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JULY 2020

Economic crisis in Russia: What’s further?


Economic crisis in Russia: What’s further?

IMAGE: aa.com.tr

Symptoms of a serious economic crisis caused by the disconnect of the Russian bureaucracy from the reality or its unwillingness to coupe with it broke the surface in the end of the first half of 2019.

Previously, SouthFront released several critical pieces on this topic:

Unfortunately, our pessimistic predictions are turning into reality.

According to the recent report by the Russian Federal State Statistics Service (Rosstat), in the first quarter of 2019, Russia’s GDP grew by 0.5%. In the same period, the US’ GDP grew by 3.2%. To get a more comprehensive look it should be noted that the US GDP in 2017 was $19390.60 billion while the Russian GPD in 2017 was $1577.52 billion.

Rosstat also reported a new record of the capital outflow from Russia – for the first four months of 2019, this number was $34.7 billion, exceeding 1.9 times the figure for the first quarter of 2018. Foreign investment in the Russian economy also declined to a minimum. Real incomes of the population continue to fall. Foreign trade, which steadily recovered in 2017–2018, began to fall again.

The developing crisis in the Russian economy is a result of the government’s desire to withdraw income from the population and business by increasing taxes and fees. This cannot lead to any other results.

SouthFront economic analysts had made several critical comments regarding this practice since the start of 2018. They are mystified at what reasons may be behind this economic policy. Russia has a successful experience of overcoming crisis developments in 1998-1999. Then, a serious economic and financial crisis was overcome within a very short time thanks to actions of the government led by Yevgeny Primakov (then Prime Minister of Russia) and Yuri Maslyukov (the first deputy chairman). This Primakov-Maslyukov government took several measures to solve the crisis: economic policy changes, reduction of tariffs, value-added tax on food is reduced, and the default is overcome.

For example: By the time Primakov assumed government, the debt of enterprises and organizations to the budget was 50 billion rubles, and the budget debt to enterprises amounted to 150 billion rubles. Debts also accumulated between the enterprises themselves. Federal authorities demanded cash-only payments. Direct clearing settlements were banned in accordance with the recommendations of the IMF i.e. For one side to repay its debt to another, it had to use cash, as did the other side. However, recall that by this time the Russian economy was deliberately demonetized. The volume of monetary supply was reduced by 4-5 times below the average level of other governments of the world. This meant that there was no money and repayment of debt was practically impossible. This promoted a furtherance of debt with respect to wages, pensions, and taxes, lack of capital and other negative phenomena. All of this was done under direct control and through recommendations of the IMF and international advisers. Primakov’s government, contrary to recommendations of the IMF and prior practice, initiated mutual settlements between government and enterprises. At the outset, it allowed to liberate 50 billion rubles. MORE HERE

After that, the real sector of the Russian economy get a momentum for rapid development. The measures applied by the Primakov-Maslyukov government are in many ways directly opposed to what the economic bloc of the current Medvedev government has been doing over the past 1.5-2 years. Previously, the problems of transition of the economy to a steady growth were associated with certain “structural reforms”. After these 1.5-2 years it seems that all the real problems are connected with the bureaucratic sabotage of the country’s economic development. It is hard to explain this by logic.

The first explanation is that the entire structure and system of the Russian bureaucracy is flawed. Another version is that the country is experiencing a deliberate sabotage by senior officials of the economic block of the government. Many of these persons are de-facto agents of foreign interests (power groups) that are not linking their activity with Russia’s national interests and people. The Russian government’s economic bloc largerly consists of alumnus of the National Research University Higher School of Economics (NRUHSE). The NRUHSE is well-known for its pro-Western visions.

The decline in annual GDP growth rate from 2.7% year-on-year to 0.5% year-on-year in the 1st quarter of 2019 means that the economy in the 1st quarter shrink by about by 1.6% in comparison with the previous one. This is the most serious quarterly failure since the economic crisis in 2008–2009.

Neither the collapse of oil prices in 2014 (in the middle of 2019 the oil price is at a level higher than the comfort level of the Russian economy), nor the sanctions could cause the same economic failure as an increase in taxes and administrative pressure (fines, fees, etc.). This has withdrawn resources from the economy, significantly reduced the real household disposable income, significantly increased expenses for small and medium businesses, and negatively affected the desire of both citizens and small and medium businesses to invest in new projects.

