Stuck in the minor leagues

An energy superpower, it controlled how Europe was heated and contributed one out of every eight barrels of oil produced around the world. Petrodollars flowed in even faster than Russian billionaires could spend them on Bentleys and Gucci. The billionaires, while meek as lambs in the presence of Kremlin political bosses, roared like lions abroad, buying up foreign companies.

Last summer, Russia's military won its first foreign war in decades, albeit against a tiny neighbor. While not yet loved or respected, Russia was starting to be feared — a welcome return to the glories of the past.

The current economic crisis, too, seemed promising at first. The hated Yankees were finally getting their comeuppance. America's economic power was finished, its greenback was garbage and its economic management was discredited.

How sweet it was! And what a disappointment, also. The economic slump hit Russia sooner and more severely than the rest of the world. Equally unpleasant was the rally by U.S. Treasury bills and the appreciation of the dollar, which rose a whopping 50 percent against the ruble.

But by far the worst blow was when it became clear that Russia was only a minor-league player on the international scene. Russia is not contributing anything significant to the debate on how to solve the economic crisis. The only thing Russian leaders can plausibly do is sit tight and wait until U.S. President Barack Obama finds a way to pull the U.S. economy out of its slump.

That Russia is not a decision maker in the world economy should not be surprising. Russia is a latecomer in the global economic system, which functioned in its current form for nearly five decades before the Soviet Union emerged from behind the Iron Curtain.

Even China, with its huge population and enormous flow of exports, has not been able to mitigate the crisis. Just like their Kremlin colleagues, the communists in Beijing have no choice but keep their fingers crossed for Obama's success.

Both Russia and China are precariously situated. The current economic crisis, as more and more people realize, is not about the real estate collapse in the United States or the breakdown of the global financial system. It is a once-in-a-century shift in the supply-demand paradigm. Old demand, based on excess dollar liquidity and sophisticated debt engineering, has disappeared and cannot be revived. The world will have to develop new ways of paying for the formidable quantities of goods and services that the global economic machine has geared up to produce. It is going to be a long and arduous process.

Until last fall, there was plenty of debt-financed demand, which meant that most markets were sellers' markets. From now on, demand is going to be extremely scarce, which means that buyers will have an upper hand in transactions. They will require low prices, greater reliability and better quality of everything they pay for.

This applies not only to cars, clothing and consumer electronics but to commodities as well. The World Bank has warned recently that global gross domestic product will shrink this year for the first time since World War II. The world will need less oil, natural gas, metals, lumber and other commodities. Unless Russia wakes up and becomes more responsive to the needs of its international clients, it may find itself unable to sell its commodities in a highly competitive market environment.

Alexei Bayer, a native Muscovite, is a New York-based economist.

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