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Attending the World Economic Forum this year in Davos is becoming more unpopular than popular in some respects as many politicians and business leaders have opted not to attend. And some of these leaders, as in the case of New York State Governor David Paterson, have been shamed into not attending. Nonetheless, we have been following the proceedings in Davos with some interest as there are obvious geopolitical implications that need to be considered based on the statements of various world leaders, in particular Vladimir Putin of Russia.

The Russian Prime Minister gave a key note address at the forum and also participated in a number of panels, below we have highlighted a number of his comments and our interpretation of those comments.

Putin: “In the last few months, virtually every speech on this subject started with criticism of the United States. But I will do nothing of the kind.”

Research Edge: If that’s not starting a speech acknowledging a critical view of the U.S., I’m not sure what is . . . he then went on to say:

Putin: “I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasized the US economy's fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.”

Research Edge: It is obviously hard to argue with Putin’s assessment here, but he does fail to mention the catastrophic loss of profits by Russian Oligarchs and “blue chip” Russian companies, such as Gazprom. Putin then went on to specifically question whether the world should rely on the U.S. as heavily as it does:

Putin: “Excessive dependence on a single reserve currency is dangerous for the global economy. Consequently, it would be sensible to encourage the objective process of creating several strong reserve currencies in the future. It is high time we launched a detailed discussion of methods to facilitate a smooth and irreversible switchover to the new model.”

Research Edge: In effect, he suggested a concerted world effort to usurp the economic power of the U.S. and its currency. Putin then went on to suggest ways to solve the current economic crisis:

Putin: “Unfortunately, we are increasingly hearing the argument that the build-up of military spending could solve today's social and economic problems. The logic is simple enough. Additional military allocations create new jobs.”

Research Edge: In typical KGB / Putin fashion, he is cautioning against the build-up of the military, yet this is also the first point he makes in discussing an economic recovery and with it implies that a military build-up would be an effective and straightforward solution.

Following his key note address, Putin later participated in a panel in which he took another swipe at American capitalism by smacking down on Michael Dell, CEO and Founder of Dell Computers.

Michael Dell: “When we look at the level of talent [in Russia], there is still room to further utilize the IT sector. So my question to you is: How can we as the IT sector, help you broaden the economy as you come out of the crisis, and take advantage of that great scientific talent that you have?”

Putin: “The trick is that we don’t need any help. We are not invalids, we do not have any limited capacity. People with limited capacity should be helped; pensioners should be helped, developing countries should be help. Our programmers are the best in the world, and everyone would agree, even our Indian colleagues.”

Putin could not have made his disdain for American capitalism and American capitalists more emphatic at Davos. Given the current economic crisis in Russia, which is being highlighted by a currency that is under attack as noted in the Early Look today, Russia’s economic power is largely marginalized, especially within the backdrop of weak commodity prices. Nonetheless, Putin’s tone and words are an important takeaway from Davos and are the leading indicator of potential geopolitical tail risk emerging from Russia, but at this point we do need to consider his words as largely rhetorical. Or as President Obama would say: “Just words.”

Daryl G. Jones
Managing Director