Maybe Russia should have talked to the China …

Via Felix Salmon and Marginal Revolution comes word that Yegor Gaidar thinks the Saudis -- not Star Wars -- broke the back of the old Soviet Union in the 1980s.

Russia -- as has become very, very clear recently -- is a big energy exporter.  Back in the 1980s, the Saudis decided to defend their share of the global oil market even if meant lower prices.  That wasn't good for the old Soviet Union.  It quickly exhausted its commercial credit lines, and, well credit from Western European governments came with political conditions.

"Government-to-government loans were bound to come with a number of rigid conditions.For instance, if the Soviet military crushed Solidarity Party demonstrations in Warsaw, the Soviet Union would not have received the desperately needed $100 billion from the West."

Apparently government-to-government bond purchases don't come with similar conditions.  Either that or China just is far more generous than Europe ever was back in the 1980s.   

After all, Chinese purchases of Treasuries and Agencies currently provides the US with a wee bit more than $100b in credit annually, without either economic or political conditions.   

For that matter, Russia -- the heir to most of the Soviet Union -- is on track to provide the US with a $100b credit line in 2007 as well.   Its reserve are currently growing at an annualized pace of over $200b a year (they are up $100b in the first five months of 2006), and about half are still in dollars.  

Putin called for a new international economic order last weekend (via Drezner):

"Mr Putin said the world needed to create a new international financial architecture to replace an existing model that had become “archaic, undemocratic and unwieldy."

In some deep sense, I suspect Putin already has helped to create a new international financial architecture.  

This new international order is just dominated by big national institutions -- SAFE and the PBoC, the Bank of Russia, the Saudi Arabian Monetary Agency, the Abu Dhabi Investment Authority and the like -- not big international institutions.  The international financial institutions of the old international economic order -- the IMF for example -- are still around.   But they don't have as much influence as they once did.    

The IMF's total lending capacity is about $200b.   China will add at least twice that to its reserves (or to the state investment company) this year. That truly is a profound change in the world's financial architecture.   And it may auger future changes on the world's political architecture.  More on this later.