The American Interest

Moscow Notebook

This year’s mid-fall was not pretty in Moscow, where I write this column.  Wind, drizzle, and early frost herald a long winter.

It won’t be the winter of Russian discontent, however.  Western sanctions and low oil prices have harmed the economy—it contracted by 4.3 percent in the third quarter—but Putin’s approval rating is consistently well above 80 percent.  What the prophets of Russia’s quick doom at AEI and Heritage fail to understand is that, for most Russians, regaining global stature takes precedence over economic issues.  This may change, but not any time soon.

Those economic issues may nevertheless become pressing in 2016.  Russia’s diversification away from commodities (over 70 percent of exports) has not started.  The government’s much-heralded import-substitution program has been a failure thus far, with manufacturing stagnant or even slightly declining.  Pumping trillions of rubles into the banking system has resulted in a new round of currency speculation by the bank-owning oligarchs, rather than making cheap credit available to the economy.  To curb inflation, the base lending rate has been raised by the central bank to 11 percent, with adverse consequences for thousands of cash-starved small- and medium-sized companies.

My Moscow contacts claim that Russia’s economic woes are only partly the result of...

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