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Russian economics

Russian economics: We invent the rules.

Pouting Putin
Photo by Mark Wilson/Getty Images

The EU and U.S. have increased sanctions on Russia, but Vladimir Putin and his government aren’t worried about it. Economic planners will make adjustments to offset their losses in other sectors. Well, surely they must. However, Russia is going feel the effect which will push their economy to a level that is recessed and below growing. In the sustainable economics model, an economy that generates sufficient benefit to ensure a good life for all citizens is sufficient.

Russia may be lacking some essential materials and items, however, it has sufficient fuel, for instance. A nation that is not dependent on others for power has a considerable advantage. However, other factors come into play such as land and climate. Is there sufficient arable land to produce food for the population?

Is economic performance sufficient to pay for all of the people who are working for government, such as the military?

Are military parts supplies sufficient to maintain weapon systems without foreign trade and access to suppliers?

To what extent will Russia’s economic degradation affect government performance over time?

At what point will Russian citizens reach ultimate disappointment?

Economic isolation will exact a toll, eventually. It is a matter of rate and time.

Russia shrugs.

One assessment from Hamish McRae from the Independent says that the sanctions will inhibit Russia from advancing its economy. It will put them into a freeze. Standing still will eventually result in being left behind.

“This is not a new Cold War. These new upgraded, “phase three” economic sanctions will not suddenly bring Russia to its knees.

But what they will do, coupled with Russia’s response to them, is make it impossible for Russia to escape the middle income trap – stop it from turning itself into a fully developed economy, with all the wealth and other benefits that western Europe enjoys, and its former satellites in eastern Europe are now acquiring.”

http://www.independent.co.uk/voices/comment/our-sanctions-will-not-cripple-russia-it-is-doing-a-lot-of-the-dirty-work-itself-9636110.html

The fact that they don’t hurt that much, and that everyone knows irritates the Russian bear. The Russian’s can pull the plug on the power and threaten not to feed its dependent neighbors. Reciprocal stings will hurt everyone. Will that be sufficient to motivate the Europeans to look for other solutions? The process for Europeans to make changes in the supply chain will take time. The sooner they start, the more likely sanctions will work. Otherwise, the Russians will just wait them out.

“In the world of sanctions, which is a complicated world ... this represents a high degree of coordination and one in which we think helps advance our common policy of sending a message to Russia about its behavior in Ukraine,” the senior State Department administration official said.”

http://www.militarytimes.com/article/20140729/NEWS08/307290083/U-S-EU-pledge-new-sanctions-against-Russia

“Russia takes defiant stance in face of tough EU and US sanctions

Russian officials say focus will shift to domestic market production, but analysts say defence and oil industries will suffer”

http://www.theguardian.com/world/2014/jul/30/russia-defiant-stance-eu-us-sanctions