Russian Concerns Over Sanctions Are Growing

Alexei Kudrin is the latest leading figure to contradict the official line in Moscow that sanctions are ineffective.

Expert comment Updated 7 December 2018 Published 16 October 2018 2 minute READ
Alexei Kudrin meets with other Russian Accounts Chamber officials in May. Photo via Getty Images.

Alexei Kudrin meets with other Russian Accounts Chamber officials in May. Photo via Getty Images.

On 10 October Alexei Kudrin, head of the Russian Accounts Chamber, spoke to leading business people about Western sanctions. He said that if sanctions were tightened, Russia would be unable to achieve the economic goals set out by President Vladimir Putin for his new presidential term.

Kudrin added that Russian foreign policy ‘should be subordinated to reducing tensions in our relations with other countries’. This success of this policy, he said, should be measured by whether sanctions were eased or intensified.

Kudrin’s comments are significant for three reasons. First, they sharply contradict the official position that sanctions are futile and ineffective, and that efforts to pressure on Russia are counterproductive.

Second, the timing is notable. The tighter sanctions that Kudrin warned of are virtually inevitable. Following the nerve agent attack in Salisbury in March, the United States is preparing to apply what the State Department has termed ‘very severe’ new measures next month.

Third, Kudrin made his remarks to the Russian Union of Industrialists and Entrepreneurs, a leading business group sometimes known as the ‘oligarchs’ club’. Its members are highly sensitive to the impact of sanctions, and are far more vulnerable to them than the population as a whole. Some have already been targeted.

Kudrin holds a unique position in the Russian system. Highly regarded for his tenure as finance minister from 2000 to 2011, his standing and experience as an advocate of economic reform are unrivalled. He and Putin have known each other since they worked together in the St Petersburg city administration in the 1990s, and remain on good terms.

Kudrin has often played the role of licensed critic. He has been outspoken before, notably when he resigned as finance minister in protest at defence spending under President Dmitry Medvedev.

But Kudrin’s latest comments go further. He has not only stated that sanctions are hurting Russia, but drawn an explicit link between the poor state of relations with the US and Europe and Russia’s failure to achieve key domestic goals. And by publicly calling for a major change in foreign policy, he has encroached on a presidential prerogative. One leading military newspaper has asked whether Kudrin’s remarks amount to ‘incompetence or sabotage’.

Other senior figures have expressed concerns about sanctions effects, though less forcefully. Elvira Nabiullina, the widely respected head of the central bank, recently stated that, in the current circumstances, Russia’s economy would not grow more than the global average, despite Putin setting a higher growth rate as a goal of his presidential term. In August Nikolai Patrushev, secretary of the Security Council, and a leading silovik (security official), told regional officials that sanctions were creating ‘serious problems’ in the crucial oil and gas sector.

Senior figures who agree on little else increasingly acknowledge the impact of sanctions. In July the government approved a strategy to combat their effects. Capital outflow is rising. The signs are unmistakeable: sanctions are causing significant problems that will grow with time.