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April 23, 2007
Bering Strait Tunnel -
It's Possible, but is it Affordable?

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Though some might call the current proposal for a Bering Straits Tunnel a crazy idea, that is an outdated view. This does not mean, however, that the idea should escape thorough evaluation. Among the many issues that need to be examined, there are two of particular note:

The first is financial soundness. The Euro Tunnel, popularly known as the "Chunnel" -- half the length of this proposed Bering Straits tunnel and connecting huge European population centers -- is on the verge of coming out of bankruptcy for, I believe, the third time. This chronic financial weakness was initially attributable largely to construction cost overruns, which left it saddled with high debt service. In addition, its passenger services have not been able to compete as effectively as forecasted with the airlines, a number of which are newer low-cost carriers, and the freight services that use the Chunnel are not robust enough to bridge the revenue gap. Adding to these problems, the Chunnel has incurred much higher operating costs in recent years for security and preventing illegal immigration.

The second issue for a Bering Straits Tunnel is the Jones Act, a law affecting the U.S. maritime industry. At a conference in 2005, then Governor of Alaska (and former U.S. Senator) Mike Murkowski strongly promoted connecting Alaska to the Lower 48 by a rail corridor through Canada. His rationale: it is politically impossible to modify the Jones Act, which makes coastal shipping uneconomical because it restricts cabotage (sailing from one U.S. port to another to deliver freight or passengers) by foreign vessels, thus requiring uneconomically costly U.S. bottoms and U.S. crews for American domestic coastal shipping. The question is, will the U.S. Congress be able to take on maritime labor unions and the Jones Act in the name of efficient transportation? If the Jones Act were amended to remove the cabotage restriction -- which is not likely but perhaps not impossible -- it would reduce the amount of freight flowing on an Alaska-to-Lower-48 rail line, perhaps to the point of making the rail line uneconomic.

These economic issues are much more challenging than the technical ones, and both must be resolved if a Bering Straits Tunnel is to move forward.

Tom Till is managing director of Discovery Institute's Cascadia Center for Regional Development, a non-profit regional transportation initiative funded by the Bill and Melinda Gates Foundation. Mr. Till managed major transportation investment projects in the former Soviet Union for both the World Bank and the London-based European Bank for Reconstruction and Development.

Click on the extended post to read an Anchorage Daily News story about the proposed tunnel project.

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The proposed Bering Straits tunnel would link Asia and North America

Original Article

Russia-Alaska Link - A Bering Strait Tunnel
By Sabra Ayres, Anchorage Daily News Reporter
Published: April 21, 2007

JUNEAU -- A proposal for another big construction project is gathering headlines across the world.

No, we're not talking about a $30 billion pipeline to send natural gas to the Lower 48.

This is bigger: A $10 billion to $12 billion tunnel under the Bering Strait linking Alaska and Russia. And another $50 billion to lay railways to make the tunnel usable.

The proponents of the 64-mile tunnel are not working off an original idea. Over the past 150 years, at least one Russian czar and several American entrepreneurs have devised plans for linking the continents.

The latest Russian concept is a tunnel tying Russia's Chukotka to Alaska's Cape Prince of Wales as part of a hoped-for continuous railway from London to New York. More than 6,000 miles of new rail lines -- about half laid in Siberia and the remainder in Alaska and Canada -- would connect the railheads on both sides. Siberian oil, gas, hydroelectric power and fiber optic cable could be exported through pipes built beside the high-speed rail service, they said.

But something is different about this current proposal, backers of the plan say, and it's not just modern technology. Some say it's the tolerant nod of approval the Russian government has given to hosting a conference next week on the tunnel project.Others say it's the momentum the idea has gained from media attention this week.

Maybe it's just timing: Russia's economy is booming, thanks to high world oil prices that have poured billions into the Russia treasury after 15 years of a difficult, post-Soviet transition.

In Alaska, a new governor promising to get the state a profitable natural gas pipeline has spurred some to think about fresh starts. But it could just be kindred spirits finding common ground on dreaming big. Russia, the largest country in the world, once tried to reverse river flows to better irrigate crops.

Alaskans have seen their fair share of mega projects, too, including the trans-Alaska oil pipeline.

Former Gov. Wally Hickel has long been a champion of big, transforming projects. Hickel is one of the Bering Strait tunnel project's most serious supporters. He said he plans to attend the conference next week in Moscow to watch a plan he has been behind for some 25 years finally find the support it deserves.

