Year of the Pig

For reasons not known to me the Russians have always been following closely the Chinese horoscope. I remember still well, when in the end of 1985  - we had moved to Moscow in February of that year – a Russian gave me for the new year a porcelain figure of tiger (which was the forthcoming year’s symbol). Seeing the astonishment in my face he explained the meaning of the gift – for me that was the first encounter with the Chinese zodiacs.

 Afterwards having spent quite a few years in Russia, I have taken the habit always to check what is the coming year’s symbol in the Chinese horoscope and what is the corresponding prognosis for the respective year. In the beginning of February 2019 we will migrate to the Year of the Pig and this time with earth as the main element. Pig’s year is the one which completes the 12-year rotation of the Chinese system of zodiacs and it should be “a year of fortune and luck”.

 Looking at the events we have ahead, it is hard to see factors which would make 2019 “a joyous year” (quotation from one of the sites describing the Year of the Pig) for Russia:

-      In the first months of the year there will most likely be issued new sanctions by the Americans; the US administration is obliged to choose three items from a list of six actions[1] as a follow up to the “Skripal-case” and there are two initiatives in the pipe-line (labelled DAASKA and DETER) for laws to be voted by the congress. Whether they will be dealt with separately or they will be merged in to one set of actions, the outcome is with high level of certainty even stronger sanctions than the present ones.

-          The Special Prosecutor Robert Mueller will give an interim report on the findings of his team somewhere in February. What will come out of this is of course unknown, but it being something positive for the US-Russia relations would be a surprise.

-          Ukraine will hold Presidential elections on March 31 (if they will be held as scheduled), which means that it is hardly likely that local politicians would want to show willingness to negotiate with Russia. And the same atmosphere will continue probably until the parliamentary elections scheduled to be held in the autumn. Ergo: unlikely that there would be any serious attempts to implement or re-negotiate the Minsk agreement, which in its turn is a condition precedent for softening of the sanctions regime.

-          As one analyst put it the EU-Russia relations will at the best stay as they are now, so no help from there either.

-          The world economy does also give signals of slower growth and volatile financial markets – not good news for the price of oil or demand for Russia’s traditional export goods.

-          Unpredictability is increased also by the fact that towards the end of this year the Americans will start process, which will end in the next Presidential elections in 2020. Russia will continue to be an instrument in the domestic policy of the US.

-          2019 is a kind of a gap year for Russia as regard to her own domestic policy. However there are in the autumn a few local elections being interesting on the federal level as well; the inhabitants of St. Petersburg will elect a new mayor in September and a new Council of the city of Moscow will be elected on the same day. Although there is a mounting atmosphere of dissatisfaction among the Russians, it is expected that the results of these elections will be the ones favored by the Kremlin.

 So, it seems to be the case that the Year of the Pig for Russia will be driven by external factors, rather than determined by the policy actions of the government and/or the president.

 One of the rare forces working for Russia’s benefit is inertia. The economy seems to be growing around the 1.5 per cent per annum regardless of almost anything that happens and the inflation stays close enough to the 4 % target set by the CBR. This all means that those who did well in 2018 will with high probability be doing ok also in 2019.

 At the same time, it is good to be aware of the fact that disruptive black swans can appear at any moment. Mapping and managing the business risks are as important as ever also in 2019.

Ilkka Salonen/ Jan 9, 2018

[1] Downgrade or suspension of diplomatic relations, 2) ban on Aeroflot’s flights to the US, 3) severe import restrictions, 4) further export restrictions, 5) severe restrictions on bank loans and 6) ban on multilateral development bank assistance.