Tag Archives: russia

Ukraine Crisis Hits Soccer

Amid the political tensions between Ukraine and Russia, which have also involved most Western countries on Ukraine’s side, there are many economic and social repercussions to consider. As has been discussed on this blog, the economic implications of the crisis are vast, especially when looking within Ukraine. However, this period has been very tense business-wise between Russian companies and Western countries. A very unexpected implication of the crisis, at least for me, is that with the popular German soccer team Schalke. According to an article from the Wall Street Journal, Russian state-owned gas giant OAO Gazprom pays around $20 million a year to sponsor Germany’s Schalke soccer club. The problem here is not that Gazprom will halt its sponsorship, it is in fact very content with the market results of the sponsorship. However, out of this Russian-German connection, Russian President Vladimir Putin extended an invitation for the team to visit the Kremlin.

The article notes that “new complications for German business leaders who have been trying to maintain normal ties to Russia amid the mounting crisis in Ukraine. German companies trying to take a business-as-usual stance with Russia increasingly find themselves under political pressure at home to avoid appearing to be part of Moscow’s propaganda efforts.” Earlier this week, the team seemed inclined to accept the invitation. But today the backed down and declined it. Apparently, Schalke’s chairman, Clemens Tönnies, has serious business ties with Russia; besides the sponsorship of the team, him and his partners are investing over $800 million in pork factories in Russia. His initial response in an interview was that “the team would love to see the Kremlin and is interested in Moscow…and the Russian president is interested in Schalke and invited us.” But after political outrage on the behalf of German Chancellor Angela Merkel’s allies, today Mr. Tönnies took back his comment: “there was never and there is no commitment to such a visit…this would not be appropriate in light of the current political situation.”

It’s interesting to see the repercussions of the political tensions in Ukraine. And it is unexpected to see it manifested in areas like soccer. Luckily for German soccer lovers, the team says its fans are widely unaffected by the situation. With respect to the sponsor, they say most people just see the sponsor as a source of capital, and not a national flag. Personally, I think this is the right approach to the situation. Though it is more complicated when considering the Putin himself invited the team to Russia, it is important to remember that the Russian government’s actions do not represent every Russian’s views and wishes. In general, it is unfair and economically-illogical to punish Russian businesses for the actions of its government.

The Russian Economy: Why Natural Resources Are Its Only Hope (Part 2)

This is a continuation of my previous post about the adverse effects that the Russia/Ukraine conflict has had and will continue to have on the Russian economy. I will elaborate on two more of these negative effects and argue that Russia’s natural resource industry is one of the only bright spots in an otherwise grim view of the future for the Russian economy. As a recent Economist article, “From Bad to Worse,” emphasizes, the three most notable negative effects of the Russia/Ukraine conflict are: (1) Sanction tightening, (2) a cut off of foreign lending + investment into Russia, and (3) a fall in the value of the ruble. Having examined sanction tightening in the last post, I will take a closer look at the last two effects in this post.

2.    Cut off of Foreign Lending + Investment into Russia

Political instability in Ukraine is causing foreign investors to doubt whether or not their investments and loans to Russian firms are safe bets. As I have discussed numerous times before in previous posts, availability of credit drives business cycles (both short and long term), so a credit tightening in Russia would have many unfavorable consequences including plummeting asset prices, a drop in productivity, and decreased incomes. Unfortunately, these potential effects are already becoming realities. As the article states,

With capital flight hitting $60-70 billion in the first quarter of this year alone, investment in domestic production—what the spluttering economy needs most of all—will be even harder to come by.

It is worth noting that the main concern is not about existing investments and loans, but new ones. Many of the investments into Russian firms are under long term contracts, which make them difficult to get out of, but new financing is unlikely to come rushing in after the conflict in Ukraine. Although Russian banks have expressed enthusiasm in replacing the role of their foreign counterparts, their ability to do so is doubtful because many of these banks rely on western loans. If further sanctions and investor doubt forces these western loans to stop flowing in, Russian banks may be in an even worse position than the Russian firms relying on foreign imports (discussed next).

3.    Fall in the Ruble

The ruble has plummeted as a result of the conflict in Ukraine. Although there is some argument about whether or not a weak ruble is good or bad for Russia, I would argue that the costs clearly outweigh the benefits. A weak currency makes imports more expensive, and with many Russian firms not only relying on foreign loans, but also on foreign imports of supplies, a weak ruble is not something to celebrate.

