{"id":7461,"date":"2022-01-27T16:42:29","date_gmt":"2022-01-27T14:42:29","guid":{"rendered":"http:\/\/www.liberalglobe.com\/?p=7461"},"modified":"2022-01-27T16:42:39","modified_gmt":"2022-01-27T14:42:39","slug":"the-putin-dilemma-war-with-ukraine-and-crash-in-the-russian-economy-or-retreat-of-the-russian-army","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=7461","title":{"rendered":"The Putin Dilemma: War with Ukraine and Crash in the Russian Economy or Retreat of the Russian Army"},"content":{"rendered":"\n

At the military level, Russia has the upper hand over Ukraine and NATO, which has made it clear in any case that it will not be directly involved in a war. With the economy, however, things are different. <\/p>\n\n\n\n

The geopolitical and economic poker that the West and Russia are playing around Ukraine has reached its most critical point, where it is possible that one of them – or both – may decide to take the big risk and play his “leftovers”. .<\/p>\n\n\n\n

The beginning of this week showed that the Russian markets also consider the possibility of a war in Ukraine possible, as they realize that the Kremlin boss will hardly back down. That, after all, would mean that Russian President Vladimir Putin would lose much of his credibility and the image of the “undefeated” he has built over the past two decades – with implications both on the international stage and at home. <\/p>\n\n\n\n

The Russian stock market and the ruble show<\/strong> shock<\/strong><\/p>\n\n\n\n

It is noteworthy that at Monday’s meeting, the index on the Moscow stock exchange fell by more than 7%, with the result that losses reach or exceed 15% since the beginning of the year. In fact, for several “heavyweights”, such as the shares of Sberbank and Gazprom, the daily losses exceeded 10%.<\/p>\n\n\n\n

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There are also problems with the ruble, whose exchange rate against the dollar fell to a 14-month low – close to 80 rubles per dollar. The truth, in fact, is that the decline was contained after the central bank decided to temporarily suspend the foreign exchange market (under 2017 legislation, Russia buys foreign currency when oil prices are high and sells when they fall below 44). dollars per barrel).<\/p>\n\n\n\n

An important element, which also reflects the nervousness that prevails, is the large fluctuations that the ruble had in yesterday’s meeting – although today it seems to be stabilizing, even temporarily. At the same time, the 5-year “cost” for possible bankruptcy reached the highest levels since March 2020, at 225.7 basis points.<\/p>\n\n\n\n

“Such periods of decline are always followed by periods of growth. “The sooner our opponents stop their hysterical actions, the sooner the pessimistic mood in the markets will disappear,” was the comment made by the Kremlin spokesman, seeking to keep a low profile and avoid the panic that could lead to in a generalized sell-out.<\/p>\n\n\n\n

Nevertheless, the fragile balance and the West’s decision to impose “unprecedented” financial sanctions on Russia in the event of military intervention in Ukraine (although the scenario of its exclusion from the international payment system SWIFT looks like, for the time being , be abandoned) do not allow any kind of relaxation. They will keep the markets in the red for several days, as the scenario of a “crash” is open if the war is not prevented.<\/p>\n\n\n\n

“The Russian economy has insufficient infrastructure to meet the challenges posed by international sanctions. It is increasingly controlled by the state, especially by Putin’s close associates. It is also concentrated in a few areas and groups, which are highly dependent on the import of technology items, while they are also terribly corrupt. “<\/p>\n\n\n\n

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Russian economy: low public debt<\/strong> &<\/strong> large foreign exchange reserves<\/strong><\/p>\n\n\n\n

The truth, of course, is that Russia has a strong enough arsenal to withstand a lasting crisis, which includes war and sanctions. And this is something that owes a great deal to oil and gas, which with their high prices in the international markets (something that is taken care of by the cartel set up by Moscow and OPEC\u2026) have filled the state coffers. .<\/p>\n\n\n\n

As a matter of fact, its public debt is rather unrealistic for the West – only 18% of GDP, with 80% in rubles. The current account balance in 2021 was positive, yielding $ 125 billion, which is a record amount. As for foreign exchange reserves, they increased by $ 40 billion last year, reaching 620 billion.<\/p>\n\n\n\n

Do all these offer Putin the opportunity to maneuver as much as he wants – and, ultimately, to choose war, if he deems it necessary? Is Russia able to bear the cost of completely severing its ties with the West – especially Europe and Germany – at least until it “balances” its losses by turning to Asia? And will Putin accept to fall unconditionally into the arms of Beijing, without having alternative options and markets?<\/p>\n\n\n\n

The dilemma<\/strong><\/p>\n\n\n\n

These questions are not easy to answer. And this despite the fact that for years the “tsar” has been trying to gradually build a Russia-fortress, which depends as little as possible on the West – something he has achieved with the United States, but not with Europe.<\/p>\n\n\n\n

After all, the “structural” problems facing the Russian economy and society are great, making some people talk about a “giant with clay feet”. They will become explosive in a time of generalized crisis – probably forcing the Kremlin to resort to even more authoritarian methods to deal with them.<\/p>\n\n\n\n

The acute demographic problem, the over-dependence on oil and gas, the huge inequalities and the lack of what is called a “safety net”, the inflation that in 2021 reached twice the expected level and “gnaws” the purchasing power of the Russians, as well as the great geopolitical risks, compose a scenario that is at least threatening to Putin and his power.<\/p>\n\n\n\n

However, here things have come to an end and despite all the above, it may be very difficult – if not impossible – for him to back down. And this may be the best paper of the US and the West, which consider that they have “squeezed” Putin for good, as they threaten to hit him in the “Achilles heel”.<\/p>\n","protected":false},"excerpt":{"rendered":"

At the military level, Russia has the upper hand over Ukraine and NATO, which has made it clear in any case that it will…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[836,3],"tags":[3271,1983,58,2354,1020,1156,1166,1976],"class_list":["post-7461","post","type-post","status-publish","format-standard","hentry","category-asia-geopolitical","category-geopolitical","tag-crash","tag-economy","tag-russia","tag-russian-army","tag-russian-economy","tag-ukraine","tag-vladimir-putin","tag-war"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7461","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7461"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7461\/revisions"}],"predecessor-version":[{"id":7463,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7461\/revisions\/7463"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7461"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7461"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}