Russia

Christmas Day, 1991 - The Soviet Union crumbles.

The old guard embraced capitalism because of its profitability. They brought an old KGB colonel to power (Vladimir Putin) and consolidated power by taking control of natural resources, abolishing popular elections for regional governors, restricting NGO's, and arresting threats to their power.

Example: Mikhail B. Khodorkovsky founded Yukos, an oil company which became the largest in Russia. Then he began criticizing Mr. Putin. Last October, Mr. Khodorkovsky was arrested on tax and fraud charges; then back-taxes leveled on Yukos sent the company into bankruptcy. It was sold at auction for a surprisingly low figure, to a company with ties to the Russian government and possibly organized crime.

I say possibly because I have no material evidence, only commonsense. The rise of Russian organized criminal activity correlates with the fall of the iron fisted government. Politicians and criminals have lined their pockets because oversight does not apply to them. The criminals sacked local economic markets (with political co-conspirators) as the government conserved natural resources and sold big ticket Soviet relics to foreign governments; i.e. military hardware to China and nuclear reactors to Iran. As time past, Mr. Putin gathered the necessary conditions to consolidate power; terrorism from Chechnya, shaken confidence in capitalism and liberal democracy because of rampant corruption, and rising oil prices because of Mideast turmoil. Russia has an authoritarian affinity; a majority of modern Russians harbor "ambivalence or ambiguous" emotions toward Stalin.

Now, Mr. Putin has twice displayed his power on the geo-political stage:

1. Russia cut natural gas supplies to Ukraine on New Year's Day past. Turning off the heat in a cold winter was enough for the opposition (and anti-Western) party to take control of parliament just sixteen months after the Orange Revolution overthrew a fallacious, Moscow-supported, regime.
2. In mid-January, Russia cut natural gas supplies to European customer with shortfalls in Italy, Croatia and Hungary. The EU is doubtful Russia can be a reliable supplier of energy.

Russia is going to get worse before it gets better. Recent economic growth has been based mostly on energy price inflation, not capital investment. It will all come to a head when Mr. Putin leaves the presidency, but rest assured he will still exert an enormous influence among the controlling elites.