It is unlikely, however, that Russia will be deflected from its
purpose. The one thing that could conceivably change its mind would be an
economic catastrophe. It doesn’t look like it’s about to happen.
Various pessimistic predictions of an imminent Russian economic
collapse due to Western economic sanctions and the subsequent drop in world oil
prices have failed to come true. Popular discontent has been sporadic, but
mostly manageable.
Personal sanctions affected some people in Putin’s immediate
circle but their impact has been limited. The bulk of Russia’s rich, a class
that is mostly comprised of so-called public servants and law enforcement
officials bloated with pilfered funds, have not really felt too much
discomfort. A decade of shameless stealing has insulated them from the decline
of the domestic economy. Their money and assets are secreted abroad, their kids
are living in Western Europe and North America, and as long as they stay out of
trouble in Russia they are safe.
Moreover, the corrupt bureaucrats and Russia’s numerous siloviki, who constitute Putin’s power
base, are still squarely behind him. They see him as the guarantor of their
continued ability to steal with impunity and to shake down private citizens and
businesses.
The average Russian, meanwhile, hadn’t seen a whole lot of the
petrodollar windfall before 2014 – unless he was cellist Sergey Roldugin, of
course – and now Western sanctions and Putin’s food embargo, resulting in
rising prices and falling quality of food products and consumer goods, have
been deemed an acceptable price to pay for the revived national greatness – at
least as it is shown on national television – and the annexation of Crimea.
In any case, Russia has no civil society. Private citizens are
disorganized, dumbed down by propaganda and lack the political culture of
influencing their rulers. They’re easy to distract and, if need be, intimidate.
The economy has started to stabilize at lower levels. Over the
past two years, businesses and consumers have become adapted to living with
sanctions, a weak ruble and low oil prices. The informal Soviet economy, which
allowed people to survive in what was perhaps the most perverse economic system
in history, endured among the many through the years of oil-based prosperity
for the few. Loose rules, lack of
transparency and the culture of poverty may be
keeping Russia from becoming a rich, modern nation, but they allow its
ordinary people to survive.
Besides, the longer the sanctions last, the weaker they get.
Business is like water; sooner or later it discovers cracks in even the most
impenetrable wall of sanctions through which to seep in.
For example, the world’s major automakers invested heavily into
the Russian motor vehicles industry on expectations that the local market would
grow to be Europe’s biggest, surpassing Germany. Russia’s car sales have
collapsed over the past two years, prompting most factories to lay off about
half of their workers and switch to a four-day week for the rest. But now the
catastrophic pace of sales decline is moderating and the market is stabilizing
at lower levels, so that further contraction may be avoided.
At the same time, lower wages and costs may encourage some
producers to export their Russian production to other markets. True, corruption
and general mismanagement, as well as poor infrastructure, add to costs, but
companies will eventually figure a way to do business anyway.
Meanwhile, against the backdrop of a stabilizing economy, oil
prices are suddenly going up, providing a bit of windfall of sorts, on a far
smaller scale. The ruble is edging higher, too.
Russia has settled into the same pattern as the Soviet Union:
its economy is rotting, but it will go on doing it slowly. Gradually, the
chunks of the market economy built during the 1990s and early 2000s will fall
off. Just as the building of the market economy was accompanied by economic
shocks, causing the pauperization of the population, so the its unwinding will
be painful as well. The banking system will probably collapse, forcing the
government to print rubles and bring back hyperinflation. Hard currency
accounts will be converted into rubles – or, essentially, confiscated. But it
won’t be the end of the world, at least not as far as ordinary Russians are
concerned.
There are other resources for the Putin government to fall back
on. It has hired a U.S. law firm, White & Case, to explore privatizing
Rosneft. The scheme may not work at all
and, given the company’s murky history, incompetent and corrupt management and
U.S. sanctions, the company’s shares will have to be sold at a huge discount if
it does. Russia won’t raise too much cash from such a sale. But Russia is a
rich country and there is plenty that can be pawned to keep going.
There is of course the question why a government would want to
systematically destroy its own economy and undermine its country’s future for
many generations to come – and do so with the enthusiastic support of its own
people.
But this is not what Ukrainians should be asking themselves. They have
their own problems, and may be going down a path that will deprive their own
nation of a meaningful future, destroy their national independence and link
Ukraine to a crumbling 19th century empire instead of joining prosperous,
democratic and peaceful Europe.
Events of the past several months show that the best strategy
Putin could adopt in relation to Ukraine is to sit back and wait. If Ukraine’s
political and business elites have fallen back onto their worst instincts the
moment they felt relatively safe from the Russians and from their own people, a
couple of years of peace and stability could make the country ripe for a better
planned takeover by Moscow.
