By Paul Goble
Even though Vladimir Putin hopes that Donald Trump will end the sanctions regime against Russia, the president-elect’s commitment to protectionism, an expansion in US production of oil and gas and a re-industrialization of America “may have the most negative consequences for the Russian economy,” according to Moscow analysts.
In today’s “Nezavisimaya gazeta,” journalist Olga Solovyeva notes that the Kremlin and its closest allies are celebrating Trump’s victory because they believe, as presidential advisor Sergey Glazyev put it that “Trump as a pragmatic man will end anti-Russian sanctions which are harming American business” (ng.ru/economics/2016-11-10/1_6854_export.html).
And the Moscow journalist says that Andrey Kostin of the VTB banking group fully shares that optimism and says that he excludes any possibility of unexpected “’black swans’” arising in the relationship between Russia and the United States now that Trump has been elected.
But independent analysts are less sure that Trump’s election will be only a boon for Russia. Aleksey Makarkin, the vice president of the Moscow Center for Political Technologies, says that “Trump’s victory carries with it significant risk for Russia, the full extent of which still must be considered.”
First of all, he argues, “there is the risk of the destabilization of the world economy as a result of the trade wars which Trump may start” by his calls for abrogating or renegotiating trade agreements and his focus on rebuilding the American economy by among other things penalizing American firms that move abroad.
Second, Markarkin adds, there is “the risk that oil prices will fall as a result of the lifting of limitations on drilling, a policy change American business has long sought.” If oil prices fall further as a result, the Russian economy will be hurt – and everyone must remember that it has fewer reserves than it did.
And Andrey Koptilov of Moscow’s Synergy University adds a third: Trump’s unpredictability will rile markets and lead investors to put their funds in safe havens, thus reducing their willingness to invest in emerging markets like Russia’s. That will put yet another crimp on Russian economic development.
Koptilov sees other dangers as well. If in Decmeber, the US Federal Reserve raises its base interest rate, that trend of capital flight from emerging markets, including Russia, will only accelerate. And if American actions hurt the Chinese economy, that will hurt Russia’s as well given Russian sales to China.
And a third Moscow analyst, Kirill Yakovenko of Moscow’s Alor Broker Company, argues that Trump’s policies will push down the price of oil and that in turn will cut the earnings of the Russian oil and gas monopolies from foreign sales “by two to three times,” on top of the losses they have already taken.
Please Donate Today
Did you enjoy this article? Then please consider donating today to ensure that Eurasia Review can continue to be able to provide similar content.