Paul Goble
Staunton,
December 21 – Just as the threat of a strike is often a more powerful labor
weapon than any strike itself, so too the threat of new sanctions by the West
is already having a more serious and negative impact on Russia than the sanctions
Western countries have already applied, according to Rosbalt commentator Sergey
Shelin.
He
says that Russia has been living for some months in the expectation of new
sanctions as a result of the Skripal
case and the Azov crisis and that the last year has shown that “future actions
against the Russian economy have already cost our country more dearly than
those which are already in place” (rosbalt.ru/blogs/2018/12/21/1754647.html).
Despite Vladimir
Putin’s upbeat messaging, Shelin says, Russians are entering 2019 far more
pessimistic about the future than they were a year ago, less because of any
specific Moscow action, including pension reform, than because of their
expectations that more sanctions are about to be applied and that these will
hurt them more directly than earlier ones.
These expectations have several real
world consequences, and those consequences are likely only to become more
serious, he suggests. First of all,
there has been an effective devaluation of the ruble. At the start of 2018, it
stood at 56 to the US dollar; now, it is at 68 rubles to the dollar.
Until very
recently, oil prices have been high and so this change is not the result of
that, Shelin continues; and “only the special measures taken by the Central
Bank and the finance ministry have prevented a more serious devaluation,” a
fall that he says is the result of “fear and panic” among Russians about the
future. And that fall is now “the main driver of inflation.”
Second, there has been a rise in
interest rates, with every indication that they will go higher still. “This is a natural response to growing uncertainty
in the ruble. One of the consequences of this new course, the rise in the cost
of all kinds of credit, is bad news for ordinary people because a life in debt
has become the norm for many.”
Third, given the decline of the ruble
and the expectations it will continue, Russians are increasingly pulling their
money out of banks. Some of that, of course, reflects an effort to maintain their
standard of living given that incomes are flat and inflation is rising; but
much of it is about fears the US will impose sanctions that will make
purchasing dollars more difficult.
And fourth, there has been a sharp
increase in the amount of capital flight.
The amount leaving this year will be more than 60 billion US dollars,
more than twice the 25 billion which left last year. The current year’s flight is less than in
four other years since 2007 but it is still impressive – and the trend will
only get worse.
Most important, “except for the
expectation of sanctions, there are no other reasons” for this to be
happening. Both Russians and foreigners
view Russian firms as toxic and dangerous places to put money given that additional
sanctions may make it difficult or impossible to retrieve it and thus impose
real costs on those who keep their money in Russia.
Ordinary Russians understand even if
Putin is trying to convince them otherwise that “life in 2018 really got worse,
and not because of sanctions but only because of the anticipation that there will
be more of them.” They may accept the
Kremlin’s version of the Skripal and Azov cases; but they aren’t ready to
accept its projections about the future.
Consequently, more sanctions and
counter-sanctions are coming, but they will be doing so, Shelin says, “not in
the same public atmosphere as they did earlier;” and that means the Russian
powers that be won’t have the same flexibility or support that they did in the
past. The expectation of sanctions will thus do much to redefine the nature of
Russian politics in 2019.
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