Neoliberalism Still in Vogue In Moscow

○ Putin doubles down on free markets and fiscal restraint even as Russia’s import-dependent economy reels

- Matthew Boesler

Two weeks into Russian President Vladimir Putin’s invasion of Ukraine, the fallout at home is starting to come into focus as the economy becomes increasingly closed off from the outside world.

Debilitating sanctions imposed by Ukraine’s allies have brought about a collapse in the value of the ruble and a mass exodus of foreign companies serving the Russian market. The combination is making it difficult for the country to continue importing critical goods, increasing prices dramatically for those it can still get, and threatening to push up unemployment sharply as production of everything from Nissan sedans to McDonald’s hamburgers grinds to a halt.

Putin and his policymakers have limited options to cushion the blow. Days after Russian troops swept into Ukraine, the Russian central bank raised its benchmark interest rate to an unprecedented 20% in a bid to stop the ruble’s free fall, a move that will curtail credit and activity in construction and other sectors that are especially sensitive to borrowing costs.

Russia watchers say Putin’s desire to portray the situation as temporary, and his commitment to market principles and financial discipline, is preventing the type of broad shift in fiscal and industrial policies that others within elite circles would favor to cope with the sudden stop in the flow of capital and commerce. The impact of sanctions may ultimately make that position untenable.