Geopolitics

How US-Russian Relations Have Hit Rock Bottom

And why it's not as bad as you think.

Rock, paper, missile
Rock, paper, missile
Marie Jégo

MOSCOW - The “reset” in the Russian-American relationship pushed by Barack Obama at the beginning of his first term is jammed again.

Termination of bilateral agreements, harassment of American NGOs, harsh words – Moscow and Washington have been going head-to-head for months.

On Jan. 30, Prime Minister Dmitry Medvedev dissolved a bilateral agreement signed with the U.S. in 2002 on cooperation in security issues and drug enforcement. The agreement called for the U.S. to finance programs fighting against crime in Russia. It has “exhausted its maximum potential,” said Medvedev.

What this means is that, Russia, which is now a donor country, does no longer need handouts. “We can continue the work without anyone’s help,” said Aleksei Pushkov, the head of the Foreign Affairs Committee of the Russian Lower House. “We have terminated the third agreement with the U.S. in the last six months. Russia is ending its dependency on the global superpower,” he tweeted.

Moscow’s decision echoes Washington’s announcement on Jan. 25, that it was ending its cooperation in the Russian-American Bilateral Presidential Commission on Civil Society. The U.S. State department has repeatedly denounced the crackdown on civil society since the return of Vladimir Putin to the Kremlin, in May 2012.

In Oct. 2012, the U.S. Agency for International Development (USAID) was told by Moscow its services were no longer wanted. In Russia, USAID financed human rights organizations, disabled rights groups, as well as the election watchdog Golos NGO, who was quick to denounce fraud during the December 2011 legislative elections.

In the aftermath of USAID being booted out of Russia, the National Democracy Institute (NDI) and the International Republican Institute (IRI) were also forced to close shop, with their Russian employees having to leave the country with their families. They were at risk of being prosecuted under the new Russian Criminal Code’s articles on treason and espionage.

A quota of positive news

Voted in Oct. 2012, these new laws state that individuals “providing financial, technical, advisory or any other assistance to a foreign state or international organization…” could face up to 20 years in prison. After the law was passed, FSB (the KGB’s successor) agents paid a visit to the local heads of these American NGOs. “We work in an increasingly tense atmosphere,” one of them said.

Quick to accuse the U.S. State Department of being behind the protests of the winter of 2011-2012, as soon as Vladimir Putin was elected, he undertook a massive cleanup of Russian NGOs that were financed from abroad. Activists and protest leaders are often described by the Russian media as foreign agents.

The Russian Parliament has been on a roll, passing bills that bring Russia back 100 years – with the return of the “foreign agent” phobia, the stigmatization of homosexuals, and tougher punishments for “treason.” A new law is being considered that would introduce the notion of “blasphemy” in the criminal code, while another would ban Russian journalists holding dual passports from working. Another bill would impose a quota of 70% of positive news in the media.

More than ever, Vladimir Putin is doing his best “Homo sovieticus” impression by showing Russia as a besieged fortress and passing off the opposition as a Washington-supported fifth column.

“Vladimir Putin’s anti-Americanism has similar internal political roots to, for example, Mahmoud Ahmadinejad’s. However, Iran is more problematic for the U.S. than Russia is,” wrote Russian newspaper Vedomosti. In effect, Moscow is “neither a threat nor a priority” for Washington. On the big issues – nuclear Iran, Syria, Afghanistan, missile defense – the old cold war enemies will continue to cooperate.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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