An article from last week in the Christian Science Monitor looks at the possible effects of economic sanctions on Russia. It contrasts Russian claims that sanctions will rally people around Putin and spur greater self-sufficiency with analysis by economists who say that sanctions could send Russia into a recession and put pressure on Putin to compromise. However, both these views assume that the Russian government is motivated by concerns about the general welfare of the nation.
An alternative view would be to look at Russia through the lens of Selectorate Theory and ask what does Putin actually need to do to survive in office? Is Putin a leader who depends on a large coalition to stay in office and thus must provide good public policy to satisfy the coalition and keep his job? If this was the case, the threat of a recession would be troubling to Putin and he would both need the "people" to rally around him and to take steps to mitigate any bad effects from the sanctions lest these same people abandon him.
Alternatively, Putin may depend on a small coalition of essential supporters to stay in office and, therefore, needs to provide private benefits to these supporters. In this case, the opinion of the public and general health of the economy would be at best secondary concerns. Putin's primary concern would be to make sure that his supporters continue to receive the private benefits upon which their support is based and to make sure that no one is in a position to offer them a better deal than they have with him. As long as he does that, the economy can go to hell and the Russians on the street can think whatever they want, short of overthrowing the whole system.
Of course, it is the second case we are dealing with here. While Putin probably depends on a larger coalition than he would like, it is clear that he stays in office by virtue of a system of private benefits doled out to essential supporters. The notorious cost overruns and performance shortfalls of the preparations for the Sochi Olympics should make it clear that government performance is not the basis for Putin's power.
Therefore, the effects of any sanctions on the Russia economy are far less important than the effects on Putin's ability to put money in the pockets of his essential supporters. Therefore, it does make sense to try to target individuals as the US and EU are doing. But hitting these supporters in the pocketbook will only be effective if Putin is unable to make good their losses (supposing there are losses in the first place) with other additional benefits.
Even if the economy goes into a severe recession, Putin will probably be able to channel enough money to his key supporters as long as the oil and gas revenues continue to roll in. Indeed, all the talk about making the economy more self-sufficient suggests that there will be many opportunities for the government to intervene in the economy in the name of resisting Western pressure. We should expect such interventions, such as investments in agriculture, to be geared towards enriching cronies more than improving economic performance.
Frankly, it is hard to see Putin's power being threatened by anything less than a significant reduction in oil and gas revenue. In the short term, this would only occur if the EU boycotts Russia gas and oil or if fighting in Ukraine broke out that physically disrupted Russia's supply lines. Of course, this will probably act as a significant deterrent to all parties involved. However, because everyone is mutually deterred, there will be plenty of room for low levels of conflict such as we are seeing.
In the long run, there may be a more credible threat to Russia's oil and gas revenues if Europe is able to find other suppliers. The problem here is that the pipelines through the Ukraine supply so much oil and, especially, natural gas, that it is currently impossible to replace the quantities supplied by Russia with similar quantities from other sources. Natural gas in particular is difficult to ship by sea and there is a dearth of tankers with which to do it.
However, capacity can be built. The Baltic states and Poland have started building port facilities to allow liquefied natural gas (LNG) to be imported from overseas. Of course, this gas has to come from somewhere. If only there was a nation with vast natural gas reserves that was currently not exporting LNG and could step into the breach...
Wait, that's us, as in the US. The US has a surplus of natural gas and has not been exporting any of it. Sadly, that also means that we are lacking in export facilities to do so and it will take years to get such facilities up and running. So, while there have been efforts in the US government to expedite the approval of exports, this really is a long term fix.
Even so, the future casts a shadow over the present and, if Putin and his supporters see a future threat to their take from the oil revenues, they may take a more moderate stance. Therefore, if the US starts to move more quickly on approving exports of gas and oil (and building the facilities for doing so) while European nations (particularly Germany) invest in import facilities, it may have an effect on Russian actions. Consider it the economic equivalent of sending a few hundred troops to Poland.
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