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Putin's gamble
Published in The Saudi Gazette on 29 - 10 - 2014

The US-led economic sanctions that were originally imposed on Russia stem from Moscow's seizure of the Crimea and its violation of Ukrainian sovereignty. Further attempts to censure Russia have been triggered by Russia's clear interference and indeed fostering of the current separatist fighting in the east of Ukraine.
The echoes of Cold War proscription on trade with the Soviet Union are clear. Communist leaders were by and large forced to go it alone, economically. President Vladimir Putin has just told a gathering of foreign correspondents that he is perfectly content to return to the old Soviet-era self-sufficiency. Indeed, his officials were busy briefing that Russia positively relished the opportunity to replace foreign consumables that have become shopping staples of the middle classes.
It is a given, even among diehard Communists that the Soviet state, dominated as it was by the so-called “Military Industrial Complex” demonstrated ever-greater economic illiteracy. Indeed, it was the parlous failure of the centrally-planned economy that triggered the Communist political collapse.
Russia today, so the Kremlin argues, is very different. It is a free-market economy with a strong financial system, substantial foreign currency reserves, a steady income from oil and gas sales and plenty of entrepreneurs ready to expand their production to make up for the loss of French yoghurts and cheeses, German wurst and Italian designer clothes. Indeed, argue Putin's people, the economic sanctions which have cut off corporate Russia's access to further foreign currency loans mean that the country simply must boost its import substitution, because there will not be the free flow of dollars and euros with which to pay for imports.
Yet the reality is rather different. Putin is in many ways recreating Soviet-era structures as part of a drive to return absolute power to the Kremlin. Those super-rich oligarchs who have survived imprisonment for challenging the president are no longer powers in the land. Their businesses are being renationalized, particularly in the oil and gas sector.
Russian manufacturers may just step up to the plate and produce the desirable goods that can no longer be imported. However, it seems more likely that a much greater and indeed simpler investment will be made in black market imports. One more layer of economic incoherence, if not criminality, will have been added to an already distorted market.
Western analysts who enthusiastically predict a Russian collapse are influenced by what they hope will happen. Russia will survive, one way or another. Dissent is no longer a threat to Putin. The media has been largely muzzled. Prominent protest leaders are now closely marked by the FSB successor to the KGB in which Putin learnt much his politics.
And of course, Putin has the national pride card to play. It seems clear that many ordinary Russians still admire their tough autocratic leader. They are enjoying the newly assertive Russian foreign policy and they are proud to have “got back” the Crimea. Putin has said that the Crimean annexation is irreversible. He may seek to end international sanctions by enforcing a peace in the eastern Ukraine and quelling Russian separatists. His calculation would be that if he won this deal, it would be a de facto recognition of Moscow's claim to the Crimea. His problem is that the failing President Obama as he approaches his last two anticlimactic years in office, does not wish to appear any weaker.


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