Saturday, March 14, 2020

Putin Elite will Respond to Crisis as It Always Has, Taking Steps to Benefit Itself Even if They Hurt Russia, Shelin Says

Paul Goble

            Staunton, March 9 – It is difficult if not impossible to say how the current crises will develop, Sergey Shelin says; but it is quite possible to predict how the powers that be in Moscow will act. “They will as always begin to do what helps them” in the first instance, regardless of its impact on the country.

            The Rosbalt commentator reaches that conclusion after exploring the larger issues of whether the current crisis was avoidable, whether it will expand beyond its current limits, and finally “what will our regime do for its own citizens” in response? (

            The collapse of oil prices in part reflected Moscow’s desire to undercut the US-led shale oil revolution, but it has been compounded by the coronavirus which has had a negative impact on the economies of most countries and thus sent the demand for oil plunging.  That, of course, is something new in principle and certain to affect Russia for some time.

            And because Moscow does not have the leverage to return oil prices to anything like they were in the “fat” years, ordinary Russians should operate on the assumption that they are not going to see a return to those times of rising incomes anytime soon if ever, Shelin argues.

            At the same time, the issue of whether there will be a global recession, he continues, is a much broader issue. The probabilities of that outcome are “now higher than at any moment in the last decades.” The current pandemic may be the trigger; it has certainly sparked panic on the world’s stock exchanges.

            The view of most in Moscow is that the Russian economy won’t be nearly as affected as others and that any impact on ordinary Russians is something the government can compensate for rather easily.  The first part of this logic may be true, the commentator says; but the second isn’t, not because the government couldn’t but because it won’t.

            The reason so many believe the second is the existence of the Reserve Fund and the government’s promise to use it to help ordinary Russians. But that assumption is false on two grounds. On the one hand, the reserve fund is part of the government’s assets and is fungible. And on the other, the Kremlin has used it to help elites but not to help the population.

            There is no plausible reason to assume that the Kremlin will do anything else this time. Instead, it will force the population to pay for any problems via inflation and the reduction in essential services. Moreover, no one near the top is prepared to cut spending on the military and security services. Consequently, the Russian people will suffer, although the elites not so much.

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