Dispatches from Sochi: Conversation with a Senior Russian Official

Vice president of Carnegie Corporation's International Program, Deanna Arsenian, reports from the 13th meeting of the Valdai Discussion Club, Sochi, Russia

By Carnegie Corporation of New York October 25, 2016

Emerging Global Order

On sanctions: although they are difficult, unjust, and negative, they have pushed Russia to start real structural reforms and diversification of its economy. This process is going at full speed. Russia can sustain the EU sanctions indefinitely, but it is critical to stress that sanctions are not good for either Russia or the EU. They hurt both.

Russia is restructuring its economic relations, as are other countries. Russia’s trade relations are also evolving, due both to technological advances and changing consumption patterns.

On the Eurasia Union: an international group of experts from the representative countries recently conducted an analysis of all aspects of the union. The report is about to be released and might set the course of the union. The intention is to also use the report to bring together leaders to start negotiations concerning the union's future. Prospects are expansive.

Russia's investment climate is improving as its global rating rises quickly and steeply. Russia’s goal is to become among the top 20 highest-rated countries.

Innovation is a priority and investments are being made to restructure universities with this in mind, starting with the Moscow State University and including up to 20 regional universities. The intent is to restructure instruction and curricula. The Skolkovo tech project—which includes a joint Russia-MIT high-tech university–is part of this and is progressing as planned.

A Ukrainian participant asked if Russia’s recent declaration to cut defense sector imports from Ukraine will further affect an already deteriorated Ukrainian economy. The senior Russian official responded that Russia does not intend to stop all trade. Ukraine’s economic decline shows how far the mismanagement of Ukraine's turn toward the European Union has gone.

To a question on the openness with which Russia discusses war and conflict with the West, the senior Russian official responded by saying that one has to remember Russian history. Traditionally, when there has been any pressure from abroad, Russian society pulls together. Ukraine, sanctions, etc., are all seen as threats to Russia, and all of these factors have affected Russian citizens. It is not Putin who is igniting these ideas, and he is determined to dampen such views. No other country has suffered more from wars in the 20th century than has Russia. But, if pushed into war, every Russian will fight to win. That is the Russian DNA.

On the development of the economy: the economic plan developed by Kudrin and a group of experts is the path forward. It is a plan that reflects the reality and is founded on the government's vision for economic development.

On the vision for the Eurasia Union: it is seen as flexible, expansive, and including countries from a large region with the aim of deepening trade and investments.

On the economy: the denationalization of some industries, starting with the energy sector, is key to managing the state budget. Increases in taxes are not envisioned. Putin's position is that Russia's main answer to sanctions is the liberalization of business.

Key take-away from this session: the Russians are seriously thinking about the economic forces of the future—trade, industries, and the changing patterns of demand and consumption. Under Putin's call, they are marshaling national expertise to identify possible future partners to make priority investments. Whether or not they succeed with economic reforms, it seems wise to take these defining factors into consideration in the future.