"You know how to build a gas line? Just build it," Hickel said. "Big projects are what civilizations need. Just to let the world know you can do it."

The tunnel idea resurfaced last week when a long-time advocate of the project, Viktor Razbegin, a deputy at the Ministry of Economic Development and Trade, announced the Moscow conference and invited several American and Canadian enthusiasts. Razbegin, Hickel and members of the aptly named Interhemispheric Bering Strait Tunnel & Railroad Group have been coordinating on the project since the late 1990s.

Enthusiasm aside, the current idea, like those in the past, is meeting skepticism.

Experts have said construction in the icy Bering Strait is possible, but finding funding will be difficult.

The Russians will need to complete a huge amount of rail lines to reach the remote Chukotka region, currently only accessible by plane or boat.

"I don't mean to diminish this, but a connection to Russia through Alaska any time soon is probably no more valid than the idea that we are going to send a manned mission to Mars," said Bruce Carr, the Alaska Railroad's strategic planning director.

The state-owned Alaska Railroad has been studying the possibility of connecting to Canada's rails for more than 60 years, Carr added. The U.S. government has shown little interest in the project.

"It would be safe to say that no one here has ever heard of this thing," said Janelle Hironimus, a spokeswoman for the State Department.

Several of Russia's deputy ministers are scheduled to attend the conference, but Kremlin officials, including President Vladimir Putin, have been reluctant to throw their full weight behind it.

Still, the Russian side of the project has put on a remarkable un-Russian PR campaign ahead of the conference, said Joe Henri, an Anchorage developer and a member of the Interhemispheric Bering Strait Tunnel group. Russian organizers said the tunnel would help develop the remote Far East, where there are untapped stores of natural resources. The state-owned electricity, railway and energy pipeline companies are listed as conference sponsors.

By late this week, stories from London to Ottawa popped up in the media and on the Internet.

Bloggers began having a field day. "Bering Strait Tunnel Project: OMG! Ultimate Road Trip!" one headlined.

Henri said the interest is a big change for a plan that has been called crazy.

But will attention and the Moscow conference move the project along?

"Biggest thing now is to form a corporation, get some Russian money, sell some stock and raise money for a feasibility study," he said.
--------------------------------------------------------------------------------
Daily News reporter Sabra Ayres can be reached at sayres@adn.com or 1-907-586-1531.



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21 Comments

Hello,

I am a school district administrator with the Bering Strait School District, and read with
interest your posting about the proposed tunnel linking Russia and the United States.

The school district's Student Broadcasting Team (SBT) was in the process of preparing their
own piece on the conference next week. Actually, one student reporter interviewed Senator Ted Stevens about the tunnel project proposal last week, and they are editing footage ;-)

The proposal would, of course, be of enormous impact on our region. It has both positive and negative effects that are critical for the students and adults in the Bering Strait School District to understand. We welcome web posts and articles such as yours that help inform the coming debate.

We run a live, steerable webcam link the school has looking over across the International Dateline into Russia. Since it is looking across the International Dateline, it is "looking into tomorrow", it is pretty unique!

BSSD Tommorow Cam
http://www.bssd.org/diocam.html

This is a high quality camera that can be steered around, zoomed in and out, and will take still
pictures for visitors. The cliffs you see in the view are Russia, and the International Dateline
runs right between where the camera is and the cliffs.

There is another camera at the Wales School looking toward Diomede...which can be seen easily. This is thus the direct route the tunnel would take.


Diomede and Wales are both villages in our school district, and we have a very nice QuickTime VR panorama that shows a 3D virtual view looking from Little Diomede over to Russia.

In addition, we recently completed a video with extensive recent footage showing Diomede, the view from the top of the island over to both Cape Prince of Wales, and the Russican coast line.

The vide is very large, and near professional quality. The students will be editing and posting a lower quality compressed version in the next day or two.

