Putin: The best answer to sanctions is increasing business freedoms

0 5


Putin: The best answer to sanctions is increasing business freedoms

Translated from Russian by J.Hawk

The President of the Russian Federation said that expanding
business freedoms is the best answer to external challenges and limitations. He
voiced this opinion appearing at the Week of Russian Business of the Russian
Union of Entrepreneurs and Manufacturers.

“Further expansion of business freedoms is the best answer
to external sanctions and challenges. Therefore we will continue to establish
the most favorable conditions for those who wish to invest in domestic industry
and economy, in the development of technologies and modern-era jobs.”

The capital amnesty rules in Russia ought to correspond to
all international legal demands, so as not to cause suspicion of money
laundering, Putin said. “State and business ought to work as partners to
overcome the current poor climate and to trust one another. Esteemed
colleagues, we can overcome the poor unfavorable economic climate and to
establish a stable trajectory of growth only through a state-business partnership,
which of course is impossible without mutual trust. We need to have a shared
understanding of the country’s strategic tasks and keep our mutual interests in

The President emphasized that capital amnesty rules ought to
be consistent with the demands of Financial Action Task Force. “They should be
absolutely legal and understandable from the point of view of international
law, so that nobody should have any doubt that what’s happening in Russia in
that respect is wholly in accordance with international law and practice,
including from the perspective of not allowing the laundering of money obtained
through illegal activities.”

Putin believes that the current Central Bank lending rate is
still quite high. “Indeed, at the moment the funds rate is high. We have not
yet established the additional fundamental conditions that would allow us to
feel confident, therefore it is still very important to provide targeted

The President underscored that the government ought to adopt
practical measures to ensure available financing reaches targeted enterprises.

The Minister of Finance Anton Siluanov said that the peak negatives
which were evident in Russian economy in late 2014 and early 2015 have passed. “We
have passed the peak negatives, and we are seeing certain aspects of
stabilization.” In his view, Russia’s economy has adapted to new conditions.

J.Hawk’s Comment: What does all of that mean? For starters, it
means Russia is returning (or maybe has returned) not to Five-Year Plans of the
Stalin era which, while extremely effective at industrializing the country,
also proved extremely difficult to manage, but to Lenin’s “Commanding Heights”
model of the economy that was the norm during Lenin’s New Economic Policy of the 1920s and which is the norm in today’s China, in which the State retains close control over certain
strategic branches of the economy (usually through the control of enterprises
deemed to be “system-forming” and through state monopolies), while allowing
other sectors of the economy to operate under free market principles. This
approach is evident in Russia’s import substitution strategy—targeted support
for the system-forming enterprises, and maximum liberalization to allow the
opportunities created by sanctions and the ruble devaluation to be exploited by
private entrepreneurs more swiftly and efficiently than a Five-Year-Plan would.

This duality of approach is also reflected in the
composition of the Russian government, with the “statists” clearly
predominating, but the “liberals” (which include Siluanov and possibly even
Medvedev) playing and indispensable supporting role. Ultimately Russia needs
both of these segments of the elite for its economy to function well—the over-dominance
by either of the two is liable to cause economic problems, as Russia’s
experience of the 1980s and the 1990s has shown.

Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.