Will the Russian economy ever grow again?

[Music] uh good afternoon in the united states and good evening in europe my name is andersha ostland and i'm a senior a fellow at the atlantic council's duration center today i have a great pleasure to introduce a panel to you all for good friends of mine and outstanding specialists on the russian economy and we have four people on this uh panel uh i'll take them in alphabetical order we have dr sergey alexandre who's a former uh deputy minister of finance and the deputy governor of the central bank of russia and has also been in private business and academia for many years we have a doctor sergey gourayev now professor of economics at the insurance pool in in paris but has previously been the chief economist of ebrd the european bank for reconstruction and development and for many years president of the new economic school in moscow which was an outstanding institution and vladimir who's a russian opposition leader and the leading economist in the circle around alexei navalny and also a very good television host on on youtube you should watch him and finally elena rebakova who's the deputy chief economist at the institute of international finance here in washington and previously has worked at various investment banks and what we are going to discuss today is the state of russian economy and we have a similar discussion half a year ago last may and we will look at the various sides of the russian economy i hope that we will have a quick discussion i post the questions to the panelists and for the audience you are most welcome to write your questions into the q and a function on zoom and i will use your questions and read them out uh you can do them with name or anonymous as you as you you like and the idea is that we will have a moderated discussion for 40 45 minutes and then 15 to 20 minutes uh i will take the questions that happen but if i summarize the russian economy in two words that has been pretty much the same for a very long time but for the last decade or so it's macroeconomic stability but no economic growth stagnant and elena you are all the time looking up on the macroeconomic situation could you elaborate a bit more which do you see as the big issue save three big issues for the russian economy in the short term well uh thank you so much anders it's a great pleasure to be in such a distinguished company um the short answer to your question is none right in the short run we have stability compared to any other emerging markets we have no government debt we have no external debt very high reserves you'd think this is fantastic right but the issue is that over the medium term we have all the possible imaginable problems and that is inability to generate higher potential growth and why is that happening because over the previous 20 years we've mostly relied on commodities and that has generated a certain sense of complacency in terms of uh regional development and also the way we're thinking about fiscal federalism and there is an interesting sort of uh connection between different issues you have you would like to diversify the economy from oil you would like to promote competitiveness in the economy you would like to have stronger regions but unfortunately given the current political structure that makes this economic changes almost impossible and i think and i look forward to discussing that more shortly with you yeah i mean what did you really say it is russia is the severe case of energy curse vladimir you are working in moscow and in the regions what do people really feel about the the situation in russia and i'm not thinking on the political side but more what are russian people's greatest concerns today uh thank you anderson it's always great to be in the company of best friends and it's also good to have a cross check every six months as to what happens with the russian economy now on the ground people are getting more and more outraged i'm not exaggerating i think that's the word because uh basically yeah we all we all have been hit with these lockdowns and the impacts of pandemic and spraying but then again everybody including russia expected more or less swift recovery that's actually the rhetoric that you have been hearing from the russian authorities uh that after a deep plunge because of the lockdowns things like more or less will be continuously growing back to normal now this hope is rapidly fading uh i'm sure you saw the october statistical numbers they are worse than september and august so actually we have like a second round of decline uh before in the middle of the year uh russian government central bank has formulated the situation as stabilization at a lower level don't even have that anymore so what october curve uh shows you is that economy started to decline again uh and i think the fourth quarter might be even worse than some of the previous grim expectations i would say the major contributing factor because authorities have decided not to reintroduce lockdowns this time because they understand that it costs them a lot politically people don't like it so they they decided to go through the second wave of pandemic without introducing lockdowns and i think it's not the major factor contributing to renewed decline i think the major factor is that uh there's still there's been very very little uh financial aid from the government to assist uh difficulties with the first wave and right now the authorities say that there will be none anymore there is no aid package being discussed or planned however the financial safety net of the ordinary russians of the small and medium-sized businesses have significantly eroded plus another important factor what has been supporting some sort of growth that we had on the previous years was massive growth in retail credit people actually borrowed money to substitute decline in incomes now that is coming to an end you can see a lot of uh criteria showing that standard and poor's recently published a report saying that the era of healthy growth of consumer credit in russia is over meaning that if if the growth is still to follow it's going to be unhealthy people will borrow but will not be able to repay uh because their incomes are are in a sharp decline