There are examples. Let’s take a look at two real companies, which were provided by our Russian readers as an example of this situation.

  1. One small LTD with a monthly turnover of about 2,000-3,000 USD and the number of employees 3-5 worked for 1.5 years. Then, due to the planned change in the scope of activity, it temporarily ceased to carry out operations (for one quarter). After the resumption of work, it turned out that the deadlines for delivery of a part of quarter reports were violated [the campaign did not work and there were no account turnover records]. As a result of this minor administrative violation, the campaign was penalized by the tax authorities – initially around 350 USD. This case was instantly transferred to the Federal Bailiffs Service. LTD got no notice regarding this decision. The Federal Bailiffs Service instantly increased the penalty to 700 USD. This decision was motivated by the supposed debt collection costs.
  2. A second example is much more flagrant. An IT company operating in Moscow with a monthly turnover of 15,000-20,000 USD and a staff of 25-30 people signed a 50,000 USD contract to create an analytical software package for one of Russia’s state structures. The contract was executed in time. The work was accepted without complaints and objections. One month after the execution of the contract, the revenue authority initiated an inspection. The campaign provided the entire package of documents. Authorities citing a new regulatory document stated that the company had not provided an appendix to the work completion certificate. This appendix had to be issued by the client. To this requirement, the company stated that it needed a short period of time to inform the client about this new requirement. The revenue authority rejected this request and imposed on the company a penalty of 200,000 USD. The IT company went bankrupt and ceased its work.

Another factor that affected the state of the Russian economy in the first half of 2019 was a sharp deterioration in the economic situation in Western Europe and Turkey. This led to a drop in Russian gas exports to these consumers. If we take into account that in the structure of Russia’s GDP, gas supplies are a part of the wholesale trade and transport, this fall presumably was around 10%.

The most significant fall of the wholesale trade was recorded in January-March. Its turnover, according to Rosstat, decreased by 9.3% year-on-year. In addition, a decrease in economic dynamics is facilitated by a reduction in oil production within the OPEC + deal. In the second half of 2018, the recovery in oil production and rising energy prices were among the factors accelerating the economy.

The seerious problem is a huge outflow of capital. The Central Bank in its bulletin “What are the trends talking about”: 8.8 billion USD of direct foreign investment came to Russia in the end of 2018. This figure is more than 3 times less than a year earlier (28.6 billion USD). It is the minimum figure for last 10 years. Another point is that a large part of foreign investments to Russia is in fact the re-investment capital previously withdrawn from the economy. These funds are returned back through offshore jurisdictions such as the Netherlands. As a general rule, these funds belong to oligarchs.

All these problems make it impossible to fulfill the instructions and tasks received by the government from President Vladimir Putin in December 2016:

“I instruct the government, with the participation of leading business associations, to develop a substantive action plan by May 2025, the implementation of which will make it possible to reach world economic growth rates in 2019–2020, which means strengthening Russia’s position in the global economy “.

Later, the same goal was declared in Putin’s “May decrees”.

“The Government of the Russian Federation shall ensure the achievement of the following national development goals of the Russian Federation for the period up to 2024: […] Russian Federation should join the group of the world’s five largest economies, ensure economic growth rates above the world’s level while keeping macroeconomic stability, including inflation at no more than 4%.”

Orders and high-sounding words do not change the situation. Now it is obvious that these tasks cannot be completed. However, there are no staff decisions or changes in the Russian economic agenda observed. Preconditions for such changes are not observed also. Officials of the economic bloc believe that they are doing everything correctly, and the ongoing processes are in no way connected with their actions.

For comparison, it is useful to get a look at actions of US President Donald Trump and officials from the economic bloc of his administration. Some accuse Trump of providing the inconsistent and wrong economic policy. Nonetheless, a strict protectionism, especially in relation to the real sector of the US national economy, is a key feature of this policy.

The Trump administration consistently promotes interests of US business around the world and creates comfortable conditions for key industry enterprises. The Trump administration economic policy includes both strict protectionism and mercantilism. The results are obvious.

Earlier we noted that the Primakov-Maslyukov government in Russia’s 1990s undertook the same measures.

