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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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Foreign Banks Are Embracing Russia’s Alternative To SWIFT, Moscow Says

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative.

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Via Zerohedge


On Friday, one day after Russia and China pledged to reduce their reliance on the dollar by increasing the amount of bilateral trade conducted in rubles and yuan (a goal toward which much progress has already been made over the past three years), Russia’s Central Bank provided the latest update on Moscow’s alternative to US-dominated international payments network SWIFT.

Moscow started working on the project back in 2014, when international sanctions over Russia’s annexation of Crimea inspired fears that the country’s largest banks would soon be cut off from SWIFT which, though it’s based in Belgium and claims to be politically neutral, is effectively controlled by the US Treasury.

Today, the Russian alternative, known as the System for Transfer of Financial Messages, has attracted a modest amount of support within the Russian business community, with 416 Russian companies having joined as of September, including the Russian Federal Treasury and large state corporations likeGazprom Neft and Rosneft.

And now, eight months after a senior Russian official advised that “our banks are ready to turn off SWIFT,” it appears the system has reached another milestone in its development: It’s ready to take on international partners in the quest to de-dollarize and end the US’s leverage over the international financial system. A Russian official advised that non-residents will begin joining the system “this year,” according to RT.

“Non-residents will start connecting to us this year. People are already turning to us,”said First Deputy Governor of the Central Bank of Russia Olga Skorobogatova. Earlier, the official said that by using the alternative payment system foreign firms would be able to do business with sanctioned Russian companies.

Turkey, China, India and others are among the countries that might be interested in a SWIFT alternative, as Russian President Vladimir Putin pointed out in a speech earlier this month, the US’s willingness to blithely sanction countries from Iran to Venezuela and beyond will eventually rebound on the US economy by undermining the dollar’s status as the world’s reserve currency.

To be sure, the Russians aren’t the only ones building a SWIFT alternative to help avoid US sanctions. Russia and China, along with the European Union are launching an interbank payments network known as the Special Purpose Vehicle to help companies pursue “legitimate business with Iran” in defiance of US sanctions.

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative. For one, much of Europe is dependent on Russian natural gas and oil.

And as Russian trade with other US rivals increases, Moscow’s payments network will look increasingly attractive,particularly if buyers of Russian crude have no other alternatives to pay for their goods.

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US leaving INF will put nuclear non-proliferation at risk & may lead to ‘complete chaos’

The US is pulling out of a nuclear missile pact with Russia. The Intermediate-Range Nuclear Forces Treaty requires both countries to eliminate their short and medium-range atomic missiles.

The Duran

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Via RT


If the US ditches the Intermediate-Range Nuclear Forces Treaty (INF), it could collapse the entire nuclear non-proliferation system, and bring nuclear war even closer, Russian officials warn.

By ending the INF, Washington risks creating a domino effect which could endanger other landmark deals like the Strategic Arms Reduction Treaty (START) and collapse the existing non-proliferation mechanism as we know it, senior lawmaker Konstantin Kosachev said on Sunday.

The current iteration of the START treaty, which limits the deployment of all types of nuclear weapons, is due to expire in 2021. Kosachev, who chairs the Parliament’s Upper House Foreign Affairs Committee, warned that such an outcome pits mankind against “complete chaos in terms of nuclear weapons.”

“Now the US Western allies face a choice: either embarking on the same path, possibly leading to new war, or siding with common sense, at least for the sake of their self-preservation instinct.”

His remarks came after US President Donald Trump announced his intentions to “terminate” the INF, citing alleged violations of the deal by Russia.

Moscow has repeatedly denied undermining the treaty, pointing out that Trump has failed to produce any evidence of violations. Moreover, Russian officials insist that the deployment of US-made Mk 41 ground-based universal launching systems in Europe actually violates the agreement since the launchers are capable of firing mid-range cruise missiles.

Leonid Slutsky, who leads the Foreign Affairs Committee in parliament’s lower chamber, argued that Trump’s words are akin to placing “a huge mine under the whole disarmament process on the planet.”

The INF Treaty was signed in 1987 by then-President Ronald Reagan and Soviet leader Mikhail Gorbachev. The deal effectively bans the parties from having and developing short- and mid-range missiles of all types. According to the provisions, the US was obliged to destroy Pershing I and II launcher systems and BGM-109G Gryphon ground-launched cruise missiles. Moscow, meanwhile, pledged to remove the SS-20 and several other types of missiles from its nuclear arsenal.

Pershing missiles stationed in the US Army arsenal. © Hulton Archive / Getty Images ©

By scrapping the historic accord, Washington is trying to fulfill its “dream of a unipolar world,” a source within the Russian Foreign Ministry said.

“This decision fits into the US policy of ditching the international agreements which impose equal obligations on it and its partners, and render the ‘exceptionalism’ concept vulnerable.”

Deputy Foreign Minister Sergey Ryabkov denounced Trump’s threats as “blackmail” and said that Washington wants to dismantle the INF because it views the deal as a “problem” on its course for “total domination” in the military sphere.

The issue of nuclear arms treaties is too vital for national and global security to rush into hastily-made “emotional” decisions, the official explained. Russia is expecting to hear more on the US’ plans from Trump’s top security adviser, John Bolton, who is set to hold talks in Moscow tomorrow.

