Russia’s geopolitical influence is at its highest level since the end of the cold war and fall of the Soviet Union nearly thirty years ago, points out Angelo Katsoras, Research Analyst at National Bank Financial.
Key Quotes
“Russia has partitioned Georgia (2008), annexed Crimea (2014), stopped Ukraine from joining the European Union and NATO, and kept the Assad regime in power in Syria. Russia has also been accused of meddling in the 2016 U.S. presidential election by bombarding websites with fake news.”
“Though Russian President Vladimir Putin has proved a very shrewd geopolitical tactician, he faces many challenges. For one thing, Russia’s long-term structural economic weaknesses are at odds with its geopolitical ambitions. There is also the risk that the cost of these geopolitical successes may ultimately outweigh their benefits.”
“While many western countries have imposed sanctions on Russia, the U.S. response has been particularly harsh. Indeed, despite Trump’s conciliatory rhetoric, his administration has been much tougher on Russia than any other in the post-Cold War era.”
“Since taking office last year, U.S. President Donald Trump has intensified the use of draconian economic sanctions to target geopolitical adversaries. Though the strategy has proved highly effective, the more the United States employs these measures, the more likely it is that countries will intensify their efforts to reduce their reliance on the U.S. financial system.”
“Thanks to the implementation of certain reforms and, more importantly, to high energy prices beginning in the early 2000s, Russia was able to bring its economy back from the abyss. However, since 2008 the economy has struggled to grow. Russia’s GDP expanded 1.5% in 2017 and is projected to grow only 1.7% this year. If oil prices fall again, growth will be even weaker.”
“Surging tensions between the United States and Russia have had the unintended effect of pushing Russia into a closer alliance with China. This partnership has been strengthened by their shared opposition to the U.S.-dominated global order and by the fact that they have both been hit by U.S. tariffs and/or sanctions.”
“Russia’s recent string of geopolitical victories comes nowhere near to making up for its relatively small economy. Indeed, thanks to a lack of economic reforms, an over-reliance on fossil fuels, excessive state intervention, an aging population, and corruption, Russia faces decades of slow growth. Successive waves of sanctions only add to the headwinds already facing Russia. Russia’s central-bank chief, Elvira Nabiullina, stated as much recently: “Even if the price of oil rose to $100, from around $65 today, it’s very unlikely that our economy can grow above 1.5% to 2%” a year.”
“Given Russia’s large landmass, strategic location and massive nuclear arsenal, the challenge for the West, and in particular the United States, is to find a way to balance the need to restrain Russia without squeezing it so hard as to cause its economy to tank and regional tensions to even further worsen.”
“Another major risk is that China and Russia overcome their historical suspicion of one another to form a durable alliance able to challenge the United States and the West on several fronts, including greater efforts to shun the dollar in their trade relationship.”
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