How Putin “outsmarted” Obama

Obama’s theory that Russian economy has been “torn apart”, has broke into pieces these days! Bloomberg announced, that “in the first three months of 2015, according to all indicators, Russian currency moved from the category of the worst to the best in the world”.

Obama & Putin

Uninformed reader might think that the sanctions from the West had been lifted, and that it is “allowed” for Russia to lift its head up and avoid the economic catastrophe, and all that after Obama “broke Russian economy into pieces”.

What really happened?

The sanctions were introduced in order to destroy the Russian economy, and thus cause the dissatisfaction of citizens, whose reaction would be to overthrow Putin of his authorities. The measures that have been taken, were carefully selected- not too harm the economy of Western countries, which in recent decades largely intertwined with the Russian economy. To avoid a ban on imports of Russian energy generating products, the West decided to reduce oil and gas prices drastically, convinced that it will inflict a serious blow to the Russian budget which is mostly filled with dollars from exports of energy generating products. In this situation, it would be logical for Russia to reduce exports and wait for better times, but they did just the opposite- they increased the production and export. The ruble is falling drastically and the Russian budget, which is planned in rubles- has been loading enormously.

Russia reversed inflation to its favor

To explain, we’ll take $100 thousand for example.

At the time when sanctions were introduced, the dollar was worth 34 ruble. At one point, after the collapse in oil prices, American currency was worth almost 70 rubles. This means that for every $100 thousand, the state treasury would receive 7 million rubles! Oil exporting companies have never lived better- they earn in dollars, but pay their obligations in rubles.

But Russia is not just a major exporter of energy, but also a major importer of food and high tech, which is, of course, payed in dollars. Because of the drastic decline of the ruble, prices of imported food, following the rise of the dollar,would be doubled. To prevent that from happening, Putin, despite expectations, bans the import of food from the west.

Russia will invest its saved rubles into the formerly much neglected domestic agriculture, and the products they cannot produce, will be imported from the countries which haven’t imposed the sanctions, and whose prices are even lower then in Europe.

Thanks to this, social discontent is completely avoided, salaries and pensions grow at the same pace that was planned before the sanctions. Russian stores are still full, while the deficit of any product is of the question. Putin’s “cons sanctions” to Europe (which succumbed to pressure from US) have proven to be useful for the Russian agriculture.

Source: Vesti online

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