On the Sanctions Front Russia Is Brainwashed Against Her Own Interest
Paul Craig Roberts
A commentator sent to me on Wednesday the economic component of Putin’s speech about the economic measures the Kremlin is taking to adjust to the economic sanctions, asking me to decipher it. Putin’s speech is reproduced below. Perhaps I am mistaken, but it looks to me like Russia was not prepared for sanctions and is not availing herself of effective countermeasures.
Putin’s speech shows no realization that the ONLY reason sanctions against Russia are effective is because the Russians bought in to globalism and, thereby, gave foreigners power over them. It seems incomprehensible that Russia would willingly place her economic life under her enemies’ control.
Putin’s inability to identify Russia’s commitment to globalism as her problem indicates that Putin is still committed to globalism. The Russians were sufficiently brainwashed during the Yeltsin years to orientate their economy to global rather than domestic markets. This served Western interests not Russian interests. The happiest economy is the self-sufficient one. In the 1950s and 1960s, Paul Samuelson, the most authoritative of American economists, emphasized that the US economy was self-sufficient and could not be harmed by external forces. We relied on our own markets. We made here and sold here and prospered as we never have since. Our debt was held by ourselves. We owed it to ourselves.
Putin praises the Russian central bank which was so careless as to hold Russian reserves in foreign banks where they could be seized. This is like praising a battlefield commander for conducting his operations in a manner that guaranteed his defeat.
If Russian prices are rising due to the speculation against the ruble, the problem is entirely Russia’s exposure to globalism and dependency on imports. Russia should use exchange controls to prevent currency speculators from driving down the ruble.
Russia has the power to shut down all sanctions immediately. Either the Kremlin is unaware of its power, or the Kremlin is so committed to globalism and export earnings that Russia cannot use its power.
Russian central bank reserves have been seized by the West. Yet, the Russians still insist on servicing their debt. The Russians should simply say: “Well, you have stolen our reserves, so you can service our debts out of our stolen reserves. In the meantime, we seize all sanctioning countries’ assets in Russia in order to compensate ourselves for our stolen bank reserves and all other damage you might have done us.” But Putin says Russia, alone in the world, respects private property so much that he will let foreigners steal Russia’s assets, but Russia will not steal in return. In other words, come rob Russia. We permit robbery of ourselves. So who rules in Russia, Vladimir Putin or Vladimir Potanin? https://www.rt.com/business/551768-potanin-foreign-businesses-confiscating/ [1]
If Russia turned off ALL energy supplies to Europe and ceased the export of all minerals, Western industry would collapse. But Putin won’t do this because he has been brainwashed to think Russia needs the foreign exchange earnings from exporting oil and minerals. So Russia subsidizes the economies of the countries that sanction Russia. This is why no one takes Russia seriously.
The West would collapse in a heartbeat if Putin used the obvious counter sanctions I have described. All sanctions on Russia would be immediately withdrawn, and Washington’s Ukrainian puppet would be ordered to surrender immediately to Russia and assist the war crime tribunals of the neo-Nazi war criminals.
The Russian government is so brainwashed by neoliberal economics that the Kremlin has no comprehension of the enormous power it holds over the West. As far as I can tell, Russia has only one economist who is not in the pocket of the West. His name is Sergey Glazyev. He is not perfect, but he understands that Russia does not need foreign loans or access to foreign capital and can finance its internal development with its own central bank. The incompetent head of the Russian central bank does not understand this, or if she does, she is acting against Russia as a foreign agent.
Sometimes a single voice can suffice. But in Russia Glazyev’s hasn’t. The Russian government is so brainwashed that it is the government’s own policy that contributes to the presence and success of sanctions.
Instead of imposing economic sanctions on the West, thereby ending the West’s sanction game, Putin has devised a policy that accepts the sanctions and attempts to organize Russia to live within them.
The silver lining for Russia in the sanctions is that they are forcing Russia off Western globalism and into more self-sufficiency and development of trade relations with Asia and non-Western parts of the world. In order to avoid provocations that will eventually lead to nuclear war, Russia needs to disengage from the Western world.
Putin’s speech:
Dear colleagues!
It is obvious that the events taking place draw a line under the global dominance of Western countries both in politics and in the economy. Moreover, they question the economic model that has been imposed on developing countries and indeed on the world in recent decades.
I emphasize that the sanctions obsession of the United States and its supporters is not shared by countries where more than half of the world’s population lives. It is these states that represent the rapidly growing, most promising part of the global economy. Among them is Russia.
Yes, it’s not easy for us now. Russian financial companies, large enterprises, small and medium-sized businesses are facing unprecedented pressure.
The banking system was the first to be hit by sanctions, but Russian banks coped with this challenge. Working literally around the clock, they continue to make payments and settlements of citizens, to ensure the activities of enterprises.