Here is the link to the virtual reality panorama download:

Diomede Panorama With Russia In View
http://www.bssd.org/download/diomede_panorama.mov

You will need the free QuickTime player to view the file. It is available for Windows
and Macintosh computers at:

Free QuickTime Download
http://www.apple.com/quicktime/download/

The Student Broadcasting Team website, which will have significant student-based coverage
of this project proposal, and will examine the potential impacts of the tunnel on the local and regional ecomomies and cultures, is located at:

Bering Strait Student Broadcasting Team
http://sbt.bssd.org/

Regards,

JTC

Well isn't that cheerful!
once again the insane have taken over. Not only has noone bothered to reflect on the fact that the U.S. rail system is virtually in its death throes and therefore, a trans-siberian arctic leg would be of little value to any one at all, (and could not possibly be cost effective) what is worse, anyone who knows anything about the Arctic knows that such a monstrosity as a sub-Bering tunnel (and its constuction chaos) would likely tip the balance killing off what remains of the incredibly delicate ARctic ecosystem upon which life in the Northern Hemisphere is dependent. Who got this train rolling anyway?
Just a bystander constantly amazed at the stupidity of humanity
(Lois DuPey)

Interesting idea. One thing I have not seen talked about is that of the earthquakes that have happened in Alaska. There was an 8 pt something quake some years back. What will be the implications of that on the structure? If a train was in the tunnel 40 miles under and an earthquake happens what is going to be in place to handle the stresses from an engineering prospective?

I think it´s a wonderful project.I hope it may be constructed as soon as possible.

I read the article I am a American My wife is from Russia and she has lived in the Far East. I would first attempt to do bond issues for railway construction. Russia Yakutsk to the Bering straights North America from Fort Nelson to the Bering straights. The private investors in North America like this idea. Remember running a marathon has 3 legs 1st leg is to construct railways than the second leg is to do a detailed study of the Eartquake fault lines for stuctural tolerances. Than determine what course of action can be taken

John, thanks for the links. The panoramic view was pretty cool. Lois, you may want to click on that link of John's, before talking about Artic's "incredibly delicate ecosystem" *rolling eyes*

Lois, as for rail system being in its death throes, you simply have no clue about what you are talking about. The freight railroad business is booming in America. Sure the passenger railroad system may be dismal, but freight is growing. BNSF out here in flyover country is having a hard time finding enough people to hire. UP is also doing well. DME is planning on building new lines through Wyoming, South Dakota, and Minnesota, which all together will be the biggest railroad project since the trans-continental railroad.

As far as building a tunnel to handle seismic events, anything is possible if the money is there. The seismic risks would add a lot to the cost of the project, though.

This project is a neat idea, but likely improbable due to the cost. If Russia foots the bill for the tunnel to Alaska, I could possibly see the US/Canada step up and fund the rail and road projects to the continental US. It still is a longshot though.

Lois DuPey,

And, what the hell is America going to "trade" with Russia???

Do people think raw materials will leave Russia long term? No, eventualy finished goods... So what will the US give in return that will trade so massivly over the new "bridge"? dollars? What the hell does america make anymore?

Like George Carlin says: AMERICA MAKES NOTHING WORTH A DAMN ANYMORE !!

In his own words:
http://www.therussiansarehere.com/vid/gCarlin/video-only-war.mov

April 26,2007
High speed maglev containers and dual mode maglev vehicles will provide the world with the alternative to replace maritime and air transport thru the Bering Strait and thru the Grenland-Iceland routes. Maglev (not trains) will deliver 50 times more in a given period than those mentioned. In the sixties I presented the US DOT in Washinton DC with the "Dual Mode Maglev" concept which stimulated them and others to move in that direction towards a global participation in the very near future. For more info check these web pages
http://trillions.topcities.com
http://globalsys.topcities.com
http://angelfire.com/nj4/streetrag/index4.html
http://geocities.com/gblsys/index4.html
The enclosed pipelines wether under water or above ground provide a controlled environment safer than anything now existing and is the reason we are now ready to roll...er..glide..? to all corners of the planet.
PS- Don't let the fast talkers and B.S.ers feed you that they came up with these new ideas.Bachelet's patent was of a NYC Maglev subway in 1912.
So let's move on to a whole New World.
Jack Marchand

I wonder what the FINAL price tag is going to be, when everything's said and done -- all unforeseen expenditures added up. And, how much will it cost to maintain it? A worthwhile endeavor? Um... hardly.

Also, moving to the "whole New World" sounds fine and dandy. But as for now, we can't even agree on simple security issues, such as missile defense system in Chekhoslovakia and Poland. Undoubtedly, this tunnel will be of certain strategic importance, being an efficient link to two major continents. And the powers that be seem to disagree the most on just such issues.

