Are sanctions working?---this tends to prove they are in fact hitting Russia hard--will they change Russia's stance---check the last sentence and one sees the economy will truly tank before Putin accepts "failure".
From NYTs 17/9/2014
MOSCOW — President Obama has warned Russia that “there will be costs” for its policies in Ukraine. European leaders and the head of the North Atlantic Treaty Organization have done the same.
On Tuesday, an influential figure in the Russian political elite and a longtime aide to President Vladimir V. Putin drove home this argument.
European Union and American sanctions have pushed Russia to a tipping point between growth and recession, Aleksei L. Kudrin, a former finance minister, told an audience of Western executives at a conference in Moscow hosted by the American chamber of commerce. Mr. Kudrin then outlined, in unvarnished and detailed terms, what awaits Russia if a fragile cease-fire in the war in eastern Ukraine breaks down: possibily a contraction over 5 percent lasting one to two years.
“The ceasefire is important for everybody, and for Russia most of all,” Mr. Kudrin said. “We should study these consequences, and avoid a worsening of the situation.”
Already, Mr. Kudrin said, sanctions have trimmed about 1 percent from Russia’s $2 trillion gross domestic product this year, with the effects now being felt beyond the tight coterie of businessmen deemed close to President Putin who first felt the sting. Economic growth slowed to what Citigroup projects will be 0.5 percent this year. Since January, $110 billion has left Russia as capital flight.
Aleksei L. Kudrin, a former finance chief for Russia, said sanctions have trimmed about 1 percent from Russia’s $2 trillion gross domestic product this year. Credit Olga Maltseva/Agence France-Presse — Getty Images
Faint consumer demand caused car and other durable goods sales to contract. Rosneft, the state oil company has asked for a government bailout. Yevraziya, a chain of sushi restaurants, closed in Moscow after the price of salmon doubled.
Bob Foresman, the chief executive of Barclays bank in Russia, in a speech to the gathering cited a survey of businessmen’s views on the Russian economy, highlighting phrases like “fatigue,” “caution,” “false hope” and “false dawn.”
In Ukraine this week, Separatist gunmen and the Ukrainian army are exchanging artillery fire daily over military objectives like a regional airport and a strategic village, Debaltsevo, northeast of Donetsk, where Organization for Security and Cooperation in Europe observers came under fire Sunday.
If European leaders decide the cease-fire has failed, they have vowed to leave in place financial and oil industry sanctions imposed last week, rather than repeal them. That, Mr. Kudrin said, would stall the Russian economy with zero growth in 2015, or push it into a mild recession.
If the European Union and United States escalate sanctions on the banking sector by prohibiting Russian banks from accessing SWIFT, the international secure money transfer system, the Russian economy will go into deep recession with a contraction of at least 5 percent lasting one or two years, Mr. Kudrin said.
Turning inward and relying on a revival of domestic manufacturing and agriculture helped by the weakening ruble, the plan to fortify the Russian economy of so-called import substitution outlined by an acting deputy prime minister who also spoke at the gathering, is unrealistic, Mr. Kudrin suggested.
Soft-spoken and with a wry sense of humor, Mr. Kudrin seems at times to almost take pleasure in pointing out the dismal realities of the global economy, when nobody else here will.
Europe and the United States, the governments imposing sanctions on Russia, spend about $1.5 trillion on research and development annually, while Russia spends $20 billion, he noted. As such, Russia can never hope to replicate a wide range of these nations’ imported goods. The Russian government should designate only select niches of the economy for this policy, he said.
The Russian leadership, he said, understands the costs but may be willing to pay them. Earlier, he described the economic blow as the price for Russia having a foreign policy independent of the United States.
“At a minimum, two or three years are needed to resolve the questions,” of the Ukraine crisis, he said, even if no escalation takes place.
“Until then, we won’t know what investment climate we have and the final state of our relations with the West,” he added, and the Russian economy will be in a “period of instability.”
Mr. Kudrin, whose ties to Mr. Putin stretch back two decades to the city hall of St. Petersburg, where both worked, is retired from government. His is a rare public voice of a liberal wing of the Russian elite on the mounting economic costs of the war and sanctions. Kremlin watchers, though, are divided on whether such sentiments carry any weight now with Mr. Putin.
One attendee at the conference questioned whether the Kremlin, already hurt by sanctions, sees no point in changing its behavior in Ukraine, citing Winston Churchill saying “If you’re going through hell keep going.”
Reply With Quote
Originally Posted by Dayuhan
Bookmarks