so uh i think politically it has great implications uh everybody was like more or less happy in like july august september that this kovy thing seemed to be over and putin was saying that like you know we had victory over or this uh coronavirus and so on uh but right now and together with it we have been largely promised the beginning of like things going back to normal economically more or less maybe not swift but steady recovery now these illusions are crashing and this this is already having a lot of political implications particularly heading into next year do my elections so we we will see more and more uh discontent i think it will inevitably translate into political attitude towards russian authorities uh if these negative trends which we saw in october if they persist yeah vladimir at the same time russia is having less of the economic decline probably it will probably be three or four percent uh this year than any other any other countries really uh so cold it seems to hit more politically and that people have more regrets so i think it's quite important what you say that they have taken so much before so therefore kobe comes as the last straw in russia so that it's taken worse i'm quite amazed uh elena touched upon it how uh very conservative about that policies in russia so russia probably has the smallest budget deficit almost over any country around in the least the decline in gdp but at the same time this reaction that you mentioned let me follow up we have seen now in khabarovsk if i remember rightly you have been to khabarovsk and visited and very big demonstrations every saturday of is still continuing and what other economic mode is there or is it all about the governor who were sacked by putin well first anders about the relatively mild numbers of gdp decline first the fourth quarter is not over yet and the trend that we saw in october is negative so i mean let's let's not let's not just uh finish our analysis right here probably things can get worse second these relatively mild numbers have been achieved at one very important cost and political cost because people were basically forced to spend all they got spend all their financial reserves which they did so now right right now the financial safety pillow of the population of small and medium-sized businesses is dried up that's the cost of a relatively mild like four or five percent decline in gdp now in khabarovsk not really i think in khabarovsk is more political than economic because what happened in khabarovsk in the past couple of years is a complete overthrow of the rule of united russia party so they have been kicked out of the governor's seat two years ago and then completely kicked out of the legislature and essentially people liked what happened afterwards what they're doing right now obviously the demonstrations have shrunk in size because they've been out for like five months that's a lot already but they will re-emerge we can talk about this later uh and and the perceptions uh have only worsened about putin and the government and so on but this was not so much economic as much of a demonstration of approval that people liked the new governorship which had a totally different governing style than united russia like we decide everything behind closed doors and just tell you the result what sergey for gal the arrested governors did he introduced a totally different style of management of governance and people like that the authorities have sort of turned their face more towards the people and uh broke away from from this uh absolutely non-democratic system of making decisions and so on so they came out on the street defending this i think it's far more than the economic factors uh specifically which contributed this year thank you very very interesting uh sergey alexander you recently wrote about the change of the government in russia this is something that has gone completely unnoticed in the uh western media first that russia got a completely new government in uh january that mikhail schuster the dimitri medvedev as a prime minister and now again last month we saw half a dozen changes in that government what is going on here we expect that there is complete stagnation and then we have all these personal changes what is it about uh it's about uh putin's personal fatigue i think he is tired to be 20 years in charge of everything what's going on in russia and sometimes in previous years he mentioned i need a more efficient government i want them to make decisions i want them to find solutions but every time they come to my office and ask me what to do i don't want to have this and it was evident that while the dmitry medvedev was in this position he was afraid to demonstrate any political ambitions in order not to be sacked yet because he dreamed i believe he during his dream enough to know to really become a president of russia as putin lives uh and that's why uh definitely was not interested in his position was not interested in any activity and it is not it's on one hand it is surprised but i believe that it is linked to the changes in constitution that putin wanted to get more political responsibility more political power and at the same time to give all day-to-day issues to someone else he looked at in his if you look on his administration in kremlin you may see that in recent years he has replaced all his old friends with news uh guys they are let's say 35 to 45 efficient managers effectively manager yeah who has no any political ambitions but who wants uh to demonstrate their loyalty to putin he looked around and found only one guy similar guy uh in his government it was mikhail mishustin uh who by some rumors is uh believed to be a an efficient tangent at least in digitalization of communication of taxpayers with the tax authorities and he gave him this power to reshuffle the government and to create a new government nine months have passed the government was in a new position after kovid and i think it was uh initiative who came to putin and said vladimir which look i can't work with this minister with that minister they are too weak and we need to make some changes and to say hey do it it doesn't matter for me if you replace a by b and b by c i don't care uh they in