Impact of Western Sanctions on Russia

Sunday, May 1, 2016

Seyyedeh Motahhareh Hosseini
Assistant Professor of Political Science & Expert on Central Asia and Caucasus Affairs

While Russia is doing its best to deny the impact of sanctions imposed against Moscow by Western countries on its policies, and go on with its former domestic, and especially foreign, policies, it seems that the effect of sanctions on Russia has led to deterioration of the country’s economic situation and people’s financial state. As a result, economic and financial indexes of Russia have been plagued with crisis and have been on the fall one after the other. Most Russian people currently prefer not to invest their money and capital in capital production and instead, either take it out of the country or keep it in banks and get interest. The priority given by the Russian government to liquidity, along with other domestic financial policies, will increase inflation and this issue can reduce people’s purchasing power, bring production to a halt and lead to increasing joblessness and poverty.

Out of fear of losing their jobs, people try to reduce their expenses to a minimum. As a result, factories cannot sell their products and subsequently, have been laying off their workers. The result of all these developments will be increasing deficit in Russia's budget, which is projected to rise on a yearly basis. The financial crisis has been found its way into state-run bodies and if Russia stops selling oil and gas, even high-ranking employees will be facing serious financial challenges. After reaching this point, the government will usually make a decision to do something about sanctions. When rentier states reach this stage, their rulers usually feel the sting of sanctions, distance from propaganda slogans and think about solutions to solve the problem of sanctions. Of course, Russia has not reached this stage yet and may never get there, because it is a big country with extremely diverse potentialities, which allow it to find different ways to solve its problems. The Russian spirit and personality also has its own special and different capabilities to deal with various crises.

Russians may resort to violent solutions such as disrupting regional orders in order to overcome their increasing financial crisis, and this seems to be what they are doing right now. By spending their money on military affairs and a defensive (and sometimes aggressive) foreign policy, Russians have been trying to take their financial and social crises out of the country and, at the same time, increase the cost of opposition with Russia for the West. However, spending the country’s budget on weapons will further increase the Russian government’s expenditure. On the whole, it is not possible to compare sanctions imposed on Russia with other countries because conditions in Russia are different from other countries, especially taking into account that Russia enjoys high territorial and manpower capabilities.

However, it cannot be ignored that the consequences of sanctions imposed on Russia will harm ordinary people more than anybody else. This is true because governments like that of the Russian Federation reduce expenses that are related to ordinary affairs in order to save enough money to be spent in those places, which they want, so that they would be able to prevent any harm to their general policies. At the same time, they take such steps as mobilizing political and social forces, embarking on widespread propaganda, creating a police state and increasing the cost of opposition in order to maintain general atmosphere in the country in line with their purported policies and keep the public opinion in line with the government. However, it must not be forgotten that due to existence of such processes as elections, a party system, widespread state bureaucracy which maintains security and distributes budget, and existence of relatively democratic systems, the Russian government enjoys relative legitimacy and is totally capable of mobilizing people’s motivations in line with its goals.

Key WordsWestern Sanctions, Russia, Impact, Deterioration, Economic Situation, Regional Orders, Defensive Foreign Policy, Financial Crisis, Hosseini

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