London: Since the Russian invasion of Crimea last February, many different phrases have been used to describe the tactics of the Russian President, Vladimir Putin. Some have spoken of a “new Cold War”. Others have described him as “anti Western” or “anti American”.
But there is another adjective one could also use to describe his behaviour: “experimental”. For apart from everything else he has said and done, Putin has, in effect, launched a vast experiment into whether it is possible to extract a large and relatively well-integrated country from the global mainstream.
In truth, the experiment began long before Crimea. For several years now, Russia, a member of the WTO, has defied the spirit of that institution by using selective trade boycotts Lithuanian cheese, Polish meat to make political points.
In 2008, the Russian Army also invaded and occupied parts of Georgia, which at least poked a hole in the ideal of “Europe whole and free”.
But the annexation of Crimea truly broke new ground: by not only moving troops across borders but actually altering borders in Europe by force, he challenged both the written and unwritten rules which have governed the continent since 1945.
The US, Europe, Australia and Japan responded with sanctions which were deliberately designed to target a small number of wealthy Russians. But Putin broke new ground again.
Instead of responding in kind, he banned food imports from the West. Because Russia normally imports at least a quarter and possibly as much as half of its food, he ensured that food prices would rise, not just for a small number of people but for the entire nation.
It was a calculated risk: the Russian President apparently reckoned that the Russian people would agree to pay higher prices for food in exchange for glory.
Was he right? We are about to find out. This week the rouble, which has lost a third of its value in three months, slid by nine per cent in a single day.
A recession is now predicted. Inflation is predicted too, as high as eight or nine per cent. A controversial but long-planned pipeline construction has been cancelled.
Major Russian banks are asking for government loans. Russian companies which earn in roubles and borrow in dollars are suddenly in trouble.
Capital has been swiftly flowing out of the country, and some banks are rumoured to be limiting withdrawals. There are so many rumours about capital controls that the Prime Minister, Dmitri Medvedev, has explicitly denied them.
Not all of Russia’s economic disruption is caused by sanctions, of course. Since last spring, oil prices have also dropped by nearly 40 per cent.
This might not matter as much to other oil producers, but for more than a decade Putin has coasted on the illusion that historically high oil and gas revenues could both support the national budget and disguise Russia’s failure to create a more productive economy.
High energy prices even paid for the excesses of autocracy and an expansionist foreign policy. Sanctions have exacerbated the difficulties created by the collapse in oil prices, and in this narrow economic sense, Putin’s experiment has failed.
Oil prices may rise again, Russia has large reserves and its economy may well recover but in the meantime ordinary Russians will pay a huge price.
If nothing else, we have learned that it is very expensive to break international economic rules and to live without allies.
Even the Chinese have used the crisis to take advantage of Russian weakness, negotiating for themselves an advantageous gas deal.
The broader political test of the experiment is still to come. For Putin is historically correct in thinking his break with the mainstream might be possible.
Once upon a time, the citizens of the Soviet Union really were willing to put up with terrible hardship in the name of defending their country.
At the beginning of this crisis, some Russians sounded as if this were 1941, when Hitler invaded the USSR.
The Ukrainians were said to be Nazis; Nato was said to be encircling. The head of a state polling agency told the Wall Street Journal, “If the West doesn’t like us, that means we’re on track.”
In this atmosphere, rapidly falling living standards blamed, of course, on the West might well persuade Russians to rally around their leader, who might be inspired to push his adventurism further.
There is another 1941 precedent to keep in mind here too: in December of that year, Japan bombed Pearl Harbour, at least partly in retaliation for an American oil embargo.
Still, this is 2014, not 1941, and if nothing else, the past decade of high oil prices gave many Russians a standard of living that their Soviet parents and grandparents could never have imagined.
are not just oligarchs but concentric circles of people who have invested in the West or otherwise benefitted from Russia’s integration into the global economy. They have no clear mechanism to respond to the economic crisis.
They could leave the country, withdraw their money, stage a palace coup or simply find ways to make life in Russia unpleasant for Russia’s leaders in ways we haven’t yet imagined.
May be there’s no point in speculating. After all, this an experiment, and we don’t yet know how it will come out.
By arrangement with the Spectator
