Sanctions Hurting Not Putin Economy but Private Business and Russian People, Inozemtsev Says

Paul Goble

            Staunton, Aug. 8 – Western sanctions are not destroying what may be called “the Putin economy” but rather the private businesses which have managed to emerge in the Russian Federation over the last two decades and the Russian people, Vladislav Inozemtsev says. Instead, from the point of view of the Kremlin, they are strengthening the Putin economy.

            That is not to argue that the West should not be imposing sanctions, the Russian economist says. They are an entirely justified response to what Moscow has been doing. But it is important to understand that they are not having the effect many expect and won’t anytime soon (kasparov.ru/material.php?id=62F0D28F9CE1D&section_id=50A6C962A3D7C).

            The reason for that conclusion, Inozemtsev says, flows from the fact that the Putin economy is very different from a “normal” one. Putin and his entourage have “de facto privatized the entire country and relate to it as their personal property, rely on state corporations, use the legal system to back them, and profit by selling off the natural resources of the country.

            In addition, he continues, they want Russia to turn away from the West and believe that they can best serve their personal interests by making Russia into “a Chinese satellite.” If the Russian economy were a normal one, it wouldn’t have that status or be interested in pursuing such policies.

            But once that difference is recognized, it is easy to see that from the point of view of Putin and his team, what has happened as a result of sanctions is “not a catastrophe” but rather a series of developments which have led to “the strengthening and consolidation” of their position and a confirmation of their approach.

            Since February 24^th, Russia and the West have split, Moscow has divided all investors into friendly and otherwise, it has trampled on the rights of foreign investors and even seized part of their property, and it has been able to act to the economy as a whole in ways that up to them it was able to act only to state corporations.

            Add to this list, Inozemtsev says, are the amendments to laws on intellectual property and patents and allowing Russian firms to engage in illegal imports, all of which help the Kremlin and its “Putin economy” but hurt the Russian economy as such systems are usually and with justification understood.

            Putin and his team can’t be unhappy with the fact that the main impact of sanctions has been on private business and entrepreneurial culture, something the regime wants to exploit but fears will almost inevitably grow into a threat to its own special economy, the economist and commentator says.

            One measure of where sanctions have hit hardest is where qualified cadres have emigrated from; and thus it should be no surprise that “the powers completely sincerely and with justice say that [their departure] does not have a serious impact on the economy, at least as they understand it.”