there they have the same guy they're the same puppets in your hands and that's why my i want to reiterate i believe that is pujan's personal fatigue of day-to-day care and to a certain extent he is trust to issue as an efficient manager so but this most recent change you pointed out on ecomaster website that these new people are much older they are already pensioners by russian standards why is such old people when mishusting came in we heard that these were younger technocrats now we are getting older apparatus instead uh i i think the the russian of the government these changes and the government to a certain extent were uh unexpected by missions on the one hand he initiated those changes on the other hand he has no uh along a big team or alone least in his home book he needed to look around and not to find only an efficient manager but to find an efficient manager loyal completion and accepted by putin and if you look for example on position of minister of transportation and uh minister this ministry is in charge of huge huge budget expenditures of the road construction on railway construction and so on and so forth and of course putin cannot deliver this position to unknown guy who will be in charge of spending billions and millions of rumors and that's why in this position we found vitamin c who is a personal friend of putin for more than 25 years so that's that's a combination um the policies are is not possible thank you then i understand that and i noticed that you did not mention the word reforms i'm not even going to ask you about it let me turn to you uh sergey goreng if you have worked a lot on the soft side of the german condition in in russia and both on happiness and the state of health and what are you thinking now with regard to the kobe situation vladimir talked a bit about it and how do you see the russian policy on the corona virus thanks anderson thank you very much for invitations a great great panel great honor to speak here i indeed would pick up or vladimir left at talking about the impact on the russian economy and i fully agree with you anders that relative to where we stood half a year ago russian economy is doing better we are projecting something like minus four percent imf is a bit more pessimistic kudrin is even more pessimistic but uh if you look at ocd ocd is a bit like imf russian government is a bit like a bit more optimistic for 2020 just half a year ago we would project minus six minus seven minus eight percent and uh the decline in gdp in 2020 is uh is not as dramatic while other countries as you rightly said are doing much worse advanced economies on average will lose six percent many european countries will lose ten percent of gdp and uh even us will lose more than four percent and uh in that sense um it looks like a puzzle and i think the key to the puzzle is exactly your question you cannot just analyze gdp you need to think about why and the answer why is russian government uh chose economy over health if you look at the policies the the lockdowns were not really enforced in the spring and also whenever lockdowns were imposed russians neglected lockdowns because a russian government was stinging russian governments economic support measures were much smaller than those in the west and actually even on average less generous than those in emerging economies if you look at the imf fiscal policy monitor uh this is publicly available data comparable across countries russian uh fiscal support is below three percentage points advanced economies rolled out on average 10 percentage points of gdp and so it's much much more generous so we shouldn't be surprised that russians didn't see it at home they did walked around they did go to work and there are data that you can look up at google and apple websites which show you the mobility data how much russians were sitting in one place how much they spend in shops in parks and workplaces and you see russians where much less disciplined than italians are french so we shouldn't be surprised that uh death rates are very high now this is where we have yet another challenge russian government statistics are not to be trusted so you really need to look at excess deaths excess mortality and these numbers are horrible uh there are different ways to look at these numbers there is a former um demographer alexi raksha who uh worked at rostad until he started to talk about those issues so he now is an independent demographer since summer and so his uh analysis is based on the uh comparing what's happening now with the pre-2020 trend immortality which was declined and if you look at his estimates uh up until now we are talking about something like 200 000 extra deaths which is a huge number and by the end of the year his estimate is 300 000. so these are huge numbers even if you look um at the official the official data are much much smaller and the reason for uh russian government to be softer on lockdown measures in the in the spring is of course explainable putin needed a military parade putin needed the vote so he as vladimir correctly said declared that that we won this war against the karana virus and right now we see great increase uh right now we see that both official and unofficial mortality measures are increasing greatly and this is this is a major disaster and this is a choice of russian state preserve the economy preserve the sovereign wealth fund and uh then convince russians that they are not dying because official data are showing that they are not dying and so this is this is pretty scary but this is how i would explain the fact that russian economy is not doing that badly uh and another another issue yeah another issue here is uh of course uh we don't know what's going to happen early next year the vaccination efforts are about to start but the russian vaccine is still not has not still completed the third stage of tests so we don't know how effective it is so this is not over yet but i think one of the biggest challenges is what we can see for the next year is the russian budget russian government uh just uh adopted the next three-year budget and it's very clear in in what's signaling it's uh preserving spending for um law and other so-called law and other agencies it's preserving