Crimea and the depletion of Russia’s resources

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Analysis & Opinion

Article by: Vitaly Portnikov

At first glance it is difficult to find a connection between the disappearance of funds in Russia’s Reserve Fund and the annexation of Crimea. The need to spend money from the fund was linked, among other things, to the “drop” in oil prices, which no longer allow Russia to live on their profits. But here we touch upon the issue of Crimea. Because the issue is not just Russia’s profits. The issue is also Russia’s expenses.

And these expenses, first of all, are connected to the occupation and the subsequent annexation of the Crimean peninsula. Naturally, not because money has to be spent on the stolen peninsula. After all, it is just one more subsidized region. But because the annexation of Crimea has given rise to the Kremlin regime’s confrontation with the civilized world. To exorbitant military expenses. To newer and newer geopolitical adventures — from the Donbas to Syria. To sanctions that prevent leading Russian companies from obtaining loans, as they did before the “return of Crimea.” In short, to a whole set of economic, political, financial, and social problems. And yes, oil prices– where would they be without them

As a result, the Reserve Fund, which was created to cover deficits in the Russian Federation’s state budget, has been depleted. But the budget deficits have not gone away. Russia’s expenses have not gone away. All of this will have to be paid for.  Thus, if the “Crimean issue” has depleted the Reserve Fund, it will have to deplete Russia’s National Welfare Fund next.

This fund was created for future generations of Russians. For the development of infrastructure, for investments in strategic projects. In short, for the future — in the event the oil prices finally  “collapse.” But hardly anyone in Russia is thinking of such a future.

Unless they are thinking about the presidential elections, which the Putin regime has complacently scheduled for the same day as the Crimean annexation — a tragic day for Russia. Now, as the ruler draws nearer to these elections, he will have to demonstrate social stability and the support of citizens. And this means money will have to be spent from the remaining fund.

And what will happen when even this fund is depleted? Don’t you understand? Let us just try to imagine it. If Putin and company spend all the money that the era of crazy oil prices has brought them, then the Kremlin will begin to use Crimea itself as a bargaining chip in the hope of Western support. The restoration of international law, the recognition of the illegality of the annexation, the search for a solution that would help Moscow save face after giving up Crimea in exchange for the lifting of sanctions and Western aid to the sinking Russian state — these are the goods that the Kremlin can bargain with. And in my view, they will not price them very high.

So, as a result of one geopolitical adventure, Russia will lose both the Reserve Fund and the National Welfare Fund, as well as any hope for the future development of the country and also, of course, Crimea. I will not even begin to discuss the ruined relations with Ukraine and the lost lives and fates of thousands of people who have died on the battlefields of the “hybrid war,” who are suffering in prisons, who were forced to leave their homes. I have no need to mention all that — it is discussed and written about daily in Ukraine. And soon — when the gilding on the regime peels off –Russian journalists will begin discussing it as well.

It is hard to imagine a better illustration of the “do not steal” commandment.

Translated by: Anna Mostovych
Source: Radio Svoboda

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  • zorbatheturk

    Da problem is Da PUTIN.

    • Ihor Dawydiak

      Yes he is but so are the Kremlin elite and by natural extension, the Russian people since they are ultimately responsible for placing these demagogues in power in the first place.

      • zorbatheturk

        The siloviki are a power unto themselves. Oppose them and your life insurance premium quintuples.

  • Ihor Dawydiak

    Every empire in world history has either completely collapsed or has disintegrated into a much smaller portion or portions and the case with Putin’s empire or perceived empire should not be viewed in a different manner. In this case, Crimea’s future will not only be determined by the increasing economic chaos that has enveloped Russia but it will also depend on the willingness of the Western powers to use whatever practical force possible to hasten the return of Crimea to Ukraine since Ukraine does not possess the military power to do this alone. However, neutralizing Russia’s very real potential to re-engage itself into future expansionism will remain as a major threat to regional and global peace and security until it is properly dealt with. Therein lies the rub.

  • Oknemfrod

    “Russia will lose both the Reserve Fund and the National Welfare Fund, as well as any hope for the future development of the country and also, of course, Crimea.”

    To make the picture more complete, throw in untold $ billions in reparations in order for any “end the sanctions” deal to be agreed upon.

    • Dagwood Bumstead

      Dwarfstan has already lost the Reserve Fund. The few rubbles that were left have been transferred to the National Welfare Fund and the Reserve Fund offically liquidated.
      With the dwarf’s senseless wars in the Donbas and Syria continuing and the dwarf expanding into the Sudan and elsewhere the drain on the Welfare Fund will only increase, emptying it so much sooner. And when THAT is empty…… then what? Will the dwarf and his crooked henchmen Medvedev, Rogozin, Shoigu, Siluanov, Miller, Sechin, Rotenberg and Co. hand back the umpteen billions they stole from the State? Hardly. The dwarf will slash the budgets for education, health care, infrastructure and other trivia even further instead- which will solve nothing, but only increase Dwarfstan’s problems and accelerate its decline.

      • Oknemfrod

        But of course they won’t part with their ill-gotten gains voluntarily. But since they hold their wealth (IIRC, we’re talking about at least of $1T of loot) in the West, they can (and, I believe, will) be frozen and held as escrow, the latter to be used primarily to discharge the debt to such entities as Georgia, Ukraine, Moldova, etc.; and only secondarily to the Russians from whom they’ve been stolen if conditions for such return should arise at some time in the future without the risk of them being stolen again. If such conditions never materialize, too bad.

      • veth

        The EU demands to claw back from Russia 1.39 billion euros annually because of restrictions on the importation of pork. According to Politico with reference to its sources, the World Trade Organization (WTO) has already sent the demand of Brussels to the arbitration court.

        The publication reminds that in 2016 WTO decided that Russia had introduced an illegal ban on the import of pork from the EU. These measures have become a “heavy blow to farmers from Denmark, Germany and the Netherlands.”

        “Sanctions have become the opportunity for Russia to increase production of meat after the competition with foreign companies in the market has disappeared,” the article reads. Brussels, by its actions, as the newspaper notes, begins to actively challenge the legitimacy of politically motivated food sanctions against the EU. ”

        The compensation required by Brussels – 1.39 billion euros is equal to the total value of exports of pork from the EU to Russia in 2013. It is planned that the amount of penalties each year will increase by 15%.

  • veth

    Russia can withdraw from the World Trade Organization (WTO) in case of satisfying the EU’s claim to claw back from the Russian Federation 1.39 billion euros per year due to the restriction of pork imports. This was stated on Sunday by the first deputy head of the economic committee of the Council of Federation, Sergei Kalashnikov, the RIA Novosti reports.

    “If the EU’s suit is satisfied, we, probably, will have to limit our participation in the World Trade Organization, possibly completely,” he believes.

    Kalashnikov stressed that the EU’s introduction of sanctions against Russia and the reciprocal embargo on the supply of food from the EU are “absolutely out of the logic of legislation related to the WTO.”

    “Sanctions are not at all in accordance with the rules of the World Trade Organization,” said Kalashnikov.