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Home / World / Putin's fiscal fortress protects Russia from recession, global turbulence and the West

Putin's fiscal fortress protects Russia from recession, global turbulence and the West



The most recent French revelation comes when US lawmakers returned to work this week and at least two sanction laws against Russia found their way through Congress.

But policymakers and experts are wondering if further unilateral sanctions are an effective response to Russian President Vladimir Putin's thirst for adventure in the face of fears they might also damage relations with American trading partners and allies.

The US and its allies first issued a package of economic sanctions in 2014 to punish Russia for annexing Crimea and supporting separatist militias in the east Ukraine.

Since then, Moscow's policymakers have established monetary and fiscal fortresses that prioritize stability against growth and serve as a barrier to Russian sovereignty, and better to help the Kremlin's weather sanctions than many analysts expect.

With the help of experienced technocrats such as Elvira Nabiullina, the head of the Russian Central Bank, Putin has set up a foundation to protect the Kremlin from external pressures such as sanctions and strengthen the ability of the Russian economy to withstand future economic storms. ̵

1; whether it is falling oil prices or a global recession.

"Essentially, Putin has responded to the sanctions: we invest less, we grow less, we use less, but we are building up our reserves so that I can continue my aggressive policies," said Anders Åslund, a high-ranking employee of the Atlantic Council which specializes in Russian economic policy.

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Despite friendly rhetoric between US President Donald Trump and Putin, tensions escalated as a new arms race intensified. Earlier this month, Putin said Russia would manufacture rockets previously banned under a Cold War treaty. At the end of August, the Russian president promised a "symmetrical reaction" after the US had previously carried out banned rocket tests.

However, Russia's military recovery and foreign adventures in Syria, Ukraine and Venezuela are not the only signs that the Kremlin is burying itself in the long run.

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Over time, Russia experienced Putin's lifetime a series of economic crises, starting with the collapse of the Soviet Union in the early 1990s, the financial collapse of 1998, the global recession of 2008, and most recently the 2014 recession.

"When Putin deals with economic challenges, he has mine Christopher Miller, an assistant professor at Tufts University, whose research is focused on the Russian economy, said that it is much less about growth than about survival through crises.

Since 2014, Russia has increased its foreign exchange reserves to a striking $ 500 billion (the fourth highest in the world), eradicated its foreign debt, "set the Russian ruble in motion" (or in other words depreciated) to boost the euro's competitiveness Russian exports, "de-dollarized" stocks to isolate Russia from the US financial system, and balanced spending and revenue of the state.

  Moscow rally in July 2018 against a proposal by the Russian government to raise the retirement age for men and women.

Russia also has a low break-even oil price of $ 40-45 a barrel. This is the price the Russian state needs to balance its budget every year. Oil is by far the country's largest export and the foundation of its war chest.

"People are exaggerating the influence of gas on oil, especially in Washington," said Edward Chow, senior officer at the Center for Strategic and International Studies. "For every dollar that Russia earns with oil and gas, there are 80 cents of oil and only 20 cents of gas."

But the policy of the Kremlin has its price and hits the paperbacks of everyday Russians. GDP has remained weak since 2014, fluctuating between 1 and 2% of annual growth, as real wages in Russia have stagnated over the last five years and consumer debt has nearly doubled over the same period. The Kremlin plans to spend trillion rubles on "national projects" to boost the economy, but it is unlikely that they will significantly boost economic growth.

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"It all sounds wonderful, but it happens very little," said Angela Stent, a professor at Georgetown University and author of "Putin's World: Russia vs. the West and with the rest ".

And if growth rates remain low, a shrinking economy will affect Russia's ability to compete on the global stage with faster-growing economies Miller described his potential implications as follows: "You're getting foreign policy, but you're losing influence later . "

Some experts in the West expect a summer of discontent in Moscow and poor domestic growth as a sign of problems for the Kremlin.The Putin regime may be concerned about its long-term effects, but does not see it as an immediate crisis

"Putin cares about macroeconomic stability because he wants to focus on sovereignty and control the population in other ways," Åslund said. "He does not care about growth rates."

The Russian president is looking for alternatives SWIFT – the global bank payment system of the West – and maintains closer relations with China business club is not very important.

Policymakers and politicians in Europe and the US will continue to debate the best approach to counter a revanchist Russia, but they can not ignore the economic bulwarks that Putin and the Kremlin's political leaders have built.

And if the US itself imposes further sanctions without the consensus of its allies and trading partners, this could damage the transatlantic relationship, which has already begun to falter as Trump's unpredictable presidency turns it on.

"I just do not see where they have achieved many results, and what they have done is – if used extraterritorially – to further alienate some of our allies," Stent said.


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