Putin’s Russia is Built to Survive a Prolonged Economic Siege, So Don’t Count on Regime Change

As originally conceived, the concept is only really applicable in the United States, where the “exorbitant privilege” of dollar hegemony gives the federal government a more or less unlimited possibility of borrow from the rest of the world to finance its expenses.

For virtually all other countries, the theory is just wishful thinking; spending is limited by the amount of tax the government can raise.

Yet, as economic historian Adam Tooze argued on his Chartbook blog, Russia could be considered another exception.

The fact is that Russia is both already cut off from international markets, so it has little to fear from further ostracism, and for some years it has been managed in a very careful way fiscally, which leaves considerable room for action to support standard living conditions.

Russia’s growth rate has been exceptionally depressed since Putin’s annexation of Crimea in 2014.

Yet that may have less to do with the imposition of sanctions and more to do with the authoritarian way the Kremlin has managed the economy, aiming for — and often achieving — current and fiscal surpluses.

These policies required a high degree of austerity. Even Alexei Kudrin, the legendary hawkish finance minister of Putin’s first decade, complained that the policy could be “excessively harsh”.

The upside from Putin’s perspective is that he left the country with what by international standards are very low levels of public debt, and therefore able to survive a prolonged siege. In extremis, the Central Bank of Russia could simply print the rubles needed to support lifestyles.

Whether he does, or even needs to, is another matter. In its economy, as in many other things, Russia remains very orthodox in its thinking.

But don’t assume that these autocracies will buckle under economic pressures. Putin has been preparing for this moment for a long time.