spending for propaganda for state media it's cutting spending on health care and this is this is a very clear signal what the priorities are and i think this is scary but uh this is one explanation why we don't see a major decline in russian economy can we see a major increase in mortality this is a very interesting and what you're really saying is that russia should have a kingship policy and it has on the country and extremely conservative macro economy this is this is actually a puzzle russia has a sovereign wealth fund yeah it's not spending it and the question i get a lot wherever i speak about those issues why and i don't have an answer except that russian government is waiting for a yet more rainy day a rainier day it's it's it is a rainy day but probably russian government is expecting to see lower oil prices which is probably um realistic and uh maybe russian government is also preparing for the situation lukashenko is in right now where you need to pay your policemen and at that point you do need those whatever 10 or 12 percent of gdp to go through a political problem where you need to have a loyal uh police and you need to have cash to pay the police even if oil prices are low hey do you have any view of this russian vaccine uh sputnik 5 we still don't have data so this vaccine is still undergoing undergoing the tests whenever russian government says well our vaccine is 92 percent uh effective for 95 effective it's based on 20 individuals it's it's really it's really scary to what extent all this is propaganda it may be a great vaccine it's just not really here it's not enough there is not an update yeah thank you er elena let me turn to you and let's turn to more structural issues after having got the big overview questions one of the big issues uh in recent years and particularly this year has been below oil price how serious is that and perhaps if i ask you about the impact of the sanctions also i know that you have written about that recently thank you i think on the oil price it is not as serious as it might seem as we saw this year with oil prices at 20 they probably will run out of buffers maybe in a year because it's never quite linear it always turns exponential so even though in the budget it might look like you can last three years and they did put those numbers out if you run through the adjustment on revenues and also pressure on the expenditure from all lower um lower gdp growth as well then you quickly end up in a scenario where this current buffers will probably last you a year but nonetheless you know we're not quite expecting immediate uh oil prices at 20 to stay for the next couple of years um it is not a shock that i think the authorities are so much worried about or should be worried about given all the preparations they have done for this uh external threats uh what they are worried that i think carrying over from my from sergey and others who just said a second ago is they're worried about more geopolitical external pressure and that's what they're saving money for um that's the only concern and it is ironic that over time they might actually not get it and we'll let's talk about what the u.s administration might or might not do where they might get the shock actually is the internal shock from the regions from people who saw that they're being ignored from the health care spending from the lockdowns you know potential also from the vaccine and that pressure will continue building because we don't have regions that are contributing to the common port of the transfers between the regions from the sort of fiscal uh division of revenues will only have oil and gas regions contributing to that everybody else is taking money from it and over the last five years they've been getting less and less and less money and more and more pressure and the irony as we talked also last time unfortunately is that now we need to have the healthcare spending and um i would always even sort of controversially disagree on the keynesian part i think it's almost um it should definitely people should have been looked after but at this stage it's almost irrelevant because the health care infrastructure doesn't exist so you could have supported people maybe on the margin but the problem is that the regional health care units cannot look after people who are sick with coverage and that's it so the only then decision from the center is i'm gonna save the economy pretend it's not happening and i'm gonna trade off lives for um sort of propping up and keeping growth and i think that's the critical issue on the external threats front we actually might get somewhat less than we expected partially we haven't seen the talks about the u.s elections meddling and also you might have seen over the summer some of the foreign policy experts who are likely to go all sort of into transition team that have been going and also possibly in the administration they began to talk about maybe on certain issues would start to we need to start having negotiations or sort of discussions with russia and one of them is maybe nuclear maybe there could be other green ideas uh so you might actually have a cautious sort of maybe stand still towards russia and also some of the measures that they have discussed before which is either swift or death sovereign debt sanctions um congress and and staffers and treasury has looked through it current sort of bipartisan um sort of staffers and as much as they would like maybe to do more they are concerned about the global financial stability spillovers so that's why it's not obvious what kind of sort of the big bang measures that we have seen in 2014 could happen again and for the repeat of 2014 the current authorities are very well prepared and just before i pass on was since we're talking about growth i've been looking at them i think it's as vestia from november 1990 and has a wonderful chart in terms of approval ratings and i and some of you remember that very well i'm sure sergey alex sessions remembers some of it it's 99 to 89 to 1990. and there's army kgb and coppola s and the one that suffered the most in terms of approval rating into the years is actually capoeira says army and kgb is holding up very well for for that time being and