Returning to the current situation, actions of the modern Russian bureaucratic system fuel the crisis. One gets the feeling that measures to stimulate the economy proposed by the government are not aimed at the goal. Or government officials do not want to execute even them. A closer look at reporting sessions of the Russian government shows that officials are not able or do not want to solve even minor tactical issues. They try to shift the responsibility onto somebody else and justify delays with the need of numerous interdepartmental approvals. The number of unexecuted tasks and instructions increases daily. The Russian political system is heading towards a collapse that could be aggravated by the economic crisis.



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  • Xoli Xoli

    USA sanctions and USA sabotage Syrian war has big affect on Russian economy. Too many ceasefires to accommodate Erdogan who instigate terrorism against Syrian and Russian forces are having serious financial implications on Russia.

    • Turbofan

      When Russia intervened in 2015, this conflict has a military solution.Russia blew it..

  • Mish

    The logic of the liberal government is to maximize pressure on the common man in order to bring people into the streets protesting against Putin, leading to a maidan style coup. The US has the liberals’ back, and there is a deal between Putin and the liberal wing: they don’t touch defense, security or foreign policy and in return he does not touch economics and finance, among other things.

    • Brother Ma

      Well Putin needs to intervene and knock a few Oligarchs and “liberal gov ministers “on the head!
      National survival is at stake here and we know where neoliberal economic policies end up. Rack and ruin of your country to feed the USA and then total meltdown of the USA by the one percent choking the common man.

  • 1691

    SF should stay focused on reporting. Analyzing is not your strength.

    • Turbofan

      did you read the article?

      • Daniel Miller

        i agree with him alot of numbres seem to be off particularly the GDP growth and investment numbres.

      • Хасен Жасем Халфет

        they maybe tried to simplify things for us. but saying a 0.5% increase is a 1.6% decrease is just dumb as fuck. first of all last year’s year-on-year increase was 1.9% (they said it is 2.7% lol ). this year’s 0.5% increase year on year means it increased 0.5% over last year in the same period. last year it increased 1.9% over same period of 2017. so it is no way a 1.3% decrease. it is still an increase just a slower one. and to get alarmed by that and calling for crisis is abit too much. the government last year said the growth will be slower this year compared to last year (as last year it exceeded government expectations by 0.5% and the IMF’s by 0.6%) and generally in Russia the first quarter is the least productive in the year as there are so much vacations.

        the second part is that little line about the GDP: russian GDP for 2017 was 1,576 trillion dollars with 2,3% growth in 2018 it would be in the 1.65 trillion dollars. saying it is 314 million is just rediculous even if you make it 314 billion dollars that would be just 1st quarter’s GDP jesus christ

      • Harry Smith

        They even don’t understand how Russian legislation works. The examples given by their “Russian readers”.
        1st example show the owner of the small business is dumb. The Russian reality is: you have to send quarter or year reports even if you’re not working but your firm is still registered at fiscals. It’s very simple: you just have to send reports with zeros. But if you’re not smart enough to put zeros in the form, there are a lot of services that for roubles equivalent of 10 USD will fill the form and even send it to the fiscal inspection. The owner wanted to economize 10 dollars and now has to pay 700 USD.
        2nd example shows that if you have 20000 USD per month it’s doesn’t means you have the good accountant. The act of executed works (act – a document attesting a legal transaction) is a key document in Russian business documentation. After any works are completed you have to sign 2 copies of this document. Why firm’s accountants didn’t forced the owner to complete the documents flow, is just miraculous!
        Looks like SF sources in Russia are kinda millennial snowflakes.

  • Saddam Hussein

    Russia should ditch the dollar, same goes for China. They cant grow if they continue to depend on the dollar.

    • Tommy Jensen

      Its not that easy.

      • Drinas

        Easy or not, it must be done.

  • occupybacon

    Pretty good article! However I wouldn’t compare Russia’s growth with USA’s but rather with Ukraine’s growth.

  • Rob

    Russia should keep eyes on Jews for national security and protect their institutions.

    • Toronto Tonto

      Way to late man , Russia is toast but putin is buying time .

  • Harry Smith

    Translation: pro-Western vision means normal economy, pro-Russian vision – socialistic economy.
    Reason of immense pain in the butts of the masters, who ordered to home-made analysts to start the loud cry: ‘Putin’s HEAVY gold buying ‘BAD SIGN’ for WORLD PEACE’

    • Tommy Jensen

      The gold buying really shows Russia is not up to something good. Something is going on under the table and its is not grandma s cake.