The second wave of sanctions was designed to provoke panic in the trade sphere. It is estimated that over the past three weeks, the additional demand for goods has exceeded a trillion rubles. But domestic manufacturers, suppliers, transport and logistics companies have done everything to avoid a large-scale shortage in retail chains.
I would like to express my gratitude to the Russian business community, the labor collectives of companies, banks and organizations that not only provide an effective response to sanctions challenges, but also lay the foundation for the further sustainable development of our economy. I would like to note separately the Government, the Bank of Russia, the heads of the regions, and regional and municipal teams. In the current difficult conditions, you responsibly solve the tasks facing you.
Obviously, it was not possible to organize an economic blitzkrieg against Russia, to demoralize our society, to take us by snoring, so we will certainly see attempts to increase pressure on our country. But we will overcome these difficulties. The Russian economy is necessarily adapting to new realities. We will strengthen our technological and scientific sovereignty, allocate additional resources to support agriculture, manufacturing, infrastructure and housing construction, and continue to develop foreign trade relations with the expectation of fast-growing, dynamic international markets.
Of course, the new realities will require profound structural changes in our economy, and I will not hide the fact that they will not be easy, will lead to a temporary increase in inflation and unemployment.
In this situation, our task is to minimize such risks. Not only to strictly fulfill all social obligations of the state, but also to launch new, more effective mechanisms to support citizens and their incomes.
The focus is on the protection of motherhood, childhood, support for families with children. A decision has already been made – as you know this – to introduce payments for children aged 8 to 16 inclusive, who grow up in families with low incomes, from April 1. The amount of payment will be from half to one subsistence minimum for each child of this age. Now the national average is up to 12300 rubles. Thus, we will build a single support system from the moment when the expectant mother is still waiting for the birth of a child, and until the child reaches the age of 17.
I instruct the Government to ensure the work of this system in such a way that it promptly takes into account changes in the financial situation of families. That is, if parents are faced with the loss of work, other difficult life circumstances, the family should begin to receive assistance from the state as quickly as possible.
I instruct the Government to ensure the work of this system in such a way that it promptly takes into account changes in the financial situation of families. That is, if parents are faced with the loss of work, other difficult life circumstances, the family should begin to receive assistance from the state as quickly as possible.
I also ask the Government to assess the effectiveness of measures to support people who have lost their jobs as soon as possible. Obviously, such measures should be expanded, including through the mechanism of the social contract.
I understand that rising prices are seriously hurting people’s incomes, so in the near future we will make a decision to increase all social payments, including benefits and pensions, increase the minimum wage and the subsistence minimum, and increase salaries in the public sector. I ask the Government to calculate the exact parameters of such an increase.
I would like to emphasise that even in the current difficult situation, we need to reduce poverty and inequality by the end of the year. This is a feasible task even today. I ask the Government and the regions to focus on this task. And I will add that it is not only economic in nature, we all understand, but it is also a matter of social justice.
A lot now depends on the initiative of the heads of the regions of the Russian Federation, on their readiness to take responsibility. Today I have signed a decree on additional powers for the heads of the regions – they will be able to make flexible and prompt decisions to support our citizens, the economy and the social sphere based on the real situation on the ground. Let me remind you that it is in this logic, which allows us to take into account the situation in each region, in the city, in the village – and it is different everywhere – that is how we built measures to combat the coronavirus.
I instruct all units of federal authorities in the constituent entities of the Federation to coordinate their work with regional authorities in the next six months, and the governors to create operational headquarters to ensure economic development and personally lead this work.
What should be the priority here?
A key role in overcoming the current problems should be played by private business, which is able to rebuild logistics in a short time, find new suppliers, and increase the production of popular products. How quickly private business will find the necessary decisions, make them, depends on the preservation of employment, incomes and salaries of citizens, in general, ensuring the stable, rhythmic work of the economy. Therefore, we must respond to external pressure with maximum entrepreneurial freedom and support for business initiative.
I ask the Government, law enforcement agencies and supervisory bodies to continue working to remove unjustified administrative and regulatory barriers. Moreover, it is impossible to distract business and regional authorities from solving the most acute, urgent tasks, loading them with various kinds of inspections and control measures.
One of the key problems for enterprises now is the shortage of working capital, inaccessibility and high cost of loans, but the Central Bank was forced to take appropriate measures. In this regard, I instruct to implement the following steps.
First. Enterprises that fulfill the orders of government bodies and companies with state participation should receive money for the goods and services supplied as soon as possible, put them back into business. In this regard, I propose increasing the volume of advance payments for state contracts. The advance payment should be at least half of the total amount of the contract, and the payment period for the goods and services supplied should be reduced to seven working days. A similar decision should also be made at the level of the constituent entities of the Federation, municipalities and companies with state participation.