it's uh interesting that 20 years on we're sort of discussing a similar macroeconomic sort of political situation uh unfortunately and then still puzzled why we're not having stronger productivity growth interesting uh mr gorey you have both written extends extensively about oligarchs and i remember uh sergey quite a few years ago you wrote about oligarchs the productivity of oligarchs and but why is the russian economy so dominated by old industries and state-owned enterprises in in the list you find the top gas problem rust nectar is better bank the order changes a bit and then other stage banks and oil companies and big methodological companies possibly gun decks and pops up somewhere at the lower end of the the ten top cam companies are the oligox becoming less productive than when you wrote about them your uh there is there is a this is a great question and indeed when i wrote about this i i thought why uh oligarchs are more productive than other private businesses and of course more productive state-owned enterprises and uh one explanation would be that exactly because they're oligarchs because they have political connections they create different rules of the game for themselves uh and in that sense we shouldn't be surprised another more benevolent explanation benign explanation would be that uh they have concentrated on ownership so they overcome conflict of interest between managers and shareholders better and so on but uh by now as we know a lot more what has happened uh 20 years ago 25 30 years ago we see that many of the regards unfortunately became rich not because of the management expertise but because of political connections now what has happened in the last 10 years of course was crowding out of all regards by the state on enterprises or by new oligarchs and uh we shouldn't be surprised here as well one of the things you mentioned was state banks i think this is very interesting so what happened with the state banks and private banks private banks could choose whether to compete with the state banks or not if you compete with the state banks you also have to be taking a lot of risks like the state banks and then when it's time to pay it turns out that the state will bail out the state banks but will take over the private banks and kick out the managers and wipe out the shareholders which is how it should be i guess but this uneven playing field between private banks and state banks has completely destroyed the business model of private banks so a large private bank can choose to be conservative and we know there are private banks like this alpha bank is probably the only one the only one in top 10 uh the only private bank which remained on board but most state bankers benefit from this business model you take excessive risks when you lose money the government bails you out and doesn't kick out the management and uh with that private banks cannot compete in the central bank of the last uh seven years clear cleanse the system of banter state bankrupt private banks which only left state banks in power and this this is the essential uh anti-competitive policy that russian government has carried out in recent years you support state companies no matter what you support gas problem even if gas from management has not done a good job you support rosneft management even though rosneft management has not done a good job you put competitors of your friend in jail or kick them out and so you shouldn't be surprised that we have domination of companies with better political connections the only difference between now and early 2000s is the oligarchs of late 90s and early 2000s were not putin's friends and whoever is more productive or just bigger today are closer to the current leadership that's the only thing very interesting you can say that were oligarchs in the 1990s they were self-made businessmen the uh putin's oligarchs are putin made businessmen and yeah one one um 1990s oligarchs told me about one putin oligarchs we should give them their due they've never made any money without government's support yeah uh vladimir you recently wrote when the oligarchs are new entrepreneurs which follows very much on the the same uh line can you explain what what you meant and i always use your analysis of uh against prone about the kleptocracy in russia is this really just a matter of kleptocracy or do you see any entrepreneurship left in the big country yeah first others i think there's a very simple explanation why the russian economy evolved over the past 20 years from a relatively more competitive and having more different actors competing with each other to a more condensed system of monopolies cartels just a handful of people controlling major strategic sectors that is definitely it's connected with two issues first with cryptocurrency obviously because it's easier to control the cash flows for the personal benefit so essentially the government and the putin obviously himself they were looking at various industries how can they establish control over their cash flows for their benefit it ended up with either their structures uh swallowing the players in the sectors or they got an agreement with somebody else who was who were private oligarchs before about money sharing if you will second factor obviously it's politics because it's much easier to control the political system if you control a handful of uh strategic players who dominate uh the major economic sectors right so that's i think the explanation is it's a symbiosis of both uh personal enrichment plus political reasons it fits perfectly into that but also i think it's important when we talk about oligarchs in the economic sense i think it's important to have a breakdown because they are of different type sergey started this i wanted to pick up a bit i would say there are several types first like totally new oligarchs which did not exist in the 90s the oligarchs which dwell on state procurement who supply services like they build pipelines for guest prom and enrich themselves through that become a profit and totally new profit center uh like we've been asked like politicians what you're gonna do with uh rotten beer and teams when you get to power we say there will be no return back in teams they will