Trump Says He Won't Lift Russia Sanctions. Our Response: GOOD!
Sanctions forced Russia to become more self-sustainable, especially in agriculture. Keep the sanctions, and Russia will soon be an agriculture and manufacturing powerhouse.
We read with great amusement Politico's latest Russia scoop: Former Ukrainian Prime Minister and longtime criminal Yulia Tymoshenko claims that Trump personally reassured her on the sidelines of the National Prayer Breakfast that sanctions against Russia would remain intact.
What on earth is Tymoshenko doing at the National Prayer Breakfast, and did Politico dabble in dry humor when describing her as "a member of parliament who is positioning herself for a presidential campaign against the beleaguered incumbent president Petro Poroshenko"? (Answers: "begging for money";"we hope so".)
There's absolutely no reason to believe anything relayed by Tymoshenko, but for the sake of argument, let's assume she's being straight with us: Trump will keep sanctions against Russia in place.
Our response: GOOD!
Since the first day of sanctions, western political analysts have written lenghty tomes about how western sanctions will crush Russia; about how the Russian economy will collapse; about how Russians will starve in the unswept streets; about how Putin is months — maybe days! — away from being deposed by an angry mob of hungry Russians, desperate for the sweet taste of Monsanto corn and color revolution.
What an absolute pleasure it has been to read, and laugh at.
The truth is that sanctions (and counter sanctions) might have saved the Russian economy. Struggling with rock bottom oil prices, Russia found salvation in its manufacting and agricultural industries, which were underdeveloped but highly competitive do to the devaled ruble. The tired cliche about Russia being "a giant gas station" (hat tip to John McCain) was always a childish exaggeration. But before the sanctions (and counter sanctions), Russia really was underperforming in terms of agricultural and manufacting output.
The sanctions essentially forced innovation and investment in these industries — with spectacular results:
Russian Agriculture Minister Alexander Tkachev said back in September that the Russian government would prefer for sanctions to remain:
"We would like (the sanctions) to continue for another five years. (But) even if they remove them, it won't be that bad," said Tkachev, adding that sanctions and Russian counter-sanctions have already made Russian agricultural produce more competitive.
Tkachev also argued that lifting counter sanctions against Europe would have little effect on Russian agriculture, since Russian produce is enjoying increased demand from Russian consumers, partly as a result of the ruble's devaluation. But if sanctions are lifted (by both sides), the ruble's value would almost certainly increase. So best not to risk it.
And of course, keeping the sanctions in place allows Russian farmers more time to make their country truly self-sustainable. The Associated Press recently ran a story about a Russian computer whiz who became a cheesemaker. He was extremely vocal about his support for sanctions:
Russian businessman Oleg Sirota is such a big fan of Donald Trump that he's built a snowman of the new U.S. president outside his factory.
It's an irony then that he fears Trump could spell his business' ruin.
Sirota, who has borrowed large sums from banks and relatives, and taken government grants, predicts that the removal of a Russian ban on food imports would flood Russia with cheap milk imports, sweeping away fledgling businesses like his.
"It's like sending a small boy out to box a world champion," he said. "We need five or six years of sanctions, minimum, to break through. This shield has been protecting us and we need it to keep doing so."
Sirota sees himself as the proud heir to a Russian agricultural tradition devastated by war and revolution in the 20th century. He's strongly anti-globalization and backs Putin's signature foreign policy moves in Ukraine.Now he and other farmers are considering taking to the streets.
"If there's serious talk of canceling the sanctions, we'll definitely appeal to Vladimir Putin for support. Maybe we'll even have protests in favor of keeping them because it's hugely detrimental for us," he said. If sanctions go, Sirota wants higher tariffs on imported products, asking "why can the Americans do it and we can't?"
The largest growth has been in agriculture, but Russian manufacting has also benefited from the devalued ruble, making "Made in Russia" more competitive at home and abroad.
Yes, sanctions have made imported luxury goods more expensive. And yes, despite all its advantages, the devalued ruble has made life a living hell for Russians who took out loans in foreign currencies, and Russians who frequently travel abroad. But guess what? In Russia, a ruble is still a ruble. And thanks to sanctions, Russian-made products and produce aren't just affordable, they're also increasing in quality.
Lifting sanctions would most likely increase the value of the ruble, as well as lead to counter sanctions being removed. Bad idea.
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