Staunton, January 21 – Most analysts have focused on the possibility that “the Kremlin Report,” as the new US sanctions regime is usually called, will have an impact on the Putin regime. That is likely, Lidiya Shevtsova says; but more than that, it “closes an entire era not only in relations between America and Russia but in geopolitical relations more generally.”
Shevtsova, a longtime Russian political analyst now affiliated with London’s Chatham House, says that “post-modernism which has been dominate in politics over the course of the last 20 years with its blurring of values and norms and with its willingness of the West to integrate authoritarian elites, including the Russian, is ending.”
She tells Deutsche Welle that is because “this report undermines the model of the Russian elite’s survival which is based on being with the West and inside the West without any constraints,” on the one hand, “and being against the West,” on the other (dw.com/ru/лилия-шевцова-кремлевский-доклад-подрывает-модель-выживания-элиты-рф/a-42224412).
As long as that model held, Shevtsova continues, it “allowed the Russian elite to extract its rent from Russia and monetarize it in the West with the help of lobbyist structures there.” The new sanctions will put a stop to this by closing off “the mechanism of the integration of the Russian elite into the American economy.”
“More than that,” she says, the end of this arrangement will put at risk “the lobbying structures in the West, above all in America, which have made the exit of money from Russia easier,” including its conversion into Western currency and thus “the laundering of Russian means.”
The planned American sanctions, many in Russia fear, will not only hit those close to the Kremlin but others further away. “The Western laundering machine will cease to work” not only for those near the Kremlin who are “friends of Putin” but also for “representatives of the middle level” in the Russian economy who are involved as well.
Some in both Russia and the West have doubts, Shevtsova says, as to whether Donald Trump will enforce the American law in a tough way. The American president signed the measure only because it passed with veto-proof majorities and his government has been cautious in the past in imposing penalties on Russian firms with ties to powerful US interests.
Moreover, the Europeans and above all the Germans have shown that they are less than enthusiastic about a tough response to Russian criminality and remain quite prepared to make money even when the basic funds are as is the case with most Russian ones the result of criminal actions.
For his own reasons of domestic support, Shevtsova says, Trump is likely to impose the sanctions more harshly than he would like. “But the lobbying structures” which defend Russian interests and of American banks and firms linked to them “remain” and can be expected to be especially active.
The Russian elite is still in a state of shock about what lies ahead, but some individuals and institutions are taking action, individuals by seeking dual citizenship and moving their money abroad, banks not operating in occupied Crimea, and Alpha Bank, for instance, not financing defense enterprises.
Those who think that all this is going to lead to an immediate split in the Russian political elite and the overthrow of Putin are being naïve. That isn’t going to happen. The elite is still too dependent on the Kremlin leader, Shevtsova says; and the West doesn’t want to provoke a revolution in a nuclear power.
At the same time, however, she says, “dissatisfaction, fear and doubts among the Russian elite” are going to grow as a result of this “Kremlin report.” The military industrial complex is going to be hurt because it won’t be able to import the technologies it needs, as will the oil and gas sector for the same reason.
But there is an even greater threat to Moscow looming just over the horizon as a result of all this, the analyst says. Russia is going to have ever more difficulty financing its state debt. If the West won’t and Moscow has to go elsewhere, it faces a serious challenge: China values its relationship with the West more than it does its ties with Russia and will charge high interest.
That could force Moscow to print money, possibly sparking a new round of inflation, or change course in the hopes of changing Western policy. Either way, this Kremlin Report and its follow on are likely to represent a new containment of Russia for some time.