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So do sanctions on Russia actually work?

Despite years of economic warfare, there is still no evidence Russia’s economy has been significantly harmed

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(Irrussianality) – In my recent post about the Canadian House of Commons defence committee’s report on Ukraine, I complained that the committee had recommended strengthening sanctions against Russia without producing any evidence that sanctions were an effective tool in changing Russian behaviour. As luck would have it, I have acquired a copy of a recent report which analyzes the effect of sanctions on the Russian economy. I thought, therefore, that I should share the report’s conclusions with you.

Before doing so, it’s first necessary to point out that damaging the Russian economy isn’t the ultimate point of sanctions. If sanctions are to have any meaningful purpose, then that purpose has to be to change Russian behaviour, specifically vis-à-vis Ukraine, given that Ukraine was the pretext for the sanctions. That said, sanctions aren’t going to make Russia change its behaviour if they don’t damage the Russian economy. Coercion has to hurt if it is to coerce. No pain, no gain, as it were. So are they hurting?

The report I have in hand is entitled ‘What difference have sanctions made and is that about to change?’ It was published in September by Macro Advisory Eurasia-Russia Consulting which describes itself as ‘the leading independent macroeconomic and political strategy firm specialising in the Eurasia region, including Russia and the CIS states.’ The report concludes that, ‘it is impossible to say categorically that sanctions have either significantly contributed to the economic decline [in Russia since 2014] or that they have helped the economy survive what would otherwise have been a more severe recession.’ However, the report’s authors tend more towards the latter option, saying that ‘sanctions helped in many respects.’

According to the report, the Russian economy was slowing down even before 2014. The major cause of the subsequent recession was the collapse in the oil price. The impact of sanctions was very small. However, sanctions did affect the way that the Russian government responded to the oil-price-driven recession. Following the global financial crisis of 2008, the government reacted by spending large amounts of its reserves on propping up the ruble, and also by increasing government spending more generally in a type of Keynseian counter-cyclical strategy. In 2014, it abandoned this policy. Instead it allowed the ruble to become a free-floating currency, while it also exercised a tight monetary policy designed to drive down inflation.

The report’s authors credit this latter strategy with preventing the post-2014 recession from becoming as deep as many feared it would be. They write:

Sanctions removed, or made more difficult, the soft options of borrowing and spending … The combination forced the state to be much more fiscally disciplined and more flexible with monetary policy. The ruble free float would not have happened without sanctions. … the decision to stop supporting the currency was the single most important action taken by the government and one of the key reasons why sectors, such as agriculture, have become more competitive and started to grow. … [Therefore] it can be argued that the 2014 sanctions actually helped Russia avoid a steeper recession and a more severe financial crisis.

The report says also that the sanctions forced the oil and gas sector to become more efficient, resulting in an increase, not a decrease, in production after 2014. In general, says the report,

Russia is in good financial shape. … Russia is the sixth-lowest indebted nation and has the sixth-largest financial reserves. … As a result of the sanctions, Russia was forced to repay $250 bn of external debt between 2014 and 2016. That represented 12.5% of pre-devaluation GDP and 25% of post-devaluation GDP. Not many countries in the world could have done that and still avoid a catastrophic crisis. It shows the resilience in the macro-economic and social-political system.

What then of the future?

On this Macro Advisory is a little more cautious. It claims that a lot depends upon the effects of the latest sanctions legislation passed by the US Congress. With this legislation, Congress has effectively seized control of sanctions from the president. Given past experience (e.g. with Cuba, Iran, and the Jackson-Vanik amendment which imposed sanctions against the USSR), the likelihood is that the existing sanctions against Russia will remain for a very long time, regardless of what happens with US-Russia relations more broadly. The new legislation is disturbing, moreover, because it contains stipulations which could be used to dramatically increase sanctions against Russia in the future. This possibility creates a degree of uncertainty which deters foreign direct investment (FDI) in Russia. Currently FDI in Russia is rising again, but that could easily change. A much harsher sanctions regime is possible, and that, says the report, could have a negative effect on the Russian economy.

The report lays out three possibilities. The first involves a relaxation of sanctions by European powers. The second sees sanctions remaining as they are. The third envisages much tighter US sanctions. The report assesses that in the first scenario, growth in Russian GDP will pick up to 3.0% by 2020, accelerating to 4.5% by the end of Putin’s final term in office in 2024. In the second scenario, growth will gradually rise to 3.0% by 2022 and remain roughly constant at that level thereafter. In the third scenario, growth will drop to 0.8% by 2020 before increasing to 2.3% by 2024.

