A common question is whether the sanctions against Russia are working. So, are they? In a word, yes. During a Moscow investment conference in Moscow on Thursday, Russian president Vladimir Putin told attendees “…conditions have become more complicated, but, as I have already said, this stimulates us to concentrate our resources and choose the best solutions, to achieve our goals in the shortest possible time and to work more efficiently in all areas.”
When Mr. Putin says that conditions are more complicated, even he is admitting that sanctions are having an impact. As to inflation, at least in part caused by retaliatory sanctions that Russia has levied against the West, Putin tried to deflect the issue by saying that inflation was really only in the food sectors and therefore very limited. His own admission on inflation however, is revealing: “…by the end of the year it will be around 7.5-7.6, about 8 percent, which is higher than last year (it was 6.5 percent in 2013).”
Certainly one can read forums and articles in which so-called experts claim that Russia will be just fine, and that the West will be the real loser at the end of the day. Wrong. Fools are born every minute, and some have the titles or positions of experts, but that does not change their foolishness. Most of those “experts” have spent little time in Russia.
When one looks at the issue of agriculture and food, in some sectors Russian dacha owners still give professional farms a run for their money. In the month after many European and North American food products were banned, the average Russian shrugged it as if they could survive without those things. They can of course, but over time we are sensing that they do not want to do without certain things in life.
But it is not just food that has been impacted, as rising monetary inflation is felt by every Russian, but as of yet has been left largely unspoken. The loss of purchasing power is having an impact as the government has made a conscious decision to use its only real assets against Europe: oil and gas. The Ruble has fallen over 20 percent this year against the dollar. That impacts every aspect of life from a trip to the market, to a trip overseas. Inflation or currency devaluation have the same net result–chipping away at the purchasing power for consumers.
The Russian government claims that sanctions will drive the economy to become more independent. Self reliance from the West was the same sad song during the Soviet period, and that didn’t work out too well then, either. The definition of insanity remains the same–the idea of doing the same thing over and over, but expecting a different result. Russia could well develop a more robust agrarian economic sector, but Russia must fundamentally change in order for a truly grassroots economic base to develop and mature.
It was the American founding father Thomas Jefferson who said that farmers are “the most valuable citizens.” Jefferson understood that hard work, unconstrained by a suffocating government, was the best way to build a self-reliant and sustainable local economy. It is a lesson that our Russian friends have yet to learn.
