Russia miscalculated sanctions – and the people’s fondness for smuggled cheese

According to a recent report by Estonia’s foreign intelligence service, sanctions are contributing to a significant diminution in the standard of living of ordinary Russians – but despite this, the popularity of Vladimir Putin remains high.

It also says that the Russian government remains ‘surprised’ by the West’s consistent implementation of sanctions: ‘In hoping that the West’s unity in establishing and maintaining the sanctions would be short-lived, Russia made a miscalculation. The error is due to the inability to see Western policy as values-based. Perhaps the Kremlin hoped that pragmatic and economic considerations would win the day and a return to mutually beneficial deals would be imminent, as the Russian market and opportunities in Russia are indeed important for the West. But it failed to recognize how thoroughly Russia’s actions went against Western values and how this has destroyed trust in Russia.’

Counter-sanctions and import substitution have, the report says, been partly successful in stoking patriotic sentiment, but it argues that the import substitution programme has only been partly fulfilled: ‘There are clear problems with availability of high-tech parts in the energy sector and the military industry is also experiencing a drought when it comes to components sourced from the West. Injections of capital into Russian companies have nearly dried up. Russia’s other partners do not appear to be interested in filling the vacuum. High interest rates and Russian banks’ difficulties in raising capital have a stranglehold on small- to medium-sized enterprises and their borrowing needs.’

The report also notes the failure of counter-sanctions ‘to drive a wedge’ between the Member States of the EU: ‘In their zeal to impose countersanctions, Russian authorities have shot themselves in the foot, causing disgruntlement among the population by destroying smuggled food. Russian people, however, are keen to acquire contraband products. Certain Western foodstuffs have a firm local following (even everyday perishable staples such as cheese) and are of a quality Russian goods cannot compete with, and thus they are actively smuggled in.’

The report is at:
https://www.valisluureamet.ee/pdf/raport-2018-ENG-web.pdf