Yet Another American Attack to Cripple the Russian Economy

The poisonous fall-out from Russian meddling in the U.S. presidential elections of 2016 continues. It also underlines the fact that the United States no longer has a unitary foreign policy but several: that of the deep state, that of President Trump and that of the Congress. An innovation in the conduct of international relations that will in the end damage us all.

Having blatantly ignored President Obama’s incompetence in foreign policy –  telling President Putin at the end of his first term that he, Obama, could now go easy on Russia and then, when Putin took him at his word, doing absolutely nothing while the “little green men” seized Crimea from Ukraine – the Democrats have been on the war path against the Kremlin ever since Donald Trump arrived in the White House in 2017.

One cannot help feeling that their beef is, as ever, with Trump, who won against the odds, rather than the Russians, whom they accuse of helping him. Basically, anyone who gets in their way will receive brickbats. The Democrats’ latest move is an amendment to the defense authorization bill for 2020. It forbids American citizens from purchasing Russian state debt. Effectively this measure will cut Russia out of the dollar credit market, leaving Moscow to find more expensive debt relief from states such as China that will obviously squeeze every last penny from Russian pockets. It brings back memories of Russian exclusion from the international debt market in the first decade or so of Soviet power. The Russian man in the street has every right to ask: have we come so far over the past century, now as ever armed to the teeth, to find ourselves out in the street begging for financial relief?

The Russian Government has in the recent past been stringent in keeping its external financial obligations within tight constraints. But the latest American sanctions will place them in a straightjacket, and at a time when Putin and Medvedev have in mind grandiose plans for investment, especially in high technology and trade; not least the Russian section of the Chinese highway planned as a new “silk route” through Siberia – another crazy socialist experiment in gigantomania – which would supposedly be funded privately but would have to be backed by state guarantees at both ends. As if China needs more debt than it already has.

Moreover the latest survey of Russian businessmen shows the degree to which the top heavy structure of power within Russia has become an intolerable burden on incentives for taking risks with new investment. In the survey 71% of entrepreneurs considered conditions in Russia unfavourable. And, as we noted previously in our blog of 20 May – “Russia Faces a Slump” – the timing could not be worse from the Kremlin’s point of view.

(O. Samofalova, “Amerika gotovit rublyu ser’eznoe ispytanii”, Vzglyad ru, 12 July 2019; A. Kornya and A. Kholyavko, “Kazhdyi votoroi rossiiskii predprinimatel’ gotovitsya k khudshomu”, Vedomosti, 12 July 2019.)