Only not the second front – Newspaper Kommersant No. 41 (7242) of 03/11/2022

At a meeting with the president, the government confirmed the main parameters of the urgently developed anti-sanction program: it is the isolation of the financial system, attempts to keep foreign property in the Russian economy working, and the fight against poverty by moving towards a universal benefit. In the medium term, the program looks limited to work if the economy survives the current level of sanctions. The Central Bank on Thursday, March 10, in a survey of economists, gave the first forecasts for 2022 – this is a fall in GDP by 8%, inflation by 20%, the dollar exchange rate at the current level, there are no estimates of future unemployment yet. One of the already obvious problems is disagreements with large private companies that fear that they will face a war on two fronts: US and EU sanctions pressure may be supplemented by implicit counter-sanctions pressure from the Russian authorities.

On Thursday, the government held a meeting with the President of the Russian Federation on the counter-sanctions economic policy of the White House in the format of a teleconference. There was no meaningful news at the meeting – most of the anti-crisis packages based (see Kommersant on February 10) on the “pandemic” experience of 2020-2021 have already been signed the other day and are being implemented. At the same time, the parameters of the trade and financial blockade of the Russian Federation, created by the sanctions measures of most of the world’s major economies in response to Russia’s military operation in Ukraine, are still not exactly known – Prime Minister Mikhail Mishustin almost did not name figures in his speech, as did Finance Minister Anton Siluanov and relevant ministers .

On Thursday, the Bank of Russia published the first more or less countable estimates of the reaction of the Russian economy to the sanctions shock – this is the result of a survey of 18 economists on March 1-9.

According to them, it is expected to decrease GDP RF by 8% in 2022, growth of 1% in 2023 and 1.5% in 2024 – that is, an uncompensated, but not catastrophic fall during the year. Forecast for inflation – 20% per annum in 2022, 8% in 2023, 4.8% in 2024. It is assumed that the level of neutral key rate shifted in the vicinity of 7% per annum, until 2024 the Central Bank is not expected to have a soft monetary policy and rates below inflation. dollar exchange rate in estimates corresponds to the level of 100–110 rubles/$ with a slight decrease by 2024. From the estimates, analysts not affiliated with the Central Bank expect a decline in real wages by 10% in 2022, by 1.5% in 2023 and an increase of 2% in 2024. From this, apparently, one should also assume expectations of a sharp increase in unemployment much higher than the neutral level (until the end of February 2022, it was lower), but the Central Bank does not publish survey estimates, if any, or forecasts of the dynamics of real disposable income. Roughly, unemployment in the reconstruction of these models can be estimated at 7–9% in 2022–2024, which also correlates with the assessment of new social spending by the Ministry of Labor.

The view of the government of the Russian Federation on the state of affairs at the meeting was stated by Anton Siluanov:

“Over the past two weeks, Western countries have launched, in fact, a financial and economic war against Russia. The West has declared a default on its financial obligations to Russia, has frozen our gold and foreign exchange reserves, and is trying by all means to stop foreign trade and the export of goods.”

The problem of both economic forecasts and the potential effectiveness of the government’s response in this regard is that the realistic parameters of the “economic war” (the scale of the impact on GDP of the logistics collapse at the trade borders of the Russian Federation and the disruption of supply chains, the volume of future foreign trade, the state of domestic demand) will be determined not only by primary, but also so far unpredictable secondary effects of sanctions in conjunction with the “counter-sanctions” of the White House.

The latter look simple so far, but even now they are somewhat contradictory. On the one hand, the response to the isolation of a significant part of the financial system is the rejection of a pure floating rate policy, exchange controls and, in response to the freezing of international reserves and a part of external assets, including private ones, limiting payments of external debt, including private ones. The speech and subsequent comments of Anton Siluanov were purely “military” in this respect.

Although he answered questions mainly on payments on external public debt (the Russian Federation, at least in the case of Eurobonds, intends to reserve payments on them in rubles with conversion into the debt currency only when international reserves are unfrozen), the configuration of the “counter-sanctions” presidential decrees makes the possibility of large companies to conduct export business as usual – to service foreign currency debt, the exporter must obtain de facto permission from the Ministry of Finance. This, strictly speaking, is an interference with the powers of private business, already burdened with an 80% rate of sale of foreign exchange earnings, and in a significant part of cases – sanctions against company owners and an export blockade.

On the other hand, the White House sees the exit or suspension of the activities of large foreign companies in the Russian market as the most important threat – there are hundreds of them, some make a decision out of solidarity with Ukraine or under pressure from their own jurisdictions, some – assessing the consequences of sanctions against the Russian Federation, some – in anticipation of a future sharp decline in demand, logistical and own financial problems. Despite the apparent unity in the ranks of power, in fact, there are two points of view on how the power corporation in the Russian Federation should react to this: the mechanism of “accelerated bankruptcy” (proposed by United Russia) and the mechanism of temporary “external control” of production complexes – apparently competent Russian competitors.

The question of whether large Russian companies are ready to simultaneously continue to work in world trade and manage, in essence, the confiscated assets of Western competitors in the Russian Federation, he was hardly asked.

Theoretically, a major and destructive political campaign could grow out of the “nationalization” controversy in the Russian Federation. Interros co-owner Vladimir Potanin on Thursday expressed a number of doubts about the possibility and necessity of implementing such a course – he probably expresses the opinion of many large entrepreneurs. In addition to the obvious analogy of “nationalization” with the events of 1917 (the nationalization of foreign and private enterprises in 1917-1920 under the leadership of the Bolsheviks), he stated the need to remove “current servicing of external debt from the existing provision on foreign exchange restrictions” – we are talking about private debt. Vladimir Potanin spoke about the risk of cross-defaults by many large public companies, but in reality, apparently, it is also about a broader problem – by solving the issues of saving the Russian economy, the authorities in the country can, for “counter-sanction” purposes, limit the ability of companies to adapt and maintain their relations with the world economy: “counter-sanctions”, and from Kommersant’s conversations with representatives of big business, are often perceived as a possible “second front” against it, despite the fact that the first in the form of personal sanctions was opened by the EU, the USA and the UK.

Finally, the third component of the White House’s response to the crisis is the adjustment of fiscal and social policies. The Ministry of Finance expects that the growth in hydrocarbon prices will compensate for both a possible decrease in consumption and a drop in non-oil and gas revenues. The Ministry of Labor, clearly promoting the idea of ​​a universal poverty benefit, is unfreezing support for families with children — the budget needs about 500 billion rubles for this. in 2022. However, this is obviously a calculation in “today’s rubles” even with a low forecast for an increase in poverty: it will be possible to determine more or less correctly the parameters of the future income of the Russian Federation only after the real volume of exports and prices for it are clarified. Before that, it will have to survive the effects of the sanctions tsunami and the immediate effects of the trade blockade in the coming weeks. The point here is not only the dollar exchange rate, but also the availability of critical goods and technologies for the Russian economy, and the availability of alternative “mobilization” initiatives in power, and the very ability of an economically developed society to adequately survive the shock of the scale with which it is in reality encountered only in 1991 and 1998.

Dmitry Butrin


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