Western sanctions against Russia could change the nature of Russian economy and foreign trade, the Director of the Carnegie Moscow Center told New Europe.
“I think they [sanctions] do work and they’re increasingly serious and they’re hurting the Russian economy more and more,” Dmitry Trenin said on September 15 in an interview on the sidelines of the Athens Forum 2014.
“However, having said that, I don’t think that they will be effective in changing Mr Putin’s policy on Ukraine. I don’t think he will back out; I don’t think he will yield to pressure. Indeed, if there is more pressure he is less likely to yield, in my view,” he added.
The Carnegie Moscow Center Director said sanctions also push Russia to look for other potential markets to import technology and investment from, starting with China.
Russia is also looking at other currencies where they could keep their money, i.e. the Hong Kong dollar, the Chinese yuan. Russia is also thinking about having its own payment system in addition to Visa and MasterCard, allowing the Chinese, the UnionPay system, to come to Russia, Trenin said.
But more importantly they’re thinking in terms of import substitution, they’re thinking about giving more assistance to the agricultural economy so that it covers a larger proportion of Russia’s needs in terms of foodstuffs,” he said.
“Sanctions potentially could change the nature of Russian economy and certainly they’re already changing the patterns of Russian foreign trade. Also, because the ruble has gone down, having pinged on the purchasing power of Russian people when buying foreign goods or when travelling abroad, people are not very thankful to the sanctions for that,” Trenin said.
Regarding EU-Russia interdependency, Trenin reminded that Europe is trying to lessen its dependence on Russian oil and gas and at the same time, Russia is trying to diversify its markets towards Asia.
“Europe trade will remain very important and collectively Europe will still count for more trade than any other part of the world. But, at the same time, I think the current situation is likely to lead to a more distant relationship between Russia and Europe. I do not see a quick return to pre-2014 in terms of the intensity of economic contacts between Russia and Europe,” Trenin said.
Apart from that, sanctions are also “changing the general view of the West as essentially unfriendly, uncaring, selfish, given to pressuring Russia. So the age-old phobias about individual countries are being revived,” he told New Europe.
Asked if Russia’s ties are severed with the West, Trenin noted that by and large Russia is not part of the decision making process at that level.
“It has been expelled from the G8 and there is no chance that it will be readmitted. I don’t think Russia would want to become a member now. The NATO-Russia Council essentially is frozen. Russia’s bid to become an OSCE member state has been put on hold indefinitely. So I think that Russia meets the West for collective decision making in just one body essentially – that is the UN Security Council and there Russia and China often take a joint stand vis-à-vis the United States and its allies,” he said.
“The OSCE is not a decision-making body - more of a forum for discussions on security. Russia is taking part in those discussions but it’s not decision making; similarly the Parliamentary Assembly of the Council of Europe. So I would say that Russia is no longer part of the collective decision-making mechanism if such ever existed with the West,” Trenin said.
Turning to the Russian President’s increasing popularity since the Ukrainian crisis commenced, Trenin said, “The economy is Putin’s bigger challenge clearly because people are looking at their pocketbooks. They’re looking at their purchasing power. People will be lenient with him on the issue of sanctions. They will say that part of the worsening of the economic situation is due to the sanctions and the government is saying that as well. But the government is also saying that the worsening of the economic situation preceded the sanctions”.
“Basically, I think that unless Putin finds a way to deliver, he will be in a tight spot and also anyone who takes on the United States of America has to be damned good,” Trenin concluded.
(by Kostis Geropoulos, neurope.eu, 17 Sept., 2014)