Russia’s economy will be hit hard by Western sanctions, but President Vladimir Putin faces no immediate political risk and his government is likely to weather the economic fallout, a prominent Russian economist and banker has said.
In a interview With RFE/RL’s Russian Service, Andrei Movchan said the war in Ukraine – now in its fourth month – was a powerful drain on the Russian government’s coffers, as were the punitive sanctions imposed by the West in answer.
But he said high global oil prices would strengthen government finances and that while the wider Russian economy – and average Russians in particular – would suffer, it was unlikely to pose a threat to the country. Putin’s regime.
“Predictions about the impending death of the regime were made largely by the same people who made them for the past 20 years, and those predictions have not changed in any way,” Movchan said in the interview. June 7, speaking from London. . “Petrocratic regimes are generally stable. Sanctions pressure rarely changes regimes.
“Sanctions pressure consolidates regimes, makes them more stable, autonomous and reactionary,” he said. “War has indeed become today the means of maintaining the prices of hydrocarbons. The budget, of course, will suffer, and the Russian economy will experience even more serious problems in the coming years, comparable to those of the 1990s.”
An economist by training, Movchan served as a senior executive at two of Russia’s leading independent investment banks in the 1990s and 2000s before launching his own asset management firm.
The Russian economy is provide decline drastically this year, as Western sanctions cripple the country’s GDP. The World Bank forecasts that production will fall by 11.2% this year, while the Central Bank of Russia forecasts a decline of 7.5%.
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The Bank of Finland predicts a 10% drop in GDP, while the Washington-based Institute of International Finance has a much grimmer forecast, forecasting a 15% drop.
Such a drop would be the steepest since the early 1990s, when Russia was struggling to make the difficult transition from a state-controlled economy to a free market.
Russia remains heavily dependent on the export of oil and gas, the revenues from which have bolstered its finances and thwarted Western efforts to restrain Moscow economically.
The head of foreign affairs of the European Union has valued that oil exports alone bring in $1 billion a day to Russia.
Movchan said whatever economic pain Russia is feeling will likely be felt the hardest by average citizens.
“Of course, the losers of this war, despite these [high oil] prices, are the ordinary people of Russia who had little access to exporting hydrocarbons before – and now it will be much less.
“For the elites, the foreign exchange current account balance is really important, and it will be kept fairly stable,” he said of an important indicator of economic health. This will “enable the elites to govern, meet their needs and control the ruling bloc” – a reference to the security, law enforcement and military agencies that wield outsized influence over government policy.
“Stability of the type seen in Iran, Venezuela, North Korea: that’s what Russia is getting into,” he said.
Asked about the likelihood of substantial political change as a result of the sanctions, Movchan predicted there would be little.
“Sanctions certainly have an economic effect, but they don’t really lead to a serious change in foreign and domestic policy and a shift in power,” he said.
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