Personally, I suspect that scenario two is the most likely – things will continue on much as they are. If the authors are correct, therefore, we should expect that, barring some external shock such as another global recession, during Putin’s final term in office the Russian economy will experience steady if not extremely rapid growth, ending up with three years of 3.0% growth per annum. That’s not enough to catch up with the West, but it’s not bad either, and certainly sufficient to put a noticeable amount of extra money in Russians’ pockets. If that’s really true, then economically speaking Putin’s last years will be a moderate success from an economic point of view.

Of course, these are all just projections and, as we know, economists often get their projections wrong. Nevertheless, none of this is good news for those who think that sanctions are an effective tool against ‘Russian aggression’ or who imagine that the collapse of the ‘Putin regime’ is just around the corner.

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Constantinople: Ukrainian Church leader is now uncanonical

October 12 letter proclaims Metropolitan Onuphry as uncanonical and tries to strong-arm him into acquiescing through bribery and force.

Seraphim Hanisch

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The pressure in Ukraine kept ratcheting up over the last few days, with a big revelation today that Patriarch Bartholomew now considers Metropolitan Onuphy “uncanonical.” This news was published on 6 December by a hierarch of the canonical Ukrainian Orthodox Church (running under the Moscow Patriarchate).

This assessment marks a complete 180-degree turn by the leader of the Orthodox Patriarchate of Constantinople, and it further embitters the split that has developed to quite a major row between this church’s leadership and the Moscow Patriarchate.

OrthoChristian reported this today (we have added emphasis):

A letter of Patriarch Bartholomew of Constantinople to His Beatitude Metropolitan Onuphry of Kiev and All Ukraine was published yesterday by a hierarch of the canonical Ukrainian Orthodox Church, in which the Patriarch informed the Metropolitan that his title and position is, in fact, uncanonical.

This assertion represents a negation of the position held by Pat. Bartholomew himself until April of this year, when the latest stage in the Ukrainian crisis began…

The same letter was independently published by the Greek news agency Romfea today as well.

It is dated October 12, meaning it was written just one day after Constantinople made its historic decision to rehabilitate the Ukrainian schismatics and rescind the 1686 document whereby the Kiev Metropolitanate was transferred to the Russian Orthodox Church, thereby, in Constantinople’s view, taking full control of Ukraine.

In the letter, Pat. Bartholomew informs Met. Onuphry that after the council, currently scheduled for December 15, he will no longer be able to carry his current title of “Metropolitan of Kiev and All Ukraine.”

The Patriarch immediately opens his letter with Constantinople’s newly-developed historical claim about the jurisdictional alignment of Kiev: “You know from history and from indisputable archival documents that the holy Metropolitanate of Kiev has always belonged to the jurisdiction of the Mother Church of Constantinople…”

Constantinople has done an about-face on its position regarding Ukraine in recent months, given that it had previously always recognized the Metropolitan of Kiev and All Ukraine of the Ukrainian Orthodox Church-Moscow Patriarchate as the sole canonical primate in Ukraine.

…The bulk of the Patriarch’s letter is a rehash of Constantinople’s historical and canonical arguments, which have already been laid out and discussed elsewhere. (See also here and here). Pat. Bartholomew also writes that Constantinople stepped into the Ukrainian ecclesiastical sphere as the Russian Church had not managed to overcome the schisms that have persisted for 30 years.

It should be noted that the schisms began and have persisted precisely as anti-Russian movements and thus the relevant groups refused to accept union with the Russian Church.

Continuing, Pat. Bartholomew informs Met. Onuphry that his position and title are uncanonical:

Addressing you as ‘Your Eminence the Metropolitan of Kiev’ as a form of economia [indulgence/condescension—OC] and mercy, we inform you that after the elections for the primate of the Ukrainian Church by a body that will consist of clergy and laity, you will not be able ecclesiologically and canonically to bear the title of Metropolitan of Kiev, which, in any case, you now bear in violation of the described conditions of the official documents of 1686.

He also entreats Met. Onuphry to “promptly and in a spirit of harmony and unity” participate, with the other hierarchs of the Ukrainian Orthodox Church, in the founding council of the new Ukrainian church that Constantinople is planning to create, and in the election of its primate.

The Constantinople head also writes that he “allows” Met. Onuphry to be a candidate for the position of primate.

He further implores Met. Onuphry and the UOC hierarchy to communicate with Philaret Denisenko, the former Metropolitan of Kiev, and Makary Maletich, the heads of the schismatic “Kiev Patriarchate” and the schismatic “Ukrainian Autocephalous Orthodox Church” respectively—both of which have been subsumed into Constantinople—but whose canonical condemnations remain in force for the canonical Ukrainian Orthodox Church.

The hierarchs of the Serbian and Polish Churches have also officially rejected the rehabilitation of the Ukrainian schismatics.

Pat. Bartholomew concludes expressing his confidence that Met. Onuphry will decide to heal the schism through the creation of a new church in Ukraine.

