Events in Russia’s economy are accelerating in the wrong direction. No doubt at some point things will pick up again. But for now the trends are ghastly.

Amidst all the analysis of what is ‘really’ causing the rouble to slump, this one by James Miller reads well:

What is the primary reason Russia’s currency is in free fall? In order to reach this answer we have to keep in mind a basic concept — factors keeping the Russian economy from recovering may not be the same factors as what caused it to become ill. The broken hip didn’t cause the fall down the stairs, but it’s going to make it impossible to get back up.

For the moment, we’ll look at the longer-term trends, not the last two days of rapid decline…

Putin has also been pursuing a reckless game of economic protectionism. Putin’s pet project and alternative to the European Union, the Eurasian Customs Union, has failed to attract most former-Soviet states. In response to a group of Russia’s neighbors making plans to sign EU association agreements (including, of course, Ukraine), Putin spent much of 2013 waging trade wars: banning certain imports, closing borders, passing new tariffs… as it turns out, while Putin was using these tactics to bully countries into joining the Customs Union, investors don’t like trade wars.

Despite booming energy prices, Russia’s economy was looking at the strong possibility of a recession at the start of 2014. This should have been a time where Russia’s economy was on the rise, thus creating a hedge against future bad news.

Then Russia invaded Ukraine and annexed Crimea, moves which gave Russia control of territory which is not self-sufficient and cost money to take over in the first place. And then, yes, there were sanctions. But it turns out that investors like real wars even less than trade wars. Even before sanctions, or the drop in oil prices, Russia’s stock indices and the value of the ruble were starting to decline. By the time oil started to drop, the writing was already on the wall. But as long as oil is this low, or dropping, there is virtually no chance for the Putin administration to turn things around. This is one reason why the Russian economy is falling faster than the price of oil — even if oil stabilizes, which it may not, Putin’s policies have done their damage…

In summary, Putin’s policies left the Russian economy unprepared for the day energy prices declined, his policies spooked investors at the worst possible time, and his policies have failed to stop the bleeding.

Read the whole thing. Lots of vivid graphs.

So, questions. Faced with this omnishambles of Siberian proportions, will the teensy inner Russian top elite behave more or less rationally? Is it in our interests to extend the hand of friendship and good faith (yet again) even if we can not be sure that the Snarling Bear won’t bite it?

Along comes our old friend Angus Roxburgh. Yes, IT’S ALL OUR FAULT:

To keep repeating the same mistake again and again and expecting different results is, as they say, a sign of madness. And if by doing so you punish only ordinary Russian people, then it is also cruel – and counterproductive. Twenty years ago the dream was to rescue the former communist world and bring prosperity and democracy to its people. What we are doing now is impoverishing and alienating the Russians.

We can, of course, stick to our guns and insist that “sanctions are having an effect”. But what will we gain if the only effect is to destroy the Russian economy? Perhaps the hope is to destabilise the country so much that Putin is overthrown. (I detect much schadenfreude among observers, who desperately hope a collapse of the Russian economy will bring about Putin’s fall.) If so, it is a highly dangerous game of chance. Pouring fuel on Kremlin clan wars that we barely understand would be the height of folly. We have no idea what the outcome might be – and it could be much worse than what we have at present.

Or perhaps the hope is that the Russian people, ground down into poverty and despair, will rise up against the Kremlin and install a government of the west’s choosing. Dream on!

It has long been my contention that we should deal with the causes of Putin’s aggressive behaviour, not the symptoms. There is a way to bring him back into the fold (always assuming that anyone actually wishes to do so any more), but it will require fresh ideas that are utterly unappealing to most of the west’s leaders. It will take bold and imaginative thinking, not kneejerk reactions and the false logic of piling on ever tougher sanctions.

All of which takes us back to a question I posed a few years ago: is Russia an Animal, a Vegetable or a Mineral? What exactly are we dealing with? What are the ’causes’ of Putin’s ‘aggressive behaviour’?

Some of us might think that the key causes lie deep in the Soviet communist lies and propaganda that Putin absorbed in his KGB training. Yegor Gaidar, who helped set Russia on the path to modernity, agrees:

“27-28% of Russians would vote for Stalin if he were alive today. This is a man who killed more of our fellow countrymen than anyone else in the long and complex history of Russia”

This is the true existential problem for Russia. This is the overwhelming ’cause’ of Putin’s aggressive behaviour and his systemic failure to bring Russia sensibly into the modern global economy. Huge numbers of its people are trapped in a sprawling national death cult.

There is nothing whatsoever that we can do about this, other than lend some carbon-friendly machinery to help demolish the evil Lenin Mausoleum in Red Square. They need to deal with it themselves, while the rest of us do what we can to defend ourselves against the madness.

In other words, in this situation it is not easy to decide how best to deploy Roxburgh’s ‘bold and imaginative thinking’. But why should the onus be on us to deploy it?

If Putin pulled all Russian troops and violent meddlers out of Ukraine once and for all and allowed normal political and economic processes to take place there (including Crimea), the situation would be transformed for the better in hours. That would create the psychological space for starting to look calmly at some new European security arrangements that all can accept. And even look at friendly measures to help Russia’s economy get back to something approaching normal.