By Euro Wang
As a child, I loved playing with dominos– watching the first block I tapped push the next, until every block is knocked down.
This sequence is where the term “domino effect” stems from, and the Russian economy’s failure has been through a domino effect of its own.
Russia has been having a recession over the past few years, which has hurt their military, politics, and economy. Because of this, it is crucial to ask how Vladimir Putin can stop the downfall of the Russian economy.
The answer is to have better diplomatic relations with western countries, such as the United States, and to try to lift the sanctions, which have been negatively affecting Russia’s economy. These sanctions have been taking away from their GDP, which is harming trade relations and ultimately hindering improvement in the country’s economy.
When Russia attempted to annex Crimea, international leaders sanctioned Russia, hoping that these sanctions would serve as a deterrent for Russia’s increased military aggression. Instead, economic sanctions have decimated Russia’s economy. The sanctions forced Russia to cut down on its military budget, especially since the Russian economy itself has taken a hit from these sanctions. The IMF noted in 2015 that economic sanctions have reduced Russia’s GDP by 9%, making it very difficult for its economy to survive.
On top of this, Russia is projected to run out of money in 2017 with its continued military activity in places like Syria. As Ante Batovic of the University of Zadar notes, sanctions have forced Russia to cut its military budget by 5.3%, ultimately assuring the West that they were effective to decrease military aggression by Russia.
Furthermore, Western countries are using the threat of more sanctions as a tool for coercive diplomacy. Thus, as Oleg Buklemishev of the Carnegie Endowment Center in 2015 concludes, economic sanctions were the cause of the Minsk Ceasefire, which, according to the BBC, has resulted in the lowest level of fighting since the beginning of the conflict. Sanctions have been a very effective weapon in the west’s diplomatic arsenal, giving more incentive for it to continue using them until Russia strives for better diplomatic relations.
The fall of the Russian economy and the direct impact of the sanctions on it are further hampering the Russian economy by dismantling Russian trade coalitions.
Russia is a part of the BRICS, a trade coalition made up of non-western countries. After the sanctions, Russian trade has been heavily dependent on BRICS. However, the sanctions are affecting Russia’s leverage in the coalition. As Russia’s economy becomes increasingly unstable due to sanctions, other countries in this coalition are more reluctant to trade with Russia, a CNN article noted.
This is explicitly demonstrated when the countries in BRICS were very reluctant to pass a currency settlement and a $400 billion gas deal from their distrust in Russia’s economy. Ff the coalition ostracizes Russia, the country’s economy will most likely go into an even worse recession that could possibly lead to bankruptcy.
From the direct impact of the sanctions on the Russian economy and the possibility of a dismantled trade coalition, Russia is also losing its ability to restart its economy.
Mark Thompson of CNN noted in 2015 that economic sanctions are devastating because they stop technological development and end access to foreign capital. Without these things, it is incredibly difficult for Putin to restart his economy or make it better.
From the inability to restart his economy, this ultimately means that Putin is stuck with one option: to increase diplomatic relations with the west in order to make sure the sanctions are lifted, and this domino effect is ended.