  • Real Anti-Racist Action

    Russia has been given every chance by the US to end the wars in the ME. And Russia cannot see when the US opens the door for them.
    The war in Syria could have ended in 2015, but Russia rejected ending the war.
    War in Iran can be avoided permanently and the US has allowed Russia the opportunity to prevent war.
    Russia only needs deliver a half dozen S-400 systems, and Russia refuses.
    War in Yemen was never necessary, Russia only need apply economic pressure on Saudi Arabia, and Russia does not do it.
    Russia could prevent NATO’s growth by promising the indigenous tribes of Europe that whoever pushes for alliances with Russia and to break off from the US will have a friend forever, yet Russia does not do it.
    Perhaps Russia is the #1 zionist supporter of all.
    Very interesting. I think Russia pretends to not be zionist by playing the good-cop bad-cop routine with everyone, however I think literally millions of us are awakening to this tactic.
    Perhaps it is time for a revolution in Russia in which nationalist take Russia away from it’s zionist oligarchs

    • RGtz98

      A purge might be necessarily in such case, but one can imagine the backlash , especially of the west. Btw this recently happened in Saudi Arabia , a huge political purge yet they barely reported on it (As they are allies) , can imagine the same for Russia except with way more pressures

    • J Ramirez

      How can you say the US has given Russia every chance to end the war in Syria ? How ? By arming the terrorist, illegally invading a sovereign nation , killing thousands of civilians ? Are they there to spread Democracy ? ( one bomb at a time ) The middle east would be a peaceful place if The US minded their own business and kept the F#ck out :}

  • Toronto Tonto

    Putin has killed Russia and put it back 20 plus years , it will not get much better in our lifetime . good going putin time for Russians to be Russians and kick his azz to the gulag .

    • Daniel Miller

      Your opinion is irrelevant.

      • Toronto Tonto

        Russians never could handle the truth .

        • Daniel Miller

          “Russians never could handle the truth” Tell that to a Russian not me.

          • Toronto Tonto

            Well your sukkin Russian wodka soaked root .

          • Daniel Miller

            Wtf dose that even mean?

        • Mike

          Canadians never handle the truth or have a spine that’s why the dishonestly say sorry all the time because they like you are cowards.

          • Toronto Tonto

            Wrong we say sorry when we kick your azz too .

          • Concrete Mike

            this fool is not.canadian. hes.never even swung an axe before

    • Ilya

      By what metric has he killed Russia?

    • Mike

      Poroshenko killed your pathetic Ukraine in less than 4 years, so blow it out of your ass Ukie canuck.

      • Toronto Tonto

        Ukraine will be fine , yankobitch is long gone .

  • Promitheas Apollonious

    SF I am sorry to say your economist’s have absolute no idea what they are talking about and well wishing from your “analysts“ is obviously what is happening here hence the reason all your hasbaras come in force, is nothing to do with reality.

    • Tudor Miron

      I have a feeling that this is an example of deliberate ignorance if you know what I mean,

      • Promitheas Apollonious

        and I have a feeling they soon will fail as a site for news and become one of stupid zio propaganda because lately is anything but news shown here.

  • Tommy Jensen

    These two examples of the little guys struggles to make a living, shows that Russias economy are in complete tatters after Putins foreign military adventures in Crimea, Chechnya and Donetsk.

    Further the interference in Americas election and Putins pouring gasoline all over ME to cause chaos for US humanitarian interventions didn’t exactly make Russias finances better either.

    • Tom Lantos

      US “humanitarian” intervention.. I would call it US genocide

  • Mats Öhlén

    “Another factor that affected the state of the Russian economy in the first half of 2019 was a sharp deterioration in the economic situation in Western Europe…”. Do you have a source for that statement?

  • Toronto Tonto

    Putin is planning his exit strategy as we speak good luck .