Second. It is necessary to expand the ability of entrepreneurs to attract additional resources from development institutions. We are talking about expanding the work of the Project Finance Factory (it works in our country, and it works well, practice has shown demand), the provision of resources for business investment plans through the Industrial Development Fund (one of the really well-working tools), the Bank of Small and Medium-Sized Businesses as well, and in addition, through regional support institutions, including guarantee funds. I instruct the Government to allocate additional funds to the regions for such regional instruments.
I would like to draw the attention of the Government and my colleagues in the regions to the fact that the most important task is to ensure the availability of goods on the consumer market, primarily essential goods, medicines and medical devices. It is necessary to promptly solve logistical and other objective problems that lead to price spikes. At the same time, it is necessary to exclude manual interference in price regulation. It is the increase in supply that should lead to a decrease and stabilization of prices.
Separately, I would like to address our exporters. In a situation where there are difficulties with supplies to foreign markets, it is necessary not to reduce production, but, on the contrary, to send additional volumes of goods to the domestic market. Objectively, this should lead to a decrease in prices within the country, including for gasoline, diesel, bitumen, metals, and other export goods. I ask the Government, the FAS and the regional authorities to constantly monitor the situation in these markets.
Further. Taking into account the new challenges facing Russia, we must preserve and expand our long-term development agenda, including continuing the implementation of all planned projects, both at the federal and regional levels. We must make full use of the potential of our budget system as a stimulus tool.
Federal financing of projects and construction projects will be carried out, as agreed, in full. Moreover, back in December, it was decided to allocate additional funds if the cost of construction objectively increased.
What I think is important to note: in the current situation, there will be no problems with financing from the federal budget. Our economy generates a sufficient, good amount of income today, which means that we will not need to resort to emission. Simply put, the central bank will not need to print money. We have revenues – marketable, healthy incomes. The problem now is not money. We have the resources, I repeat. Key difficulties are associated with the supply of components, equipment, building materials, with the organization of the work of contractors. Therefore, the timing and methods of implementing specific projects, their stages may change, and this will require coordinated work of authorities and business representatives, accelerated implementation of import substitution projects – this is what is important.
At the same time, it is important to simplify the procedure for interaction between the regions and federal authorities, to give the regions more freedom in maneuvering resources, as well as opportunities to launch new construction projects and programmes.
Thus, the regions have already been allocated additional funds for road construction. I would like to ask the Government to work on increasing funding for other infrastructure facilities that can be put into operation this year, as well as on increasing purchases from Russian enterprises, including the renewal of public transport, for example.
It is clear that the budgets of the regions of the Russian Federation now bear a serious additional burden, therefore, as agreed, we will additionally index subsidies to equalize budget capacity. We also use other measures to support regional finance, namely, all payments on budget loans planned for the current year will be deferred, transferred, as they say, to the right, and payments on commercial loans, where necessary, will be replaced by budget loans. I ask the Government to study this issue in detail and look into each specific case. Only such individual work will lead to the desired result.
In addition, the Ministry of Finance will additionally provide an unconditional credit line to each constituent entity of the Russian Federation. It will be ten percent of the total income with a maturity not earlier than the end of this year.
We will preserve the volume of infrastructure budget loans. I instruct the Government to organise flexible management of this programme and take into account all the difficulties associated with the implementation of projects – I have already mentioned them just above. The regions should be able to quickly make decisions on changing the portfolio and content of projects, to concentrate on those of them that in the current conditions can be implemented with maximum efficiency. If necessary, we will consider a possible increase in the volume of infrastructure loans. It’s possible, it can be done. In general, we will closely monitor the situation with regional finances, make additional decisions to support them, if necessary.
I would like to emphasise that direct communications between all levels of government and a clear algorithm of actions are now fundamentally important. And here the State Council and its relevant commissions have already proved their effectiveness. I ask the State Administration Commission, which is headed by Sergei Sobyanin, together with his colleagues from the Government, to work out the problematic issues on the regional agenda, develop optimal solutions and scale them to all Russian regions. We had good experience in the fight against the epidemic.
Dear colleagues!
Our economy, the state budget, and private business have all the necessary resources to solve long-term problems. All the strategic and national goals that we have set for the period up to 2030 must be achieved. The current challenges and the opportunities that they open up should only mobilize us – this is what we must set ourselves up for, aim at achieving tangible results in the interests of citizens.
Obviously, it will be necessary to fine-tune our programmes, and the initiatives of business circles, scientists and public associations are in demand here. In this regard, I ask the regions to actively join the organization of the Forum of the Agency for Strategic Initiatives “Strong Ideas for a New Time”, within the framework of which every citizen of Russia will be able to submit their proposals, specific projects aimed at the development of their city, region and country as a whole.
Let me repeat once again: the current situation is certainly a test for all of us. I am sure that we will pass it with dignity, through hard work, joint work and mutual support, we will overcome all the difficulties and become even stronger, as it has always been in the history of thousand-year-old Russia. That’s what I want to set you up for.