Well, I’m sure Tom Clancy could come up with a scenario or two of what would follow in the wake of building such a tunnel : ) What diabolical schemes would those evil Russians be able to come up with! Sky’s the limit.

And, what the hell is America going to "trade" with Russia???

Perhaps you should ask the Russians who between them in 2006 bought some $4.7bn worth of something from the US, up from $3.9bn in 2005 and $2.9bn in 2004.

History provides us with several examples of "monster projects" such as the proposed Bering Straits Tunnel. See the Suez and Panama Canal, and more recently the Channel Tunnel between France and Great Britain, all of which are still going strong and prove extremely useful.

Yet each of these projects proved a major disaster for the inital investors, because when they thought were buying a right to cash in on commercial traffic via a particular canal or tunnel, it turned out they had in fact paid for the right to be liable for unknown or misrepresented building costs which invariably rocketed way over and above what they were gullible enough to believe in the prospectus.

This age-old principle has proved itself time and time again.

We must be particularly wary when Russia is involved.

Viktor RAZBEGIN of the Russian Economy Ministry tells us not to worry because "the governments will act as guarantors for private money".

A century ago more than 1.5 million French households massively invested in Russian government, infrastructure, utilities, and railway bonds.

They all came with a Russian government guarantee.

Not a single one has ever been paid back.

Today the Russian Federation still refuses all form of contact with 400000 present day bondholders. The total amount outstanding is in excess of US$90 billion.

How could anyone trust Mr. RAZBEGIN and his chiefs?

Mr. RAZBEGIN, before you issue new Russian government guarantees you must first deliver on the outstanding ones.

To avoid losing ALL your investment please read the following INVESTOR ALERT below. This is not rhetoric. This is present-day economics.


RUSSIAN INVESTOR ALERT


French holders of Russian government bonds remind investors that the Russian Federation is still in default today (April 2007) on their estimate of some US$ 90 billion owed to them since the Bolshevik, then the Soviet, and now the Russian Federation governments have all unilaterally repudiated Tsarist debt and refused any form of contact or dialogue with their legitimate bona fide creditors.

They also remind investors that in its Sep. 15th 2006 report entitled "Governance matters: a decade of measuring the quality of governance", the WORLD BANK has rated Russia's governance comparable to that of Swaziland, Zambia and Kazakhstan. Russia came 151st out of 208 countries in terms of (...) accountability, quality of regulatory bodies, and rule of law, (...). In particular, rule of law (i.e. the courts and the quality of contract enforcement) was judged as effective in Russia as it is in Ecuador, Indonesia, and Bangladesh. Nicaragua, East Timor, and China's ability to control corruption was judged similar to Russia's.

On February 26th 2007 the St. Petersburg Times, quoting a report from Vedomosti, wrote that "Surgutneftegaz managers covertly hold 72 % of the secretive oil firm" and that Deutsche UFG had had to "raise its estimate number of outstanding shares from less than 26 billion to (...) 43 billion" which "implies a 40% dilution in the value of the stock".

In Paris on April 3rd 2007 to launch the merged NYSE-EURONEXT entity Mr. John Thain, the New York Stock Exchange CEO, warned that he was "very concerned about the quality of corporate governance, the transparency of company financials and the protection of minority shareholders. A number of Russian companies raise serious questions around these issues."

Despite these findings, and the main rating agencies' knowledge that Russia is in default on US$ 90 billion of Tsarist debt, Russia is rated "INVESTMENT GRADE" whereas it should clearly be in "SELECTIVE DEFAULT".

French bondholders intend to pursue their claim until full settlement at present value, by any legal means and in any jurisdiction they deem appropriate.

EVERY POTENTIAL INVESTOR IN RUSSIA MUST BE MADE AWARE OF THESE RISKS.

FRENCH CREDITORS OF THE RUSSIAN FEDERATION STRONGLY ADVISE AGAINST ANY FORM OF INVESTMENT IN A COUNTRY WHOSE SOLVENT GOVERNMENT HAS IN THEIR VIEW SYTEMATICALLY REFUSED TO FULFIL ITS NATIONAL AND INTERNATIONAL CONTRACTUAL OBLIGATIONS, REFUSES ALL CONTACT AND DIALOGUE WITH ITS LEGITIMATE BONA FIDE CREDITORS, AND REFUSES TO DISCLOSE LIABILITIES WORTH US$ 90 BILLION.

