When the once and current nation of Russia threw off the yoke of central planning statism a scant 25 years ago, it had everything going for it.  A country fabulously wealthy in minerals, water, oil, gas, coal and agriculture with a populace eager to embrace capitalism and entrepreneurialism it “coulda been a contender.”  After all, neighbors like Poland and the Baltic Nations, which faced far greater disadvantages and an economy and landscape left bereft and barren by the retreating Soviets, opened up their economy to the entire populace and are today real players on the world stage.

Russia, on the other hand, is currently not an emerging nation, but a a submerging nation.  Most people think in terms of the developed world and the emerging world, as if these two represented all countries accurately.  I would add a third category: submerging nations.  Such nations are characterized by a lack of transparency, a lack of property rights and intellectual rights,  cronyism, nepotism, little or no upward mobility for average citizens, paranoia and, often, a xenophobia fanned by leaders who, once elected, rule with an iron hand.  I mentioned Burma as one such nation last month.  Argentina under the Peronistas is another; a nation that at the turn of the previous century had an economy larger than that of the United States but destroyed it all through short-sighted political and economic decisions. Russia is another. Single-digit PE ratios are luring many investors to consider Russian stocks a bargain. I disagree.

Russia looks particularly strong today but that strength is relative.  Compared to the weakness of US and Western leaders, Pol Pot would look like a giant.  Vladimir Putin’s goal is to make Russia a world super-power, with cowed neighbors on all its borders and nations further away paying tribute via high energy prices.  By vesting the nation’s wealth in a handful of ridiculously wealthy oligarchs and holding it together with brute force, he has destroyed the glimmer of hope that infused Russians in the early days of the New Russia.