Russia could do a lot in response to Western sanctions, but she turns the other cheek

Responding to sanctions: What Russia could do right now

The United States added five more Russian citizens on the so-called "Magnitsky List", including President of Chechnya, Ramzan Kadyrov. The day before it became known that the US Treasury had imposed sanctions against two more Russian companies - Novator Experimental Design Bureau and Titan-Barricades Federal Research and Production Center.

The number of sanctions lists continues growing fast, and one may lose count of them already. What is Russia going to do about it? In response to the news about anti-Russian sanctions, Russian officials usually say something vague about the need to develop a proper reaction, but it appears that those are only words. It goes without saying that the Russian authorities do something on the subject without advertising it much.

Russian President's spokesman Dmitry Peskov was asked an interesting question recently. A journalist wondered whether it was true that the Russian authorities were working to set up a special bank to service the defence sector in connection with the possible introduction of new sanctions (although the word "new" appears to be redundant here).

"Indeed, Moscow is working out and taking measures to protect our interests against the backdrop of the efforts of various countries to continue taking restrictive and sanctioning actions of various countries, which we still consider illegal," Peskov said.

"It would be wrong to publicly disclose all these measures to hedge risks, which I will not do," Putin's press secretary added.

It goes about either a reaction to the already imposed sanctions, or a response to the sanctions that are going to be imposed on Russia in the future. In addition, Russia may take measures to impose sanctions on Western countries, but the Russian authorities have not been very active in the field lately, even though top officials always say that Russia will not leave restrictive measures of the West without attention. It goes without saying that Russia is much more limited in its actions at this point, but what can Russia do and why aren't we doing it?

Pravda.Ru asked this question to Doctor of Economic Sciences Valentin Katasonov.

"Russia has not taken any special responsive measures to sanctions of the West. It's like playing a game of pingpong, in which we do not send the ball back to the opponent. In fact, we must act ahead of schedule. A set of measures is needed to ensure the economic and financial security of the country. First of all, we need to deoffshorise the Russian economy.

"In the beginning of this decade, when Putin was running for president, he promised that the Russian economy would be deoffshorised. Yet, things are right where they started. On the contrary, now the authorities have come up with various reasons to prove that deoffshorising economy is harmful.

"Secondly, we must protect our international reserves. This sanction has not been introduced yet, but it is hanging over our heads like the sword of Damocles. Russia should convert its international reserves into currencies other than the US dollar and then move them to the banks that remain outside the control of the US Treasury Federal Reserve System.

"Further, Russia needs to increase the share of gold in its international reserves. Finally, we should simply use foreign exchange reserves to strengthen our economic security. Much has been said about import substitution and the need for re-industrialization. All this requires currency. Instead of using this currency effectively to build up our production potential, we were investing it in US treasury securities.

"The Central Bank should be accountable to the state. Presently, the Central Bank is practically unaccountable hiding behind a vague definition of an independent institution.

"Undoubtedly, Russia needs to change the nature of the money issue. The Central Bank should credit the real sector of the economy. What the Central Bank is doing today is a mess. Instead of strengthening the financial position of the real sector of economy, the Central Bank wastes billions, even trillions of rubles, to sanitise the banks that suck the Russian economy dry and redirect that money to offshore companies, etc.

"Russia could also take measures to restrict and prohibit cross-border movement of capital. In this case, we will have a stable ruble rate, with all ensuing positive consequences."

Oleg Artyukov

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Author`s name Oleg Artyukov