  • Justin

    This is why Russia WILL NOT intervene with the US and Iranian conflict in the persian gulf! This conflict will HELP both Russia and the USA because oil and gas prices will soar! Why does the US want to provoke iran? Well in fact its not to piss off Iran, its to piss off China!
    This trade war between China and the USA is at boiling point and its getting hotter by the day (Huawei is related to this). China’s production DEPENDS on oil and energy! If they cant get it from Iran and Saudi is now relegated to only shipping from its west coast ports, Qatar is screwed too! then energy prices go sky high!
    Watch what happens! If the US or Iran (it doesnt matter who because they will blame each other) start a conflict in the Persian gulf, China will be forced to buy from Russia maybe 2 or 3 times more and 2 or 3 times the price it is now! USA now exports oil and gas! USA has also placed an embargo on Venezuela so i cant see china getting oil from them! Especially when they cant get through the panama canal very fast nor can they get any of their 2 shitty air craft carriers through!
    Get your crypto ready people! Because when the oil prices go up, China is going to devalue its currency massively! Chinese people will throw their money into gold and crypto! So if you have the spare money, put it where it should go and hedge your bets!
    We are already in WW3 and it began with currency wars, trade wars and then it becomes world wars! By the way, russia is not on the side of China! So if you think this, you are wrong! But dont worry, China has help! Google, facebook, twitter, CIA, Mossad and MI6 are all on the side of China because they are all Globalist intelligence agencies working for globalist corporations!

    But the NSA, DIA, DOD, FSB are going to take care of that for us!
    This was planned a looooong time a go! :)

    General Flynn Defence Intel Agency….. Putin FSB (can you do the math?)
    https://uploads.disquscdn.com/images/7b365ec214eb19d00f05cf5e229bd2cea938fe72f7f2a9f5431f8aa72dcaad6b.jpg https://uploads.disquscdn.com/images/d125777dfdfe41cc900344f0062cc2859c18ac4bf760cd44ddfc2da48070a077.jpg https://uploads.disquscdn.com/images/f71cd3b0a6226f13932081ff16b79eb7c10d849bab844bf98f746d9a293ff734.png https://uploads.disquscdn.com/images/87e8ba2304d4f8b6452007838f4caf14004f408f8bf6b52f35e00363f30b5d86.png

    “The Art of War” ……. “the Art of the Deal” https://uploads.disquscdn.com/images/708d38841bdfe4e4f2fb989538e4966ad3cae3aa57a6f1d4a5fb2147d303122e.jpg


    https://uploads.disquscdn.com/images/d4d5cfb0d80070bb158795848ee7540f61474066eae43313ddc322774b87f9e0.jpg https://uploads.disquscdn.com/images/3e4cd22cbc6141ce8e9eb4586d1bf8a5c876a7ca1c48e40afd2efbe7e7323cb5.png


    https://uploads.disquscdn.com/images/a9ccc3204331acc7893be92d902415673498bef5e55309074cf9c63b94f498a4.jpg https://uploads.disquscdn.com/images/5b6f20100a9a7fad9d7224a772788f3b7e6479cb28c852aa413a3edbd406a983.png

    https://uploads.disquscdn.com/images/c097e308246b5858d6ce4b5ee955dbd4b7a48ad3652426584a13bb3af477369d.png https://uploads.disquscdn.com/images/6fe054f7dd3df3bfc2ddda639132b4e27c4144c96c8a244f49b59272916b2f3f.png

    But dont worry! The NSA is with us….. the Good guys! The NSA hates the CIA! (Why do you think the CIA sent Snowden to the NSA only to reveal their tech to the world AND ESCAPE TO CHINA!


    But the good guys have us on their side! The NSA!
    How do we know?

    FREE SPEECH PLATFORM! https://uploads.disquscdn.com/images/0a51da5c481137819fe8eacf7bdf251f03c7da44051cf09e7a01eb64cf805a61.png

    open source free to the public reverse engineering software to stop your devices spying on you! AND ITS FREE! open fucking source = transparency for those who dont understand! (not hidden code)


    Launched on the same date that google was launching China’s DragonFly censored search engine!
    Do you have a chinese made Modem in your house? Chinese made phone? Huawei banned?
    The great awakening!
    CIA = Globalist intel agency
    China= planned new globalist HQ

    Sheep no more!
    Russia and USA are allies (unofficially) officially after 2020 elections!
    The real enemy = Zionist Globalists who use MI6, Mossad and the CIA to help advance China!
    China easy to control for OBVIOUS REASONS!