be they will disappear overnight because uh whatever we're gonna build or invest in is gonna be procured through an open tender so other people would come in who would simply win because they would be more efficient and this is how it works now the second part uh are the oligarchs which are uh affiliated and take major posts and state companies uh essentially are these are different companies from oil and gas station and miller to chambers of manufacturing and defense but bottom line it all came down to receiving major benefits from the state direct benefits or major tax benefits or whatever and this is what they dwell on now third group is state banks which sergey talked about there's a huge imbalance developing in the russian economy right now because economy is declined or stagnation for many years at the same time you see record profits of banks the largest part of which a profit is made by just a handful of biggest state banks now they use that they take these profits and use them for redistribution of control they buy tech companies they buy retail players like vtb both magnets and so on so that is i i think it's quite clear that the lack of competition in the russian banking sector and excessive profits of state banks are the major instrument over distribution of control of the economy now uh the rest there are some leftovers private oligarchs who are private owners and were left from the 90s but they found their way to make an agreement with putin they also traded major benefits uh in a return to their political loyalty like just yesterday you can go to my twitter account i posted a table that alex de pasquez rousseau the aluminium producer is virtually paying zero taxes zero taxes basically if you go even the government has been like blows off has been raising the issue or that the steel makers are paying virtually very little taxes and so on so we need to increase that so that's another part where they still uh they're more efficient in managing their assets uh as private businesses but they're still some sort of uh disproportion because through that political agreement with putin they contribute less to uh financing social uh infrastructure and so on so this i think overall this also reduces and distorts the efficiency of the economy yeah thank you thank you very much i'll look here at the questions that are coming in and there are a lot of them and i want to mention specifically a goal for alex opalus rights i want to thank sergey and vladimir for a great youtube shows that i watch uh regularly just passing on the the compliment from your our audience and i also see here a question from roman boy about what new sanctions that are to be expected from the new government helene has already answered that question but i would like to turn back to sergey alexander since you did a very good report for us at the atlantic council a couple of years ago about the impact of the sanctions and if you could mention how strong you consider that the impact of the sanctions is and what you expect from the biden administration the unknown i think anders it's a good question because in recent two weeks there are a lot of talks about potential sanctions uh though i do not believe they will materialize uh i think that uh u.s desire to harm russian economy to make some decisions that will make the life worse or hard for putin evaporated some way in mid 2016. after what the real sanctions sanctions that are written on the paper they do not work at all yes of course there is a dozen maybe of banks and companies or big banks in banks and companies that are under sanctions that cannot raise finances uh from um the western capital markets but due to the fact that all other russian banks and companies can borrow abroad and even place their shares okay the redistribution of foreign exchange in the domestic market allows uh all those russians vtp and so on to get enough of foreign exchange and to pay their debt or to invest in their projects uh i i am very skeptical about uh any personal sanctions that were imposed on roughly 300 russian uh officials militaries intelligence and so on because uh all of them maybe except of uh rotenberg had no assets that were frozen abroad and definitely it's not their desire to travel outside of russia in this time the only real uh sanctions personal sanctions that were efficient that were sanctions against alegripasca imposed uh two years ago and when he virtually lost not only control over rosal but he lost all beneficiary rights so he cannot receive any profits any dividends from this company and he cannot nominate his managers so he may rely that sometimes in the future maybe 10 years later 20 years later he will restore his property his ownership but it's under the question so i would say that at the moment despite all what we can say about russell and its sophisticated tax evasion policy in fact that is the company that is run and managed by independent managers who are not dependent who owners but all the rest all the rest i i think that the trump's administration demonstrated very well that russia is is a competitive partner in the military sector in the military arena and the united states means the u.s administration has a lot of issues to negotiate with russia starting from the nuclear weapons rather than iran then north korea then the middle east and so on and so forth and uh in the situation when russia does when putin does not implement any radical decisions any radical steps any radical violation i say a new aggression invasion of ukraine or invasion of belarus or annexation of some part of those countries now what's what's the reason what's the reason to punish putin to impose on him any sanctions because that will definitely that will not allow to make any deal um donald trump was a deal maker and he's a deal maker and definitely he dreamt all his four years in the office to sign any big deal would it be north korea would it be iran would it be a putin but he failed and definitely been a very experienced negotiator their experience experienced real estate manager he understands very well you have no permanent friends and permanent enemies you have situations and of course if you want to reach a deal with one of the power of the