acheive…

    Debt shall be the Weapon of Mass Destruction and we shall pray as the Bonds of debt dictate Foreign policy.

    Beware..the ides of March

  13. SMOKEY

    No need to be sorry for me RR6, its great to be me and I don’t condemn Russia, they have a real leader, albeit one with a chequered past, at least he is looking out for the good of his country.
    Imagine Enda and the boys faced with this. It would be “brown pants” time for all of them.
    Hell they cant even sort out the whistle blower fiasco. I would have had that in the past a few hours after it surfaced, but I am strong and they are weak, extremely weak.
    As for the American dream? It may well have seen its best days.
    When the most important issue is homosexual wedding cake or free health care to illegal aliens, then your country is well and truly fucked.
    As for the foreign policy of America, it has its bad points but don’t forget the Americans keep manners on a lot of the rest of the world. Its good to be the king.
    And on that note Im going to make a stir fry.

    • Colin

      No one ever said it better than Osama bin Laden: “When people see a strong horse and a weak horse, by nature they will like the strong horse.” ……with the exception to the rule being the American electorate on the last two occasions.

      Why the American people, swallowed the lefty liberal media driven agenda and chose such a terrible leader in Obama I’ll never know. The self hating Jew has been superceded in the self-hating stakes by the self hating American.

      God help us all!

  14. StephenKenny

    Economists and the media talk about countries in terms of economic production, imports, and exports. National pride, where it is even admitted to, it’s raised during some political activity, generally designed to weaken the nation state.
    Given history, it’s understandable that some political movements would choose to use whatever means they can (immigration/emigration, media bias, etc) to weaken the nation state. It’s the sort of thing that politicians and media people believe works: social engineering. Much in the same way that they fundamentally believe in central economic planning, to some degree or other. This manifests itself in a load of ways: central banks; government set interest rates; government support of the banks and broker/dealers; the whole “tax and then select which sector/company gets some of it back in subsidies” policy; the total centralising of power by removal of the checks and balances between parts of the state (civil service, government, legal system), and the merging of the corporations into this system.

    So although in public many would claim support of the nation, the system they encourage, feed, and work for, has been changed to head towards a single bureaucratic super state. The leaders in the EU are a slightly strange mix of vain stupid failed politicians, and enthusiastic ex-communists.

    The problem of course is that, as with all politically motivated systems, it will fail to the extent that they will be forced to redefine ‘success’, and we will be living in an upside down land, where we find ourselves increasingly believing things we know to be absolutely untrue. All very East German.

    This occurred to me because of the seeming general acceptance of the idea that going to another country to find work is a perfectly reasonable macro social policy. Indeed that ‘look after you and yours and forget the rest’ has become quite laudable. Similarly, that importing people to do things is a perfectly good idea. Over the past few years I’ve heard so many people say “I’ll come back when they’ve fixed it, and there’s a good job for me”.

    Getting rid of any real idea to the nation state is good for corporations, public sector and the left generally. For politicians, it’s about what comes afterwards, and a fantastically funded EU/US job, with staff, expenses, and all the symbols and benefits of power, is enough.

    For us, the 99% as we’ve become known, it is a slow motion train wreck, for which we will suffer, and eventually have to pay. The problem isn’t in the titles of the “sides”, it’s in the degree and granularity of control of social and economic policies that the state and corporations – the corporate state – have been allowed to accumulate, and now wield.

    • Stephen your comment is a good one (as usual) except I disagree with one fundamental point.

      The concept of a ‘nation-state’ is in itself flawed.

      This is one world we all live in.

      Nation-states, borders, visas, passports and the like are tools that have been created to control and discriminate against people.



      • SMOKEY

        This is where your ideology is flawed Adam. Q: What defines a country? A: only its borders, language and culture.
        Surely you don’t want hepatitis carrying turd worlders able to access Ireland and cause a health crisis.
        Or how do you feel about the Roma who come here and beg and steal? Perhaps you could offer them a room in your apt. next time you see them on the side of the road, or footpath.
        What about unchecked immigration from the middle east?
        Now Adam you certainly are against those who would strap a bomb onto their chests and detonate it on the Luas aren’t you??? Or maybe you don’t believe in checking ones criminal past or allegiance to the likes of Al Qaeda before they enter your country.
        And as long as we are “all in it together” perhaps you should give away your inheritance from your dad and “share” it with those less fortunate than you.
        You see this is what border controls can do for a country. Stop those unwanted “people” from coming into your neighbourhood.
        Who has your bitcoin account, open it up and give us all a just a “bit”. Pun intended.
        I mean accounts that protect wealth surley discriminate against “people” who don’t have any wealth yeah??
        To tell you the truth I think it makes you feel good to talk the “do gooder” were all in it together crap, but I doubt you will be walking the walk anytime soon.
        I think you would be very unhappy without border controls.
        Just look at what has happened in England, unchecked immigration and liberal policy’s had Lee Rigby decapitated in the street.

        And how would you feel if there was no reggae music, no French wine, no Chinese food, no Icelandic beauties or Polish beauties for that matter, what about the most boring of all games, your Euorpean football?
        And how about Sushi? Had some yesterday and it was magnificent. German beer? No Germany no German beer.
        Forget curry, you don’t have India so no Indina chutney or saag paneer for you!
        You cant get a decent steak in Ireland but surley you had some of the best beef while your were freezing your bony ass off in Chicago recently yeah?
        Heavy metal from England, grunge from Seattle, Rum from Jamaica, black pudding from Ireland, French pornography, they started it thank god, Salsa music from Cuba, Italian sausage,,,,,,,well you get the picture, BORDERS,LANGUAGE, and CULTURE. It matters

    • Colin

      So, if you’re Irish and unemployed with no hope of getting a job in Ireland, your advice is to stay put and rot on the dole? Totally bizarre! I just hope no one takes you too seriously.

      • StephenKenny

        Rather than a stupid example, how about someone who can get work, deciding to stay in Ireland when previously they would have decided to go and earn more money elsewhere. It’s a matter of degree, it’s a subtle difference. If they can earn 10 times as much money elsewhere, then it’d sensible to go, if it’s 25% more, then maybe not. Not everyone lives in a binary world.
        If everyone, or even most people, began to act this way, there’d start to be pressure on the public sector to start to make decisions that actually benefited the majority. Corporations would come under pressure to start to view the unemployed and training in the same breath. Of course, the people who run the companies would also need to believe that once people had been trained, they wouldn’t be on a plane straight to London where they can earn 25% more money.
        It’s what Adam Smith called “moral sentiment”, it’s about everyone being aware that their future is tied up with everyone in your social area – country, city etc. Which also means that the corporate and tax laws have to be aligned with this.

  15. Clare Leonard

    Russia v USA is a phoney war.
    The USA urgently needs and wants to devalue the US $ by
    30 to 50%, however, for obvious reasons the
    USA lack the political courage to implement this devaluation themselves.
    The global economic war which is taking place has accelerated as
    a result of Putin’s actions, this will deliver the desired
    devaluation for the USA— much faster than would otherwise happen.
    Putin can do whatever he wants and he knows it.
    Both sides will achieve their desired end game.
    Putin will take the blame for the collapse of the US $ as the global reserve currency,
    happy in the knowledge that it will increase his popularity at home, where it matters most.
    The EU leadership are a bunch of unelected, undemocratic and incompetent fools. They are in no position to give Putin a lecture on democracy.
    Roll on Lisbon no 3.

You must log in to post a comment.
× Hide comments