I think that instead of undertaking this monstrosity of a project, we need to look for more simple and cheaper ways of “trading”. That is, if it is so vitally important to establish a major trading route across Bering Strait (and I don’t think it is at the moment).

So then, why not build an efficient ferry system? If we’re truly in such a dire need of getting tons of raw materials and other goods transported across there, as to consider this preposterous idea of a tunnel, then I’m pretty damn sure we could efficiently barge them across the 38 mile stretch.

Unless we want to accomplish this feat just for the symbolism of it, like landing on a Moon or something, which yielded no practical results, but created a historic sensation.

Um… Except that the said trip to the Moon was funded by tax money, which the government doesn’t have to account for in full, and can always count on more rolling in. Whereas this here project aims to be funded by private investors, which is a different story altogether. This tunnel would have to start paying for itself real quick.

To Karolus

You know, Karolus, when I read your posts concerning the czarist debt to Belgians, French, etc., I can’t help but chuckle with an expression of sardonic derision on my face. I can’t bring myself to believing that someone could propound such notions in earnest.

With regards to current investing conditions in Russia, I’ve commented on that before. I don’t want to repeat myself again. In short, there’s a good measure of risk involved, but also a more than commensurate measure of reward. A succulent 71% growth of the Russian stock market in 2006 can be called nothing short of AMAZING. So whilst pessimists are screaming their heads off ‘warning’ people about the dangers of investing in Russia -- major banks, insurance companies, brokerages and high net-worth individuals are capitalizing on this growth. No risk, no reward. So Karolus, keep brooding and dreaming about your ‘liabilities worth US$ 90 billion.’ We live TODAY, and look forward to TOMORROW. Git on with it, man, onward and upward, not backward.

The tsar family was brutally murdered, all supporters of old regime killed or driven away, and common people enslaved and oppressed. A lot of European do-gooders were involved in this plot. But little did they know what fire they were playing with. If your great-grandpa bought some Russian railroad bonds before 1917, well, that’s just too bad. I hope he didn’t put his entire life savings into it. By contrast, the first husband of my great-grandmother was killed by a band of Bolsheviks for no reason whatsoever. The second, my great-grandpa, was killed in war, the poor management of which by the illustrious Yosif Vissarionitch had led to the death of millions in USSR. And she herself had to slave her entire life in kolhoz for bare subsistence, and didn’t even have pension or any sort of assistance from the glorious Communist govt when she was old. I think my family is more deserving of reparations than yours. What Russian people had gone through in 20th century does not compare to any loss, real or perceived, experienced by European countries. Please understand, Karolus, that Russia was usurped by a band of criminals, and most families in Russia had lost more than a few investments.

Asking Russian government today to honor the debts of pre-communist era is like, say, asking the French government today to be liable for the bloody deeds of Robespierre, and to pay reparations to the descendents of those he guillotined. If we go far enough in history, then I can start bending my fingers and recounting all the things tsarist Russia had done for Europe out of sheer benevolence and magnanimity of its sovereigns. When Alexander I drove Napoleon back to France, he didn’t have to graciously step back and re-instate Bourbons into French monarchy (to see them ousted shortly thereafter). And Russia had paid dearly for containing this French maniac, with whom much of Europe had conspired at the time due to their inability to stand up to him.

Anyways, I can run my mouth endlessly about the indebtedness of Europe to Russia. It’s rather pointless. Instead, enjoy the fact that you were born in this age, and not in one of the darker ages of our history. Open your mind, Karolus, and move on with life.

Regards.

To Al Goroh

Yes, I confirm: my notions are earnest...

Our points of view are worlds apart. Yet, I think: perhaps, we are both finance professionnals. So perhaps we can find some common ground. As you say, investment rewards can be big in Russia, because of the risk. No risk, no reward. Fair enough. And your stocks are up 71% in 2006.

Did you get 71% on bonds last year? I think not. Why not? Because they are for risk-adverse investors, who are ready to accept a much lower return in exchange for peace of mind. And the ultimate peace of mind comes from investing in governement-issued or government-guaranteed bonds. Because these bonds come with a governement guarantee, investors accept that they pay even less interest than private sector bonds. This trade-off is so successful that it brings billions to the public finances of solvent countries large or small around the world every year, financing major public projects and benefiting all of their citizens.

This system is based on trust in the rule of law.

