Russian sanctions are not working

The time has come to face facts: Putin's Russia is going to weather the economic sanctions.

Russia's economy is struggling, but only through a recession, not an economic crisis.
Retail sales are down and wages are falling. The IMF predicts that Russia's economy will contract 3.8% this year, after a flat economy last year.
Almost all of this can be attributed to the dramatic fall in oil prices.

That sounds bad for Russia, but it ends there. Russian markets are turning up in a very big way.

Not only is Putin still standing, but the Russian economy, against most expectations, is recovering. Its stock market is one of the best performing globally this year; the ruble, after losing nearly half its value against the dollar over the course of a year, is rebounding; interest rates have come down from their post-sanctions peak; the government is taking in more revenue than its own forecast expected; and foreign exchange reserves have risen nearly $10 billion from their post-crisis low.

The ruble has bounced 19% against the dollar since since December 16th lows, the most of any emerging market currency.
It turns out that the collapse in the value of the Ruble is part of the reason for the Russian economic turn-around. It made import prices higher, which made domestic-made products more competitive.
 photo RUB_zpseif33qi9.jpg

You might have noticed that on the opposite side of the chart from Russia, way down on the bottom is Ukraine.
Despite unprecendented efforts by the West, Ukraine is broke and about to default.

Ukraine Finance Minister Natalie Jaresko has a warning for creditors of the war-torn country: Come to the table now to restructure $40 billion in debt or face the risks of an uncertain economic, political and military climate down the road...
“They’re misunderstanding, first of all, the depth of the economic-financial distress that the country is in today,” she said.
If the situation in Ukraine deteriorates, Ms. Jaresko said, calls could grow to forsake payments on the country’s outstanding debt, a step the government didn't want to take.

Last month's IMF bailout agreement included both $17.5 billion in new loans and $15-20 billion in write-offs. The IMF had to bend their own rules to make such a generous deal, and yet one month later Ukraine is demanding more write-offs or it will default.
While Russia's economy may contract by over 3% this year, Ukraine's economy is literally collapsing.

Ukraine's economy shrank at an alarming 14.8pc over the last three months of the year, as conflict with neighbouring giant Russia and simmering civil war have devastated the country.

This is after Ukraine's economy contracted by almost 7% last year.
No country can both fight a war and have its economy collapse at the same time.

It's time that the United States faced the reality that Ukraine is going to come to some peace with the Russian-backed seperatists, and soon, the peace will include huge concessions to the seperatists, and Russia will continue with its confrontational attitude unless some sort of agreement is worked out with the West.
Instead, Obama is sending military trainers to Ukraine just as the war is wrapping up, and Hillary Clinton is calling for more money and guns for Ukraine, just as Ukraine is about to default.

Why are Democrats in Washington determined to double-down on a losing bet? Doesn't it make more sense to plan for tomorrow rather than refuse to acknowlege a failing foriegn policy bet of yesterday?
Obama managed to see the logic in that strategy with Cuba and Iran. It's time to do the same with Russia.

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chuckvw's picture

If Obama and the Clinton State Department (hard to know exactly how to apportion blame) had keep their snouts out, Ukraine could have parlayed their situation greatly to their benefit. Trade and investment from East and West. Of course the Ukrainian kleptocracy likely would have stolen much of it, but at least there could have been a little trickle down...

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You should only listen to both sides when one side isn't totally full of shit. -Jim Jefferies

cybrestrike's picture

The US versus Russia proxy war in Ukraine is just another attempt by the US to spread its neoliberal hegemony. They're trying the same thing in South America. Ukraine, Iran, Venezuela, Honduras...they're all a part of the game against the BRICs.

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gulfgal98's picture

Yep, these are proxy wars. IMO, Ukraine is more of a proxy to put NATO on Russia's doorstep.

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Do I hear the sound of guillotines being constructed?

“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy