Tag: Economy
Things will be worse for Russians
In my piece last week on how bad things could get, I gave short shrift to the situation inside Russia. I noted only that Putin is using his war against Ukraine as an opportunity to complete Moscow’s transition to autocracy. But there will be other consequences, especially on the economy. Branko Milanovic takes a look at these in two well-crafted posts, one on the short-term and one on the long-term. I recommend reading him, but I’ll offer here a layman’s account of what I think he says.
The short term is bad
Branko uses past economic crises in Russia, especially in the 1990s, to come to a rough guess at how sanctions might affect growth:
One can thus, very roughly, put the expected decline in 2022-23 at high single digits, or low double digits: it is not going to be as sharp as in 1992, nor as (relatively) mild as in 1998.
He also guesstimates that unemployment could go back up to 7-8%, with inflation rising sharply due to the ruble’s fall. That’s pretty bad, especially for lower incomes. He judges government policy responses so far “very weak,” because there are no good choices to be made.
Bottom line:
The coming years of Putin’s rule will thus look very much like the worst years of Yeltsin’s rule.
https://braveneweurope.com/branko-milanovic-russias-economic-prospects-the-short-term
The long term is worse
Next Branko looks at the long term, assuming that sanctions will remain in place for decades, because that is what American sanctions generally do. He identifies two possible strategies for Russia: import substitution and a pivot to Asia. But Russia lacks the industrial base and growing labor supply required for import substitution as well as the infrastructure and investment funds required for a pivot to Asia.
Bottom line:
…the future of the Eurasian continent looks very much like its past: the maritime areas along the Atlantic and the Pacific coasts will be fairly rich, much better-off than the significant large continental areas in the middle. Th[is] opens up the question of how politically viable will be such an uneven distribution of economic activity: will migrations, or political reconfigurations “solve” such disequilibria?
https://braveneweurope.com/branko-milanovic-long-term-difficulties-of-import-substitution-and-delocalization
It’s not just the economy
Let me add a few words about the broader social implications of this dire scenario. Putin isn’t going to allow freedom of expression if most of it will be criticism of him. So he has already taken charge of virtually all the media and made criticism of the war in Ukraine (even calling it a war) illegal. Domestic oppression is the necessary counterpart to a war that most Russians did not expect and don’t want.
In addition, Western sanctions will create money-making opportunities for evading them. The miscreants will often be people involved in the country’s secret services and the managers of state-controlled businesses. Putin has surrounded himself with former colleagues from the KGB, the security service where he started his career. His chosen oligarchs are already strong.
The West will try to damage the interests of the KGBers and oligarchs with personal sanctions on their finances, foreign property, and travel. But the smartest and luckiest of them will wriggle free. A society already plagued with organized crime will find itself firmly in the grip of whoever can help Putin evade Western sanctions.
The West is not immune
A Russian Mafia state does nothing to help the cause of democracy and freedom. You can hope Russians will rebel and chase out Putin and his cronies, but hope is not a policy. Nor can anyone in the West be sure that some Europeans and Americans won’t help Putin’s corrupt governance, as some did before the Ukraine invasion. Germany didn’t wander blindly into the Nordstream 2 natural gas pipeline. German politicians, including former Chancellor Schroeder, guided Berlin there.
In the US, the Ukraine invasion has frightened most Republicans out of their romance with Putin. But some still spout his praise, especially lead talker Tucker Carlson and lead presidential candidate Donald Trump:
They admire him as a smart and decisive autocrat. They care not about corruption. Ukrainian President Zelensky is fortunate indeed that the president who tried to withhold weapons to extort dirt on candidate Biden is no longer in office.
In addition, the war is already roiling Western economies, hiking the price of oil, and creating vast uncertainty for European and American trade and investment. What happens in Moscow doesn’t stay in Moscow. Things will be worse for the Russians, but the West is not immune.
Share this, I'll really appreciate it:
Stevenson’s army, March 3
– NYT details Western help to Ukraine.
– WSJ notes pro-Russia sentiment in Middle East
– FP China Brief notes how China is censoring Ukraine news.
– Defense News assesses chances for Ukrainian resistance.
– Atlantic assesses Russian economic vulnerabilities.
– Changing mood on Capitol Hill. Concerns over Sen. Rubio’s tweets of war info.
Policy process: All cables going from the State Dept go under the name of the SecState, though few have actually been seen by him. Axios has the story of a cable to 50 countries urging US diplomats to say India and UAE were “in Russia’s camp.” Oops. Cable recalled. The recall of the strongly worded cable indicates either a process error with a fabled and vital work product — or a policy dispute inside the U.S. government involving two key allies.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
Share this, I'll really appreciate it:
China and Russia are friends but not equals
Professor Evan Medeiros of Georgetown University analyzed the Xi-Putin declaration this week on NPR:
The Washington Post comes to similar conclusions: there is less to the declaration than some think.
Craig Singleton at Foreign Policy looks also at the readouts and Chinese press coverage. He goes a step further to suggest that President Xi gave President Putin little in order to protect Chinese economic interests, especially in Europe. Those interests he suggests could provide the West with a wedge to separate China from Russia. Economic prosperity trumps authoritarian solidarity.
The good news
The combined military and economic power and geographic extent of a China/Russia alliance would be formidable. It is good news that the Putin’s Olympics jaunt did not solidify into a genuine defense pact. Unless more was agreed than we know, Russia cannot rely on China to help beat Western sanctions. The Chinese may not like NATO enlargement, but it is not a primary concern for Beijing. The flagging Chinese economy is far more important.
The bad news
Moscow and Beijing are both exercised over human rights. Their joint declaration declares their own countries democracies but denounces human rights as a nefarious concern of the West. This may sound illogical to liberal democratic ears, but it is consistent with their distortion of “democracy.” To them, it means any system that somehow expresses the supposed will of the people, even if the people have no rights and have never validated that will in a free and fair election. Xi and Putin, like many other autocrats, think of themselves as the embodiment of the people’s will, evident in their successful assent to power.
China and Russia may be friends but are not equals
For now, Russians and Chinese are putting up with that claim, which in a perverse way demonstrates the power of the democratic example. Chinese and Russians all know the consequences of contesting the power of their leaders. But there is a big difference. Beijing can afford to repress the opposition and buy off the rest. For now, they are doing it in grand style in Xinjiang and Hong Kong, as well as in more retail ways in other parts of the country. Moscow can afford to buy off a few oligarchs but is leaving the majority of the population in straitened circumstances with shortened life expectancies, low incomes, and few free means of expression.
Putin has reasons to invade
It seems likely Putin will go ahead with the invasion of Ukraine. The Russian deployment is not a Potemkin village. It has gotten him little so far that he could not have gotten for more polite asking. The Americans have offered to limit armaments in Europe, provided the agreement is reciprocal. Putin’s moves have also unified NATO in favor of drastic sanctions, including extinction of the Nordstream 2 pipeline, and solidified Ukrainian support for the Alliance, precisely the opposite of what Putin wanted.
None of that however will make Putin hesitate. He wants to prove to the world that Russia is indispensable. “Nothing about Europe without Russia” is his motto. He is trying to reassert Moscow’s claim as a superpower capital, a claim that died with the Soviet Union. For someone for whom power is he be-all and end-all, only the successful use of force can revalidate it.
Beijing stands to lose little
Beijing won’t be happy if Russia invades Ukraine and disrupts the world’s economy, but it will be in his corner when he tries. If he succeeds, the Chinese will enjoy the outcome as a defeat for the Americans, NATO, and human rights. If he fails, the Chinese can walk away unscathed, comforted in the knowledge Putin will need to sell even more natural gas. China and Russia are friends, but not equals.
Share this, I'll really appreciate it:
Stevenson’s army, January 29
-Biden says he’ll send some US troops to eastern Europe in “near term.”
-Senators work on sanctions bill on Russia.
-FT says China stands with Russia.
– WSJ describes planned far-reaching US sanctions.
– Politico says US has had diplomatic blitz.
– US cuts aid to Egypt.
– CNAS releases study of semiconductor vulnerabilities.
– Hill article calls for Indo_Pacific economic strategy.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
Share this, I'll really appreciate it:
Stevenson’s army, November 9
-Michael Krepon explains the value and necessity of arms control.
– Journalist Jim Fallows, now on Substack, criticizes news coverage of politics.
– Politico reports on the many problems the Senate faces in December.
– Reuters says US to announce first projects to counter BRI.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I plan to republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
Share this, I'll really appreciate it:
Stevenson’s army, September 27
I’ve been traveling and negligent about publishing Charlie’s daily take, but I’ll try to do better this week:
– Erdogan defends military purchases from Russia.
– Chinese unsettled by hostage release deal.
-US Supreme Court sees sharp drop in favorability.
– WSJ says US failed to build sustainable economy in Afghanistan.
– WaPo explains failure of Afghan security forces.
– Guardian profiles Jake Sullivan.
And while this is not a prediction, Steven Dennis of Bloomberg describes the way legislative fights often work out:
“How deals sometimes come together in Congress
NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO YES TO BUDGET MODS IMMEDIATELY DIS NO NO NO NO NO NO NO NO NO NO NO NO YES TO FRAMEWORK NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO YES”
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I plan to republish here. To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
RSS - Posts