enemies you you should not harm him and in this situation i believe that biden's administration incumbent's administration will be more or less in the same position on the one hand uh definitely it will be necessary to agree upon nuclear weapons on the other hand uh from what i see and from what i can understand uh today for today's administration for this administration for the next administration for the whole washington uh political establishment china is more existential threat because china demonstrates and ready to compete in the economic field yes china declared that they want to reach military parity uh somewhere by 2027 but what is most important for the united states is air competition and economic sphere and the desire of china to become a dominant technological economic play in the world and that is undermining the united states superiority in the united states dominance in the global economy and that is unacceptable for washington and of course no one administration no one great power may fight against two enemies at the same time to fight against russia and to fight against china you you as a president of the united states have uh have to decide who is who is your number one opponent and of course it will be china and of course let me interrupt you here i think that uh by biden knows europe and the former soviet union extremely well remember that he became vice president because of a war in georgia 11 days after the war in georgia in 2008 obama chose him because he needed a tough person on the former soviet union so he is very committed he spent he went to ukraine six times as a vice president it's very committed to the defense of ukraine and also to its reforms i think that we will see quite a restructuring of the sanctions on russia so that they make sense it has not simply been a fight between uh the congress and and the trump and therefore the the russia sanctions as they have developed since 2018 you took up the russell example had been a mess russell was too big to to to sanction and now i think that we will see clear if you russia stop with this behavior we will do away with certain sanctions so i think it will be much clearer to the kremlin what the situation is and tony blanken knows uh the former soviet union very well and so does jake sullivan these are heavy weights so i think that we will see something quite different and also that the uh sanction policy will move back to the state department now it has been entirely a matter of almost entirely measurable the treasury steve mnuchin has been in charge of the sanction we should we shall see i i agree with uh your thoughts and your view that biden himself and his former foreign policy team knows eastern europe knows russia knows the cis space very well that's true but uh after by joe biden was nominated in charge of this region by president obama in 2009 uh 11 years have passed and the situation has changed and the role of china has changed and the behavior of china has changed and my argument is i i do not i i completely agree that u.s foreign policy will be more consistent will be more not rules by principle based against russia but my position is that if putin will not invade of ukraine or invade of belarus once again there is no reason to impose tough sanctions on him of course if he will use novichok once or twice or three times more there may be some other personal sanctions but they will not harm putin's economy and i do not believe that any person's sanctions may shake putin's political regime i believe that in the 21st century there was only one successful example of sanctions that were sanctions against iran let's leave that beside our topic we have lots of questions so i will ask pretty much whoever wants to answer the show your hand and i can pass them on to you and if we can try to take one minute uh for each answer stephen fisher who was head of uh city bank in the former soviet union makes the point that the russian stock market in u.s dollars is down 25 percent this year while the chinese stock market is up 25 percent who wants to comment on this elena hi steve i think steve still remembers the time when we talked about high potential growth in russia and we really cared about the stock market i think now given the external uh sort of the focus on lack of external vulnerability it's all about fixed income flows continues to fixed income but i think until we get more to the stock market it's um it's just sort of validates this conversation so i'll leave that minute here and take the point also that the sanctions are good for the uh for their bond yields so uh uh investment bankers are not necessarily against them another question here is paul uh van der and a former eu ambassador is what will happen to russia's energy exports now uh with the green um policy in in europe sergey you uh goody if you're sleeping in france or what do you think well i think i think the question is um rather for vladimir milov but uh what i can say uh uh it's uh it's not just uh what's going to happen by 2050 or 2030 it's much it's arriving much sooner uh the new eu budget will include uh carbon tax and there will be definitely carbon tax border adjustment because european producers will say we will not want to compete with agree with the dirty producers and so there will be some kind of carbon tax adjustment and so uh russia will have to respond somehow right now we just hear that russia's unhappy so um we mentioned mr medvedev dmitry mendez a few times today he wrote an article saying this is unfair protectionism but it's good that the russian government at least pays attention and yes it will be it will be very difficult for russia to export to to europe and europe has been the most important um export market now russia may export somewhere else but the green taxation is uh becoming global and now with uh us rejoining paris agreement i think russian russia will have to do something else but what is what what will happen russian ruble will depreciate in real terms and uh russian russian commodities will still uh remain more or less competitive yep thank you yeah i think what the same question from matt whoever that is i have a question for you vladimir uh from alex the bachmann what do you