Russian Railways Chief Yakunin: I Knew About The Crisis, LaRouche Warned Me
October 3, 2008 • 10:14AM

In today's issue of the leading Russian business daily Kommersant, CEO of Russian Railways (RZhD) Vladimir Yakunin was interviewed under the headline, "Liberal Capitalism Is Coming to an End in Russia." At the outset of his interview, Yakunin stated bluntly that none other than Lyndon LaRouche, the "American alternative economist," had warned him of the onrushing global financial breakdown crisis a long time ago.

Yakunin heads the state-owned railway company, a huge enterprise whose high-speed rail and transcontinental expansion projects are a critical component of Russia's economic development policy. He is a long-time associate of Prime Minister Vladimir Putin, as well as being co-founder of the International Public Forum "Dialogue of Civilizations." The Kommersant interview comes as Russian Railways deals with the impact of the global crash on its own operations. In mid-September, the company abruptly suspended a planned road show for floating a $7 billion Eurobond flotation, when it became clear there would be no takers in the frozen international credit markets.

Kommersant asked Yakunin, "When did you realize that there would be a financial crisis?"

Yakunin: "A year and a half ago. I am not making this up. I remember my first conversation with the American alternative economist, Professor LaRouche (Lyndon LaRouche —Kommersant). He is someone who uses quite powerful algorithms for evaluating the state of the economy and its prospects. And he said to me, "Vladimir, I can tell you with certainty, that the economic crisis is already taking place." He emphasized that the basis of the crisis is the transformation of the economy and, above all, finance, into a virtual economy and virtual finances. Out of the entire monetary circulation taking place in the world today, in his view, only about 15% of the paper money is backed by real value - industrial production, raw materials, etc. It seems to me that right now we are witnessing the accuracy of this formula. This summer, I have been discussing the topic of the crisis both with other economists, and with my friends in the government, so the crisis itself was not unexpected. But I am not a professional financier. If the crisis was visible and obvious to me, it should have been visible and obvious to the people who are running financial policy."

Yakunin told Kommersant that RZhD right now has sufficient liquidity for operations, but no sources of credit for investment, meaning that its investment plans may be slashed by 10-15% over the next two years. Asked about the current Russian government infusion of funds to support the banking sector and financial markets, Yakunin said that "assistance should have a specific address." He expressed support for a two-tier approach, whereby "if it's a speculating institution, let them cover their losses, but if it's a serious bank, which supports a large number of enterprises, maybe entire sectors of industry, probably they should be the first ones to receive government support."

Yakunin said that Francis Fukuyama's famous "end of history," was really the "end of neoliberal theory." Asked where things should go next, he replied, "Towards the formation of a new economic paradigm. Let's begin with the entire world. I mean realty the whole world, and build and implement a new economic theory. I hope that we'll finally get it, that you cannot live on financial surrogates, that the whole world cannot live by a single currency that isn't backed up by anything, called the dollar." He noted President Dmitri Medvedev's interest in a shift to the use of national currencies in trade, noting that this is under discussion with Arab countries.

In a concluding exchange, Yakunin defended his commitment to proceed with acquisition of a 5% stake in Germany's rail company, Deutsche Bahn. The reason for this, he said, is that "We consider the linkage of the European and Russian railroads to be of strategic importance from the standpoint of organizing a container bridge between the Pacific region and Europe." In addition, Yakunin said that the best thing the state could do, under current circumstances, is to invest in infrastructure: "At the risk of sounding paradoxical, I believe that financial investment in large, promising projects, including infrastructure projects, which create real value and will provide something for business to do, can be a stabilizing factor."