The Ukrainian Orthodox Church under Metropolitan Onuphry’s leadership is recognized as the sole canonical Orthodox jurisdiction in Ukraine by just about every other canonical Orthodox Jurisdiction besides Constantinople. Even NATO member Albania, whose expressed reaction was “both sides are wrong for recent actions” still does not accept the canonicity of the “restored hierarchs.”

In fact, about the only people in this dispute that seem to be in support of the “restored” hierarchs, Filaret and Makary, are President Poroshenko, Patriarch Bartholomew, Filaret and Makary… and NATO.

While this letter was released to the public eye yesterday, the nearly two months that Metropolitan Onuphry has had to comply with it have not been helped in any way by the actions of both the Ecumenical Patriarchate and the Ukrainian government.

Priests of the Canonical Church in Ukraine awaiting interrogation by the State authorities

For example, in parallel reports released on December 6th, the government is reportedly accusing canonical priests in Ukraine of treason because they are carrying and distributing a brochure entitled (in English): The Ukrainian Orthodox Church: Relations with the State. The Attitude Towards the Conflict in Donbass and to the Church Schism. Questions and Answers.

In a manner that would do any American liberal proud, these priests are being accused of inciting religious hatred, though really all they are doing is offering an explanation for the situation in Ukraine as it exists.

A further piece also released yesterday notes that the Ukrainian government rehabilitated an old Soviet-style technique of performing “inspections of church artifacts” at the Pochaev Lavra. This move appears to be both intended to intimidate the monastics who are living there now, who are members of the canonical Church, as well as preparation for an expected forcible takeover by the new “united Church” that is under creation. The brotherhood characterized the inspections in this way:

The brotherhood of the Pochaev Lavra previously characterized the state’s actions as communist methods of putting pressure on the monastery and aimed at destroying monasticism.

Commenting on the situation with the Pochaev Lavra, His Eminence Archbishop Clement of Nizhyn and Prilusk, the head of the Ukrainian Church’s Information-Education Department, noted:

This is a formal raiding, because no reserve ever built the Pochaev Lavra, and no Ministry of Culture ever invested a single penny to restoring the Lavra, and the state has done nothing to preserve the Lavra in its modern form. The state destroyed the Lavra, turned it into a psychiatric hospital, a hospital for infectious diseases, and so on—the state has done nothing more. And now it just declares that it all belongs to the state. No one asked the Church, the people that built it. When did the Lavra and the land become state property? They belonged to the Church from time immemorial.

With the massive pressure both geopolitically and ecclesiastically building in Ukraine almost by the day, it is anyone’s guess what will happen next.

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Ukrainian leadership is a party of war, and it will continue as long as they’re in power – Putin

“We care about Ukraine because Ukraine is our neighbor,” Putin said.

RT

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Via RT…


Russia’s President Vladimir Putin has branded the Ukrainian leadership a “party of war” which would continue fueling conflicts while they stay in power, giving the recent Kerch Strait incident as an example.

“When I look at this latest incident in the Black Sea, all what’s happening in Donbass – everything indicates that the current Ukrainian leadership is not interested in resolving this situation at all, especially in a peaceful way,” Putin told reporters during a media conference in the aftermath of the G20 summit in Buenos Aires, Argentina.

This is a party of war and as long as they stay in power, all such tragedies, all this war will go on.

The Kiev authorities are craving war primarily for two reasons – to rip profits from it, and to blame all their own domestic failures on it and actions of some sort of “aggressors.”

“As they say, for one it’s war, for other – it’s mother. That’s reason number one why the Ukrainian government is not interested in a peaceful resolution of the conflict,” Putin stated.

Second, you can always use war to justify your failures in economy, social policy. You can always blame things on an aggressor.

This approach to statecraft by the Ukrainian authorities deeply concerns Russia’s President. “We care about Ukraine because Ukraine is our neighbor,” Putin said.

Tensions between Russia and Ukraine have been soaring after the incident in the Kerch Strait. Last weekend three Ukrainian Navy ships tried to break through the strait without seeking the proper permission from Russia. Following a tense stand-off and altercation with Russia’s border guard, the vessels were seized and their crews detained over their violation of the country’s border.

While Kiev branded the incident an act of “aggression” on Moscow’s part, Russia believes the whole Kerch affair to be a deliberate “provocation” which allowed Kiev to declare a so-called “partial” martial law ahead of Ukraine’s presidential election.

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When Putin Met Bin Sally

Another G20 handshake for the history books.

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Via Zerohedge


In the annals of handshake photo-ops, we just may have a new winner (much to the delight of oil bulls who are looking at oil treading $50 and contemplating jumping out of the window).

Nothing but sheer joy, delight and friendship…

…but something is missing…

Meanwhile, earlier…

Zoomed in…

And again.

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