There will be many issues at play during the G20 summit in Buenos Aires. Alexander Gabuev offers insights into the Kremlin’s game plan.
Is Russia worried about new rounds of U.S. sanctions?
U.S. sanctions are becoming a permanent feature of Russian economic life. Following Congress’s near-unanimous vote on the Countering America’s Adversaries Through Sanctions Act (CAATSA) in summer 2017, senior leaders in the Kremlin became convinced that Western sanctions are likely to stay in place forever. The economic toll is unpleasant, but not nearly as bad as the “maximum pressure” facing countries like Iran and North Korea. Still, sanctions have dampened economic growth, made Western investors more wary of putting their money in Russian businesses, and made it harder for Russians to tap Western capital markets.
However, so far the regime has managed to weather the sanctions, and Putin’s political base has rallied around him. With nearly a half-trillion dollars in reserves and an economy centered on the export of dollar-denominated commodities like crude oil, the Kremlin has ways to cushion itself from the next round of U.S. sanctions.
At the same time, it’s important to understand that there are numerous groups in the Russian elite that actually benefit from the sanctions. The people who will benefit most are those in charge of domestic security and industries that are trying to replace the products that Russia used to buy from the West. These groups are now pocketing huge government subsidies, buying distressed assets from oligarchs who have fallen out of favor, and taking advantage of the heavily monopolized nature of the Russian economy in areas such as government procurement.
How does the Kremlin think about China?
Ties between Russia and China are very unlikely to deteriorate in the foreseeable future. From the Kremlin’s viewpoint, three fundamental factors are driving the countries closer.
First, there is a financial imperative to avoid tensions along the 4,200-kilometer border between China and Russia. Decades of costly military deployments along the border, and the more pressing security challenges that Russia faces elsewhere, have taught leaders in Moscow that a friendly relationship with China has plenty of benefits.
Second, China is a natural market for Russian exports. Catering to the resource-hungry Chinese economy could help Russia compensate for its losses in the West.