    This war is NOT between nations!
    It is between Corporations and nations!
    Corporations and free speech
    Corporations and people (divide and conquer)
    Corporations and religion (muslim against muslim, muslim against Christian)

    Most who serve in the military and in intel services are good guys (white hats)
    But getting white hats to the top is very difficult!
    But once they are there, they will fight for us!


    Remember, the ART OF WAR!



    The NSA is saving us!
    The FSB is saving us!
    Both are PRO nationalism and Christianity!
    Both hate Soros!
    The NSA speaks to us all the time :)
    They are saving Israel until last!
    “All warfare is based on deception”!

    Putin and Trump are masters of warfare! Intel agencies…. good guys!
    They used deception to win back the power for good!
    Putin tricked Berezovsky and then had him killed
    Admiral Rogers tricked Obama and the cabal!
    https://uploads.disquscdn.com/images/f592c4af596d06e9a906fcd12012feb2b112850cd7487d7ef0f2f60d48ad7b2f.png https://uploads.disquscdn.com/images/cdade533465817f8561aad6f6347d68cd98579eb3300d7b37671697048672b8b.png

    Patriots are in control :)
    China is not as innocent as you think!
    Iran not as innocent as you think! (the IRGC)
    Dont let your emotions cloud your judgement!
    Ask yourself, why did Russia allow the US to fire 2 seperate volley’s of missiles at Syria?
    Russia said they hit some and some just fell from the sky!
    Yet the USA says they hit every target!
    What really happened? Why did Russia allow it?
    Where were the US joint Chiefs of staff when the first volley was fired? Moscow? :)

    Targets were? (Classified)
    Iranian nuclear enrichment facilities and ballistic missile factories
    Why did Obama drop sanctions on Iran?
    Inspection in Iran? (but not Syria)
    Why are Trump and Putin working together on this?
    NSA, FSB are fighting the CIA and MI6

    “know thy enemy”!
    You have always known the CIA creates and owns it so called “enemy” (example isis and al-nusra)
    Dont fool yourself! They have fingers in many pies!
    They control NK, Iran (IRGC) (which is why they paid a ransom for those navy men captured by Iran) and they own China! after the fall of the Soviet Union who do you think had free reign? The CIA, MI and Mossad! They took China, enriched them, controlled them and empowered them! They own the enemy because they are the enemy!

    you cannot argue with this logic just because you THINK China killed several CIA officers!
    Rememebr its an intel war between Black hats and white hats!
    What you dont know is that the New CIA director was working with the NSA! She exposed the Deep state coup against Trump because she travelled with them to london (to visit MI6) We have NSA video to prove it! Why do u think Trump made her the NEW CIA director!

    What do you think is happening to the Ex-CIA director John Brennan?
    He will be tried for Treason very very soon! (and Comey) (watch the news)

    The NSA see’s all, including China!
    i have so much proof!
    Remember, dont get your knickers in a knot because you thought for a long tie china was good!
    China is a victim! China is being controlled! they are puppets!
    Why do you think they tried to stop putin and Trump meeting each other?
    Why do u think putin and trump had a one on one private meeting with only interpreters in the room?
    Why do u think they want to subpoena the interpreters?
    What was in the soccer ball?
    Common interests in ukraine between putin and trump?
    Clinton and obama corruption and source of so called “russian collusion”?

    Russia and USA are allies!
    China is the enemy because China is the Globalist HQ!
    the USA is not anymore because of:
    right to bare arms
    free speech
    too many checks and balances
    too many new politicians to control
    freedom of information
    etc etc etc

    China is the perfect choice, hence the transfer of industry and tech since the fall of the soviet union which is the same reason why the USA could openly march into the middle east back in 1990 to get all the oil!

    Dont hate on the USA because even YOUR country is controlled by globalists! YES YOURS! The USA has fought back and good guys are back in control (in the same way russia fought back against the old Soviet globalists oligarchs)

    Celebrate and open your eyes!
    Dont be a fish swimming in the sea! Be an Albatros! Fly high and far and dive into the water to see what you need but have a much broader perspective!

    Sorry for the rant!

  • Tudor Miron

    What a bunch of nonsense :) History shows that those 30 shekels don’t do much good for those willing to get them at any cost.

  • Miroslav Beran

    Russian Federation will experience serious economical problems after information about existing functional new clean emission-less energy technology will more widespread.

    With energy hardware capable of CoP = 58 there is no future for coal, gas and some portion of oil.