Friday, March 28, 2014

Window on Eurasia: Crimea Anschluss to Cost Russians Billions, Kudrin Says

Paul Goble

            Staunton, March 28 – Former Russian finance minister Aleksey Kudrin has said and official Russian news agencies have reported that that Russia’s annexation of Crimea is going to have extremely deleterious effects on the Russian economy, including massive capital flight and any hope of real economic growth this year.

            Kudrin said yesterday that Russia will pay for its “independent foreign policy” in Crimea with 150 to 160 billion US dollars in pure capital flight this year and that the country’s economy which had been emerging from a serious recession will stagnate or even decline slightly (

            According to the former finance minister, this is a price that “society for the time being is prepared to pay” as the cost of having “an independent foreign policy.”  He added that in his view, “this price is not critical,” although it is much higher than he and other Russian experts had suggested only a few weeks ago.

            We are talking about “hundreds of billions of dollars,” Kudrin says, although he argues that decisions about Crimea and Ukraine “cannot be evaluated only in economic terms.”  At the same time, these are real costs and need to be recognized, even if within “the framework of a soft sanctions scenario,” Russians are prepared to bear.

             Kudrin’s judgment is likely correct at least in the short term.  But three caveats suggest themselves. First, many Russians, although few close to the Kremlin, are already suffering. They complained about Putin’s spending on the Sochi Olympiad because it took money away from programs intended to help them, and they are likely to do the same in this case.

            Second, as Kudrin himself says, the massive economic price of Crimea and Ukraine could go up in a serious way if the sanctions regime is extended and toughened.  What Russians or anyone else is prepared to accept now, they would be less prepared to do so if the price went up exponentially.

            And third –and this may be the most important of all—when people begin talking about the costs of a policy instead of its goals, that in and of itself is corrosive of support for the goals.  Again and again and in country after country, many who may begin by supporting the goals that national elites have announced turn away from these goals and elites when they learn the costs.

            That may now be happening because although Kudrin is not the first to point to the enormous costs that Vladimir Putin has inflicted on his own country by his policies, he is one of the most prominent former officials to do so – and his words, unlike those of some others, are being disseminated not on websites or papers read only by a few but by the national media.

            Consequently, it is likely that the current outburst of enthusiasm for Putin’s aggressive policies may wane, especially if ever more Russians understand just how much these policies are taking out of their pockets and if the sanctions regime imposed by the West is both continued and made tougher.

            That this is already happening is suggested by two reports today, one specifying that Russian pensioners are paying for the Crimean adventure and another suggesting that Moscow is putting money into Crimea rather than into Russian medical care ( and


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