In conclusion, I have laid out a detailed summary of some of the negative consequences the Ukrainian conflict will bring upon the Russian economy (sanction tightening, cuts in foreign lending, and a fall in the value of the ruble). Furthermore, I have argued that Russia’s natural resource industry will likely survive these troubles because of two reasons– Europe’s dependence on natural gas and the prospect of new, long term deals between Russia and China.

The Russian Economy: Why Natural Resources Are Its Only Hope (Part 1)

In my last two posts I discussed Europe’s dependence on Russian natural gas and I argued that it is unlikely that this dependence will disappear anytime soon. By focusing on Russia’s prospering natural gas and oil industry I think that the past two posts downplayed the negative effects that the Russia/Ukraine conflict has the potential to bring upon the Russian economy. In this post and the next one I will elaborate on some of these negative effects and argue that Russia’s natural resource industry is one of the only bright spots in an otherwise grim view for the future of the Russian economy. As a recent Economist article, “From Bad to Worse,” emphasizes, the three most notable negative effects of the Russia/Ukraine conflict are: (1) Sanction tightening, (2) a cut off of foreign lending + investment into Russia, and (3) a fall in the value of the ruble.

1.    Sanction Tightening

Although the sanctions placed on Russia as a result of the Ukraine conflict have been minimal (mostly because gas-dependent Europe refuses to risk endangering its natural gas supply), their potential negative effect is magnified by what Alexander Kilment of Eurasia Groups calls the ‘scare factor.’ The scare factor is essentially the idea that trade sanctions cause investors to expect further sanctions and trouble in the future. Shares of Russian companies that do business abroad, especially shares of those with administrative officials whose names are on the sanctions list, have fallen greatly. What makes this even worse is that the effects of the scare factor have been hitting the Russian economy where it hurts most: its energy companies. As the article states,

Shares in Novatek, a gas producer, fell sharply when the restrictions were announced, on fears it might struggle to do deals with foreign partners or raise capital abroad because Gennady Timchenko, a friend of Vladimir Putin’s named on the American sanctions list, owns 23% of the company and sits on its board.

The article suggests that this effect could spread to other large Russian energy firms such as Rosneft (an oil company) if the American government sanctions Igor Sechin, Rosneft’s current boss.

Even given these potential drops in shares, however, I have confidence that Russian energy firms will thrive. Apart from the European dependence reason I have discussed in previous posts, another key international player has entered the Russian energy game as a result of the sanctions: China. China is taking advantage of the sanctions by urging Russian firms to sign long term trade contracts that would quell some of China’s ever-growing natural resource demand. Gazprom, for example, is on the cusp of signing a deal to sell gas to China. In the next post I will elaborate on the other two negative effects: cuts in foreign lending and a drop in the value of the ruble.

Russia’s Economic Miscalculation

The continuing conflict between the West and Russia over Ukraine is beginning to cause a larger toll on Russia.  Putin is placing its global reputation ahead of its economy.  The Russian market plunged at the threat of new sanctions from the EU and the US while its currency hit a record low.  US politicians have recommended further sanctions aimed at Russia’s petrochemical and banking sectors due to increased violence among the Ukraine-Russian border.  Russia’s recent actions have been viewed as antagonistic and imperialistic these past few months.  Unfortunately, while it may appear that Russia looks strong, its economy is beginning to hurt.  Russia has already earmarked $7 billion for economic aid to give to Crimea.

As I’ve mentioned in previous posts, one of the key determinants of foreign direct investment and capital flows is political risk.  Russia’s actions and potential sanctions makes it an increasingly risky investment.  The Central Bank of Russia recently released a report stating that Russia had a capital outflow of at least $51 billion in the first quarter of 2014.  If the trend continues, Russia could stand to lose around $200 billion, or 1% of its total GDP.  The World Bank believes that Russia’s economy could shrink around 2% in 2014.  The confidence of Russia’s economy in Russia is deteriorating rapidly as well.  There has been an increase in emigration and the cost to import in response to Russian people’s lack of confidence in the market.  The fear of stagnation is extremely real with Russia’s low growth and high inflation.  Russia’s central bank at the beginning of April said that growth would most likely fall below 1% with the lending rate staying at 7% and the inflation rate at around 6.64%.  Unfortunately, Russia most chose between strengthening the ruble through high interest rates or lower interest rates in hopes of spurring growth.  Russia foreign policy has drastically hampered its monetary policy.  The large capital flight is due to the political risks and the central bank of Russia had to reply with higher interest rates in order to maintain some of the investment that it needs for growth.  The high inflation rate and high interest rate makes it difficult for the Central Bank to control inflation unless it wants to increase the interest rate further, slowing growth even more.  Russia’s low, decreasing growth increases the chance that Russia could face another recession.

