Staunton, December 20 – Many Russians assume that they will ride out the current crisis just as they did the crises of 1998 and 2008, but that assumption is wrong, Leonid Storch argues, because the former crises were economic and the current one is political. And thus for this crisis, there is no quick or easy fix as there were in the two earlier cases.
In a commentary on Kasparov.ru today, Storch, a Russian who has taught in the US and now lives in Thailand, says that the two earlier crises were very different from the current one and that recovery from them was relatively easy in comparison with what will be required now (kasparov.ru/material.php?id=5495206047CE0).
The first two crises, as “even Putin understands,” had “exclusively economic causes” while the current one “has a political nature.” Moreover, the first two were international – 1998 affected the entire post-Soviet space, and 2008 the world economy as a whole – while this one afflicts Russia alone or almost so.
Russia was able to climb out of the crises of 1998 and 2008 “quite quickly” and relatively easily because the West generally retained its trust in the Russian government, and “the strategic profit from investments in the Russian market exceeded the political and legal risks connected with these investments.”
Capital from abroad continued to flow into Russia, Storch notes, and Western banks continued to refinance Russian companies. But “today the situation is different in a cardinal way.” The Russian leadership has “lost the credit of trust” it had had earlier and thus cannot count on the same kind of assistance.
Many in the West were prepared to overlook Moscow’s war against Georgia and its playing with Iran. “But when the threat of military actions arose in Europe,” when Moscow began to issue nuclear threats, and “when the use of gas as a weapon of intimidation passed the limits of the permissible, the West turned away from Russia.”
“This means,” Storch says, “that Russia can’t expect any credits,” a situation that means it must rely on its reserves which may not be as large as many assume. (He cites the conclusions of economist.com/blogs/freeexchange/2014/12/russias-foreign-exchange-reserves.) And it can’t expect oil prices to go back to where they were: the US and OPEC are ready to live with oil at 60 US dollars a barrel.
And that in turn means, he continues, that there are quick fixes or easy answers and there aren’t likely to be any. According to the Russian commentator, Putin understands that as well and that is why he talked about two years of difficult times. Telling oneself that things are otherwise may be a good defense strategy for Russians, but it isn’t a solution.