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Monday, July 18, 2016
Excerpts: Recent developments in Syria. Russia's economic prospects July 18, 2016

Excerpts: Recent developments in Syria. Russia's economic prospects July
18, 2016

+++SOURCE:Jordan Times 18 July’16:”Recent Developments in Syria”,by Amer Al
Sabaileh ,
FULL TEXT:Since 2012, the US and its allies have many a time attempted to
build a military power capable of holding its own in Syria. The last
attempt, the “New Syrian Army” was a failure, as it was unable to liberate
the area near Al Bukamal, in eastern Syria near the borders with Iraq, from
Daesh.

However, the failed mission might be the last concrete chance for the Obama
administration to create a strong ally on the ground in Syria.

The American target of all these attempts is fighting terrorism, and, at the
same time, preventing Syrian regime forces from monopolising the push
against Daesh for their own ends.

But it seems that the US will not be able to have a real ally on the ground
in Syria, that is why it will be impossible to replicate its achievements in
Iraq, where it backs the Iraqi army.

Whereas Russia, for example, sees in the Syrian army a very strong ally on
the ground; therefore, it is much easier to achieve concrete progress in
recapturing territories occupied by Daesh.

On the other hand, this new coming phase of the Syrian crisis might bring
about some kind of coordination between the Russians and the Americans in
their fight against terrorist groups, especially Jabhat Al Nusra.

Moreover, some new developments in the region might have a positive impact
on the Syrian crisis.

Turkey’s warming of ties with Russia might extend to include a complete
shift in its position on Egypt and even Syria.

Less animosity from Turkey towards the Syrian regime, especially as Ankara
busies itself in weeding out supporters of the failed coup, will reduce its
involvement on the ground in Syria, putting an end to the escalation in
various territories in the war-torn country.

This also coincides with the desire of many countries to reopen political
channels with Damascus, most notable in the visit of a European Parliament
delegation to Syria earlier this month.

The delegates were led by Javier Couso, vice chairman of the parliament’s
foreign affairs committee.

Prior to that, news agencies reported that Syria’s General Security
Directorate chief Mohammed Dib Zaitoun visited Rome, where he met with a
number of Italian officials.

Some agencies have reported as well that the head of Italy’s External
Information and Security Agency, Gen. Alberto Manenti, will be heading a
delegation to Damascus.

Syrian officials are highly interested in negotiating the normalisation of
relations with Italy and the abolition of the EU embargo on Syria, as the
Italian delegation has already pledged to pave the way for EU-Syria
rapprochement as soon as possible, according to international news reports.

At the regional level, observers are noticing a US interest in pushing the
frozen Palestinian-Israeli peace process forward. This requires a mutual
understanding and full coordination with Russia.

Moreover, if the Obama administration is truly keen on taking a concrete
step forward in the Mideast peace process, it has to at least ensure that a
political solution in Syria will be launched.

amersabaileh@yahoo.com


+++SOURCE:Jordan Times 18 July ’16:”Russia’s gloomy prospects”,by Project
Syndicate
SUBJECT: Russian economic prospects
QUOTE:” Russia’s economic prospects are looking increasingly grim”.
FULL TEXT:Last year, plunging energy prices and international sanctions
contributed to a 3.7 per cent fall in the gross domestic product (GDP). Real
wages in the country plummeted by around 10 per cent.

This year, the negative trend is expected to continue. In 2016, public
spending on education and healthcare is slated to decline by 8 per cent.

The Kremlin’s desultory attempts at diversifying the Russian economy have
largely failed.

Labour productivity remains chronically low and investment — foreign and
domestic — has dried up.

Sadly, a turnaround is unlikely. Under current conditions, neither higher
energy prices nor the lifting of sanctions would likely be enough to
reinvigorate the country’s moribund economy.

Over the past decade, Russian President Vladimir Putin’s regime has degraded
the institutions that are essential to the functioning of a modern economy.