Sincerely: what do you think would happen if next week the US defaulted on just one of its redeemable Treasuries? Need I answer? And if regime changes were reason enough to write off the debt run up by previous governments (a principle, incidentally, that has always been rejected in international law), the system would simply fall apart.

You tell me about the hardships your countrymen and also your family endured throughout most of the twentieth century. Indeed, I believe that; I respect it - perhaps more than you think - and I think it is clear that globally Western European countries got a much better deal than those of the former Soviet Union. I must however say I do not agree when you say the French lost just "a few" investments: 65000 km of railway tracks, plus the trans-siberian, sewerage and water networks in all your major cities were all financed by French-paid bonds, and I am not mentionning massive equity-related investments because, as you say: "no risks, no rewards". The present value I quote of US$ 90 billion is not rhetoric. It is a conservative estimate. If you doubt my words, please check: you will not prove me wrong.

But, I would like to say: this is beside the point. We are not talking about hardships. We are talking about the rule of law. We want enforcement of the rule of law. I will come back in a moment to the rule of law.

You mention Robespierre, Alexander I, Napoleon, and XIXth century events. If I understand you correctly, Europe owes a lot to Russia, but since some time has past you suggest we forget about it. I ask: when is the dateline for forgetting?

But mainly I say to you: please, if you have a claim against my governement, will you present it now. I, and my 400000 bondholder friends, will support it. That is what rule of law is about.

And the reason I come back to rule of law is that today Russia wants to benefit from its advantages without performing its related duties.

What does your governement mean when it issues its guarantee without having honoured its universally recognised obligation (again, please check this if you doubt my words, you will not be able to prove me wrong) to pay for Csarist debt?

Obviously, some people trust the Russian Federation since they actually buy its bonds.

My job is to tell them it does not pay up. I mean no insult. It is a fact.

We all know that Russia, who is now free to develop its massive power and resources, has the means to pay. Otherwise I would not be writing. Perhaps not just in one go (although last summer you paid a lump sum of US$ 23 billion to the Paris Club and then claimed to be debt free - I say: no! Russia still owes French bondholders US$ 90billion!), but it could easily be spread out over 10 years, or 20 if you want. How can you disagree? You could even offer to exchange the old Csarist bonds for modern ones: perhaps we would accept!

Instead your government chooses to refuse to talk to us, and has to resort to tactics normally used by shady businessmen. Do you remember what happened in 2002 with SEDOV, your magnificent training ship for cadets of the Russian navy, a veritable floating embassy for Russia run by Murmansk University, which had to precipitously leave Marseilles harbour under cover of darkness at 2 a.m., without waiting to host the official receptions planned for the following day, to avoid the impounding order about to be served by French bondholders? Thus Russia debases herself to behave like a vulgar misdemeanour culprit running away from a restaurant without having paid the bill. The Swiss Noga has also tried to seize the ship. I believe Russia has discreetly settled that claim, because it was only 20 or 30 million dollars. This is not worthy of Russia. Again, I mean no insult.

Anyway, my Korespondant, although we disagree entirely (agreement would have been a surprise), I truly thank you for your answer. It proves there is a contact. Perhaps, a dialogue. We can both think about it, and I hope it will continue. I appreciate your frankness. But not your sardonic smile: many people have suffered; some have killed themselves over this matter in the past.

P.S. You say I made some posts on Czarist debt to Belgians: I think this is not so... Perhaps they have been claiming too!

Sincerely,

K.

Tim Newman,

Yea, the US sells things like beef, chicken, corn and soy beans ... all of it needs massive energy inputs. So why drag natural gas from Russia to the US, use said gas to make fertilizers, and then grow these agricultural products like forced intravenous methods, and later export such products back to Russia? As new Russian tax laws have been created, incentives will make Russian farmers consume such energy locally for the local production of Canadian like beef instead of this low grade Yankee quality that my dog would spit up...

Oh, I forgot, the US makes software written by H1-B visa developers, and we get to enjoy constant viruses and crashes... great exports...

And then look at the quality of US beef and chicken, all requiring massive steroids and antibiotics... Like George Carlin said that America doesn't make anything worth a damn. An American cow or chicken today is born and dies, never being sick (during illness it loses weight )... eventually all these chemicals propagate into the US population...

