Gas Tank Running Low in Russian Crusade for Ukraine
Recently, much international attention has been focused on Putin's involvement in the Ukraine. And the question on everyone's mind is what the international community is going to do. What is the appropriate reaction? What policies should be implemented? But all of this fretting may be unnecessary.
Over the past few years, all of Europe has been suffering from slow economic growth rates. Russia's sickly economy grew by a meager 1.3% in 2013. So how sustainable is this Russian crusade?
The Russian population has begun to retract their money from the economy due to a decreasing approval rate for Putin's actions in the Ukraine. This caused a sharp increase in interest rates, which would reportedly be enough to severely impact their economy. This caused their economy to decrease by 12% already. The idea of sanctions could be even more troublesome. The tension between the West and Russia has already decreased foreign investment, a huge component of the Russian financial markets. Sanctions would only compound upon these results. So if Putin continues, he could further deter foreign investment, perpetuate if not exacerbate their economic stagnation and ultimately perhaps lead to recession that would further destabilize Russia.
Read more about their impending crisis here: http://www.reuters.com/article/2014/03/03/us-urkaine-crisis-russia-economy-analysi-idUSBREA221D020140303
2 comments:
Although Russia's economy has slowed down recently, in the first ten years of the 21st century they saw around 6% growth a year. In addition, Russia controls 13% of global oil reserves, as well as 34% of global gas reserves. So it is possible that Putin is taking these short term hits for what he believes will be a better long term solution. Crimea controls several natural gas fields and two oil fields, some onshore and others offshore. The potential gain for the Russian economy in taking Crimea could play a role in the near future. Also, the increasing political influence Russia would be able to exert on Ukraine as a result of taking some of its territory should not be underestimated. In sum, although the Russian economy may be under-performing in the wake of political difficulties, its recovery down the road should be expected.
Interesting data. Sanctions will destabilize Russian economy even further but will not likely to stop Putin unless he literally gets overthrown, which seems very unrealistic in the state where people can go to jail from 7 to 15 years for speaking up against the government. What the sanctions will do is even further hurt common people (lower and middle class) in Russia. Crimea is useless for Putin without the rest of critical Ukrainian territory on the East and South. Crimea have no energy or water supply without mainland Ukraine. Those if it goes to Russia it will become Russian problem to deal with. Crimean people are against Russian integration, despite of what "referendum" says, those Russia will have another Chechnya on its hands. This politics is not sustainable and sets a precedence that will come back to bite Russia one day when China decides to rake over large chunks of Russia.
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