In an interview to EADaily, Russian economist, analyst and publicist Mikhail Khazin has shared his views of the current economic situation and development prospects in Russia.
According to the Russian Federal State Statistics Service, the economic decline in Russia has slowed down. Let’s assume that we have reached the bottom. How can we go back to the surface? Our financial-economic authorities hope things will become better in the commodities markets. Will this be enough?
First of all, there will be no real improvement. Second, even if the situation improves, we will see growth only if we increase investments, but the problem is that we don’t and can’t have RUR investments as they are banned. Nor do we have enough U.S. dollars or prospects to get foreign investments. Consequently, we will see further decline. It will not be very active – something around 3% this year and 3% next year.
And why don’t they forget their neo-liberal dogmas and start printing rubles for investments, especially now that Trump’s election has given them a pause?
The war between Trump and Clinton or, more precisely, between their supporters, is still underway. Figuratively speaking, Clinton’s supporters are our authorities, while Trump’s supporters are our economic interests. And those two forces are fighting each other. In other words, our authorities are trying not to let our economy grow and they are doing this quite well.
The key reason why RUR rallied in 2016 was the so-called carry trade. But this cannot last forever. Sooner or later, those speculations will turn against RUR. Can this happen and what should we do if this happens?
Of course, if the speculative money goes back, we will see RUR falling again. Our consumption is still dependent on imports. Consequently, the decline will continue.
We have no less serious problems in our regions. Local governments are accumulating debts. What consequences may this have?
The debts are growing, the economy is declining, the regions are facing low business activity. I see no grounds for optimism here.
What can this lead to?
To an economic crisis, low living standard and shrinking GDP.
2017 will be the 100th year of the October Revolution. In this light, can the current economic problems cause new social upheavals?
I don’t think there will be any revolts. Let’s not forget that the first revolt in 1917, that is, the February Revolution, was organized by comprador bourgeoisie. It was very much like the events of August 1991. The second revolt, the October Revolution, was plotted by the general staff of the imperial army. But today this trick is impossible as we have no background similar to World War I. Only an industrial accident can cause mass protests today but even if it happens, the authorities will keep it secret.
Was arrest of the Russian Economic Development Ulyukaev’s a blow on the government’s neo-liberal policy or was it just Rosneft’s business?
It was kind of an attempt by the patriots to show to the liberals that after Clinton’s loss, they would have no more backing. But they failed to take the next step – to remove the whole liberal team. Perhaps, they were able to do it but the problem is that they had no alternative economic model to offer.
And what about the so-called Glazyev-Titov plan?
Titov has removed Glazyev from this plan as, in his opinion, Glazyev is not the partner he needs. But alone with his team, Titov is unable to develop a real plan. The results of the elections have shown that he has neither personal nor team resources for this. As a result, we have yet seen no real non-liberal steps to recover RUR.
Trump threatened to declare an economic war against China. What will he actually do?
Let’s wait and see. The point is that China and the United States are two sides of one and the same coin. If China falls, the United States will fall too and vice versa. So, I expect them to come to terms. Trump’s statement might have been just a warning.
But if his Twitter diplomacy turns into practical steps, China may counteract by expanding into Europe, won’t it?
China has lots of problems of its own. Just like the United States, it is facing a structural crisis. The loss of U.S. markets would be a disaster for it but this will happen in any way as the living standard in the United States is falling. Crisis is inevitable in both the United States and China. So, I think all the sides will be careful.
And what about Ukraine?
The Americans tried to make Ukraine their own and got a civil war as a result. If the Russians try to do the same, they will face similar problems as there will face several millions of pro-western Ukrainians. Here we have two options: national reconciliation or division. Unlike Obama, Trump will treat Russia as the key player in this game. But I think much in Ukraine will depend on whether it finds a person that will be able to reconcile its people. Otherwise, it will fall apart.
Do you see such a figure?
No, I don’t. Of course, he is already somewhere around but we are not yet aware of him.
Somebody from the opposition or from the former rulers?
Perhaps, some former officials but not the one who would be associated with the current regime. Somebody from the second or even the third circle.
What will be the key news for Russia and the world in 2017?
Theoretically, we are facing a situation that may result in new global agreements. Scheduled for the autumn are conferences in Bretton Woods and Yalta, which are expected to set new rules in the economy and the politics – for it is already clear that the United States is no longer able to rule the world alone. Trump is making no secret of this. But the problem is that it is not yet clear who will attend the Yalta talks. The four participants are known: Trump, Jinping, Modi and Putin, perhaps, somebody from Europe, the UK and Brazil. As regards Bretton Woods, the parties are not known because the current rulers of the financial sector are all Trump’s enemies and if the crisis continues, they will disappear. In 1944, the United States dictated the rules as it had 50% of the global economy. Today, we have no such players. But we still need new rules.
What about the EU’s future? We are already witnessing Frexit as the sentiments in France are very much like the pre-Brexit moods in the UK.
2017 will answer this question. The EU will either self-destruct quickly or will be dying slowly.
How will the EU’s hypothetical collapse affect Russia?
Russia will enhance its influence in Eastern Europe. With Poland being the key actor there, if the EU collapses and if nobody manages to ensure national reconciliation in Ukraine, the best way for Eastern Europe will be to divide Ukraine and to give Lvov to the Poles. This will calm them down and they will no longer be an obstacle for the Russians in Eastern Europe.
Will Russia be able to steamroller the Turkish Stream?
Of course, it will. Turkey will be OK. Erdogan has made the final call and he has no alternative to be friends with the Russians. He resisted but not because he has something against Russia. Simply, in these relations he will be junior while he wanted to be senior.
Interviewed by Dmitry Zavorotny, specially for EADaily