Russia’s main hope in protecting their economy has been the gas they supply to the EU and Ukraine but as Russia raises prices, these countries begin to search for alternative options.  Ukraine recently stopped purchases of Russian gas and is actively searching for alternatives.  With the US becoming one of the largest producers of oil and gas, Ukraine could look to the West for help with its energy problem.

Russia’s actions right now provide a great case study about politics versus economics.  Russia is playing a political game right now and it’s drastically hurting its economy.  Interestingly enough, Putin’s approval rating is at 72% after the annexation of Crimea.  It will be interesting to see how high it stays as the economy continues to deteriorate and as the West increases sanctions.

 

Europe’s Thirst for Russian Gas: An Addiction Unlikely To Wane (Part 2)

This post is a continuation of my previous post about Europe’s dependence on Russian natural gas. After reading a recent Economist article, I am convinced that Europe’s addiction to Russian gas will remain strong in both the short and long term. The combination of (1) an already developed infrastructure, (2) a lack of viable alternatives, and (3) a growing European demand for gas reveals that a large enough economic incentive can successfully overshadow political conflict. Having analyzed the infrastructure point last time, I will elaborate on points 2 and 3 in this post.

2.    Poor Alternatives

Even if European leaders were to overlook the infrastructure problem and tap into all the alternative sources of natural gas at their disposal, they would only have enough to cover about half of Europe’s gas demand. In order to see this more clearly I will elaborate on the main alternative sources Europe could use and the problems associated with each one:

  • Gas from other European countries (i.e. Norway, Netherlands, Britain): Although Norway and the Netherlands combined have enough gas to provide about one eighth of Europe’s yearly gas demand, environmental concerns (carbon emissions and earthquakes) and negative public opinion create domestic political barriers.
  • Shale Gas from European countries: Although tapping into local supply provides an effective hedge from international political risk, the problem with local shale gas is, once again, environmental. Many countries, such as France, the Czech Republic, and Bulgaria have banned shale gas extraction.
  • Gas from Africa (i.e. Libya, Algeria): These sources have generally been unreliable due to political unrest and increased local demand. As the article points out: “Italy’s imports from Libya, once a reliable supplier, were down by 11.9% in 2013; supplies from Algeria (where local demand is booming) were down by 40%.
  • Liquefied Natural Gas (LNG): The main problem with LNG is its inelastic supply. Due to the cost of the plants that liquefy the gas and the steadily growing demand from China and Japan, Europe would not be able to attain the LNG for a reasonable price.
  • Shale Gas from America: The lack of U.S. export facilities means that there would be large startup costs to begin importing, and even once the facilities were built, Europe would have to compete with the high prices China will be offering for the shale gas.

An interesting statistic to conclude and drive the point home: if Europe were to employ all of these alternative sources it would not only be short about half of its demand, but it would also spend $50 billion more on gas per year!

3.    Growing European Demand For Gas

The final argument is a short, but important one– European demand for gas is expected to grow for the next ten years: According to AT Kearney, a consultancy, imports are set to climb from 327bcm today to 413bcm in 2020.” A growing demand for gas would mean that gas from alternative sources would be even more expensive, making Russian gas that much more attractive.

In summary, the past two blog posts have developed a detailed argument for why European dependence on Russian gas will remain strong despite political concerns in Ukraine. The already developed infrastructure between Russia and Europe, the unjustifiably high cost of alternative gas sources, and a growing demand for gas has put European leaders in a tough position– a strong and expanding Russia is not in their best interest, but Russia’s cheap gas has chained Europe’s leaders onto the political sidelines until an economically viable alternative is found.

