Even If Oil Prices Rise and Sanctions End, Russia’s Economy Will Be in Trouble, Inozemtsev Says

Paul Goble

            Staunton, January 30 – The Putin regime “has made so many mistakes that even if oil prices rise and sanctions are lifted, the crisis will not end, according to Vladislav Inozemtsev. Instead, the director of the Moscow Center for Research on Post-Industrial Society says, the current recession will continue because the Kremlin isn’t focusing on the economy.

            And in an interview given to Deutsche Welle that has been picked up by a number of Russian outlets, he predicts that this situation will not change earlier than 2024. As a result, the magic bullets that Putin supporters often point to will not keep the economy from contracting three to four percent a year over that period (rosbalt.ru/business/2016/01/25/1483111.html).

            Moscow’s response to the current crisis stands in marked contrast to its reaction to the events of 2008. Then, Inozemtsev says, “the authorities understood that economics is important, and the reaction of the Russian government was much more active,” including the formation of a broad anti-crisis program.

            “Now,” however, “the situation is much worse,” he continues, not so much because of international sanctions but rather because of “the inadequate actions of the Russian government” which has failed to focus on economic issues and “pursues exclusively geopolitical or its own domestic political goals.” It isn’t interested in economic questions.

            “Of course,” he acknowledges, the collapse in oil prices has inflicted serious harm on the Russian situation “possibly more than Western sanctions. But in 2008-2009, oil also fell in price. But then the state demonstrated its openness to the return of investors and a desire to restore relations with the West.”

            But “the economy’s decline in no way is directly connected with the price of oil,” he says. “In 2011-2013, the rate of economic growth in Russia fell, and the average price of Brent oil was high, approximately 110 US dollars a barrel.” What one sees now is a result of the “incompetent” choices of the Russian government.

            If oil suddenly rose to 60 US dollars a barrel and sanctions ended, that would hardly be enough to change the situation. Instead, “the price of oil would have to grow by 20 percent every year.”  There is no reason to think that will happen and thus there is no reason to expect economic growth in Russia if the government’s policies continue as they are.

            “We are close to the bottom because in recent time so many mistakes have been made in Russian policy,” and because that is so, “international business is hardly likely to return to Russia in its former amount.”   As a result, the economy will stagnate until at least 2024 because the current regime is “convinced that it is doing everything right” and won’t change.

            Inozemtsev says that he doesn’t share the views of those who think that Putin’s poll numbers are false. In his view, the numbers “quite correctly show the attitudes in society. Under these conditions in 2018, the reelection of the Russian president will occur most likely quite easily.” He adds that he doesn’t see any basis for “any Maidan” in Russia.

            Later, however, the situation is likely to change, he suggests, and by 2024, “the sense in society that something isn’t right will be quite widespread.”  Then things could change but only then.