Hello Karolus

Firstly, I apologize about the Belgians. It’s just that I’ve read an extremely similar article or post somewhere, except in it the victims of defaulted bond payments were Belgians. Due to uncanny similarity of the claim I rather assumed it was you. Evidently it wasn’t.

Please understand me correctly, Karolus. I am not saying that it’s OK for the government to default on its debts just because of a radical change within the country. But I do question the validity of a claim such as yours, due to practical realism of the world we live in.

Lets explore the following point: what is government? Almost exclusively, is it not simply a small group of people, mostly privileged from birth due to fortunes and/or relations and connections? And this group of people is entrusted to ‘represent’ a given nation, all the peoples living therein. Then we say, Russian government owes, which is to say that Russia owes.

Then this group of people is supplanted, violently, murderously. Do you think that the new regime will honor the obligations of those they removed and killed? Why should they? Even the name of the country was changed eventually, from “Russia” to “Soviet Union”, although in essence it was dominated by Russia (but non-Russian leaders, mind you -- Ukrainians, Georgian, Jews, etc.) So any reference to Russia or Russian debt became obsolete. The flag was changed, religion was changed, everything was changed.

It DID NOT change the fact that a lot of French money was invested in Russian infrastructure, as you say. But the accountability for that money was destroyed. You cannot pin that accountability 4 or 5 generations later on the government of a completely changed nation.

You say, what if USA defaulted on its debt next week? It would plunge the world economy in a short-term chaos. But note this disclaimer: ALL debt of USA “…is backed by the full FAITH and credit of the United States government.” By purchasing US debt, you do so BELIEVING in CURRENT govt of USA, and that it will make good on its promise.

God forbid, if US government was violently overthrown today, all leaders and Congressmen rounded up and shot, how good a faith and credit would US debt notes have? Old promises, alliances, etc., would be dead. The currency itself would become paper. Do you think that a regime that attains power in such a manner will be awfully concerned with the obligations of the old govt? And if 70 years down the road a democratically elected government is able to govern the land again, should they assume all debts of the past?

Take Iraq for example, a contemporary issue. Before USA invaded Iraq, a lot of countries opposed it, such as Russia, Germany, (and I think France). Why? Because Russia and Germany had vested interest in Iraq (I imagine France had as well). Iraq owed like US$9 billion to Russia alone. You can clearly see why they objected -- because everyone understood: if old regime is thrown off violently, with it will go all prior agreements, obligations, contracts, etc. So when USA invaded Iraq, Russia wrote the $9 billion as a loss. Tough luck!

Lets see if Russia and Germany can demand their money from today’s govt in Iraq, if ever the situation there stabilizes. I can assure you that they’ll be shown an obscene gesture in response, and nothing more. And USA is not going to press the issue either, believe me. So investing in Iraq proved to be a little unprofitable, didn’t it? Faith and credit in Sadam’s Iraq wasn’t exactly rock-solid, mind you. One takes a risk to reap a reward. But if you take risk, you understand that the worst possible outcome of it is losing all your capital.

Lastly, your argument is flawed on one major account. You seem to suggest that since current Russian govt does not even want to discuss the issue of this old debt, it follows then that it will easily default on other obligations it assumes today.

No, Karolus, that is not so. Refusing to assume 100 year-old liabilities of two regimes past is NOT an indicator of current financial solubility of Russian government. In fact, Russia had assumed ALL debt of the defunct Soviet Union, for all the former satellite republics. What’s more, Russia is on the verge of paying off that debt in full. Soon Russia will be a lender nation, not a debtor nation like USA and much of Europe.

P.S. By the way and in passing, I don’t trade stocks anymore. I used to for a couple of years, on American exchanges. Right now my only exposure to equity markets are my 401k contributions, being invested in mostly international funds, some of which may or may not be investing in Russian economy. Personally I trade currencies exclusively (FOREX). Beats all other markets by a long shot, if you master it.

Regards

Aleksey (a.k.a. Al Goroh)

Yea, the US sells things like beef, chicken, corn and soy beans ... all of it needs massive energy inputs.

And you think that this is what makes up US exports to Russia? Where is your source for this?

As new Russian tax laws have been created, incentives will make Russian farmers consume such energy locally for the local production of Canadian like beef instead of this low grade Yankee quality that my dog would spit up...

Which new tax incentives, exactly? Certainly the farm boy who I've just employed doesn't see farming as a reemerging industry in Russia. In fact, meat and vegetable production is so poor in Russia that some towns - like the one I live in - are facing shortages.