Europe’s Thirst for Russian Gas: An Addiction Unlikely To Wane (Part 1)

The Russia/Ukraine conflict has been a topic of growing concern for the Western World in the past month, especially for Europe. Vladimir Putin has discovered a chink in his western neighbors’ armor and is now exploiting it to his advantage. Europe’s severe dependence on Russian natural gas, a majority of which is supplied through the Brotherhood pipeline that runs through Ukraine, has allowed Putin’s annexation of Crimea to go largely unpunished. If Russia were to suddenly cut off the supply of gas to Ukraine, European gas prices would skyrocket, hurting households and firms across Europe– a risk that European leaders are unwilling to take. Even though Putin has little incentive to cut supply off in the long term (the EU’s purchases of Russian gas make up 3% of Russia’s total output), it is not stopping him from using it as an effective short-term threat while the conflict with Ukraine unfolds.

In a previous post, I discussed some of the potential long-term effects of the crisis, predicting that Europe will make an effort to rely less on Russian gas in the future by increasing demand from alternative sources (Norway, Algeria, and LNG). However, after reading a recent Economist article,  “Conscious Uncoupling,” I am convinced that Europe’s addiction to Russian gas will remain strong in both the short and long term. The combination of (1) an already developed infrastructure, (2) a lack of viable alternatives, and (3) a growing European demand for gas reveals that a large enough economic incentive can successfully overshadow political conflict.

1.    The Infrastructure Problem

The transportation of gas from one region to another requires a significant amount of infrastructure. Everything from pipelines to processing plants to storage facilities need to be built and then maintained regularly. An already developed natural gas transportation infrastructure between Europe and Russia is the primary reason Europe will continue to buy Russian gas. It is simply too costly for European countries to stop using the already built pipelines, especially when, as is the case for Lithuania, Estonia, and Latvia, these pipelines are the country’s only source of natural gas:

natural_gas1

Adding to the infrastructure argument is that even if Russia were to completely cut off supply to the Brotherhood pipeline, its workload would likely be redirected to other pipelines that run from Russia to Europe. As I mentioned in my previous post on this topic, the Nord Stream pipeline through the Baltic Sea to Germany and the Yamal pipeline through Poland and Belarus offer the EU alternative methods of importing gas from Russia.

Furthermore, many alternatives to Russian gas, such as American shale gas, face infrastructure concerns as well. As the Economist article points out, investors may be wary of the large, potentially unjustified startup capital necessary to begin importing shale gas into Europe:

Private-sector investors may be chary of putting money into costly terminals that risk not being used if Europe slips back into accepting more cheap Russian gas.”

And even if European demand for shale gas was guaranteed, lobbyists in the U.S. government could attempt to stop the export of shale gas in an effort to keep domestic prices low.

In the next blog post I will analyze two other reasons for Europe’s long term dependence on Russian gas: a lack of economically viable alternatives and a growing demand for gas in general.

The Foil to Russian Energy Stranglehold (Part 2)

As mentioned in my earlier post, Russia’s foreign policy strength relies on its control of the natural gas that supplies Europe.  Unfortunately, this control allows for Russia to exert their influence and will over many issues, as seen with Crimea.  European fracking has the ability to change the landscape of political power between Europe and Russia.  Germany is one of the largest importers of Russian gas and is struggling with rising energy prices, making it significantly difficult for them to wane themselves off of Russian energy.  Where Germany is struggling with moving towards shale exploration and extraction, Poland is embracing fracking with open arms.  This past month, the Prime Minister of Poland signed a tax freeze on special taxes that used to be in place on the shale industry.  Both Britain and Poland are the leading proponents to allow for fracking.  The EU recently released guidelines on fracking instead of banning it, which is favorable for England and Poland in their hopes to employ fracking.

While I believe that fracking offers the European countries a way to reduce their reliance on Russian gas, there are many other factors that the EU and countries needs to take into consideration.  The projected reserves for shale gas and oil is often seen as an imperfect measure.  Poland’s project shale reserves have recently been revised significantly downward.  Many of the companies that Poland awarded exploration permits have abandoned Poland due to exploration and extraction not being commercially viable.  I believe though that these companies will soon be back.  The increasing natural gas prices due to global warming and Russian aggression will soon raise the price high enough that Poland’s shale reserves will become economically viable.  Another issue that many opponents of fracking have in Europe is that it will ruin the environment and destroy the English countryside.  Unfortunately, this again becomes a question of how much people value the environment.  How high will natural gas prices have to rise before the EU gives the green light to begin fracking.

