Russia’s business elite are beginning to worry that the hardline policies of Mr. Putin’s government in regards of the Ukraine are damaging business prospects.
The tense economic stand off developing between east and west over the situation in the Ukraine is having far reaching repercussions for both parties and their interests. Whilst the potential for direct military conflict is thankfully a distant spectre the accelerating economic conflict is both far more immediate and has the ability to be just as harmful in the long run.
Some European nations are less than enthusiastic about the newly instituted round of sanctions against corporate entities and individuals deemed part of the Putin apparatus, and there are some in the Putin fold that are less than happy about the situation or its possible endgame. This growing unrest on both sides points to an uncomfortable truth, that uncertainty is bad for business.
“The economic and business elite is just in horror,” said Igor Bunin, head of the Center For Political Technology in Moscow, noting that none of them are in a particular hurry to be first to say so publicly for fear of reprisals by the regime. “Any sign of rebellion and they’ll be brought to their knees” he stated bluntly in what is lamentably probably a very accurate analysis of the situation for Russia’s rich.
Whilst some might be gambling news will get better from Ukraine and that calmer times might once again prevail, there are far more attempting to do whatever they can to protect their portfolios and investments against sanctions. The 19 richest Russians lost $14.5 billion since the beginning of the year and with the developments in Ukraine having serious economic ramifications that’s set to get worse before it gets better.
Economic sanctions harmful
Inner Circle Suffering Sanctions
• Putin’s friends and allies targeted
• Economic reality might dictate change in policy
• Russian poker rooms get competition from Sochi
Some predictions are more dire than others with some of the most experienced worrying the worst.
“The threat of sanctions against entire sectors of the economy is now very real and there are serious grounds for business to be afraid.” said Mikhail Kasyanov, former Prime Minister of Russia, “If there will be sanctions against the entire financial sector the economy will collapse in six months.”
A collapsed Russian economy is probably in no one’s best interests but with no military options available short of World War III, sanctions are the only punitive measure the west can impose on what they see as an out of control Vladimir Putin. The annexation of Crimea might have been a bloodless coup but the Ukraine isn’t as neat and tidy. There are already key phrases working their way into the narrative of both media and politicians in the west that alarm Russian business leaders.
“Russia risks becoming a pariah state if it does not behave properly.” said UK Foreign Secretary Philip Hammond adding, in what is a rather bizarre admission of the political classes using media fueled public disquiet for their own ends, “We now need to use the sense of outrage that is clear to get a further round of sanctions-tightening against Russia.”
The UK Defense Secretary went further still being quoted as having commented that Mr. Putin was responsible for “sponsored terrorism”. These are harsh terms and not so veiled threats. Should the inquiry into the MH17 shoot down not completely clear the Russian separatists that Mr. Putin’s government have so obviously backed, those terms will be applied a lot more often by a lot more people.
Casinos come to Sochi
Whilst the Russian business elite are “living in fear” according to some reports, others have noted that there is some room for optimism. The recent changes to Russian gambling laws have seen casinos planned for Sochi, the former Olympic host city, despite recent opposition to the notion by Vladimir Putin himself. Where but a few months ago he saw the idea as being a threat to the good old fashioned family holiday, now he’s signing laws making it permissible.
Apparently in the face of harsh economy reality even the man who never backs down can be made to change his mind. If investors in Sochi, worst wedding venue ever, can sway him in an attempt to recoup their mounting losses by turning hotels into casinos, it is almost certain that the massive business interests under threat in Russia can persuade him to see some form of sense and come to terms with the US and EU.
Of course what those terms might be is anyone’s guess. Russia is unlikely to do anything that might lead to an eventual entry of the Ukraine into NATO, which means their support for the separatists is unlikely to cease anytime soon, and the Europeans and Americans will find it politically difficult to roll back sanctions without significant change to Russian policy in the region.
The stalemate looks set to continue with the sword of Damocles hanging over the whole situation in the shape of MH17. It is upon the investigation into the causes of that airliner’s loss and the location of those responsible that oh so much now hinges. If found to have handed over missiles to separatists that shoot down civilian airlines Russia faces a grim time, if cleared of the charges they may well yet find Mr. Putin’s gamble hasn’t broken the bank.