Paul
Goble
Staunton, October 14 – The Russian
economic model of the last decade, one based on high world prices for oil, was
already in trouble before Western sanctions, but those sanctions, a Moscow
economist says, have made such a model unsustainable and condemn Russia to
stagnation or worse unless Moscow changes its economic approach.
In a paper presented to a conference
of the Association of Independent Centers of Economic Analysis, Natalya
Akindinova, the director of the Moscow Center for Development of the Higher
School of Economics, says that the existing Russian model is “not capable of
ensuring the growth of GDP” (opec.ru/1753965.html).
And
up to now, she says, the Russian government has not focused enough on “a new driver”
for growth – increased productivity in high tech sectors – a reflection of
problems with the Russian “institutional milieu and the deficit of resources
available for investment.” Those
problems have been exacerbated by the sanctions.
Akindinova
says that the economic model Moscow had been using since 2000 had entered “a
crisis” even before the Ukrainian events and the imposition of Western
sanctions but that the sanctions had made the situation worse and ensured that
the Russian economy could not grow unless it changed its fundamental organizing
principles.
She
said that the situation had been worsened still further by “the contradictions”
among Russian political players. “On the one hand, the council of ministers is
trying to support macro-economic stability and improve conditions for business
operations. [But] on the other, the level of government interference in the
economy is growing” and military spending is overwhelming other parts of the
budget.
Western
sanctions, Moscow’s counter-sanctions, and what are called “’informal sanctions’”
involving Russia’s exclusion from various international organizations and
operations have slowed GDP growth, reduced trade, increased capital flight, cut
investments, and led to a growth of inflation, the economist said.
Emblematic
of this has been the devaluation of the ruble and the trade restrictions Moscow
itself has introduced. The Russian
population has responded by cutting back its spending on durable goods and
shifting its savings from rubles to hard currencies and thereby posing “a
threat to the stability of the banking system.”
The
Russian government’s response has included discussion of price controls and
greater regulation of the banking system “which is suffering from a deficit of
resources.” And the private sector’s
response has included efforts by larger companies to swallow up smaller ones in
the hopes of protecting themselves and their profits.
Akindinova
said the experts at her institute had come up with three scenarios for the
future if Russia remains committed to relying on earnings from the export of
raw materials. The first and most optimistic one presumes a softening of
sanctions “not later than the middle of 2015” and the ultimate lifting of those
sanctions.
The
second and more probable one presupposes the continuation of sanctions for a
significant period. And the third presupposes that and the fall in the price of
oil to 85 dollars a barrel. In all three, but in the third in particular,
inflation would be higher and growth negative for the next few years.
But
all three of these scenarios presuppose that the government will continue on
inertia and not make the kind of fundamental changes in economic policy which “could
lift the Russian economy back on to the trajectory of growth.” Unless that happens, Russia will fall further
and further behind the outside world, with all the problems that will entail.
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