Shale gas, while not environmentally friendly, looks to be the next global energy boom.  As prices in Europe continue to rise, it makes sense that Europe would look to take advantage of the large shale reserves that are present in Europe.  Africa looks to be the next continent to look towards shale energy with its large South African reserves, projected at 390 trillion cubic feet.  At this point, I believe that African shale extraction and exploration will come about more quickly than Europe due to the low regulation in Africa.  As of now, it looks like natural gas will be the next big energy supplier until renewable, green energies become more cost efficient.  The ability for Europe to become less reliant on Russia is extremely important for energy security in the future.  Unfortunately, economists project that it will take 4 years to a decade once for Europe’s shale boom to reach the same level as the US.  It took the US 25 years to reach the shale energy boom that we are now experiencing.  With the innovations that the US has come across with fracking, I believe that it will take Europe and Africa a lot less time to reach the shale boom.  Once Europe can stop relying on Russia for natural gas, it will be free of Russian influence through Gazprom.

How Long Can Russia Hold Out? (Revised)

As the US and other leaders of the now G7 group of nations have shunned Russia and its antics in Ukraine, a clear message is being sent to the former Soviets: change your actions or there will be severe consequences. A few weeks ago the G7 agreed to economic sanctions of Russian energy, finance, banking, and weapons industries until the country backed off of its annexation of Crimea. Instead of the G8’s annual meeting in Sochi this upcoming June, the now G7 will instead travel to Brussels and have their meeting there. (WSJ)

The question now I believe is to what extent will these sanctions be successful and how does that compare with other economic damage being done purely due to the political and economic unrest created by Putin’s actions. What I am getting at here has to do with the cost benefit analysis of the sanctions. For the US, as explained in this WSJ article, sanctions against Russia really would not have much of an effect as only 1% of annual US trade occurs with Russia. The meat of the sanctions would come from European countries and as shown by the following graphic, could hurt Europe as much as they do Russia:

Screen Shot 2014-03-24 at 10.15.46 PM

With almost 160 billion euros worth of oil and gas sent to the European Union in the first 9 months of 2013, there is substantial demand that would have to be gotten elsewhere if the EU were to in fact, sanction like the G7 is talking about. It is also unfortunate for the EU that over 15% of their gas needs come through Ukrainian pipelines that Russia could feasibly have some sort of control over now as well. Russia is the EU’s 4th largest trading partner and has substantial banking and automotive ties in the EU countries to boot. So obviously the G7 has something much more complicated than just sanction and wait going on here.

The good news here though, is that the G7 may not even have to impose as extreme of measure as are being talked about due to the unrest in the financial markets in Russia. As news broke of the tense situation back towards the beginning of March, Russian stock indexes dropped as far as 10% in a single day and have continued falling since. These are accompanied by massive losses in value in the Russian Ruble and the MICEX Russian Index (not hedged against losses in currency value) has fallen to almost 30% losses on the year at points. Accompanied by massive capital outflows from Russia and it becomes feasible that Russia could enter a recession without the US or the G7 ever having to do anything more than threaten to sanction. (Bloomberg) This is the most interesting part of the whole story I think, that while these threats of sanctions can be quite complicated as well as costly, there is really nothing as clear as Russian oligarchs losing over 20% of their wealth as quickly as Putin can send troops to the Ukraine.

Another factor, albeit a longer term issue, that stands in front of Russia is the shrinking cost of oil with the US becoming energy independent as well as the continual development of new alternative fuels. In a recent Barron’s article, economists from Citigroup talked about how the continual rise of production of oil in the US and elsewhere and this decreasing demand due to the ability for engines to run on alternatives, could lead to oil price averages around $75 a barrel rather than the traditional $90 to $100 range (Barron’s). This alone should make Russia think twice about its aggressive political movements of late, because alternative fuels like LNG exportation and solar energy just became a much bigger threat to Russia’s future monetary prospects. The lasting implications of aggressive moves such as these for the country are the expedited development and use of other fuels. This would leave Russia’s economy in complete shambles as that is their primary source of revenue.

The next time Mr. Putin asks his friends for a little money from the private sector and they do not have it, he may come to regret the path he has taken here on the Ukraine. The implications of his actions could be longer lasting than he realizes and the stakes for the Russian economy could be much higher than just a few months of sanctions.

