Monday, February 24, 2020

The Kremlin Plans to Modernize Russia, Again — Stephen F. Cohen

With all this “living history” in mind, Putin’s plan for such large-scale (and rapid) investment has generated the controversy in Moscow and resulted in three positions within the policy class. One fully supports the decision on the essentially Keynesian grounds that it will spur Russia’s annual economic growth, which has lagged below the global average for several years. Another opposes such massive expenditures, arguing that the funds must remain in state hands as a safeguard against the US-led “sanctions war” (and perhaps worse) against Russia. And, as usual in politics, there is a compromise position that less should be invested in civilian infrastructure and less quickly....
The Nation
The Kremlin Plans to Modernize Russia, Again
Stephen F. Cohen | Professor Emeritus of Russian Studies, History, and Politics at New York University and Princeton University


hoonose said...

Why are they using USD's, and not Rubles? Or does the article mean roughly the equivalent of that amount in USD's?

Tom Hickey said...

@ hoonose

Russia has effectively abandoned the dollar and has switched to euros for international trade. Russia has also greatly reduced its holding of US Treasuries as foreign reserves, and greatly increased its holding of gold. In short, Russia is one the leaders of de-dollarization in reaction to the US "weaponizing" the dollar for use in economic warfare.

hoonose said...

So $300-400B equivalent in Euros? Not dollars or rubles.
Why not use rubles?

Tom Hickey said...

Because the Russian RUB is not (yet) a reserve currency used in international trade. Nor is the Chinese RMB. International trade is still settled chiefly in USD. Much of Russia's international trade is with Europe, so the EUR functions as the settlement vehicle. Russia and China settle in RMB. Both Russia and China are de-dollarizing owing to the USD being weaponized against them by US economic warfare.

hoonose said...

I get that.

"$300-to-$400 billion of “rainy day” funds"

Are these foreign denominated funds or rubles?

I suspect rubles, USD equivalent. And I also suspect that they can always come up with rubles to purchase whatever they need to modernize, if purchased from within Russia itself.

Or maybe they need that amount of foreign funds in addition to any rubles to complete the process.

Tom Hickey said...

Vulnerable countries have to stock reserves to prevent being squeezed. Economic sanctions are a type of "short squeeze" of foreign reserves and vital material that need to be imported.