propose to do to the members of uh putin's mob well it's a long question because uh obviously uh we also do not want to turn russia's future into this you know spiral of political revenge uh we would somehow have to move on but obviously uh they they have stolen a lot and we have discussed this under zero the great book on this uh how much uh stolen and dirty money is being kept in the west with the west not really tackling the issue one thing uh we would obviously pursue is that i think i'm uh even supportive of the idea of granting some sort of amnesty like you know in south africa after apartheid they have a truth and reconciliation commission like if you testify and tell everything you might be cleared out of the stuff that you did i think it's very important financially because we need to return a lot of corrupt capitals that were taken out and uh this had contributed to russia's decline in stagnation as well this is a substantial part of capital flight which goes uninterrupted for more than 12 years now and we haven't seen uh income net income of capital since the first half of 2008 so we need to get it back we're going to take a lot of legal means to pursue this corrupt capitals which are harbored out there across the world we need this money back to work for our pension fund to award for financing the social infrastructure so i think that's the most important question uh save the revenge part yeah this is a big issue to come and if a corporate transparency actually goes through here in the united states the situation will change very much i have a question here from ambassador william courtney who's been ambassador for various country the former soviet union to what extent does the kremlin think the better relation with the west that might improve the the economy who's partaking on that question who sergey alexandrine i think that after 20 years in power and uh 15 years or the third cold war with the west putin does not believe in the heck in good relations with the west and he has no any trust to western policy by politicians i believe that uh putin uh believes that self not isolation but um a substitution of imprint and self reliance is the best policy for russia and that repeating the phrase that russia has no permanent friends except of army and fleet and navy and that's why theoretically it's good to have access to western technology but putin believes that the west will not give it this in at any price even if putin will sign any agreement on nuclear weapons even if putin give up ukraine so my short answer putin does not trust west at all very interesting very clear answer vladimir you wanted to add something yeah as i agree with sergey that putin i think has like completely given up on any attempts to build bridges with the west he considers the west fundamentally hostile but i disagree that sanctions are not having any impact because i advise you to read the interview of finance minister silwanov which he gave in may during this speak of the pandemic and this goes back to the question why did they prefer to keep the national wealth fund and not spend it because they said we cannot borrow we borrow at six percent for all the combination of reasons but sanctions are important part of it so russia is only slightly added to his debt but you see how the cost skyrocketed for the federal budget so we can we cannot borrow as much as the western governments can at near zero rates that's the major issue and this no matter what putin thinks this is a pressing issue for russia to rethink its foreign policy because there is no alternative we can't we can't go to to dead markets and sanctions play a great part in that interesting i have another slightly related question here from paul carter former the u.s council general in the catherineburg who wonders how much of a drain on the economy have the kremlin's foreign adventures being in such places the syria libya and the central african republic etc and thus the economic pressures that we're talking about create a window for a deal on russian withdrawal from donbass sergey alexandrine has already said that no to that question so then i pass it on to somebody else elena i just want to comment in terms of the hidden expenditure in the budget um that number is now in well into double digits and this number started growing over the last five years and there are nice research studies done that trying to identify it and you started first picking it up i think literally in tucson post 2014 and while it's natural for countries to have some small portions maybe of hidden expenditure but such a large part of spending being fully hidden from transparency and then also earlier deals where the banks give some payments to the military block and then the repayments um sort of the obscure schemes i think it's just an indication of how much is possibly going to this various adventures directly um then indirectly as vladimir also pointed out in terms of cost of borrowing russia compares extremely well to other emerging markets but imagine what russia would look like if it also didn't have sanctions hanging over it um it would be a completely different country but on the u.s side of ferris is um and many of you remember what happened was the wto and jacksonvanic amendment uh which pretty much almost never was taken off although it lost its relevance completely so i think russia also lost an opportunity with codification of sanctions and the bar is just so much higher now to be able to come back to the negotiating table to remove sanctions i would put it even less than 10 probability in the coming years thank you very much and thank you to all of you we have uh reached the witching hour it's exactly one one o'clock and thank you very much for all your very substantial answers this was exactly what i what i think we needed and i hope that our audience thinks the same let's do this again in a half a year's time muslim thank you have a nice day thank you very much thank you so much [Music] [Music] you

Channel: AtlanticCouncil

Views: 11,098

Keywords: Bankova, Ukraine, economic shock, IMF, Ukraine economy, COVID-19, coronavirus, pandemic, Ukrainian reform

Id: v8EoeCjmRbk

Length: 60min 11sec (3611 seconds)

Published: Wed Dec 02 2020