Why Ukraine’s Gas Shutoff Could Actually Lead to Long Term Growth

Today Ukraine received another blow from Moscow as Russian natural gas provider, Gazprom announced that it will be raising the price of gas for Ukraine by 81%. The CEO of Gazprom, stated that he will raise the cost from $268.50 to $485.50 for 1000 cubic meters starting this month. Russia justified this economic attack by stating that it is due to Ukraine being late on $2.2 billion worth of payments on natural gas. (WSJ – Ukraine Leader Warns of Gas Shutoff)

Ukrainian Prime Minister Yatsenyuk responded to the economic attack by stating that Kiev will not accept the new prices and will take the case to the international arbitrage court. Currently natural gas is Ukraine’s largest imported product and more than half of all their natural gas imports come from Russia. Yatsenyuk announced that Ukraine will look for solutions to lower their exposure to Russian imported gas. One short term solution that has been in the works is to import 20 billion cubic meters with the help of the European Union from Hungary, Slovakia, and Poland. Russia claims that the importation from the EU will break Ukraine’s contract for natural gas importation, so it is unknown how viable this option will be.

In the short term, it is very likely that Ukraine will experience an economic recession as they continue to absorb economic pressures from Russia and have to deal with a limited gas supply. These pressures will undoubtedly hinder their manufacturing sector, as well as the rest of their economy. Despite the likelihood of the gas shortage crippling Ukraine in the short term, in the long term it will likely help Ukraine build stronger ties with the EU, which will help Ukraine develop in the long term after the Crimea conflict dwindles.

Prime Minister Yatsenyuk already vowed to leave the Gazprom pipelines to Europe alone, so by not tampering with the gas flow to Europe, Yatsenyuk signaled that he is more willing to work in accordance with the European Union in the future over Russia. If this trend continues it is likely that we will see further agreements signed between the EU and Ukraine that will open up more trade between the two markets. According to Martina Bozadzhieva, Head of Research for Frontier Strategy Group, as Ukraine integrates more strongly with the European Union there economy will grow. According to data from Frontier Strategy Group, “integration with the European Union tends to improve the operating environment of a nation.” (WSJ – Ukraine Turmoil Has Huge Impact on Multinational Businesses) In the short term Gazprom’s economic assault on Ukraine will likely be effective of forcing the Ukrainian economy into a recession, but it will also force Ukraine to seek the support of the EU and integrate itself further with the European economy. This fundamental change will help Ukraine in the long term and help it make a quicker recovery.

Effects on Russia’s Economy

According to the Wall Street Journal, Russia is experiencing an extreme growth in capital outflow. According to the article, this can be related to the recent annex of the Crimean peninsula. In the first quarter of 2014, its capital outflow should be between $65 billion and $70 billion. This has had adverse effects on the economy. Russia’s economy’s growth has been hindered because the increase in capital outflow has cut into investment spending. With all of the money going out, there is not a lot of money coming in for investments.

An article in the New York Times by Andrew E. Kramer discusses the increase in economic pressure that Russia is imposing on Ukraine. According to the article, about 25% of all of Ukraine’s exports go to Russia. Factories in Ukraine have been benefitting from this. In a series of blogs in the New York Times, Russia’s economy has been suffering at the cost of this situation with Ukraine.

Personally, I do not understand why Russia would be willing to sacrifice its own economy for a crisis with a neighbor. At the same time, Ukraine’s factories are benefitting. The way this crisis is working is that Russia is willing to hurt its own economy and help the economy of its rival neighbor. That does not make any sense. Along with that, Russia’s actions have not been seen as favorable in western eyes. The western world is very important politically and economically. Positive relations with it are crucial to success in the world. Russia is continuing to shoot itself in the foot with this crisis in Ukraine. This country is very strong and has a bright future. Putin is throwing it all away.

In my opinion, Russia should pull out of Ukraine as soon as possible. The country will be viewed more positively by the western world. Furthermore, Russia would be saving its own economy. In order to fulfill its potential, the country would need an influx of investments. The only country that would not benefit would be Ukraine. However, the country would not suffer as much. The larger changes would be in the Russian economy. If Putin were to serve his country well, he would end this crisis with Ukraine at once. His country would benefit immediately. Personally, I do not understand why a political leader would want to hurt the economy of his or her country, but maybe that is why I am not in politics.