The judicial system, for example, is largely in tatters. And above all, the
ownership and governance of key assets and resources are almost all in state
hands.

Indeed, in 2012, the International Monetary Fund calculated that the
consolidated public sector accounted for nearly 70 per cent of Russia’s GDP.

Though comparably detailed estimates are not available for earlier years, in
the early 2000s, this share was around 30-40 per cent.

The expansion of the state’s control of the Russian economy has been driven
by a proliferation of state-owned corporations, whose gross liabilities now
amount to 150 per cent of the GDP.

Firms in the energy, infrastructure, banking, and armaments sectors have
been nationalised.

In 2014, publicly owned or controlled entities accounted for nearly 70 per
cent of the turnover and 85 per cent of employment among Russia’s top 15
companies.

For the largest 100 companies, these shares were 54 per cent and 68 per
cent, respectively. The consolidated public sector now accounts for
one-third of total employment.

Russia’s big state-owned corporations are, for the most part, controlled —
with considerable lack of transparency — by management that has been
appointed by Putin personally.

Many major corporate decisions are made during one-on-one meetings between
Putin and a company’s CEO. Many mergers and acquisitions require the
president’s personal approval.

Lack of transparency is pervasive.

Only a few state-owned companies file International Financial Reporting
Standards (IFRS) accounts and many have large numbers of subsidiaries, which
can dilute benefits to shareholders, while offering opportunities for
managers and other connected parties to enrich themselves.

Russian Railways, for example, has more than 23,000 subsidiaries. Gazprom
has more than 4,300.

Lack of detailed information makes it difficult to document the state’s full
asset portfolio, let alone set up a workable and transparent system of
oversight.

The agency charged with managing state property (Rosimushchestvo) is unable
to act as an effective controlling shareholder.

Putin’s Russia is increasingly reminiscent of President Suharto’s
Indonesia — an intricate system of crony capitalism without real property
rights.

Many close to Putin have acquired great fortunes through their connections
to state companies.

One route to enrichment is to privately appropriate the financial flows of
state companies. Another is to leverage connections in order to secure
no-bid contracts or to purchase state assets for a pittance.

The size of the crony economy is hinted at in the Panama Papers, but even
those revelations are just the tip of the iceberg.

In 2014, the net worth of those who are subject to sanctions by the US and
EU was estimated at around $17 billion; one sanctioned bank alone holds
assets valued at more than $11 billion.

This system comes at considerable costs to the Russian economy, favouring
rent-seeking at the expense of productivity growth. Russia does possess some
efficient, dynamic, large private companies, but the space for these firms
is quickly receding.

Experience suggests that large public sectors are associated with sub-par
growth and the crowding out of investment in the private sector.

Indeed, with the expansion of the large state corporations, many of them in
the hands of cronies, competition has drastically diminished in many
sectors.

Despite all this, Putin’s commitment to the system that he has built is
unwavering. Even proposed measures to raise fiscal revenues — such as the
privatisation of minority shares in seven state-owned corporations — will
likely be done in a way that favours his cronies.

Part of the reluctance to change is due the fact that Putin remains very
popular — for now.

As the economy continues to crumble that could shift very rapidly, as Putin
seems to have acknowledged when — in apparent anticipation of trouble — he
created a National Guard of 400,000 paramilitary security forces and put it
under the command of his long-time bodyguard.

Given the regime’s dependence on the personalisation of power, it would be
hard to design any credible path for change that preserves the prerogatives
of Putin and his cronies.

Opening up the economy to competition and expanding the private sector would
undermine the system of wealth and power that Putin’s associates enjoy.

And that why Russia’s economic troubles are likely to continue.

Anders Åslund is a senior fellow at the Atlantic Council in Washington, DC.
Simon Commander is a managing partner at Altura Partners and professor at IE
Business School. ©Project Syndicate, 2016. www.project-syndicate.org
=============
Sue Lerner - Associate, IMRA

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