President Trump has been open about unilaterally pulling the US out of various international agreements if he deems them to be damaging to national interests. Earlier this year, Washington withdrew from the Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear program. All other signatories to the landmark agreement, including Russia, China, and the EU, decided to stick to the deal, while blasting Trump for leaving.

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Kiev ‘Patriarch’ prepares to seize Moscow properties in Ukraine

Although Constantinople besought the Kiev church to stop property seizures, they were ignored and used, or perhaps, complicit.

Seraphim Hanisch

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The attack on the Eastern Orthodox Church, brought about by the US State Department and its proxies in Constantinople and Ukraine, is continuing. On October 20, 2018, the illegitimate “Kyiv (Kiev) Patriarchate”, led by Filaret Denisenko who is calling himself “Patriarch Filaret”, had a synodal meeting in which it changed the commemoration title of the leader of the church to include the Kyiv Caves and Pochaev Lavras.

This is a problem because Metropolitan Onuphry of the Ukrainian Orthodox Church which is canonically accepted and acts as a very autonomous church under the Moscow Patriarchate has these places under his pastoral care.

This move takes place only one week after Patriarch Bartholomew I of Constantinople unilaterally (and illegally) lifted the excommunications, depositions (removal from priestly ranks as punishment) and anathemas against Filaret and Makary that were imposed on them by the hierarchy of the Moscow Patriarchate.

These two censures are very serious matters in the Orthodox Church. Excommunication means that the person or church so considered cannot receive Holy Communion or any of the other Mysteries (called Sacraments in the West) in a neighboring local Orthodox Church. Anathema is even more serious, for this happens when a cleric disregards his excommunication and deposition (removal from the priesthood), and acts as a priest or a bishop anyway.

Filaret Denisenko received all these censures in 1992, and Patriarch Bartholomew accepted this decision at the time, as stated in a letter he sent to Moscow shortly after the censures. However, three years later, Patriarch Bartholomew received a group of Ukrainian autocephalist bishops called the Ukrainian Orthodox Church in the USA, who had been in communion with Filaret’s group. While this move may have been motivated by the factor of Bartholomew’s almost total isolation within Istanbul, Turkey, it is nonetheless non-canonical.

This year’s moves have far exceeded previous ones, though, and now the possibility for a real clash that could cost lives is raised. With Filaret’s “church” – really an agglomeration of Ukrainian ultranationalists and Neo-Nazis in the mix, plus millions of no doubt innocent Ukrainian faithful who are deluded about the problems of their church, challenging an existing arrangement regarding Ukraine and Russia’s two most holy sites, the results are not likely to be good at all.

Here is the report about today’s developments, reprinted in part from OrthoChristian.com:

Meeting today in Kiev, the Synod of the schismatic “Kiev Patriarchate” (KP) has officially changed the title of its primate, “Patriarch” Philaret, to include the Kiev Caves and Pochaev Lavras under his jurisdiction.

The primate’s new official title, as given on the site of the KP, is “His Holiness and Beatitude (name), Archbishop and Metropolitan of Kiev—Mother of the cities of Rus’, and Galicia, Patriarch of All Rus’-Ukraine, Svyaschenno-Archimandrite of the Holy Dormition Kiev Caves and Pochaev Lavras.”

…Thus, the KP Synod is declaring that “Patriarch” Philaret has jurisdiction over the Kiev Caves and Pochaev Lavras, although they are canonically under the omophorion of His Beatitude Metropolitan Onuphry of Kiev and All Ukraine, the primate of the canonical Ukrainian Orthodox Church.

Philaret and his followers and nationalistic radicals have continually proclaimed that they will take the Lavras for themselves.

This claim to the ancient and venerable monasteries comes after the Holy Synod of the Ecumenical Patriarchate announced that it had removed the anathema placed upon Philaret by the Russian Orthodox Church and had restored him to his hierarchical office. Philaret was a metropolitan of the canonical Church, becoming patriarch in his schismatic organization.

Representatives of the Ecumenical Patriarchate have clarified that they consider Philaret to be the “former Metropolitan of Kiev,” but he and his organization continue to consider him an active patriarch, with jurisdiction in Ukraine.

Constantinople’s statement also appealed to all in Ukraine to “avoid appropriation of churches, monasteries, and other properties,” which the Synod of the KP ignored in today’s decision.

The KP primate’s abbreviated title will be, “His Holiness (name), Patriarch of Kiev and All Rus’-Ukraine,” and the acceptable form for relations with other Local Churches is “His Beatitude Archbishop (name), Metropolitan of Kiev and All Rus’-Ukraine.”

The Russian Orthodox Church broke eucharistic communion and all relations with the Ecumenical Patriarchate over this matter earlier this week. Of the fourteen local Orthodox Churches recognized the world over, twelve have expressed the viewpoint that Constantinople’s move was in violation of the canons of the Holy Orthodox Church. Only one local Church supported Constantinople wholeheartedly, and all jurisdictions except Constantinople have appealed for an interOrthodox Synod to address and solve the Ukrainian matter in a legitimate manner.

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