Like George Carlin said that America doesn't make anything worth a damn.

You've already said this. You are repeating yourself. If Americans don't make anything worth a damn, why are the Russians importing some $4.7bn worth of something from the US, up from $3.9bn in 2005 and $2.9bn in 2004?

Sorry Luther, but I think that declaring Americans too incompetent to raise decent beef (not even organic?) goes beyond the "America is going to hell in a handbasket position" into the realm of mindless anti-Americanism.

Charles,

I'm not arguing your point, sure we Americans raise "some" organic beef.

But the majority is cheap crap. And the cheapest, unhealthiest garbage is exported.

And anything of quality food requires far too much energy inputs in the US.

In fact, this is what scares me, for the US, our best and highest volume of exports mostly rely on massive amounts of energy inputs.

A bushel of corn in America might take less labor, but it needs a lot more energy to make it than say Brazil... and illegal immigrant workers also help keep costs down in the US… Our measure of efficiency is related to labor, not energy... and we only make things with perceived quality because they are bigger with more horse power...

Oil nations are buying our big SUVs and trucks at unprecedented rates... Hummers are an attraction in Moscow and so are International based SUVs. We do have a few spots of success, like Boeing or software, and our weapons keep many a dictators happy… At this rate, even Cisco has left the country for its manufacturing… Most Ethernet devices are not US based…

What ever is known in the world that is exported by America, chances are, it needs a lot of energy to make it and operate.

Maybe I am bashing America... wouldn't want to hurt anyone’s feelings, but the markets and nature aren't worried about diplomacy.

Anyway, I’m sure curious what America will be sending to Russia over the Bering Strait Tunnel…

FYI: Our biggest export to China in terms of volume? It’s waste paper, news paper, cardboard, and so forth. Sorry, that doesn’t impress me.

In reference to my comment of April 26 above the 3rd
web site cited was wrong.Try
this instead+go down to #10
--http://www.angelfire.com/nj4/streetrag/index5a.html--
IT shows connection to all countries with 10 or more tunnels.That previous comment related to my global high speed dual mode maglev the world is now talking about and it is in the direction we are going.

RePosted by: jack marchand | July 7th, 2007 7:20 PM ---Modified from(April 26, 2007 5:01 PM)Above.
High speed maglev containers and dual mode maglev vehicles will provide the world with new alternative thru the Bering Strait and thru the Grenland-Iceland routes.It could replace maritime and air transport. Maglev (not trains) will deliver 50 times more in a given period than those mentioned. In the sixties I presented the US DOT in Washinton DC with the "Dual Mode Maglev" concept which stimulated them and others to move in that direction towards a global participation in the very near future. For more info check these web pages NOTE:interference to --http://trillions.topcities.com -- my web site is occurring and I'm quite suspicious that it may be deliberate by those who have other interests. To access it for now follow the suggestion below.NOTE: If a POP-UP like "vBuddy" shows up and covers the screen hit the "X' square in top right hand corner to cancel it.

To knock out "vBuddy" pop-up should it appear 130% bigger than your screen lower the blue bar at the top and move it to the far left. Then to erase the pop up click on its "X" at top right corner. Some asses may be trying to intercept your access to that web page. Here are other pages to visit...they too may have pop-ups
http://trillions.topcities.com/dualmodemaglev2.html
http://trillions.topcities.com
http://globalsys.topcities.com
http://angelfire.com/nj4/streetrag/index4a.html
http://geocities.com/gblsys/index4a.html

Those enclosed pipelines wether under water or above ground provide a controlled environment safer than anything now existing and is the reason we are now ready to roll...er..glide..? to all corners of the planet.

PS- Don't let the fast talkers and B.S.ers feed you that they came up with these
new ideas.Bachelet's patent was of a NYC Maglev subway in 1912.So let's move on to a whole New World. Let's not allow negative bloggers hold us back.Its easy to be a critic any ass can be one. Let's seek solutions instead.

All the best..
Jack Marchand

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Russia Blog presents up-to-date news, facts and commentary on the state of events in Russia and the former Soviet Union. The blog was created and is managed by Yuri Mamchur, Director of Discovery Institute's Real Russia Project, Executive Director of the World Russia Forum, and a Vanderbilt University MBA graduate.


 






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